STATE OF JHARKHAND & ORS. Vs. TATA STEEL LTD & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4285 of 2007, Judgment Date: Feb 12, 2016
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4285 OF 2007
State of Jharkhand & Ors. ... Appellants
Versus
Tata Steel Ltd. & Ors. ...Respondents
J U D G M E N T
Dipak Misra, J.
M/s. Tata Steel Limited, the 1st respondent herein, had established a
manufacturing unit for production of HRP, rounds, structural and other iron
and steel products in Dhanbad situated in erstwhile Bihar. The State of
Bihar had on 22.12.1995 formulated an industrial policy for tax exemption
and/or deferment to such industrial units which started production between
01.09.1995 and 31.08.2000. The said policy was issued in exercise of power
conferred by Section 23A of the Bihar Finance Act, 1981 (for short, “the
1981 Act”) and the purpose of framing the policy was industrial growth of
the State. The policy stipulated that such industrial units should have
the registration certificate indicating that the unit was eligible to have
the benefits of the policy. The policy was issued with a view to create an
atmosphere conducive for growth of industries and optimum utilisation of
the natural resources available in the designated/stipulated area. As is
evident, by the said policy, the Government intended to attract investors
from various parts of the country to invest in the identified areas. The
major incentive under the policy, apart from others, included eight years
sales tax exemption on sale and purchase of material from the date of
commencement of production as stipulated in the policy. Keeping in view
the purpose incorporated in the policy, exemption notification under the
1981 Act was issued. The appellant expressed its willingness to install a
cold rolling mill in Jamshedpur by investing Rs. 2000 crores. After a
final decision was taken upon due deliberation, the 1st respondent sought a
confirmation from the State of Bihar to assure the commitment to grant
sales tax exemption as stated in the policy as an incentive. Number of
meetings took place between the authorities of the State of Bihar and the
1st respondent and in pursuance of the discussion, certain amendments in
the policy took place, as a consequence of which a communication was made
to the 1st respondent for setting up a cold rolling mill with production
capacity of 1.02 million tonnes requiring investment of Rs. 1874.04 crores
on the project. Regard being had to the discussion and the communication,
the 1st respondent invested nearly Rs. 2000 crores on its own and the
commercial production commenced from 01.08.2000.
2. When the matter stood thus, the Bihar Reorganisation Act, 2000 came
into existence on 15.11.2000 as a result of which Jamshedpur became part of
a newly carved out State, namely, Jharkhand. After coming into force of
the new State, on 15.12.2000, the Governor of Jharkhand by notification
ordered that the 1981 Act, the Central Sales Tax (Bihar) Rules, 1956 and
the notifications made thereunder, etc. amongst 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 issued an
exemption certificate as contemplated in earlier notification issued by the
Bihar State Finance and Commercial Taxes Department exempting the new units
which also included the unit established by the 1st respondent, from the
purchase tax as well as the sales tax on purchase and sales made in regard
to the cold rolling mill. Be it stated that the said certificate was
issued after holding proper enquiry by the concerned Joint Commissioner.
After due enquiry, he had opined that though the raw materials for the
manufacture of CR product is HR product, the CR product is totally
different, both in its metallurgical components and 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.
On that score, he had approved issuance of the certificate. However, the
Commissioner of Commercial Taxes, Jharkhand initiated a suo motu revision
under Section 46(4) of the 1981 Act and placing reliance on Telangana Steel
Industries v. State of A.P.[1] held that the two products must be treated
as the same commodity and the products not being different commodities, the
benefit of exemption was not available.
3. Being aggrieved by the order passed by the Commissioner, the 1st
respondent filed a writ petition before the High Court of Jharkhand which
ultimately remanded the matter to the competent authority to examine
whether HR product and CR product manufactured by the two units of the
company are one and the same or two different products.
4. The aforesaid order came to be assailed before this Court in Tata
Iron & Steel Co. Ltd. v. State of Jharkhand and others[2]. The Court,
taking note of various aspects and the submissions raised at the bar, held
as follows:-
“20. 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.
21. 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
that 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 2000 crores but the State
says it may be to the tune of Rs 1400 crores. 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 Government/authorities
concerned 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 is 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 Commissioner which is found to be erroneous,
we find the ends of justice would not be served by remanding the matter for
further inquiry.”
