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Rajasthan Sales Tax Act – Exemption from paying tax on new cement units – the assesse claimed 75% exemption – where the the committee declared that he was entitled to only 25% exemption as it is a large scale unit as per Item 1E of Annexure ‘C’- Tax Board held that the assesse entitled for 75% exemption and remanded the matter – revenue filed revision to high court and high court dismissed the same – Apex court held when there is specific provisions was there , general provision is not applicable – Item 1E of Annexure – C clearly holds large scale units are entitled to 25% exemption only – Apex court set aside the order of high court and that off Tax board =COMMERCIAL TAX OFFICER, | | |RAJASTHAN |..Appellant(s) | Versus |M/S. BINANI CEMENTS LTD. & ANR. |..Respondent(s) = 2014(Feb.Part) judis.nic.in/supremecourt/filename=41236

Rajasthan Sales Tax Act – Exemption from paying tax on new cement units – the assesse claimed 75% exemption – where the the committee declared that he was entitled to only 25% exemption as it is a large scale unit as per Item 1E of Annexure ‘C’- Tax Board held that the assesse entitled for 75% exemption and remanded the matter – revenue filed revision to high court and high court dismissed the same – Apex court held when there is specific provisions was there , general provision is not applicable – Item 1E of Annexure – C clearly holds large scale units are entitled to 25% exemption only – Apex court set aside the order of high court and that off Tax board =

 

The Scheme for exemption from payment of sales

   tax was notified by the State of Rajasthan  in  exercise  of  its  powers

   under sub-section(2) of Section 4 of the Rajasthan Sales  Tax  Act,  1954

   (for short, “the Act”). 

The scheme exempts certain industrial units  from

   payment of tax on the sale of  goods  manufactured  by  them  within  the

   State. 

It specifies and categorizes the districts, types  of  units,  the

   extent of exemption from  tax  (in  percentage),  the  maximum  exemption

   available in terms of percentage of fixed capital  investment  (FCI)  and

   the  maximum  time  limit  for  availing  such  exemption  from  tax.  

 

The respondent-assessee is a new industrial  unit  manufacturing  cement

   situated within Panchayat Samiti, Pindwara, Rajasthan. It is an  admitted

   fact that it started its commercial production on 27.05.1997. 

It is  also

   not disputed that the respondent-assessee has  fixed  capital  investment

   (for short, “the FCI”) exceeding Rs.500/- Crores and  employs  more  than

   250 employees.

After   the   introduction   of

   notification dated 13.12.1996, the exclusion is made  to  the  expression

   ‘New Units’ by specifically including certain type of industrial units by

   inserting items 1A to 1F. 

Item 1E specifically talks of New Cement  Units

   except in Tribal Sub-Plan area. 

The extent  of  percentage  of  exemption

   from tax under Item 1E depends on the type of unit or the industry. If it

   is a small scale unit, the extent of exemption is 75%, if  it  is  medium

   scale, the extent of exemption is 50%, and if it is large scale unit, the

   extent of percentage of exemption from tax is 25%. The maximum time limit

   for availing exemption from tax is restricted  to  seven  years.  Item  4

   speaks of New Units producing pollution  control  equipments,  pioneering

   units and prestigious units.  

The extent of the percentage  of  exemption

   from tax is 75% of  total  liability  and  the  maximum  time  limit  for

   availing exemption from tax is  9  years  from  the  date  of  commercial

   production.  

Item 5 relates to New  Very  Prestigious  Units  other  than

   cement units except in Tribal Sub-plan Area and the total  percentage  of

   exemption from tax is 90% of total tax liability  and  the  maximum  time

   limit for availing exemption from tax is eleven years.

1E.   |New Cement units |75%, 50% & 25%  |125% of FCI in|Seven years.  |

|      |except in Tribal |of total tax    |case of small |              |

|      |Sub-Plan area.   |liability in    |scale units   |              |

|      |                 |case of small,  |subject to an |              |

|      |                 |medium and large|overall limit |              |

|      |                 |scale units     |of Rs.1.00    |              |

|      |                 |respectively    |crore and 100%|              |

|      |                 |                |of FCI in case|              |

|      |                 |                |of medium and |              |

|      |                 |                |large scale   |              |

|      |                 |                |units.        |              |

 

Reverting to state the facts, the respondent-assessee  had  applied  to

   the State Level Screening Committee for claiming benefit of exemption  at

   75% under the Scheme. 

The Committee rejected the claim of the respondent-

   assessee and observed that since the respondent-assessee is a large scale

   unit covered under the specific provision of Item 1E of Annexure ‘C’,  it

   is entitled to 25% exemption, by its order dated 15.01.1998.

 

 

18. Being aggrieved by the said order, the respondent-assessee filed appeal

   before Rajasthan Tax Board, Ajmer (for short, ‘the Board’) in respect  of

   the calculation of eligible FCI  as  well  as  the  exemption  under  the

   Scheme. The Board while remanding the matter to the State Level Screening

   Committee held that  the  respondent-assessee  is  entitled  to  75%  tax

   exemption by holding the respondent-unit as Prestigious  Unit  under  the

   Scheme.

 

 

19. The revenue being aggrieved by the decision of  the  Board,  filed  Tax

   Revision Petition before the High Court under Section 86(2) of  the  Act.

   The High Court dismissed the revision petition filed by the  revenue  and

   upheld the decision of the Board by holding that the respondent-unit is a

   Prestigious Unit and therefore, entitled to 75% tax exemption  under  the

   Scheme.=

In the  instant  case,  the  item  1E  is  subject  specific  provision

   introduced by an amendment in 1996 to  the  Scheme.  

The  said  amendment

   removed “new cement industries”  from  the  non-eligible  Annexure-B  and

   placed it into Annexure-C amongst the eligible industries. 

It  classified

   the cement units for eligibility of tax exemption into three  categories:

   small, medium and large. 

The said categories  are  comprehensive  whereby

   small and medium cement units have been prescribed to have  maximum  FCIs

   of Rs.60/- lakhs and Rs.5/- crores, respectively and large to be over the

   FCI of Rs.5/- crores. 

