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PETITIONER: STATE OF BIHAR & ORS.  ETC.  ETC.

       Vs.

RESPONDENT: M/S.   SUPRABHAT  STEEL  LIMITED  &  ORS., ADITYAPUR ROLLING

DATE OF JUDGMENT:       17/11/1998

BENCH: S.P.BHARUCHA, G.B.PATTANAIK, AND S.RAJENDRA BABU.

ACT:

HEADNOTE:

JUDGMENT: JUDGMENT G.B.PATTANAIK. J. Leave granted in the Special Leave Petitions which have been tagged on to the Civil Appeals. In these appeals, the Judgment of the Division Bench of Patna High Court in Civil  Writ  Jurisdiction  Case  Nos. 7063,  7068  and  7467  of  1994  and  the  other  judgments following the same are under challenge.  The short  question for consideration is whether the Industrial Units which have started  production  prior to 1.4.93 and whose investment on plant and machinery do not exceed Rs.  15 Crores  on  1.4.93 would  be  entitled to the facilities of sales tax exemption on the purchase of war material for a period of seven  years from  1.4.93  in  accordance  with  Clause 10.4(i)(b) of the Industrial Incentive Policy, 1993 (hereinafter  referred  to as  ’the  Industrial  Policy’)  and whether the notification issued by the Government of Bihar dated 2nd of  April,  1994 in  exercise  of  power under Section 7 of the Bihar Finance Act to the extent it indicates "who has not availed  of  any facility  or  benefit under any Industrial Promotion Policy" is invalid as being contrary to  the  Policy  Resolution  of 1993.   The  High Court by the impugned Judgment came to the conclusion that the old industrial units whose investment on plant and machinery did not exceed Rs.  15 Crores on  1.4.93 would be entitled to the sales tax exemption on the purchase of  raw  material  for  a period of seven years from 1.4.93. Examining the notification dated 2nd of April, 1994,  issued by the Government of Bihar in exercise of power conferred by Clause  (b)  of  sub-section  (3)  of Section 7 of the Bihar Finance Act, 1981,  the  High  Court  further  came  to  the conclusion  that  the  notification  so  far as it imposes a condition that  the  facility  of  sales  tax  exemption  on purchase  of  raw  material  will be available only to those industrial   units   who   have   not   availed    of    any facility/benefit  on the earlier incentive policy is bad and struck down that part of the notification. It is not necessary to state the  facts  in  detail. Suffice it to say that the State of Bihar with the object of accelerating  the industrial progress in the State have been declaring the industrial policies  from  time  to  time  and