5. After so stating, this Court allowed the appeal and set aside the
order of the High Court and restored the proposal made by the Joint
Commissioner for grant of exemption certificate to the company and also the
exemption certificate granted subsequently.
6. In pursuance of the aforesaid judgment, the 1st respondent company
availed the benefit of exemption. As the facts would unveil, on
01.04.2006, Jharkhand Value Added Tax Act, 2005 (for brevity, “JVAT Act”)
came into force. Prior to that, through a notification SO no. 202 dated
30.03.2006 issued under Section 7(3) of the 1981 Act, the State of
Jharkhand had withdrawn notification nos. 478 and 479 dated 22.01.1995 and
SO nos. 57 and 58 dated 02.03.2000 with immediate effect, as a result of
which the facility of exemption from payment of sales tax on the purchase
of raw materials and also facility of exemption of sales tax on its
finished products was withdrawn. On 30.03.2006, a notification bearing SO
no. 202 under Section 8(5)(a) of the Central Sales Tax Act, 1956 was issued
withdrawing notification no. 481 dated 22.12.1995.
7. At this juncture, it is relevant to refer to Section 95(3) (ii) of
the JVAT Act which reads as under:-
“95. Transitional Provisions –
(3)(ii) Where a registered dealer was enjoying the facility of exemption
for payment of tax extended to him under the provisions of adopted Bihar
Finance Act, 1981 for his having established new industrial unit in the
State or undertaken expansion, modernization or diversification in such
industrial units immediately before the appointed day, may be allowed to
convert the facility of exemption from payment of tax under the Act into
getting the facility of deferment of payment of tax for the un-expired
period or percentage of value of fixed asset as determined, as might have
been allowed to such dealer under that Act, by a notification published in
Official Gazette by the State Government.”
8. Rule 64 of the Jharkhand Value Added Tax Rules, 2006 (for short “the
Rules”) deals with deferment. The said rule reads as under:-
“64. Deferment.-(1) (a) All such Industrial units, which were availing
the benefit of deferment of tax under the provisions of the Repealed Act
and notifications issued there-under, immediately before the Appointed Day,
and who are continued to be so eligible on such Appointed Day under the
Act, may be allowed to continue the benefit of such deferment of payment of
tax, for the balance un-expired period or un-availed percentage of gross
value of fixed assets, provided such Industrial units file an application
in Form JVAT 121 for grant of fresh eligibility Certificate, for the
balance un-expired period or un-availed percentage of gross value of fixed
assets, before the In-charge of the Circle, in which such unit is
registered.
(b) All the procedure and provisions issued for availing deferment
in the Repealed Act shall continue to be in operation and shall be deemed
to have been adopted for the purpose of the Act.
(c) The In-charge of Circle, on receipt of such application
mentioned in sub-rule (a) shall issue a revised eligibility certificate,
indicating therein the balance un-expired period or un-availed percentage
of gross value of fixed assets.
Provided such Industrial Unit shall file an application mentioned in
sub-rule (a) within a period of fifteen days from the date, on which the
Act comes into operation.
Provided further the In-charge of the circle, shall issue a revised
eligibility certificate, for the remaining un-expired period within fifteen
days, from receipt of such application.
(2) All such industrial units, which were availing the benefit of
exemption from payment of tax on the sales of their finished products,
granted under clause (b) of sub-section (3) of Section 7 of the Repealed
Act, and who have not availed of their full entitlement as on Appointed
Day, may be allowed to opt for deferment of payment of tax for the balance
unexpired period or unveiled percentage of value of fixed assets as
determined, whichever is earlier, in accordance with sub-section (3)(ii) of
Section 95 of the Act.
Provided no dealer eligible for deferment under sub-rule (2), shall be
allowed to defer his tax liability under the Act, unless he applies to the
concerned Registering Authority of the Circle in Form JVAT 121, and upon
receipt of such application, the concerned Registering Authority of the
circle shall issue a certificate of eligibility in Form JVAT 408.
Provided further such deferment as mentioned in sub-rule (2) shall be
allowed in accordance with the notification issued for this purpose by the
State Government in accordance with the provisions of sub-section (3)(ii)
of Section 95 of the Act.
Provided also that, if such notification is issued by the State Government,
the Industrial Unit opting to changeover to deferment the tax for the
remaining unexpired period or unveiled percentage of value of fixed assets,
shall apply within fifteen days of publication of such notification before
the In-charge of the circle in which such unit is registered, and
thereafter the In-charge of the Circle shall issue revised eligibility
certificate for the balance unexpired period or unveiled percentage of
value of fixed assets, after making such enquiry as he may deem fit &
proper.”