The maximum ceiling for large cement units has been

   purposefully left open and thereby reflects that the intention clearly is

   to provide for an all-inclusive provision for new cement units so  as  to

   avoid  any  ambiguity  in  determination  of  appropriate  provision  for

   applicability to new cement units to seek exemption.

 

 

 

 

44.  It  leaves  no  doubt  that  what  is  specific  has  to  be  seen  in

   contradistinction  with  the  other  items/entries.  

The  provision  more

   specific than the other on the same subject would  prevail.  Here  it  is

   subject specific item and therefore as against items 1, 4, 6 and 7, which

   deal with units of all industries and not only cement, item 1E restricted

   to only cement units would be a specific and special entry and thus would

   override the general provision.

 

 

45.  The  proposition  put  forth  by  the  respondent-Company   that   the

   construction which is most beneficial to the assessee must be applied and

   adopted fails to impress upon us its application in this case. 

Howsoever,

   it is true that the canons of construction must  be  applied  to  extract

   most beneficial re-conciliation of provisions. In case of fiscal  statute

   dealing with exemption, it would require  interpretation  benefiting  the

   assessee. 

But here the introduction of the subject  specific  entry  vide

   amendment into general scheme of exemption speaks volumes in  respect  of

   intention of the legislature to restrict the benefit to cement industries

   as available only under Item 1E, which categorically classified them into

   three as per their FCI. 

The specific  entries  being  mutually  exclusive

   have been placed so systematically arranged and classified in the Scheme.

   The construction of provisions must not be divorced from  the  object  of

   introduction  of  subject  specific  provision  while   retaining   other

   generalized provision  that  now  specifically  exclude  the  new  cement

   industries,  which  could  otherwise  fall  into  its  ambit,  lest  such

   interpretation would be not ab  absurdo  (i.e.,  interpretation  avoiding

   absurd results).

 

46. Therefore, in our considered view the respondent-Company would only  be

   eligible for grant of exemption under Item 1E as a large new cement  unit

   in accordance with its FCI being above Rs.5/- crores.  

In  light  of  the

   aforesaid, we are of the considered opinion that the judgment  and  order

   passed by the High Court ought to be set aside and  the  appeals  of  the

   Revenue requires to be allowed.

 

 

47. In the result, the appeal is allowed and the judgment and order  passed

   by the High Court is set aside. No order as to costs.

 

2014(Feb.Part) judis.nic.in/supremecourt/filename=41236

 

H.L. DATTU, S.A. BOBDE

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.336 OF 2003

 

 

|COMMERCIAL TAX OFFICER, | |
|RAJASTHAN |..Appellant(s) |

 

Versus

|M/S. BINANI CEMENTS LTD. & ANR. |..Respondent(s) |

 

 

J U D G M E N T
H.L. DATTU, J.
1. The Revenue is in appeal before us against the impugned judgment and
order passed by the High Court of Rajasthan at Jodhpur in S.B. Sales Tax
Revision Petition No.582 of 1999, dated 02.07.2001 whereby and whereunder
the High Court has dismissed the revision petition filed by the Revenue
and upheld the case of the respondent-assessee.
2. The respondent-assessee is a new industrial unit manufacturing cement
situated within Panchayat Samiti, Pindwara, Rajasthan. It is an admitted
fact that it started its commercial production on 27.05.1997. It is also
not disputed that the respondent-assessee has fixed capital investment
(for short, “the FCI”) exceeding Rs.500/- Crores and employs more than
250 employees.

 
3. The core issue arises out of the respondent-assessee’s application for
grant of eligibility certificate for exemption from payment of Central
Sales Tax and Rajasthan Sales Tax to the State Level Screening Committee,
Jaipur under the “Sales Tax New Incentive Scheme for Industries, 1989”
(for short “the Scheme”).
4. For convenience of discussion, we would first notice the relevant scheme
and certain provisions and thereafter proceed towards analysis of the
facts in the instant case. The Scheme for exemption from payment of sales
tax was notified by the State of Rajasthan in exercise of its powers
under sub-section(2) of Section 4 of the Rajasthan Sales Tax Act, 1954
(for short, “the Act”). The scheme exempts certain industrial units from
payment of tax on the sale of goods manufactured by them within the
State. It specifies and categorizes the districts, types of units, the
extent of exemption from tax (in percentage), the maximum exemption
available in terms of percentage of fixed capital investment (FCI) and
the maximum time limit for availing such exemption from tax. By
introducing a deeming clause, the scheme is deemed to have come into
operation with effect from 05.03.1987 and to remain in force upto
31.03.1992. An amendment to the aforesaid notification was brought in by
issuing notification – S. No.763: F.4(35) FD/ Gr.IV/87-38, dated
06.07.1989 and was made operative/effective with effect from 05.03.1987
and to remain in force upto 31.03.1995. Yet another amendment was
introduced by the State Government by issuing notification No.763:
F.4(35)FD/Gr.IV/87-38 dated 06.07.1989. Once again by introducing a
deeming clause, the notification was made operative with effect from
05.03.1987 and to remain in force upto 31.03.1997. The State Government
has issued another subsequent notification amending the earlier
notification in exercise of its power under Section 4(2) of the Act in
763: F.4(35)FD/Gr.IV/87-38, dated 06.07.1989 which is deemed to have come
into operation with effect from 05.03.1987 and to remain in force upto
31.03.1998. Clause 1 of the scheme notification provides for its
operation. Clause 2 is the dictionary clause which provides for meaning
of the expressions like “New Industrial Unit”, “Sick Industrial Unit”,
“Eligible Fixed Capital Investment” etc. For the purpose of this case,
we require to notice the definitions of New Industrial Unit, Eligible
Fixed Capital Investment, Prestigious Unit and Very Prestigious Unit.
5. Clause 2(a) defines the meaning of the expression ‘New Industrial Unit’
to mean an industrial unit which commences commercial production during
the operative period of the scheme. The definition provides an exclusion
of certain industries from the purview of New Industrial Unit. They are
industrial units established by transferring or shifting or dismantling
an existing industry and an industrial unit established on the site of an
existing unit manufacturing similar goods. Explanation I and II appended
to the notification need not be noticed by us, since the same is not
necessary for the purpose of disposal of this appeal.
6. It is neither in dispute nor could be disputed by the revenue that the
respondent is not a ‘New Industrial Unit’.
7. Clause 2(e) defines eligible fixed capital investment (FCI) to mean
investment made in land, new buildings, new plant and machinery and
imported second hand machinery from outside the country and installation
expenditure capitalized for plant and machinery and installation
capitalized for plant and machinery’s capitalized interest during
construction not exceeding 5% of the total fixed capital investment; and
technical know-how fees or drawing fees paid in lump-sum to foreign
collaborators or foreign suppliers as approved by Government of India or
paid to laboratories recognized by the State Government or Central
Government and Rail Sidings, rolling stock, racks and railway engines,
owned by the unit.
8. Clause 2(i) defines ‘Prestigious Unit’. The same is as under:-

