STATE OF HARYANA & ORS.versusBHARTI TELETECH LTD.

                         [2014] 1 S.C.R. 548


A                   STATE OF HARYANA & ORS.
                                  v.
                      BHARTI TELETECH LTD.
                   (Civil Appeal No. 6791 of 2004)
                         JANUARY 20, 2014.
B
       [H.L. DATTU, DIPAK MISRA AND S.A. BOBDE JJ.]

        HARYANA GENERAL SALES TAX RULES, 1975:

c        r. 28-A (11) (a) (i) and (b) - Sales tax exemption allowed
    subject to assessee maintaining production for next five years
    on the average of preceding five years - Failure on part of
    assessee to comply with the condition - Held: Exemption
    being an exception has to be respected regard being had to
    its nature and purpose - Beneficiary unit having failed to fulfil
0
    the stipulation contained in r.28-A(11 )(a)(i) and (b) is liable
    to pay full amount of tax benefit with interest.

           s.28-A(11)(a)(i)(b) - Sales tax exemption - Held:
    Concept of exemption is required to be tested on a different
E   anvil, for it grants freedom from liability - In the case at hand,
    it is 'unif specific - Clubbing is not permissible - It amounts
    to violation of the conditions stipulated under sub-r. (11) (a)(i)
    of r. 28A and, therefore, the consequences have to follow.

F     The respondent -assessee was allowed sales tax
  exemption under r. 28A of the Haryana General Sales Tax
  Rules, 1975 for the period 13.12.1991 to 12.12.1998,
  subject to the condition that the industrial unit after
  availing of the benefit would continue its production at
G least for the next five years not below the level of average
  production for the preceding five years. After the expiry
  of the period of exemption, the Deputy Excise and
  Taxation Commissioner noticed that the respondent unit
  was not maintaining the level of production of the
H                                  548
STATE OF HARYANA & ORS. v. BHARTI TELETECH 549
                  LTD.
preceding five years and, accordingly, initiated A
proceedings against it on the foundation that it had
violated the condition stipulated under r. 28A (11) (a) (i)
and was thereby liable to make full payment of tax
exemption benefit already availed by it along with interest.
The respondent-assessee stated that production of its B
another unit also required to be clubbed for the purpose
of determining the level of production after 12.12.1998.
The adjudicating authority rejected the said stand and
ruled that the assessee, having failed to meet the
production level, was liable to make full payment along c
with interest. The appeals of the assessee-respondent
before the appellate authority as also the Sales Tax
Tribunal were dismissed. However, the Division Bench of
the High Court in the writ petition held in favour of the
assessee.
                                                             D
     In the appeal filed by the revenue, the question for
consideration before the Court was: whether production
of two different units can be combined together to meet
the requirement of r. 28A(11 ).
                                                             E
     Allowing the appeal, the Court

     HELD: 1.1. The concept of exemption has been
introduced for development of industrial activity and it is
granted for a certain purpose to a unit for certain types      F
of goods with certain conditions. The concept of
exemption is required to be tested on a different anvil, for
it grants freedom from liability. In the case at hand, it is
'unit' specific. [para 18) [562-H; 563-A-B]

    Hansraj Gordhanadas v. H. H. Dave, Assistant Collector     G
of Central Excise and Customs, Surat and others 1969 SCR
343 =AIR 1970 SC 755 - referred to.
   1.2. A statutory rule or an exemption notification
which confers benefit to the assessee on certain               H
    550     SUPRFME COURT REPORTS                [2014] 1 S.C.R.


A conditions should be liberally construed but the
  beneficiary should fall within the ambit of the rule or
  notification and further if there are conditions and
  violation thereof provided, then the concept of liberal
  construction would not arise. Exemption being an
B exception has to be respected regard being had to its
  nature and purpose. [Para 22] [564-E-G]

        State of Haryana and others v. A. S. Fuels Private Limited
    and another 2008 (12) SCR 370 = (2008) 9 sec 230 - relied
    on.
c
       Commissioner of Sales Tax v. Industrial Coal Enterprises
  1999 (1) SCR 871 = (1999) 2 SCC 607, after referring to CIT
                                                   =
  v. Straw Board Mfg. Co. Ltd 1989 (2) SCR 772 (1989) Supp
  (2) sec 523 and Bajaj Tempo Ltd. v. CIT (1992) 3 sec 78;
D Tamil Nadu Electricity Board and Another v. Status Spinning
                                                 =
  Mills Limited and another 2008 (9) SCR 870 (2008) 7 SCC
  353 - referred to.

