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TMI Blog2001 (12) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Exemption Scheme for Industries, 1998 (hereinafter referred to as "the Scheme of 1998"). It envisages exemption to certain industrial units from payment of tax on the intra-State sales/inter-State sales of the goods manufactured by them within the State, including by-products and the waste items derived therefrom and the packing material used therein in the manner, to the extent and for the period as specified in the notification. 3.. The appellants-petitioners in these two set of appeals are two manufacturers of cement, who claim that the respective cement units owned by them are sick industrial units. One is J.K. Udaipur Udhyog Limited having its unit at Udaipur and another is J.K. Synthetics Ltd. having a white cement plant at Gotan and a grey cement plant at Nimbahera in Rajasthan. Both of them have not availed benefit of exemption from payment of tax or deferment of tax, previously. The petitions relate to successive financial years of assessment in respect of which claim of exemption from payment of tax/deferment of tax payable is laid by them under the scheme at the rate mentioned in column 3 of item 1 read with item 4(a) of the annexure B of the Scheme. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved at about the applicability of the date of corrigendum." 6.. The notification, captioned as "Corrigendum under the Scheme dated 30th September, 1999", has not been published till that date but was published only on 7th January, 2000 after the decision of the State Level Screening Committee was made and communicated to the petitioner. 7.. In the other case of J.K. Synthetics Ltd., the application was made for sanctioning the exemption under the Scheme as a sick industrial unit in 1998. The J.K. Synthetics Ltd. company was declared as a sick company by Board for Industrial and Financial Reconstruction under the Sick Companies (Special Provisions) Act, 1975. The claim was in respect of one of its units manufacturing white cement and grey cement. The application for claiming benefit of Scheme as a sick unit was certified to be complete in all respects as on November 20, 1998. 8.. The State Level Screening Committee in the first instance was of the opinion that declaration of company as a sick company may not necessarily mean that it is also in respect of unit in question as a sick industry. Hence to remove this doubt, letter was addressed to Board for Industrial and Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divided into two categories, viz., those which have availed exemptions previously and which have not availed such benefit. In end of these two categories, again all sick industries were treated as one class. 11. It will be apposite to reproduce here annexure "B" as existing before the notification dated 30th September, 1999 was made effective. Annexure B Eligibility extent of exemption from tax under the Exemption Scheme S. No. Type of units Extent of the percentage of exemption from total tax liability Maximum exemption in terms of percentage of eligible fixed capital investment (FCI) Maximum time-limit for availing exemption from tax 1 2 3 4 5 1. New units other than the units mentioned at items 2 and 3 and units going in for expansion or diversification 1st year 100% 2nd year 90% 3rd year 80% 4th year 70% 5th year 60% 6th year 50% 7th year 50% 8th year 40% 9th year 40% 10th year 30% 11th year 30% 100% of eligible fixed capital investment in cases where such investment exceeds Rs. 150.00 lacs, and 125% of eligible fixed capital investment in cases where such investment does not exceed Rs. 150.00 lacs. Eleven years 2. (a) New units of knitwears, gems and jewellery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of quantum can be availed by an industrial unit in respect of its turnover of goods manufactured by it, which are entitled to avail exemption is related to the Eligible fixed capital investment on percentage basis by availing exemption in the manner provided in column 3, viz., the rate at which the exemption can be claimed in the annual assessment from payment of tax which is otherwise payable by the industrial unit concerned. The amount of exemption availed every year is to be adjusted against the amount specified in column 4 with further limitation that such maximum limit has to be availed or exhausted within the period specified in column 5. After the expiry of that period, no further exemption can be availed by the industrial unit, even if the industrial unit has not been able to avail the exemption of maximum extent permissible. Likewise, even though the period specified in column 5 has not expired but an assessee has availed the maximum amount of exemption quantified in terms of column 4, he will still cease to draw any exemption after exhausting that limit forthwith. Thus, making it sure that an assessee avails the exemption in any circumstances neither more than what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... couple of years the rate of availing exemption from tax is reduced by 10 per cent, that is to say, the rate at which exemption from payment of regular tax can be availed for 6th and 7th year is 50 per cent, for 8th and 9th year it can avail exemption at 40 per cent and for last two years at 30 per cent. Thus, at no stage exemption rate declines below 30 per cent of tax. 16.. In the like manner, for all sick units the manner, extent, and period were laid in clause (b) of item 4 of the annexure "B". It envisaged a uniform gradual declining rate for availing tax exemption up to 100 per cent of eligible fixed capital investment within 11 years. 17.. By notification dated 30th September, 1999, published on 7th January, 2000 in item 4(a) under columns 2 and 3 for the expression "New Units" at serial No. 1, the words "new units at serial Nos. 1, 2 and 3, as the case may be" have been substituted which makes item 4(a) read,"All sick units which have not availed of benefits of exemption from tax or deferment of tax previously, shall avail benefits as are made available to new units at serial Nos. 1, 2 and 3 as the case may be." 18.. Thus, the manner and the extent to which the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 2 would still avail the tax exemption at gradual declining rate only for the specified period as ordained, if it is a sick industry which has availed the benefit of tax exemption or tax deferment previously. In the case of sick industry falling in item 4(a) read with item 2 benefits have not been affected adversely. 