Calcutta High Court
Supreme Oil Industries Ltd. And Anr. vs Special Secretary, Finance (Taxation) ... on 19 April, 2002
Equivalent citations: [2002]127STC352(CAL)
Author: Asok Kumar Ganguly
Bench: Asok Kumar Ganguly
JUDGMENT Asok Kumar Ganguly, J.
1. This writ petition has been filed challenging the order dated January 25, 1999 passed by the Special Secretary, Finance (Taxation) Department, Government of West Bengal rejecting the petitioner's application for getting the benefit under the West Bengal Industrial Promotion (Assistance to Industrial Unit) Scheme, 1994 (hereinafter called the "said Scheme").
2. It may be noted that the impugned order was passed pursuant to an order of the honourable High Court on a previous writ petition being W.P. No. 1734 of 1998.
3. On such petition, a learned judge of this Court by an order dated December 15, 1998 directed that the petitioner's application filed in Form I under the scheme be heard and a reasoned order be passed disposing of the application.
4. Pursuant to the said order, the impugned decision was passed as stated hereinabove.
5. Therefore, the question that falls for consideration before this Court is whether the petitioner is entitled to the assistance under the said scheme in respect of the goods manufactured by it.
6. The basic facts in this case are that the petitioner-company carries on business, inter alia, of manufacturing rice bran oil raw grade-I by the solvent extraction process. -According to the petitioner-company, the said oil is known as "edible rice bran oil". The petitioner has further stated that the refined grade of rice bran oil is fit for direct human consumption. But, the rice bran oil of Raw Grade-I manufactured by the petitioner-company is also of edible variety and is rendered fit for human consumption after some processing. But, the rice bran oil raw grade-II is not edible and is meant for only industrial purposes. The case of the petitioner-company is that the rice bran oil raw grade-I is used by the Vanaspati Industries. The petitioner has further stated that the said oil, viz., rice bran oil raw grade-I obtained by the method of solvent extraction is permitted to be used in the manufacture of vanaspati and in support of this contention, the petitioner has referred to the notification issued by the Directorate of Vanaspati, Vegetable Oil and Fats, Government of India and several other materials.
7. Now referring back to the said scheme, this Court finds that the said scheme was introduced by the Government of West Bengal in accordance with the Finance Minister's Budget Speech on May 27, 1994. The said scheme dated May 27, 1994 was also published in the Calcutta Gazette on that date. From a perusal of the resolution of the Government of West Bengal promulgating the said scheme, it appears that the State Government found that certain industries in the State were passing through an acute financial crisis. As such, the State Government thought it necessary to extend the financial assistance to those industries to tide over such crisis. The said financial assistance was applicable to the manufacturing units of such industries of the State as were manufacturing items mentioned in the schedule to the said scheme. The said scheme was come into effect on April 1, 1994 and was to remain valid for a period of one year from that date, i.e., up to March 31, 1995. Under Clause 3 of the said scheme, the entitlement to the Industrial Promotion Assistance has been laid down and the same is set out below :
"Clause 3. Entitlement to the Industrial Promotion Assistance.--Where a registered dealer manufactures in his unit goods specified in Schedule A or manufactures in his SSI unit goods specified in Schedule B and sells such goods in the State--intra-State or in the course of inter-State trade or commerce within the meaning of Section 3 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per centum of the amount of sales tax paid by him for any quarter under the Sales Tax Act in respect of sales of such goods, as industrial promotion assistance."
8. In Clause 4 of the said scheme, the manner of applying for assistance was provided.
9. In Clause 5 of the said scheme, the manner of payment of the assistance has been laid down. Along with the said scheme, a Schedule has been appended. In so far as the controversy in the present case is concerned, the same is confined to Schedule "A" and the item No. 4 in the said Schedule. The said item No. 4 in Schedule "A" is "Edible rice bran oil".
