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CASE NO.: Appeal (civil)  7147 of 2004

PETITIONER: M/s. Jai Beverages Pvt. Ltd.

RESPONDENT: State of Jammu & Kashmir and others

DATE OF JUDGMENT: 12/05/2006

BENCH: B.P. SINGH, TARUN CHATTERJEE & ALTAMAS KABIR

JUDGMENT: J U D G M E N T  

B.P. SINGH, J.

       The appellant herein claiming to be a "prestigious unit" having  a capital investment of over Rs.25 crores claimed exemption from  payment of General Sales Tax and Central Sales Tax under  Notification No. SOR 247 of August 20, 1998 issued by the  Government of Jammu & Kashmir pursuant to its Industrial Policy of  1998-2003.  Under the said Industrial Policy, a package of incentives  was offered to industrial units, and in particular to ""prestigious units"  having a capital investment of Rs.25 crores or more.  The appellant  Company set up a soft drink manufacturing unit in Jammu.  The claim  of the appellant was negatived by the State Government, which led to  the filing of two writ petitions before the High Court of Jammu and  Kashmir.  A learned single Judge of the High Court dismissed the writ  petitions holding that the petitioner was not entitled to the incentives  claimed under the aforesaid Industrial Policy, as it did not validly  acquire the status of a "prestigious unit".  Aggrieved thereby the  appellant preferred a Letters Patent Appeal which was dismissed in  limine by the judgment and order of the High Court dated October 4,  2004.

To appreciate the issues involved. it would be necessary to  notice the background facts giving rise to this controversy.  The facts  are as under :-           Pursuant to the Cabinet decision of May 15, 1998, sanction was  accorded to the new Industrial Policy 1998-2003 as per Annexures  ’A’ and ’B’ to the package of incentives appended to GO No.202 IND  of 1998 dated May 27, 1998.  A package of incentives was offered for  the development of large/medium/small and tiny industries in the  State of Jammu and Kashmir.  Paragraph 6 of GO No.202 of 1998  provided that the Industries and Commerce Department shall notify  negative lists referred to in the new package of incentives, in  consultation with Finance Department.

The relevant part of the package of incentives contained in  Annexure ’B’ relates to exemption from payment of General Sales  Tax etc. and is as follows :-   

"8.     General Sales Tax  

i.      There will be no GST on sales of finished  goods by the existing local SSI units till  31.3.2003 and for a period of 5 years from the

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date of production in case of new SSI units  except on items brought on negative list.

ii      There will be no GST on the raw material  procured by the local SSI, Medium and Large  units except on items brought on the negative  list.

iii     There will be no GST on the sale of finished  goods manufactured by the new Medium and  Large industrial units upto a ceiling on such  amount of GST which would have been  otherwise payable equivalent to 150% of the  total capital investment made in the unit or for a  period of 5 years from the date of production  whichever occurs earlier, except on items  brought on the negative list.

iv      There will be no GST on purchase of  machinery and equipment for construction of  the factory for a period of 5 years from the date  of provisional registration by the SSI units.

v       The above concessions shall also be available  to SICOP while acting on behalf of local  registered SSI units.

9.      Central Sales Tax   

The local existing SSI units shall be exempt  from charging and payment of CST on sale of  their finished goods outside the State upto  31.3.2003 and the new SSI units for a period of  5 years from the date of production.  

10.     Special provision for "prestigious unit"s  

(1)     Not withstanding anything contained in paras 7,  8 and 9 above, prestigious units i.e. those  having capital investment of Rs.25 crores or  above shall have the option to avail of full  exemption from payment of GST, CST and  special/additional toll tax for a period of 5 years  from the date of production or until such  amount of exemption reaches the level of 150%  of capital investment in the project whichever  occurs earlier.

(2)    Not withstanding anything contained in para 7,  8 and 9 above those prestigious units which  come into commercial production in the year  1998, shall have the option to avail a power  tariff freeze at the rate of Rs.1.50 per unit for a  period of five years from the date of  commercial production.

       For purposes of paras 7, 8, 9 & 10 above, all the  new units shall also have the option to count the  period of 5 years from the date of production or  from the succeeding financial year".

       On August 20, 1998 a Notification was issued by the  Government of Jammu and Kashmir exempting "prestigious units"  from payment of General Sales Tax and Central Sales Tax for a period

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of 5 years from the date of production or until such amount of  exemption reaches the level of 150% of capital investment in the  project, whichever occurs earlier.  The Notification is re-produced  below for the sake of convenience.   