20.. Coming to the case of item No. 3 which relates to the cement plants. It has prescribed 100 per cent of the eligible fixed capital investment as the extent of exemption that can be availed within the period of 11 years. This is at par with item No. 1 except to the extent where eligible fixed capital investment does not exceed 150 lakhs or 1.5 crores but instead of availing that benefit at a gradual declining rate from 100 per cent to 30 per cent during each year of eligible period stipulating higher rate of exemption during initial period, it has provided for availing exemption from payment of tax at a flat rate of 25 per cent throughout the period which is less than the minimum rate of exemption from tax payment during each year of eligibility period envisaged in item No. 1 or item No. 2. The item 3 takes within its ambit expansion, diversion and also pion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have started availing such benefit in the terms of scheme under clause 4(h) with effect from the date their applications were complete in all respects as per certification by competent officer. In the case of M/s. J.K. Udaipur Udhyog Ltd., sanction had also been made prior to 7th January, 2000 the date on which the notification dated 30th September, 1999 was published. Both the petitioners have not availed benefit of tax exemption or deferment previously and fall in item 4(a) of annexure "B" of the scheme. 24.. They are precisely aggrieved with the condition imposed on them for availing only 25 per cent of exemption each year of their eligibility period to claim full extent of their benefit instead of graduated declining rate of availing exemption prescribed under item No. 1 in the table reproduced above which ensured much higher rate of availing exemption each year, in fact between 4 times to 2 times up to first 7 years of specified period, which makes them more potent in availing full benefit as in case of all other sick industries. They claim that "sick cement plants" have been singled out for differential treatment amongst "sick industries" which has been recognised as a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinct object is not to provide incentive but is by way of rehabilitation programme of existing sick industries within the State, to save them from total decline. Benefits extended to any sick industry in the State are directly relatable to achieve the second objective stated above. For this reason the sick industrial units irrespective of their capital investment volume, have been dealt with as one single class irrespective of the commodity which they manufacture and irrespective of the area where they are situated. The two inhibitions attached with other class of eligible units to avail benefit of scheme as incentive and were treated distinctly for extending a general package of incentives. 28.. In short, the contentions on behalf of the petitioners are that since the petitioners became entitled to avail benefits of exemption under item 4(a) with effect from the date of their respective applications became complete in all respects, which were so certified by the Member-Secretary of the State Level Screening Committee. Date of completion of application in each case was prior to the date of the notification. Eligibility certificate was in fact issued also to the J.K. Udaipur Udhy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already availed the benefit of exemption or deferment at an earlier point of time. 29.. It is contended by learned counsel that it is not open for the State to discriminate in extending benefits to a member of same class of persons/industry admitted to the benefit of exemption to avail the benefit in reduced or lesser proportion of exemption by amending substantive mode of availing the benefit for availing the full level, once it has been admitted to avail the benefit of exemption as a sick industry and not as an incentive for new capital investment or expanding existing production capacities for any specified commodity in any specified area. 30.. Moreover, a sick cement industry cannot be treated differently solely in the case, if it has not availed earlier benefit of exemption or deferment when it is otherwise similarly treated with all other sick industries if it has earlier availed the benefit of exemption/deferment. This classification has no rational nexus with the object sought to be achieved by extending benefit of exemption or deferment of payment of tax to any sick industry. 31.. On the other hand, it is contended by learned AdvocateGeneral that the framing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner provided as per the amendment with effect from the date of its publication, viz., 7th January, 2000. Aggrieved with the aforesaid judgment dated 27th March, 2001 passed in S.B. Civil Writ Petition No. 1141 of 2000 J.K. Udaipur Udyog Ltd. v. State of Rajasthan and followed in other writ petitions, these appeals have been preferred by the respective companies owning the industrial units in question and the State. 33.. To the extent the learned single Judge has held that the impugned notification is not a corrigendum but an amendment and that until the date of publication, the unit shall be entitled to avail benefit under unamended provision, the State Government has also filed appeals. Whether notification dated September 30, 1999 is a corrigendum or an amendment in the Scheme? 34.. The questions had been raised before learned single Judge, Whether the notification dated September 30, 1999 is merely a corrigendum as it purports to be or an amendment resulting in altering the scheme substantively and substantially and whether notification dated 30th September, 1999 came into effect on the date of notification or on 7th January, 2000 when it was published? 35.. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court further held rejecting the claim of the assessee and upholding the plea of the petitioner-Commissioner of Sales Tax, that every law must be reasonably interpreted. No interpretation should be adopted which tends to defeat the very purpose of the law. Even a taxation law must be reasonably construed and the same principle applies to a notification issued under the taxation statute. With these precincts, the court held that since it was a case of correction of the printing error, the notification dated 11th June, 1974 must be read in its correct form since the beginning, the corrigendum was only clerical in nature. 