STATE OF BIHAR AND ORS.versusSTEEL CITY BEVERAGES LTD. AND ANR.

                       STA TE OF BIHAR AND ORS.                                          A
                                   v.
                  STEEL CITY BEVERAGES LTD. AND ANR.
r
                               NOVEMBER 18, 1998

         [S.P. BHARUCHA, G.T. NANA VAT! AND B.N. KIRPAL, JJ.]                            B


         Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990: Rules
    2(v)-3-Proviso.

          Sales Tax-Deferred payment of-Incentives to new industrial units               C
    and units under expansion-Company-Business of manufacturing soft drink
    beverages-Deferment claim in respect of investment in bottles and crates-
    Held not permissible-Held plant includes apparatus used for manufacturing
    soft drinks or beverages-But does not include crates and bottles used for
    storing the manufactured product.                                                    D
          Industries (Development & .Regulation) Act, 1951           Section I 1-B-
    Notifications issued under-Applicability of

          Interpretation of Statute-Word-Giving different meaning to-Held
    permissible when defined differently under different provision or if the context     E
    so requires.

          Words and Phrases :

          "Plant "-Meaning of~In the context of Bihar Sales Tax Supplementary
    (Deferment of Tax) Rules, 1990, Rule 2(v).

          Respondent-company, engaged in the business of manufacturing soft
                                                                                         F
    drinks and beverages, claimed benefit of deferment of payment of sales tax
    under the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990.
    The competent authority viz. the District Level Committee held that the
    company was entitled to the benefit of deferment of payment of sales tax to
    the extent of 90 per cent of its fixed capital investment in fixed capital assets.   G
    However, the company's claim for benefit of deferment rules in respect of
    investment in bottles and crates was rejected. On appeal, the High Court held
    that bottles and crates employed by the company for its business were also
    "plant" within the meaning of Rule 2(v) of the Deferment Rules and, therefore,
    the respondent-company was entitled to get the benefit of deferment on the           H
                                            5
    6                          SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A   investment made in them.

         In State's appeal to this Court on the question whether under the
    'Deferment Rules' "plant" would include bottles and crates employed by an
    industrial unit manufacturing soft drinks and beverages for carrying on its
    business.
B
          Allowing the appeal, this Court

          HELD: 1. High Court was wrong in interpreting the word 'plant' in
    Rule 2{v) of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules,
    1990 widely. It failed to consider whether the object and scheme of Deferment
C   Rules permits such a wide interpretation. The Deferment Rules do not define
    plant and, therefore what should have been considered by the High Court was
    what meaning should be given to it in the context of the Deferment Rules.
                                                                    (9-G-H; IO-BJ

          2. As. disclosed by the industrial policy and the Deferment Rules, the
D State agrees to suffer temporary loss of revenue by not requiring immediate
    payment of sales-tax on sale of goods produced or manufactured by an
    industrial unit if it makes new fixed capital investment in the State. What
    the State desires and what the Deferment Rules require for getting the
    benefit tht:reunder, is not capital investment but fixed capital investment.
E   Rule 2(v) defines fixed capital investment to mean investment in land, building, .
    plant and machinery. Thus, the nature of investment contemplated by the
    Deferment Rules is investment in fixed assets which are ordinarily considered
    essential for production or manufacture of goods and have some degree of
    permanency. The second proviso to Rule 3 makes this position further clear.
    Therefore, the context in which the word 'plant' is used in Rule 2(v) indicates
F   that it is not used in its wider sense and does not include within its meaning
    land, building and machinery. The rule-making authority did not intend
    'plant' to mean what is not a fixed asset. By 'plant' what is intended by the
    rule-making authority is that apparatus which is used by the industry for
    carrying on its industrial process of manufacture, in respect of an industry
G   manufacturing soft drinks, it can be said that plant would mean .that apparatus
    which is used for manufacturing soft drinks or beverages and not articles
    like crates and bottles used for storing the manufactured product.
                                                           [10-G-H; 11-A-B-C-D-E) ·