10. It is the petitioner's case that it filed an application claiming the said assistance under the said scheme on the quarter ending on June 30, 1994. But, since no action was taken by the respondent-authorities in respect of the application, representations were made to the Government by the Eastern India Oil Industry and the Trade Association. But, no response was given. Thereafter, the petitioner demanded justice by a letter dated June 4, 1998, but, no reply was received. Then the petitioner filed a writ petition being W.P. No. 1734 of 1998 and on that writ petition, a learned Judge of this Court passed an order dated December 15, 1998 and, thereafter, by the impugned order dated January 25, 1999, the claim of the petitioner was turned down, inter alia, on the ground that the item which is manufactured by the petitioner is not coming within Sl. No. 4 of the Schedule which has been quoted above. The authority found that the petitioner is manufacturing rice bran oil raw grade-I from which the refined rice bran oil or vanaspati could be prepared. But according to the respondents since the item manufactured by the petitioner was not fit for human consumption, therefore, the rice bran oil raw grade-I which is manufactured by the petitioner is not covered by the expression "edible rice bran oil" and, as such, the claim of the petitioner was rejected.
11. In coming to the decision that the product manufactured by the petitioner is not "edible rice bran oil", the authority relied on the dictionary meaning of the word "edible" and also certain decisions of the High Court. The learned counsel for the petitioner has, however, contested the said findings on several grounds.
12. The learned counsel for the petitioner submitted that the aforesaid interpretation given by the authority concerned is divorced from the context on which the claim of the petitioner is based. In support of this contention, the learned counsel for the petitioner referred to the preamble of the said scheme. The learned counsel submitted that it is clear from the said preamble that it was made applicable to the industries in the State of West Bengal which were going through an acute financial crisis. Therefore, the learned counsel for the petitioner submits that the said scheme is meant in respect of existing industries and not for industries which are to be set up, inasmuch as the industry which has not yet been set up or is yet to be set up or is about to be set up cannot go through an acute financial crisis. The learned counsel further submits that the life of the said scheme is for one year. Therefore, the two considerations, viz,, existence of financial crisis and the limited span of the said scheme taken together definitely point out that the said scheme has been framed keeping in mind the existing industries and not industries which are yet to be set up. The learned counsel further submits that the argument of the respondent that scheme has been introduced for the purpose of encouraging the setting up of units to manufacture its products is not tenable.
13. It was urged by the petitioner's counsel that the benefit of the consumer is also not contemplated under the said scheme. The scheme is for extension of financial assistance to certain manufacturing industries to tide over the financial crisis by giving them back 90 per cent of the sales tax. The burden of tax on the consuming public is not reduced, as they have to pay the tax. But after the same is collected and deposited by the manufacturing units in question, they will be entitled to get back 90 per cent of such tax deposited by them by way of assistance. Apart from that the limited life of the Scheme for one year makes it clear that it is not for encouraging the setting up of new units.
14. This Court is of the opinion that the aforesaid contention of the learned counsel for the petitioner is right. It is no doubt true that the said scheme is for an existing unit which is going through a financial crisis. It is also true that the said scheme is not meant for the interest of the consuming public. But, what is of essence to the said scheme is that in order to claim benefit or entitlement under the said scheme, the unit must be a manufacturing unit and it must manufacture one of goods specified in Schedule "A". Here the relevant goods in the Schedule "A" is "edible rice bran oil" and the question is whether the petitioner is manufacturing "edible rice bran oil". In this connection, the petitioner is relying on its averments in para 7 of the writ petition for contending that at the relevant point of time when the said scheme was introduced, there was no unit in the State of West Bengal manufacturing refined grade rice bran oil and the only unit for the manufacture of refined grade rice bran oil was Kusum Products Ltd. But the said unit was started in the year 1996, i.e., after the period mentioned in the said scheme was over. Therefore, the petitioner's unit which is manufacturing rice bran oil grade-I at the relevant point of time must be included within item No. 4 of the Schedule, The learned counsel also referred to para 16 at page 14 of the writ petition where averments made in para 7 have been repeated. The learned counsel also relied on the fact that these averments have not been denied by the respondent-authorities. Therefore, the learned counsel submits that since there was no unit in the year 1994, which was producing refined rice bran oil, the item in the Schedule mentioned as "edible rice bran oil", must mean rice bran oil which was being manufactured in the State by solvent extraction process. The learned counsel stated that any other interpretation would render the said scheme useless, which would mean that no industry in the State would get the benefit. The learned counsel further stated that the product of the petitioner-company, viz., rice bran oil raw grade-I, is known in the trade as edible rice bran oil. The learned counsel submits that there are three grades of rice bran oil, viz., refined grade, raw grade-I and raw grade-II. The raw grade-I is of edible variety and is rendered fit for human consumption. But the raw grade-II is not of edible variety. The learned counsel for the petitioner submits that the stand of the respondent-authorities in the impugned order is to adopt the dictionary meaning of the word "edible" ignoring the product as described in the Schedule to the scheme, viz., edible rice bran oil. The learned counsel also submitted that from the materials which were filed before the authority passing the impugned order, it is clear that the product of the petitioner-company is known in the market as edible rice bran oil.