40.. In contrast, question had arisen before this Court in Kandoi Kabliwala v. Assistant Commercial Taxes Officer, Pali [1989] 75 STC 316. It was a case of two separate notifications issued in 1969 granting exemption to "desi sweetmeats" and "namkins" respectively. Exemption on "namkin" was withdrawn by notification dated April 26, 1972. A notification titled as a "Corrigendum" was issued on October 5, 1972 purporting to be correcting some error in notification dated April 26, 1972 for withdrawing exemption on sweetmeats also. 41.. It was contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Clauses Act, 1897 and section 23 of the Rajasthan General Clauses Act, 1955, power to issue notification includes power to add, amend, vary or rescind the notification in the like manner and subject to like conditions. Being part of the same power to issue notification, the notification adding, amending, varying or rescinding earlier notification can also be exercised only in the like manner in which the power is ordained to be exercised under the concerned statute. Therefore, a notification having the effect of altering earlier notification issued under respective provisions can only be deemed to have come into existence when it was published in the manner envisaged under the rules. 45.. In this connection, attention may be drawn to Union of India v. Ganesh Das Bhojraj [2000] 119 STC 293 (SC); AIR 2000 SC 1102. The court said: "Section 25 of the Customs Act empowers the Central Government to exempt either absolutely or subject to such conditions, from the whole or any part of the duty of customs leviable thereon by a notification in the official Gazette. The said notification can be modified or cancelled. The method and mode provided for grant of exemption or with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples that have to be applied for interpretation of statutory amendments taking away substantive rights are well-settled. The first of these is that statutory provisions creating substantive rights are ordinarily prospective; they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective. The retrospective operation will be limited only to the extent to which it has been so made by express words or necessary implication. The second rule is that the intention of Legislature has always to be gathered from the words used by it giving to the words their plain, normal grammatical meaning. Thirdly, if in any legislation, the general object of which is to benefit a particular class of persons, any provision is ambiguous so that it is capable of two meanings, one which would preserve the benefit and another which would take it away, the meaning which preserves it should be adopted. The fourth rule is that if the strict grammatical interpretation gives rise to an absurdity or inconsistency, such interpretation should be discarded and an interpretation which will give effect to the purpose, the Legislature may reasonably be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Shahdeo v. State of Bihar AIR 1999 SC 3609 the apex Court reiterated that a statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits. The court was concerned with the determination of compensation payable to the appellant under the Bihar Land Reforms Act, 1950. By Act of 1974, compensation payable for mines and minerals was restricted to three times of net income. The appellant contended that the date on which he became entitled to compensation was prior to the amending Act, 1974 came into effect. The State contended that section 6 of the amending Act of 1974 was retrospective in its effect and would affect the determination of the compensation in the case of appellant which has to be determined after 1974. The court negatived the contention by holding: "As the essential idea of a legal system is that current law should govern c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Section 8(5) of the Central Sales Tax Act, 1956 does not authorise the State Government to issue notification to have retrospective effect. In these circumstances, a legitimate question does arise whether in pursuit of common object any State Government, by issuing one composite notification both as a delegate of the State Legislature as well as the Parliament for conferring certain benefits vide notification dated April 7, 1978, can have power to modify the same retrospectively by issuing a composite notification subsequently under the very same powers or at any rate such notification can be read, without any clear expression to that effect, to have retrospective effect. 59.. A division Bench of the Rajasthan High Court in Union of India v. State of Rajasthan [1993] 91 STC 284 has held while considering the like provision of section 4(2) of the Rajasthan Sales Tax Act, 1954 that State Government can issue the notification granting exemption retrospectively with any condition it likes, but the said section does not contemplate withdrawal of exemption later on by putting any condition. This view appears to be open to doubt inasmuch as the law appears to be settled that a deleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e competence of the State Government to alter/modify the same as required in public interest. Petitioner is held entitled for the relief as per the original scheme up to the date of amendment and subsequent thereto as provided in the corrigendum." 62.. It is apparent that the learned single Judge held that modification in the scheme has to be held prospective in operation so as not to affect the vested rights. He has upheld the power of the State Government to modify or alter the scheme and that the petitioner cannot claim to enjoy the benefits granted under the original scheme for the entire period as it is. With effect from the date of the publication of the notification the petitioner shall enjoy the benefits as per amended scheme. 63.. This is also now not seriously challenged before us that the notification is by way of amendment and is not retrospective in operation. 