       1.3. In the instant case, Clause (b) of sub-r. (11) of r.
E 28A of the Haryana General Sales Tax Rules, 1975 clearly
  stipulates that in case of violation of clause (a) (i) of sub-
  r. (11 ), the assessee shall be liable for making the full
  amount of tax-benefit availed of by it during the period
  of exemption/deferment with interest chargeable under
F the Act. [Para 15] [560-E-F]

        R.K. Mittal Woolen Mills v. State of Haryana and others
    (2001) 123 STC 248 - held inapplicable.

       1.4. The production of the beneficiary unit had failed
G to fulfil the stipulation incorporated in sub-r. (11) (a)(i) of
  r. 28A of the Rules. It is also the undisputed position that
  the production of the expanded unit has been computed
  and clubbed with the first unit to reflect the meeting of
  the criterion. The competent authority has come to a
H
STATE OF HARYANA & ORS. v. BHARTI TELETECH 551
                   LTD.
definite conclusion that the expanded capacity had been         A
created to show that the rate of production is maintained
but it is fundamentally a subterfuge. The authority has
also taken into consideration the different items produced
and how there has been loss of production of EPBT in
the first unit. The High Court has failed to appreciate the     B
relevant facts and, without noticing that the respondent-
assessee had clubbed the production of the units,
lancinated the orders passed by the forums below. [Para
16] [560-G-H; 561-A-B]

     1.5. In the case at hand, clubbing is not permissible.     C
It amounts to violation of the conditions stipulated under
sub-r. (11) (a)(i) of r. 28A and, therefore, the consequences
have to follow and as a result, the assessee has to pay
the full amount of tax benefit and interest. The approach
of the High Court is absolutely erroneous. The judgment         D
and order passed by the High Court is set aside and the
orders of the tribunal and other authorities are restored.
[para 24-45] [56~-H; 566-A-C]
                     Case Law Reference:                        E
    (2001) 123 STC 248       held inapplicable     para 10
    1969 SCR 343             referred to           para 19
    2008 (12) SCR 370        relied on             para 23
                                                                F
    1999 (1) SCR 871         referred to           para 20
    1989 (2) SCR 772         referred to           para 20
    (1992) 3 sec 78          referred to           para 20
                                                                G
    2008 (9) SCR 870          referred to          para 21
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6791 of 2004.

                                                                H
    552      SUPREME COURT REPORTS                [2014] 1 S.C.R.


A        From the Judgment and Order dated 08.05.2003 of the
    High Court of Punjab & Haryana at Chandigarh in Civil Writ
    Petition No. 16336 of 2002.

      Manjit Singh, Tarjit Singh, Anil Anti! (For Kamal Mohan
B Gupta) for the Appellants.

         Gopal Jain, Bina Gupta, Abhay Jena Ranjit Raut, Kaushik
    Laik for the Respondent.

          The Judgment of the Court was delivered by
c       DIPAK MISRA, J. 1. Calling in question the legal
  acceptability and propriety of the judgment and order dated
  08.05.2003 passed by the High Court of Punjab and Haryana
  at Chandigarh in C.W.P. No. 16336 of 2002 whereby the
  Division Bench has quashed the order dated 2b.9.2002 passed
D by the Sales Tax Tribunal, Haryana which had affirmed the
  orders passed by the appellate authority, namely, Joint Excise
  and Taxation and that of the Deputy Excise and Taxation
  Commissioner (Gurgaon), the original authority who had, upon
  initiation of a proceeding under Rule 28 (11) (b) of the Haryana
E General Sales Tax Rules, 1975 (for short "the Rules"), come to
  hold that the respondent-assessee herein had violated the
  provisions of Rule 28A (11) (a) (i) as it had failed to maintain,
  without convincing reasons, the requisite production and was,
  therefore, liable to make full payment of tax exemption benefit
F availed by it during the concessional period, i.e., 13.12.1991
  to 12.12.1998 of sale of Electronic Push Button Telephones
  (EPBT), the present appeal, by special leave, has been
  preferred by the State of Haryana and its functionaries.