"SRO-247.       In exercise of the power conferred by  Section 5 of the Jammu and Kashmir General  Sales Tax Act, 1962 (XX of 1962) and read with  sub-section (5) of Section 8 of the Central Sales  Tax Act, 1956 (Act No. 74 of 1956), the  Government of Jammu & Kashmir hereby direct  that the prestigious units, i.e., those having capital  investment of 25 crores or above shall have the  option to avail of full exemption from payment of  general sales tax and Central Sales Tax for the  period of 5 years from the date of production or  until such amount of exemption reaches the level  of 150% of capital investment in the project,  whichever occurs earlier."

       On the same date, Notification No. SRO 249 was issued  regarding exemption of General Sales Tax on sale of finished goods  manufactured by medium and large scale industries.  It is worth  noticing that this Notification refers to the exemption from the  payment of General Sales Tax granted to medium and large scale  industrial units.  It makes no reference to small and tiny units as also  to "prestigious units".  Moreover, a separate Notification was issued  on the same day relating to grant of such exemption to "prestigious  units".  It is the case of the appellant that this Notification related only  to medium and large scale industries and did not in any manner curtail  exemptions granted to "prestigious units" by Notification SRO 247  issued on the same date.  The proviso to Clause 6 of the Notification  provided that the incentives granted shall not apply to goods specified  in the Schedule. There is no dispute that "soft drinks" has been shown  as item No.VIII in the Schedule to Notification SRO 249 dated  August 20, 1998.                  In the mean time having regard to the Industrial Policy  announced by the Government of Jammu and Kashmir, the appellant,  whose unit was registered as a medium scale industry, applied to the  Government making a proposal for investment of Rs.25 crores or  more pursuant to the Industrial Policy of the Government so that it  could acquire the status of a "prestigious unit" and be entitled to all  the incentives provided in the Industrial Policy for such a unit.  The  proposal was discussed in a meeting attended by the Chief Minister,  Finance Minister, the Minister for Industries and Commerce, Chief  Secretary, Principal Secretary, Managing Director SIDCO, and the  Chairman of the appellant \026 Company.  The revised proposal was  considered and it was observed that no departure from the new  industrial policy was involved if the investment materilised  concurrently with the availment of incentives.  However, it was felt  that a liberal view needed to be taken of the policy to the extent that if  the investment of Rs.25 crores or more materializes within the  maximum period of six months from the date of commercial  production, the company should be given the benefit of incentives.  A  Memorandum of Understanding (for short ’MOU’) for this purpose  had to be executed by and between J&K SIDCO and the appellant  Company.  The proposal had the concurrence of the Finance Minister  whereafter a Memorandum was submitted to the Cabinet which was  approved vide Cabinet decision No.7/2 dated January 19, 2000.   Accordingly, SIDCO respondent No.7, signed a MOU with the  appellant Company on the above lines.         The MOU signed on February 1, 2000 recites the fact that the  appellant Company had applied to the State Government to give

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permission to set up a Soft Beverages bottling plant and that the State  Government had agreed to grant permission to it and authorize its  nodal agency respondent No.7 SIDCO to enter into a Memorandum of  Understanding.  It is also noticed that the unit proposed to be set up by  the appellant involved capital investment of around Rs.27.50 crores.   The other relevant parts of the MOU read as under:-

"AND WHEREAS the State Government has agreed  to grant incentives and subsidies to JBPL which are  applicable to the prestigious units as per new  Industrial Policy (1998-2003) right from the date of  commercial production which is expected to start  from the end of March 2000 so as to make huge  capital investment viable.  SIDCO and JBPL are  desirous of recording the terms and conditions agreed  between and by the parties, which are appearing  hereinafter in this Memorandum of Understanding.

\005.                   \005.           \005.           \005.           \005.

JBPL shall start manufacture of soft beverages in the  existing built up accommodation at Bari Brahmana  Jammu premises of erstwhile Hindustan Lever Ltd. by  end of March, 2000 and complete the minimum  capital investment of Rs.25 crores or more latest by  30.9.2000.

\005.           \005.           \005.           \005.           \005.

\005.           \005.           \005.           \005.           \005.

M/s JBPL shall become eligible to avail and be  entitled to all incentives and subsidies currently  applicable to prestigious units in pursuance of the  Industrial Policy in vogue as published vide Govt.  order No.202-IND of 1998 dt. 27th May, 1998 right  from the date of commercial production against to the  condition that JBPL makes an investment of not less  than Rs.25 crores as capital investment which is a pre- requisite for qualifying as a prestigious unit.

JBPL undertakes to start commercial production by  end of March 2000 in the existing available  infrastructure and complete the minimum investment  of Rs.25 crores with a period of six months i.e. by end  of Sept. 2000.  In the event of failure of JBPL to make  investment of at least Rs.25 crores (prestigious unit)  JBPL undertakes to refund the incentives, if any,  availed as prestigious unit alongwith interest at Bank  rates, besides entailing other consequences as laid  down in the relevant laws".