64. We recall what Lopes, C.J., tersely said while considering the ambit and scope of rule against retrospectivity of a law unless distinctly and expressly designed otherwise In re Pulborough Parish School Board Election, Bourke v. Nutt (1894) 1 QB 725: "Every statute which takes away or impairs vested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty of some particular person or persons as a present interest, independent of a contingency. It is a right which cannot be taken away without the consent of the owner. Vested rights can arise from contracts, from statute and from operation of law." 71.. This was the principle adopted by a Full Bench of this Court in R. Dayal v. State of Rajasthan 96 (3) WLC 513 while considering the question of an employee's right to be appointed on a post, the process of which has commenced. The court said: "The settled principle of service jurisprudence is that no person possesses any vested right for appointment to a published post. He only possess a right to be considered for appointment provided he fulfils and possesses the requisite eligibility and suitability on the date of appointment." 72.. The expression "vested right" has been explained in Black's Law Dictionary as under: Vested rights: In constitutional law, rights which have so completely and definitely accrued to or settled in a person that they are not subject to be defeated or cancelled by the act of any other private person, and which it is right and equitable that the Government should recognise and protect, as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded decorticating, expelling, crushing, roasting, parching, frying of oil seeds and colouring, decolouring and scenting of oil. This was founded on the satisfaction of the Government that oil industry is sufficiently dispersed in rural areas in respect of which the existing capacity of the existing industries was more than adequate. 75.. In these background, the appellant before the Supreme Court contended that notification dated July 17, 1971 would have no effect on the eligibility already acquired by them to claim exemption from payment of tax. As per the commencement certificate issued to the appellants, the assessee had commissioner the plants on May 17, 1970 that is to say prior to the exemption notification dated November 11, 1970 by which the period for availing benefit was prescribed as five years from the date of issue of eligibility certificate. The assessee sought the benefit of the notification dated 11th November, 1970 for a period of five years as the vested right. He also claimed relief by invoking doctrine of promissory estoppel alleging that because of assurance contained in notification dated April 29, 1970 he has invested capital and altered his position t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fallacy contained in them, viz., the wrong assumption that the appellants had acquired a vested right. The High Court has rightly repelled the plea that the appellants had acquired a vested right and were, therefore, entitled to claim exemption from payment of tax for a period of five years notwithstanding the revocation of the exemption under the notification dated July 17, 1971. The High Court has further taken the view that the earlier notifications granting exemption of tax only created existing rights and such existing rights can always be withdrawn by means of a revocation notification and that is exactly what has happened in this case." 77.. The court also found that the notification was issued on April 29, 1970 and the plant was commissioned on May 17, 1970, the second notification would not apply because that was prospective in operation and in respect of the first notification it was found that it was not the appellants' case and indeed it could never be so contended that they launched the project and commenced the construction of the oil mill only after the notification of April 29, 1970 was made and that the entire construction was completed in about two weeks' time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing rights under a lease". 79.. The principle was applied by the Supreme Court in Govinddas v. Income-tax Officer [1976] 103 ITR 123; AIR 1977 SC 552. It was a case where the Income-tax Officer sought to apply the provisions of section 171 of the Income-tax Act, 1961 to the pending proceedings for the assessment years 1950-51 to 1956-57. The court applying the principle "unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure" and held that the Income-tax Officer was not entitled to avail of the provision enacted in sub-section (6) read with sub-section (7) of section 171 of the new Act for the purpose of recovering the tax or any part thereof personally from any member of the joint family for the aforesaid assessment years prior to 1962-63. 80. In Mohd. Rashid Ahmad v. State of U.P. AIR 1979 SC 592, the court emphasised: "Perhaps no rule of construction is more firmly established than this-that retrospective operation is not to be given to a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from payment of tax up to the said amount is to be availed by way of being absolved from payment of tax at such per cent of total tax liability for each year of the specified period within which the exemption could be availed up to the maximum extent fixed with reference to EFCI. If that limit is exhausted by availing exemption in above manner before expiry of specified period, no further exemption from payment of tax can be availed for remainder of specified period. Likewise, even after availing the exemption from payment of tax in above manner for the specified period of exemption for such unit, the unit is not able to exhaust maximum permissible limit up to which he is entitled to avail exemption, it cannot avail any further exemption from payment thereafter. This is made clear firstly from the preamble of the scheme which provides "the State Government............... notifies...............this scheme and exempt the industrial unit from payment of tax............... in the manner, to the extent and for the period as specified in this notification". It becomes further clear from clause 5(d) of the scheme which provides that "where the limit of exemption specified in annexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are classified under the category of (i) new industrial units, (ii) the industrial units going for expansion, (iii) the industrial units launching diversification, and (iv) the sick industrial units. 