28 September 2004
Supreme Court
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STATE OF RAJASTHAN Vs J.K. UDAIPUR UDYOG LTD.

Bench: RUMA PAL,ARUN KUMAR
Case number: C.A. No.-008193-008193 / 2003
Diary number: 7440 / 2002
Advocates: Vs GAGRAT AND CO


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CASE NO.: Appeal (civil)  8193 of 2003

PETITIONER: State of Rajasthan & Anr..

RESPONDENT: J.K. Udaipur Udyog Ltd. & Anr.

DATE OF JUDGMENT: 28/09/2004

BENCH: RUMA PAL & ARUN KUMAR

JUDGMENT: J U D G M E N T

WITH C.A. Nos.8194-8201 OF 2003,  C.A. Nos. 8203-8206 OF 2003

RUMA PAL

      A scheme was framed  by  the first appellant granting   exemption to industrial  units from    payment of sales tax on  intra-state  and    inter-state sale of goods and  by-products   manufactured within the State of Rajasthan.  By  a  subsequent    notification  the extent of the percentage  of  exemption  available      to sick  industries was  sought  to  be corrected.   The        disputes in these appeals relate to the interpretation of the  scheme and the effect of the corrigendum.   The scheme was part of the New 4th Industrial Policy of the  State. The Policy stated that the object of the scheme was to  make Rajasthan "a most favoured destination for industries" and  to encourage the setting up of industries in the State.  The policy  describes the nature of the exemptions which were sought to be  granted to the different kinds of industries with exemption/  deferment incentives for 11 years in respect of some industries  and 14 years for others. A greater incentive was granted to  industries being set up in the five industrial growth centres in the  State. The incentives available during the first year were to be  gradually tapered off to a particular percentage of the fixed  capital investment at different rates in respect of some industries.    However, in respect of cement industries the percentage of  exemption proposed was at a flat rate of 25% for 11 years.  According to the policy the scheme would also give benefits for  the first time to sick units.    The sick units were classified  into  two categories as follows: (1)  "Those units which have not availed  of any benefits in the past will get  full benefits at par with a new unit.

(2)  Those units which have availed of  sales tax benefits in the past will get  ST benefit on a tapering basis up to  11 years (maximum 80% and  minimum10% exemption/deferment  on a tapering basis)".

Pursuant to this Policy the Rajasthan Sales    Tax/Central Sales Tax   Exemption Scheme for Industries,  1998 (referred to as    ’the scheme’) was framed  and

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notified  in exercise of the powers    conferred on    the  State   Government by section 15 of the   Rajasthan  Sales   Tax Act,  1994    (referred  to  as  "RST  Act")  and by  sub- section (5) of Section 8 of the Central Sales Tax Act, 1956  (referred to as ’the CST Act"),         The scheme came into  force from 1st April 1998.  Clause 1-(b) of the scheme  envisages that  "an industrial unit which commences  commercial production during the operative period of this  scheme, shall be entitled to claim benefits under this  scheme."  Clause 3(a) provides that the scheme shall be  applicable to: (i)     the new industrial units;

(ii)    the industrial units going for  expansion;

(iii)   the industrial units launching  diversification; and

(iv)    the sick industrial units.  A "New Industrial Unit" has been defined in clause  2(k) as:-

(i)       "New Industrial Unit" means an industrial  unit which commences commercial  production during the operative period of  this Scheme including a unit set up on the  site of an existing industrial unit by  making separately identifiable capital  investment; subject however, that where  an industrial unit manufacturing the same  product is established on the site of an  existing unit, the benefit permissible for a  new unit shall be available to it only on  the production in excess of 80% of the  installed capacity of the existing unit.

(ii)    "New Industrial Unit" shall also include a  sick unit:-

(a)     which has not availed of any  benefits of exemption from tax  or deferment of tax;

(b)     which has been appraised by  financial institution and  appropriate rehabilitation plan  has been formulated; and

(c)     which has been purchased by a  new management other than by  way of collusive transfer and  such management has made  additional fixed capital  investment not less than 25% of  the depreciated value of the  assets of such unit".

The respondents in these appeals viz M/s. J.K.  Udyog and J.K. Synthetics Ltd were writ petitioners before  the High Court of Rajasthan and are companies which  manufacture cement in different units within the State of  Rajasthan. The respondent-companies in these appeals

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are undisputedly ’sick’.   The description  of the type of units, extent of the  percentage of exemption from tax liability,  the maximum  exemption permissible under the scheme and the  maximum time limit for availing  the exemption under the  scheme have been set out in Annexure ’B’  to the Scheme.  

