Holding

The exemption under Entry 255(2) is conditional on the eligible unit actually using the raw materials itself; any transfer to an ineligible unit breaches the notification, rendering the exemption unavailable and justifying the levy of purchase tax and penalty.

Summary

The State of Gujarat appealed against the exemption claimed by Essar Steel Ltd. (later Arcelor Mittal Nippon Steel India Ltd.) under Entry No.255(2) of the Gujarat Sales Tax Act, 1969 for purchase tax on naphtha and natural gas. The steel unit purchased the raw materials, claimed exemption, and then sold them to its power subsidiary, which used them to generate electricity that was later sold back to the steel unit. The Supreme Court held that the exemption required the eligible unit to actually use the raw materials itself within Gujarat, and that transferring them to an ineligible power company violated the conditions of the original notification and the declaration in Form 26. Consequently, the exemption was unavailable, the demand for purchase tax and the penalty under Section 45 were upheld, and the High Court and Tribunal orders were set aside. The Court also ruled that the doctrine of promissory estoppel does not apply to tax exemptions where statutory conditions are not met.

Issues considered

Whether the respondent‑dealer was entitled to exemption from purchase tax under the original Entry No.255(2) dated 05.03.1992.
Whether the subsequent amendments to Entry No.255(2) (notifications dated 14.11.2000 and 16.01.2002) altered the basic eligibility criteria.
Whether the amended entries took away the right to claim exemption under the original entry.
Whether there was a breach of the declaration made in Form 26 by the respondent.
Whether the demand of purchase tax after 14.11.2000 is barred by the principle of promissory estoppel.

Legislation cited

Gujarat Sales Tax Act, 1969s. 45, s. 45(5), s. 45(6), s. 49(2), s. 50

Subjects

sales taxpurchase tax exemptionGujarat Sales Tax Actpromissory estoppelexemption notificationpenaltyForm 26eligible unitineligible industrystrict construction

Judgment

720 [2022]
SUPREME COURT 12 S.C.R. 720
REPORTS [2022] 12 S.C.R.

A STATE OF GUJARAT
v.
ARCELOR MITTAL NIPPON STEEL INDIA LIMITED
(Civil Appeal Nos. 7710-7714 of 2021)
B JANUARY 21, 2022
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Gujarat Sales Tax Act, 1969: s. 49(2), 45 – Exemption from
payment of sales tax – ESL-assessee dealer, a steel manufacturing
unit made investments in the Scheme – ESL granted exemption from
C
payment of purchase tax on raw materials for Naphtha and Natural
Gas as per Entry No. 255 of the Notification dated 05.03.1992,
subject to fulfilling certain conditions – Amendment to Entry No.
255 vide two notifications – Under the said three Notifications, main
requirements was that the eligible unit furnishes to the selling dealer
D a certificate in Form No. 26 declaring that the goods shall be used
by it as raw materials, processing materials or consumable stores in
its industrial unit for which it has obtained the eligibility certificate,
for the manufacture of goods in its industrial unit as per the
conditions provided under the three notifications – Said exemption
made available to steel manufacturing units and the units/entities
E
engaged in generating electricity placed in the list of industries
“Not Eligible” for this incentive – Natural Gas and Naphtha
purchased by the ESL, against declarations in Form No.26 were
sold to EPL and EPL utilized the Natural Gas and Naphtha
purchased from ESL for the purpose of generating/manufacturing
F electricity, which came to be sold to the ESL by the EPL – Assessee
dealer seeking exemption from payment of the purchase tax as per
the original Entry No.255(2) vide notification dated 05.03.1992 –
Entitlement to – Held: As per the declaration furnished in Form
No.26, the eligible unit-ESL was required to actually use the goods
by him within the State of Gujarat as raw materials, for manufacture
G
of goods by him – Power producing companies were specifically
put in the list of ‘ineligible’ industries for any exemption from sale/
purchase tax on procurement of raw materials – Transfer of Naphtha
and Natural Gas by the eligible unit ESL to EPL, after availing the
exemption from payment of purchase tax and not using the raw
H
720
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 721
INDIA LIMITED

material for its own use is in violation of the eligibility criteria/ A
condition mentioned in the Original Entry No. 255(2) – Basic
eligibility condition that the eligible unit “shall actually use the
goods” remain the same in amended Entry No.255(2) vide
notifications dated 14.11.2002 and 16.01.2002 – Subsequent
amended Entry can be said to be clarificatory and expanding the
B
scope of eligibility as it was – It cannot said to be taking away the
rights available to the eligible unit under the original Entry
No.255(2) dated 05.03.1992, or in anyway in conflict with the first/
parent notification/Entry No.255(2) – Thus, there was breach of
the declaration given in Form No.26 (Entry No.255) by the assessee
dealer – Demand of the purchase tax on and after 14.11.2000, not C
hit by the principle of promissory estoppel – ESL not entitled to the
exemption from payment of the purchase tax as per the original
exemption notice – It was a case of false and wrong claim of
exemption, thus, levy of penalty justified – Assessee dealer, liable
to pay the penalty not exceeding one and one-half times.
D
Interpretation of statutes: Exemption notifications under
taxing statutes – Construction /Interpretation of – Held: Exemption
notification should be strictly construed and given meaning
according to legislative intendment – It is not open to the court to
ignore the conditions prescribed in industrial policy and the
exemption notifications – If any of the conditions laid down in the E
notification is not fulfilled, the party is not entitled to the benefit of
that notification – Gujarat Sale Tax Act, 1969
Doctrines: Doctrine of promissory estoppel – Applicability
of, in taxing statutes – Held: Doctrine of promissory estoppel is an
equitable remedy and has to be moulded depending on the facts of F
each case and not straitjacketed into pigeonholes – There cannot
be any hard and fast rule for applying the doctrine of promissory
estoppel but the doctrine has to evolve and expand itself so as to do
justice between the parties and ensure equity between the parties –
In taxing matters, the doctrine of promissory estoppel as such is not G
applicable and the Revenue can take a position different from its
earlier stand in a case with established distinguishing features –
Rules of promissory estoppel and estoppel by conduct may not be
applied to alter or amend the specific terms and against statutory
provisions.
H
722 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Allowing the appeals, the Court
HELD: 1. The respondent-the eligible unit was not entitled
to the exemption from payment of purchase tax under the original
Entry No.255(2) dated 05.03.1992, firstly, on the ground that it
did not fulfill the eligibility criteria/conditions mentioned in the
B original Entry No.255(2) dated 05.03.1992 and secondly that there
was a breach of declaration in Form No.26 furnished by the
respondent – eligible unit – ESL. The order passed by the
Assessing Officer levying the demand of purchase tax and
imposing the penalty is hereby restored. [Para 24][760-D-F]
C 2.1 The original Entry No.255(2) dated 05.03.1992 does
not provide that the eligible unit after purchase of the raw
materials instead of using the same by itself or himself can transfer/
sold to another unit and the another unit can use the said raw
materials. If it is accepted, in that case, it would be varying the
conditions imposed in the original Entry No.255(2) and it shall
D tantamount to adding something more than what is not provided
in the exemption notification/original entry, which is not
permissible. The original notification does not at all permit such
transfer and use of the raw materials after availing the exemption
for use of another unit, who, as such is otherwise not entitled to
E any exemption as per the incentive policy. [Para 11.1][752-F-G]
2.2 As per the incentive policy, the actual benefit of
exemption was available to certain industries as per the list of
‘eligible’ industries. The power producing companies were
specifically put in the list of ‘ineligible’ industries for any
F exemption from sale/purchase tax on procurement of raw
materials. Thus, the EPL being a power producing company was
not eligible at all for any exemption from sale/purchase tax on
procurement of raw materials. Therefore, as such, by such transfer
and sale of raw materials by ESL to EPL, EPL got the benefit of
exemption, which otherwise being a power producing company
G was not eligible for such an exemption. [Para 12][752-H; 753-A-
B]
2.3. Transfer of Naphtha and Natural Gas by the eligible
unit - ESL to another unit – EPL, after availing the exemption
from payment of purchase tax and not using the Naphtha and
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 723
INDIA LIMITED

Natural Gas (raw materials) for its own use for manufacture of A
the goods so manufactured by it, it can be said to be violating the
eligibility criteria/condition mentioned in the original Entry
No.255(2) dated 05.03.1992 and it can be said that the respondent
-ESL committed a breach of the declaration given in Form No.26.
Therefore, the High Court has committed an error in holding
B
that the respondent did not commit any breach of any of the
conditions mentioned in the original Entry No.255(2) dated
05.03.1992. [Para 14][753-D-F]
2.4. While the exemption notification should be liberally
construed, beneficiary must fall within the ambit of the exemption
and fulfill the conditions thereof. In case such conditions are not C
fulfilled, the issue of application of the notification does not arise.
It is settled law that the notification has to be read as a whole. If
any of the conditions laid down in the notification is not fulfilled,
the party is not entitled to the benefit of that notification. An
exception and/or an exempting provision in a taxing statute should D
be construed strictly and it is not open to the court to ignore the
conditions prescribed in industrial policy and the exemption
notifications. The Statutory provisions providing for exemption
have to be interpreted in the light of the words employed in them
and there cannot be any addition or subtraction from the statutory
provisions. Eligibility clause, it is well settled, in relation to E
exemption notification must be given effect to as per the language
and not to expand the scope deviating from the language. There
is a vast difference and distinction between a charging provision
in a fiscal statute and an exemption notification. [Para 14.1-14.3,
14.6][753-G-H; 754-A-B,G] F
2.5. In the instant case, the intention of the State to provide
the incentive under the incentive policy was to give benefit of
exemption from payment of purchase tax was to the specific class
of industries and, more particularly, as per the list of ‘eligible
industries’. Exemption was not available to the industries listed G
in the ‘ineligible’ industries. It was never the intension of the
State Government while framing the incentive policy to grant the
benefit of exemption to ‘ineligible industries’ like the power
producing industries like the EPL, which as such was put in the
list of ‘ineligible’ industries. [Para 14.5][754-D-E]
H
724 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 2.6. Second notification dated 14.11.2000/the amended
Entry No.255(2), is clarificatory in nature and there is no change
in the basic eligibility criteria/conditions mentioned in the original
Entry No.255(2). As per the original Entry No.255(2) dated
05.03.1992 and even as per the Form No.26 appended thereto,
the eligible unit was required to actually use the raw materials
B
purchased. In the subsequent notification, it is made explicitly
clear that the raw materials so purchased are to be used by the
eligible unit in its industrial unit. Therefore, the basic requirement
that the eligible unit has to actually use such raw materials
purchased by him is in no way modified and/or amended. On the
C contrary, the subsequent amended Entry No.255(2) dated
14.11.2000 can be said to be expanding the scope of eligibility as
it was. Earlier the eligible unit was required to actually use the
goods purchased within the State of Gujarat and as per the
subsequent amended Entry No.255(2) dated 14.11.2000 even if
such goods are used by it outside the State of Gujarat in that case
D
also such eligible unit was held to be eligible for exemption. Even
as per the condition No.6 in the amended Entry No.255(2) dated
14.11.2000, it is specifically mentioned that the eligible unit shall
actually use the goods purchased, which was the requirement in
the first notification also. Therefore, the subsequent amended
E Entry No.255(2) vide notification dated 14.11.2000 can be said to
be clarificatory and/or expanding the scope of eligibility, but in
no case, it can be said to be taking away any right under the
original Entry No.255(2) dated 05.03.1992. Similarly, even the
third amended Entry No.255(2) dated 16.01.2002 also cannot be
said to be taking away any right available under the original Entry
F
No.255(2) dated 05.03.1992. [Para 15.1, 16][755-B-G]
2.7. Subsequent amended Entry No.255(2) vide notification
dated 16.01.2002 also can be said to be expanding the scope of
eligibility and in no way can be said to be taking away the rights
available to the eligible unit under the original Entry No.255(2)
G dated 05.03.1992. The eligibility criteria/condition that the eligible
unit “shall actually use the goods” remain the same even in the
said amendedEntry No.255(2) dated 16.01.2002. Therefore, the
subsequent notifications/amended Entries cannot be said to be
in any way in conflict with the first/parent notification/Entry
H No.255(2). [Para 16.1][755-H; 756-A-B]
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 725
INDIA LIMITED