9. In pursuance of the statutory provision and the rules framed
thereunder, the 1st respondent on April 15, 2006 submitted an application
for registration under deferment of payment of tax. In the said
application it has been stated thus:-
“With the enactment of “The Jharkhand Value Added Tax Act, 2005”, effective
from 01.04.2006, exemptions have been converted to the deferment of payment
of tax. We expressed our strong protest for withdrawing the said exemption
of Tata Steel and replaced by deferment of payment of Tax provision. We
also pray you to review the provision of the said deferment of payment of
tax and allow us to continue availing the existing Sales Tax exemption on
purchase of raw materials and other goods for production of CR products as
well as on selling the CR Products as per the Bihar Industrial Policy, 1995
and the Notification made thereunder till 31st July, 2008.
In pursuance to the VAT Act and Rules, we have to file the application by
15th April, 2006 for converting the exemption to deferment and we are
applying for the same under protest, as per the enclosed prescribed format
JVAT 121.”
The said application seeking deferment of tax was rejected vide order
dated 05.05.2006.
10. Though the 1st respondent filed the said application, it moved the
High Court in W.P.(T) No. 2664 of 2006 challenging the constitutional
validity of Section 95(3)(ii) and Section 96(3) of the JVAT Act. It also
challenged the withdrawal of the notification and asserted that the company
was entitled to get the benefit of exemption that had already been granted
and that there was no justification for withdrawal of the same. The
Division Bench of the High Court took up the said petition along with
others and came to hold thus:-
“55. After holding that the principle of promissory estoppels is
enforceable in the present case, the question arises what relief the
petitioners were entitled to. As observed by us, even if the impugned
notifications had not been issued, the exemption notifications were
otherwise to die in view of Section 96(3) of the VAT Act and the
petitioners were not entitled to the benefit of exemption thereafter. We
have declined to strike down the provisions of VAT Act, including Section
96(3) of the VAT Act. Therefore, we are unable to uphold the exemption
benefits to the petitioners on account of the provisions of Section 96(3)
of the VAT Act. However, the State cannot justify the issuance of the
impugned notifications in view of our findings on various aspects,
upholding the enforceability of doctrine of promissory/equitable estoppel
when it is intended to even deny legitimate tax deferment benefit under
Sec. 95(3) of the VAT Act. We, therefore, quash the impugned notifications
S.Os. 201 and 202 both dated 30th March, 2006 as also order dated 5th May,
2006 rejecting claim for deferment of tax under Section 95(3) of VAT Act
and as a natural corollary the petitioners will be and are entitled to the
benefit of deferment of tax in terms of Section 95(3) of the VAT Act. We,
thus, allow these writ petitions and direct the respondent-State to allow
the benefit of deferment of tax to the petitioners for the remaining period
under 1995 Industrial Policy read with the notifications S.Os. 478,479 and
481 all dated 22nd December, 1995 and S.Os. 57 and 58 both dated 2nd March,
2000, in accordance with the provisions of Section 95(3) of the VAT Act.”
The aforesaid order is the subject matter of assail in this civil
appeal by special leave.
11. We have heard Mr. Ajit Kumar Sinha, learned senior counsel for the
appellants and Mr. Dushyant A. Dave, learned senior counsel for the 1st
respondent.
12. At the very outset, it is necessary to state that the 1st respondent
had enjoyed the benefit of exemption from payment of sales tax on cold
rolling mills products w.e.f. 01.08.2000 to 31.03.2006. Initially, the
exemption was granted from 01.08.2000 to 31.07.2008. It is not in dispute
that the 1st respondent had applied for conversion from exemption of tax to
deferment of tax for the remaining period i.e. 01.04.2006 to 31.07.2008.
The High Court, as is manifest, while quashing the notification nos. 201
and 202 had directed the State to grant deferment of tax to the 1st
respondent under Section 95(3) (ii) of the JVAT Act. It is pertinent to
mention here as exemption was claimed and not granted, the 1st respondent
had preferred an appeal by special leave but the same has already been
disposed of. It has been fairly stated at the Bar that the issue that is
seminal to the present lis is benefit of deferment and the period of
repayment.
