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TMI Blog2001 (7) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... xed capital investment (FCI) in the new industrial unit claimed by the company was Rs. 53,252.87 lakhs (Rs. 532.52 crores) but only Rs. 5,553.72 lakhs (Rs. 55.53 crores) were accepted in the first instance as FCI eligible for availing the benefit under the New Incentive Scheme, 1989. On that basis, the State Level Screening Committee certified the company entitled to avail exemption of tax to the extent of 25 per cent of the tax imposable only by treating it to be a large scale industry. Though it has not given any reasons for confining the benefit to 25 per cent apparently it refers to item 1-E of annexure C appended to the Rajasthan New Sales Tax Incentive Scheme, 1989. 3.. Aggrieved with the quantum accepted as fixed capital investment as well as the percentage of tax exemption specified in the order of SLSC, the company appealed before the Rajasthan Tax Board under the provisions of the said scheme. 4.. Before the Tax Board, it was contended by the Revenue that as it is not first cement unit within the Panchayat Samiti, Pindwara, it is not a prestigious unit falling under item 4 to avail the benefit of tax exemption at the rate of 75 per cent of the tax leviable and it ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme 1989 is confined to the extent envisaged under item 1-E of annexure "C", the said entry being specific entry relating to the cement industry, no other entry which is of general character can be looked into for the purpose of availing benefit in respect of a new cement unit. Therefore, notwithstanding that the company's unit may be considered a new prestigious unit, item No. 4 being general in character, cannot govern the case of cement industries. He relies on a decision of this Court in Commercial Taxes Officer, Chittorgarh v. Aditya Cement [2001] 121 STC 113 (Raj); (2000) 2 WLN 384 (Raj) in contending that the legislative history of the provision goes to show that the general benefit available to prestigious or new very prestigious unit are not extended to the cement industry in general from the very beginning and therefore the entries in annexure "C" must be read in that background as not conferring additional benefit than what has been envisaged under item No. 1-E of the appendix annexure "C". 8.. Mr. Sudhir Gupta, learned counsel for the assessee, on the other hand, contends that there has been considerable shift in treatment to the cement industry under the scheme since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of cement industry. For the purpose, he invited attention to item No. 2 concerning expansion or diversification unit and item No. 5 new very prestigious unit and clause 1 applying to new units generally, yet no amendment was made in item No. 4 specifying the quantum of incentive available to new units falling in the category of a unit producing pollution control equipment/pioneer unit/prestigious unit. This act of excluding cement industry deliberately from items Nos. 1, 2 and 5, contends learned counsel, will leave no room of doubt that industry of cement otherwise falls in specific items identified specially for privileged treatment in the matter of grant of incentives under the scheme did not lose its applicability unless expressly excluded by the amended notification dated December 10, 1996. 9.. I have given my anxious consideration to the rival contentions. 10.. There is no dispute between the parties on facts. Firstly that it is a new industrial unit established for manufacture of cement in Panchayat Samiti, Pindwara, its FCI exceeds Rs. 500 crores and it employs more than 250 employees, to be precise 336 as found by the Tribunal and corresponds to the definition of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minimum number of persons. Significantly with an industry with investment over Rs. 25 crores condition of its setting up in Panchayat Samiti itself is not a condition. It may be clear that expression "new unit" has occurred at two places; firstly it qualifies a new industry established in a Panchayat Samiti and second expression qualifies a new industrial unit having a FCI exceeding Rs. 25 crores simplicitor. The second time use of expression "new industrial unit" only qualifies amount of investment. Apparently, the condition of first established industry in Panchayat Samiti is not attached with the other two conditions else the very first condition becomes redundant requiring fixed capital investment only to the minimum extent of Rs. 10 crores or more. If this condition is attached with investment of Rs. 25 crores or more, the alternative requirement will be redundant. Rs. 25 crores are always more than minimum of Rs. 10 crores. 