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prior  to  1993  policy, had announced the Policy on 1.9.86. Being of the opinion that the incentives  given  under  1986 Policy  have not achieved the desired industrial progress in all the Districts of  the  State  and  to  achieve  balanced industrial  growth  in  a  planned  manner,  the  industrial incentives require  new  dimensions,  the  State  Government introduced the  new  Industrial  Policy  of  1993.    Clause 10.4(i)(b) of the Policy deals with the  facility  of  sales tax  exemption  on  the  purchase of raw material with which provision we are concerned in the present  appeals  are  old industrial  units  which  have come into production prior to 1.4.93 but whose investment on plant and machinery  did  not exceed Rs.  15 Crores on 1.4.93.  The State Government after introducing  the  new  Industrial Policy of 1993, issued the exemption notification on 4th of April, 1994 in exercise  of the  power  under  Section  7 of the Bihar Finance Act under which the old industrial units like the respondents who  had started  production  prior to 1.4.93 but whose investment on plant and machinery did not exceed Rs.  15 Crores on  1.4.93 were  denied  the  facility  of  sales  tax exemption on the purchase of raw materials as those units had availed of some facilities under the prior Policy of 1986.  Being  aggrieved by  the  said  notification,  the respondents approached the High Court of Patna for quashing the said notification dated 4th of April, 1994 to the extent it makes the old industrial units of the respondents  ineligible  for  the  facility  of sales  tax  exemption on purchase of raw materials and for a direction to the State of Bihar to extend  the  facility  to such  old  units  of sales tax exemption on raw materials in terms of Clause 10.4(i)(b) of the Policy Resolution of 1993. Those writ petitions having been allowed, as stated earlier, the State has preferred these appeals. Mr.    Rakesh   Dwivedi,   learned   Senior  Council appearing for the appellant-State contends that  the  Policy resolution  of  1993  having  been  made applicable to those industrial units which came into production from  1.4.93  to 31.3.98   as   provided   in   Clause   1(a)  and  to  those entrepreneurs   who   have   invested   capital   for    the establishment   of  industry  on  the  basis  of  previously announced incentives  before  1.4.93  but  could  not  begin production  till  31.3.93 subject to exercising their option within 30 days from the date of the issue of the 1993 Policy resolution, indicating  whether  they  would  avail  of  the benefits under the previous incentive policy or thee benefit of  the new industrial policy, the respondents being the old industrial units who have started producing prior to  1.4.93 would  not  be entitled to the benefit of the exemption from sales tax on the purchase of raw  material,  even  if  their investment on  plant  and  machinery  did not exceed Rs.  15 Crores on 1.4.93 as indicated in Clause  10.4(i)(b)  of  the Policy.  According  to  Mr.  Dwivedi, said Clause 10.4(i)(b) must be read subject Clause 1(a) which in no uncertain terms declares  that  the  Industrial  Policy  of  1993  will   be applicable  to  those industrial units which would come into production from 1.4.93 to 31.3.98.   In  this  view  of  the matter, Mr.    Dwivedi  contends  that the High Court was in error to hold that the respondents’ old industrial units are entitled to the facility  of  sales  tax  exemption  on  the purchase  of  raw  material  even  if  their production have started prior to 1.4.93 since undisputedly their  investment on plant  and  machinery  did  not  exceed Rs.  15 Crores on 1.4.93 in terms of Clause 10.4(i)(b) of the Policy of  1993. Mr.   Dwivedi,  learned  Senior  Counsel further argued that even if it is construed that the old industrial  units  like the  respondents  are  entitled to the facility of sales tax

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exemption on the purchase  of  raw  materials  in  terms  of Clause  10.4(i)(b)  of  the  Policy  of  1993  but  no  such exemption  can  be  claimed  until  and  unless  the   State Government  issues  notification of exemption in exercise of power under Section  7  of  the  Bihar  Finance  Act.    The Government  having  issued  such  a  notification  on 4th of April, 1994 and the said notification having made  it  clear that  the respondents will not be entitled to the benefit of Clause 10.4(i)(b) of the Policy, as  such  industrial  units have  already availed of the facilities and incentives under the old Policy of 1986, the High Court  committed  error  in striking  down the said notification of the State Government issued on 4th of April, 1994.  According to Mr.  Dwivedi the power of the State Government for  issuing  notification  of exemption  under  Section  7 of the Bihar Finance Act having authorised the State Government to issue  such  notification subject to such conditions and restrictions as it may impose and the State Government under the impugned notification was within  the  powers  conferred on the State Government under sub-section (3) of Section 7 of the Bihar  Finance  Act  and the  High  Court,  therefore,  was not justified in striking down the same to the extent already indicated. We have carefully considered both the contentions raised  by the  learned  counsel  for the appellant, but we do not find force in any one of them.  It is no doubt true  that  Clause (a)  of  the Policy early indicates that the policy would be applicable to those industrial units which would  come  into production from  1.4.93  to 31.3.98.  But in enumerating the benefits which would be  available  under  the  Policy,  the policy  makers have indicated different heads of the benefit dealing with subsidy,  financial  assistance,  exemption  in sales tax/deferment  facility  so  on  and so forth.  Clause (10) deals with facility of sales  tax  deferment.    Clause 10.4  deals  with  the  heading  ’Sales tax exemption on the purchase of raw material’.    It  would  be  appropriate  to extract  Clause  10.4 in extenso since the interpretation of this Clause is involved in these appeals. "10.4.  Sales Tax exemption on the purchase of raw material: (i)    This facility will be admissible  to  the  industrial units mentioned in Annexure-V in the following manner: (a)   Industrial Units coming into production between 1.4.93 to  31.3.98  whose  investment on plant & machinery does not exceed Rs. 15.00 Crores shall be entitled for this  facility for a period of seven years from the date of production. (b) Such old industrial units whose investment  on  plant  & machinery do not exceed Rs.  15.00 Crores on 1.4.93 shall be entitled  for this facility for a period of seven years from 1.4.93. (ii) All other industrial units shall continue to enjoy  the existing   facility   of   purchase   of   raw  material  on concessional rate of tax as announced and made applicable by the Sales Tax Department as before." A bare look at the aforesaid Clause makes it crystal clear  that under sub-clause (a), while the industrial units coming into  production  between  1.4.93  to  31.3.98  whose investment on  plant  &  machinery  does  not exceed Rs.  15 Crores would be entitled to the facility of exemption on the purchase of raw material for a period of  seven  years  from the  date  of  production,  under  sub-clause  (b)  the  old industrial units whose investment on plant  &  machinery  do not exceed Rs.    15 Crores on 1.4.93.  In view of the clear and unambiguous language of sub-clause (b) of  Clause  10.4, it is  difficult  to  accept the contention of Mr.  Dwivedi, learned Senior Counsel, appearing for the  State  that  even said  sub-clause (b) would be subject to the terms indicated

