25 August 2004
Supreme Court
Download

M/S. TATA IRON & STEEL CO. LTD. Vs STATE OF JHARKHAND .

Case number: C.A. No.-002188-002188 / 2002
Diary number: 15916 / 2001
Advocates: M. K. DUA Vs ASHOK MATHUR


1

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (civil)  2188 of 2002

PETITIONER: M/s. Tata Iron & Steel Co. Ltd.                  

RESPONDENT: State of Jharkhand & Ors.                        

DATE OF JUDGMENT: 25/08/2004

BENCH: N Santosh Hegde & A K Mathur

JUDGMENT: J U D G M E N T

(With SLP ) No.9942/2003, 15419 of 2004, CA  No.1912/2004)

SANTOSH HEGDE, J.   

CA No. 2188/02 :

The appellant in this apeal has challenged a judgment of  the High Court of Jharkhand, Ranchi, made in Civil Writ  Jurisdiction Case No.1426 of 2001 dated 30.8.2001 whereby  the High Court remanded the matter to the Commissioner of  Commercial Taxes, Jharkhand, to re-examine the question  whether in fact the appellant in its newly established industry  manufactures a product which is commercially different from  the product manufactured in its pre-existing unit of  manufacturing Hot Rolled Product (HRP). The facts giving rise to this appeal, briefly stated for the  limited purpose of disposal of this appeal, are as follows :

The appellant company had established a manufacturing  unit for production of HRP, Rounds, Structurals and other iron  and steel products in Dhanbad which was then in the erstwhile  State of Bihar. The State of Bihar in the year 1995 evolved a  new industrial policy with a view to create an environment  conducive to growth of industries in the State and to utilise to  its optimum advantage all the resources available in the form of  surface and ground water, fertile land, mineral wealth,  disciplined and skilled manpower etc. By the said policy the  Government tried to attract investors from various parts of the  country to invest in identified thrust areas, as also for creation  of essential infrastructure including private generation. One of  the areas which the said industrial policy sought to develop was  in the field of metallurgical industries. As an incentive to attract  investment in the State among others, the said policy provided  for sales-tax incentives which included (exemption for new  units in category ’B’ districts) 8 years’ sales-tax exemption on  sale and purchase of materials from the date of commencement  of production by such units located in category ’B’ districts. In  pursuance of the said policy, necessary exemption notifications  under section 7 of the Bihar Finance Act, were also issued.

The appellant having noticed the incentives offered by  the State Government, by letter dated 30.4.1997 intimated the  then Chief Minister of the State that it has a plan for installing a

2

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

Cold Rolling Mill in Jamshedpur in which a sum of Rs.2,000  crores was to be invested if the financial climate in the State  was favourable. Therefore, before taking a final decision in this  regard, it sought a confirmation from the State of Bihar as to its  commitment to grant sales tax exemption as stated above. By  that letter the appellant also requested the Chief Minister to  authorise the Secretary of the Department of Industries and  other officials of the State to have a discussion with the  appellant about the plan in detail and to guide the appellant in  the manner in which it could enjoy the benefits of sales-tax  incentives.

Pursuant to the above request letter of the appellant, a  meeting of the High Power Committee under the Chairmanship  of the Chief Minister was summoned on 21.7.1997. Among the  persons present at the meeting were the Minister for  Commercial Taxes, Chief Secretary, Commissioner of Finance,  Secretary of Industrial Department, Commissioner of  Commercial Taxes and Director of Industries, Bihar, who were  also the members of the said High Power Committee. In the  said meeting the letter written by the appellant came to be  discussed and a decision was taken that even existing industries  which go in for diversification with an additional capital of  Rs.500 crores shall be deemed to be treated as new units and all  the benefits under the Industrial Policy of 1995 will be made  available to them. It is pursuant to the said decision of the High  Power Committee that a resolution was passed by the  Government of Bihar amending the Industrial Policy  Resolution, 1995 bringing it in conformity with the decision  taken at the meeting of the High Power Committee on  21.7.1997.