          3. Two notifications of the Government oflndia dated 2.4.1991 and
H   1.1.1993 issued under Section 11-B of the Industries (Development &
               STATEv. STEEL CITY BEVERAGES LTD. [NANAVATI,J.]                    7
    Regulation) Act, 1951 are also relevant to decide the question involved            A
    herein. Further on 8.5.1995, the Government of India issued a circular
    clarifying that investment in bottles and crates in such units is in the nature
    of storage of finished products and, therefore, such investment has to be
r
    excluded while computing the value of plant and machinery. While declaring
    its investment at the time of seeking registration as a small scale industrial     B
    unit the respondent-company did not include investment in bottles and crates
    under the head 'plant and machinery'. If the investment of the company in
    bottles and crates was included under the head 'plant' then its total fixed
    capital investment would have reached the level of 137.36 lakhs and it could
    no longer have been regarded as a small scale industrial unit. As the
    company had applied as SSI unit, the District Level Committee had to verify        C
    the status of the company as SSI unit and, therefore, it was bound to take
    into account the above referred two notifications. If under these circumstances,
    the District Level Committee came to the conclusion that the company was
    not entitled to the benefit of deferment in respect of its investment in bottles
    and crates, it cannot be said that it has acted contrary to law.
                                                       [11-E-F-G-H; 12-A-B-C-D-EJ      D
         C.J.T. v. Taj Mahal Hotel, (1971) 82 ITR 44 and Scientific Engineering
    House P. Ltd. v. CIT, (1986) 157 ITR 86, held inapplicable. ·

          Yarmouth v. France, (1887) 19 QBD 647, referred to.
                                                                                       E
          Advanced Accounting by Jamshed R. Batliboi, referred to.

          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12556 of 1996.

         From the Judgment and Order dated 18.1.96 of the Patna High Court in
    C.W.J.C. No. 1118of1992.
                                                                                       F
          B.B. Singh for the Appellants.

         M.L. Varma, Gopal Prasad, Rohit Tandon and Ejaz Maqbool for the
    Respondents.

          The Judgment of the Court was delivered by
                                                                                       G
          NANA VA TI, J. A short question which arises for consideration in this
    appeal is whether investment made by Steel City Beverages Limited,
    (respondent No. I herein and hereafter referred to as "the Company"), in
    bottles and crates can be said to be investment in "Plant" so as to amount
    to "Fixed Capital Investment" under the Bihar Sales Tax Supplementary
    (Deferment of Tax) Rules, 1990 (hereinafter referred to as "the Deferment          H
    8                           SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A Rules").
           The Company is engaged in the business of manufacturing soft-drinks
    and beverages. It is a registered dealer under the Bihar Finance Act, 1981. It
    filed a writ petition being Civil Writ Jurisdiction Case No. 1118 of 1992,
    through ilS' Director-respondent No. 2, in Patna High Court for a direction to
B   the State Government and its officers, appdlants herein, to accord permission
    under Rule 42 (7) of the Bihar Sales Tax Rules, 1983 and exempt it from using
    Form No XXVlll-B. While the petition was pending before the High Court,
    it made an application under the Deferment Rules to the competent authority
    for grant of an eligibility certificate which would enable it to claim benefit of
    deferment of payment of sales-tax scheme declared under the Deferment
C   Rules. It was stated in the application that under the Resolution of the State
    Government dated 6.9.1989 and the Deferment Rules, it was qualified to seek
    the benefit of deferment. The High Court by its order dated 13.7.1992 directed
    the Deputy Commissioner of Commercial Taxes, respondent No. 4, to place
    that application before the District Level Committee for Singhbhum District for
D   its consideration. The District Level Committee decided on 9.1.1995 that the
    Company was entitled to the benefit of deferment of payment of sales-tax to
    the extent of90% of its fixed capital investment in fixed-capital assets. However,
    it rejected the Company's claim that investment in bottles, crates, electrification
    and tools was an investment in "Plant" and, therefore, it was also a "fixed
    capital investment". The Company, therefore, amended the writ petition and
E   challenged that part of the decision of the District Level Committee which was
    against it.

          The High Court after considering that under the Deferment Rules "fixed
    capital investment" means investment in land, building, plant and machinery
    and that they do not define the word "Plant", observed that it was required
F   to be construed according to its dictionary meaning or as understood in
    common parlance and not in its technical sense. It then held that the word
    "Plant" would include whatever apparatus is used by a businessman for
    carrying on his business; not his stock in trade which he buys or makes for
    sales, but all goods and chattels fixed or movable which he keeps for
G   employment in his business and which have some degree of durability.
    Considering the nature of business of the Company, namely, manufacturing
    soft drinks and beverages, the High Court held that bottles and crates employed
    by it for its business are al.so 'Plant' and, therefore, the Company is entitled
    to get the benefit of defern1ent on the investment made in them. The High
    Court quashed the decision of the District Level Committee which was under
H   challeng1: and directed the State and its officers to grant the benefit of
                ST ATE v. STEEL CITY BEVERAGES LTD. [NANA VATl, J.]                   9