13. When the special leave petition was listed on 04.05.2007, the
following interim order was passed:-
“Till the hearing and final disposal of the matter the assessee will open a
separate account and the tax which is being deferred from today will be
shown in that account which will be subject to the result of the petition.”
14. It is the admitted position that the assessee had collected the tax
from the consumers for the period 01.04.2006 to 31.07.2008 and stopped
collecting tax after 31.07.2008. It is pertinent to note here that on
12.07.2013, in IA No. 1 of 2013, the following order came to be passed:-
“After hearing learned counsel for the parties to the lis, we are of the
opinion that the respondent no.1 herein should be directed to pay a sum of
Rs.25 crores each in six monthly instalments till the entire amount of
Rs.186.70 crores is paid to the appellant-applicant, excluding the amount
of Rs.20 crores already paid to the appellant-applicant. The first
instalment of Rs.25 crores shall be paid by 31.8.2013.”
15. We have been appraised at the Bar that the said amount has been paid.
We may repeat at the cost of repetition that the issue of exemption is not
alive and it has been fairly accepted by Mr. Dave, learned senior counsel
for the 1st respondent. The singular issue that arises for consideration
is the interpretation of the deferment policy in the context of provisions
enumerated under the JVAT Act. Section 95(3) (ii) envisages that a
registered dealer who was enjoying the benefit of exemption of tax is
allowed to convert the facility of exemption from payment of tax under the
JVAT Act into the facility of deferment of payment of tax for the unexpired
period. The assessee-company has availed the deferment and paid the amount
of tax. The gravamen of the grievance pertains to the period within which
the amount was liable to be paid. Submission of Mr. Sinha, learned senior
counsel appearing for the State is that the deferment of tax has to be
computed in such a manner so that the period of thirteen years as provided
in the notification is calculated from the year 2000 ending with the year
2013. In essence, his argument is, as the assessee had failed to make the
repayment of deferred tax within the prescribed period, the assessee is
obligated to pay the interest for the delayed period.
16. The aforesaid being the fulcrum of cavil, we are obliged to refer to
the relevant paragraphs of SO No. 480 dated 22.12.1995. They read as
follows:-
“S.O. No. 480, dated 22-12-1995:- In exercise of powers conferred by
Section 23A of the Bihar Finance Act, 1981(Bihar Act No. 5 of 1981) Part I,
the Governor of Bihar on being satisfied that it is necessary to do so in
the interest of industrial growth, is pleased to permit those new units
which started production between 01-09-1995 to 31-08-2000 and which have
the registration certificate issued from the prescribed authority and been
given eligibility certificate for this purpose, are allowed to defer the
payable sales tax on the sale of manufactured finished goods for a
prescribed period under the following terms and conditions:
x x x x x
5. Repayment of deferred tax amount by industrial units:-
Repayment of deferred tax amount by industrial units:-
(1) The repayment of deferred tax amount shall have to be done after the
completion of eligibility period of deferment or the prescribed percentage
limit of fixed capital investment, whichever reaches earlier. Repayment of
total deferred amount shall have to be done in ten equal six-monthly
instalments in such a manner so as to be completed within 13 years from the
date of start of deferment.
(2) In case of non-payment of the deferred amount after the expiry of the
prescribed period as stated in part (1), a simple interest at the rate of
2.5 percent per month on repayable amount shall be payable till the month
in which payment is made. For the purpose of this part, a part of month
will be treated as full month.
(3) If any unit defaults in repayment of the deferred amount within the
prescribed period, then for the recovery of due amount alongwith interest
as stated in part(2) above, all the suitable provisions of the Bihar
Finance Act, 1981 Part I related to recovery of tax, realization of dues
and imposition of penalty alongwith prosecution under Section 49 shall be
applicable without adversely affecting other actions taken under the Act.”
[Emphasis added]
17. Relying on the language employed in the notification, it is
submitted by Mr. Sinha, learned senior counsel for the appellant that
deferment of tax as contemplated in the said notification has to commence
from 31.08.2000 for the purpose of computation of 13 years. The words used
in para 5(1) “from the date of start of deferment” are not to be
interpreted to convey to be determinative on the foundation of individual
case of deferment but they have to be understood that the grant of benefit
of deferment is associated with the repayment of deferred tax and in that
context it has to be so done that the period of repayment is completed
within 13 years, that is, 31.08.2013.