Subsequent to the above referred amendment, the  Commissioner and Secretary, Government of Bihar,  Department of Industries, wrote a letter on 11.11.1997 stating  that the Government has taken a decision that any investment  over Rs.500 crore would be taken as an  expansion/diversification or a new unit, as such the appellant  company will be entitled to all the reliefs under the Bihar  Industrial Policy. In the said letter the Secretary also expressed  the hope that the appellant will take necessary steps to set up a  unit in Bihar as soon as possible. As a follow-up action on  10.1.1998, the Director of Technical Development, Department  of Industries, State of Bihar wrote to the appellant expressing  the happiness on the decision of the appellant to put up a Cold  Rolling Mill of 1.2 million tons per annum capacity and  requested the appellant to go ahead with the project  implementation and to keep the Government informed of the  progress in this regard. By a letter dated 16.4.1999 the  Commissioner and Secretary, Government of Bihar, re-assured  the appellant that the Central sales-tax and Bihar sales-tax both  will be exempted as provided in the policy in regard to the  purchase and sale of Cold Rolling Mill. The said letter also  assured that if production in the new unit of the appellant  started in the year 1997 such benefit of exemption would be  available up to the year 2005.  It also assured that even if the  industrial policy expired the facilities granted to the appellant  will continue till a period of 8 years from the date of  production.

On 2.3.2000 exercising the power conferred under sub- section 3(b) of section 7 of the Bihar Finance Act, 1981, an  amendment was brought about in the notification which came  into existence pursuant to the industrial policy of 1995. This  amendment also provided the benefit to the new industries

3

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

which came into existence by way of expansion/modernisation/  diversification provided the investment in such expansion/  modernisation/diversification was done on an additional  investment of Rs.500 crore. On 20.5.2000 pursuant to a  decision taken on 26.4.2000 by the Commissioner, Finance,  Director of Industries, Bihar, conveyed to the appellant that the  Government has granted approval for setting up of Cold Rolling  Mill with production capacity of 1.20 million tons on an  investment of Rs.1874.04 crores put by the appellant on this  project. On 9.8.2002, the Director Technical Development,  Department of Industries (Director of Technical Development)  wrote to the appellant that the team of  Technical Officers  constituted by his Department to determine the date of  commercial production of appellant’s Cold Rolling Mill made  the site verification and examined the related papers, thereafter,  they had submitted a report of inspection observing that the  date of commercial production has been recommended as  1.8.2000, hence, the commercial production at CRMs is  declared as from 1.8.2000.

From the above, it is noticed that relying on the industrial  policy of the Government of Bihar of 1995 and the assurance  given by the Government pursuant to the said policy and the  notification made thereunder, the appellant invested nearly  Rs.2000 crores on its new unit for the manufacture of CRMs,  the commercial production of which commenced from 1.8.2000  which was verified by the Technical Officers of the Department  of Industries, Bihar and certified as such by them. On 15.11.2000 under the Bihar Re-organisation Act,  2000, a part of Bihar which included Jamshedpur, became a  new State named as Jharkhand State. On 15.12.2000 by a  notification, the Governor of Jharkhand ordered that the Bihar  Finance Act, 1981, Central Sales Tax (Bihar) Rules, 1956 and  the notification made thereunder, among other Acts, Rules and  Regulations, shall be deemed to be in force in the entire State of  Jharkhand w.e.f. 15.11.2000.  

On 21.12.2000, the successor State, namely, the State of  Jharkhand issued the exemption certificate as contemplated  under Notification Nos.478 and 479 dated 22.12.1995 by the  Bihar State Finance (and Commercial Tax) Department  exempting the new unit of the appellant from purchase tax as  well as sales-tax on purchases and sales made in regard to the  Cold Rolling Mill. This was pursuant to an order made by the  Joint Commissioner of Commercial Taxes dated 16.12.2000  wherein after an elaborate inquiry and after hearing the  departmental representatives, the Joint Commissioner came to  the conclusion among other findings that the product  manufactured by the appellant in its new unit is entirely a new  product called Cold Rolled Products while the product  manufactured in its old unit was a separate product called  HRPs; both of which required distinctly different  manufacturing processes and equipments. He also held that  though the raw-material for the manufacture of CR product is  HR product, the CR product is totally different both in its  metallurgical components, the end-use, and the two products  were commercially recognised as different products, hence, the  Cold Rolled Products manufactured by the new unit being  different from the Hot Rolled Product manufactured by the old  unit, the appellants were entitled to exemption of sales-tax as  provided under the industrial policy and the notifications,  therefore, he approved the issuance of certficate.