G      2. The facts that are imperative to be stated are that the
  respondent assessee, namely, Mis. Bharti Teletech Limited,
  was allowed sales tax exemption under Rule 28A of the Rules
  for the period 13.12.1991 to 12.12.1998 for an amount of
  Rs.498.80 lakhs. This benefit was granted subject to the
H conditions laid down in the said sub-rule 11 of Rul~ 28A of the
STATE OF HARYANA & ORS. v. BHARTI TELETECH 553
           LTD. [DIPAK MISRA, J.]
Rules. The conditions postulated in sub-rule 11 (a) are that the A
industrial unit after availing of the benefit shall continue its
production at least for the next five years not below the level of
average production for the preceding five years. There is also
stipulation in the sub-rule 11 that if the unit violates any of the
conditions laid down in clause (a) of sub-rule 11, it shall be liable B
to make, in addition to the full amount of tax benefit availed of
by it during the period of exemption, payment of interest
chargeable under the Act as if no tax exemption was ever
available to it. It is apt to note that there is a proviso that provides
that the rigors of the said clause would not come into play if the
loss of production is explained to the satisfaction of the Deputy C
Excise and Taxation Commissioner concerned as being due to
reasons beyond the control of the unit.

     3. As the facts would uncurtain, on 3.05.1997, the
assessee submitted an application seeking amendment in the D
eligibility certificate so as to include certain other items but ·it
was rejected vide order dated 22. 7.1997 by the High Level
Screening Committee. On an appeal being filed, the
Commissioner of Industries accepted the same and remitted
the matter to the High Level Screening Committee to revise the E
eligibility certificate allowing the benefit of sales tax exemption
by inclusion of additional items. However, the period of
exemption remained unaltered. Be it noted, the assessee was
granted the full benefit of exemption for the entire period.

     4. After the expiry of the period of exemption, the Deputy       F
Excise and Taxation Commissioner (Gurgaon), the 2nd
appellant herein, while monitoring the production level of the
respondent unit, noticed that it was not maintaining the level of
production of the preceding five years and, accordingly, initiated
a proceeding against it on the foundation that it had violated        G
the conditions enumerated under Rule 28A (11) (a) (i) and was
thereby liable to make full payment of tax exemption benefit
already availed by it along with interest. As required under the
Rules, it issued a notice to show cause to explain non-
                                                                      H
    554     SUPREME COURT REPORTS                 [2014] 1 S.C.R.


A maintenance of average production after the expiry of the
  benefit period inasmuch as it had drastically come down to
  Rs.9.06 crores from 17.52 crores. In the course of adjudication,
  in reply to the show cause, the assessee explained that it had
  established another unit as an expansion unit which had come
8 into commercial production w.e.f. 27.3.1998 and for the
  purpose of determining the level of production after
  12.12.1998, the production figures of the expansion unit were
  also required to be taken into account. A contention was raised
  before the 2nd appellant that the notice to show cause was
C premature as it was given prior to the expiry of twelve months
  from 12.12.1998, that is, the date on which the period of benefit
  expired.

          5. The adjudicating authority rejected the said contention
  and proceeded to delve into the facts that had emerged before
D it. It came to hold that the Gross Turn Over (GTO) during January
  1999 and December 1999 was Rs.9.06 crores as against the
  average GTO of Rs.17 .52 crores during the five years
  immediately preceding 12.12.1998. The said authority also
  considered the GTO for the assessment year 1999-2000
E (1.4.1999 to 31.3.2000) which reflected the amount as
  Rs.4,48,05,695.00 for the year immediately preceding, i.e.,
  assessment year 1998-1999.