90.. The new industry has further been classified for the purposes of fixing extent of exemption commensurating with importance assigned to respective categories into (i) the pioneer unit which has special feature of being established in any Panchayat Samiti of the State during the period of scheme having a fixed capital investment exceeding Rs. 3 crores and minimum regular employment of 50 persons each. This benefit is available only to first 10 units established in the Panchayat Samiti, or (ii) a premier unit which envisages the industrial unit which has fixed capital investment exceeding 150 crores with a minimum regular employment of 500 persons, (iii) prestigious unit, and (iv) very prestigious unit have the characteristic of capital investment exceeding 15 crores and fixed capital investment exceeding 50 crores respectively with minimum regular employment of 100 and 200 persons respectively. 91.. Installation of new production capacity in the State in such areas which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported form outside country or if purchased from existing unit within India on fulfilment of conditions detailed in aforesaid provision is to be taken into consideration. So also capitalised interest, technical know-how fees, drawing fees are also included in EFCI amongst other fixed assets. As against this, Explanations II and III appended to clause 2(e), which read as under, the EFCI for a sick industry, whether deemed to be a new industry as defined in clause k(ii), or otherwise, is the depreciated value of fixed assets. 95.. Explanations.- I........................ II. In case of a new industrial unit covered by clause (k)(ii) the depreciated value of the fixed assets on the date of its purchase or lease, as the case may be, shall be considered as eligible fixed capital investment. III. In case of sick units, following investment shall be considered as eligible fixed capital investment: "(a) In case of sick units, the depreciated value of fixed assets on the date of declaration of sickness by the Board for Industrial and Financial Reconstruction (BIFR) in BIFR cases and by the State Level Committee or the appropriate District Level Committee, in the Industries Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it is clear that for the purpose of applicability of exemption scheme, a sick industrial unit has been separately classified distinctly from "a new industrial unit", the industrial unit going for "expansion" and the industrial unit launching "diversification". As noticed by us above, the new industrial unit, in all its manifestation whether pioneering unit, premier unit, prestigious unit and very prestigious unit, are treated s one class for the purpose of clause 3(1). 100.. The above provisions lay the contours of area within which the exemption is made applicable and the classification for extending such exemptions. With the object of providing a recovery therapy, the sick industrial units have been classified in two classes, viz., (1) one which has not availed benefit of exemption from payment of tax or deferment of payment of tax previously, or the sick unit which has availed such benefit previously for the purpose of providing separate package. The former class has further been classified as a new industrial unit if it has not availed any benefit of exemption from tax or deferment of tax and has been appraised by financial institution and appropriate rehabilitation plan ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als with general terms and conditions for exemption from sales tax. A perusal of sub-clauses (g) and (h) of clause 4 makes it clear that the benefits under the scheme do not wait to be availed of by the unit until eligibility certificate is issued or sanction is ordered by the concerned screening committee but it becomes operative as soon as its application is complete in all respects. It is to be certified by the Member Secretary of the appropriate screening committee that the application filed by the applicant unit is complete in all respects. The date on which certification is made is not relevant. Relevant is what date is certified as the date on which application became complete. Certificate may be issued on a later date. 103.. The eligibility certificate issued under the scheme to remain in force to avail the exemption from tax in accordance with the provisions of the scheme till permissible exemption is not exhausted or till certificate is amended, superseded or revoked. 104.. It is apparent that availing of the benefits of the scheme in accordance with the provisions of the Scheme is not kept in abeyance until the eligibility certificate is issued, but becomes operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known on the date of completion of the application and that right is crystallised. The quantum up to which benefit can be availed is too ex hypothesi is determined at the same time, though becomes known on being quantified by Screening Committee later on, and must find place in the eligibility certificate in terms of sub-clause 2(g) and (h) of clause 4. The eligibility certificate, obviously, will have to be issued in consonance with the scheme which was operative on the date the unit commences availing the benefit that is to say the date on which the application is said to be completed. 107.. This becomes further apparent from clause 5(g) which makes it clear that subsequent inhibition against grant of exemption after the application is completed and is pending consideration, is not affected by subsequent amendments. It postulates that once an application is made by an eligible industrial unit and is pending consideration, even its inclusion in list of ineligible industries, does not affect its right of consideration and availing benefit of the scheme, if it otherwise fulfils other conditions. Thus, subsequent withdrawal from eligibility list altogether does not affect rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 111.. In the case of J.K. Udaipur Udhyog, the application was completed on July 26, 1999 and sanction has also been issued prior to the date the notification was published and became operative on completion of application on December 13, 1999. 