       A reading of the Memorandum of Understanding leaves no  manner of doubt that the industrial unit to be set up involved a  minimum capital investment of Rs.27.50 and was an industrial unit for  the manufacture and bottling of Soft Beverages.  It was also clearly  understood that the commercial production was to start by end of  March, 2000 and the minimum investment of Rs.25 crores must be  made within a period of six months i.e. by end of September, 2000.  In  the event of the failure of the appellant to make investment as agreed,  the appellant undertook to refund the incentive, if any availed of, as a  "prestigious unit" together with interest.  It was also clearly  understood that the appellant shall become eligible to avail and be  entitled to all incentives and subsidies currently applicable to

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"prestigious units" in pursuance of the Industrial Policy as published  on May 27, 1998 from the date of the commercial production.

       Pursuant to the MOU, on February 17, 2000 the SIDCO  executed a Deed of Lease in favour of the appellant Company  granting to it lease hold rights in respect of land measuring 133.6  kanals for a period of 90 years.

       On April 25, 2000 SIDCO issued a certificate to the effect that  the appellant was entitled to avail of incentives as a prestigious  industry from the date of its commercial production in accordance  with the Industrial Policy 1998 \0262003.  The certificate reads as under:-

"TO WHOMSOEVER IT MAY CONCERN

This is to certify that a Memorandum of  Understanding has been signed by J&K State  Industrial Development Corporation (SIDCO) with  M/s Jai Beverages Pvt. Ltd. (JBPL) to set up a  bottling plant having an installed capacity of 800  BPM with a capital investment of more than 25  crores.  This is pursuant to the cabinet decision No.7.2  dated 10-1-2000. As per Memorandum of  Understanding, executed with J&K SIDCO on 1st  February, 2000 JBPL will avail incentives as  prestigious industry right from the date of commercial  production in accordance with the new Industrial  Policy 1998-2003 (in vogue), subject to the condition  that the company completes the investment before 30th  Sept. 2000 failing which they will refund the  incentives availed with interest.  The SRO 247 dated  20-8-98 issued vide No.FD-ST/163.98 governing  release incentives to prestigious units reads as under:-          "The Govt. of J&K hereby direct that the  prestigious unit i.e. having capital investment of  Rs.25.00 crores or above shall have the option  to avail exemption from payment of GST/CST  for a period of 5 years from the date of  production or until such amount of exemption  reaches the level of 150% of capital investment  of the project which ever occur earlier".

In the light of the above JBPL is entitled to avail  incentives as a prestigious unit from the date of  commercial production.

(Raman Soni) General Manager"   

       On April 25, 2000, the Officer on Special Duty in the  Department of Industries and Commerce, Government of Jammu and  Kashmir wrote to the Principal Secretary and Secretary to Finance  Department that in view of the MOU signed with the appellant \026  Company pursuant to the Cabinet decision of January 1, 2000, a SRO  be issued permitting the appellant to avail of incentives as "prestigious  unit" from the date of commercial production.

       On June 14, 2000 the Directorate of Industries and Commerce  also granted a certificate substantially to the same effect as the one  granted by SIDCO which reads as follows:-

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"TO WHOMSOEVER IT MAY CONCERN

As certified by General Manager, J & K State  Industrial Development Corporation Limited,  Regional Office, Vir Marg, Jammu vide  NO.:IDG/ROJ/99/803 dated 25-04-2000, it is further  certify that a Memorandum of Understanding has  been signed by J & K State Industrial Development  Corporation (SIDCO) with M/s. Jai Beverages Pvt.  Ltd. (JBPL) to set up a bottling plant having an  installed capacity of 800 BPM with a capital  investment of more than 25 crores.  This is pursuant to  the cabinet decision No.7/2 dated 10-01-2000.  JBPL  will avail incentives as prestigious industry right from  the date of commercial production in accordance with  the new Industrial Policy 1998-2003 (In vogue),  subject to the conditions that the company completes  the investment before 30th September, 2000 failing  which they will refund the incentives availed with  interest.  The SRO 247 dated 20-08-1998, issued vide  No.FD/ST/163/98 governing release incentives to  prestigious units reads as under:-

"The Govt. of J & K hereby direct that the  prestigious unit i.e. having capital investment of  Rs.25 crores or above shall have the option to  avail exemption from payment of GST/CST for  a period of 5 years from the date of production  or until such amount of exemption reaches the  level of 150% capital investment of the project  whichever occur earlier."

In the light of the above JBPL is entitled to avail  incentives as a prestigious unit from the date of  commercial production.

(DEVINDER K. N.) IAS Director of Industrial & Commerce,  J & K Govt., Srinagar".