       6. It may be noted that a contention was advanced that the
F unit during the five years preceding 12.12.1998 had produced
  40,83,246 pieces giving yearly average of 8, 16,649 pieces
  against which the average production in the post benefit period
  is 1898961 pieces which 111ould show that the production
  actually increased after the expiry of the benefit period. The
  competent authority, upon perusal of the production chart for
G the period 13.12.1993 to 12.12.1998, analysed the same and
  arrived at the average production. The tabular chart prepared
  by the adjudicating authority is as follows:-


H
 STATE OF HARYANA & ORS. v. BHARTI TELETECH 555
            LTD. [DIPAK MISRA, J.]
                        Average'Production                          A
 Items    Before on      Expiry    After Expiry   Increase(+)
          period         benefit   benefit period Decrease (-)


 ETBT     330431                   163270          (-) 167161       B

 Pagers 4405                       Nil             (-) 4405

 Spare    481813                   1735691         (+) 1253878
 Parts                                                              c
     7. The reasoning adopted by the 2nd appellant basically
was that the claim of the assessee that production had not come
down in the post benefit period was wholly unacceptable
because it could not be given the same weightage as its
individual parts inasmuch as a complete telephone set could         D
not, for the exemption purpose, be equated with its number of
parts which constituted its assembly. Being of this view, the 2nd
appellant came to hold that it was obligatory on the part of the
assessee industrial unit, having availed the benefit of tax
exemption for the specified period, to continue its business and    E
to respect the conditions enumerated in the prescription in the
rule. The said authority ruled that the assessee, having failed
to meet the production level, was liable to be visited with the
consequences and, accordingly, directed for making full
payment along with interest.                                        F
     8. Grieved by the aforesaid order, the assessee preferred
an appeal before the appellate authority who came to hold that
the explanation for loss in production was due to outdated
machinery and, hence, the reasons for fall in production could
                                                                    G
not be held to be beyond the control of the assessee, for it was
well within his control to replace the outdated machinery of the
old unit instead of putting up a new unit. On the aforesaid
bedrock, the appellate authority declined to interfere in appeal.

     9. Failure in appeal led the assessee to file an appeal        H
    556       SUPREME COURT REPORTS                  [2014] 1 S.C.R.


A before the Sales Tax Tribunal which, on reappreciation of the
  factual matrix in entirety, came to hold that the average
  manufacturing of EPBT in the subsequent three years was
  approximately of 9.32 lacs as against an average of 3. 79 in
  the preceding five years. That apart, the appellant had not taken
B the plea that the lower production was because of factors
  beyond their control. The tribunal further observed that it was
  not a mere coincidence that the second unit (expansion)
  became operational soon after the expiry of benefit in the first
  unit from which it was evident that the assessee had a well
c thought out plan to deliberately reduce the manufacturing of
  EPBT drastically in the first unit and increase the production of
  the said item in the second unit. The tribunal also took note of
  the fact from the information provided by the assessee it was
  obvious that the turnover in the expanded unit had increased
0 from Rs.65.49 lacs in 1998-1999 to Rs.31.36 crores in 1999
  but on the other hand, the turnover in the first-unit had gone
  down from Rs.13.27 crore during 1998-99 to Rs.4.48 crore
  during 1999-2000 and hence, it was clearly indicative that the
  expanded capacity had been created to coincide with the
E expiry of the benefit period in the first unit. Finally, the tribunal
  held:-

          'Though increase or decrease in the turnover by itself may
          not be of much consequence in the scheme but the turnover
          does have direct relationship with the production and since
F         the production of higher value item i.e. EPBT was reduced,
          the total gross turnover in terms of value was also bound
          to decline and the spare capacity in the first unit was
          utilized by increasing the production of spare parts i.e. low
          value items. It is, therefore, obvious from the facts of the
G         case that the production of EPBT was deliberately
          reduced in the first unit and increased in the second unit
          as the appellant company was hoped of getting the benefit
          of exemption again on the expanded capacity."