We set out below the material portion of Annexure B  to the exemption scheme.

 Sl.   No. Type of Units Extent of the  percentage of  exemption from  total tax liability Maximum exemption  in terms  of percentage  of eligible fixed  capital investment(FCI) Maximum availing  limit  for  exemption  from tax.

1 2 3 4 5

1 New Units other than  the units mentioned  at S.No.2 and  3 and units going in  for expansion  or diversification 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 100 % 90% 80% 70% 60% 50% 50% 40%

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40% 30% 30%

100%of eligible fixed  capital investment in  cases where  such investment  exceeds Rs.1,50,00 Iacs,  and 125% of eligible FCI  in cases where  such investment does  not exceed Rs.150,00 lacs Eleven years

2 . (a)New Units  of knitwears, gems  and jewellery, textile,  electronics  and telecommunications,  computer software,  foot wears and  leather goods,  and ceramic  (b) Very  Prestigious Units  1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year 12th year 13th year 100 % 100 % 90% 80% 70% 60% 50% 50% 40% 40% 30% 30% 30% 30%

125% of eligible fixed  capital investment Thirteen years

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3 All categories of  cement Plants/ units  including pioneering  to Prestigious unit  Very prestigious/Premier  Units except  mini cement  plants mentioned  in Annexure-A 25% of  total  liability

100% of eligible FCI Eleven years

4 Sick Units: (a) Sick units which  have not availed  of benefits of exemption  from tax or determent   of tax previously, Same  benefits  which  are  available  to new  Units at  S. No.1

Eleven years

(b) Other sick  units which have  availed of the benefits  of exemption from tax  or deferment of tax 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year 11th year

80% 70% 60% 50% 40% 30% 20% 10% 10%

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10% 10% 100% of eligible  fixed capital investment  in cases where  such investment  exceeds Rs.150.00 lacs  and 125% of FCI in  cases where  such investment does  not exceed Rs.150.00 lacs Eleven years

         It is apparent from this annexure that for the  purposes of deferring the rate of exemption  the industries  were classified into three categories under Srl. Nos. 1, 2  and 3 according to the kind of Industry.  Cement  plants/units have been separately placed in Srl.No.3.    According to the respondent-companies, however,  sick units were  treated as a special category, and  irrespective of the nature of the industry, were covered by  Srl.4.  It is the respondent’s case that as far as their  cement units were concerned they were not covered by Srl.  No 3  but by Srl. No.4 (a) and thus, according to them,   they were entitled to the higher benefits accorded to new  units under Srl. No.1. According to them the words under  column 3 against Srl. No.4 made this clear.          According to the appellants on the other hand, this  was never the intention of the State Government which had  wanted to treat  sick industrial units of a particular kind on  par with new industrial units of that kind in the matter of  grant of exemption.  But we are anticipating the dispute  which is considered in detail subsequently.  Returning to  the scheme : -   the procedure for obtaining exemption  under the scheme has been provided in clause 4, the  relevant extract of which reads as under:         "Sanction of benefits under the  Exemption Scheme and issue of Eligibility  Certificate:-

(a)     In order to avail the benefit under  this Scheme, the applicant industrial  unit shall have to obtain sanction  from the State Level Screening  Committee or District Level  Screening Committee, as the case  may be.  The Screening  Committees shall act as quasi- judicial authorities whose decisions  shall be final subject to other  provisions provided for in this  Scheme. (b)     \005\005 (c)     \005\005.. (d)     \005\005. (e)     The appropriate Screening  Committee shall, after having  examined the application of an  industrial unit and after having  gathered or collected such other  information, documents or evidence  as may be considered necessary  and after having got conducted  such further enquiry as deemed

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proper in the circumstances of the  case, sanction the benefits under  this Scheme to the said unit if it is  found fully covered by the  provisions of this Scheme and is not  in any way debarred or disqualified  to claim the said benefits.   However, in particular, the said  Screening Committee shall reject  the application of the applicant,  unit\027

(i)     where its case does not fall within  the parameters of this Scheme, or

(ii)    where it has failed in spite of  adequate opportunity being given,  to supply any information asked for  or adduce any evidence required  for; or

(iii)   where any case of avoidance or  evasion of tax is pending against it  at any forum or it is found penalized  for such offence, within a period of  two years immediately preceding  the date of the filing of the  application; however, the said  Screening Committee may waive  this disqualification in an  appropriate case if the offence is  technical or venial in nature or has  been compounded.