2.8. Even under the first/ original Entry No.255(2) dated A
05.03.1992 and even as per the declaration furnished in Form
No.26, the eligible unit – respondent – ESL was required to
actually use the goods by him/within the State of Gujarat as raw
materials, for manufacture of goods by him. But by actually not
using the raw materials so purchased by which it got the benefit
B
of exemption from payment of purchase tax, sold the said raw
materials, which in fact were required to be used by him, to
another unit/entity, which another unit used it for manufacture of
its goods – generating the electricity and which in turn the EPL
sold to the ESL. Thus, the ESL– eligible unit did not comply with
and/or fulfilled the eligibility criteria/conditions even as per the C
original Entry No.255(2) and therefore, was/is not entitled to the
exemption from payment of the purchase tax as per the exemption
notification dated 05.03.1992 vide original Entry No.255(2).
Therefore, even assuming that the subsequent amended Entries
vide second and third notifications are not to be made applicable
D
in that case also the respondent -Essar Steel Ltd. being eligible
unit was required to comply with and/or fulfill all the eligibility
criteria/conditions mentioned in the original Entry No.255(2), by
not actually using the raw materials by himself and transferring/
selling the same to the non-eligible unit, the respondent was not
entitled to avail the benefit of exemption even under the original E
Entry No.255(2). [Para 17][756-C-F]
2.9. Even as per Form No. 26 (Entry No.255), as per the
declaration filed by the respondent, being ‘eligible’ unit while
purchasing goods for use in manufacturing goods, it was declared
that the raw materials so purchased will be used by it in the F
manufacture of goods for sale. Thus, by not using the raw materials
so purchased by it, the respondent – eligible unit – ESL has
violated the declaration given in Form No.26. Therefore, the
respondent was not entitled to the exemption even under the
first/parent notification. [Para 18][756-G]
G
2.10. In the instant case, first of all, the principle of
promissory estoppel to the exemption sought ought not to have
been applied at all. Each assessment year/period is independent.
Even otherwise, in the facts and circumstances of the case, the
principle of promissory estoppel shall not be applicable. In the
H
726 SUPREME COURT REPORTS [2022] 12 S.C.R.

A instant case, the respondent – eligible unit as such was not
entitled to the exemption even under the first notification as it
violated the declaration given in Form No.26 as well as did not
comply with and/or fulfilled the eligibility criteria/conditions
required to be fulfilled while availing benefit of exemption. The
respondent did not actually use the raw materials purchased by
B
him/it and availed the exemption and after availing the exemption
sold the said raw materials to ‘ineligible’ unit - EPL and the EPL
used the same for manufacture of its goods – generating the
electricity, which subsequently again sold to the ESL – eligible
unit on payment of sale consideration. [Para 19][757-A-C]
C 2.11. As per the incentive policy declared by the State
Government, the power generating company was put in the list
of ‘ineligible industries’ and thus, independently was not entitled
to the exemption under the original Entry No.255(2). Thus, by
such a transfer/sale from the eligible unit to another unit the benefit
D of exemption is availed by the ‘ineligible’ industry, which is wholly
impermissible and that cannot be said to be the intention of the
Government while providing the incentive in the form of
exemption from payment of purchase tax. Such a benefit of
exemption was available only to eligible units/industries and the
steel industry of which ESL belonged being one of the eligible
E industries. Therefore, there was no question of applicability of
principle of promissory estoppel. [Para 20][757-D-E]
2.12. ESL had furnished wrong and false declarations. In
the original notification/entry, it was not provided that even if the
raw materials so purchased is not used by itself after availing the
F exemption, the same can be sold to another entity, which is
‘ineligible’ industry. It did not provide that in such a situation
also and despite the fact that raw material is not actually used by
the eligible unit, which was required to be used even as per the
declaration in Form No.26, such eligible unit shall be entitled to
G the exemption. No such promise was given. The wordings and
the language used in the exemption notifications are very clear,
simple and unambiguous. Therefore, when there was no such
promise and/or representation, the demand cannot be said to be
hit by the principle of promissory estoppel as observed and held

H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 727
INDIA LIMITED

by the Tribunal as well as the High Court in the impugned A
judgment and order. [Para 20.1][757-F-H; 758-A]
2.13. The doctrine of promissory estoppel is an equitable
remedy and has to be moulded depending on the facts of each
case and not straitjacketed into pigeonholes. There cannot be
any hard and fast rule for applying the doctrine of promissory B
estoppel but the doctrine has to evolve and expand itself so as to
do justice between the parties and ensure equity between the
parties. In the present case, the principle of promissory estoppel
shall not be applicable. [Para 20.2][758-B-C]
2.14. In taxing matters, the doctrine of promissory estoppel C
as such is not applicable and the Revenue can take a position
different from its earlier stand in a case with established
distinguishing features. The rules of promissory estoppel and
estoppel by conduct may not be applied to alter or amend the
specific terms and against statutory provisions. All the terms and
conditions contained in the exemption notification shall prevail D
and the person claiming the exemption has to fulfil and satisfy all
the eligibility criteria/conditions mentioned in the exemption
notification. [Para 20.3, 20.4][758-C-E]
2.15. The Scheme of the Statute does not in any manner
indicate that the incentive provided has to continue for the E
consecutive years irrespective of the fulfilling of the eligibility
conditions. Applicability of the incentive is directly related to the
eligibility and not dehors the same. If it is found that the industrial
undertaking does not fulfil the eligibility criteria, it cannot claim
the incentive/exemption. The submission that as in the earlier F
assessment years benefit of exemption was granted to the
respondent and, therefore, in the subsequent assessment years
also, despite the fact that it is found that the respondent was/is
not eligible for the benefit of exemption under the original
Notification/Entry No.255(2) cannot be accepted. If such a
submission is accepted in that case it will be perpetuating the G
illegality and granting the benefit of exemption to ‘ineligible
industry’, who did not fulfill and/or comply with the eligibility
criteria/conditions mentioned in the exemption notification. The
principle of promissory estoppel shall not be applicable contrary
H
728 SUPREME COURT REPORTS [2022] 12 S.C.R.

A to the Statute. Merely because erroneously and/or on
misinterpretation, some benefits in the earlier assessment years
were wrongly given, cannot be a ground to continue the wrong
and to grant the benefit of exemption though not eligible under
the exemption notification. [Para 21.1, 22][758-G-H; 759-A-C]
B 2.16. The penalty is leviable under Section 45 and such a
penalty is leviable under sub-sections (5) and (6) of Section 45 of
the Act, 1969 and the penalty is leviable on purchase tax assessed.
It provides that if the difference of tax paid and tax leviable/
assessed is more than twenty- five percent, in that case, the dealer
shall be deemed to have failed to pay the tax to the extent of the
C difference between the amount so assessed/re-assessed and the
amount paid and, in that case, there shall be levied on such dealer
a penalty not extending one and one-half times the difference as
per sub-section (5). Therefore, there being difference of more
than twenty five percent, penalty to the said extent shall be
D leviable. This is a clear case of false and wrong claim of exemption,
as the exempted goods were transferred to a third person and
used in an ‘ineligible’ industry. This is a case of deliberate violation
and evil doing. [Para 23][759-D-E]
2.17. As the difference between total tax paid and the
E purchase tax is more than twenty-five percent, the respondent is
deemed to have failed to pay the tax as per sub-section (5) of
Section 45 and, therefore, liable to pay the penalty not exceeding
one and one-half times. The words used in sub-section (6) of
Section 45 is “there shall be levied on such dealer a penalty not
exceeding one and one-half times the difference”. In the instant
F case, the modus operandi which was adopted by the respondent
warrants a penalty. Though, the raw material was required to be
used by itself for the manufacture of their goods, after availing
the exemption as eligible unit and instead of using the same for
itself/himself, the ESL sold the raw materials to an ‘ineligible’
G entity – EPL, who used it for manufacture of its own goods –
generating the electricity, which again came to be sold to ESL
under the power purchase agreement. [Para 23.1][759-F-H; 760-
A]
2.18. As such the EPL, under the incentive scheme, was
H not eligible at all for exemption from payment of purchase tax as
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 729
INDIA LIMITED

in fact power generating companies were put in the list of A
‘ineligible industries’. Therefore, by such a modus operandi, the
benefit, which was not available to the EPL was made available
by such transfer of raw materials by the ESL to EPL. There is a
breach of declaration in Form No.26 also. Therefore, in the facts
and circumstances of the case, the levy of penalty is justified and
B
warranted. [Para 23.2][760-B-C]
2.19. The impugned common judgment and order passed
by the High Court as well as that of the Tribunal quashing and
setting aside the demand of purchase tax from the respondent
are hereby quashed and set aside. [Para 24][760-D]
C
Commissioner of Central Excise, Bangalore-1 v. Bal
Pharma Limited, Bangalore and Ors., (2011) 2 SCC
620 – relied on.
Commissioner of Customs (Import), Mumbai v. Dilip
Kumar and Company and Others, (2018) 9 SCC 1 : D
[2018] 7 SCR 1191; Union of India and Anr. Etc. Etc.
v. V.V.F. Limited and Another, Etc. Etc., (2020) SCC
Online SC 378; Bengaluru Development Authority v.
Sudhakar Hegde and Ors., (2020) 15 SCC 63; Kothari
Industrial Corporation Limited v. Tamil Nadu Electricity
Board and Anr., (2016) 4 SCC 134 : [2016] 1 SCR 564 ; E
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta & Ors., (2020) 8 SCC 531 : [2019]
16 SCR 275; Assistant Commissioner (CT) LTU and
Anr. v. Amara Raja Batteries Limited, (2009) 8 SCC 209
: [2009] 11 SCR 953; Hindustan Steel Ltd. v. State of F
Orissa, (1969) 2 SCC 627 : [1970] 1 SCR 753; Excel
Crop Care Limited v. Competition Commission of India
and Anr., (2017) 8 SCC 47 : [2017] 5 SCR 901 -
referred to.
Case Law Reference G
[2018] 7 SCR 1191 referred to Para 3.7
(2020) 15 SCC 63 referred to Para 3.10
[2016] 1 SCR 564 referred to Para 3.12
H
730 SUPREME COURT REPORTS [2022] 12 S.C.R.