          10. In view of the aforesaid analysis, the tribunal affirmed
H
STATE OF HARYANA & ORS v. BHARTI TELETECH 557
           LTD. [DIPAK MISRA, J.]
the conclusion recorded by the forums below. The aforesaid             A
order of the tribunal came to be as5ailed before the High Court
in a writ petition. The Division Bench of the High Court referred
to the rule position and quantity manufactured in lacs and
turnover of goods and placed reliance on R.K. Mittal Woolen
Mills v. State of Haryana and others1 and came to hold that            B
the tribunal ought to have set aside the orders of the Deputy
Excise and Taxation Commissioner and Joint Excise and
Taxation Commissioner instead of upholding their action on
totally erroneous consideration. It opined t~~t the approach of
the tribunal was erroneous inasmuch as withoµt pointing out to         C
the violation of the rules, it had passed the order solely on the
 basis of conjecture. The High Court further observed that even
 if the factum of reduction of production as stated by the tribunal
was accepted as correct, still the exemption on·;tax could not
 have been withdrawn as it was not a ground mentioned in sub-
 rule II (a) (i) of Rule 28A for withdrawal of exemption.              D

       11. Questioning the defensibility of the order passed by
 the High Court, Mr. Manjit Singh, learned counsel appearing for
 the appellants, has contended that the High Court in a laconic
 manner has arrived at the conclusion that the autho;ities as well     E
 as the tribunal has fallen into error by opining that there has
 been a violation of the rule in question though on a bare reading
 of the said orders there can be no shadow of doubt that the
 increased production in respect of the second unit could not
 have been taken into account for the first unit since the second      F
 unit was an individual unit having no concern with the first unit.
  It is his further submission that the High Court failed to
 appreciate that the respondent had tried to take recourse to
. an innovative subterfuge by establishing a new unit producing
 the same items as the earlier ones and added the production           G
  of the second unit to the first unit to claim the benefit which is
  impermissible. Learned counsel would further submit that when
  the conditions enumerated under the rule had factually been

1.   (2001) 123 STC 248.                                               H
    558      SUPREME COURT REPORTS                    [2014] 1 S.C.R.

A violated, there was no justification on the part of the High Court
  to opine on the basis of the decision rendered in the R.K. Mittal
  Woolen Mills' case that the exemption could not have been
  withdrawn because there had been no violation of clauses (I)
  and (II) of sub-rule 11 (a) of Rule 28A of the Rules.
B       12. Mr. Gopal Jain, learned counsel appearing for the
  respondent contended, in support of the impugned order, that
  the appreciation of facts by the High Court and the reasons
  ascribed by it for annulling the orders of the forums below are
  absolutely unimpeachable since the assessee was under an
C obligation to apply for exemption even in respect of expansion
  and in that background, there was no justification for the forums
  below not to take into consideration the production of the
  expanded unit. It is also urged by him that even assuming that
  there are two units, the same would be covered under the
D definition of Rule 28A (f) which defines "eligible industrial unit"
  and on a proper construction of the provision, the combined
  conclusion of the production of the units cannot really be found
  fault with. It is also put forth by him that the provisions relating
  to exemption and the exemption notifications are required to
E be liberally construed for industrial growth and the High Court,
  keeping in mind the said principle, has dislodged the orders
  passed by the forums below and, therefore, the order impugned
  should not be taken exception to.

F         13. To appreciate the rivalised contention raised at the bar,
    it is appropriate to refer to Rule 28A (11) which reads as
    follows:-
           "11 (a) The benefit of tax-exemption/deferment under this
          rule shall be subject to the condition that the beneficiary/
G         industrial unit after having availed of the benefit, -
                 (i) shall continue its production at least for the next
                 five years not below the level of average production
                 for the preceding five year: and
H
STATE OF HARYANA & ORS. v. BHARTI TELETECH 559
           LTD. [DIPAK MISRA, J.]

            (ii) shall not make sales outside the State for next      A
            five years by way of transfer or consignment of
            goods manufactured by it.

    (b) In case the unit violates any of the conditions laid down
    in clause (a). it shall be liable to make. in addition to the     8
    full amount of tax-benefit availed of by it during the period
    of exemption/deferment. payment of interest chargeable
    under the Act as if no tax exemption/ deferment was ever
    available to it;

    PROVIDED that the provisions of this clause shall not come        C
    into play if the loss in production is explained to the
    satisfaction of the Deputy Excise and Taxation
    Commissioner concerned as being due to the reasons
    beyond the control of the units:
                                                                      D
    PROVIDED FURTHER that a unit shall not be called upon
    to pay any sum under this clause without having been
    given reasonable opportunity of being heard."