However, the Commissioner of Commercial Taxes,  Jharkhand, initiated suo motu revision purporting to act under

4

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

section 46(4) of the Bihar Finance Act against the said approval  granted by the Joint Commissioner and after an inquiry and  hearing the parties concerned, came to the conclusion that the  hot rolled steel i.e. the HR product and cold rolled steel i.e. the  CR product have to be treated as one and the same commodity  for the purpose of   levy of tax, therefore, the appellants are not  entitled to the sales-tax exemption. In this process, he did not  disagree with the finding of fact arrived at by the Joint  Commissioner as to the nature of product and how they are  different but relied on an entry found in the Schedule to section  14 of the Central Sales Tax Act, which enumerated both hot  and cold rolled products in the same entry. Then relying on a  judgment in Telengana Steel Industries [93 STC 187(SC)] held  merely because the two products are found in the same Entry in  the Schedule to the Central Sales Tax Act, both the products  will have to be treated as the same. Though it was pointed out  to the Commissioner that the judgment of this Court in  Telengana’s case (supra) was subsequently held to be contrary  to an earlier Constitution Bench judgment of this Court and  declared to be not good law in K.A.K. Anwar & Co. v. State of  Tamil Nadu [108 STC 258 (SC)], the Commissioner seems to  have lost sight of the same and chose to rely upon Telengana  Steel (supra) to come to the conclusion that the two products  must be treated as the same commodity merely because they are  found in the same Entry in the Act for the purpose of levy of  sales-tax and if that be so under the policy and the notification  unless the products are two different commodities the benefit of  exemption was not available.

Being aggrieved by the said order of the Commissioner,  the appellant preferred a civil writ petition before the High  Court of Jharkhand. The High Court by the impugned  judgment, accepted the appellants’ case in all other respects  including the effect of the judgment of this Court in K.A.K.  Anwar & Co.’s case (supra) and came to the conclusion that  merely because two commodities are shown in the same Entry  in the Central Sales Tax Act, it would not ipso facto make the  two commodities the same commodities. It also recorded the   concession made by the learned Additional Advocate General  appearing for the respondent-State who had submitted that all  other issues raised in the writ petition have to be answered in  favour of the appellant. The Court also held that the only issue  to be decided was whether on facts the HR product and CR  product manufactured by the two units of the appellant are one  and the same product or are two different products, and not on  the basis of law as held by the Commissioner.

On the above basis, the High Court without there being a  challenge to the finding of the Joint Commissioner as to the  comparability of the two products on facts, and which finding  being based on material produced before the said authority, still  remanded the matter to the Commissioner holding that the  appellant had not produced enough material whereby it could  be satisfactorily held that the CRM is a product commercially  different from HRM. It is because of this limited finding that  the appellant is now before us.

Mr. Dushyant A. Dave, learned senior counsel appearing  for the appellants, raised various grounds, attacking the  judgment of the High Court including the ground that after the  amendment which permitted diversification with an investment  of Rs.500 crore, nature of product manufactured by the new  product has no relevance for the purpose of promised  exemption. He also contended that the correspondence between  the State of Bihar and the appellant which culminated in the

5

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

certificate of exemption granted by the successor State, clearly  shows that there was an unambiguous offer, if not a fervent  request by the State of Bihar to the appellant to invest large  sums of money in an industrial project for which all assistance  and exemptions as available under the 1995 policy were  promised by the State of Bihar and it was because of this  representation, request and promise that the appellant which  otherwise was thinking of putting up its project in other States  like Orissa, Gujarat etc. which also had promised certain  benefits, chose to come to Bihar and invest nearly Rs.2,000  crores. In such circumstances, the respondent-State is precluded  by the principle of promissory estoppel from retracting its  promise.