    defe1TI1ent after taking into account the investment made in bottles and crates        A
    also. The claim in relation to electrification and tools was not pressed before
    the High Court. Aggrieved by the decision of the High Court, the State has
r   filed this appeal.
           It was contended by Mr. B.B. Singh, learned counsel for the appellant-
     State that the High Court has mis-interpreted the word "Plant" in Rul~ 2(v)           B
     of the Defe1TI1ent Rules. It was submitted by him that unless a thing is of
     durable nature and fixed like land, building or machinery, it cannot be said to
     be 'Plant' and, therefore, bottles and crates have been wrongly held as
     'Plant'. He also submitted that all the decisions relied upon by the High Court
     were under the Income-Tax Act, 1961 which defines the word "plant" very
     widely and, therefore, they were really not relevant for the correct interpretation   C
     of the word plant as used in Rule 2(v) of the Defe1TI1ent Rules. On the other
     hand, learned counsel for the respondents supported the decision of the High
     Court on the grounds given by the High Court in its judgment.
             Therefore, what we have to consider is whether under the 'Deferment
      Rules' "plant" would include bottles and crates employed by an industrial D
      unit manufac!uring soft-drinks and beverages for carrying on its business.
      The word plant has a very wide meaning and a variety of articles, objects or
    . things have been held to be plant. Dictionaries have defined plant as land,
      building, fixtures, machine_ry, implements and tools, and apparatus used in
      carrying on a mechanical operation or an industrial process. This Court in E
      C.J.T. v. Taj Mahal Hotel, [1971] 82 !TR 44 and Scientific Engineering House
      P. Ltd. v. CIT, (1986) 157 !TR 86 referred to with approval the observations
      of Lindley LJ in Yarmouth v. France, (1887) 19 QBD 647 that in its ordinary
      sense plant includes whatever apparatus is used by a businessman for carrying
      on his business, - not his stock-in-trade which he buys or makes for sale; but
      all goods and chattels, fixed or movable, live or dead, which he keeps for F
      pe1TI1anent employment in his business. In that case, this Court further held
      that the test to decide whether a particular thing is plant would be : "Does
      the article fulfil the function of a plant in the assessee' s trading activity ? Is
      it a tool of his trade with which he carries on his business ? If the answer
      is in the affirmative, it will be a plant". Learned counsel for the respondents, G
      heavily relying upon this decision, submitted that the High Court was right
      in interpreting the word plant in the Deferment Rules as mcluding bottles and
      crates also as they are used by the Company for carrying on its business.
      We cannot agree with this contention as we are of the view that the High
      Court was wrong in interpreting the word plant in Rule 2(v) so widely. It failed
      to consider whether the object and scheme of the Defe1TI1ent Rules perm it H
     IO                         SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.

A such a wide interpretation. The High Court also failed to appreciate that the
    decisions of this Court in Taj Mahal Hotel (supra) and Scientific Engineering
    House (supra) were under the Income Tax Act and the observations made and
    the test indicated therein were in the context of the wide definition of the word
    plant given in that Act and, therefore, not of universal application. Obviously,
B   if plant is defined differently under a different provision or if the context so
    requin!s, it may have to be given a different and a narrower meaning. The
    Deferment Rules do not define plant and, therefore, what should have been
    considered by the High Court was what meaning should be given to it in the
    context of the Deferment Rules.

C       :It was in pursuance of the Government Resolution dated 6.9.1989 which
  declarnd its policy of giving incentives to new industrial units and the existing
  industrial units going for expansion that the State Government in exercise of
  the powers conferred by sub-section (!) of Section 58 of the Bihar Finance
  Act, made the Deferment Rules. An examination of these discloses that they
  provide for deferred payment of sales-tax in respect of sale of goods
D manufactured by new industrial units and existing industrial units under
  expansion. The deferment is limited to 90 per cent of the fixed capital investment
  in fixed capital assets at the time of grant of eligibility in the case of new
  industrial units and 90 per cent of the additional fixed capital investment in
  the case of an existing industrial unit undertaking expansion. For claiming the
E benefit of deferred payment, an eligible unit has to apply for a certificate of
  eligibility. The District Level Committee or the State Level Committee, as the
  case may be, adjudges the eligibility of the industrial unit. An application for
  grant of eligibility certificate made by a small-scale industrial unit is required
  to be considered by the District Level Committee of the district in which the
  industrial unit is situated. The District Level Committee, after considering the
F report prepared by the District Industries Centre or the Director of Industries
  and a11y other relevant information, decides whether and to what extent the
  industrial unit is entitled to the. benefit of deferment. The extent of benefit is
  partly made dependent upon the 'Fixed Capital Investment' made by the
  industrial unit and also upon its status viz. whether it is a large scale industrial
G unit or a small-scale industrial unit.