(f)     In case of sanction of benefits under the  Scheme, such sanction shall be  communicated in writing  to the  Assessing Authority of the applicant  unit, who shall issue Eligibility Certificate  to the said unit in Form\027C, appended  to this notification, within a period of  seven days from the date of the receipt  of the sanction, and a copy of such  Certificate shall also be sent to the  Member Secretary of the concerned  Screening Committee.

(g)     The Eligibility Certificate issued under  this Scheme shall remain in force till the  permissible exemption from tax in  accordance with the provisions of this  scheme is not exhausted, or till such  Certificate is not amended, suspended  or revoked.

(h)     The benefits under this Scheme shall be  available from the date of the application  filed by the applicant unit completed in  all respects, as certified by the member  Secretary of the appropriate Screening  Committee.

(i)     During the currency of the Eligibility  Certificate, the unit concerned shall be  exempted from payment of tax on the

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intra-State sales/inter-State sales of the  goods and by-products manufactured by  it within the State including  the waste  items derived therefrom and the packing  material used therewith."                  The order in which the steps envisaged for grant of benefits  under this clause of the scheme was therefore; 1)      making of an application by the industrial unit; 2)      the certification of the application as complete  and the  provisional availability of the benefits  (clause 4(h) ); 3)      The examination of the application by the Screening  Committee after collecting information/enquiry etc         Clause (4( e)); 4)      The sanction or rejection of the application by the  Screening Committee . (Clause (4(e)); 5)      In case of sanction, the communication of the sanction  to the Assessing Authority. (Clause (4 (f)) 6)      The issuance of Eligibility Certificate by the Assessing  Authority within seven days. (Clause 4( f)); 7)      The availability of exemption from payment of tax  during the currency of the Eligibility Certificate until the  exemption was either exhausted  or unless the  certificates were amended, suspended or revoked.  (Clauses 4(i)).

       The respondent companies applied for exemption under  the scheme claiming benefits at par with units under Srl.No.1.  As  far as M/s. J.K. Synthetics Limited is concerned, the Director of  Industries certified that the application was complete. The  certificate issued under Section 4(h) on 20th February, 1999  made it clear:

"This certificate will not be treated as  sanction of incentive under the Sales Tax  Exemption Scheme, 1998. Incentive if  any availed under Clause 4(h) of the  aforesaid scheme will be entirely at the  risk of the unit, subject to decision of the  State level Screening Committee. A  suitable undertaking shall be taken by the  concerned assessing authority in this  regard from the unit."          In terms of the requirement, M/s. J.K. Synthetics Limited  gave an undertaking in writing to the effect that the incentives  availed by the company from the date of completion of the  application till the grant of sanction of eligibility certificate would  be entirely at the risk of the company and in case the company’s  application was rejected for any reason, the company shall pay  the tax which was being availed of on the basis of the certificate  of completion. While the application of M/s. J.K. Synthetics was pending  for  consideration by the Screening Committee, the corrigendum  was issued on 30th September, 1999, by the Finance Department  inter-alia,  amending  the third column against Srl.No.4  of  Annexure B by replacing the phrase "New units at   Srl. No. 1"   with "New units at Srl. No. 1,2 and 3 as the case may be". Thus   sick cement units under Srl.No.4 (a) were expressly put on par  with new  cement units under Srl.No.3.     M/s. J.K. Synthetics Limited submitted a representation  to the Screening Committee that the corrigendum should not  affect the company.  The Screening Committee deferred its  decision on the ground that as the particular unit of M/s. J.K.  Synthetics Limited in respect of which the exemption was