We, however, do not think it is necessary for us to go  into these questions since in our opinion as recorded by the  High Court in the impugned judgment, the only question that  arises for our consideration is whether the product  manufactured by the appellant in its new unit is a Cold Rolled  Mill product or as it is termed in some parts of the judgment  and orders as CRM or it is the same product as is being  manufactured by the appellant in its old unit which is known as  Hot Rolled Mill product or HRM.

In this regard, learned counsel for the appellant submits  the correspondence between the State of Bihar and the appellant  clearly shows that the new unit was being established for the  manufacture of CRM and the appellant had no intention to  increase the production of its HRM in the existing factory. It  accepted the proposal of the State Government to invest such a  huge amount of money because CRM is a new product used in  the manufacture of certain sophisticated equipments for which  HRM cannot be the raw-material. He submitted that from the  various reports furnished by the appellant making known the  process of manufacture, the inputs and the equipments required  for such manufacture, it is clear that the product they  manufacture in the new unit is only CRM. He further submitted  that even the report submitted after inspection by the  representatives of the Industries Department also establishes the  same fact. Learned counsel pointed out that the Joint  Commissioner while holding the two products to be different  commodities had considered various materials to come to the  said conclusion, and has given reasons for the same. He also  pointed out that the Commissioner in his suo motu revisional  order did not disagree with the Joint Commissioner on this  question of fact but on an erroneous interpretation of the  placement of the product in the same entry in the Central Sales,  and following an overruled judgment of this Court, the said  Commissioner came to an erroneous conclusion on a  technicality, therefore, the High Court having found that  technical reasoning of the Commissioner is unsustainable and  having noticed the concession of the Additional Advocate  General, it could not have allowed the writ petition on a ground  which was neither raised nor argued before it and remanded the  matter to the tribunal for a de novo inquiry by the  Commissioner which would only amount to the harassment to  the appellant.

Mr. Altaf Ahmad, learned senior counsel appearing for  the State of Jharkhand, however, contended that while it is true  that the only question which arose for consideration before the  High Court was in regard to the nature of product manufactured  by the new unit of the appellant. He contended that none of the  parties had led sufficient evidence for establishing this fact,  therefore, the High Court was justified in remanding the matter

6

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

to the Commissioner with liberty to lead fresh evidence. He  submitted that the appellant would not be put to any prejudice if  really the product manufactured by it in the new unit is a new  product because it can establish its case before the  Commissioner. He also pointed out that this Court normally  does not interfere in an order of remand.

Having heard learned counsel for the parties, we think in  the facts and circumstances of this case, the High Court was in  error in remanding the matter to the Commissioner to decide  the question of fact which in our opinion was already   conclusively decided by the Joint Commissioner and not  disagreed on facts by the Commissioner. In this process, if we  see from the narration of facts recorded hereinabove that right  from the beginning, it is the case of the appellant that they  wanted to establish a new unit for the manufacture of CRM.  The correspondence also shows at every stage even the State  and the concerned Department accepted the proposal for the  said purpose. No case has been made out, leave alone an  attempt on behalf of the State has been made that the appellant  misled the Department or by any sort of camouflage tried to put  up a plant which only manufactures HRM. As a matter of fact,  it was not the case of the respondent-State that in fact the  product manufactured by the appellant in the new unit is not  CRM. It could not have been the case either because in our  opinion a careful reading of the letter of the Director of  Technical Developent, Bihar, dated 9.8.2000 wherein he has  referred to a team of Technical Officers who visited the unit of  the appellant, had reported that the commercial production was  CRM and on verification, production of the same was found to  have started hence they recommended that a declaration be  given in regard to the same w.e.f. 1.8.2000. These Technical  Officers who we must presume have seen the product, have  nowhere stated that the products manufactured were not CRM  nor has the respondent-State repudiated this letter or challenged  the correctness of the same.