       By order of December 12, 2000, the Director of Industries and  Commerce, Government of Jammu and Kashmir declared the  appellant Unit  a "prestigious unit".  The relevant part of the order is  as follows:-

"Whereas M/s. Jai Beverages Pvt. Ltd. have submitted  a certificate from the Chartered Accountants M/s.  O.P. Bagla & Co., Kalkaji Extn. New Delhi regarding  capital investment ending 30-09-2000, certifying that  an investment of Rs.2711.59 Lacs has been made by  the company.

Whereas the details incorporated in the Chartered  Accountants certificate have been authenticated by the  General Manager, District Industries Center, Jammu,  vide his letter No.DICJ/MD/12875 dated 24-11-2000.

Whereas the J&K State Industrial Development  Corporation have inspected the Unit and verified the  investment made to the tune of Rs.27.12 crores and  conveyed vide their letter No.IDC/CO/PROJ/803- II/1136 dated 9-12-2000.

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Now, therefore, on the basis of documents submitted by  M/s Jai Beverages (P) Ltd. and as certified by the  General Manager, District Industries Centre, Jammu and  J&K State Industrial Development Corporation Ltd., M/s.  Jai Beverages (P) Ltd., located at Industrial Complex,  Bari Brahamana, Jammu is declared as a prestigious Unit  defined  in  terms  of  new  Industrial  Policy    dated     27-5-1998 thereby qualifying for incentives enshrined in  the policy and the SRO NO.247 of 20-8-1998 issued by  the Finance Department".

       This order clearly states that on verification it has been found  that the appellant has made investment to the tune of Rs.27.12 crores  by September 30, 2000.

       It would thus appear from the Notifications, Orders and  Certificates noticed above that the appellant signed a MOU with  SIDCO pursuant to a Cabinet decision to set up an industry with a  capital investment of more than Rs. 25 crores for the manufacture and  bottling of soft beverages.  As between the parties, it was clearly  understood that the unit to be set up by the appellant shall be entitled  to avail of the package of incentives offered by the Industrial Policy to  the "prestigious units".  The commercial production was to commence  by March 30, 2000 and the investment of Rs.25 crores or more was to  be made on or before September 30,2000.  The certificates issued by  the authorities establish that commercial production had commenced  as agreed and that investment of over Rs.27 crores by way of capital  investment had been made by September 30, 2000.

       By a communication dated July 4, 2002 addressed by the Under  Secretary to the Government in the Department of Industries and  Commerce to the Director, Industries and Commerce, it was conveyed  that the competent authority had not agreed to grant exemption from  payment of Sales Tax/Toll Tax to the appellant.  Aggrieved thereby,  the appellant filed the first Writ Petition before the High Court being  OWP No.613 of 2002 praying for quashing of the letter dated July 4,  2002 and for issuance of a Writ of Mandamus commanding the  respondents to allow exemption from payment of Sales Tax and Toll  Tax to the appellant in respect of its prestigious industrial unit in  accordance with the Government Order dated May 27, 1998, SRO 247  dated August 20, 2000 and MOU dated February 1, 2000.  The  appellant also prayed for other ancillary reliefs .

       On October 25, 2002 a communication was issued by the  Department of Industries and Commerce to the effect that the orders  issued by the Directorate of Industries and Commerce according   prestigious status to the units named therein had been kept in  abeyance till the cases were considered by the competent authority i.e.   State Level Committee-I.  One of the units mentioned therein is that  of the appellant.

       This decision of the Government was also challenged before the  High Court in OWP No.1166 of 2002.   

       Both the writ petitions were heard together and disposed of by a  common judgment and order dated July 30, 2004 dismissing the writ  petitions.        

       Before the learned Judge, who disposed of the two writ  petitions, it was urged on behalf of the respondents that in terms of  SRO 247, an industrial unit accorded the status of a "prestigious unit"  was one in which a capital investment of Rs. 25 crores or more was  made.  This investment was to be made as the initial investment, i.e.

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the investment of Rs.25 crores was to be made at the time when the  unit went into commercial production, and not at a later stage of its  development.  It was, therefore, urged that since the unit of the  appellant commenced its production on April 24, 2000 and by this  date an investment of Rs. 25 crores or more had not been made, it was  not entitled to the incentives offered to a "prestigious unit" under the  provisions of Notification No. SRO 247 issued pursuant to the  Industrial Policy.  Secondly it was urged that the negative list applied  to large and medium scale industrial units and, therefore, the appellant  which was registered as a medium scale industrial unit could not avail  of incentives if it was involved in the manufacture of goods specified  in the schedule to Notification SRO 249.  "Soft drinks" being one of  the goods specified in the schedule, the appellant was not entitled to  any incentive in terms of SRO 249.  Thirdly it was argued that any  decision of the Industries Department declaring the unit of the  appellant as a "prestigious unit" could not supercede Notification  SRO 249, and in any case the same was not binding on the Sales Tax  Department.  The Finance Department could grant the exemption only  if it found the unit eligible for such incentives in terms of SROs 247  and 249.  Fourthly it was argued that since the Cabinet had  reconsidered its decision and refused the exemption claimed, the  Finance Department and the Sales Tax Department were justified in  denying such incentives to the appellant, and in insisting upon  payment of tax in accordance with the provisions of the Jammu &  Kashmir General Sales Tax Act, 1962.    