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claimed was not sick, although the company itself had been  declared sick, it should await the rehabilitation programme duly  approved by the BIFR providing the benefit of sales tax  incentives scheme to all such units.  While deferring the case till  the approval of the rehabilitation programme by BIFR, the  Screening Committee said that the unit could avail of the benefit  under the scheme to the extent permissible under the  corrigendum.  Neither any sanction under clause 4(e) and  consequently no Eligibility Certificate under clause 4(f) have  been issued to M/s. J.K. Synthetics Limited under the scheme till  today.  As far as M/s. Udaipur Udyog Limited is concerned, its  application under the scheme was certified as complete under  Clause 4(h)on 26th July, 1999 and was sanctioned on 30th  December, 1999.  However the quantum of benefit was granted  in terms of the corrigendum from the date of issuance of the  corrigendum. The eligibility certificate was issued to M/s. J.K.  Udyog  on 29th February, 2000 also restricting the benefits under  the scheme on the basis of the corrigendum.         Since the respondent had been availing of the higher rates  of exemption against Srl.No.1, consequent upon the decision of  the Screening Committee granting the benefits under the  corrigendum, provisional assessment orders and notices were  issued to both the respondent companies by the Sales Tax  Authorities over the differential sales tax.         M/s. J.K. Synthetics Limited and J.K. Udyog Limited filed  separate writ petitions before the High Court of Rajasthan  challenging the corrigendum dated 30th September, 1999; in the  alternative a prayer was made to hold that the corrigendum had  no application to the respondent companies; for quashing the  decisions of the Screening Committee in so far as the  respondent companies were given the benefit of the exemption  scheme on the basis of the corrigendum and for quashing the  provisional assessment orders and notices.         The submission of the respondent companies before the  High Court inter alia was that the scheme as originally framed  allowed the companies to avail of the benefit of the exemption  scheme under the Srl.No. 4(a) read with Srl. No. 1 for a period of  11 years up to a maximum limit of hundred percent of the  companies’ eligibility fixed capital investment at percentages of  the total tax liability ranging from 100% in the first year to 30% in  the 11th year.  These rights of the companies under the scheme  were claimed to be crystalised with effect from the date of the  certification of their applications under clause 4 (h), which could  not be taken away by the corrigendum with retrospective effect.         The learned single judge accepted  the submission of the  respondent companies that the impugned corrigendum really  amounted to an amendment  of the scheme.  But it was held that  the State Government was competent  to modify the scheme  and, therefore, the respondent companies were entitled to relief  in terms of the scheme as originally notified up to the date of  amendment and subsequent thereto as provided in the  corrigendum.  Since the corrigendum had been published in the  Official Gazette on 7th January, 2000 it was held that it would be  applicable with effect from that date.         Several appeals were preferred both by the State of  Rajasthan as well as by the respondent companies from the  decision of the learned Single Judge.  The Division Bench  disposed of all the appeals by the  judgment impugned before  us. The Appellate Court agreed with the learned Single Judge  that the corrigendum notification was in fact an amendment of  the scheme and therefore, this would operate only prospectively  i.e. from 7th January, 2000. The plea of the respondent  companies that the State Government was bound by the  principles of promissory estoppel from modifying or amending the

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scheme was negated by the Division Bench.  The respondent  companies have not sought to challenge  this conclusion  before  us.    The Division Bench however held that the rights of the  respondent companies of enjoying  the benefit  under the original  scheme including the maximum amount of exemption, the  maximum period of exemption, and the percentage of exemption  were available to the respondent companies with effect from the  date of certification of their applications under clause 4(h) and  were substantive and that these rights could not be affected  adversely unless the subsequent notification clearly manifested  an intention to do so. It was held that the corrigendum did not  contain any such explicit provision nor could any inference be  drawn that accrued rights were to be affected.  It was held that  even if this proposition was unacceptable, the amendment was  arbitrary and violative of Article 14 being discriminatory vis-‘-vis  other sick industries.  It was further held that the amendment  could not discriminate against  sick cement plants which had not  availed of benefits of tax exemption earlier, so that such sick  industries were treated in a manner worse than sick cement  industries which had availed of exemptions from sales tax earlier.   The Division Bench accordingly held that the respondent  companies were entitled to avail of the benefits under the  scheme as originally notified in the manner provided in column 3  of Serial No. 1 of Annexure B read with Serial No. 4(a) and that  such rights were not affected by the corrigendum published on  7th January, 2000. However. the corrigendum notification itself  was not quashed as had been prayed for.         The appellants have impugned the decision of the Division  Bench and have contended that the Division Bench had erred in  fact and in law in coming to the conclusion that the respondent  companies had a vested right to the benefits of the scheme as  available to new units under Srl. No. 1 of Annexure ’B’ to the  scheme.  It is pointed out that as far as J.K. Synthetics is  concerned its application has not been sanctioned at all. It is  contended that the corrigendum notification was in fact a  corrigendum and not an amendment, and that the corrigendum  merely made explicit the intention of the State Government to  treat the sick units of a particular industry on par with new units  of such industries. It is further contended that even if the  corrigendum were construed as an amendment, the State  Government had the power to withdraw or modify the benefit of  the  scheme not only under Section 15 of the RST Act read with  Section 8(5) of the CST Act but also under clause (9)  of the  scheme which provides for the power to the State Government to  review or modify the exemption scheme "as and when needed in  public interest". It is submitted  that an exemption is in the nature  of a concession and was by that reason a defeasible right.  It is  submitted that exemptions granted could not create any vested  right in the beneficiaries  of the exemption to the continued grant  of the exemption until and unless the beneficiary was able to  establish that the State Government was bound by the principles  of promissory estoppel from modifying or withdrawing the  concession. It is submitted that since the respondent companies  had failed to establish any promissory estoppel on the part of the  State Government, the Government could withdraw or modify the  concession given at least from the date of the publication of the  corrigendum notification.  As far as the High Court’s findings on  the issue of discrimination is concerned, it is submitted that in  fact there were no other cement units in the State in comparison  with which it could be said that the respondents-companies were  being unfairly treated.  The language of Srl. No.3 in Annexure B  was also relied upon to contend that the corrigendum was not  discriminatory and merely treated  sick cement units and new  cement units equally.         Counsel  for  the  respondent-companies  has submitted