“Prestigious Unit” means a “new industrial unit” first
established in any Panchayat Samiti of the State during the
period of this Scheme in which investment in fixed capital
exceeds Rs.10/- cores with a minimum permanent employment of 250
persons or a “new industrial unit” having a fixed capital
investment exceeding Rs.25.00 crores and with a minimum
permanent employment of 250 persons or a new electronic
industrial unit having fixed capital investment exceeding Rs.25/-
crores’.

9. The definition is in three parts. The first part speaks of a ‘New
Industrial Unit’ first established in any Panchayat Samiti of the State.
The establishment is of the unit during the period of the Scheme. The
investment in fixed capital must exceed Rs.10/- crores and lastly the
industrial unit has minimum permanent employment of 250 persons. In the
second limb, the necessity of establishing the ‘New Industrial Unit’ in
Panchayat Samiti is done away with. The unit should have capital
investment exceeding Rs.25/- crores and should have minimum permanent
employment of 250 persons. The third limb of this definition applies only
to Electronic Industrial Unit having fixed capital investment exceeding
Rs.25/- crores.
10. Clause 2(ii) defines the expression “Very Prestigious Unit” as under:
“Very Prestigious Unit” means a new industrial unit established
in any Panchayat Samiti of the State during the period of this
Scheme in which investment in fixed capital is Rs.100/- crores or
more. However, the progressive investment of the amount of
project cost as appraised by the financial institutions shall be
considered as investment made by a new unit, and as soon as such
investment reaches or crosses the point of Rs.100/- crores during
the operative period of the Scheme, the unit shall acquire the
status of a Very Prestigious Unit for the purpose of claiming
enhanced proportionate benefits under this Scheme”.
11. The ‘Very Prestigious Unit’ means a new industrial unit established in
any Panchayat Samiti in the State during the operative period of the
Scheme and the other important requirement is the investment in such
industrial unit must be Rs.100/- crores or more. The second limb of the
definition clause provides for a new industrial unit to acquire the
status of Very Prestigious Unit. The project cost as appraised by the
financial institution shall be considered as investment made by a new
unit. The progressive investment of the amount of project cost as soon as
it reaches or crosses the point of Rs.100/- crores during the operation
of the Scheme, the industrial unit shall acquire the status of a Very
Prestigious Unit in order to claim enhanced proportionate benefits under
the Scheme.

12. Clause 2(k) provides for constitution of Screening Committee for the
purpose of consideration and to grant Eligibility Certificate under the
New Incentive Scheme both for small and medium and also large scale
industrial units to avail benefit under the New Incentive Scheme. The
note appended to this sub-clause speaks of Small Scale Units, Medium
Scale Units and Large Scale Units. Small Scale Units means a unit of
which investment in plant and machinery does not exceed Rs.60/- Lakhs, a
Medium Scale Unit means a unit of which the project cost does not exceed
Rs. Five Crores and Large Scale Unit means a unit of which the project
cost exceeds Rs. Five Crores.
13. Clause 3 of the notification speaks of applicability of the Scheme. By
this clause, the State Government has made the Scheme applicable to (a)
new industrial units, (b) industrial units going in for expansion or
diversification and (c) sick units.
14. Clause 4 of the Scheme provides for exemption from Payment of Sales Tax
as per parameters mentioned in Annexure ‘C’ to the said notification.
This clause also envisages that the industrial unit which is granted an
eligibility certificate by the Screening Committee is alone exempted to
claim benefit of this notification.
15. Annexure ‘C’ provides for the quantum of sales tax exemption under the
Scheme. Para C therein is relevant for the purpose of this case,
therefore, omitting what is not necessary is extracted hereunder:-

ANNEXURE ‘C’