                                              [Emphasis added]
                                                                      E
      14. On a bare reading of the said Rule, it is evincible that
the conditions which are imposed have been enumerated in
clause I (ii) of the said sub-rule 11 (a) of Rule 28A to the effect
that in the event of non-maintenance of the quality of production
after the expiry of the exemption, the assessee has to pay the        F
tax benefit availed with interest. In the case at hand, the revenue
has press1:1d clat.ise I (ii) into service. The Division Bench has
relied on .the decision in. R.K. Mittal .Woolen MH/s (sqpraj
wherein the High Court was dealing with the withdrawal of
eligibility of certificate as provided in sub-rules 8 and 9 of Rule   G
28A. After referring to sub-rule a· of Rule 28A that deals with
the withdrawal of eligibility certificate under certain
circumstances. Analysing the said Rule, it was stated thus :-

     "A perusal of the aforesaid sub-rule would show that the
                                                                      H
    560       SUPREME COURT REPORTS                     [2014] 1 S.C.R.


A         grounds on which the eligibility certificate and be
          withdrawn are mentioned therein but the ground of non-
          production of the change of land use permission from the
          Town and Country Planning Department is not one of the
          grounds mentioned therein. Sub-rule (8) of Rule 28A being
B         a part of a taxing statute has, in the nature otthings, to be
          construed very strictly and, therefore, the eligibility
          certificate can be withdrawn only on the grounds mentioned
          therein and on no other grounds. The authorities cannot
          add any other ground to the said sub-rule. We are,
c         therefore, satisfied that the eligibility certificate granted to
          the petitioner could not be withdrawn only on the ground
          of non-production of the change of land use permission by
          the Town and Country Planning Department"

        15. The said decision, as we perceive, was rendered in a
D totally different context. In the present case, we are not
  concerned with the withdrawal of eligibility certificate. We are
  concerned with the consequences that have been enumerated
  in clause (b) of sub-rule 11 of Rule 28A which clearly stipulates
  that in case of violation of clause 11 (a) (i) of Rule 11, the
E assessee shall be liable for making, in addition to the full
  amount of tax-benefit availed of by it during the period of
  exemption/deferment, with interest chargeable under the Act.
  Thus, reliance placed by the High Court on the said decision
  is misconceived and inappropriate.
F
       16. The hub of the matter is whether production of two
  different units can be combined together to meet the
  requirement of the postulate enshrined under the Rule. The
  production of the beneficiary unit had failed to fulfil the stipulation
G incorporated in sub-rule 11 (a)(i) of Rule 28A of the Rules. It is
  also the undisputed position that the production of the expanded
  unit has been computed and clubbed with the first unit to reflect
  the meeting of the criterion. The competent authority has come
  to a definite conclusion that the expanded capacity had been
H created to show that the rate of production is maintained but it
STATE OF HARYANA & ORS. v. BHARTI TELETECH 561
           LTD. [DIPAK MISRA, J.]

is fundamentally a subterfuge. The authority has also taken into . A
consideration the different items produced and how there has
been loss of production of EPBT in the first unit. The High Court
has failed to appreciate the relevant facts and, without noticing
that the respondent-assessee had clubbed the production of
the units, lancinated the orders passed by the forums below.       B
                                                                          '
     17. Mr. Jain, learned counsel for the respondent has drawn
our attention to clause (f) of sub-rule (2) of Rule 28A which
defines 'eligible industrial unit'. The definition reads as follows:-

     "(f) 'eligible industrial unit' means:-                              c
     (i) a new industrial unit or expansion or diversification of
     the existing unit, which-

             (1) has obtained certificate of registration under the       D
             Act;

             (II) is not a public sector undertaking where the
             Central Government held 51 per cent or more
             shares;
                                                                          E
             (Ill) is not availing incentive of interest free loan from
             the Industries Department for investment after the
             1st day of April, 1988;

             (IV) is not included in Schedule Ill appended to
             these rules except the tiny units set up in a rural              F
             area on or after 1-4-1992, in which capital
             investment in plant and machinery including market
             price of plant and machinery taken on base or
             otherwise, does not exceed rupees five lakhs, shall
             not form part of Schedule Ill;                               G

             (V) is not availing or has availed of exemption
             under Section 13 of the Act;

     (ii) a sick industrial unit recommended by the High
     Powered Committee for the grant of fiscal relief either in               H
    562      SUPREME COURT REPORTS                   [2014] 1 S.C.R.