18. Refuting the said submission, it is canvassed by Mr.
Dave, learned senior counsel appearing for the assessee that the date of
start of deferment has to be the date when deferment commences and the span
of 13 years has to be computed from that date. On that basis, it is urged
by him that the period of repayment will come to end only after expiry of
13 years from 2006, the year in which the deferment of the tax commenced as
per the order of the High Court. Learned senior counsel has emphasised
that when the language employed in the notification is absolutely plain and
clear, the meaning has to be attributed to the clear words for the words
employed therein. For the said purpose, he has placed reliance on the
authority in Hansraj Gordhandas v. H.H. Dave, Assistant Collector of
Central Excise & Customs, Surat and Two ors.[3].
19. We have already reproduced the relevant paragraphs of the
notification. Regard being had to the language employed therein, we have to
appreciate what has been laid down in Hansraj Gordhandas (supra). The
passage from which Mr. Dave, learned senior counsel has drawn inspiration
reads as follows:-
“It was contended on behalf of the respondent that the object of granting
exemption was to encourage the formation of cooperative societies which not
only produced cotton fabrics but which also consisted of members, not only
owning but having actually operated not more than four power-looms during
the three years immediately preceding their having joined the society. The
policy was that instead of each such member operating his looms on his own,
he should combine with others by forming a society which, through the
cooperative effort should produce cloth. The intention was that the goods
produced for which exemption could be claimed must be goods produced on its
own behalf by the society. We are unable to accept the contention put
forward on behalf of the respondents as correct. On a true construction of
the language of the notifications, dated July 31, 1959 and April 30, 1960
it is clear that all that is required for claiming exemption is that the
cotton fabrics must be produced on power-looms owned by the cooperative
society. There is no further requirement under the two notifications that
the cotton fabrics must be produced by the Co-operative Society on the
power-looms “for itself”. It is well established that in a taxing statute
there is no room for any intendment but regard must be had to the clear
meaning of the words. The entire matter is governed wholly by the language
of the notification. If the tax-payer is within the plain terms of the
exemption it cannot be denied its benefit by calling in aid any supposed
intention of the exempting authority. If such intention can be gathered
from the construction of the words of the notification or by necessary
implication therefrom, the matter is different, but that is not the case
here.”
[Underlining is ours]
20. Thus, the aforesaid decision makes it quite clear that in a taxing
statute there is no room for any intendment but regard must be had to the
clear meaning of the words. The entire matter is governed wholly by the
language of the notification. It has also been held by the Constitution
Bench, if the tax-payer is within the plain terms of the exemption, it
cannot be denied its benefits by calling in aid any supposed intention of
the exempting authority. That apart, it has also been stated therein that
if different intention can be gathered from the construction of the words
of the notification or by necessary implication therefrom, the matter is
different. The larger Bench has not applied the said principle to the case
involved therein.
21. In this context, we may recapitulate the words of Lord Reid in
Maunsell v. Olins[4] wherein it has been observed as follows:-
“Then rules of construction are relied on. They are not rules in the
ordinary sense of having some binding force. They are our servants not our
masters. They are aids to construction, presumptions or pointers. Not
infrequently one ‘rule’ points in one direction, another in a different
direction. In each case we must look at all relevant circumstances and
decide as a matter of judgment what weight to attach to any particular
‘rule’.”
22. The said passage has been referred with approval by the Court in
Utkal Contractors and Joinery Pvt. Ltd. and others v. State of Orissa and
others[5]
23. In M/s Doypack Systems Pvt. Ltd. v. Union of India & others[6] a two-
Judge Bench while emphasising on the concept of interpretation opined thus:-
“58. The words in the statute must, prima facie, be given their ordinary
meanings. Where the grammatical construction is clear and manifest and
without doubt, that construction ought to prevail unless there are some
strong and obvious reasons to the contrary. Nothing has been shown to
warrant that literal construction should not be given effect to. See
Chandavarkar S.R. Rao v. Ashalata[7] approving 44 Halsbury’s Laws of
England, 4th Edn., para 856 at page 552, Nokes v. Doncaster Amalgamated
Collieries Limited[8]. It must be emphasised that interpretation must be in
consonance with the Directive Principles of State Policy in Article 39 (b)
and (c) of the Constitution.