A [2019] 16 SCR 275 referred to Para 4.1
[2009] 11 SCR 953 referred to Para 4.10
[1970] 1 SCR 753 referred to Para 4.29
[2017] 5 SCR 901 referred to Para 4.29
B (2011) 2 SCC 620 relied on Para 20.3
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.7710-
7714 of 2021.
From the Judgment and Order dated 06.05.2016 of the High Court
of Gujarat at Ahmedabad in Tax Appeal Nos.136 to 140 of 2016.
C
Maninder Singh, Sr. Adv., Prabhas Bajaj, Ms. Deepanwita
Priyanka, Advs. for the Appellant.
Ritin Rai, Sr. Adv., Vishal Gehrana, Ashutosh P. Shukla, Ms. Kritika,
M/s Karanjawala & Co., Advs. for the Respondent.
D The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court of Gujarat dated 06.05.2016
E passed in Tax Appeal Nos. 136 of 2016 to 140 of 2016 by which the
High Court has dismissed the said appeals preferred by the State and
has upheld the common order dated 29.01.2015 passed by the Gujarat
Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as the
“Tribunal”) in Second Appeal Nos.420 to 423 of 2013 by which the
Tribunal held that the respondent is entitled to the exemption from payment
F of amount of sales tax as per the original Entry No.255(2) vide F.D.’s
Notification dated 05.03.1992, which was issued under Section 49(2) of
the Gujarat Sales Tax Act, 1969 (hereinafter referred to as “Act, 1969”),
the State of Gujarat has preferred the present appeals.
2. That the respondent herein – assessee -dealer (earlier known
G as Essar Steel Ltd.) is engaged in the activity of manufacture and sale
of Hot Briquetted Iron (HBI)and Hot Rolled Coil (HRC) at its two units
located atHazira in Surat, Gujarat. The respondent holds registration
certificate under the Gujarat Sales Tax Act, 1969 and also under the
Central Sales Tax Act, 1956. The respondent made eligible investment
in Unit No.1 pursuant to Resolution dated 07.05.1986 issued by the
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 731
INDIA LIMITED [M. R. SHAH, J.]

Industries, Mines and Energy Departmentof the Government of Gujarat. A
Therefore, the respondent was certified as entitled to avail incentives
during the eligible period from 01.08.1990 to 31.07.2004 up to the upper
monetary limit of Rs.237.59 crores.
2.1 The Government of Gujarat vide Resolution dated 26.07.1991
announced a scheme known as “The Scheme for SpecialIncentives to B
Prestigious Units 1990-95 (modified)” for attracting investments in core
sector industries. Under the said scheme, a prestigious unit was eligible
for incentives up to 90% of the fixed capital investment. That pursuant
to the said Scheme, the respondent – Essar Steel Ltd. (hereinafter referred
to as “ESL”) invested approximately Rs.5000 crores formanufacture of
HRC. That the said exemption was provided as per Entry 255 of the C
notification issued by the Government of Gujarat under Section 49(2) of
the Act, 1969. That the Unit No.2 of the ESL was granted Sales Tax
exemption in terms of Entry No.255(2) of the Notification dated
05.03.1992 issued under Section 49(2) of the Act, 1969 for the period
from 22.02.1993 to 21.02.2007 up to a maximum monetary limit ofRs. D
2050 crores.
2.2 At this stage, it is required to be noted that the said exemption
as per Entry No.255(2) vide Notification dated 05.03.1992 was subject
to fulfilling certain conditions provided in the said original Entry No.255(2),
which shall be dealt with hereinafter below. E
2.3 That the exemption granted to Unit No.2 of the respondent
was an exemption from payment of purchase tax on raw materials for
(i) Naphtha; and (ii) Natural Gas. The applicable purchase tax at the
relevant time on Naphtha was @16% on the taxable value and for Natural
Gas, it was @20% on taxable value. At this stage, it is also required to F
be noted that this exemption had been made available to steel
manufacturing units and the units/entities engaged in generating electricity
were specifically excluded from this exemption by placing them in the
list of industries “Not Eligible” for this incentive.
2.4 As per the original Entry No.255(2) dated 05.03.1992, the G
condition No.6 required the eligible units to actually use the goods
purchased within the State of Gujarat as raw materials, processing
materials or consumable stores in the manufacture of goods for sale
within the State of Gujarat or outside the State of Gujarat or as packing
materials in packing of the goods so manufactured.
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732 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 2.5 That thereafter vide Government Notification dated 14.11.2000,
Entry No.255(2) came to be amended w.e.f. 14.11.2000 whereby it was
provided that the goods were to be actually used by the eligible units as
raw materials, processing materials or consumable stores in its industrial
units for which it has obtained the eligibility certificate. That thereafter
Entry No.255(2) came to be further amended vide Notification dated
B
16.01.2002, which provided that the eligible units, who claim exemption
from purchase tax on purchase of the goodseven if the goods are used
as raw materials, processing materials or consumable stores in its
industrial units for which it has obtained the eligibility certificate in the
manufacturing of goods for dispatch to its another unit or division situated
C within the State of Gujarat or outside the State of Gujarat for use in the
manufacture of other goods for sale by such other unit.
2.6 At this stage, it is required to be noted that under all the aforesaid
three notifications, one of the main requirements was that the eligible
unit furnishes to the selling dealer a certificate in Form No. 26 and obtained
D from the registering authority, declaring inter alia that the goods shall be
used by it as raw materials, processing materials or consumable stores
in its industrial unit for which it has obtained the eligibility certificate,
forthe manufacture of goods in its industrial unitas per the conditions
provided under the three notifications.
E 2.7 On commissioning of the Unit No.2, the Natural Gas and
Naphtha purchased by the respondent – ESL, against declarations in
Form No.26 were sold to Essar Power Limited (another company)
(hereinafter referred to as “EPL”) and the EPL utilized the Natural Gas
and Naphtha purchased from ESL for the purpose of generating/
manufacturing electricity, which came to be sold to the ESL by the EPL.
F It is the case on behalf of the respondent – ESL that the said electricity
generated by EPL was used by it for the purpose of manufacturing
HRC in its industrial unit.
2.8 The Officers of the Sales Tax conducted a surprise visit at the
premises of the respondent – ESL in the month of July, 2001. A notice
G was issued by the Sales Tax Officer calling for certain information
including details of branch transfers, deemed exports, transfer of finished
goods etc. The Sales Tax Department thereafter raised a dispute inter
alia regarding breach of declaration given in Form No.26 while purchasing
Naphtha/Natural Gas having been committed by the respondent – ESL
H on the ground that the goods so purchased were transferred to EPL for
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 733
INDIA LIMITED [M. R. SHAH, J.]

generation of electricity, which was then used in Unit No.2 for the A
manufacture of HRC. A notice was issued on 30.06.2002 by the Sales
Tax Officer calling upon the ESLto give clarification in respect of the
purported breach of conditions of exemptions, including the transfer of
Naphtha/Natural Gas to EPL for generation of electricity. That the
Assessing Officer passed the Assessment Orders in respect of Unit
B
No.2 for Assessment Years 1995-1996 to 1997-1998 and 2000-2001
holding inter alia that no tax was due and payable by the respondent –
ESL on account of any purported breach of the conditions of the exemption
admissible under Entry 255(2).
2.9 Subsequently, a notice dated 30.05.2005 came to be issued by
the Deputy Commissioner of Sales Tax for initiating levy of purchase C
tax of Rs.480.99 crores and for levying penalty for the period 1995-1996
to 2005-2006 on the ground that the respondent – ESL has contravened
the provisions of the Act, more particularly, Entry No.255 and availed
the exemption wrongly. The respondent -ESL filed a writ petition before
the High Court challenging the notice issued by the Deputy Commissioner. D
By order dated 28.03.2006, the High Court restrained the departmental
authorities fromimplementing or enforcing the assessment orders subject
tothecondition that in respect of Unit No.2, the respondent – ESL
shoulddeposit 50% of the tax dues within the time stipulated in the order.
The assessment orders by the Deputy Commissioner of Sales Tax came
to be challenged by way of appeals before the Joint Commissioner. The E
Joint Commissioner – the first Appellate Authority vide order dated
30.04.2013 imposed purchase tax under Section 50 of the Act for the
years 1998-1999 and 1999-2000. However, the first Appellate Authority
accepted in the first appeal that till the amendment took place in Entry
No.255 on 14.11.2000, even if the purchased goods were used for F
manufacture at any place in the State of Gujarat, there was no breach of
the conditions stipulated in Form No.26 and for the said assessment
years, the purchase tax together with interest and penalty imposed came
to be set aside. Thus, the Joint Commissioner/first Appellate Authority
confirmed the levy of purchase tax in respect of the purchase of goods
till 14.11.2000. G

2.10 Being aggrieved against the order passed by the Joint
Commissioner dated 30.04.2013, both, the respondent -dealer – ESLand
the State Government preferred the appeals before the Tribunal. That
by order dated 29.01.2015, the Tribunal allowed the second appeals
H
734 SUPREME COURT REPORTS [2022] 12 S.C.R.