112.. About the basic feature that all units which have applied for availing benefit start availing benefit of exemption from payment of tax with effect from the date of completion of application in all its aspects, and does not have to await sanction by the Screening Committee and issue of eligibility certificate, there is no contention. There is no option about the date from which exemption is to be availed. In fact, the scheme obligates the applicant not to collect and charge the tax with effect from the date of completion of application. This obligation is not postponed. On grant of sanction and issue of eligibility certificate, the same relates back to the date of completion of application. The specified period within which the full exemption can be availed, therefore, begins with the date of completion of application. There is no provision that such features of exemption are modified later on. On the other hand, clause 4(g) ensu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st March, 2003. Thus, notwithstanding the notification under which scheme came into existence itself was issued only on April 7, 1998 but by specifically naming the earlier date of its operative period, brought to it into effect with an earlier date. Not only this, the application filed prior to April 1, 1998 but were still pending consideration under Incentive Scheme, 1987 or New Incentive Scheme, 1989 were too brought within its fold to the extent it was meant to be brought within it by making express provisions in that regard in sub-clauses (g) and (h) of clause 1. 116.. More importantly, the scheme read in its totality reveals unmistakably that notwithstanding the scheme shall cease to be operative on March 31, 2003, a unit which has made an application prior to March 31, 2003 and started availing benefit under the scheme under clause 4(g) and (h), or whose applications have already been sanctioned prior to March 31, 2003, will not cease to avail benefit for the requisite period up to limit as per its EFCI by availing the exemption from payment of tax as per annexure B read with clause 4 even thereafter until the limit of exemption is exhausted or specified period expires whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B" is integrally connected with exhausting the benefits up to maximum limit which can be availed by the claimants within the specified period by claiming exemption every year at the rate prescribed in column 3. One cannot be severed from the other. It is not disputed before us, nor there is any alteration in the scheme in that regard that for a sick industry including the cement plant also, no change has been affected in the quantum subject to which benefit can be availed by the sick unit nor there is any change in the specified period during which the unit has opportunity to avail the maximum benefit under the scheme. Thus, by reducing the annual rate of exemption in the case of sick cement plant it has totally altered its right by substantially reducing the availability of opportunities to exhaust the total permissible exemption within specified period. Right to avail maximum benefit within specified period, through opportunities offered on the date the limit specified period commences, became vested in such industry on the date of such commencement under the scheme. 118.. The right of the petitioners to avail the benefit up to the extent it has been made available by seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oppel which was held to be not substantiated. Moreover, it was found by the court that the exemption in the case of oil industry under the State enactment has been withdrawn as a result of satisfaction about public interest in doing so and in that event doctrine of promissory estoppel cannot be invoked. 122.. Arvind Industries v. State of Gujarat [1995] 99 STC 333 (SC); (1995) 6 SCC 53 was too a case where no factual foundation was laid for having acquired any vested right. It was a usual exercise of modifying the rate structure which becomes operative with effect from the date such rates are introduced. In doing so, the duty was brought under the rate structure by withdrawing concession granted earlier. 123.. Likewise, reliance on State of Rajasthan v. Bhatnagar Cement Co. (Pvt.) Ltd. [2002] 125 STC 290 (SC); (1999) 3 SCC 264 is also misplaced. It was a case of giving retrospective effect to the amendment in express terms. Under the 1987 Incentive Scheme, a cement plant was found eligible for benefits under the scheme and was entitled to 100 per cent tax exemption for a period of 7 years. By amendments of January 11, 1990 and February 22, 1990 the benefit under the scheme in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn, it was free to act in the manner it did. Thus, the court found that the promise, even, if any existed, could be withdrawn because a case for withdrawal in public interest was made out by the State Government. 125.. In this connection, it will be apposite to notice a recent decision of the Supreme Court in Union of India v. Indian Charge Chrome (1999) 7 SCC 314. Under the scheme of notification extending exemption from payment of excise duty in the case of power projects, the court has found that merely making of an application for registration did not confer any right on the application. The application has to be decided in accordance with the law applicable on the date on which the authority granting the registration is required to apply its mind on the prayer made for registration and the application for registration was not ripe for consideration until the main amendment. It was further held to be merely clarificatory in nature. In these circumstances, the question of saving the rights already accrued before the amendment so brought into scheme did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only to avail the benefits in present but also to avail such benefits in future up to a specified limit and within specified period? If such right has come into existence, whether as a result of any subsequent amendment, which is not retrospective in operation, can such right be truncated or altered? Such controversy as appears from the report was neither raised nor decided by the court in Kasinka Trading case (1995) 1 SCC 274. The question raised in the present case will have to be answered in the light of scheme of 1998. 