On the other hand the appellant contended that there was no  separate registration of a "prestigious unit".  A medium or large scale  unit was different from a "prestigious unit" in the sense that if the  capital investment made in a particular industrial unit was Rs. 25  crores or more, it was granted the status of a "prestigious unit" and  was eligible for the incentives available to a "prestigious unit".  The  appellant had invested a sum of over Rs. 27 crores within the period  prescribed in the Memorandum of Understanding and, therefore, it  was entitled to be regarded as a "prestigious unit".  So far as the  negative list was concerned, it was the case of the appellant herein  that the negative list was only applicable to medium and large scale  industrial units and not to "prestigious units" having a capital  investment of Rs.25 crores or more.  It was also submitted that the  decision to enter into a Memorandum of Understanding was taken at  the highest level, namely at the Cabinet level, and the period for  making the investment of Rs.25 crores or more was prescribed in the  said Memorandum of Understanding, Factually it could not be  disputed that by September 30, 2000 the investment made by the  appellant was more than Rs.27 crores.  The appellant had, therefore,  fulfilled all the conditions laid down by the Government for acquiring  the status of a "prestigious unit".  Necessary certificates had been  issued by the concerned departments of the Government and it was  also certified, after verification, that the appellant had invested a sum  of Rs.27.12 crores by way of capital investment by September 30,  2000.  It is the case of the appellant that if the terms and conditions  laid down in the Notifications issued by the State of Jammu and  Kashmir pursuant to its Industrial Policy decision are fulfilled the  appellant is entitled to be treated as a "prestigious unit".  It was not of  much significance that such a declaration had not been issued by the  Department of Finance but was issued by the Department of Industries  and Commerce and J&K SIDCO.   

The learned Judge held that in terms of SRO 247 an investment  of Rs. 25 crores was required to be made by way of initial investment  in the case of a "prestigious unit".  Any investment made at a  subsequent stage was immaterial and, therefore, since on the date of  commencement of commercial production i.e. 24th April, 2000 a sum  of Rs. 25 crores had not been invested, the appellant could not be  declared to be a "prestigious unit" entitled to the incentives provided

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under SRO 247 dated August 20, 1998.  The High Court further held  that the Government had not issued any SRO declaring the appellant  unit as a "prestigious unit".  The appellant unit was registered as a  medium scale unit and, therefore, it was for the Government to take a  decision as to whether the industrial unit fulfilled the eligibility  conditions specified and indicated in SROs 247 and 249.  Negative list  appended to SRO 249 had to be kept in mind while declaring a unit as  "prestigious unit" under SRO 247.  Though not so clearly spelt out,  the learned Judge, came to the conclusion that SROs 247 and 249 had  to be read together and any medium scale or large scale industrial unit  producing goods specified in the schedule were not entitled to the  incentives under those Notifications.  

It was further held that the Director Industries and Commerce  was not competent to declare the unit as a "prestigious unit", as it was  only the Government which could take a decision in this regard by  issuing a SRO on being satisfied that the industrial unit was eligible to  claim the incentives.

       On such findings the learned Judge by his judgment and order  of July 30, 2004 dismissed both the writ petitions.

       The Letters Patent Appeal preferred by the appellant was  dismissed in limine by order dated October 4, 2004.  

       Having regard to the facts and circumstances of the case and the  findings recorded by the High Court, principally two questions fall for  our consideration.  Firstly, whether the industrial unit set up by the  appellant fulfilled all the necessary conditions for being declared a  "prestigious unit".  In this connection it has to be considered whether  the appellant had made the necessary investment of Rs. 25 crores or  more within the period prescribed.  Secondly, whether the negative  list appended to SRO 249 applies to "prestigious units" as well.  If it  is held that the industrial unit set up by the appellant fulfilled all the  conditions of eligibility for being considered to be a "prestigious  unit", and if the negative list appended to SRO 249 is not applicable to  the "prestigious units", it must follow that the appellant is entitled to  the package of incentives promised to the "prestigious units" under  the Notifications issued by the State pursuant to its industrial policy.   It is not of much consequence as to whether the declaration, that the  industrial unit set up by the appellant is a "prestigious unit", was  issued by SIDCO or by the Department of Industries and Commerce,  or that it should have been issued by the Department of Finance or the  Government of Jammu and Kashmir.   