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that  there  was  no power in the State Government to issue the  corrigendum with retrospective effect.  It is submitted that the  scheme was issued not only under Section 15 of the RST Act but  also under Section 8(5) of the CST Act.  The exercise of the  power was thus, to use counsel’s language, ’inseverable’.  It is  argued that as there is no power under Section 8(5) of the CST  Act to withdraw an exemption with retrospective effect the entire  exercise of issuing the corrigendum must fail.  In addition, it is  submitted that even Section 15 of the Act  did not allow the State  Government to withdraw an exemption with retrospective effect.  It is stated that under clause 4(h) read with clause 5(g),  on the  date on which the respondents-companies’ application was  certified as being complete, rights accrued to the industrial units  which could not be withdrawn and it was not necessary to rely  upon the principle of promissory estoppel for the purpose of  claiming continued exemption.  It is submitted that the  subsequent notification was not a corrigendum but an  amendment of the scheme and could not be construed as  amounting to withdrawal of the rights conferred under the  scheme as originally published.  It is submitted that sick units  have been treated as a class apart irrespective of the nature of  industry.   It is also submitted that the corrigendum if construed in  the manner advocated by the appellants, would be violative of  Article 14.  Finally, it is submitted that in any event this Court  should protect the respondent-companies in so far as they had  availed of the benefits of the scheme as originally published at  least from the date of the order of the High Court.  It is submitted  that the High Court had struck down the corrigendum notification,  Therefore, Annexure B as originally notified would revive.  The  decision of the High Court not having been stayed by this Court,  the respondent-companies had not and indeed could not recover  the sales tax from their customers by virtue of Section 14(2) of  the RST Act and it would in these circumstances be inequitable  to saddle them with sales tax liability for the period subsequent to  the decision of the High Court.  Reliance has been placed on the  decision of this Court in  State of Rajasthan V. Mahaveer Oil  Industries and Ors. 1999 (4) SCC 357 in support of the  submission.  

     The issue whether the subsequent notification should be  read as a correction or an amendment of the scheme as  originally notified would be relevant only if the appellants sought  to give retrospective effect to it. Since the appellants have stated  before us that they do not intend to take away the benefits which  may have actually been enjoyed by the respondent companies  prior to the date of publication of the corrigendum viz 7th January,  2000,  a determination of  the issue would be an academic  exercise and a consideration of the several decisions cited with  regard to the principles for deciding whether a statutory provision  has retrospective effect, is unnecessary. The question is whether  the subsequent notification could operate as far as the  respondent companies are concerned with effect from 7.1.2000.   The answer to this question would depend upon the nature of the  rights of the respondent companies under the scheme.         An exemption is by definition a freedom from an obligation  which the exemptee is otherwise liable to discharge. It is a  privilege granting an advantage not available to others.  An  exemption granted under a statutory provision in a fiscal statute  has been held to be a concession granted by the State  Government so that the beneficiaries of such concession are not  required to pay the tax or duty they are otherwise liable to pay  under such statute. The recipient of a concession has no legally  enforceable right against the Government to grant a concession  except to enjoy the benefits of the concession during the period  of its grant.  This right to enjoy is a defeasible one in the sense

