IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE  JURISDICTION

CIVIL APPEAL NO. 3685 OF 2003

STATE OF HARYANA ... APPELLANT

Versus

M/S ANIL PESTICIDES LTD. & ANR. ... RESPONDENTS

O R D E R

This appeal,  by special  leave,  is  directed against  the judgment and  

order dated 5th August 2002, passed by the High Court of Punjab & Haryana  

at Chandigarh in CWP No.18436 of 2001.  By the impugned  judgment, the  

High Court has dismissed the writ petition filed by the State of Haryana,  the  

appellant herein, affirming the decision of the Commissioner and Secretary  

to  the  Government  of  Haryana,  Industries  Department,  holding  that  

‘Monocrotophos  (Technical)’  and  ‘Dichlorvos  (Technical)’,  being  

manufactured by the respondent (hereinafter referred to as the “Dealer”) are  

“chemicals”  and not  “pesticides”  within  the  meaning  of  Entry  43  of  the

negative list as contained in Schedule III to the Haryana General Sales Tax  

Rules, 1975 (for short “the Rules”).

The State of Haryana announced an industrial policy for the period 1st  

April  1988  to  31st March  1997,  wherein  incentive  by  way  of  sales  tax  

exemption was to be given for the industries set up in backward areas of the  

State.  During the year 1994-95, the Dealer set up an industrial unit at village  

Badgodam,  District  Panchkula,  a  backward  area,  for  manufacturing,  

amongst others, ‘Monocrotophos (Technical)’ and ‘Dichlorvos (Technical)’.  

It  claimed sales tax exemption in terms of  the said industrial  policy and  

applied for grant of an Eligibility Certificate under Rule 28A of the Rules.   

On  or  about  3rd January  1996,  a  notice  was  given  as  regards  the  

intention  of  the  State  to  amend  Rules  in  respect  whereof   a  draft  was  

circulated for information of persons likely to be affected thereby so as to  

enable  them  to  file  objections  and  suggestions  thereto.   Ultimately,  

amendments in terms of the said draft Rules were notified on 16th December  

1996, by the Haryana General Sales Tax (Fifth Amendment) Rules, 1996  

and certain more items were included in Schedule III.  One of the items so  

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included  in  the  list  was  Item  No.43—“Pesticides  manufacturing  and  

Formulations.” The said notification had the following two Notes:-

“Note1. The  above  list  shall  not  be  applicable  to  the  industrial unit set up under the Rural Industries Scheme except  the units covered under any of the entries mentioned at serial  Nos. 1,2,4 and 20.

Note 2. The Industrial units in which investment has been  made upto 25% of the anticipated cost of the project and which  have been included in the above list for the first time shall be  entitled  to  the  sales  tax  benefit  related  to  the  extent  of  investment  made  upto the  3rd of  January,  1996.   Only  those  assets  will  be included in the fixed capital  investment which  have been installed or erected at site and have been paid for.  The anticipated cost of the project will be taken on the basis of  documents  furnished  to  a  financial  institution  or  banks  for  drawing a loan and which have been accepted by the financial  institution or bank concerned for sanction of loan”.

The  effect  of  Note  2,  with  which  we  are  concerned,  was  that  the  

industrial units which had made investment upto 25% of the anticipated cost  

of the project and which had been included in the negative list in Schedule  

III for the first time by virtue of the said notification would be entitled to the  

sales tax exemption related to the extent of investment made upto 3rd January  

1996.  On 28th May 1997, Note 2 was omitted deeming the same to have  

always been omitted.

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The application filed by the Dealer was considered by a High Level  

Screening Committee,  which was of the opinion that the said items were  

covered under the category of “pesticides” falling in Entry 43 of the negative  

list and, therefore, in view of notification dated 16th December 1996, issued  

in terms of Section 64 of the Haryana General Sales Tax Act, 1973 (for short  

“the  Act”),  the  Dealer  was  not  entitled  to  sales  tax  exemption.   The  

application of the Dealer for grant of benefit  of sales tax exemption was  

thus, rejected.   

Feeling  aggrieved  by this  decision,  the  Dealer  preferred  an  appeal  

before  the  Commissioner  and  Secretary  to  the  Government  of  Haryana,  

Industries Department, who, by his order dated 25th May, 2001 allowed the  

appeal and held that the items manufactured by the Dealer did not fall in the  

category of “Pesticides and formulations” as referred to in Entry 43 of the  

negative  list  and,  therefore,  the  Dealer  was  entitled  to  claim  sales  tax  

exemption in respect of chemicals manufactured by them.  He ordered that  

the Eligibility Certificate, as applied for by the Dealer, be issued.  The said  

decision was challenged by the appellant by preferring writ petition in the  

High Court.   As stated above,  the High Court  having dismissed the writ  

petition, the appellant is before us in this appeal.  

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It appears that notification dated 16th December 1996 was challenged  

by some of the industrial units whose products were included in the negative  

list for the first time by virtue of the said notification, before the Punjab &  

Haryana High Court. Having failed before the High Court, the Dealers filed  

appeals before this Court, inter-alia, contending that the notification deleting  

Note 2 to Schedule III with retrospective effect and thereby disentitling the  

Dealers to the benefit of exemption was illegal because Section 64(2A) of  

the Act had come into force in the year 2001.  Accepting the said plea of the  

Dealers, this Court in Mahabir Vegetable Oils (P) Ltd. & Anr. Vs. State of   

Haryana  &  Ors.1 held  that  afore-extracted  Note  2  could  not  be  given  

retrospective effect.  It was observed thus:-   (Para 44, SCC)

“By reason of Note 2, certain rights were conferred.  Although  there lies a distinction between vested rights and accrued rights  as by reason of a delegated legislation, a right cannot be taken  away.   The  amendments  carried  out  in  1996  as  also  the  subsequent  amendments  made prior to 2001, could not,  thus,  have taken away the rights of the appellant with retrospective  effect.”  

Learned  counsel  for  both  the  parties  submit  that  they  would  be  

satisfied  if  without  going  into  the  question  whether  the  afore-noted  two  

1 (2006) 3 SCC 620

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items  manufactured  by  the  Dealer  are  “pesticides”  or  “chemicals”,  the  

appeal is disposed of in terms of the afore-extracted paragraph in the case of  

Mahabir Vegetable Oils (supra).   

Accordingly, the appeal is partly allowed and the impugned order is  

modified to the extent that the case of the Dealer shall be considered afresh  

by the authorities concerned in terms of the said decision of this Court.  The  

relief,  to  which  the  Dealer  would  be  entitled  to,  shall  be  determined  as  

expeditiously as possible, preferably within three months from the date of  

receipt of a copy of this order. There will be no order as to costs.

......................................J.                          (D.K. JAIN)

........................................J.  (P. SATHASIVAM)

........................................J.             (AFTAB ALAM)

New Delhi, May 6, 2010

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