REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.               OF 2009 [Arising out of SLP (Civil) No. 18795 of 2006]

Assistant Commr. (CT) LTU and Anr. …Appellants

Versus

Amara Raja Batteries Ltd. …Respondent

WITH

CIVIL APPEAL NOs.__________________________________________  ______________________________________________________OF 2008 [Arising out of SLP (Civil) No. 19104, 21482 of 2006, 489, 12440, 12151,  

14640 and 17903 of 2007]

J U D G M E N T  

S.B. SINHA, J :   

1. Leave granted.

2. Interpretation  of  GOMs  No.  108  dated  20.05.1996  falls  for  our  

consideration in this batch of appeals which are being disposed of by this  

common judgment.

3. Respondents  are  owners  of  various  industries.   Indisputably,  the  

Government of Andhra Pradesh in order to encourage industrialization in the  

entire State had been evolving various schemes in terms whereof incentives  

were to be provided to the entrepreneurs not only for the establishment of  

new units but also expansion thereof.  Such incentives were being granted in  

various forms such as subsidy, deferment/ tax holiday, rebate in electricity  

charges, interest subsidy, etc.   

For the aforementioned purpose, government orders were being issued  

from  time  to  time  since  1989.   By  reason  of  GOMs  No.  498  dated  

16.10.1989,  the  government provided investment  subsidy at  various rates  

depending upon the backwardness of  different  districts  of the  State  apart  

from granting deferment/ tax holiday on sales tax.   

4. The  said  GOMs  No.  498  dated  16.10.1989  was  followed  by  the  

GOMs No. 117 dated 17.03.1993 which was operative from 3.10.1992 to  

31.03.1997.

5. Another  GOMs  No.  386  dated  26.09.1994  was  issued  by  way  of  

amendment to GOMs No. 117 dated 17.03.1993 on representations made by  

various entrepreneurs in terms whereof benefits were sought to be conferred  

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on expansion/modernization.  In the said GOMs various terms were defined  

including the term “base turnover” which is to the following effect:

“Base   Turnover  :  the  best  production  achieved  during three years preceding the year of expansion  or the maximum capacity expected to be achieved  by the Industry as per the appraisal made by the  Financial  Institution  before  funding  the  project,  whichever is higher.”

6. Thereafter, GOMs No. 75 dated 14.03.1996 was issued by way of a  

clarification; the relevant portion whereof reads as under:

“After  careful  examination  of  the  matter,  Government  hereby  clarify  that  “tax  deferral  would be only on the amount  of  tax payable  on  additional local sales over and above the previous  level of local sales before expansion.  In case the  local sales after expansion is less than or equal to  the previous level, the actual tax liability.”

7. The Government of Andhra Pradesh came up with a new industrial  

policy called ‘Target 2000’ by way of GOMs No. 108 dated 20.05.1996.  In  

this  GOMs  issued  for  enforcing  the  said  policy,  all  other  GOMs  were  

mentioned except GOMs No. 75 dated 14.03.1996.  Apart from the grant of  

subsidy upto 20% of the fixed capital  not exceeding Rs. 20,00,000/-,  tax  

holiday was declared for a period of seven years and deferment of tax for a  

period of fourteen years, apart from other benefits specified therein.

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8. We may notice some provisions of GOMs No. 108 dated 20.05.1996  

which are as under:

“4.  After  careful  review and  examination  of  the  package of incentives and all the other connected factors,  in  modification  of  all  the  earlier  orders,  Government  have  decided  to  introduce  a  New  Industrial Policy called “TARGET-2000”  in order  to accelerate Industrial  Development of the State  and issued it

*** *** ***

7.00 Expansion projects:-

Existing industrial  units,  in eligible areas,  setting  up expansion project in products other than those  listed  in  Annexure,  involving  enhancement  of  fixed capital investment by at least 25% as well as  enhancement of capacity by 25% for the products  of the same product-line, will be eligible for sales  tax  deferral  or  sales  tax  exemption  for  the  enhanced  turnover  above  the  base  turnover  as  defined  for  a  period  of  14  years  or  7  years  respectively,  subject  to  a  ceiling  of  135%  of  additional fixed capital investment made, from the  date of commencement of commercial production  by the expansion project.   Base turnover for this  purpose  shall  be  the  best  production  achieved  during three years preceding the year of expansion  or the maximum capacity expected to be achieved  by the industry as per the appraisal made by the  financial  institution  before  funding  the  project,  whichever  is  earlier.   The  same  limits  and  conditions as specified in para 6.03 and 6.05 above  will apply.

