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TMI Blog2003 (7) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ISCO, the position is that the said extent of land is held by TELCO on the basis of that sub-lease and in terms of section 7E of the Bihar Land Reforms Act. 3.. On July 8, 1993, a joint enterprise agreement was entered into by TELCO and the Cummins Engine Company INC (USA). They agreed to form a jointly owned venture in India for the purposes described in that agreement. The share capital to be invested by TELCO and the Cummins Company was to be in the ratio of 50:50 and the parties were to hold 50 per cent of the shares each in the joint venture. The profits were to be distributed as dividends on shares of stocks held by the respective parties. The Board of Directors of the joint company to be formed was to consist of eight members initially, each party having a right to appoint an equal number of persons as its representatives in the Board. The enterprise was not to be liable for any of the obligations of TELCO or of Cummins Engine Company INC (USA). TELCO was to make available to the joint enterprise, office premises, the site (if a location owned by TELCO is selected), buildings, workers' residences and all facilities necessary to carry on the business prior to the time when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract investments to generate economic activities, reviving potentially viable and closed industries to boost exports of goods in production of which the State enjoys comparative advantages and to simplify procedures to expedite and impart transparency in decision-making. As part of the incentives, the policy envisaged allotment of land/shed in growth centers to entrepreneurs for setting up industrial units on lease for 99 years with option for renewal. It also envisaged (which is more relevant in our present context) certain sales tax incentives. Clause 16 stated that sales tax benefit plays an important role in attracting and directing investment and in sustaining industrial development in a State. In that background, new units were allowed the facility of either "set-off" or "exemption" at their choice, of sales tax on purchase of raw materials and the period was to be limited as envisaged in clause 16.1 of the policy. By clause 16.2 the benefit of exemption/set-off on sales tax on sale of finished goods was allowed with option to the new units either to choose deferment of payment of sales tax or exemption of sales tax for the period referred to therein. This policy regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was clear that there was no valid lease in favour of Tata Cummins Limited and consequently, Tata Cummins Limited could not claim the benefit under the Notifications S.O. Nos. 478 and 479 dated December 22, 1995. Tata Cummins Limited challenged the decision of the Deputy Commissioner in C.W.J.C. No. 2689 of 2000(R). The division Bench noticed that the claim of Tata Cummins Limited was rejected on the ground that it had no right, title or interest over the land where the industry was set up inasmuch as it was not transferred to it by way of a valid lease. After considering the argument of Tata Cummins Limited and after adverting to clauses 7.1 and 7.2 of the Industrial Policy, 1995, the division Bench held that Tata Cummins Limited not having a valid lease obtained either from the State Government or from the sub-lessee, TELCO, it could not claim the benefit of the exemption under the relevant notifications. Thus, the order of the Deputy Commissioner of Commercial Taxes was upheld. Tata Cummins Limited challenged the decision of the division Bench in the Supreme Court of India by way of petitions for Special Leave to Appeal (Civil) Nos. 20375 and 20376 of 2000. 7. It appears th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifications. Thus, the order of the Deputy Commissioner of Commer-cial Taxes was upheld. Tata Cummins Limited challenged the decisionof the division Bench in the Supreme Court of India by way of petitionsfor Special Leave to Appeal (Civil) Nos. 20375 and 20376 of 2000. 7. It appears that meanwhile, the Joint Commissioner of Com-mercial Taxes (Administration) had passed an order on July 11, 2000to the effect that since the order passed by the Deputy Commissionerof Commercial Taxes was without the approval of the Joint Commis-sioner which is a condition precedent under Notifications S.O. Nos. 478and 479, he was passing an order to call for the records of the case to examine the question of exemption afresh after issuing notices to the Deputy Commissioner and the Tata Cummins Ltd. Thus, when the Supreme Court took up the petitions for special leave to appeal for a final decision, this proceeding initiated by the Joint Commissioner of Commercial Taxes (Administration) was brought to its notice. By order dated March 26, 2003 in Civil Appeal Nos. 2394-2395 of 2001, the Supreme Court noticed that Tata Cummins Limited had two contentions. It may be better to extract what has been noticed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of TELCO taken on lease from TISCO; (ii) TELCO has allotted part of its leased land to Tata Cummins Limited; (iii) As per the sub-lease agreement between TISCO and TELCO, TELCO had no right to allot part of the land to any other company; and (iv) Tata Cummins Limited had requested TISCO to execute a lease agreement but the lease agreement had not been executed. 9.. He then recorded the conclusion that the Tata Cummins Limited had neither legal title nor ownership over the land on which the industry was established. Nor was it in a position to produce a registered lease deed for a term of fifteen years or more for getting the benefit of exemption under the notifications S.O. Nos. 478 and 479. The conditions laid down in those notifications had not been complied with. 10.. We may notice that though he referred to the arguments of Tata Cummins Limited that it was the exclusive owner of the building and the factory put up for the industry and the argument of counsel for the department that that portion of the notification regarding the ownership of the building applied only to buildings already in existence on the date of the notification, and not to buildings subsequently co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remedy by way of an appeal and a Second Appeal under the Sales Tax Act and it was in that context that the Supreme Court held that the jurisdiction under article 226 of the Constitution of India was not liable to be invoked. The decision in Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu [1976] 37 STC 517 (SC) is only authority for the proposition that even if the power is couched in a language indicating the conferment of power to be exercised suo motu, the same could be exercised by that authority even at the instance of an assessee. The period of exemption provided