QUANTUM OF SALES TAX EXEMPTION UNDER THE NEW INCENTIVE SCHEME

 
|Item |Type of Units |Extent of the |Maximum |Maximum time |
|No. | |percentage of |exemption in |limit for |
| | |exemption from |terms of |availing |
| | |tax |percentage of |exemption from|
| | | |fixed capital |tax |
| | | |investment | |
| | | |(FCI) | |
|1. |New Units (Other |75% of total tax|100% of FCI in|Seven years |
| |than the units |liability |case of medium| |
| |mentioned at | |and large | |
| |items 1A to 1F) | |scale units | |
| | | |and 125% of | |
| | | |FCI in case of| |
| | | |small scale | |
| | | |units | |
|1A. |Leather based New|90% of total tax|100% of FCI in|Seven years |
| |Unit |liability |case of medium| |
| | | |and large | |
| | | |scale units | |
| | | |and 125% of | |
| | | |FCI in case of| |
| | | |SSI units | |
|1B. |New Units in |90% of total tax|100% of FCI |Nine years. |
| |Ceramic, Glass, |liability for | | |
| |Electronics and |first three | | |
| |Telecommuni-catio|years, 80% for | | |
| |ns industry |next three years| | |
| |having a FCI |and 75% for the | | |
| |between Rs.5 |remaining | | |
| |crores and Rs.25 |period. | | |
| |crores | | | |
|1C. |New Units in |100% of total |100% of FCI |Eleven years. |
| |Ceramic, Glass, |tax liability | | |
| |Electronics, and |for the first | | |
| |Telecommuni-catio|four years, 90% | | |
| |ns industry |for the next | | |
| |having a FCI of |four years and | | |
| |Rs.25 crores or |75% for the | | |
| |more |remaining | | |
| | |period. | | |
|1D |New labour |75% of total tax|145% of FCI in|Seven years. |
| |intensive units |liability |case of SSI | |
| |as defined in the| |units and 120%| |
| |Capital | |of FCI in case| |
| |Investment | |of medium and | |
| |Subsidy Scheme, | |large scale | |
| |1990 | |units. | |
|1E. |New Cement units |75%, 50% & 25% |125% of FCI in|Seven years. |
| |except in Tribal |of total tax |case of small | |
| |Sub-Plan area. |liability in |scale units | |
| | |case of small, |subject to an | |
| | |medium and large|overall limit | |
| | |scale units |of Rs.1.00 | |
| | |respectively |crore and 100%| |
| | | |of FCI in case| |
| | | |of medium and | |
| | | |large scale | |
| | | |units. | |
|1F. |Large scale |25% of total tax|100% of FCI |Seven years. |
| |granite and |liability | | |
| |marble units. | | | |
|2. |Units (Other than|75% of total tax|100% of |Seven years |
| |(a) cement unit |liability |additional FCI| |
| |except in Tribal | | | |
| |Sub-Plan area and| | | |
| |(b) large scale | | | |
| |granite and | | | |
| |marble units | | | |
| |going in for | | | |
| |expansion or | | | |
| |diversification. | | | |
|2A. |Leather based |75% of total tax|100% of |Seven years |
| |units going in |liability |additional FCI| |
| |for expansion or | | | |
| |diversificat-ion | | | |
|3. |Sick Units |50% of total tax|100% of FCI in|Seven years |
| | |liability |case of medium| |
| | | |and large | |
| | | |scale units & | |
| | | |125% of FCI in| |
| | | |case of small | |
| | | |scale units. | |
|4. |New Units |75% of total tax|100% of FCI |Nine years |
| |producing |liability | | |
| |pollution control| | | |
| |equipments/ | | | |
| |Pioneering units/| | | |
| |Prestigious | | | |
| |units. | | | |
|5. |New Very |90% of total tax|100% of FCI |Eleven years |
| |Prestigious units|liability | | |
| |(Other than | | | |
| |cement units | | | |
| |except in Tribal | | | |
| |Sub-plan Area) | | | |
|6. |100% Export |100% of total |100% of FCI |Nine years |
| |Oriented |tax liability | | |
| |Prestigious/ | | | |
| |Pioneering units | | | |
|7. |100% Export |100% of total |100% of FCI |Eleven years |
| |Oriented Very |tax liability | | |
| |Prestigious Units| | | |

16. As we have observed earlier, Annexure-C has five columns. The second
column speaks of type of units, the third column speaks of the extent of
percentage of exemption from tax, the fourth column provides for the
maximum exemption in terms of percentage of FCI and the fifth and the
last column provides the maximum time limit for availing exemption from
tax. Prior to issuance of notification dated 13.12.1996, Annexure ‘C’ was
primarily confined to ‘New Units’. After the introduction of
notification dated 13.12.1996, the exclusion is made to the expression
‘New Units’ by specifically including certain type of industrial units by
inserting items 1A to 1F. Item 1E specifically talks of New Cement Units
except in Tribal Sub-Plan area. The extent of percentage of exemption
from tax under Item 1E depends on the type of unit or the industry. If it
is a small scale unit, the extent of exemption is 75%, if it is medium
scale, the extent of exemption is 50%, and if it is large scale unit, the
extent of percentage of exemption from tax is 25%. The maximum time limit
for availing exemption from tax is restricted to seven years. Item 4
speaks of New Units producing pollution control equipments, pioneering
units and prestigious units. The extent of the percentage of exemption
from tax is 75% of total liability and the maximum time limit for
availing exemption from tax is 9 years from the date of commercial
production. Item 5 relates to New Very Prestigious Units other than
cement units except in Tribal Sub-plan Area and the total percentage of
exemption from tax is 90% of total tax liability and the maximum time
limit for availing exemption from tax is eleven years.
17. Reverting to state the facts, the respondent-assessee had applied to
the State Level Screening Committee for claiming benefit of exemption at
75% under the Scheme. The Committee rejected the claim of the respondent-
assessee and observed that since the respondent-assessee is a large scale
unit covered under the specific provision of Item 1E of Annexure ‘C’, it
is entitled to 25% exemption, by its order dated 15.01.1998.
18. Being aggrieved by the said order, the respondent-assessee filed appeal
before Rajasthan Tax Board, Ajmer (for short, ‘the Board’) in respect of
the calculation of eligible FCI as well as the exemption under the
Scheme. The Board while remanding the matter to the State Level Screening
Committee held that the respondent-assessee is entitled to 75% tax
exemption by holding the respondent-unit as Prestigious Unit under the
Scheme.
19. The revenue being aggrieved by the decision of the Board, filed Tax
Revision Petition before the High Court under Section 86(2) of the Act.
The High Court dismissed the revision petition filed by the revenue and
upheld the decision of the Board by holding that the respondent-unit is a
Prestigious Unit and therefore, entitled to 75% tax exemption under the
Scheme.