Mr. K.K. Venugopal, learned senior counsel appearing on  behalf of the appellant, submitted that the package of incentives  announced by the State included certain benefits relating to payment  of General Sales Tax and Central Sales Tax.  Annexure ’B’ appended  to GO No. 202 of May 27, 1998 provided for certain concessions to  small scale industrial units as well as well as medium and large scale  units except on items brought on the negative list.  The package is  contained in paragraphs 8 and 9 of Annexure ’B’ which we have  quoted earlier in this judgment.  Paragraph 10 of Annexure ’B’ relates  to special provisions for "prestigious units" and it begins with the  words "Not withstanding anything contained in paragraphs 7, 8 and 9  above".  Thus the provision in regard to "prestigious units" is a  special provision confined to "prestigious units" i.e. those having  capital investment of Rs. 25 crores or above.  The benefit envisaged  under paragraph 10 is full exemption from payment of General Sales  Tax and Central Sales Tax and Special/Additional Toll Tax for a  period of 5 years from the date of production or until such amount of  exemption reaches the level of 150 % of capital investment in the  project, whichever occurs earlier.

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SROs 247 and 249 were both issued on the same date, namely  on August 20, 1998.  SRO 247 provides that the "prestigious units"  shall have the option to avail of full exemption from payment of  General Sales Tax and Central Sales Tax for a period of 5 years from  the date of production or until such amount of exemption reaches the  level of 150 % of the capital investment in the project, whichever  occurs earlier.  This exemption which was granted by the State  Government in exercise of powers conferred by Section 5 of the  Jammu & Kashmir General Sales Tax Act, 1962 read with sub-section  (5) of Section 8 of the Central Sales Tax Act, 1956, does not refer to  any negative list.

On the other hand SRO 249 issued on the same date provides  that finished goods manufactured by newly established medium and  large scale industrial units registered with the Department of  Industries and Commerce shall be exempted from payment of General  Sales Tax, which would have been otherwise payable, equivalent to  150 % of the total capital investment made by the unit or for a period  of 5 years from the date of production whichever occurs earlier  subject to the conditions specified therein.  It is not necessary for us to  notice the conditions specified therein, but the proviso to paragraph 6  of the Notification is to the effect that the exemptions granted under  SRO 249 shall not apply to goods specified in the Schedule.  Thus no  exemption was permissible to medium and large scale industrial units  for the manufacture of goods mentioned in the Schedule, which  includes "Soft Drinks".  It was, therefore, submitted by Mr.  Venugopal that the negative list contained in SRO 249 is applicable  only to "medium and large scale industrial units" and not to  "prestigious units" contemplated by SRO 247.  Both the SROs,  namely 247 and 249 were issued on the same date i.e. August 20,  1998.  Whereas SRO 249 contains the negative list and confines its  application to medium and large scale industrial units, there is no such  limitation in SRO 247.  Moreover Annexure ’B’ to Government Order  No. 202 of 1988, particularly paragraphs 8 and 9 thereof refer to  certain benefits conferred on small scale, medium scale and large  scale units.  Sub-paragraphs (i), (ii) and (iii) of paragraph 8 in terms  provide that the benefits contained therein shall not be available to  units which manufacture items brought on the negative list.   Paragraph 10 begins with non obstante clause and in terms provides  that notwithstanding anything contained in paragraphs 7, 8 and 9,  "prestigious units" shall have the option to avail of full exemption  from payment of General Sales Tax, Central Sales Tax etc.

Mr. Rohtagi, learned senior counsel appearing on behalf of the  State, submitted that there is no reason why the negative list must not  apply to all industrial units, whether small scale or medium scale or  large scale or even "prestigious units".   According to him the concept  of negative list is the same and there is no reason why "prestigious  units" should be treated on a different footing from other units in the  matter of application of negative list.  

Having perused Annexure ’B’ to G.O. No. 202 of 1988 of May  27, 1998 ; SRO 247 and SRO 249 issued on August 20, 1998, we are  of the view that the negative list concept is not applicable to  "prestigious units".  Paragraph 10 of Annexure ’B’ to G.O. No. 202 of  May 27, 1998 in terms provides a special package of incentives for  "prestigious units" and begins with the words "notwithstanding  anything contained in paragraphs 7, 8 and 9" above.  In paragraphs 8  (i), (ii) and (iii) certain benefits are conferred on small scale units,  medium scale units and large scale units in the matter of payment of  General Sales Tax, except on items brought in the negative list.  There  is no mention of the negative list in paragraph 10 of the G.O. which  clearly brings out the intention of the Government to treat "prestigious  units" on a different footing altogether. Similarly, SRO 247 which  grants exemption to "prestigious units" from payment of General

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Sales Tax and Central Sales Tax does not refer to the negative list.   Even SRO 249 to which the negative list is appended as a Schedule,  only refers to finished goods manufactured by newly established,  "medium and large scale" industrial units but does not refer to  "prestigious units" which are treated as a separate class altogether.  