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that it may be taken away in exercise of the very power under  which the exemption was granted. [See: Shri Bakul Oil  Industries & Anr. V.State of Gujarat; 1987 (1) SCC 31;  Kasinka Trading v. Union of India (1995)1 SCC 274; Shrijee  Sales Corpn. v. Union of India (1997) 3 SCC 398].   In this case the scheme being notified under the power in  the State Government to grant exemptions both under Section  15 of the RST and Section 8(5) of the CST in the public interest,  the State Government was competent to modify or revoke the  grant for the same reason.  Thus what is granted can be  withdrawn unless the Government is precluded from doing so on  the ground of promissory estoppel, which principle is itself  subject to considerations of equity and public interest.            [See: Sales Tax Officer v. Shree Durga Oil Mills (1998) 1 SCC  572].  The vesting of a defeasible right is therefore, a  contradiction in terms.   There being no indefeasible right to the  continued grant of an exemption (absent the exception of  promissory estoppel), the question of the respondent companies  having an indefeasible right to any facet of such exemption such  as the rate, period etc. does not arise. In any event, the High Court erred in fact in holding that  M/s. J.K. Synthetics had a vested right to the benefits of the  scheme.  Clause 4 of the scheme clearly provides that the  benefits under the scheme were subject to the sanction of the  Screening Committee.  No sanction has been issued to M/s. J.K.  Synthetics till date.         Apart from this, the exemption being a creature of the  scheme is subject to the scheme. Clause 9 of the scheme makes  it clear that the right under the scheme was temporary in the  sense that the scheme could be modified or reviewed.  It is true  that  clause 9 also provides that such review or modification could  take place only in the public interest. But nevertheless the right  conferred was a modifiable or revocable one. If any right under the  scheme is held to be unmodifiable it would be contrary to the  scheme itself.  Therefore even if one were to assume that the  respondent companies were entitled to the benefits of the scheme  on par with new units under Srl.No.1 with effect from the date of  the certification of their application under clause 4(h), the right  could be modified with effect from the date  on which the scheme  was modified.  The further argument of the respondent that the  subsequent notification could not be construed as a modification  and would apply only to subsequent applicants is unacceptable.  There is no ambiguity in the language of the subsequent  notification.  On the contrary the use of the word corrigendum  itself indicates the intention was to correct and to rectify what the  State Government thought  had been erroneously done. Coming now to the question of public interest.  The 4th New  Industrial Policy pursuant to which the scheme had been framed  by the State Government was indisputably in the public interest.  Therefore, if the intention of the State Government was to  effectuate the policy by issuing  the subsequent notification it  cannot be said that the State Government was not acting in the  public interest.  The Industrial Policy which resulted in the  exemption scheme expressly provided that the rate of benefits  which were to be given to sick industrial units which had not  availed of any such benefits in the past would be at par with a new  unit. But does this mean that the words "new unit" in the policy  referred to industries under Srl. No.1 ? We think not. New units of  different kinds of industries had been separately classified both  under the policy and under Srl.Nos.1,2 and 3 of  Annexure B to  the scheme. Each of the three categories at Srl.Nos.1,2 and 3  have been granted different rates of exemption  Serial No.1  relates to new industries not covered by Srl.No.2 and 3.  It is  therefore, the residuary category and any new industry covered by  Srl. Nos. 2 and 3 would not be covered by Srl.No.1. Serial No.2

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speaks  of particular industries such as knitwears, gems and  jewellery, textile, electronics telecommunications, computer  software, footwear and leather goods and ceramics.  This  category  of industries has been sub-classified under the heads of  (a) "new units" and (b) very prestigious units". A very prestigious  unit is not defined in the scheme itself but is referred to in the  industrial policy as those industries which have a fixed capital  investment of Rs.50 crore or more and regular employment of 250  persons.  Srl.No.3 makes no such distinction and refers to "all  categories"  of cement plants  except mini cement plants  mentioned in Annexure ’A’ to the scheme.    Subject to the  exception of Annexure A all categories of cement plants/units  including new units have been allowed exemption of 25% of the  total tax liability for 11 years.  There is no tapering of the incentive  for the 11 years that the benefit was to be available as is the case  under the other Serial Numbers. "All categories"  would  necessarily include new cement plants and sick industrial units  falling within the definition of Clause 2(k)(ii), which was also  entitled to the same level of benefit as all other new cement units.    It would be incongruous to grant sick industrial units which do not  fall within clause 2(k)(ii) higher benefits than sick industrial units  which do.  Since a sick industrial unit is granted a particular  benefit subject to the fulfillment of    various conditions,   it implies  that the industry which fulfils the conditions would be better off  than the one which does not.    If we were to accept the  respondents’ interpretation of the original notification under  Srl.No.4(a) and (b),  higher benefits would be available to sick  industrial units which did not comply with the conditions imposed  under clause 2(k)(ii). Such a conclusion is not only illogical but  would serve to make a distinction between sick industrial units on  an irrational basis. Clause 2(k)(ii) therefore indicates that the  highest benefit that a sick industrial unit can claim under the  scheme, is to be treated at par with new industries.  The thrust of the industrial policy was to give an incentive to  new entrepreneurs.  It is true that there are separate provisions for  ’sick industries’ but given the main object of the policy to make  Rajasthan a "most  favoured destination for industries", it could not  have been the intention of the State Government to give a lower  benefit to new industries and to give higher benefits to sick  industrial units already established in the State. However,  when  the scheme was first notified  although the body of the scheme  effectuated the objective, the entry under column 3 against  Srl.No.4 in  Annexure B did not clearly reflect this.  Doubtless the  interpretation put by the respondent companies and accepted by  the High Court on the entries against Srl.No. 4 as it originally  stood in Annexure B, is a possible interpretation, but in our opinion  Annexure B was equally susceptible of the interpretation put  forward by the appellants before us particularly in the context of  the Industrial Policy.   It was to clarify this ambiguity that the subsequent  notification was issued by the State Government to correct or  amend Annexure B to the extent that it could be interpreted in a  manner not in keeping with  the published industrial policy of the  State and the substantive provisions of the scheme.  For these reasons also the corrigendum cannot be said to  be violative of Article 14.  On the contrary, if the corrigendum were  not to be given effect to, the entire scheme would operate  irrationally by making an invidious distinction between sick cement  units as we have already said. The irrationality is also apparent  vis-a-vis industries referable to Srl.No.2. Under the scheme, the  highest rate of exemption and greatest benefits is granted to new  units under Srl.No.2. If the respondents’ interpretation of the  corrigendum  is accepted, a sick industry of a particular kind which  otherwise falls under Srl.No.2 would, by virtue of the entry against  Srl.No.4, be entitled to much lesser than  new units of the same