20. Aggrieved by the order so passed by the High Court, the Revenue is
before us in this appeal.

21. We have heard learned counsel for the parties to the lis and perused
the documents on record as well as the order(s) passed by the authorities
and the High Court, respectively.
22. Shri Rohington Nariman, learned senior counsel appearing for the
appellant submits that the case pleaded by respondent-unit right from the
beginning of filing the application before the State Level Screening
Committee was that the new unit had made an investment of more than
Rs.500/- crores by way of fixed capital assets and therefore they should
be placed under the category of ‘Prestigious Unit’ and accordingly be
granted eligibility certificate to claim 75% of exemption from tax for
the maximum time limit provided under the Scheme. In aid of this
submission, the learned senior counsel would draw our attention to the
application and the accompanying affidavit filed by the respondent-new
unit before the State Level Screening Committee. He would further contend
that the respondent-unit before all the authorities below including the
High Court had adopted the stand that the fixed capital investment
excluding investment made before 05.03.1987 was more than Rs.532/- crores
and therefore the respondent-unit is a Prestigious Unit entitled to an
exemption of 75% of total tax liability. It is further contended that the
respondent-new unit being New Cement Unit and further being large scale
unit though can avail the benefit of the incentive scheme under 1E of
Annexure ‘C’ which provides for exemption upto 25% of total liabilities,
it cannot avail the benefit of exemption at the rate of 75% under Item 4
as Prestigious Unit. He would further submit that benefit to cement
industry is confined to the extent envisaged under the Item 1E of
Annexure-C as the said item is a specific provision relating to cement
industry and thus would prevail over other provisions which are general
in character in terms of reference to new cement unit. Alternatively, it
is contended that the respondent-unit being new cement unit, it may fall
under `New Very Prestigious Unit’, however Item 5 of Annexure `C’ speaks
of the New Very Prestigious Units other than cement units except those
located in Sub-Plan area, respondent-unit may not be entitled to avail
the benefit of the Scheme.

23. Per contra, learned counsel, Shri Sudhir Gupta would justify the
reasoning and the conclusion reached by the High Court while rejecting
the revenue’s revision petition and thereby confirming the view expressed
by the Board. He would, inter alia, submit that Item 1E is only an
exception to the general rule envisaged in Item 1 and not an exception to
the other Items in the Annexure-C, i.e., Items 2 to 7 as it is not
intended to govern the entire field of exemptions made available to the
cement industry so as to deny the benefits to a unit even if it falls
under another Item envisaging better incentives. He would further submit
that since new cement unit is specifically excluded from application of
Item 1 (new units generally), Item 2 (expanding/diversifying unit) and
Item 5 (very prestigious unit) but not Item 4 (prestigious units), Item
6 (export oriented prestigious/pioneering unit) and Item 7 (export
oriented very prestigious units), it falls that the intention behind such
express exclusion is such that but for the said exclusion, cement
industries would be included in the said entries. He would strenuously
submit that since the tax exemption clauses are made with a beneficent
object, i.e., to encourage investment in specified rural/semi-urban
areas, their construction must be liberal such as to confer the most
beneficial meaning to the provisions.

24. The facts which are not in dispute are that the respondent-assessee
(hereinafter referred to as ‘the Company’) established a new cement unit
within Panchayat Samiti, Pindwara and commenced commercial production
some time in the year 1997. It engaged itself in the manufacture of
cement. The total capital investment – (FCI) in the new industrial unit
claimed by the Company was Rupees 53252.87 Lakhs (Rs.532.52/- crores)
25. The Company had applied for grant of Eligibility Certificate for
exemption from payment of Central Sales Tax and Rajasthan Sales Tax
before the State Level Screening Committee, Jaipur, under the Scheme.
However, the Screening Committee accepted only Rs.5553.72 Lakhs (Rs.55.32
crores) as FCI eligible for availing the benefits under the Scheme. On
the aforesaid basis the State Level Screening Committee certified that
the company is entitled to avail exemption of tax to the extent of 25% of
the tax liability by treating the same to be a Large Scale Industry. In
the appeal, the Board took the view since the Company had invested more
than Rs.25 crores and has employed more than 250 workmen, it has the
status of `New Prestigious Unit’ and thus, falls within the definition of
a Prestigious Unit and should be governed by Item 4 of Annexure `C’ being
entitled to avail 75% of total tax liability. This view, as we have
already observed, is accepted by the High Court, while dismissing the tax
revision petition filed by the revenue.

26. At the outset, we would observe that the High Court has erred in
reaching its conclusion by holding that (a) the respondent-company would
fall into all the three categories of industries referred to in the
Scheme, that is to say it is a new unit which is a ‘Large Scale Unit’, a
“Prestigious New Unit” and also a “Very Prestigious Unit”; (b) the
classification of a new unit, viz. small scale, medium scale and large
scale under item 1E on the basis of scale of investment does not denude a
new industrial unit of any type of the special status of “Pioneer”,
“Prestigious” and “Very Prestigious” unit under items 4 and 5 to also
exclude operation of General entry; and (c) the special entry would not
exclude the applicability of general entry in context of the Scheme so as
to exclude the operation of items 4, 6 and 7. Thereby implying that
though there exists an overlap between the general and special provision,
the general provision would also be sustained and the two would co-exist.

 

27. Before we deal with the fact situation in the present appeal, we
reiterate the settled legal position in law, that is, if in a Statutory
Rule or Statutory Notification, there are two expressions used, one in
General Terms and the other in special words, under the rules of
interpretation, it has to be understood that the special words were not
meant to be included in the general expression. Alternatively, it can be
said that where a Statute contains both a General Provision as well as
specific provision, the later must prevail.
28. We are mindful of the principle that the Court should examine every
word of a statute in its context and must use context in its widest
sense. We are also in acquaintance with observations of this Court in
Reserve Bank of India v. Peerless General Finance and Investment Co.
Ltd., 1987 SCR (2) 1 where Chinnappa Reddy, J. noting the importance of
the context in which every word is used in the matter of interpretation
of statutes held thus:

“Interpretation must depend on the text and the context. They are the
basis of interpretation. One may well say if the text is the texture,
context is what gives the colour. Neither can be ignored. Both are
important. That interpretation is best which makes the textual
interpretation match the contextual. A statute is best interpreted
when we know why it was enacted. With this knowledge, the statute
must be read, first as a whole and then section by section, clause by
clause, phrase by phrase and word by word. If a statute is looked at,
in the context of its enactment, with the glasses of the statute-
maker, provided by such context, its scheme, the sections, clauses,
phrases and words may take colour and appear different than when the
statute is looked at without the glasses provided by the context.
With these glasses we must look at the Act as a whole and discover
what each section, each clause, each phrase and each word is meant
and designed to say as to fit into the scheme of the entire Act. No
part of a statute and no word of a statute can be construed in
isolation. Statutes have to be construed so that every word has a
place and everything is in its place.”