A preferred by the respondent-ESL holding that the respondent – ESLis
not liable to pay any tax, interest or penalty on the disputed transactions
and dismissed the cross objections of the State.
2.11 Feeling aggrieved and dissatisfied with the orders passed by
the Tribunal allowing the second appeals preferred by the respondent –
B dealer - assessee and dismissing the cross objection preferred by the
State and holding that the respondent – ESL is not liable to pay any tax,
interest or penalty on the disputed transactions, the State preferred the
present appeals before the High Court being Tax Appeal Nos. 136 of
2016 to 140 of 2016. By impugned common judgment and order, the
High Court has dismissed the said appeals mainly on the ground of
C promissory estoppel and also observing that the respondent – ESL has
not violated any of the conditions provided under the original Entry
No.255(2) dated 05.03.1992.
2.12 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court, the State has preferred
D the present appeals.
3. Shri Maninder Singh, learned Senior Advocate appearing on
behalf of the appellant – State of Gujarat has vehemently submitted that
the impugned common judgment and order passed by the High Court is
patently erroneous and unsustainable.
E
3.1 It is vehemently submitted by Shri Maninder Singh, learned
senior counsel appearing on behalf of the State that in the present case,
the Notification dated 05.03.1992 can be said to be a parent notification
and all other subsequent Notifications dated 14.11.2000 and 16.01.2002
were either clarificatory in nature and/or expanding the scope of
F exemption. It is submitted that in any case, subsequent Notifications
dated 14.11.2000 and 16.01.2002 amending the original Entry No.255(2)
cannot be said to be taking away any rights, which were conferred under
the parent Notification dated 05.03.1992. It is submitted that therefore
there is no question of the promissory estoppel as applied by the High
G Court and the Tribunal.
3.2 It is submitted by Shri Singh, learned Senior Advocate appearing
for the State that as per the original Notification dated 05.03.1992 and
as per the original Entry No. 255(2) and the statutory Form No.26, it is
abundantly clear that the parent Notification dated 05.03.1992 extends
the exemption only to ‘the eligible unit’ for utilizing the raw materials for
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 735
INDIA LIMITED [M. R. SHAH, J.]

manufacture of goods in that unit itself. It is submitted that the wordings A
used in the notification are clear and unambiguous that the exemption
shall become available only if the said eligible unit utilizes the raw
materials for manufacture of goods in the very same ‘eligible unit’. It is
submitted that therefore the raw materials – Naphtha and Natural Gas
were required to be used by the ‘eligible unit – Essar Steel Ltd.’ in the
B
very same steel unit and for manufacture of the steel only.
3.3 It is submitted that if the interpretation made by the High
Court and the Tribunal is accepted, in that case, even when the eligible
unit does not itself utilizes the raw materials, it may, after availing the
exemption, simply transmit the raw materials to any other unit or entity,
even the said entities are ‘not eligible’ to the exemption and such entities C
though are ‘not eligible’ would then get the benefit of exemption. It is
submitted that that could not be the object and purpose of granting
exemption to the ‘eligible units’ only.
3.4 It is submitted that while introducing the incentive scheme,
the Department issued the list of industries of ‘eligible units’ and ‘non D
eligible units’ for any exemption from sale/purchase tax on procurement
of raw materials. It is submitted that in the present case the power
generating companies were specifically put in the ‘non eligible units’
category. It is submitted that in the present case despite being fully aware
of the clear and unambiguous terms and conditions of the notifications E
wherein the power producing companies were specifically made
‘ineligible’ for availing the exemptions and though ESLwas required to
use the raw materials - Naphtha and Natural Gas in their own unit, after
availing the exemption from payment of purchase tax, the ESL did not
use the said raw materials in its unit but sold the said rawmaterials to
another company – EPL,and EPL used the said raw materials – Naphtha F
and Natural Gas for generating the electricity, which came to be
subsequently sold to the ESL.It is submitted that, thus, through such
circuitous method, the ESL passed on the benefit of exemption to EPL,
which otherwise the EPL was not eligible and/or entitled to.
3.5 It is submitted that, thus, the interpretation advanced by the G
assessee – ESLaccepted by the High Court and the Tribunal would
completely defeat the purpose of exemption notifications and would be
giving premium to such dishonest assessee/dealer, who after availing
the exemption would sell the raw materials to another industry/entity,
who as such are not entitled to and/or eligible for such an exemption. It H
736 SUPREME COURT REPORTS [2022] 12 S.C.R.

A is submitted that if the interpretation advanced by the assessee is
accepted, in that case, it would permit industries, which are eligible for
exemption to simply purchase the raw materials; not use them for any
manufacturing in their own units, and then simply transmit them for use
and manufacture by other units, even though such units are not eligible
for exemption under the notification/policy.
B
3.6 It is further submitted by Shri Maninder Singh, learned Senior
Advocate appearing on behalf of the State that in the present case, the
wordings used in the parent exemption notification and Entry No.255(2)
dated 05.03.1992 are very much clear and unambiguous. It specifically
provides the conditions for availing the exemption and the eligible units
C have to fulfill all the conditions stipulated in the parent Entry No.255(2)
dated 05.03.1992.
3.7 It is submitted that as per the law laid down by this Court in
catena of decisions, the provisions of an exemption notification are to be
construed strictly. It is submitted that even in the case of any perceived
D ambiguity, the provision has to be construed in favour of the Revenue.
Reliance is placed on the decision of the Constitution Bench of this Court
in the case of Commissioner of Customs (Import), Mumbai Vs.
Dilip Kumar and Company and Others,(2018) 9 SCC 1(para 66)
as well as another decision of this Court in the case of Union of India
E and Anr. Etc. Etc. Vs. V.V.F. Limited and Another, Etc. Etc., (2020)
SCC Online SC 378(paras 53-55).
3.8 It is further submitted by Shri Maninder Singh, learned Senior
Advocate appearing on behalf of the State that what is weighed with
High Court that levy of the purchase tax is hit by the principle of
F promissory estoppel by observing that by the subsequent Notifications
dated 14.11.2000 and 16.01.2002, the State could not have taken the
rights which are available under the parent Notification dated 05.03.1992.
3.9 It is submitted that as such the subsequent Notification dated
14.11.2000 can be said to be clarificatory in nature and therefore,
G conditions provided in the parent Entry No. 255(2) dated 05.03.1992
cannot be said to have been affected by subsequent notifications. It is
submitted that as such by the subsequent Notification dated 14.11.2000,
the conditions in the original Entry No. 255(2) dated 05.03.1992 have
been explicitly made clear and as such there is no basic modification of
the conditions imposed in the parent Entry No.255(2) dated 05.03.1992.
H It is submitted that both the Notifications dated 05.03.1992 and 14.11.2000
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 737
INDIA LIMITED [M. R. SHAH, J.]

provided the basic condition that the eligible unit shall have to furnish to A
the selling dealer a certificate in Form No.26 that the raw materials
purchased shall be used as input in its industrial unit only. It is therefore
submitted that as such the subsequent Notification dated 14.11.2000 by
no stretch of imagination can be said to be modifying the basic conditions
of availing the exemption provided in the parent Entry No.255(2) dated
B
05.03.1992.
3.10 It is submitted that as such the clarificatory notification dated
14.11.2000 had made it abundantly clear and beyond any pale of doubt
that any such exemption on purchase of raw materials, shall be available
only to the unit when it is consuming the raw materials for manufacture
of goods in the very same unit. It is submitted that it is a settled position C
of law that any such amendment being only clarificatory in nature, applies
to all entities uniformly and from the date of original notification granting
the exemption itself. Reliance is placed on the decision of this Court in
the cases ofUnion of India and Anr. Etc. Etc. Vs. V.V.F. Limited
and Another, Etc. Etc. (supra) and Bengaluru Development D
Authority Vs. Sudhakar Hegde and Ors., (2020) 15 SCC 63 (paras
32 to 35). It is submitted that therefore the view taken by the High Court
in the impugned judgment that the Notification dated 14.11.2000 would
apply only to such units, which get established after 14.11.2000 is
unsustainable and deserves to be reversed by this Court.
E
3.11 It is further submitted that even the further amended Entry
No.255(2) dated 16.01.2002 can be said to be expanding the scope of
eligibility for availing the exemption. It is submitted that the subsequent
Entry No.255(2) dated 16.01.2002 cannot be said to be taking away
something what was provided in the parent Entry No.255(2) dated
05.03.1992. it is submitted that therefore the High Court has erred in F
applying the principle of promissory estoppel to hold that by subsequent
notifications the benefit of exemption under Entry No.255(2) dated
05.03.1992 cannot be taken away.
3.12 It is further submitted by Shri Maninder Singh, learned Senior
Advocate appearing on behalf of the State that even the High Court has G
erred in observing that denying the benefit of exemption under 1992
notification would result in denying the respondent – ESL facility of using
the electricity generated by EPL. It is submitted that the said finding of
the High Court is patently erroneous and unsustainable. It is submitted
that as per the settled proposition of law, any tax exemption granted H
738 SUPREME COURT REPORTS [2022] 12 S.C.R.

A under a statutory provision by the Government is a concession, which
does not create any legally enforceable right against the Government
and the Government is always empowered to vary or withdraw the said
exemption and that the principle of promissory estoppel shall have no
applicability in this behalf. Heavy reliance is placed on the decision of
this Court in the case of Union of India and Anr. Etc. Etc. Vs. V.V.F.
B
Limited and Another, Etc. Etc. (supra)(paras 40 to 45) and another
decision of this Court in the case of Kothari Industrial Corporation
Limited Vs. Tamil Nadu Electricity Board and Anr., (2016) 4 SCC
134 (paras 10 to 14). It is further submitted that the aforesaid findings
that to deny the exemption to the respondent – ESL under the parent
C Entry No.255(2) dated 05.03.1992 would be denying the respondent –
ESL the facility of using the electricity generated by EPL is absolutely
erroneous and is unsustainable. It is submitted that the arrangement
between the respondent –assessee – ESL and EPL as such has no
bearing on the liability of the respondent – assessee to fulfill its tax
obligation. It is submitted that even otherwise in the present case, the
D
raw materials – Naphtha and Natural Gas purchased by the eligible unit
– ESL though was required to be used by Essar Steel in its own units,
the ESL sold the same to the EPL and EPL used the said raw materials
for generation of electricity, which came to be sold to the ESL under the
power purchase agreement. It is submitted that as submitted hereinabove,
E the electricity generation companies were as such put in the ‘not eligible’
list and, therefore, as such the EPL was not eligible for exemption under
parent Entry No.255(2) dated 05.03.1992 and, thus, through the circuitous
methodology or modus operandi, the EPL got the benefit of exemption
though ‘not eligible’.
F 3.13 In the alternatively, it is submitted by Shri Maninder Singh,
learned Senior Advocate appearing on behalf of the State that even
assuming that the subsequent amended Entry No. 255(2) issued vide
Notifications dated 14.11.2000 and 16.01.2002 are not to be made
applicable, which according to the High Court was hit by principle of
promissory estoppel,in that case also, the respondent – assessee – ESL
G was required to satisfy all the conditions, which are provided in the parent
Entry No.255(2) dated 05.03.1992, which the ESL failed to fulfill/satisfy.
3.14 It is further submitted that in the field of taxation, every
assessment year is an independent year and merely because in the earlier
assessment years, some benefit, though was not available, was wrongly
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 739
INDIA LIMITED [M. R. SHAH, J.]