by the notification as claimed by Tata Cummins Limited commenced from January 1, 1996 and it would come to an end on December 31, 2003, about six months away. It appears to us that it will be necessary to bring a finality to this claim of Tata Cummins Limited one way or the other at the earliest. Investigation into the claim has already completed the first round by going up to the Supreme Court and it is really in the second round that the Joint Commissioner has taken a fresh decision in the light of the direction of the Supreme Court. Now he has rendered a decision, though of course, as highlighted by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of exemption for new units will be limited to 10 years for category 'A' and 8 years for category 'B' districts from the date of commencement of production of the unit. 16.2 Sales tax on sale of finished goods for new units. New units, in addition to the benefit of 'exemption/set-off ' of sales tax on purchases, will also have the option to choose deferment or exemption of sales tax [both Bihar Sales Tax (BST) and Central Sales Tax (CST)] on sale of finished goods for a period of 10 years for category 'A' and 8 years for category 'B' districts from the date of production of the unit with a ceiling of 100 per cent of the fixed investment made by the unit. However, those industries which are considered 'thrust industries' as listed earlier in para 15 (excluding telecommunication, computers, software/hardware and electronics industries) as also industries located in 'A' category backward districts the ceiling for deferment would be 150 per cent of the fixed investment. The ceiling for deferment linked to the fixed investment in regard to telecommunication, computers, software/hardware and electronics industries would be 300 per cent of the fixed investment made by the unit." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that this was not a contention that was raised at the earlier stages and was being highlighted only for the first time in this writ petition by raising a ground in that behalf. 15.. On going through the order of the Supreme Court directing the Joint Commissioner to consider whether Tata Cummins Limited was entitled to the benefit of the notifications, it appears to us that what he was concerned with and what we are really concerned with, is the question whether Tata Cummins Limited, in fact, satisfied the conditions laid down by the two notifications. We are therefore satisfied that the arguments raised, based on the notifications being beyond the Industrial Policy, cannot be accepted. It is overruled. 16.. Learned Senior Counsel for Tata Cummins Limited argued that the notifications like the ones in question should be construed liberally in favour of grant of benefits envisaged by the Industrial Policy and not in a restrictive manner. The decision in Ambe Cement, Dhanbad v. State of Jharkhand (2003) 2 JCR 309 was referred to. The decision of the Patna High Court in S.C.I. India Ltd. v. State of Bihar in C.W.J.C. No. 3768 of 2002 was also relied on. In that decision, a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that in the context of these facts and the benefits envisaged by the Industrial Policy, Tata Cummins Limited would be entitled to the benefit of the notifications on the ground that it was the exclusive owner of the building in which the unit is installed. Learned Advocate-General, on the other hand, submitted that the first limb of the notification applied only to assessees who were the absolute owners of the land and the buildings, in contradistinction to an assessee who was a lessee of the land and the building covered by the second part of the notification and since even according to Tata Cummins Limited, it had no ownership over the land wherein the buildings were constructed, it could not claim to be eligible for concession in terms of the first limb of the notification. The Advocate-General also emphasised that as a matter of fact, the so-called further lease by the sub-lessee, Telco, to Tata Cummins Limited itself was invalid in law. 18.. Thus, the question boils down to this: whether Tata Cummins Limited should establish that it is not only the owner of the building in which the unit was installed, but it is also the owner of the land on which the building was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the notification appears to us to be an unreasonably restrictive understanding of the notifications in the context of the objects sought to be achieved by them. 21.. Though the argument in this behalf was specifically noticed by the Supreme Court in its order of remand and was taken note of by the Joint Commissioner in his order, we have to notice that the Joint Commissioner had not answered this claim put forward by Tata Cummins Limited. He has founded his decision on the fact that Tata Cummins Limited did not have a lease hold under a registered lease exceeding fifteen years and that the sub-lessee under TISCO might not have a right to further sub-lease a part or portion of the land held by it as a sub-lessee. The argument of the learned AdvocateGeneral that the construction was made even before the lease was actually granted and when the parties actually contemplated the execution of a lease deed, does not appear to be fatal to the claim of Tata Cummins Limited. The fact remains that TELCO which had 50 per cent interest in Tata Cummins Limited, made available a piece of land held by it validly at the relevant time and made it available to Tata Cummins Limited for puttin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELCO is a holding company. What is argued is that the expression partner in the notification should not be understood in the sense in which it is understood in partnership law. But, it should be understood as a generic term in which two persons come together in a joint venture and one of them owns the land or holds it on lease and on which the other makes a construction. It appears to us that the acceptance of this submission will be straining the language of the notification and acting against the normal understanding of the expression "partner" in law. Obviously, a company incorporated under the Indian Companies Act has a distinct entity, different from a firm as defined in the Indian Partnership Act. The notification contemplates three types of ownership of the leasehold: (i) exclusive ownership or proprietorship; (ii) ownership of a firm; and (iii) ownership of a company. The first poses no problem. That is not the case here. The second provides that the firm must be the lessee, but it is enough if the lease is held by one of the partners. As regards a company, like here, it must be held by the company or it is enough, if it is held by a holding company. There is no case that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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