 
29. It is well established that when a general law and a special law
dealing with some aspect dealt with by the general law are in question,
the rule adopted and applied is one of harmonious construction whereby
the general law, to the extent dealt with by the special law, is
impliedly repealed. This principle finds its origins in the latin maxim
of generalia specialibus non derogant, i.e., general law yields to
special law should they operate in the same field on same subject.
(Vepa P. Sarathi, Interpretation of Statutes, 5th Ed., Eastern Book
Company; N. S. Bindra’s Interpretation of Statutes, 8th Ed., The Law Book
Company; Craies on Statute Law, S.G.G.Edkar, 7th Ed., Sweet & Maxwell;
Justice G.P. Singh, Principles of Statutory Interpretation, 13th Ed.,
LexisNexis; Craies on Legislation, Daniel Greenberg, 9th Ed., Thomson Sweet
& Maxwell, Maxwell on Interpretation of Statutes, 12th Ed., Lexis Nexis)

 
30. Generally, the principle has found vast application in cases of there
being two statutes: general or specific with the latter treating the
common subject matter more specifically or minutely than the former.
Corpus Juris Secundum, 82 C.J.S. Statutes § 482 states that when
construing a general and a specific statute pertaining to the same topic,
it is necessary to consider the statutes as consistent with one another
and such statutes therefore should be harmonized, if possible, with the
objective of giving effect to a consistent legislative policy. On the
other hand, where a general statute and a specific statute relating to
the same subject matter cannot be reconciled, the special or specific
statute ordinarily will control. The provision more specifically directed
to the matter at issue prevails as an exception to or qualification of
the provision which is more general in nature, provided that the specific
or special statute clearly includes the matter in controversy.
(Edmond v. U.S., 520 U.S. 651, Warden, Lewisburg Penitentiary v. Marrero,
417 U.S. 653)

31. The maxim generalia specialibus non derogant is dealt with in Volume
44 (1) of the 4th ed. of Halsbury’s Laws of England at paragraph 1300 as
follows:
“The principle descends clearly from decisions of the House of
Lords in Seward v. Owner of “The Vera Cruz”, (1884) 10 App Cas
59 and the Privy Council in Barker v Edger, [1898] AC 748 and has
been affirmed and put into effect on many occasions…. If
Parliament has considered all the circumstances of, and made special
provision for, a particular case, the presumption is that a
subsequent enactment of a purely general character would not have
been intended to interfere with that provision; and therefore, if
such an enactment, although inconsistent in substance, is capable of
reasonable and sensible application without extending to the case in
question, it is prima facie to be construed as not so extending. The
special provision stands as an exceptional proviso upon the general.
If, however, it appears from a consideration of the general
enactment in the light of admissible circumstances that Parliament’s
true intention was to establish thereby a rule of universal
application, then the special provision must give way to the
general.”

32. The question in Seward v. Owner of the “Vera Cruz”, (1884) 10 App Cas
59 was whether Section 7 of the Admiralty Court Act of 1861, which gave
jurisdiction to that Court over “any claim for damage done by any ship”
also gave jurisdiction over claims for loss of life which would otherwise
come under the Fatal Accidents Act, 1846. It was held that the general
words of Section 7 of the Admiralty Court Act did not exclude the
applicability of the Fatal Accidents Act and therefore, the Admiralty
Court had no jurisdiction to entertain a claim for damages for loss of
life.

33. The adoption of the aforesaid rule in application of principle of
harmonious construction has been explained by Kasliwal J. while
expressing his partial dissent to the majority judgment in St. Stephen’s
College v. University of Delhi, (1992) 1 SCC 558 as follows:

 

“140. …The golden rule of interpretation is that words should be
read in the ordinary, natural and grammatical meaning and the
principle of harmonious construction merely applies the rule that
where there is a general provision of law dealing with a subject,
and a special provision dealing with the same subject, the special
prevails over the general. If it is not constructed in that way the
result would be that the special provision would be wholly defeated.
The House of Lords observed in Warburton v. Loveland, (1824-34) All
ER Rep 589 as under:

 
“No rule of construction can require that when the words of one part
of statute convey a clear meaning … it shall be necessary to
introduce another part of statute which speaks with less
perspicuity, and of which the words may be capable of such
construction, as by possibility to diminish the efficacy of the
first part.”

 
(Anandji Haridas and Co. (P) Ltd. v. S.P. Kasture, (1968) 1 SCR 661,
Patna Improvement Trust v. Lakshmi Devi, 1963 Supp (2) SCR 812,
Ethiopian Airlines v. Ganesh Narain Saboo, (2011) 8 SCC 539,
Usmanbhai Dawoodbhai Memon v. State of Gujarat, (1988) 2 SCC 271,
South India Corpn. (P) Ltd. v. Secy., Board of Revenue, Trivandrum,
(1964) 4 SCR 280, Maharashtra State Board of Secondary and Higher
Secondary Education v. Paritosh Bhupeshkumar Sheth, (1984) 4 SCC 27)

 
34. In J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P.,
(1961) 3 SCR 185, this Court has clarified that not only does this rule
of construction resolve the conflicts between the general provision in
one statute and the special provision in another, it also finds utility
in resolving a conflict between general and special provisions in the
same legislative instrument too and observed that:

“9. …We reach the same result by applying another well known rule of
construction that general provisions yield to special provisions.
The learned Attorney-General seemed to suggest that while this rule
of construction is applicable to resolve the conflict between the
general provision in one Act and the special provision in another
Act, the rule cannot apply in resolving a conflict between general
and special provisions in the same legislative instrument. This
suggestion does not find support in either principle or authority.
The rule that general provisions should yield to specific provisions
is not an arbitrary principle made by lawyers and Judges but springs
from the common understanding of men and women that when the same
person gives two directions one covering a large number of matters
in general and another to only some of them his intention is that
these latter directions should prevail as regards these while as
regards all the rest the earlier direction should have effect. In
Pretty v. Solly (quoted in Craies on Statute Law at p.m. 206, 6th
Edn.) Romilly, M.R., mentioned the rule thus:
“The rule is, that whenever there is a particular enactment and a
general enactment in the same statute and the latter, taken in its
most comprehensive sense, would overrule the former, the particular
enactment must be operative, and the general enactment must be taken
to affect only the other parts of the statute to which it may
properly apply.”
The rule has been applied as between different provisions of the
same statute in numerous cases some of which only need be mentioned:
De Winton v. Brecon, Churchill v. Crease, United States v. Chase and
Carroll v. Greenwich Ins. Co.
10. Applying this rule of construction that in cases of conflict
between a specific provision and a general provision the specific
provision prevails over the general provision and the general
provision applies only to such cases which are not covered by the
special provision, we must hold that clause 5(a) has no application
in a case where the special provisions of clause 23 are applicable.”

35. Lord Cooke of Thorndon pointed out, however, in Effort Shipping Co Ltd.
v. Linden Management, SA [1998] AC 605 that the maxim is not a technical
rule peculiar to English statutory interpretation, rather it “represents
simple common sense and ordinary usage”. Bennion, Statutory
Interpretation, 5th ed. (2008), p. 1155 states that it is based, like
other linguistic canons of construction, “on the rules of logic, grammar,
syntax and punctuation, and the use of language as a medium of
communication generally. As Lord Wilberforce observed in Associated
Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538, 554, that
it is still a matter of legislative intention, which the courts endeavour
to extract from all available indications.

36. In Waverly Jute Mills Co. Ltd. v. Raymon & Co. (India) (P) Ltd., (1963)
3 SCR 209 and Union of India v. India Fisheries (P) Ltd., AIR 1966 SC 35
this Court has observed that when there is an apparent conflict between
two independent provisions of law, the special provision must prevail. In
CCE v. Jayant Oil Mills (P) Ltd., (1989) 3 SCC 343 this Court has
accepted the aforesaid rule as “the basic rule of construction” that is
to say “a more specific item should be preferred to one less so.” In
Sarabjit Rick Singh v. Union of India, (2008) 2 SCC 417 this Court has in
fact followed the aforesaid precedents thus:

“58. The Act is a special statute. It shall, therefore, prevail over
the provisions of a general statute like the Code of Criminal
Procedure.”

37. This Court has noticed the application of the said rule in construction
of taxing statutes along with the proposition that the provisions must be
given the most beneficial interpretation in CIT v. Shahzada Nand & Sons,
(1966) 3 SCR 379:

“10. …The classic statement of Rowlatt, J., in Cape Brandy Syndicate
v. IRC, (1921) 1 KB 64, 71 still holds the field. It reads:
“In a Taxing Act one has to look merely at what is clearly said.
There is no room for any intendment. There is no equity about a
tax. There is no presumption as to a tax. Nothing is to be read
in, nothing is to be implied. One can only look fairly at the
language used.”
To this may be added a rider: in a case of reasonable doubt, the
construction most beneficial to the subject is to be adopted. But
even so, the fundamental rule of construction is the same for all
statutes, whether fiscal or otherwise. “The underlying principle is
that the meaning and intention of a statute must be collected from
the plain and unambiguous expression used therein rather than from
any notions which may be entertained by the court as to what is just
or expedient.” The expressed intention must guide the court. Another
rule of construction which is relevant to the present enquiry is
expressed in the maxim, generalia specialibus non derogant, which
means that when there is a conflict between a general and a special
provision, the latter shall prevail. The said principle has been
stated in Craies on Statute Law, 5th Edn., at p. 205, thus:
“The rule is, that whenever there is a particular enactment and a
general enactment in the same statute, and the latter, taken in
its most comprehensive sense, would overrule the former, the
particular enactment must be operative, and the general enactment
must be taken to affect only the other parts of the statute to
which it may properly apply.”
…When the words of a section are clear, but its scope is sought to
be curtailed by construction, the approach suggested by Lord Coke in
Heydon case, (1584) 3 Rep 7b, yield better results:
“To arrive at the real meaning, it is always necessary to get an
exact conception of the aim, scope, and object of the whole Act:
to consider, according to Lord Coke: (1) What was the law before
the Act was passed; (2) What was the mischief or defect for which
the law had not provided; (3) What remedy Parliament has
appointed; and (4) The reason of the remedy.””
(emphasis supplied)
38. In LIC v. D.J. Bahadur, (1981) 1 SCC 315 this Court was confronted with
the question as to whether the LIC Act is a special legislation or a
general legislation and while considering the rule in discussion, this
Court observed thus:
“49. …the legal maxim generalia specialibus non derogant is
ordinarily attracted where there is a conflict between a special and
a general statute and an argument of implied repeal is raised.
Craies states the law correctly:
“The general rule, that prior statutes are held to be repealed by
implication by subsequent statutes if the two are repugnant, is
said not to apply if the prior enactment is special and the
subsequent enactment is general, the rule of law being, as stated
by Lord Selbourne in Sewards v. Vera Cruz, ‘that where there are
general words in a later Act capable of reasonable and sensible
application without extending them to subjects specially dealt
with by earlier legislation, you are not to hold that earlier and
special legislation indirectly repealed, altered, or derogated
from merely by force of such general words, without any indication
of a particular intention to do so. There is a well-known rule
which has application to this case, which is that a subsequent
general Act does not affect a prior special Act by implication.
That this is the law cannot be doubted, and the cases on the
subject will be found collected in the third edition of Maxwell is
generalia specialibus non derogant — i.e. general provisions will
not abrogate special provisions.’ When the legislature has given
its attention to a separate subject and made provision for it, the
presumption is that a subsequent general enactment is not intended
to interfere with the special provision unless it manifests that
intention very clearly. Each enactment must be construed in that
respect according to its own subject-matter and its own terms.”