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in the beginning of the Resolution that the Policy would  be applicable  only  to those industrial units which would come into production from 1.4.93 to 31.3.98.   While  considering the  benefits and incentives given to the several industrial units under the Policy Resolution of 1993, it would  not  be appropriate  to  exclude those industrial units who would be otherwise  entitled  to  the  sales  tax  exemption  on  the purchase  of  raw  material  under  Clause 10.4(i)(b) of the Policy.  Reading the Policy as a whole, the only  conclusion which  can  be  arrived at is while generally the incentives under the 1993 Policy would be available to  the  industrial units coming into production between 1.4.93 and 31.3.98, but so  far  as  sales  tax  exemption  on  the  purchase of raw material is concerned which is provided under  Clause  10.4, even though the old industrial units have started production prior to 1.4.93, but whose investment on plant and machinery do not  exceed Rs.  15 Crores on 1.4.93 would be entitled to the facility for a period of seven years from  1.4.93.    We are  entirely in agreement with the conclusion arrived at by the High Court in granting the benefits of the  said  Clause 10.4(i)(b)  of  the  Policy  to  the respondents’ industrial units.  We accordingly have  no  hesitation  to  affirm  the conclusion  of  the  High Court on this score and reject the submission of Mr.   Dwivedi,  the  learned  Senior  Counsel, appearing for the appellant. Coming to the second question, namely  the  issuance of notification by the State Government in exercise of power under  Section  7  of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives  and  benefits  declared  by  the State  Government  in  its  own industrial incentive policy. But in exercise of such power it would  not  be  permissible for  the  State  Government  to  deny  any  benefit which is otherwise  available  to  an  industrial  unit   under   the Incentive Policy itself.  The Industrial Incentive policy is issued by the State Government after such Policy is approved by the  Cabinet  itself.    The issuance of the notification under Section 7 of the Bihar Finance Act  is  by  the  State Government  in  the Finance Department which notification is issued to carry out the objectives and the policy  decisions taken in  the Industrial Policy itself.  In this view of the matter, any notification issued by the Government  Order  in exercise  of power under Section 7 of the Bihar Finance Act, if is  found  to  be  repugnant  to  the  Industrial  Policy declared   in   a   government  resolution,  then  the  said notification must be held to be bad to that extent.  In  the case   in   hand,  the  notification  issued  by  the  State Government on 4th of April, 1994 has been  examined  by  the High  Court  and  has been found, rightly, to be contrary to the  Industrial  Incentive  Policy,  more  particularly  the Policy engrafted  in  Clause  10.4(i)(b).  Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant  to  sub-clause  (b)  of Clause 10.4(i) and we do not find any error committed by the High Court  in  striking down the said notification.  We are not persuaded to accept the contention of Mr.  Dwivedi  that it  would be open for the Government to issue a notification in exercise of power under Section 7 of  the  Bihar  Finance Act, which  may  over-ride  the incentive policy itself.  In our considered opinion the expression "such  conditions  and restrictions as it may impose" in sub-section (3) of Section 7  of  the  Bihar  Finance  Act will not authorise the State Government to negate the incentives and benefits  which  any industrial  unit  would  be  otherwise entitled to under the general Policy Resolution itself.    In  this  view  of  the

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matter,  we  see no illegality with the impugned judgment of the High Court in striking down a part of  the  notification dated 4th April, 1994. We, accordingly do  not  find  any  force  in  these appeals,   which   are,  therefore,  dismissed  but  in  the circumstances there will be no order as to costs.