12.. The other conditions are not being referred because it is not in dispute before me that as per the scheme the assessee falls in all the three categories of the industries referred to above; viz., a new unit which in "large scale", a new unit which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt the exemption is made available under column No. 3 in rate of tax. For example, on sale of commodity X tax is payable at 10 per cent and if 50 per cent of the tax liability is exempted on each sales of goods manufactured by the industrial unit eligible to avail benefit under the scheme. On assessment of tax on turnover of commodity X at 10 per cent, 50 per cent of the tax liability will have to be paid by the assessee and he will enjoy benefit of exemption in respect of balance 50 per cent. Thus, under column 3 the extent of percentage of exemption from tax relates to each transaction of sale, the new unit can enjoy, subject to maximum limit in aggregate as envisaged in column 4, within a maximum period as envisaged under column 5, as will be seen hereinafter. 15.. Column No. 4 which lays down the maximum limit of exemption in terms of percentage of fixed capital investment puts the maximum amount of exemption from tax in aggregate which the assessee is entitled to avail under column No. 3. The aggregate of tax exemption under column 3 is subject to maximum quantum of benefit the dealer can enjoy in respect of eligible industrial unit, which cannot exceed the maximum exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories; (i) new unit, (ii) expansion, (iii) sick, (iv) pioneer, (v) new prestigious, (vi) new very prestigious, (vii) 100 per cent export oriented new prestigious/pioneer unit, and (viii) 100 per cent export oriented new very prestigious unit. It also classifies, independent of above classification for which separate limits of incentives have been envisaged, new units simplicitor in small, medium and large scale new units. This general category of new industrial unit is subclassified into small, medium or large scale. A new unit in its manifestation of small/medium/large scale unit as per volume of capital investment is a general category of new industrial unit vis-a-vis a new pioneer unit, or new prestigious unit, or a new very prestigious unit. The 100 per cent exported oriented industries falling in the category of pioneer/prestigious or very prestigious unit has still been entreated to special treatment than general class of pioneer, prestigious or very prestigious new units. This reveals the concept of general versus specific in the backdrop of scheme and treatment of various types of industrial units falling into specific description specified in the scheme. This is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyment of at least 100 persons in such new industry which is first of its own time. 20.. However, a very first industry in the Panchayat Samiti with still large FCI of Rs. 10 crores and higher employment opportunity to a minimum of 250 people puts it in the category of not only in a large scale industry or a pioneer industry but also as a prestigious industry. 21. On the other hand, even if a unit is not pioneer industry in the sense that it is not of the very first of its type in a Panchayat Samiti, still a substantive large amount of capital investment of Rs. 25 crores more with employment opportunity of 250 persons is still considered a prestigious unit, though it is a large scale industry and not a pioneer industry but looking to FCI, in the area, makes it a prestigious industry. 22.. Still higher incentives are offered for mega investment in a Panchayat Samiti without any other condition by classifying it as a very prestigious unit. Obviously, this is with an object of inviting huge capital investment in the area which usually helps building infrastructure for growth of allied industry and trade in area. Hundred per cent export oriented pioneer, prestigious or very pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t include,- (i) an industrial unit established by transferring or shifting or dismantling an existing industry; and (ii) an industrial unit established on the site of an existing unit manufacturing similar goods. Explanation I.-Date of commencement of commercial production means the 61st day after the day on which the raw material is, for the first time, put in the process of production including trial production. Explanation II.-Very prestigious electronic industrial unit may use the dismantled machinery of an existing industry up to twenty per cent of its investment in plant and machinery. (h) 'Pioneering unit' means the first 'new industrial unit' established in any panchayat samiti of the State during the period of this scheme in which investment in fixed capital exceeds Rs. 3.00 crores and the minimum permanent employment is 100 persons. (i) 'Prestigious unit' means a 'new industrial unit' first established in any panchayat samiti of the State during the period of this scheme in which investment in fixed capital exceeds Rs. 10.00 crores with a minimum of permanent employment of 250 persons or a 'new industrial unit' having a fixed capital investment exceeding Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber medium scale units where RIICO is the lead institution Notes.-(1)(a) Small-scale unit means a unit of which the investment in plant and machinery does not exceed rupees sixty lakhs. A mini cement plant, where the investment in its plant and machinery does not exceed the limits prescribed for small-scale units, shall mean a small-scale unit. (b) Medium scale unit means a unit of which the project cost does not exceed rupees five crores. (c) Large scale unit means a unit of which the project cost exceeds rupees five crores. .............................". 