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CASE NO.: Appeal (civil)  926 of 2007

PETITIONER: M/s Vividh Marbles Pvt. Ltd

RESPONDENT: Commercial Tax Officer

DATE OF JUDGMENT: 23/02/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) 17056 of 2006]

S.B. SINHA, J :

       Leave granted.

       The State of Rajasthan pursuant to its industrial policy formulated  ’Sales Tax Incentive Scheme, 1987’ (for short, ’1987 Scheme’) and ’Sales  Tax New Incentive Scheme for Industries, 1989’ (for short, ’1989 Scheme) .    In terms of  1987 Scheme exemption from payment of sales tax of 100%  was provided.  1989 Scheme which was notified in the Official Gazette on  or about 06.07.1989 was given retrospective operation with effect from  05.03.1987.   It was to remain in force upto 31.03.1998.   Sub-clause (b) of  Clause (1) of 1989 Scheme reads as under :

(b)     An industrial Unit, other than the new industrial  unit covered by 1985 Dispensation, being covered by the  Sales Tax Incentive Scheme for Industries, 1987  (hereinafter referred to as the Old Incentive Scheme)  shall have an alternative option to seek the benefits under  the New Incentive Scheme."

       Clause 4 of the said Scheme which is relevant for our purpose,  reads  as under :

" 4. Exemption from tax on sales \026 (a)  An industrial  unit, which is granted eligibility certificate under this  notification shall be exempted from payment of tax on  sales made within the State of the goods manufactured by  it in accordance with the parameters incorporated in  Annexure "C" to this notification.

               \005            \005            \005            \005

(b)  for the purpose of arriving at the limit of tax  exemption as provided in Annexure "C" the aggregate of  the following shall be considered \026

(i) Aggregate amount of tax which would have been  leviable under the provisions of the RST Act 1954;

(ii) Aggregate amount of tax on inter-State sales which  would have been leviable under the provisions of the  CST Act, 1956; and

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(iii) Aggregate amount of tax, as and when levied, on  consignments.

               \005            \005            \005            \005

(d)  When the limit of tax exemption prescribed in  Annexure "C" is exhausted, all sales thereafter shall be  subject to tax under the Act by the assessing authority  concerned.

(e)  The Incentive available under this Scheme shall be  subject to the condition that the beneficiary industrial  unit after having availed of any benefit under this  Scheme shall not make sales outside the State including  branch transfers of the goods manufactured by it  exceeding 60% in case of SSI, Medium and Large units  and 80% in case of Pioneering and Prestigious units and  90% in case of Very Prestigious Units of its total  production."

       Appellant herein was eligible to obtain the benefits of the said  Industrial Policy both under 1987 and 1989 Schemes.  It, however, opted for  1989 Scheme, wherefor an application for grant of sanction of eligibility  certificate was filed before the Manager, District Industries Centre,  Rajsamand on 01.04.1995.  Indisputably, the eligibility certificate was to be  granted by the Industries Department of the State.  The said certificate was  granted on 07.12.1996, pursuant whereto exemption from tax liability was  limited to 75%.            Contending, however, that it had altered its position on a  representation made by the State that 1987 Scheme would be applicable in  its case, the appellant alleged that it had not realized sales-tax from its  customers.  In support of the said contention, it inter-alia relied upon an  order of sanction of eligibility for grant of exemption/deferment issued by  the Member Secretary of the Department to the  Commercial Taxes Officer,  Rajsamand, which is in the following terms :

"The application has been prima-facie found eligible for the benefit  of exemption from tax/deferment of tax on the basis of ’A Industrial  Unit’/’ a New Unit covered by 1985 dispensation/a sick Industrial  Unit/ Expansion/ Diversification  / under sales tax Incentive/   Deferment Scheme 1987/1989 under PST and  / or C.S.T. Act’ on  the sale of Marble Slabs.

Hence a formal eligibility certificate as per law be granted to the  said applicant.   The application filled by the unit was completed in  all respect on 6.5.95.

