2002 (10) TMI 742 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner, a manufacturer of ethyl alcohol, falls under item 10 of the negative list in the Haryana Government notification dated February 11, 1994, thereby disqualifying it from claiming sales tax exemption under Rule 28-A of the Haryana General Sales Tax Rules, 1975.

Detailed Analysis:

1. Interpretation of Entry 10 of the Negative List:
- The primary issue is whether the petitioner's ethyl alcohol manufacturing unit falls under item 10 of the negative list, which reads: "Ethanol (ethyl alcohol) based industries except non-molasses alcohol industries."
- The petitioner's contention is that this entry refers to industries based on ethanol (ethyl alcohol) as a raw material, not industries manufacturing ethanol (ethyl alcohol). The petitioner argues that the term "based" indicates a post-manufacture stage where ethanol is used as an input, not the manufacturing process itself.
- The petitioner supports this interpretation by referring to previous and subsequent notifications, highlighting that the term "ethanol (ethyl alcohol) based industries" consistently refers to industries consuming ethanol as a solvent or input, not manufacturing it.

2. Legal Precedents and Rules of Interpretation:
- The petitioner cites several Supreme Court judgments to support their interpretation:
- Abhoy Pada Saha v. Sudhir Kumar Mondal: Interpreted "Sunri excluding Saha" to mean that exclusions must relate to the main category.
- Shriram Vinyl and Chemical Industries v. Commissioner of Customs: Emphasized that clear and plain language in notifications should be construed rationally, not in a manner that deprives benefits.
- State of Punjab v. Jullundur Vegetables Syndicate: Stated that provisions granting economic incentives should be interpreted liberally to promote growth.
- The petitioner argues that the exception "except non-molasses alcohol industries" should be understood in the context of the main clause, meaning it excludes industries based on non-molasses alcohol from the negative list.

3. Respondents' Argument and Intention of the Notification:
- The respondents argue that the petitioner's unit falls within the negative list because it uses molasses to manufacture ethyl alcohol, which is discouraged due to the short supply of molasses.
- The respondents contend that the entry consists of two parts: (i) Ethanol (ethyl alcohol) based industries, and (ii) except non-molasses alcohol industries. They argue that the exception clarifies that industries using molasses are included in the negative list.
- The respondents also argue that interpreting the entry as suggested by the petitioner would render the exception redundant and make the provision unworkable, as it would be difficult to verify the source of the alcohol used by industries.

4. Court's Analysis and Conclusion:
- The court rejects the respondents' interpretation that the entry consists of two separate categories. It holds that the entry is a single sentence with part (i) as the main clause and part (ii) as an exception.
- The court finds that "Ethanol (ethyl alcohol) based industries" refers to industries consuming ethanol as an input, not manufacturing it. Therefore, the petitioner's manufacturing unit does not fall under this category.
- The court emphasizes that exceptions must be read in relation to the main provision and cannot nullify or expand it. The exception "except non-molasses alcohol industries" excludes industries based on non-molasses alcohol from the negative list.
- The court concludes that the plain language of the entry does not include the petitioner's manufacturing unit, and any practical difficulties in implementation cannot justify a different interpretation.

Judgment:
- The court sets aside the impugned orders denying the exemption to the petitioner and remands the matter to the High Level Screening Committee for fresh determination in light of the court's observations.
- If the petitioner is found entitled to exemption, the demands created by the assessment orders will be modified accordingly.
- Both writ petitions are allowed, with no order as to costs.