 

39. In Ashoka Marketing Ltd. v. Punjab National Bank, (1990) 4 SCC 406 this
Court has placed reliance upon Bennion, Statutory Interpretation (supra)
and J.K. Cotton Spinning & Weaving Mills case (supra), amongst others,
and explaining the rationale of this rule has reiterated the law as
under:

“52. In U.P. State Electricity Board v. Hari Shanker Jain this Court
has observed:
“In passing a special Act, Parliament devotes its entire
consideration to a particular subject. When a general Act is
subsequently passed, it is logical to presume that Parliament has
not repealed or modified the former special Act unless it appears
that the special Act again received consideration from
Parliament.”
53. In Life Insurance Corporation v. D.J. Bahadur Krishna Iyer, J.
has pointed out :
“In determining whether a statute is a special or a general one,
the focus must be on the principal subject matter plus the
particular perspective. For certain purposes, an Act may be
general and for certain other purpose it may be special and we
cannot blur distinctions when dealing with finer points of law.””

40. In U.P. SEB v. Hari Shankar Jain, (1978) 4 SCC 16, this Court has
concluded that if Section 79(c) of the Electricity Supply Act generally
provides for the making of regulations providing for the conditions of
service of the employees of the Board, it can only be regarded as a
general provision which must yield to the special provisions of the
Industrial Employment (Standing Orders) Act in respect of matters covered
by the latter Act, and observed that:

“9. The reason for the rule that a general provision should
yield to a specific provision is this: In passing a special
Act, Parliament devotes its entire consideration to a
particular subject. When a general Act is subsequently passed,
it is logical to presume that Parliament has not repealed or
modified the former Special Act unless it appears that the
Special Act again received consideration from Parliament. Vide
London and Blackwall Railway v. Limehouse District Board of
Works, and Thorpe v. Adams.
41. In Gobind Sugar Mills Ltd. v. State of Bihar, (1999) 7 SCC 76 this
Court has observed that while determining the question whether a statute
is a general or a special one, focus must be on the principal subject-
matter coupled with a particular perspective with reference to the
intendment of the Act. With this basic principle in mind, the provisions
must be examined to find out whether it is possible to construe
harmoniously the two provisions. If it is not possible then an effort
will have to be made to ascertain whether the legislature had intended to
accord a special treatment vis-à-vis the general entries and a further
endeavour will have to be made to find out whether the specific provision
excludes the applicability of the general ones. Once we come to the
conclusion that intention of the legislation is to exclude the general
provision then the rule “general provision should yield to special
provision” is squarely attracted.

42. Having noticed the aforesaid, it could be concluded that the rule of
statutory construction that the specific governs the general is not an
absolute rule but is merely a strong indication of statutory meaning that
can be overcome by textual indications that point in the other direction.
This rule is particularly applicable where the legislature has enacted
comprehensive scheme and has deliberately targeted specific problems with
specific solutions. A subject specific provision relating to a specific,
defined and descriptable subject is regarded as an exception to and would
prevail over a general provision relating to a broad subject.
43. In the instant case, the item 1E is subject specific provision
introduced by an amendment in 1996 to the Scheme. The said amendment
removed “new cement industries” from the non-eligible Annexure-B and
placed it into Annexure-C amongst the eligible industries. It classified
the cement units for eligibility of tax exemption into three categories:
small, medium and large. The said categories are comprehensive whereby
small and medium cement units have been prescribed to have maximum FCIs
of Rs.60/- lakhs and Rs.5/- crores, respectively and large to be over the
FCI of Rs.5/- crores. The maximum ceiling for large cement units has been
purposefully left open and thereby reflects that the intention clearly is
to provide for an all-inclusive provision for new cement units so as to
avoid any ambiguity in determination of appropriate provision for
applicability to new cement units to seek exemption.

 
44. It leaves no doubt that what is specific has to be seen in
contradistinction with the other items/entries. The provision more
specific than the other on the same subject would prevail. Here it is
subject specific item and therefore as against items 1, 4, 6 and 7, which
deal with units of all industries and not only cement, item 1E restricted
to only cement units would be a specific and special entry and thus would
override the general provision.
45. The proposition put forth by the respondent-Company that the
construction which is most beneficial to the assessee must be applied and
adopted fails to impress upon us its application in this case. Howsoever,
it is true that the canons of construction must be applied to extract
most beneficial re-conciliation of provisions. In case of fiscal statute
dealing with exemption, it would require interpretation benefiting the
assessee. But here the introduction of the subject specific entry vide
amendment into general scheme of exemption speaks volumes in respect of
intention of the legislature to restrict the benefit to cement industries
as available only under Item 1E, which categorically classified them into
three as per their FCI. The specific entries being mutually exclusive
have been placed so systematically arranged and classified in the Scheme.
The construction of provisions must not be divorced from the object of
introduction of subject specific provision while retaining other
generalized provision that now specifically exclude the new cement
industries, which could otherwise fall into its ambit, lest such
interpretation would be not ab absurdo (i.e., interpretation avoiding
absurd results).

46. Therefore, in our considered view the respondent-Company would only be
eligible for grant of exemption under Item 1E as a large new cement unit
in accordance with its FCI being above Rs.5/- crores. In light of the
aforesaid, we are of the considered opinion that the judgment and order
passed by the High Court ought to be set aside and the appeals of the
Revenue requires to be allowed.
47. In the result, the appeal is allowed and the judgment and order passed
by the High Court is set aside. No order as to costs.

………………..J.
[ H.L. DATTU ]

 

………………..J.
[ S.A. BOBDE ]

NEW DELHI,
FEBRUARY 19, 2014.

 

 

 

 

 

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