A         the form of exemption from the payment of sales tax or
          purchase tax or both or deferment of tax."
         18. He has laid immense emphasis on the term
    'expansion' of the existing unit. The term 'expansion' has been
    defined in clause (d) of sub-rule (2) of Rule 28A which reads
8   thus:-
          (d) "expansion/diversification of industrial unit" means a
          capacity set up or installed during the operative period
          which creates additional productions/manufacturing
c         facilities for manufacture of the same product/products as
          of the existing unit (expansion) or different products
          (diversification) at the same or new location -

          (i) in which the additional fixed -capital investment made
          during the operative period exceeds 25% of the fixed
D         capital investment of the existing unit, and

          (ii) which results into increase in annual production by 25%
          of the installed capacity of the Existing Unit in case of
          expansion.
E On a careful reading of the aforesaid provisions, it is quite
  clear as day that they deal with the eligibility to get the benefit
  of exemption/deferment from the payment of tax. On a studied
  scrutiny of clause (f) (i) (I), it is manifest that it is incumbent on
  the unit to obtain certificate of registration under the Act. The
F submission of Mr. Jain is that the second unit has obtained the
  registration certificate under the Act and, hence, the production
  of the said unit, being eligible, is permitted to be included.
  Needless to say, obtainment of registration certificate is a
  condition precedent to become eligible but that does not mean
G that the production of the said unit will be taken into account
  for sustaining the benefit of the first unit. They are independent
  of each other as far as sub-rule 11 of the Rule 28A is
  concerned. We are disposed to think so as the grant of
  exemption has a sacrosanct purpose. The concept of
H exemption has been introduced for development of industrial
STATE OF HARYANA & ORS. v. BHARTI TELETECH 563
           LTD. [DIPAK MISRA, J.]

activity and it is granted for a certain purpose to a unit for certain   A
types of good. Exemption can be granted under the Rules or
under a notification with certain conditions and also ensure
payment of taxes post the exemption period. The concept of
exemption is required to be tested on a different anvil, for it
grants freedom from liability. In the case at hand, as we                B
understand, it is 'unit' specific. The term 'unit' has not been
defined. The grant of exemption unit wise can be best
understood by way of example. An entrepreneur can get an
exemption of a unit and thereafter establish number of units and
try to club together the production of all of them to get the benefit    c
for all. It would be well nigh unacceptable, for what is required
is that each unit must meet the condition to avail the benefit.

      19. We will be failing in our duty if we do not address to a
submission, albeit the last straw, of Mr. Jain that any provision
relating to grant of exemption, be it under a rule or notification,      D
should be considered liberally. In this regard, we may profitably
refer to the decision in Hansraj Gordhanadas v. H.H. Dave,
Assistant Collector of Central Excise and Customs, Surat and
others2 wherein it has been held as follows:-
                                                                         E
     "... lt is well established that in a taxing statute there is no
     room for any intendment but regard must be had to the
     clear meaning of the words. The entire matter is governed
     wholly by the language of the notification. If the tax-payer
     is within the plain terms of the exemption it cannot be
                                                                         F
     denied its benefit by calling in aid any supposed intention
     of the exempting authority. If such intention can be
     gathered from the construction of the words of the
     notification or by necessary implication therefrom, the
     matter is different..."
                                                                         G
    20. In Commissioner of Sales Tax v. Industrial Coal
Enterprises, 3 after referring to CIT v. Straw Board Mfg. Co. Ltd4
2.   AIR 1970 SC 755.
3.   (1999) 2 sec 607.
4.   (1989) Supp (2) sec 523.                                            H
    564       SUPREME COURT REPORTS                    (2014] 1 S.C.R.


