2014 (3) TMI 905 - SC - VAT and Sales Tax

Eligibility for exemption of tax Scheme for exemption from payment of sales tax notified u/s 4(2) of the Rajasthan Sales Tax Act, 1954 - Interpretation of Statute Principle of harmonious construction - Intention and object of the legislation Specific versus general provision - Held that - Judgment in Gobind Sugar Mills Ltd. Versus State of Bihar and Others 1999 (8) TMI 761 - SUPREME COURT OF INDIA , Reserve Bank of India versus Peerless General Finance & Investment Co. Ltd. ors. and Vice 1987 (1) TMI 452 - SUPREME COURT and JK. Cotton Spinning & Weaving Mills Co. Ltd. versus State of Up. 1960 (12) TMI 77 - SUPREME COURT followed If in a Statutory Rule or Statutory Notification, there are two expressions used, one in General Terms and the other in special words, under the rules of interpretation, it has to be understood that the special words were not meant to be included in the general expression. The rule is, that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. - Specific governs the general is not an absolute rule but is merely a strong indication of statutory meaning that can be overcome by textual indications that point in the other direction - This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions - A subject specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a broad subject. The item 1E is subject specific provision introduced by an amendment in 1996 - The amendment removed new cement industries from the non-eligible Annexure-B and placed it into Annexure-C amongst the eligible industries - It classified the cement units for eligibility of tax exemption into three categories small, medium and large - The said categories are comprehensive whereby small and medium cement units have been prescribed to have maximum Fixed Capital Investments (FCIs) of ₹ 60/- lakhs and ₹ 5/- crores, respectively and large to be over the FCI of ₹ 5/- crores - The maximum ceiling for large cement units has been purposefully left open and thereby reflects that the intention clearly is to provide for an all-inclusive provision for new cement units so as to avoid any ambiguity in determination of appropriate provision for applicability to new cement units to seek exemption -What is specific has to be seen in contradistinction with the other items/entries - The provision more specific than the other on the same subject would prevail - Here it is subject specific item and therefore as against items 1, 4, 6 and 7, which deal with units of all industries and not only cement, item 1E restricted to only cement units would be a specific and special entry and thus would override the general provision. The introduction of the subject specific entry vide amendment into general scheme of exemption speaks volumes in respect of intention of the legislature to restrict the benefit to cement industries as available only under Item 1E, which categorically classified them into three as per their FCI - The specific entries being mutually exclusive have been placed so systematically arranged and classified in the Scheme - The construction of provisions must not be divorced from the object of introduction of subject specific provision while retaining other generalized provision that now specifically exclude the new cement industries, which could otherwise fall into its ambit, lest such interpretation would be not ab absurdo (i.e., interpretation avoiding absurd results) - The Company would only be eligible for grant of exemption under Item 1E as a large new cement unit in accordance with its FCI being above ₹ 5/- crores - The judgment and order passed by the High Court set aside and the appeals of the Revenue allowed Decided against Assessee.

Summary

Issues Involved:
1. Eligibility for tax exemption under the "Sales Tax New Incentive Scheme for Industries, 1989".
2. Classification of the respondent-assessee as a "Prestigious Unit" or "Very Prestigious Unit".
3. Interpretation of specific versus general provisions in statutory schemes.

Detailed Analysis:

1. Eligibility for Tax Exemption:
The core issue revolves around the respondent-assessee's application for an eligibility certificate for exemption from Central Sales Tax and Rajasthan Sales Tax under the "Sales Tax New Incentive Scheme for Industries, 1989" (the Scheme). The Scheme, notified under Section 4(2) of the Rajasthan Sales Tax Act, 1954, exempts certain industrial units from tax on goods manufactured within the state. The respondent-assessee, a new industrial unit manufacturing cement, started commercial production on 27.05.1997 and has a fixed capital investment (FCI) exceeding Rs. 500 crores, employing more than 250 employees. The State Level Screening Committee initially granted only 25% exemption, treating the unit as a large-scale industry under Item 1E of Annexure 'C' of the Scheme. However, the Rajasthan Tax Board and the High Court later classified the unit as a "Prestigious Unit," entitling it to a 75% exemption.

2. Classification as "Prestigious Unit" or "Very Prestigious Unit":
The Scheme defines various categories of units, including "New Industrial Unit," "Prestigious Unit," and "Very Prestigious Unit." A "Prestigious Unit" is defined as a new industrial unit with an FCI exceeding Rs. 10 crores and employing at least 250 persons, or with an FCI exceeding Rs. 25 crores and employing at least 250 persons. A "Very Prestigious Unit" requires an FCI of Rs. 100 crores or more. The respondent-assessee claimed to be a "Prestigious Unit" based on its FCI and employment figures. The High Court upheld this classification, granting a 75% tax exemption. However, the Supreme Court noted that Item 1E specifically addresses new cement units, categorizing them into small, medium, and large units based on FCI, with varying exemption percentages.

3. Interpretation of Specific vs. General Provisions:
The Supreme Court emphasized the principle of statutory interpretation that specific provisions prevail over general ones. Item 1E, introduced by an amendment in 1996, specifically governs new cement units, providing a detailed classification and exemption structure. This specific provision overrides general provisions applicable to other industrial units. The Court cited several precedents, including Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P., and others, to support this principle. The Court concluded that the respondent-assessee, being a new large-scale cement unit, is only eligible for the 25% exemption under Item 1E, not the 75% exemption under the general "Prestigious Unit" category.

Conclusion:
The Supreme Court set aside the High Court's judgment, ruling that the specific provision (Item 1E) for new cement units prevails over the general provisions for "Prestigious Units." The respondent-assessee is entitled to a 25% tax exemption as a large new cement unit, in accordance with its FCI exceeding Rs. 5 crores. The appeal by the Revenue was allowed, and no order as to costs was made.