129.. The rights which have vested in the petitioners as on the date of the completion of their application for availing benefit under the scheme is the composite right of availing the benefit in the manner, to the extent and within the specified period prescribed under annexure B to the notification dated April 7, 1998 such vested right, in our opinion, in its composite form cannot be altered by treating one part of it independent of other, so as to alter the mode and manner in which the maximum extent of benefit can be availed within specified period. 130.. There is no dispute that the applications of both the petitioners-appellants in two sets of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme after April 30, 2000 the date the operative period of scheme, and but for such provision would not have become entitled to benefit. This supports petitioner-appellant rather than respondents, that the right to benefit accruing under the scheme in one compact form once having vested are not envisaged to be altered by subsequent amendment. Rather it assures that those industries who have taken some effective steps as envisaged under the scheme will still be allowed entry to benefits of the scheme. 133.. In these circumstances, we are of the opinion that the exemption from payment of tax to which the applicant becomes entitled physically as an eligible industry on the completion of application in the manner, up to total amount as quantified within the specified period cannot be affected by subsequent amendment in the scheme unless expressly provided for and subject to other constitutional limits. The two petitioners, in our opinion, are entitled to avail benefit in the same proportion during each year of specified period as they became entitled to avail as on the dates their respective applications were complete and that remains unaffected by the amendment that came into e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are considered to be potentially viable and are taken by a Central or State level financial institution or by a bank under programme of rehabilitation or are such industrial units which are declared sick during the operative period of this scheme by the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 or by the State Level Committee or the appropriate District Level Committee in the Industries Department in case of non-BIFR cases, or industrial unit which is taken over and sold during the operative period of the scheme to a new management by the State Government or RIICO or RFC. 139.. The definition of "sick industrial unit" in clause 2(q) makes it abundantly clear that in order to come in the field of "sick industrial unit" it must be a pre-existing industry and must have suffered cash loss for at least two years consecutively either immediately before the commencement of the scheme or thereafter. When a sick unit is taken over by a new management and makes additional capital investment which is at least 25 per cent of the depreciated value of the existing assets in given circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh unless otherwise specified they may fall in item No. 1 as a new industrial unit simpliciter. Item No. 2 on the one hand is extended to new units of specified commodities and also to very prestigious units for a greater volume of exemption for a longer period up to the extent of 125 per cent of eligible fixed capital investment. The special feature of item 2 is that for first two years of its existence the new units of the specified commodities and very prestigious units are allowed to avail 100 per cent exemption from payment of tax for that period and gradually declining rates from the third year at the same rate until it reaches 30 per cent. Item No. 2 does not extend to expansions or diversifications, even if they are engaged in manufacture of goods specified in column 2 of said item and continue to be governed by item No. 1. Item No. 3 is confined to cement as such where new capital investment by way of new industrial unit or by expansion or diversification or the industrial unit is of a pioneer, prestigious, very prestigious or a premier unit. Item No. 5 like item No. 2 deals distinctly with pioneer, prestigious and exporting units with a minimum of 50 per cent of their pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand to the new industrial units, the units going for expansion and the units launching diversification, is to provide incentives to fulfil the need of the State to achieve a balanced economic growth through new investment and addition of new production capacities in the State within eligible area in the industries other than ineligible industries. On the other hand, the sick industrial units have been extended benefits of the scheme to save the existing investment and production capacities within the State by providing timely assistance for staging recovery from the set back. This difference in object becomes very relevant for the present purpose. 147.. One belongs to realm of nurturing a new born for a healthy growth, the other to providing sustenance for survival and prevent from dying. Amongst the diseased unit gasping for oxygen, there cannot ordinarily be any reason for treating them differently in packaging fiscal oxygen by way of tax concession unless some specific purpose for administering different treatment becomes discernible. 148.. Item No. 4 in this perspective, if seen, reveals that it has classified all sick units cumulatively for the purpose of extending ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere exists a rational nexus with object sought to be achieved in classifying sick cement unit as different from other sick industrial unit making amendment in the scheme vide notification dated September 30, 1999 on the basis that it has not availed the benefit of exemption from payment of tax or deferment of tax? 154.. With this premise, if one turns to the effect of change which is alleged to have been brought out by the notification dated 30th September, 1999, it reveals that it has sought to bring certain change in clause (a) of item 4 and clause (b) remain unchanged. 155.. As a result of amendment in question all sick industrial units, which have not availed the benefits previously, except in the case of a sick cement plant falling in that category, continue to avail benefit at higher level than the units falling in clause (b). But only a sick cement industry which has not availed benefit previously is relegated to avail lesser amount of benefit every year than it could avail under item 4(b) if it had already availed benefit of exemption previously. So also regularly lesser percentage benefit is made available to only a sick cement unit than any other industries falling un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g under item 4(a) in a position lower than a sick cement plant which had previously availed benefit of exemption. 