given, the same can be corrected in the subsequent assessment years A
and the tax is to be permitted to be levied as per the law. It is submitted
that in the present case, it can be said that though right from the very
beginning, the ESL did not comply with the requisite conditions provided
in the parent Entry No.255(2) dated 05.03.1992, still they got the
exemption benefit for the period prior to 2000 erroneously. It is submitted
B
that that does not take away the right of the State to levy the tax, which
otherwise is permissible under thelaw and which is levied in accordance
with law.
3.15 It is further submitted that in the present case, considering
the modus operandi adopted by the ESL and the EPL and despite being
fully aware of the clear and unambiguous terms of the exemption C
notification and despite the power producing companies were specifically
made ‘ineligible’ for availing the exemption and despite the fact that as
per the conditions provided in the parent Entry, the raw materials –
Naphtha and Natural Gas were required to be used by the assessee –
ESL in its own unit, the raw materials came to be sold to an ‘ineligible’ D
entity – EPL and the ‘ineligible unit’ indirectly/directly got the benefit of
exemption though not entitled to and/or eligible and used the said raw
materials in their own unit for generation of electricity, the respondent –
assessee is liable to pay the penalty in terms of Section 45(5). It is
submitted that therefore the orders passed by the Joint Commissioner
setting aside the penalty confirmed by the Tribunal and the High Court E
also deserve to be quashed and set aside.
3.16 Making above submissions and relying upon the above
decisions, it is prayed to allow the present appeals.
4. Present appeals are vehemently opposed by Shri Ritin Rai, F
learned Senior Advocate appearing on behalf of the respondent –
assessee.
4.1 It is submitted that the respondent was previously named as
Essar Steel Ltd., which was then changed to Essar Steel India Limited
(ESIL). It is submitted that Essar Steel India Limited was admitted into G
insolvency under the Insolvency and Bankruptcy Code, 2016 (“IBC”)
on 02.08.2017 and the Corporate Insolvency Resolution Process has
been concluded in the approval of a Resolution Plan for ESIL submitted
by Arcelor Mittal India Private Limited, which has been upheld by this
Court vide its judgment and order in Committee of Creditors of Essar
H
740 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Steel India Limited Vs. Satish Kumar Gupta & Ors., (2020) 8
SCC 531). It is submitted that pursuant to the same, the 100%
shareholding of the respondent- Essar Steel India Limited now vests
with the Arcelor Mittal India Private Limited. It is submitted that even
subsequently, the name of ESIL has been changed to Arcelor Mittal
Nippon Steel India Limited.
B
4.2 It is submitted by Shri Rai, learned Senior Advocate appearing
on behalf of the respondent that in the present case there are concurrent
findings in favour of the original writ petitioner - respondent herein by
both, the Tribunal as well as the High Court, whereby it is held that the
Essar Steel Ltd. is eligible for exemption under the parent Entry No.255(2)
C vide F.D.’s Notification dated 05.03.1992. It is submitted that there are
concurrent findings by the Tribunal as well as the High Court that the
subsequent amended Entry No.255(2) issued vide Government
Notifications dated 14.11.2000 and 16.01.2002 are not applicable to the
respondent and accordingly the question of imposition of penalty would
D not arise. It is submitted that even otherwise in absence of any mala
fides proved on the part of the respondent,there shall not be any levy of
penalty.
4.3 It is submitted that the respondent made eligible investment in
its first unit (Unit No. 1) pursuant to the Resolution dated 07.05.1986
E issued by the Industries, Mines and Energy Department of the
Government of Gujarat, and, therefore, was certified as entitled to avail
incentives during the eligible period from 01.08.1990 to 31.07.2004 up to
upper monetary limit of Rs.237.59 crores. It is submitted that, thus, the
investment made in Unit No. 1, started manufacturing HBI for which
sales tax exemption incentives were admissible under Entry 118 of the
F notification issued by the Government of Gujarat under Section 49(2)
ofthe Gujarat Sales Tax Act, 1969.
4.4 It is submitted that on 26.07.1991, the State of Gujarat by way
of a resolution announced a Scheme known as “The Scheme for Special
Incentives to Prestigious Units, 1990-95 (Modified)” for attracting
G investment in core sector industries. Pursuant to the aforesaid scheme,
the respondent undertook investment of approximately Rs.5,000 crores
for the manufacture of HRC in its second unit (Unit No. 2) and it was
entitled to incentives during the eligible period from 22.02.1993 to
21.02.2007 up to the monetary limit of Rs. 2050 crores. It is submitted
H that for Unit No. 2 as an eligible unit, the respondent was entitled to
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 741
INDIA LIMITED [M. R. SHAH, J.]

exemption under Entry 255 of the Notification issued by the Government A
of Gujarat under Section 49(2) of the Act, 1969.
4.5 It is further submitted that the respondent, in accordance with
the eligibility certificate and the exemption granted as aforesaid, availed
exemption from payment of purchase tax and sales-tax. It is submitted
that as such the respondent had always intended to install a captive B
power plant up to 200 MW, but due to the requirement of the appellant-
State, a separate power plant was commissioned by Essar Power Limited,
a group company of erstwhile Essar Steel India Limited. It is submitted
that on commissioning of Unit No. 2, Natural Gas and Naphtha purchased
by the respondent – Essar Steel Ltd. against declarations in Form No.26
were converted into electricity through Essar Power Limited and utilized C
as an input for the purpose of manufacturing HRC in the industrial unit
of the respondent – ESL. It is submitted that this was done by nature of
a job-work arrangement and after complying with all the necessary
statutory formalities from 1994-95.
4.6 It is submitted that the respondent was/is duly eligible under D
the parent Entry No.255(2)/parent Notification dated 05.03.1992to seek
exemption from payment of the purchase tax. It is submitted that even
the Commissioner of Sales Tax in its earlier order dated 16.8.2002 and
thereafter by the Assessing Officer in the assessment orders for the
Assessment Years 1995-1996 to 1997-1998 and 2000-2001 also allowed E
and/or permitted the respondent-Essar Steel Ltd. to avail the exemption
under parent Entry No.255(2) dated 05.03.1992. It is submitted that in
the present case, even for the subsequent Assessment Years also the
Tribunal as well as the High Court have also held that the respondent-
Essar Steel Ltd. was/is entitled to the exemption from payment of
purchase tax as per parent Entry No.255(2) dated 05.03.1992. F

4.7 It is submitted that as such and even as observed and held by
the High Court, the respondent – ESL met with the conditions prescribed
under original parent Entry No.255(2) dated 05.03.1992 and so at the
relevant time, it was granted the benefit of the Scheme. It is submitted
that as such the respondent –ESL was granted the exemption under G
parent Entry No.255(2) dated 05.03.1992 for the Assessment Years prior
to 14.11.2000.
4.8 It is submitted that as such the respondent – ESL fulfilled/
complied with all the eligibility criteria/conditions required to avail the
exemption under the first/parent Entry No.255(2) dated 05.03.1992. It is H
742 SUPREME COURT REPORTS [2022] 12 S.C.R.

A submitted that eligibility criteria to avail the exemption under the first/
parent notification was that the goods so purchased must be used in the
unit and anywhere within the State of Gujarat. It is submitted that the
conditions mentioned in the first/parent notification does not restrict the
use of goods in the eligible unit, but on the contrary, it provides for use
anywhere within the State of Gujarat. It is submitted that even as per
B
the condition No.6, the eligible unit was permitted to actually use the
goods purchased within the State of Gujarat as raw materials.
4.9 It is therefore submitted that when the goods were transferred
to Essar Power Limited, which is situated within the State of Gujarat for
conversion to electricity, on job-work basis and the power so generated
C was used in the manufacturing of goods by the respondent –Essar Steel,
the conditions set out in the first/parent notification stood fully satisfied.
It is submitted that the Scheme under the first/parent notification never
envisaged or provided for use of goods in the same form in which they
were purchased. It is submitted that in the present case, Naphtha and
D Natural Gas purchased, were used in the form of power in Unit No. 2
and, therefore, there was no breach of declarations given in Form No.26
for purchase of these goods.
4.10 It is submitted that as per the settled law, while deciding
whether an entity is entitled to incentives, a strict interpretation of the
E provisions should be made. However, after accepting that an entity is
entitled to the incentives, when determining any questions arising qua
the scope of the incentives, a liberal approach should be adopted. Reliance
is placed on the decision of this Court in the case of Assistant
Commissioner (CT) LTU and Anr. Vs. Amara Raja Batteries
Limited, (2009) 8 SCC 209.
F
4.11 It is submitted that admittedly,the respondent’s Unit No.2
was eligible to get the exemption prior to the second notification. The
appellant - State did not raise any objection, nor did they levy any tax
liability prior to the second notification. It is submitted that rather vide
letter dated 16.08.2002 issued by the Commissioner of Sales Tax, the
G appellant – State confirmed that there has been no breach by the
respondent. It is submitted that therefore, once the Unit No.2 was found
to be eligible under the parent notification, unless it changed its modus
operandi, it ought to have been given the exemption under the first/parent
notification.
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 743
INDIA LIMITED [M. R. SHAH, J.]

4.12 It is further submitted that it was never the case on behalf of A
the State that the respondent was in breach of the first/parent notification.
It merely alleged that the conditions as substituted under second
notification have been violated. It is submitted that therefore it is
imperative to assess if the second and third notifications were at all
applicable to the respondent – Essar Steel Ltd.
B
4.13 It is submitted that in any event the first/parent notification
also stated that “if the eligible unit fulfills the conditions specified
hereunder and further conditions as may be laid down from time to time”.
It is submitted that while the appellant State may further add to the
conditions provided under the first/parent notification, such further
additional condition could not be in effect to alter/amend the original C
condition, i.e., the goods are to be used within the State of Gujarat.
4.14 It is submitted that by the second notification, the original
eligibility condition was amended and the requirement of use within the
State of Gujarat was changed to within the industrial unit for which the
eligibility certificate was obtained. It is submitted that this change in the D
original condition was not permitted since the first/parent notification
only stipulated imposition of additional conditions and did not envisage
an amendment of the original condition.
4.15 It is further submitted that the second notification would be
applicable only for the industries that were setup after 14.11.2000. It is E
submitted that the first notification was issued pursuant to the incentive
Scheme. It is submitted that in terms of the said Scheme, the respondent
was entitled to incentives during the eligible period from 22.02.1993 to
21.02.2007 up to the monetary limit of Rs. 2050 crores if the conditions
prevalent at the time of grant of the incentives were met. F
4.16 It is submitted that a conjoint reading of the Scheme along
with the first notification would indicate that the State invited industries
to invest in its State by offering incentives, which once granted would be
valid for a fixed period i.e., till 21.02.2007 in case of the respondent,
subject to the eligibility conditions being met. It is submitted that the first G
notification only stipulated imposition of additional conditions which had
to be complied with by the eligible entities.
4.17 It is further submitted that the third notification by which the
parent Entry No.255(2) dated 05.03.1992came to be amended, further
provided that eligible unit could claim exemption from purchase tax on
H
744 SUPREME COURT REPORTS [2022] 12 S.C.R.