The eligible fixed capital Investment as determined by the  committee which is subject to verification as per law is as follows :-

              a.     Cost of land                                              :   ________

               b.    Cost of new building                                      :   9.49

               c.    Cost of new plant and                      machinery or imported second                :   57.00                            land machinery

              d.    Installation expenditure capitalized                                    for P & M                                           :   ________

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              e.           Capitalized interest during construction                     not exceeding 5% of the total fixed                      capital investment                          :   ________

         f.     Technical know-how fees or drawing                     fees paid Laboratories recognized by                     the State Govt. or  the                      Central Government                          :   ________

                                               Total                   :   66.49

A copy of eligibility certificate issued by you may also please be  sent to this office. "

       Reliance has also been placed on the order of assessment passed by  the Assessing Authority of the Commercial Taxes Department, wherein also  exemption had been stated to have been granted in terms of 1987 Scheme, a  sample copy whereof reads  as under :  

"5.    Sale under Incentive Scheme

From 6.5.95 to 5.5.2003 under the Incentive Scheme,  1987 the assessee has already been allowed a heavy tax  exemption of Rs. 3,11,250.00.   Eligibility Certificate  No. 1/354 has been issued to the Assessee.

Under the Incentive Scheme, 1987 the assesse has made  a sale of marbles slab of Rs. 5,42,063.  On this sales tax  @ 16 percent of Rs. 86,730 is being imposed and being  deducted from eligible amounts received under the  Incentive Scheme."

       The mistake of the Assessing Authority, however, having been  discovered, the appellant was issued with a notice to show cause  as to why  it should not pay the balance sales-tax on 25% of its turnover.  A writ  petition filed thereagainst by the appellant has been dismissed by reason of  the impugned judgment.

       Mr.  M.L. Verma, the learned Senior Counsel appearing on behalf of  the appellant, would submit that in view of the  representation made by the  respondent, pursuant whereto or in furtherance whereof  the appellant had  not collected any tax from the customers, the impugned order cannot be  sustained.  In any event, it was urged that no penalty or interest should be  levied on the said amount.   

       The learned counsel appearing on behalf of the respondent, however,  supported the impugned judgment.

       It is not in dispute that the State formulated two Schemes; one in the  year 1987 and another in 1989.  The said Schemes provided for different  nature of incentives.  Although 1989 Scheme was framed during  pendency  of 1987 Scheme, as noticed hereinbefore, the same was given a retrospective  operation in terms whereof the entrepreneurs were given a choice to opt  either for 1987 Scheme or 1989 Scheme.  Appellant was aware thereabout.   It opted for 1989 Scheme.  The sanction of eligibility provided that a formal  eligibility certificate as per law would be granted to the appellant.  The  investment for capital, however, was determined at Rs.66.49 lacs.  The said  sanction did not amount to a grant of a certificate.  The eligibility certificate,  as indicated hereinbefore, was granted only on 07.12.1996, in terms whereof  clearly 1989 Scheme was applied.  It was so explicitly stated in the  eligibility certificate also.  It may be true that the Assessing Authority  committed a mistake in referring to the 1987 Scheme in its order of

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assessment, but thereby the appellant cannot be permitted to derive any  benefit to which it was not entitled under the law.  Appellant indisputably  was eligible for grant of exemption in terms of both the Schemes.  It had  opted for the latter Scheme.  While doing so, it must have taken into  consideration the benefits under both the Schemes separately.  Having opted  for the 1989 Scheme, in our opinion, now the appellant cannot be permitted  to turn round and contend that it should have been granted the benefit of  1987 Scheme, only because at a later stage it found the same to be more  beneficial.

       A contention was raised that the eligibility certificate dated  07.12.1996 was communicated on 02.07.2003.  No. such contention was  raised before the High Court.  Before the High Court, the principal  contentions raised on behalf of the appellant were : (i) It being eligible for  grant of exemption under both the Schemes, it preferred to avail of 100%  exemption under 1987 Scheme; (ii) Notices seeking  recovery of 25% tax  liability was contrary to the order of assessment; and (iii) Respondent cannot  now be permitted to change its opinion to allow only 75% exemption under  1989 Scheme, because for all practical purposes it had availed and had been  granted exemption under 1987 Scheme.  