161.. As noticed above, those sick industries which fall in category of item No. 2 read with clause 4(a) can avail higher maximum limit for longer period, and in the same manner of availing exemption from payment in each year during specified period at a gradual reducing rate, ensuring higher exemption in initial period and lesser exemption as the specified period passes on. It starts with 100 per cent in the first two years and does not go below 30 per cent in the last three years. So also no change is effected in any sick industries other than falling under item 1 read with clause 4(a). The only adverse change is brought about in the case of a sick cement plant which has not availed benefit of exemption from payment of tax or deferment of tax previously in the manner of availing benefit. It does not bring about change in maximum extent up to which exemption can be availed, nor it reduces the specified period. 162.. Reliance placed on decision of this Court in Aditya Cement's case [2001] 121 STC 113 to which one of us was a party, as affirmed by the apex Court, als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints. Declaration under article 13 of the Constitution is unequivocal. It declares all existing laws in force at the commencement of Constitution inconsistent with Part III of the Constitution to be void to the extent of inconsistence. It ordains and prohibits State from making any law taking away or abridging rights conferred by Part III and declared law made in contravention to be void. Law for that purpose includes notification having force of law. The notification excepting something from the purview of tax in exercise of power conferred under section 15 of the Act of 1994 or section 8(5) of the Central Sales Tax Act, 1956 is a matter of subordinate legislation. Hence it cannot be beyond the reach of article 14. Even if the notification be taken to be an executive action, no act of State is beyond the reach of article 14 which not only forbids discrimination by classification without having rational nexus with object sought to be achieved, but is antithesis of arbitrariness in all spheres of State action. That has been well-established since the decision of the Supreme Court in E.P. Royappa v. State of Tamil Nadu AIR 1974 SC 555. 165.. Therefore, like any other laws, tax la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions relating to exemption from tax. But such law does not enjoy any exception from scrutiny at the touchstone of article 14 in absolute. 168.. Such exemption from tax in any form, while relieves the burden of benefited tax-payer, correspondingly it increases burden on the persons who have not been so exempted. Therefore the exemption being a matter of legislative policy by way of exception to general rule, the court would not normally interfere to enlarge the field of exemptions. However, this does not postulate that any statute whether by parent legislation or by subordinate legislation is immune from constraints of constitutional provisions including Part III of the Constitution. The law is trite that though wide field of discretion is enjoyed by State in choosing the subject of tax, still it is as much inhibited by constitutional limits as any other statute. In this connection we may notice the observations made in Mohinder Kumar v. State of Haryana (1985) 4 SCC 221. 169.. That was a case where constitutional validity of section 1(3) of the Haryana Urban (Control of Rent and Eviction) Act, 1973 had been challenged. While holding that the court will not ordinarily interfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently for devising a package of exemption different from other commodities, perhaps challenge on the ground of violation of article 14 would fail. The case of Aditya Cement v. Commercial Taxes Officer [2001] 123 STC 425 (SC) fell in that category and therefore, the court upheld the special treatment given to the cement industry as a whole in the matter of devising a separate package for extending benefit under the Incentive Scheme, 1987 or New Incentive Scheme, 1989. The question raised in the present case is entirely different and has been raised under a different scheme in a different context. We have already noticed while examining the contours of the scheme in detail that two distinct purposes are discernible as objects of the scheme firstly to devise a package of exemption incentive for industries bringing in State new fixed capital investment and new production capacities within the existing one. Those industries are classified as "new industrial units", "expansion units", and "units going for diversification". For this purpose it is conditioned with eligibility of area and industries to be outside a list of ineligible industries, which commences production on or after commen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed period to avail full benefit of the scheme as a rehabilitation programme and is even less than the benefit that can be availed during first six years of specified period if it falls in category 4(b). Industry which is a sick industrial unit within the meaning of the scheme, is classified as an independent while extending package to the sick industries which have not availed the benefit of exemptions earlier than the sick cement plant which has previously availed the benefits and this results in the later unit of the same genre availing the exemptions at a higher rate than the cement plant falling in the former category which not only results in classification between a cement plants itself not founded on any intelligible differentia but results in anomalous situation. In the entirety of scheme except cement industry, in no other case a sick unit, which has already availed the tax exemption previously, can avail more liberal package for availing the same amount of tax benefit within the specified period on the rates prescribed for that purpose than the one which has not availed the benefit previously. We see no criterion much less any criteria founded on intelligible differenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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