A purchases of goods even if the goods are used as raw materials, packing
materials, consumable stores in its industrial unit for which it had obtained
the eligibility certificate for the manufacture of goods for dispatch to its
another unit or division situated within the State of Gujarat for use in the
manufacture of another goods for sale by such another unit or division
or to such another unit or division situated outside the State for use in the
B
manufacture of other goods for sale by such other unit.
4.18 It is submitted that the Scheme and the first notification as
initially enacted permitted the use of Natural Gas and Naphtha for
generation of electricity outside the unit when the electricity was used in
the eligible unit as was accepted in the assessment orders for the
C preceding years. Similarly, the amendments made vide third notification
permit the use of purchased goods in the manufacture of goods in the
unit, for transfer to other unit as well, within or even outside the State of
Gujarat for use in the manufacture of other goods. It is submitted that,
thus, pursuant to the amendment, use of the goods even in other unit
D within or outside the State of Gujarat has been permissible.
4.19 It is submitted that therefore when the notification initially
enacted on 05.03.1992 and amended vide third notification w.e.f.
16.01.2002 permitted the use of goods outside the unit, it cannot be said
that only for a short intervening period between 14.11.2000 to 15.01.2002,
E the Government had different intentions to restrict the use entirely in the
eligible unit only and that the conditions under the Scheme which granted
incentives for a tenure of 14 years would be changed on yearly basis.
4.20 It is submitted that the scheme never envisaged or provided
for use of goods in the same form in which they were purchased, and
Naphtha and Natural Gas purchased by the respondent were used in the
F form of power in Unit No. 2 and, therefore, there was no breach of
declarations given in Form No. 26 for purchase of these goods.
4.21 It is further submitted that even otherwise any amendment
made to the original eligibility condition, would be prospective in nature
and applicable only to fresh industrial units/entities which would become
G eligible after 14.11.2000. The amended notification would not be applicable
on industries that were setup pursuant to, and eligible under the first
notification and whose rights had crystallised for 14 years under the first
notification.
4.22 It is submitted that as such the respondent – Essar Steel has
H not committed any breach of declarations given in Form No. 26. Merely
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 745
INDIA LIMITED [M. R. SHAH, J.]

because Natural Gas and Naphtha were used for generation of electricity A
through EPL, which was ultimately used in the eligible unit, the respondent
– ESL cannot be said to have breached the given conditions.
4.23 It is submitted that even assuming that the second and the
third notificationswere applicable to the respondent – ESL, the amended
condition does not require “direct” use of purchased goods in the unit B
and therefore even when Natural Gas/Naphtha after conversion into
electricity is used in the unit, the condition is satisfied. It is submitted that
there are concurrent findings of fact both, by the High Court and the
Tribunal that there is no diversion of the fuel purchased by the respondent-
ESLat a concessional rate, and the same was given to EPL only for a
limited purpose for conversion to electricity and was thereafter used by C
the respondent – Essar Steelin its manufacturing process.
4.24 It is further submitted by Shri Rai, learned Senior Advocate
appearing on behalf of the respondent – ESL that even otherwise the
demand of the purchase tax was barred by the Rule of promissory
estoppel and legitimate expectation as observed and held by the Tribunal D
as well as by the Hon’ble High Court.
4.25 It is submitted that the respondent invested a sum of Rs.5000
crores for the manufacture of HRC in its Unit No. 2 by relying upon the
incentives provided by the appellant-State. The said incentive provided
in the Scheme and the first notification imposes a condition that the E
goods purchased by the eligible entity would be used by it within the
State of Gujarat as raw materials, processing materials or consumable
stores in the manufacture of goods to be sold by the eligible entity. It is
submitted that therefore thereafter the State is estopped from amending
the conditions required to be met for obtaining the incentives, since the F
respondent acted upon the assurance of the State that as long as it met
the conditions, it would be eligible for receiving exemptions for a fixed
amount of time as contemplated under the Scheme.
4.26 It is submitted that based on the assurance of the State, the
respondent had changed its position irretrievably by making huge G
investments in Unit No. 2 and by entering into various agreements
including the one with Essar Power Limited for supply of electricity. It is
submitted that therefore the Hon’ble High Court and the Tribunal were
correct in invoking the principle of promissory estoppel as a rule of
evidence to recognize the crystallised rights of the respondent.
H
746 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 4.27 It is further submitted that even otherwise in any case the
imposition of penalty by the State upon the respondent is illegal and
without any basis in law. It is submitted that (a) the respondent has not
breached the conditions as stipulated in the first notification; (b)the second
and the third notifications are not applicable to the respondent and; (c)
even assuming that the second and third notifications are applicable to
B
the respondent, the conditions therein have not been breached by the
respondent, the question of imposition of penalty would not arise.
4.28 It is further submitted that even otherwise, the State has
mechanically imposed the penalty, at the maximum rate of 150%, without
any application of mind or adjudication. It is submitted that therefore, the
C imposition of penalty without appreciating the factual circumstances
surrounding the dispute is arbitrary, unjust, and illegal, and therefore the
Tribunal as well as the Hon’ble High Court has rightly set aside the
imposition of penalty.
4.29 It is further submitted that as held by this Court in several
D judgments the imposition of penalty is the result of a quasi-criminal
adjudication. Reliance is placed upon the decision of this Court in
Hindustan Steel Ltd. Vs. State of Orissa, (1969) 2 SCC 627and
Excel Crop Care Limited Vs. Competition Commission of India
and Anr., (2017) 8 SCC 47.
E 4.30 It is submitted that in the facts of the present case the
respondent had been under a genuine bona fide belief that it was eligible
to claim exemption under the first notification based on the declaration
made in Form No. 26 and that the amended notifications would not govern
the respondent since the incentives had been assured under the Scheme
for a fixed period of time and such belief of the incentive was also
F upheld by the letter dated 16.08.2002 issued by the Commissioner of
Sales Tax, which confirmed that there has been no breach by the
respondent and that the State has not made out a case of mala fide
intention or willful and deliberate contravention of the statutory provisions
by the respondent, there is no justification at all for levy of the penalty.
G 4.31 Making above submissions, it prayed to dismiss the present
appeal.
5. Heard the learned counsel appearing for the respective parties
at length.
6. The questions which are posed for consideration of this Court
H in the present appeals are:
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 747
INDIA LIMITED [M. R. SHAH, J.]

(i) Whether the respondent -dealer-assessee – Essar Steel Ltd. A
(erstwhile) was/is entitled to the exemption from payment
of the purchase tax as per the original Entry No.255(2)
vide F.D.’s notification dated 05.03.1992?
(ii) Whether subsequent amended Entry No.255(2) issued vide
Notifications dated 14.11.2000 and 16.01.2002 in any way B
alters or amends the basic requirements/conditions stipulated
as per the first notification dated 05.03.1992?
(iii) Whether the subsequent amended Entry vide Government
Notifications dated 14.11.2000 and 16.01.2002 in any way
takes away the right of the respondent to avail the exemption C
under the first/parent Entry No.255(2) issued vide
Notification dated 05.03.1992?
(iv) Whether there was any breach of the declaration filed by
the respondent as per Form No.26?
(v) Whether in the facts and circumstances of the case, the D
demand of the purchase tax on and after 14.11.2000 was
hit by the principle of promissory estoppel?
7. While answering the aforesaid questions, the original Entry
No.255(2) vide Notification dated 05.03.1992 and the subsequent
amended Entry No.255(2) amended by Notifications dated 14.11.2000 E
and 16.01.2002 and the conditions/eligibility criteria mentioned in the
said notifications are required to be referred to, which read as under:-
1. Original Entry No.255 (2) vide F.D’s Notification dated
05.03.1992.
Entry Cl ass of Sales of Cond itions
F
No. Purchases

255 (2) Sale or raw materials, (1) If t he eligible unit furnishes to the sell ing
processing materials, dealer a certificate in Form 26 appended
consumable stores or hereto declaring inter ali a that the goods
packing materials by a are required for use by him within the State
registered dealer to an of Guj arat as raw materi als, processi ng G
eligi ble unit. materials or consumable stores in the
manufacture of goods for sale within the
State of Gujarat or as packing materials in
packing of the goods so manufactured.

(2) If the eligible unit fulfils the conditions
speci fied hereunder and further conditions
as may be laid down from time to time. H
748 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Conditions:-
6. The eligible unit shall actually use the goods purchased within
the State of Gujarat as raw materials, processing materials or
consumable stores in the manufacture of goods for sale within
the State of Gujarat or outside the State of Gujarat or as packing
B materials in the packing of the goods so manufactured.
2. Amendments in Entry No.255(2) vide Government
Notification dated 14.11.2000
Entry Class of Sales of Conditions
No. Purchases
C
255 (2) Sale or raw materials, (1) If the eligible unit furnishes to the selling
processing materials, dealer a certificate in Form 26 appended
consumable stores or hereto and obtained from the registering
packing materials by a authority, declaring inter alia that the
registered dealer to an goods shall be used by it as raw
eligible unit. materials, processing materials or
consumable stores in its industrial unit
D for which it has obtained the eligibility
certificate in the manufacture of goods
for sale within the State of Gujarat or
outside the State of Gujarat or as packing
materials in the packing of goods so
manufactured.

E Conditions:

6. The eligible unit shall actually use the goods purchased as raw
materials, processing materials or consumable stores in its industrial
unit for which it has obtained the eligibility certificate in the
manufacture of goods for sale within the State of Gujarat or outside
F the State of Gujarat, or as packing materials in the packing of
goods so manufactured.

(c) In Form 26, for the words “within the State of Gujarat” the
words “in the industrial unit for which the eligibility certificate has
G been obtained” have been substituted.

3. Amendment in Entry No.255(2) vide Government
Notification dated 16.01.2002.

H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 749
INDIA LIMITED [M. R. SHAH, J.]

Entry Class of Sales of Conditions A
No. Purchases

255 (2) Sale or raw materials, (1) Insertion of condition (IA) after condition
processing materials, (I) or
consumable stores or
packing materials by a (IA) If the eligible unit furnishes to the selling
registered dealer to an dealer a certificate in Form 26 appended
eligible unit. hereto and obtained from the registering
B
authority, declaring inter alia that the goods
shall be used by it as raw materials,
processing materials or consumable stores
in its industrial unit for which it has
obtained the eligibility certificate, in the
manufacture of goods for dispatch to its
another unit or division situated within the C
State for use in the manufacture of another
goods for sale by such another unit or
division or to its another unit or division
situated outside the State for use in the
manufacture of other goods.

(b) Insertion of condition 6(A) after condition 6 D
(6A) The eligible unit shall actually use the goods so purchased
as raw material, processing material or consumable stores in its
industrial unit for which it has obtained the eligibility certificate, in
the manufacture of goods, which are dispatched to its another
unit or division situated within the State for use in the manufacture E
of other goods for sale by such another unit or division or to its
another unit or division situated outside the State for use in the
manufacture of other goods.
8. Form No.26 applicable in 1992 reads as under:-
“FORM-26 [Entry 255] F
Certificate by an eligible unit purchasing, goods for use in
manufacturing goods.
[See Entry at serial No.255 inserted by Government Notification,
Finance Department No. (GHN-8) GST-1092/(S.49)-(249)-TH
dated the 5thMarch, 1992 issued under section 49(2) of the Gujarat G
Sales Tax Act,1969]
I, ________ of M/s. __________Address ____________
certify the I/the said ______ as/is a registered dealer holding a
certificate of registration No._____ dated ______ and also holding
H
750 SUPREME COURT REPORTS [2022] 12 S.C.R.

A a certificate No. ________ dated _______ granted by the
Commissioner of Sales Tax, Gujarat State under Government
Notification No. (GHN-8) GST-1092 (S.49)-(249) TH, dated the
5th March, 1992 and that the goods being raw materials, processing
materials mentioned in bills/cash memo/invoice No. ______ dated
___________ of M/s ___________ will be used by me/the said
B
_______ in the manufacture of goods for sale or being the packing
materials mentioned in bill/cash memo/invoice No._______ dated
_________ of M/s. _________ will be used in the packing of
the goods so manufactured, namely _____________

C
I further certify that the aforesaid certificate was in force on the
date of the aforesaid purchase of goods.