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kind of industry as it would be treated on par with new units of  different kinds of industries under Srl.No.1.  This is perhaps the  reason why the corrigendum was not challenged by those  industries covered by Srl. No.2 which are sick and which are not  new industrial units within the meaning of clause 2(k)(ii) of the  scheme. Although it appears to us that Srl.No.3 would include all  categories of cement industries, the question whether Srl. No. 4(b)  would relate to sick cement industries not covered by clause 2(k)  (iii) or Srl. No.4(a)  is not an issue which requires to be finally  decided in this case, particularly when there is no such industry  before us which claims the benefit of clause 4(b).  Learned counsel for the respondents’ additional contention  is that the Screening Committee had proceeded on the basis that  the sick cement units were covered under Srl.No.4 and not  Srl.No.3. It is argued that such decision of the Screening  Committee being final in terms of Clause 4(a) of the scheme,  it  was not open to the State to contend otherwise. The argument is  without force.  The finality given to the decision of Screening  Committee in terms of Clause 4(a) is "subject to other provisions  provided for in the scheme".  Any decision of the Screening  Committee cannot be contrary to the provisions of the scheme.   Besides all that the Screening Committee has held is that the  respondent companies are to be treated on par with other cement  companies, with effect from the date of the subsequent  notification. That is also what the appellants contend, namely that  Srl.No.4(a) expressly puts  sick cement units on par with new  cement units under Srl.No.3. The respondent companies are therefore required to avail of  the benefits under the scheme on the basis of the corrigendum  with effect from 7.1.2000.  Learned counsel for the respondent  companies may be right in his contention that if a sanction is  granted and an Eligibility  Certificate issued on the basis of the  sanction, then having regard to the provisions of Section 4(h) the  period of exemption under the sanction ought to cover  the date of  the certification of the application as complete under Clause 4(h).   But it is again unnecessary to decide the ambit of the Screening  Committee’s power, as the appellants have not argued that the  benefits of the higher rate of exemption already availed of by the  respondent companies with effect from the date of certification  under clause 4(h) up to 7th January, 2000 should be taken away  from them.         This brings us to the last argument of the respondent  companies viz. that they should not be made liable for the  sales  tax on the basis of the corrigendum for the period they had availed   of the exemptions after the decision of the High Court.  The  submission proceeded on the basis that the High Court had  quashed the corrigendum Notification.  As we have noted earlier  the Division Bench had not quashed the corrigendum notification  but had contented itself with construing it. The mere fact that this  Court has not granted a stay of operation of the decision of the  High Court would not  give the respondent companies any right to  the fruits of that decision if the decision is ultimately reversed by  this Court. Besides the respondent-companies should have been  aware that with the admission of the appeal from the High Court’s  order their rights thereunder were precarious. [See: Union of  India  v. West Coast Paper Mills Ltd. 2004(2) SCC 747, 753].         The mere circumstance that the respondent companies   having availed of the exemption scheme were prohibited from  collecting  the tax from its customers or that they had not  collected the sales tax from their customers, (which assertion is  strongly disputed by the appellants), is of no consequence.  The  primary liability to pay the Sales Tax is on the seller. The seller  may or may not be entitled  to recover the same from the  purchaser. The State Government is entitled to recover the same  from the respondent-companies irrespective of the fact that the