15. The decision, in this case, depends on a proper interpretation of the item edible rice bran oil. Now the question is in coming to the proper interpretation of the said expression whether the court should adopt, as has been done in the impugned order, the dictionary meaning of the word "edible" or the court should go by the commercial parlance and connotation of the word "edible" in trade and business. In the impugned order, the authority relied on the meaning of the word "edible" given in the Concise Oxford Dictionary and also in Webster's Third New International Dictionary. Following the meaning given to the word "edible" in the two dictionaries the authority came to the conclusion that the word "edible" means something which is meant for human consumption and as the petitioner's product, viz., rice bran oil grade-I is not fit for human consumption, the same is not included in the Schedule to the said scheme. The reasoning given in the impugned order is that since the item manufactured by the petitioner is not fit for human consumption, unless it goes through certain process, the same cannot be called edible rice bran oil. The aforesaid conclusion arrived at in the impugned order is also sought to be developed on the basis of some decision which the court now proposes to consider.
16. The first of such decision referred to in the impugned order is in the case of Chhatar Extractions Pvt. Limited v. Excise and Taxation Commissioner, Punjab and Chandigarh reported in [1986] 61 STC 374 (P&H).
17. In the said case, the word "edible" came up for consideration and the learned Judge interpreted the word "edible" to mean something fit to be eaten as food. The said decision is based on another decision in the case of Chandausi Oil Mills, Chandausi, Moradabad v. Sales Tax Commissioner reported in [1961] 12 STC 310 (All.). Relying on the ratio in Chandausi the learned Judges held in Chhatar Extraction [1986] 61 STC 374 (P&H) that it may be true that the Government of India has permitted the use of specific percentage of rice bran oil by mixing it with refined seasame oil for the manufacture of edible vegetable oil products but the constituents of edible oil are not necessarily edible. The learned Judge held that rice bran oil becomes edible only after it is refined. The another judgment relied on in the impugned order is in the case of Gridharmal Kapur Chand v. Dev Raj Madan Gopal . In that judgment, the learned Judges of the honourable Supreme Court held that the cotton seed is an oil seed, but it is not fit for human consumption. Therefore, the said oil seed is not edible.
18. The learned counsel for the petitioner has, however, relied on a few judgments in support of his contentions that the trade meaning of the item is to be have preference over the dictionary meaning and the dictionary meaning is not the safest guide in such circumstances. Reliance was first placed on the decision in the case of Aditya Mills Limited v. Union of India . In that case, the question which came up for consideration was the meaning of the word "yarn" in the context of imposition of the Central excise duty. In paragraphs 7 and 8 of the said judgment the learned Judges explained that for ascertaining the correct meaning of a fiscal entry, reference to a dictionary is apt to be misleading. According to the learned Judges of the honourable Supreme Court, the dictionary gives all the different shades of meanings, but, the correct meaning which is to be ascertained in such case is the meaning in the context of the trade and business and the trade meaning is also to be given preference. The other decision on which the reliance was placed was given in the case of Collector of Central Excise v. Alco Industries reported in (1991) 55 ELT 184 (Mad.). In that case, the meaning of the expression "domestic electrical appliance" came up for consideration and the learned Judges in para 10 of the said judgment have held that in interpreting the tariff item or a taxable entry, scientific, technical or dictionary meaning should not be mechanically adopted. The meaning of such words should be construed in their own context in the sense as ordinary people understood in dealing with the such goods. Reliance was also placed by the learned counsel on the decision in the case of Collector of Customs, Bombay v. Swastic Wollens (P.) Ltd. . In that case, the learned Judges of the honourable Supreme Court held that when the statutory definition is not provided in the Act in respect of an item in the Customs Act or the Central Excise Act, the trade understanding and meaning thereby in the opinion of those who deal with the goods in question is the safest guide.