It was sought to be argued before us that a "prestigious unit"  also must fall in the category of medium or large scale industrial unit.   Therefore, it was not reasonable to exclude the "prestigious units"  while applying the negative list to medium and large scale industrial  units.  The submission is not tenable.  This is a matter of policy, and if  the Government decides as a matter of policy to treat the "prestigious  units" on a different footing than medium and large scale industrial  units, the Courts will not interfere unless it is shown that there is  something arbitrary or unreasonable in such classification.  Large  industrial undertaking provides greater employment opportunities and  makes a large contribution to the State exchequer by way of revenue,  and this may very well be a reason for according a special status to  "prestigious units".  It is worth noticing that while the Government’s  Industrial Policy deals with tiny, small, medium and large scale  industrial units, the negative list is made applicable by SRO 249 only  to medium and large scale industrial units.  Obviously tiny and small  scale industrial units have been excluded so far as SRO 249 is  concerned.  Under paragraphs 8(i) and 8(ii) of GO. No. 202 of 1998,  the negative list is made applicable to small scale industrial units in so  far as sale of finished goods and purchase of raw-materials is  concerned, but does not make it applicable to tiny units.  It thus  appears that wherever the negative list is made applicable it is so  expressly provided.  There is nothing in any of the Notifications  which may lead us to hold that the negative list applies to "prestigious  units" as well.  On the contrary the language employed in paragraph  10 of G.O. No. 202 of 1998, which begins with the non obstante  clause, support the conclusion to the contrary.  We, therefore, hold  that the negative list concept does not apply to "prestigious units".   This is how the Government also understood its Industrial Policy and  the Notifications issued thereafter.   As we have noticed earlier the  matter was considered at different levels by high powered committee  presided over by the Chief Minister of the State himself and it was  understood that the proposal of the appellant did not involve departure  from the new Industrial Policy.  The matter was thereafter considered  by the Finance Department and lastly by the Cabinet which approved  the proposal and permitted SIDCO to sign a Memorandum of  Understanding with the appellant.  It was known to the Government  that the industrial unit being set up by the appellant was a soft  beverages manufacture and bottling plant with a capacity of  approximately 800 bottles per minute.  It was also known to the  Government that approximate capital investment for the project was  around Rs.27.50 crores.  Being fully informed of these facts, the  Government agreed to grant incentives and subsidies to the appellant  which were applicable to the "prestigious units" as per new Industrial  Policy (1998-2003) from the date of commercial production i.e. from  the end of March, 2000.  Thus the Government also, after considering  the proposal at various levels, came to the conclusion that the plant for  manufacture and bottling of soft beverages being set up by the  appellant with an investment of about Rs.27.50 crores was entitled to  the package of incentives promised to the "prestigious units" in the  new Industrial Policy.  After the Memorandum of Understanding was  signed and the industrial unit set up at a cost of over Rs. 27 crores, the  Government appears to have changed its mind and, in our view  unreasonably.  

This takes us to the next question as to whether the industrial  unit set up by the appellant qualifies as a "prestigious unit" in terms of  SRO No.247 dated August 20, 1998.  We have earlier reproduced the  aforesaid Notification.  The Notification contemplates a "prestigious

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unit" as being one which has a capital investment of Rs.25 crores or  more.  Neither the aforesaid Notification nor the Industrial Policy  itself prescribes the date by which the investment of Rs.25 crores must  be made.  It is not the case of the State that if the commercial  production commenced by 30th September, 2000, by which date         Rs. 27 crores and odd had been invested, the unit set up by the  appellant would not have been entitled to be reckoned as a  "prestigious unit".  The objection taken is that on the date of the unit  coming into production, the investment was below Rs. 25 crores,  though the investment was to the tune of over Rs.27 crores by 30th  September, 2000.   