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*** *** ***

16.00 The decisions of the State Level Committee  shall  be  final  in  scrutinizing  and  deciding  the  eligible investment and sanctioning the incentives  for eligible industries.

*** *** ***

18.00 These  orders  shall  take  effect  from  15.11.1995 and will be in force up to 31.03.2000.”

9. Indisputably, in terms of the said GOMs No. 108 dated 20.05.1996,  

the respondents herein applied for and was granted eligibility certificate on  

their project for expansion of their factory as a result whereof the benefit of  

deferment on sales tax to the extent of 13.5% of the capital investment made  

by  them  was  conferred.   It  is  also  not  in  dispute  that  the  respondents  

thereafter claimed the benefit of deferment on sales tax payable by them on  

their production in their expanded units which were, however, either rejected  

or restricted to a lesser amount while passing the orders of assessment by the  

assessing officers under the Andhra Pradesh General Sales Tax Act.

10. Some matters were taken to the Sales Tax Appellate Tribunal.   By  

reason of a judgment and order dated 27.09.2003, the Tribunal held:

“For  the  all  the  above  reason,  we  hold  that  for  availing the benefit of deferment of tax under the  

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Eligibility  Certificate  granted to the appellant  by  the  industries  department,  the  appellant  has  to  satisfy  not  only  the  achievement  of  base  production  as  per  G.O.  Ms.  No.108  but  has  to  achieve  the  previous  level  of  local  sales  under  APGST Act.  In this case, there is no dispute that  the appellant achieved base production by the cut  off date 11.2.98 and also the level of previous local  sales  of  the  base  year  under  APGST  Act  in  as  much  as  previous  level  as  stated  by  the  Dy.  Commissioner  is  Rs.8,79,98,708/-  whereas  according  to  Dy.  Commissioner  himself  the  APGST Act paid the appellant  upto out  off date  during  the  assessment  year  1997-98  is  Rs.9,02,10,115/- which is more than the tax paid  under  APGDT  Act  during  he  base  year  and  therefore  the  appellant  is  entitled  to  avail  deferment from 12.2.98 onwards which is rightly  granted  by  the  assessing  authority  and  the  Dy.  Commissioner erred in holding that the appellant  should  also  achieve  the  previous  level  of  sales  under  CST  Act  for  the  purpose  of  availing  deferment  benefit  and  therefore  we  come to  the  conclusion  that  the  revision  made  by  the  Dy.  Commissioner  is  not  justified  in  the  facts  and  circumstances and the same is not valid and legal  and therefore not sustainable and liable to be set  aside by allowing the TA.”

11. Several writ applications were filed thereagainst.   Some of the writ  

applications  were  filed  questioning  the  orders  of  assessment,  without  

availing the remedies available to the assessee under the Andhra Pradesh  

General Sales Tax Act.

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12. By reason of the impugned judgment, the High Court opined that the  

definition  of  the  term  “base  turnover”  referred  only  to  the  quantum  of  

production and not the turnover thereof and hence the Tribunal’s judgment  

to that effect was held to be erroneous.

13. Mr. I. Venkatanarayanan, learned senior counsel appearing on behalf  

of the State, would urge:

(i) The High Court committed a serious error insofar as it  failed to  

take into consideration that GOMs No. 108 was to be read with  

other GOMs preceding thereto.

(ii) The  High  Court  should  not  have  entertained  petitions  directly  

against the orders of assessment as the question as to whether the  

entrepreneurs  had fulfilled  the  conditions  laid  down in  the  said  

GOMs or  not  were  required to  be considered by  the  respective  

assessing authorities.   