         As disclosed by the industrial policy and the Deferment Rules, the State
  agrees to suffer temporary loss of revenue by not requiring immediate payment
  of sales-tax on sale of goods produced or manufactured by an industrial unit
  if it makes new fixed capital investment in the State. What the State desires
H and what the Deferment Rules require for getting the benefit thereunder, is
               STATEv. STEEL CITY BEVERAGES LTD. (NANAVATI,J.]                    11
    not capital investment but fixed capital investment. Rule 2(v) defines 'fixed A - ·
    capital investment' to mean investment in land, building, plant and machinery.
    Thus, the nature of investment contemplated by the Deferment Rules is
    investment in fixed assets which are ordinarily considered essential for
    production or manufacture of goods and have some degree of permanency.
    The second proviso to Rule 3 makes this position further clear. It states that B
    "Deferment shall be limited to 90 per cent of the fixed capital investment in
    fixed capital assets". To explain how in business accounting "fixed capital"
    and "fixed assets" are understood, Mr. Singh, learned counsel for the State,
    drew our attention to the book titled "Advanced Accounting" by Jamshed R.
    Batliboi. Therein, it is stated that "fixed capital of a business consists of its
    fixed assets" and "fixed assets are those which are acquired and intended to C
    be retained permanently for the purpose of carrying on a business, such as
    land, buildings, plant and machinery etc. Therefore, the context in which the
    word 'plant' is used in Rule 2(v) indicates that it is not used in its wider sense
    and does not include within its meaning land, building and machinery. It also
    appears that the rule-making authority did not intend 'plant' to mean what is
    not a fixed asset. For all these reasons, we are of the view that by 'plant' what D
    is intended by the rule-making authority is that apparatus which is used by
    the industry for carrying on its industrial process of manufacture. In respect<
    of an industry manufacturing soft-drinks and beverages, it can be said that
    plant would mean that apparatus which is used for manufacturing soft-drinks
    or beverages and not articles like crates. and bottles used for storing the E
    manufactured product.

           It is also relevant to refer to the two notifications of the Government
     of India in the Ministry of Industry (Department of Industrial Development)
     dated 2.4.1991 and 1.1.1993 issued under Section 11-B of the Industries
     (Development & Regulation) Act, 1951. Notification No.232 dated 2.4.1991           F
     while stating what has to. be included under fixed assets while ascertaining
     whether a small-scale industrial unit's investment has exceeded the limit of
     Rs.60 lakhs has clarified that the cost of storage tanks which store raw
     material .or finished products is to be excluded. The 1993 notification has
     amended the notification of 2.4.1991 and clarified by adding Note No.2 that        G
     in calculating the value of plant and machinery, the cost of storage tanks
>
    _which store raw materials/finished products only and which are not linked
     with the manufacturing process shall be excluded. On 8.5.1995, the Government
     of India again issued a Circular, after having received representations from the
     industry seeking clarification whether bottles and crates are to be taken into
     account for detennining the SS! status of the units engaged in manufacture         H
     12                         SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A of soft drinks/concentrates, clarifying that investment in bottles and crates in
    such units i!: in the nature of storage of finished products and, therefore, such
    investment has to be excluded while computing the value of plant and
    machinery.

          As pointed out in the affidavit in rejoinder, the Company had applied
B for an Eligibility Certificate claiming the status of a small scale industry. It is,
    in fact, registered as a small scale industrial unit. While declaring its investment
    at the time of seeking registration as a small scale industrial unit it did not
    include investment in bottles and crates under the head 'Plant and Machinery'.
    The investment in bottles and crates was shown under a separate head. It is
C   further pointed out in the said affidavit that if the investment of the Company
    in bottles and crates is included under the head 'Plant' then its total fixed
    capital inve!:tment will reach the level of 137.36 lakhs and it can no longer be
    regarded as a small scale industrial unit. As the Company had applied as a
    SS! unit, tile District Level Committee had to verify the status of the Company
    as SS! Unit and, therefore, it was bound to take into account the above
D   referred two notifications of years 1991and1993. If under these circumstances,
    the District Level Committee came to the conclusion that the Company is not
    entitled to the benefit of deferment in respect of its investment in bottles and
    crates, it cannot be said that it has acted contrary to law.

           We, therefore, allow this appeal, set aside the judgment of the High
E Court and dismiss the writ petition filed by the Company.
    T.N.A.                                                            Appeal allowed.