Place: Signature :
D
Date: Status :”
9. Form-26(Entry No.255) as applicable in years 2000/2002 after
the amended Entry No.255(2) vide Notifications dated 14.11.2000 and
16.01.2002 reads as under:-
E “FORM-26 [Entry 255]
Certificate by an eligible unit purchasing, goods for use in
manufacturing goods.
[See Entry at serial No.255 inserted by Government Notification,
Finance Department No. (GHN-8) GST-1092/(S.49)-(249)-TH
F dated the 5th March, 1992 issued under section 49(2) of the Gujarat
Sales Tax Act,1969]

I, ________ of M/s.____________ Address ____________
G certify the I/the said ______ as/is a registered dealer holding a
certificate of registration No._____ dated ______ and also holding
a certificate No. ________ dated _______ granted by the
Commissioner of Sales Tax, Gujarat State under Government
Notification No. (GHN-8) GST-1092 (S.49)-(249) TH, dated the
5th March, 1992 and that the goods being raw materials, processing
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 751
INDIA LIMITED [M. R. SHAH, J.]

materials mentioned in bills/cash memo/invoice No. ______ dated A
___________ of M/s ___________ will be used by me/the said
______ (1) [in the industrial unit for which the eligibility certificate
has been obtained] in the manufacture of goods for sale (2) [within
the State or outside the State of Gujarat or for dispatch either to
its another unit or division situated within the State for use in the
B
manufacture of other goods for sale by such another unit or division,
or to its another unit or division situated outside the State for use
in the manufacture of other goods] or being the packing materials
mentioned in bill/cash memo/invoice No._______ dated
_________ of M/s. _________ will be used in the packing of
the goods so manufactured, namely _____________ C

I further certify that the aforesaid certificate was in force on the
date of the aforesaid purchase of goods.

D
Place: Signature :
Date: Status :
(1) These words were substituted for “within the state of Gujarat”
by s-49 (332) dt. 14-11-2000.
E
(2) These words were inserted by s-49 (357) dt. 16-01-2002.”
10. Thus, as per the original Entry No.255(2) issued by Notification
dated 05.03.1992 while claiming the exemption from payment of purchase
tax of raw materials, processing materials or consumable stores, the
following conditions were required to be fulfilled/complied with:-
F
(i) That the eligible unit was required to furnish to the selling
dealer a certificate in Form No.26 declaring inter alia that
the goods are required for use by him/it within the State of
Gujarat as raw materials, processing materials or
consumable stores in the manufacture of goods for sale
within the State of Gujarat or as packing materials in packing G
of goods so manufactured; and
(ii) That the eligible unit shall actually use the goods purchased
within the State of Gujarat as raw materials, processing
materials or consumable stores in the manufacture of goods
H
752 SUPREME COURT REPORTS [2022] 12 S.C.R.

A for sale within the State of Gujarat or outside the State of
Gujarat as packing materials for the packing of the goods
so manufactured.
10.1 Therefore, only in a case where the raw materials, processing
materials or consumable stores are used by the eligible unit and the
B eligible unit actually uses the goods purchased within the State of Gujarat
as raw materials, processing materials or consumable stores in the
manufacture of goods, there shall be exemption from payment of
purchase tax/sales tax to the extent provided in the said Entry.
11. In the present case, it is an admitted position that after furnishing
C a declaration in Form No.26, the goods-raw materials, processing
materials or consumable stores so purchased were to be used by ESL,
but the respondent -ESL after purchase of raw materials – Naphtha and
Natural Gas and after availing the benefit of exemption from the payment
of purchase tax did not himself/itself used the same, but, instead, sold
the same to another entity – EPL and the said another entity – EPL used
D the said raw materials for generating the electricity, which thereafter
came to be sold to the respondent -ESL pursuant to the power purchase
agreement. The submission on behalf of the respondent that as Naphtha
and Natural Gas were transferred to EPL for generating the electricity,
which in turn came to be used by the respondent – ESLfor manufacture
E of HRC, and it cannot be said that there is a breach of conditions of
original Entry No.255(2) dated 05.03.1992, cannot be accepted.
11.1 The original Entry No.255(2) dated 05.03.1992 does not
provide that the eligible unit after purchase of the raw materials instead
of using the same by itself or himself can transfer/sold to another unit
F and the another unit can use the said raw materials. If the submission on
behalf of the respondent is accepted, in that case, it will be varying the
conditions imposed in the original Entry No.255(2) dated 05.03.1992 and
it shall tantamount to adding something more than what is not provided
in the exemption notification/original entry, which is not permissible. The
original notification does not at all permit such transfer and use of the
G raw materials after availing the exemption for use of another unit, who,
as such is otherwise not entitled to any exemption as per the incentive
policy.
12. At this stage, it is required to be noted that as per the incentive
policy, the actual benefit of exemption was available to certain industries
H as per the list of ‘eligible’ industries. The power producing companies
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 753
INDIA LIMITED [M. R. SHAH, J.]

were specifically put in the list of ‘ineligible’ industries for any exemption A
from sale/purchase tax on procurement of raw materials. Thus, the Essar
Power Limited being a power producing company was not eligible at all
for any exemption from sale/purchase tax on procurement of raw
materials. Therefore, as such, by such transfer and sale of raw materials
by ESL to EPL, EPL got the benefit of exemption, which otherwise
B
being a power producing company was not eligible for such an exemption.
13. Learned counsel appearing on behalf of the State is right in
submitting that if such an interpretation put forward by the respondent is
accepted, in that case, it would completely defeat the purpose of the
exemption and it would permit industries, which are eligible for exemption
to simply purchase the raw materials; not use them for manufacturing in C
their own units, and simply transmit them for use and manufacture to
other units, even though such units are not eligible for exemption under
the notification.
14. Thus, by transfer of Naphtha and Natural Gas by the eligible
unit – ESL to another unit – EPL, after availing the exemption from D
payment of purchase tax and not using the Naphtha and Natural Gas
(raw materials) for its own use for manufacture of the goods so
manufactured by it, it can be said to be violating the eligibility criteria/
condition mentioned in the original Entry No.255(2) dated 05.03.1992
and it can be said that the respondent -Essar Steel Ltd. Committed a E
breach of the declaration given in Form No.26. Therefore, the High
Court has committed an error in holding that the respondent did not
commit any breach of any of the conditions mentioned in the original
Entry No.255(2) dated 05.03.1992 and that the respondent fulfilled all
the conditions provided in the said Entry and that there was no breach of
any of the conditions provided in the original Entry No.255(2) dated F
05.03.1992.
14.1 While the exemption notification should be liberally construed,
beneficiary must fall within the ambit of the exemption and fulfill the
conditions thereof. In case such conditions are not fulfilled, the issue of
application of the notification does not arise. G
14.2 It is settled law that the notification has to be read as a
whole. If any of the conditions laid down in the notification is not fulfilled,
the party is not entitled to the benefit of that notification. An exception
and/or an exempting provision in a taxing statute should be construed
H
754 SUPREME COURT REPORTS [2022] 12 S.C.R.

A strictly and it is not open to the court to ignore the conditions prescribed
in industrial policy and the exemption notifications.
14.3 The exemption notification should be strictly construed and
given meaning according to legislative intendment. The Statutory
provisions providing for exemption have to be interpreted in the light of
B the words employed in them and there cannot be any addition or
subtraction from the statutory provisions.
14.4 As per the law laid down by this Court in catena of decisions,
in the taxing statute, it is the plain language of the provision that has to
be preferred, where language is plain and is capable of determining
C defined meaning.Strict interpretation to the provision is to be accorded
to each case on hand. Purposive interpretation can be given only when
there is an ambiguity in the statutory provision or it alleges to absurd
results, which is so not found in the present case.
14.5 In the present case, the intention of the State to provide the
D incentive under the incentive policy was to give benefit of exemption
from payment of purchase tax was to the specific class of industries
and, more particularly, as per the list of ‘eligible industries’. Exemption
was not available to the industries listed in the ‘ineligible’ industries. It
was never the intension of the State Government while framing the
incentive policy to grant the benefit of exemption to ‘ineligible industries’
E like the power producing industries like the EPL, which as such was put
in the list of ‘ineligible’ industries.
14.6 Now, so far as the submission on behalf of the respondent
that in the event of obscure in a provision in a fiscal statute, construction
favourable to the assessee should be adopted is concerned, the said
F principle shall not be applicable to construction of an exemption
notification, as it is clear and not ambiguous. Thus, it will be for the
assessee to show that he comes within the purview of the
notification.Eligibility clause, it is well settled, in relation to exemption
notification must be given effect to as per the language and not to expand
G the scope deviating from the language. There is a vast difference and
distinction between a charging provision in a fiscal statute and an
exemption notification.
15. Now, the next question, which is posed for the consideration
of this Court is whether the subsequent amended Entries vide notifications
dated 14.11.2000 and 16.01.2002 can be said to be clarificatory and/or
H
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 755
INDIA LIMITED [M. R. SHAH, J.]

take away any of the rights under the original Entry No.255(2) dated A
05.03.1992 and/or the subsequent notifications modifies/amends the basic
conditions for availing the exemption under the original Entry No.255(2)
dated 05.03.1992?
15.1 Having gone through the second notification dated 14.11.2000/
the amended Entry No.255(2), it can be seen that the same is clarificatory B
in nature and there is no change in the basic eligibility criteria/conditions
mentioned in the original Entry No.255(2). In the subsequent notification,
instead of the word “him”, the word used is “it” and it is specifically
made clear that the raw materials so purchased shall be used in its
industrial unit for which it has obtained the eligibility certificate for the
manufacture of goods for sale within the State or outside the State of C
Gujarat or as packing materials in the packing of goods so manufactured.
Even as per the original Entry No.255(2) dated 05.03.1992 and even as
per the Form No.26 appended thereto, the eligible unit was required to
actually use the raw materials purchased. In the subsequent notification,
it is made explicitly clear that the raw materials so purchased are to be D
used by the eligible unit in its industrial unit. Therefore, the basic
requirement that the eligible unit has to actually use such raw materials
purchased by him is in no way modified and/or amended. On the contrary,
the subsequent amended Entry No.255(2) dated 14.11.2000 can be said
to be expanding the scope of eligibility as it was. Earlier the eligible unit
was required to actually use the goods purchased within the State of E
Gujarat and as per the subsequent amended Entry No.255(2) dated
14.11.2000 even if such goods are used by it outside the State of Gujarat
in that case also such eligible unit was held to be eligible for exemption.
Even as per the condition No.6 in the amended Entry No.255(2) dated
14.11.2000, it is specifically mentioned that the eligible unit shall actually F
use the goods purchased, which was the requirement in the first notification
also. Therefore, the subsequent amended Entry No.255(2) vide
notification dated 14.11.2000 can be said to be clarificatory and/or
expanding the scope of eligibility, but in no case, it can be said to be
taking away any right under the original Entry No.255(2) dated
05.03.1992. G
16. Similarly, even the third amended Entry No.255(2) dated
16.01.2002 also cannot be said to be taking away any right available
under the original Entry No.255(2) dated 05.03.1992.
16.1 Even the subsequent amended Entry No.255(2) vide
notification dated 16.01.2002 also can be said to be expanding the scope H
756 SUPREME COURT REPORTS [2022] 12 S.C.R.