14. Mr.  T.L.V.  Iyer,  Mr.  S.  Ganesh,  learned  senior  counsel,  Mr.  K.V.  

Vishwanathan  and  Mrs.  Shally  Bhasin  Maheshwari,  learned  counsel  

appearing on behalf of the respondents, on the other hand, urged:

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(i) The exemption notification having been valid for a period of five  

years,  the  conditions  laid  down  therefor  must  be  read  literally  

keeping in view the terminologies used in paragraph 7 only.  The  

principle  of  interpretation adopted by the High Court  should be  

accepted as the GOMs refers to the quantity and/ or capacity and  

not the turnover.

(ii) GOMs No. 108 should be read literally and not along with other  

GOMs as the former was issued in modification of the earlier ones  

as  even  in  some  cases  the  State  had  issued  the  eligibility  

certificates in quantitative terms which would clearly go to show  

that even the authorities of the State had read the GOMs in that  

way.  A different stand taken by them in that regard at a later stage  

has rightly been rejected by the High Court.   

(iii) The word “modification” would amount to an express repeal and/  

or must be held to be issued in departure from the earlier GOMs.  

By reason of the GOMs No. 108 as exemption from payment of  

tax had been granted on the condition that the respondents would  

not collect  the same from the consumers and the said condition  

having been complied with, even in equity, this Court should not  

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interfere  with  the  impugned order  in  exercise  of  its  jurisdiction  

under Article 136 of the Constitution of India.

15. GOMs No. 108 dated 20.05.1996 referred to the earlier GOMs, which  

are 18 in number, except GOMs No. 75, only for the purpose of tracing  the  

history thereof.  Indisputably, the said Government Orders had been issued  

by the Government having regard to the liberalized state incentive schemes  

for setting up of new industries and/or expansion thereof.

16. A  new  industrial  policy  statement  was  issued  in  the  year  1992.  

Pursuant to or in furtherance of the said industrial policy statement, various  

government orders were issued from 31.03.1993 to 21.11.1995.

17. It  is  in  the  aforementioned  backdrop  of  events,  the  Government  

adopted a new industrial policy called ‘Target 2000’.  The said policy was  

adopted in order to accelerate industrial development in the State.

18. The  scheme  for  grant  of  the  said  incentive  and/  or  deferment  or  

exemption  from payment  of  sales  tax  was  granted  not  only  to  the  new  

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industries but also to those entrepreneurs who had got expansion projects  

prepared.

19. Indisputably, the respondents had expanded their projects pursuant to  

or in furtherance of the said policy decision.  The period for which the said  

policy was to remain operative was between 15.11.1995 and 31.03.2000.  It  

was, therefore, valid for a fixed period.   

As the period in question has a direct nexus with the scheme, in our  

opinion,  it  would  not  be  correct  to  contend  as  has  been  done  by  Mr.  

Venkatanarayanan that the said policy decision should be read with earlier  

policy decisions.  Reference to the earlier policy decision has nothing to do  

with  the  new  scheme  introduced  by  the  Government.   They  have  been  

referred to only for the purpose of tracing the history and to lay emphasis on  

the  fact  that  the  Government  of  Andhra  Pradesh  had from time  to  time  

issued  appropriate  notifications  with  a  view  to  implement  its  liberalized  

State Incentive Schemes as also the industrial policy statement issued in the  

year  1992.   Each  of  the  Schemes,  as  noticed  hereinbefore,  operated  in  

different fields.  Had the intention of the Government of Andhra Pradesh  

been to continue with the old schemes, only the period therefor could have  

been  extended  from time  to  time.   It  was  not  necessary  for  it  to  issue  

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notification introducing the new scheme.  The said notification indisputably  

was  issued  in  modification  of  all  the  earlier  orders.   What  is  meant  by  

modification  has  been  noticed  by  the  High Court  in  its  judgment  in  the  

following terms:

“…The word ‘modification’ means – ‘an alteration  that does not change the general purpose and effect  of  that  which  is  modified  (as  per  West’s  Legal  Thesaurus/Dictionary);  and,  ‘a  change  and  alteration  or  amendment,  which  introduces  new  element into the details or cancel some of them but  leave the general purpose and effect of the subject  matter intact’ (as per the Judicial Dictionary – by  L.P. Singh & P.K. Majmudar...”