19. The learned counsel further submitted that the expression "edible" cannot be construed in isolation from the rest of the words "rice bran oil". The learned counsel submits that in the instant case, the object of the scheme is to encourage industrial activities by providing concession. Therefore, it must receive a liberal interpretation. In support of the said contention, the learned counsel relied on the decision in the case of Commissioner of Income-tax, Amritsar v. Straw Board Manufacturing Co. Ltd. . In the said judgment at page 434 of the report, the learned judges held that when a provision is made in the context of law providing for concessional rates of tax for the purpose of encouraging an industrial activity, liberal construction should be put on such statute.
20. The learned counsel for the petitioner has also submitted by referring to various materials before this Court that the products manufactured by the petitioner is accepted in trade and commerce as an edible rice bran oil. Reliance was placed on the following materials :
(a) The petitioner relied on the general terms and conditions for purchase of oils and fats by specified Hindustan Lever Ltd., and Lipton Ltd. Those companies were engaged at the relevant time in the manufacturing of vanaspati. At page 47 of the writ petition, edible rice bran oil has been referred to in the list of quality specification for solvent extracted oil. The learned counsel submitted that by edible rice bran oil the item which was manufactured by the petitioner is meant both in trade and commerce and the quality specification of these two Vanaspati manufacturers of repute would show that.
(b) The petitioner relied on the letter of the Director (Adm. and Van) of the Directorate of Vanaspati, Vegetable Oils and Fats, Ministry of Civil Supplies, Government of India, to the effect that the solvent extracted rice bran oil is known as "edible grade-I oil". It is no doubt true that the petitioner manufactured that oil and that is in the edible variety. This has been referred to at page 55 of the writ petition.
(c) The petitioner also relied on a circular dated July 31, 1997 received by the Department of Revenue, Ministry of Finance, Government of India to the effect that the vegetable oils of edible grade covers vegetable oils which are fit for human consumption as also vanaspati oils which are fit for such consumption after further processing and by saying so the said circular makes it clear that the benefit of duty exemption is admissible as long as vegetable oils imported are used for edible purposes even after refining. This has been referred to at page 56 of the writ petition.
(d) The petitioner also relied on the notification dated April 9, 1997, issued by the department of Revenue, Ministry of Finance; Government of India, to the effect that solvent extracted rice bran oil was edible grade rice bran oil.
(e) The petitioner also relied on Pulses, Edible Oil Seeds and Edible Oil (Storage Control) (Fourth Amendment) Order, 1977. The said Order was issued in exercise of power under Section 3 of the Essential Commodities Act. The said order was amended in the year 1990 and under the said amended order, the expression "edible oil" has been defined. The said definition is as follows :
" 'Edible oil' means any oil used, directly or after processing, for human consumption and includes hydrogenated vegetable oil."
(f) The petitioner also relied on the opinion of the Director of Technical Research Institute of Jawahar Lal Nehru Technological University. In his opinion, the Director stated as follows :
"The rice bran oil grade-I has been defined as edible rice bran oil because the oil is used for edible purposes after refining whereas the rice bran oil grade-II which is not fit for refining process due to obvious techno-economical reasons is termed and classified as an oil meant for industrial uses. Since the same cannot be used for edible purposes, but can be used only for industrial purposes."