25. The perusal of above provisions will confirm that while under clause I classification of a new unit is founded solely on the basis of amount of investment made in a new industry, in each of other specific clause emphasis is on something more than amount of investment. In the latter class amount of investment requires to be made is substantial or other conditions. That saves the pioneer, prestigious or very prestigious units from being excluded by any entry in the genere of a new unit with reference to its classification solely on the basis of its scale of investment taking it to small, medium or large scale unit as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------------------------------------------------------------- 1 New units 75% of total 100% of fixed capital Seven tax liability investment in case of years medium and large scale units and 125% of FCI in case of small-scale units. 1E New cement 75%, 50% and 125% of fixed capital Seven units except in 25% of total investment in case of years Tribal sub-plan tax liability in small-scale units area case of small, subject to an overall medium and limit of Rs. 1.00 large scale crore and 100% of units respecFCI in case of tively. medium and large scale units. 2. ................ .......... .......... .......... 3. ................ .......... .......... .......... 4. New units pro75% of total 100% of fixed capital Nine ducing pollutax liability investment years tion control equipments/pioneering units/ prestigious units. 5. New very pres90% of total 100% of fixed capital Eleven tigious units tax liability investment years other than cement units except in tribal sub-plan area 6. 100% export 100% of total 100% of fixed capital Nine oriented prestitax liability investment years gious/pioneering units 7. 100% export 100% of total 100% of fixed capital Eleven orient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch could still fall amongst a pioneer unit as per the definition given in clause 2(h) or a prestigious unit as defined in clause 2(i) or 100 per cent export oriented pioneer prestigious unit or very prestigious unit, yet no such clause was inserted to exclude the applicability of these specified class of industries slated for special treatment to exclude the cement industry from its purview. 30.. The contention that a special entry will exclude the applicability of general entry, in my opinion, will not operate in the context of the scheme which exists today, to exclude the operation of item Nos. 4, 6 and 7. 31.. By insertion of item No. 1E itself, it cannot, perhaps, be argued that 100 per cent export oriented unit is by itself not a specific entry having its purpose to promote export in addition to establishment of a new industry simplicitor, an object different from what is generally attached to new unit. It does not stand to reason that special benefits offered as incentives for export oriented industry were intended to be denied to the 100 per cent export oriented new cement units falling in item Nos. 6 and 7 otherwise, simply because new cement industry has been classifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 6 and 7 are all particular provisions relating to new units in general. When for cement, item No. 1 is substituted by item 1-E, it became general law applicable to a new cement industry generally vis-a-vis particular law governing new units falling in categories governed by item Nos. 4, 5, 6 and 7. There is no ambiguity in it. Because of this, item No. 5, a specific provision was enacted for excluding new cement units from its ambit but no such specific provision was made in respect of item Nos. 4, 6 and 7. This omission of specific exclusion clause, coupled with special treatment envisaged for pioneer, prestigious and export oriented units of three limits, there is no room of doubt that on the field on which clauses 4, 6 or 7 operate clause 1 or clause 1-E do not operate. In fact, each of item Nos. 4, 5, 6 and 7 is a specific entry vis-a-vis general entry of item No. 1, the new industrial unit or item No. 1-E, "new cement units" applicable to a new cement unit generally to be treated differently from item No. 1, but at the same time item No. 1-E is a general entry relating to new units manufacturing cement be of large, small or medium scale in relation to specific entries at ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Merely exclusion from item No. 1 and giving a different deal for a new cement industrial unit simplicitor from the general new industrial unit would not take way from it, its specific identity as separately defined which is otherwise attached with it as a prestigious unit, or as a pioneer unit, or as a very prestigious unit, or as 100 per cent export oriented unit or for that matter even on diversification or sick units. It is because of this factor, the legislative authority thought it fit wherever it desired to exclude the availability of the special incentives to the cement industry by specifying the same. It has so specified under item Nos. 1, 2 and item No. 5 only. 36.. The contentions of learned counsel for the petitioners fails at the altar of reasoning on their own showing that diversification and expansion is not a new unit and would not be governed by item No. 1 or 1-E. Therefore, it needed an exclusion under clause 2. This