20. The State  advisedly  used the  word ‘modification’.   When the  said  

GOMs No. 108 was issued, some of the earlier  notifications might be in  

force.  There cannot, however, be any doubt whatsoever that the said GOMs  

is totally an independent one and a complete code by itself and in that view  

of the matter, it is not necessary at all to refer to the earlier GOMs for the  

purpose of either its construction or implementation.

21. Paragraph  7  of  the  said  GOMs  refers  to  projects  for  expansion.  

Setting up of such expansion projects in products other than those listed in  

the Annexure attached thereto refers to enhancement of capacity by 25%  

thereof  for  which  purpose  only  the  base  turnover  was  to  be  the  best  

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‘production achieved’ during three years preceding the years of expansion or  

the  ‘maximum  capacity  expected  to  be  achieved’  by  the  industry.   The  

notification used the words ‘production achieved’ and ‘maximum capacity  

expected to be achieved’.   It did not use the word ‘turnover’.   It did not  

provide that the amount of sales tax paid in the earlier years will have any  

relevance for the purpose of enforcement of the scheme.  The said GOMs  

does  not  refer  to  maintenance  of  local  sales.   The  term ‘base  turnover’  

would,  therefore,  in our opinion refers  to the turnover  of  the quantity  in  

goods and not its monetary value.

22. ‘Base  turnover’  was  defined  differently  from  that  of  the  earlier  

definitions  given  in  various  earlier  orders  which  clearly  discloses  the  

intention on the part of the government.  If what was provided in the earlier  

government orders were to be followed, nothing prevented the State to adopt  

the same.  We have noticed hereinbefore that even on earlier occasions the  

State had been issuing clarificatory notifications as has been done in the case  

of GOMs No. 75.  It has rightly been pointed out that even in GOMs No.  

386, the State level Committee was given liberty to adopt in the place of  

production the turnover in value but such liberty had not been granted to the  

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State  Level  Committee  or  to  any  other  authority  under  the  GOMs  in  

question.   

23. An  exemption  notification  should  be  given  a  literary  meaning.  

Recourse to other principles or canons of interpretation of statute should be  

resorted to only in the event the same give rise to anomaly or absurdity.  The  

exemption notification must be construed having regard to the purpose and  

object it seeks to achieve.  The Government sought for increase in industrial  

development in the State.  Such a benevolent act on the part of the State,  

unless there exists any statutory interdict, should be given full effect.  [See  

Vadilal Chemicals Ltd. v. State of A.P. and Others (2005) 6 SCC 292]

24. We may notice that  this  Court  in  Innamuri  Gopalan and Others v.  

State of Andhra Pradesh and Anr. [(1964) 2 SCR 888] held:

“…We  do  not  feel  persuaded  to  accept  this  argument.  No doubt, statutes have to be construed  as  a  whole  so  as  to  avoid  any  inconsistency  or  repugnancy  among  its  several  provisions,  but  if  there  is  nothing  to  modify,  nothing  to  alter,  or  nothing  to  qualify  the  language  of  a  statute,  the  words and sentences have to be construed in their  ordinary  and natural  meaning  [vide  36  Hals  (3rd  Edn.) s. 585]…”

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The said dicta was followed by this Court in  Hansraj  Gordhandas v.  