A and Bajaj Tempo Ltd. v. CIT, 5 the Court ruled that an exemption
  notification, as is well known, should be construed liberally once
  it is found that the entrepreneur fulfills all the eligibility criteria.
  In reading an exemption notification, no condition should be
  read into it when there is none. If an entrepreneur is entitled to
B the benefit thereof, the same should not be denied.
        21. In this context, reference to Tamil Nadu Electricity
    Board and Another v. Status Spinning Mills Limited and
    another6 would be fruitful. It has been held therein :-

C         "It may be true that the exemption notification should
          receive a strict construction as has been held by this Court
          in Novopan India Ltd. v. CCE and Customs7 , but it is also
          true that once it is found that the industry is entitled to the
          benefit of exemption notification, it would received a broad
D         construction. (See Tata Iron & Steel Co. Ltd. v. State of
          Jharkhanc/8 and A.P. Steel Re-Rolling Mill Ltd. v. State
          of Kera/a 9 ). A notification granting exemption can be
          withdrawn in public interest. What would be the public
          interest would, however, depend upon the facts of each
E         case."

       22. From the aforesaid authorities, it is clear as crystal that
  a statutory rule or an exemption notification which confers
  benefit to the assessee on certain conditions should be liberally
  construed but the beneficiary should fall within the ambit of the
F rule or notification and further if there are conditions and
  violation thereof are provided, then the concept of liberal
  construction would not arise. Exemption being an exception has
  to be respected regard being had to its nature and purpose.
  There can be cases where liberal interpretation or
G
    5.   (1992) 3 sec 78.
    6.   c2008) 7 sec 353.
    7.   1994 Supp (3) sec 606.
    8.   (2005) 4 sec 272.
H 9. (2007) 2 sec 725.
STATE OF HARYANA & ORS. v. BHARTI TELETECH 565
           LTD. [DIPAK MISRA, J.]

understanding would be permissible, but in the present case,           A
the rule position being clear, the same does not arise.

      23. At this juncture, it is apposite to refer to the
pronouncement in State of Haryana and others v. A. S. Fuels
Private Limited and another. 10 In the said case, the State of
                                                                       8
Haryana had approached this Court as the High Court had
construed the effect of sub-rule 10 (v) of Rule 28A of the Rules
which authorises the department to withdraw the tax exemption
certificate but had granted liberty to the State to scrutinize if it
was a case for withdrawal of the eligibility certificate under sub-
rule (8) of Rule 28A of the Rules and, thereafter, to proceed in       C
accordance with the law. This Court, scanning the anatomy of
Rule 28A, opined that under sub-rule (8)(b), when the eligibility
certificate is withdrawn, the exemption/entitlement certificate is
also deemed to have been withdrawn from the first day of its
validity and the unit shall be liable to payment of tax, interest or   D
penalty under the Act as if no entitlement certificate had ever
been granted to it. Thereafter, the Court adverted to sub-rule
11 (a) and, in that context, it observed thus:-

     "... there are several conditions which are relevant; firstly,    E
     there is a requirement of continuing the production for at
     least next five years; secondly, consequences flowing in
     case of violation of the conditions laid down in clause (a).
     In other words, in case of non continuance of production
     for next five years, the result is that it shall be deemed as     F
     if there was no tax exemption/entitlement available to it.
     The proviso permits to the dealers to explain satisfactorily
     to the DETC that the loss in production was because of
     the reasons beyond the control of the unit. The materials
     have to be placed in this regard by the party. The High           G
     Court seems to have completely lost sight of sub-rule
     (11)(b)."

     24. In the case at hand, as we have already held, clubbing

10. (2008) 9 sec 230.                                                  H
    566     SUPREME COURT REPORTS                [2014] 1 S.C.R.


A is not permissible. It amounts to a violation of the conditions
  stipulated under Rule 11 (a)(i) of Rule 28A and, therefore, the
  consequences have to follow and as a result, the assessee has
  to pay the full amount of tax benefit and interest. The approach
  of the High Court is absolutely erroneous and it really cannot
B withstand close scrutiny.

       25. In view of our aforesaid analysis and prismatic
  reasoning, the appeal is allowed and the judgment and order
  passed by the High Court is set aside and those of the tribunal
  and other authorities are restored. There shall be no order as
C to costs.

    R.P.                                         Appeal allowed.