59. It has to be reiterated that the object of interpretation of a statute
is to discover the intention of the Parliament as expressed in the Act. The
dominant purpose in construing a statute is to ascertain the intention of
the legislature as expressed in the statute, considering it as a whole and
in its context. That intention, and therefore the meaning of the statute,
is primarily to be sought in the words used in the statute itself, which
must, if they are plain and unambiguous, be applied as they stand. …”
The aforestated principle has been reiterated in Keshavji Ravji and
Co. and others vs. Commissioner of Income Tax[9].
24. In this regard, reference to Mahadeo Prasad Bais (Dead) vs. Income-
Tax Officer ‘A’ Ward, Gorakhpur and another[10] would be absolutely seemly.
In the said case, it has been held that an interpretation which will
result in an anomaly or absurdity should be avoided and where literal
construction creates an anomaly, absurdity and discrimination, statute
should be liberally construed even slightly straining the language so as to
avoid the meaningless anomaly. Emphasis has been laid on the principle
that if an interpretation leads to absurdity, it is the duty of the court
to avoid the same.
25. In Oxford University Press v. Commissioner of Income Tax[11]
Mohapatra, J. has opined that interpretation should serve the intent and
purpose of the statutory provision. In that context, the learned Judge has
referred to the authority in State of T.N. v. Kodaikanal Motor Union (P)
Ltd.[12] wherein this Court after referring to K.P. Varghese v. ITO[13] and
Luke v. IRC[14] has observed:-
“The courts must always seek to find out the intention of the legislature.
Though the courts must find out the intention of the statute from the
language used, but language more often than not is an imperfect instrument
of expression of human thought. As Lord Denning said it would be idle to
expect every statutory provision to be drafted with divine prescience and
perfect clarity. As Judge Learned Hand said, we must not make a fortress
out of dictionary but remember that statutes must have some purpose or
object, whose imaginative discovery is judicial craftsmanship. We need not
always cling to literalness and should seek to endeavour to avoid an unjust
or absurd result. We should not make a mockery of legislation. To make
sense out of an unhappily worded provision, where the purpose is apparent
to the judicial eye ‘some’ violence to language is permissible.”
26. Sabharwal, J. (as His Lordship then was) has observed thus:-
“… It is well-recognised rule of construction that a statutory provision
must be so construed, if possible, that absurdity and mischief may be
avoided. It was held that construction suggested on behalf of the Revenue
would lead to a wholly unreasonable result which could never have been
intended by the legislature. It was said that the literalness in the
interpretation of Section 52(2) must be eschewed and the court should try
to arrive at an interpretation which avoids the absurdity and the mischief
and makes the provision rational, sensible, unless of course, the hands of
the court are tied and it cannot find any escape from the tyranny of
literal interpretation. It is said that it is now well-settled rule of
construction that where the plain literal interpretation of a statutory
provision produces a manifestly absurd and unjust result which could never
have been intended by the legislature, the court may modify the language
used by the legislature or even “do some violence” to it, so as to achieve
the obvious intention of the legislature and produce a rational
construction. In such a case the court may read into the statutory
provision a condition which, though not expressed, is implicit in
construing the basic assumption underlying the statutory provision. …”
27. Keeping in view the aforesaid principle, the language employed in the
notification has to be appreciated. Benefit of deferment of tax is granted
under certain terms and conditions. One of the terms and conditions
pertains to repayment of deferment of tax amount by the industrial unit.
The first part of sub-para (1) of para 5 stipulates that the repayment of
deferred tax amount shall have to be done after the completion of
eligibility period of deferment or the prescribed percentage limit of
fixed capital investment, whichever reaches earlier. In the case at hand,
the period of exemption has been converted to period of deferment of tax.