H.H. Dave, Assistant Collector of Central Excise and Customs, Surat and  

Others [AIR 1970 SC 755], in the following terms:

“…It  is  well  established  that  in  a  taxing  statute  there  is  no  room for  any  intendment  but  regard  must  be had to  the  clear  meaning  of  the  words.  The  entire  matter  is  governed  wholly  by  the  language  of  the  notification.   If  the  tax-payer  is  within the plain terms of the exemption it cannot  be denied its benefit by calling in aid any supposed  intention of the exempting authority…”

The same in turn has been followed in Parle Biscuits (P) Ltd. v. State  

of Bihar and Others [(2005) 9 SCC 669], stating:

“19. It is well established that in a taxing statute  there  is  no room for  any intendment  and regard  must be had to the clear meaning of the words. The  entire matter is governed wholly by the language  of  the  notification.  If  the  taxpayer  is  within  the  plain terms of the exemption, it cannot be denied  its benefit by calling in aid any supposed intention  of the exempting authority. If such intention can be  gathered from the construction of the words of the  notification or by necessary implication therefrom,  the matter is different, but that is not the case here.  In this connection we may refer to the observations  of Lord Watson in Salomon v. Salomon & Co.5  (AC at p. 38): (All ER p. 41 C-D)

“ ‘Intention of the legislature’ is a common,  but  very  slippery  phrase,  which,  popularly  

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understood,  may  signify  anything  from  intention  embodied  in  positive  enactment  to  speculative  opinion  as  to  what  the  legislature  probably would have meant, although there has  been an omission to enact it. In a court of law  or  equity,  what  the  legislature  intended  to  be  done or not to be done can only be legitimately  ascertained  from that  which  it  has  chosen  to  enact, either in express words or by reasonable  and necessary implication.”

25. The exemption notification furthermore as is well known should be  

construed  liberally  once  it  is  found  that  the  entrepreneur  fulfills  all  the  

eligibility criteria.  In reading an exemption notification, no condition should  

be read into  it  when there  is  none.   If  an entrepreneur  is  entitled  to the  

benefit thereof, the same should not be denied.  [See Commissioner of Sales  

Tax v. Industrial Coal Enterprises [(1999) 2 SCC 607]

26. In  Commissioner,  Trade  Tax,  U.P. v.  DSM  Group  of  Industries  

[(2005)  1  SCC  657],  this  Court  opined  that  when  an  application  for  

exemption  is  filed  for  an  expansion  or  diversification,  Explanation  5  

appended to Section 4-A(6) specifying the word ‘unit’ must receive a liberal  

construction to include not only a new unit but also a unit which is sought to  

be expanded, modernized or diversified, stating :

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“25…As  seen  above,  the  term  “unit”  has  the  meaning  as  defined in Section 4-A.  As we have  already seen, Section 4-A defines the term “unit”  to  mean  an  industrial  undertaking,  which  has  undertaken  expansion,  modernisation  and  diversification.  Even  under  the  General  Clauses  Act, where the context so requires the singular can  include  the  plural.  A  plain  reading  of  the  notification  shows  that  for  “expansion,  modernisation  and  diversification”  it  is  the  industrial  undertaking  which  is  considered  to  be  the “unit”. This is also clear from the fact that in  the  notification  wherever  the  words  “expansion,  modernisation  or  diversification”  are  used,  there  are no qualifying words to the effect “in any one  unit”.  In  none  of  the  clauses  is  there  any  requirement of the investment being in one unit of  the industrial undertaking. Words to the effect “in  a particular unit” or “in one unit” are missing. To  accept Mr Sunil Gupta’s submission would require  adding  words  to  a  notification  which  the  Government purposely omitted to add.”

In  M/s.  G.P.  Ceramics Pvt.  Ltd.  v.  Commissioner,  Trade Tax,  UP.  

[(2009) 2 SCC 90], this Court held:

“29. It is now a well established principle of law  that  whereas  eligibility  criteria  laid  down  in  an  exemption notification are required to be construed  strictly, once it is found that the applicant satisfies  the  same,  the  exemption  notification  should  be  construed liberally.”  

[See  also  A.P.  Steel  Re-Rolling  Mill  Ltd. v.  State  of  Kerala  and  

Others (2007) 2 SCC 725].