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respondent-companies may have lost the chance of passing on  their liability to pay sales tax to their purchasers.           It is true that this Court has on some occasions granted  relief from payment of sales tax to an assessee despite having  found against the assessee on  equitable considerations.  But on  every occasion there was something more than the  mere  impossibility of the assessee  passing on the tax to its  purchasers.  Thus in the case of British Physical Lab India Ltd.  V. State of Karnataka and Anr.  1999 (1) SCC 170, the State  Government had itself issued a notification reducing the rate of  tax.  The notification was struck down by Court.  The State  Government then sought to recover the difference between the  reduced rate as had been notified by it and the rate generally  applicable. This Court granted relief to the assessee since the  State Government had itself issued the notification concerned.         Similarly in Shree Cement Limited and Anr. v. State of  Rajasthan and Others 2000(1) SCC 765, relief was granted  having regard to the peculiar history of the case. By three  notifications covering 1990 to 1994 issued by the State of  Rajasthan the rate of tax payable by local dealers in respect of   inter-state sales had been reduced. The notifications were  challenged by cement manufacturers from outside the State.   The High Court rejected the challenge.  When the non local  cement manufacturers came to this Court, this Court held that  the notifications were void and quashed them. [Shri Digvijay  Cement Companies v. State of Rajasthan, 1997 (5) SCC 406].   A fourth notification was subsequently issued by the State of  Rajasthan similar to the earlier three notifications which had  been quashed.   The fourth notification was challenged directly  before this Court by means of a writ petition under Article 32.  This time the Bench which entertained the writ petition   disagreed with the view expressed earlier by this Court in respect  of  Shri Digvijay Cement and referred the matter to a larger  Bench.  The Constitution Bench overruled  the decision in Shri  Digvijay Cement.   The question then was whether the local  manufacturers would be entitled to the benefit of the decision of  the Constitution Bench despite the fact that the notifications  under which they had availed of a lower rate of tax had been  decided against them in Shri Digvijay Cement.  This Court held  in favour of the local manufacturers. The circumstance that the  notifications were subsequently held to be valid by a  larger  Bench operated to protect them from liabilities which had arisen  by virtue of the earlier erroneous decision.         In State of Rajasthan and anr. v. Mahaveer Oil  Industries  & others 1999(4) SCC 357, this Court  allowed the  assessee to retain benefits under a scheme upto 4.4.1994  despite the fact that the assesses were held not entitled to such  benefits, on the ground that in another proceeding this Court had  allowed similar industries to retain the benefit up to 4.4.1994.   What is of significance is that the assesses were denied further  benefit even though they had been successful before the Single  Judge, before the Division Bench of the High Court and no stay  had been obtained from this Court at any stage.  It was said: "The respondents have been aware  throughout that the judgment of the Single  Judge was appealed against. Even after the  Division Bench dismissed the appeal the  matter was carried further by filing the present  special leave petition/appeal before this Court.   The respondents continued to enjoy the  benefits of the said two Schemes since no  stay was obtained.  Nevertheless, the  question whether the respondents are entitled  to the said benefits, has been sub judice  throughout.  Since the appeal is now being

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decided against the respondents, they cannot  claim the benefit of an eligibility certificate  which was granted entirely on account of a  judgment of a Single Judge in their favour  which is now being set aside."  

As far as M/s. J.K. Synthetics is concerned, their right to  obtain benefits under the scheme by reason of clause 4(b) was in  any event provisional.  The undertaking given by this company  was to the effect that the benefits of the scheme were being   availed at the risk of the company till the sanction was granted by  the Screening Committee.  Since no sanction has been granted to  the company, the company was aware that its rights to the  benefits under the scheme were conditional and that it might be  called upon to meet its sales tax liabilities in the event sanction  was not granted on  its application.  In such circumstances it must be open to the State  Government to recover sales tax dues  as it is entitled to under the  RST Act allowing the respondent companies to only keep such  benefits  as had been already availed of by then upto 7th January,  2000 and thereafter at the rates specified and according to the  provisions of the scheme as modified by the corrigendum  notification.  However no interest or penalty will be charged from  the respondent companies by the appellants on the differential  amounts for the period the matter was sub judice  before this  Court provided the respondent companies  pay the principal  amount of sales tax within such time as may be specified by the  appellants in this regard.    We, therefore, allow the appeals and set aside the  impugned decision without any order as to costs.