argument at least goes to show that the insertion of item No. 1-E is not of all pervasive operation governing the entire field of incentives available to a new cement industries as a whole. Therefore, it needed specific provision in respect of sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition of being treated distinctly for special treatment to the industries established in a particular area with a minimum investment and minimum employment opportunity offered by them. The object of offering additional incentives to pioneer and prestigious units being distinct than granting of incentive to merely a new industrial unit, in my opinion, rule out the construction to treat the entry No. 1E a special provision vice entries Nos. 4, 5, 6 and 7 as general entry. In fact construction of scheme as a whole points out to opposite direction and if the principle "specific entry excludes the general entry" is to be applied, to a prestigious new unit of cement is a specific provisional then a new unit item No. 1 or 1-E, and in the face of couple operating of 1-E will be left to the field of large, medium and small-scale generally which otherwise do not correspond to special description. 38.. When it was pointed out that at more than one place the draftsman of the scheme has used exclusion clause to exclude new cement unit from the domain of specific item, but no such exclusion clause has been used to exclude applicability of items Nos. 4, 6 and 7 of the annexure "C", it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l's order does not call for interference. 44.. However, great deal of emphasis has been laid by the learned Advocate-General on the decision of this Court in Aditya Cement's case [2001] 121 STC 113 against which SLP has been dismissed. 45.. Having carefully gone through the aforesaid judgment, the principle enunciated in Aditya Cement's case [2001] 121 STC 113 (Raj) cannot be invoked in the present case. The brief resume of that case would make out reason for my conclusion. That was a case in which the commercial production of cement had started on March 28, 1995 on which date the cement industry was included in the list of ineligible industries in annexure "B". Therefore, on its own force, no part of the scheme including annexure "C" was applicable to the cement industry. However, a limited opening was made for making available to the cement industry the incentives under the scheme by inserting second proviso to clause 2(j) of the scheme of 1989 and a proviso to clause 4(a) of that scheme. No amendment was made in annexure "C" also. Clause 2(j) defines ineligible industries. Second proviso to clause 2(j) stated that large scale new cement plants shall be entitled to deferment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther answered the issue before it as under: Therefore, as on the date, the respondent-unit commenced its commercial production it fell within the definition of large scale unit having project costs of over Rs. 100 crores and thus also fell to be governed by the second proviso to clause 4(a) of the scheme of 1989. That is on the anvil of assigning the same meaning to the same expressions used in two provisos. Admittedly in second proviso to clause 2(j) a large scale cement plant has been used irrespective of its further classification into prestigious or very prestigious unit to which category also, the large scale unit may belong. If they were to be considered as different classes of units for the purposes of this scheme then this will have to be accepted that the prestigious and very prestigious units have still not been included within expression "large scale unit" in the exception carved out from the ineligible industries under second proviso to clause 2(j) of the scheme of 1989." The court concluded as under: "Therefore, bringing into second proviso, the extension of deferment benefit to large scale units can only be referable to the unit having fixed capital investment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing cement industry in list of ineligible industry, was confined to the benefit envisaged in exception carved out thereto vide two provisos. Therefore, for identifying available incentives only provisos inserted by amendment could be looked into and not beyond. 50.. However, the scheme has entirely changed after December 13, 1996. The cement industry has been taken out from the list of ineligible industry and has been thrown in the general pool for availing of the incentive in its fullness under the scheme and new provisions were made for quantifying the incentives in the general pool. Therefore, the principle governing the quantification of the incentive in annexure C will govern the quantification of the incentives after December 13, 1996 and not in the context of availability of incentive as an exception to the general provision under the scheme existing prior to December 13, 1996. 51.. Moreover, it is now well-settled principle approved by the Supreme Court in Union of India v. Wood Papers Ltd. [1991] 83 STC 251; AIR 1991 SC 2049: "Truly speaking, liberal and strict constructions of an exemption provision are to be invoked at different stages of interpreting it. When the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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