It will be seen from the Memorandum of Understanding that the  appellant was to start manufacture of soft beverages in the existing  built up accommodation by the end of March, 2000 and complete the  minimum capital investment of Rs. 25 crores or more latest by 30th  September, 2000.  Mr. Rohtagi, learned senior counsel appearing on  behalf of the State, also could not dispute the fact that the appellant  had invested a sum of Rs.27.11 crores as on September 30, 2000.   This fact is admitted in the order of the Director, Industries and  Commerce dated December 12, 2000 which declared the appellant as  a "prestigious unit".  It also appears from the same order that the  matter had been examined by the General Manager, District Industries  Center, Jammu and J&K State Industrial Development Corporation  Ltd.   This was also supported by a certificate issued by the Chartered  Accountants of the appellant which had been authenticated by the  General Manager, District Industries Center, Jammu.  This is also  apparent from the two certificates issued by the General Manager,  District Industries Center, Jammu and J&K State Industrial  Development Corporation Ltd. as also from the communication dated  April 25, 2000 of the Industries and Commerce Department  recommending that SRO be issued permitting the appellant to avail of  incentives as a "prestigious unit" from the date of commercial  production.  Thus it would appear that the Government took a  conscious decision to permit the appellant to complete the minimum  capital investment of Rs. 25 crores latest by September 30, 2000.  It  also appears from the letter of the Industries and Commerce  Department dated April 25, 2000 that while discussing the proposal of  the appellant it was felt that a liberal view needs to be taken of the  policy to the extent that if the investment of Rs. 25 cores or more  materializes within the maximum period of 6 months from the date of  commercial production, the appellant should be given the benefits of  the incentives.  This proposal had the approval of the Finance  department as also the approval of the Cabinet, which did not consider  it as a departure from the policy announced.   

All these facts, therefore, lead to the only conclusion that  having considered its new Industrial Policy, and having considered the  proposal made by the appellant, the Government took a conscious  decision to grant the package of incentives to the industrial unit being  set up by the appellant provided it went into commercial production  by the end of March 2000 and made the necessary investment of      Rs. 25 crores or more on or before September 30, 2000.  The  documents and material on record disclose that the Government took  this decision after full discussion on all aspects of the matter, and in  particular by reference to the date by which the appellant was required  to invest Rs.25 crores in the industrial unit being set up by it.  The  State cannot be permitted to ignore its own conscious decision to  permit the appellant to invest a sum of Rs. 25 crores or more by  September 30, 2000.   The appellant acted on the basis of the decision  taken by the State Government and incorporated in the Memorandum  of Understanding.  The fact that Rs.25 crores was invested by  September 30, 2000 was not disputed in the several counter-affidavits  filed before the High Court.  In view of the voluminous evidence on  record the State cannot dispute the fact that over Rs.27 crores was

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invested by the prescribed date i.e. by September 30, 2000.  In this  background, the State cannot be allowed to say that the incentives  cannot be extended to the industrial unit set up by the appellant  because the amount of Rs.25 crores or more was not invested by the  date the unit went into commercial production, though the amount of  Rs.27 crores was invested within the period prescribed by the  Government as incorporated in the Memorandum of Understanding.   

We, therefore, find no substance in the objection of learned  senior counsel appearing on behalf of the State of Jammu and  Kashmir that the appellant had not fulfilled the requirement of making  the investment of Rs.25 crores or more by the date it went into  commercial production.  As we have noticed the Government itself  was of the view that within the framework of the policy formulated by  it, it was permissible to prescribe a time schedule within which the  investment of Rs.25 crores or more was to be made. Accordingly it  required the appellant to invest a sum of Rs.25 crores or more before  September 30, 2000 which the appellant did.  We have also not been  shown anything in the Policy or in the Notifications issued pursuant  thereto, prescribing any date for the capital investment of Rs.25 crores  or that within the framework of the policy, the State Government was  not entitled to prescribe a date by which the investment of Rs.25  crores or more should be made.  

In view of our findings that the negative list concept does not  apply to prestigious industrial units and that the industrial unit set up  by the appellant fulfilled all the conditions laid down in the  Government’s new Industrial Policy and the notifications issued in  connection therewith, it must be held that the appellant is entitled to  the package of benefits promised by the new Industrial Policy of the  State of Jammu & Kashmir read with various notifications issued  pursuant thereto.

The question as to whether the certificates issued by the SIDCO  or by the Department of Industries and Commerce are valid, or  whether the declaration made by the Industries and Commerce  Directorate by its order dated December 12, 2000 declaring the  appellant  a "prestigious unit" is binding on the State Government, has  no significance.  The appellant having fulfilled all the conditions  which it was required to fulfil is entitled to the benefits promised to  "prestigious units" under the State’s new Industrial Policy (1998- 2003).  

We, therefore, set aside the judgment and order of the High  Court of Jammu & Kashmir in L.P.A. No. 73 of 2004 and allow the  writ petition filed by the appellant.  It is declared that the appellant is  entitled to all the incentives and subsidies applicable to "prestigious  units" under the New Industrial Policy published vide Government  Order No. 202-IND of 1998 dated May 27, 1998 and the notifications  issued pursuant thereto from the date the aforesaid unit went into  commercial production.  This appeal is accordingly allowed without  any order as to costs.