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In State of Orissa v. Tata Sponge Iron Ltd. [(2007) 8 SCC 189], this  

Court held:

“21.  It  is  furthermore  a  well-settled  principle  of  law  that  an  exemption  notification  must  be  liberally construed.”  

 27. We  may  furthermore  notice  that  construction  of  the  words  ‘base  

production’ came up for consideration before this Court in Commissioner of  

Trade Tax, U.P. v. Modipan Fibres Co.  [(2006) 6 SCC 577] wherein it was  

opined:

“8.  Purpose  of  granting  exemption  under  the  notification  dated  27-7-1999 was to  promote  the  development of certain industries in the State. By  the said notification, exemption from payment of  tax or reduction in rate of tax was granted to new  units  as  also  to  the  units  which  had  undertaken  expansion,  diversification  or  modernisation.  The  units of dealers in all the revisions are units, which  had  undertaken  expansion/modernisation.  The  units of the dealers (the respondents) are covered  by clause (1-B)(a) of the notification. Exemption  granted is on the turnover of sales of quantity of  goods manufactured in excess of base production.  Under  clause  (6)(a)  of  the  said  notification,  turnover of sale of goods in any assessment year to  the  extent  of  quantity  covered  by  the  base  production of that year and balance stock of base  production of previous years, shall  be deemed to  be turnover of the base production. Under clause  (6)(b) of the notification, the facility of exemption  

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can be availed on the turnover of  goods in “any  assessment year” in excess of the quantity referred  to  in  sub-clause  (a)  of  clause  (6).  A  conjoint  reading of clause (1-B)(a),  clauses (6)(a) and (b)  makes it  clear that the dealer is entitled to claim  exemption  in  respect  of  the  turnover  of  sale  of  goods of an assessment year in excess of the base  production. “Assessment year” has been defined in  Section 3(j) to mean the twelve months ending on  March 31.  If  that  be the  case  then the  extent  of  entitlement to exemption will depend on the sale of  goods  in  the  assessment  year  minus  the  base  production  determined  under  the  Act  (sic  notification). Simply because the dealer has to file  returns  from  month  to  month  and  deposit  the  admitted tax at the time of filing of the return does  not  mean that  the  question  of  exemption  on  the  turnover  of  the  production in excess  of  the  base  production can be considered only after the base  production is achieved. Returns filed every month  and the tax paid would be subject to adjustment at  the  time  of  the  finalisation  of  the  assessment.  Intention  of  the  legislature  is  clear  and  unambiguous.  Exemption  is  to  be  given  on  the  turnover of sale of goods in an assessment year in  excess of the base production. We do not find any  substance in the submission advanced on behalf of  the appellants.”

28. Although the word ‘modification’  may not be held to be expressly  

repealing the earlier notifications, indisputably, the State intended to depart  

from the conditions laid down in the earlier GOMs.  If the condition of local  

sale, thus, had not been incorporated in the GOMs, we are of the opinion that  

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no  case  has  been  made  out  for  incorporating  the  same  by  reference  or  

otherwise.   

29. Furthermore, even in equity, the State cannot be permitted to alter its  

stand as pursuant to or in furtherance of the representation made by it the  

entrepreneurs had not collected tax from its consumers to which they were  

otherwise entitled to.

30. Mr.  Venkatanarayanan  also  is  not  correct  in  contending  that  in  a  

situation of this nature, the High Court should not have entertained the writ  

applications directly from the orders of assessment.

31. As the Tribunal had already expressed its views in the matter, it has  

rightly  been contended  that  appeal  to  the  appellate  authority  as  also  the  

Tribunal would have been an idle formality.

32. Civil Appeals arising out of SLP (C) Nos. 18795, 19104, 21482 of  

2006, 489, 12440 and 12151 of 2007 are dismissed and other appeals being  

Civil Appeals arising out of SLP (C) Nos. 14640 and 17903 of 2007 filed by  

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Suryachandra Paper Mills Limited are allowed with costs.  Counsel’s fee  

assessed at Rs.50,000/- in each case.

………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi; July 27, 2009

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