        There had been no representation whatsoever on behalf of the  respondent that the appellant would be entitled to exemption under 1987  Scheme.  The eligibility certificate was to be granted and in fact granted by  the Industries Department.  The Sales Tax Authorities, therefore, were  merely to pass an order of assessment on the basis thereof.   

       The order of sanction being in a printed proforma referred to both the  1987 and 1989 Schemes.  It was issued only for the purpose of  determination of the fixed capital investment.  It had nothing to do with the  grant of eligibility certificate.  If the Assessing Authority committed a   mistake in referring to 1987 Scheme and allowed 100% exemption in terms  thereof, the  State cannot suffer thereby.  The statutory authorities are  entitled to rectify their mistake.  When such mistakes are apparent on the  face of the records even no opportunity of hearing is necessary., [See   Maharashtra State Seeds Corporation Ltd. v. Hariprasad Drupadrao Jhadao  & Another \026 (2006) 3 SCC 690]       

       Appellant having opted for grant exemption under 1989 Scheme, the  respondent was  bound to accept the same and, thus,  it had not committed  any illegality in doing so.   In that view of the matter, in our considered  view,  the appellant who is estopped and precluded from raising a contention  contrary to or inconsistent with its assertion for grant of exemption.                  Reliance has been placed by Mr. Verma on Indian Cement and Others  v. State of Andhra Pradesh and Others [(1988) 1 SCC 743], West Bengal  Hosiery Association and Others v. State of Bihar and Another [(1988) 4  SCC 134]; and British Physical Lab India Ltd. v. State of Karnataka and  Another [(1999) 1 SCC 170].

       In West Bengal Hosiery Association (supra), the question which arose  for consideration was as to whether the levy of sales-tax on goods imported  into one State from another may affect the free flow of trade and commerce  and, thus, attract  Article 301 of the Constitution of India.  Such a question  does not arise herein.   

       In Indian Cement (supra) preference to local manufacturers was held  to be ultra vires  Part XIII of the Constitution of India.

       In British Physical Lab India Ltd. (supra), it was opined that it was  just and equitable not to permit the State to collect the differential amount.   The said decision again has no application in the instant case.    

       Mr. Verma then submitted that at least a direction should be issued  that the appellant is not liable to pay any interest or any penalty.  We do not

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see as to how in a case of this nature such a direction can be issued.   Appellant herein  knew the actual state of affairs.  It at all material times was  aware of the extent of its entitlement thereto, which was confined to the  benefits under the 1989 Scheme.  However, despite such knowledge if  it  had not recovered any tax, it must thank itself therefor.    

       Furthermore, the question as to whether the appellant did show it bona  fide or not is a question of fact.  Such a contention can be raised only in an  appropriate proceeding and not before us for the first time.  Reliance placed  on Shree Cement Ltd. and Another v. State of Rajasthan and Others [(2000)  1 SCC 765] is misplaced.  Therein,  again dicta in Indian Cement (supra)  and  Shree Digvijay Cement Co. Ltd. and Others  v. State of Rajasthan and  Others [(2000) 1 SCC 688] was followed  In this case, there is no direction  to the respondent-State to recover the difference in tax.   

       In State of Rajasthan and Another v. J.K. Udiapur Udyog Ltd. and  Another [(2004) 7 SCC 673], whereupon again strong reliance has been  placed, the Court held that no penalty or interest should be charged, as the  said proceeding had been remained pending.  Such a direction was issued by  this Court in exercise of its jurisdiction under Article 142 of the Constitution  of India, having regard to the fact that the lis was finally determined by this  Court.  The fact of the present case, in our opinion, is completely different,  as applicability of the Schemes in question depended upon the volition of the  appellant, wherewith the respondent had nothing to do.    

       For the reasons aforementioned, there is no merit in this appeal, which  is dismissed accordingly, with costs.  Counsel’s fee is assessed at  Rs.10,000/- (Rupees ten thousand only).