It is for 8 years. There is no dispute that the assessee had availed the
exemption for a period of 6 years and he is entitled to deferment of tax
for the rest of the period which commenced in 2006. It is the next part of
the said sub-para which requires to be understood. The notification lays a
clear postulate that repayment of total deferred amount shall have to be
done in ten equal six monthly instalments in such a manner so as to be
completed within 13 years from the date of start of deferment. The words
“from the date of start of deferment” have to have nexus with the policy
stated in the beginning. The policy would apply if the unit has commenced
between 01.09.1995 and 31.08.2000; that it has a registration certification
from the prescribed authority and that, most importantly, it has been given
an eligibility certificate for the said purpose. The policy would come
into play only if these conditions are satisfied and then the assessee will
be allowed to have the benefit of deferment of sales tax on the sale of
manufactured finished goods for a prescribed period. Therefore, the
authority has been given the power to lay down the prescribed period for
grant of deferment. In the beginning, the 1st respondent was granted
exemption. The concept of exemption is distinct from the concept of
deferment of tax. After the JVAT Act came into force, under the statutory
provisions, there was no exemption and beneficiaries were entitled to
convert to the scheme of deferment. The period remains intact, that is, 8
years. The repayment has to be done in equal six monthly instalments and
that period is 5 years. The repayment commences after completion of
eligibility period of deferment or the prescribed percentage limit of fixed
capital investment, whichever is earlier. The prescribed authority can
grant an eligibility certificate but he has to keep in view the terms and
conditions stipulated in the notification. The said authority cannot
travel beyond the stipulations of the notification. The language employed
in the notification conveys that the grant of certificate has to be such
that after expiration of the eligibility period, the amount has to be paid
back within a span of 5 years but the gap cannot exceed 13 years from the
date of start of deferment. The postulate enshrined therein has to be
appositely appreciated. It does not flow from the notification that if a
benefit is granted for 8 years or for a lesser period, the assessee cannot
claim that the repayment has to be completed within 13 years from the date
of grant. In the case at hand, the claim of the assessee that the
repayment schedule has to continue for a period of 13 years from 2006, for
the deferment commenced only in 2006. Such an interpretation not only
causes serious violence to the language employed in the notification but if
it is allowed to be understood in such a manner, it shall lead to an absurd
situation. That apart, the intention can be gathered from the notification
that it has to relate back to the date of eligibility with a maximum limit
of 13 years. It cannot be construed to mean 13 years from the date of
completion of the eligibility period. The repayment schedule is 5 years
from the expiry of eligibility period of deferment. The period of 5 years
has to be so arranged that it does not go beyond 13 years from the date of
deferment. Language employed in para 5(1) has to be understood in this
manner to give it an appropriate meaning. Otherwise, the interpretation
propounded on behalf of the assessee will lead to an anomalous situation
because as regards fixation of schedule of repayment within 5 years from
the date of completion of the eligibility period, will become totally
otiose and, in a way, irrelevant. Words “from the date of start of
deferment” cannot be conferred a meaning in the manner suggested by the
learned senior counsel for the assessee. It is a well-known principle of
statutory interpretation that if an interpretation leads to absurdity, the
same is to be avoided. And we have no hesitation here to say that if the
notification is read as a whole, the intention, purpose and working of it
is absolutely clear. The ingenious interpretation placed on the words are
really beyond the context and, therefore, we are not disposed to accept the
same. Thus analysed, the irresistible conclusion is that the repayment
schedule has to end on 31.08.2013 within a span of 5 years from the
expiration of the eligibility period.
28. Having said that, we may proceed to deal with the imposition of
interest and penalty under the JVAT Act. Rule 66 of the Rules provides for
payment for breach of the Rules. We may immediately make it clear that the
question of levy of penalty as envisaged under Rule 66 of the Rules should
not be made applicable to the case at hand. We say so as the present case
projects special features. It is submitted by Mr. Sinha, learned senior
counsel for the State that the revenue is entitled to 2.5% interest per
month as per sub-para 2 of paragraph 5 of the notification. It is argued
on behalf of the assessee that it is not a case for levy of interest.
Regard being had to the special features of the case and taking note of the
fact that the assessee-1st respondent had already deposited the amount in
pursuance of the order of this Court and regard being had to the nature of
litigation, we direct that the 1st respondent-assessee shall pay 12%
interest per annum and the said amount shall be deposited with the
competent authority of the revenue within three months hence.
29. Resultantly, the appeal stands disposed of in above terms. There
shall be no order as to costs.
…………………………..J.
[Dipak Misra]
……………………….…J.
[N.V. Ramana]
New Delhi;
February 12, 2016
-----------------------
[1] 1994 Supp. (2) SCC 259
[2] (2004) 7 SCC 242
[3] (1969) 2 SCR 252
[4] (1975) 1 All ER 16, 21, 18
[5] (1987) 3 SCC 279
[6] (1988) 2 SCC 299
[7] (1986) 4 SCC 447, 476
[8] 1940 AC 1014, 1022
[9] (1990) 2 SCC 231
[10] (1991) 4 SCC 560
[11] (2001) 3 SCC 359
[12] (1986) 3 SCC 91
[13] (1981) 4 SCC 173
[14] (1964) 54 ITR 692 : 1963 AC 557 (HL)
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