A of eligibility and in no way can be said to be taking away the rights
available to the eligible unit under the original Entry No.255(2) dated
05.03.1992. The eligibility criteria/condition that the eligible unit “shall
actually use the goods” remain the same even in the said amended Entry
No.255(2) dated 16.01.2002. Therefore, the subsequent notifications/
amended Entries cannot be said to be in any way in conflict with the
B
first/parent notification/Entry No.255(2).
17. As observed hereinabove, even under the first/original Entry
No.255(2) dated 05.03.1992 and even as per the declaration furnished
in Form No.26, the eligible unit – respondent – ESLwas required to
actually use the goods by him/within the State of Gujarat as raw materials,
C for manufacture of goods by him. But by actually not using the raw
materials so purchased by which it got the benefit of exemption from
payment of purchase tax, sold the said raw materials, which in fact
were required to be used by him, to another unit/entity, which another
unit used it for manufacture of its goods – generating the electricity and
D which in turn the EPL sold to the ESL. Thus, the ESL– eligible unit did
not comply with and/or fulfilled the eligibility criteria/conditions even as
per the original Entry No.255(2) and therefore, was/is not entitled to the
exemption from payment of the purchase tax as per the exemption
notification dated 05.03.1992 vide original Entry No.255(2). Therefore,
even assuming that the subsequent amended Entries vide second and
E third notifications are not to be made applicable in that case also the
respondent -Essar Steel Ltd. being eligible unit was required to comply
with and/or fulfill all the eligibility criteria/conditions mentioned in the
original Entry No.255(2), which as observed hereinabove, by not actually
using the raw materials by himself and transferring/selling the same to
F the non-eligible unit, the respondent was not entitled to avail the benefit
of exemption even under the original Entry No.255(2).
18. Even as per Form No. 26 (Entry No.255), as per the declaration
filed by the respondent, being ‘eligible’ unit while purchasing goods for
use in manufacturing goods, it was declared that the raw materials so
purchased will be used by it in the manufacture of goods for sale. Thus,
G by not using the raw materials so purchased by it, the respondent –
eligible unit – ESL has violated the declaration given in Form No.26.
Therefore, the respondent was not entitled to the exemption even under
the first/parent notification.
19. Even the reasoning given by the Tribunal and the High Court
H that the demand of purchase tax is hit by the principle of promissory
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 757
INDIA LIMITED [M. R. SHAH, J.]

estoppel also cannot be accepted. In the present case, first of all, the A
principle of promissory estoppel to the exemption sought ought not to
have been applied at all. Each assessment year/period is independent.
Even otherwise, in the facts and circumstances of the case, the principle
of promissory estoppel shall not be applicable. In the present case, as
observed hereinabove, the respondent – eligible unit as such was not
B
entitled to the exemption even under the first notification as it violated
the declaration given in Form No.26 as well as did not comply with and/
or fulfilled the eligibility criteria/conditions required to be fulfilled while
availing benefit of exemption. As observed hereinabove, the respondent
did not actually use the raw materials purchased by him/it and availed
the exemption and after availing the exemption sold the said raw materials C
to ‘ineligible’ unit -EPL and the EPL used the same for manufacture of
its goods – generating the electricity, which subsequently again sold to
the ESL– eligible unit on payment of sale consideration.
20. At the cost of repetition, it is observed that as per the incentive
policy declared by the State Government, the power generating company D
was put in the list of ‘ineligible industries’ and thus, independently was
not entitled to the exemption under the original Entry No.255(2). Thus,
by such a transfer/sale from the eligible unit to another unit the benefit
of exemption is availed by the ‘ineligible’ industry, which is wholly
impermissible and that cannot be said to be the intention of the
Government while providing the incentive in the form of exemption from E
payment of purchase tax. Such a benefit of exemption was available
only to eligible units/industries and the steel industry of which Essar
Steel Ltd. belongedbeing one of the eligible industries. Therefore, there
was no question of applicability of principle of promissory estoppel.
20.1 Even otherwise in the facts and circumstances of the case F
narrated hereinabove, the principle of promissory estoppel shall not be
applicable. ESL had furnished wrong and false declarations. In the original
notification/entry, it was not provided that even if the raw materials so
purchased is not used by itself after availing the exemption, the same
can be sold to another entity, which is ‘ineligible’ industry. It did not G
provide that in such a situation also and despite the fact that raw material
is not actually used by the eligible unit, which was required to be used
even as per the declaration in Form No.26, such eligible unit shall be
entitled to the exemption. No such promise was given. The wordings
and the language used in the exemption notifications are very clear, simple
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758 SUPREME COURT REPORTS [2022] 12 S.C.R.

A and unambiguous. Therefore, when there was no such promise and/or
representation, the demand cannot be said to be hit by the principle of
promissory estoppel as observed and held by the Tribunal as well as the
High Court in the impugned judgment and order.
20.2 The doctrine of promissory estoppel is an equitable remedy
B and has to be moulded depending on the facts of each case and not
straitjacketed into pigeonholes. In other words, there cannot be any hard
and fast rule for applying the doctrine of promissory estoppel but the
doctrine has to evolve and expand itself so as to do justice between the
parties and ensure equity between the parties. In the present case, the
principle of promissory estoppel shall not be applicable.
C
20.3 In taxing matters, the doctrine of promissory estoppel as
such is not applicable and the Revenue can take a position different
from its earlier stand in a case with established distinguishing features.
[See Commissioner of Central Excise, Bangalore – 1 Vs. Bal
Pharma Limited, Bangalore and Ors., (2011) 2 SSC 620].
D
20.4 The rules of promissory estoppel and estoppel by conduct
may not be applied to alter or amend the specific terms and against
statutory provisions. All the terms and conditions contained in the
exemption notification shall prevail and the person claiming the exemption
has to fulfil and satisfy all the eligibility criteria/conditions mentioned in
E the exemption notification.
21. Now, so far as the submission on behalf of the respondent
that prior to 14.11.2000, there was no demand of the purchase tax and/
or the exemption from payment of purchase tax was made available in
the earlier assessment years and, therefore, in the subsequent assessment
F years also, the respondent – assessee shall be entitled to the exemption
is concerned, the aforesaid has no substance. In the taxation matters,
every assessment year/period is a different year/period.
21.1 The Scheme of the Statute does not in any manner indicate
that the incentive provided has to continue for the consecutive years
G irrespective of the fulfilling of the eligibility conditions. Applicability of
the incentive is directly related to the eligibility and not dehors the same.
If it is found that the industrial undertaking does not fulfil the eligibility
criteria, it cannot claim the incentive/exemption.
22. Therefore, the submission on behalf of the respondent –
H assessee that as in the earlier assessment years benefit of exemption
STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL 759
INDIA LIMITED [M. R. SHAH, J.]

was granted to the respondent and, therefore, in the subsequent A
assessment years also, despite the fact that it is found that the respondent
was/is not eligible for the benefit of exemption under the original
Notification/Entry No.255(2) cannot be accepted. If such a submission
is accepted in that case it will be perpetuating the illegality and granting
the benefit of exemption to ‘ineligible industry’, who did not fulfill and/or
B
comply with the eligibility criteria/conditions mentioned in the exemption
notification. The principle of promissory estoppel shall not be applicable
contrary to the Statute. Merely because erroneously and/or on
misinterpretation, some benefits in the earlier assessment years were
wrongly given, cannot be a ground to continue the wrong and to grant
the benefit of exemption though not eligible under the exemption C
notification.
23. Now, so far as the levy of penalty is concerned, it is to be
noted that the penalty is leviable under Section 45 and such a penalty is
leviable under sub-sections (5) and(6) of Section 45 of the Act, 1969 and
the penalty is leviable on purchase tax assessed. It provides that if the D
difference of tax paid and tax leviable/assessed is more than twenty-
five percent,in that case, the dealer shall be deemed to have failed to
pay the tax to the extent of the difference between the amount so
assessed/re-assessed and the amount paid and, in that case, there shall
be levied on such dealer a penalty not extending one and one-half times
the difference as per sub-section (5). Therefore, there being difference E
of more than twenty five percent, penalty to the aforesaid extent shall
be leviable. This is a clear case of false and wrong claim of exemption,
as the exempted goods were transferred to a third person and used in an
‘ineligible’ industry. This is a case of deliberate violation and evil doing.
23.1 In the present case, as the difference between total tax paid F
and the purchase tax is more than twenty-five percent, the respondent is
deemed to have failed to pay the tax as per sub-section(5) of Section 45
and, therefore, liable to pay the penalty not exceeding one and one-half
times. The words used in sub-section (6) of Section 45 is “there shall be
levied on such dealer a penalty not exceeding one and one-half times the G
difference”. As noted above, in the present case, the modus operandi
which was adopted by the respondent – Essar Steel warrants a penalty.
Though, the raw material was required to be used by itself for the
manufacture of their goods, after availing the exemption as eligible unit
and instead of using the same for itself/himself, the ESL sold the raw
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A materials to an‘ineligible’ entity – EPL, who used it for manufacture of
its own goods – generating the electricity, which again came to be sold
to ESL under the power purchase agreement.
23.2 As observed hereinabove, as such the EPL, under the
incentive scheme, was not eligible at all for exemption from payment of
B purchase tax as in fact power generating companies were put in the list
of ‘ineligible industries’. Therefore, by such a modus operandi, the benefit,
which was not available to the EPL was made available by such transfer
of raw materials by the Essar Steel Ltd. to Essar Power Limited. As
observed hereinabove, there is a breach of declaration in Form No.26
also. Therefore, in the facts and circumstances of the case, the levy of
C penalty is justified and warranted. The Joint Commissioner, the Tribunal
as well as the High Court have committed a grave error in quashing and
setting aside the penalty imposed by the Assessing Officer.
24. In view of the above and for the reasons stated above, the
impugned common judgment and order passed by the High Court as
D well as that of the Tribunal quashing and setting aside the demand of
purchase tax from the respondent are hereby quashed and set aside. It
is held that the respondent -Essar Steel Ltd. – the eligible unit was not
entitled to the exemption from payment of purchase tax under the original
Entry No.255(2) dated 05.03.1992, firstly, on the ground that it did not
E fulfill the eligibility criteria/conditions mentioned in the original Entry
No.255(2) dated 05.03.1992 and secondly that there was a breach of
declaration in Form No.26 furnished by the respondent – eligible unit –
Essar Steel Ltd. The orders setting aside the penalty imposed by the
Assessing Officer are also hereby quashed and set aside. The order
passed by the Assessing Officer levying the demand of purchase tax
F and imposing the penalty ishereby restored.
25. Present appeals are accordingly allowed. In the facts and
circumstances of the case, there shall be no order as to costs.

G Nidhi Jain Appeals allowed.
(Assisted by : Preetam Bharti, LCRA)

H