As noticed above, even the Commissioner who initiated  suo motu revision, did not disagree with the finding of the Joint  Commissioner given on facts that the product is CRM. He only  proceeded on a technicality relying on an erroneous judgment.  In the writ petition filed by the appellant the State has filed a  counter affidavit. Even in the counter affidavit the factual  aspect of the product being CRM is not questioned nor do we  find any argument addressed on behalf of the respondent-State  before the High Court that the product manufactured by the  appellant in its new unit is not CRM. It is for the first time the  High Court having come to the conclusion that the finding of  the Commissioner based on the judgment of this Court in  Telengana Steel (supra) is erroneous, on its own proceeded to  examine the material available on facts to establish whether the  product manufactured by the appellant in its new unit is CRM  or HRM. Even the High Court on such material that was  available before it did not come to a definite conclusion that the  finding of the Joint Commissioner was erroneous but it  proceeded to weigh the quantity of evidence and thought it  more prudent to remand the matter to take more evidence in this  regard. We think in a writ petition filed under Article 226 or  227, the High Court ought not to have done such an exercise.

Mr. Altaf Ahmad, learned senior counsel cotnended that  the finding of the Joint Commissioner in regard to the nature of  product only refers to certain literature produced by the  appellant and certain feasibility report, project data and the  correspondence between the Government of Bihar and the

7

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

appellant. This by itself according to learned counsel, would not  in fact indicate that the actual product that is manufactured by  the appellant is CRM. He submitted that the appellant ought to  have either by summoning the officers to the site or by other  materials established that the new unit produced only CRM and  not HRM.

We are unable to accept this argument either. First of all,  as noticed above, it is not the case of the State that the product  manufactured by the appellant in its new unit is not CRM. It is  not the case of the State that the existing unit either by its  machinery or by its process is capable of making HRM and not  CRM or is capable of manufacturing both. Of course, if such an  issue were to be raised the burden would have been on the  appellant to establish the same. When such an issue is not  raised it is not necessary for the appellant to establish that fact  by any such intrinsic evidence. The material produced before  the Joint Commissioner was in our opinion sufficient to decide  whether the product manufactured by the appellant is CRM or  not and the said Joint Commissioner having given a positive  finding and that finding having not been interfered with by the  Commissioner, we think the High Court erred in remanding the  matter for fresh inquiry.

It is true that normally as against an order of remand this  Court hesitates to interfere since there is always another  opportunity for an aggrieved party to establish its case. But in  this case  we should notice the decision to establish an  industrial unit was initiated by the appellant as far back as in  the year 1997. Based on a promise made in the industrial policy  of the State of Bihar, at every stage the appellants tried to verify  and confirm whether they are entitled to the benefit of  exemption or not and they were assured of that exemption. It is  based on these assurances that the appellant invested a huge  sum of money which according to the appellant is to the tune of  Rs.2,000 crore but the State says it may be to the tune of  Rs.1,400 crore. Whatever may be the figure, the fact still  remains that the appellants have invested huge sums of money  in installing its new industrial unit. At every stage of the  construction,  progress and installation of the machineries, the  concerned Government/authorities were informed and at no  point of time it was suspected that the new unit was going to  manufacture HRM. The process of manufacturing HRM and  CRM as could be seen from the experts’ opinion are totally  different and the material on record also shows that the plant  design for a new unit is for the purpose of manufacturing CRM.  These factors coupled with the fact that at no stage of the  proceedings which culminated in the judgment of the High  Court, the respondent-State had questioned this fact except for  the technical ground taken by the Joint Commissioner which is  found to be erroneous, we find ends of justice would not be  served by remanding the matter for further inquiry.

We are convinced that the issue before the High Court  was not whether in fact the new unit of the appellant  manufactures HRM or CRM. That being the case, the High  Court ought not to have raised the issue suo motu and remanded  the matter to the Commissioner.

For the reasons stated above, this appeal succeeds; the  impugned order of the High Court is set aside. We restore the  proposal made by the Joint Commissioner for grant of  exemption certificate to the appellant as also the exemption  certificates granted consequently.

8

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8