(g) Reliance was also placed on the opinion of Professor M.M. Chakraborty, formerly Ghose Professor of Applied Chemistry, Calcutta University and Vice-Chancellor of the Jadavpur University and Bidhan Chandra Krishi Vidyalaya, West Bengal. Professor Chakraborty was also at the relevant point of time the Chairman of the Committee formulating ISI standards on the rice bran oil. In his opinion, professor Chakraborty has stated as follows :
"As a matter of fact rice bran oil grade-I is considered to be edible but is not meant for direct human consumption as it is extracted through the solvent extraction method. It is a known fact that any solvent extracted oil cannot be meant for direct human consumption even if it is edible till it is refined, deodorised and bleached. It will be worthwhile mentioning that soyabean, groundnut and mustard oils though edible has to be refined before it is meant for direct human consumption if the same is extracted through the solvent extraction method.
The rice bran oil grade-I was defined as edible rice bran oil because it is used for edible purposes and the rice bran oil grade-II for industrial use. As it was not meant for edible purposes but for industrial purposes."
(h) Reliance was also placed on the publication made by the Central Food Technological Research Institute, Department of Grain Science and Technology, Ministry of Food Processing Industry, Government of India. The entire report has been disclosed in the writ petition. On rice bran oil, the following position has been stated in the said publication :
"In India, rice bran oil has only recently begun to be used as cooking oil. As far as food use is concerned, so far it has been used only for making vanaspati, for which purpose oil with less than 8-10 per cent FFA is considered acceptable and this oil is called 'edible rice bran oil' in the trade. Genuine edible grade oil to be used for cooking/salad oil requires refining.
Other vegetable oils are generally prepared in India by pressing and can be directly used in food. But rice bran oil is prepared by solvent extraction and as such it has to be refined for use in cooking. Refining is also necessary in view of the presence of acids in it. Even if the oil is prepared from fresh or stabilised bran, the amount of FFA in the oil is usually more than 3 per cent, making it generally unsuitable for direct use in food."
21. This Court finds from a perusal of the impugned order that it has not considered the meaning of edible rice bran oil as prevalent in trade and commerce and the materials which are disclosed in the writ petition to ascertain the true meaning of edible rice bran oil were also not considered. This is clear from the text of the impugned order. Apart from that, the impugned order is suffering from an infirmity in the decision making process. It is clear from the impugned order that the authority has relied on a report dated January 5, 1999. The said report was furnished by the Commercial Tax Directorate under Memo No. 4233 CT/AC dated January 5, 1999. The said report is dated January 5, 1999 and the hearing were given to the petitioner on January 13, 1999. It appears from a perusal of the report which has been disclosed before this Court at the time of final hearing that the impugned order is substantially based on the same. In other words, the petitioner's case for availing of the benefits under the said scheme was rejected on the basis of the said report which was not disclosed to the petitioner. This is clearly a gross failure of natural justice. This has certainly vitiated the decision making process, since the petitioner had no chance of knowing the material and naturally had no chance to controvert the same when its case was heard. For this reason alone, the impugned order cannot be sustained and, as such, is quashed. This point has been taken in paragraph 12 of the writ petition.
22. The learned counsel for the respondent, however, submitted that according to para 5 of the said scheme a certificate is required to be submitted by the Commissioner of Commercial Taxes for verifying the correctness of the particulars furnished in the application filed for getting the benefit under the scheme.
23. It has been also argued that the report dated January 5, 1999 was given after hearing the petitioner.
24. It may be true that before the report was submitted by the Assistant Commissioner of Commercial Taxes, the petitioner was heard by the Assistant Commissioner. But that is not enough compliance with the principles of natural justice and fair play. The person who has been heard is also entitled to know the contents of the report submitted after hearing him and especially when the contents of the said report is used for the purpose of deciding his right to claim tax exemption under the scheme. These are the inalienable attributes of any quasi-judicial proceedings. If these principles of fairness in the adjudication of the "lis" are offended, the resultant decision cannot be sustained in law.
25. But it is difficult for this Court to come to a positive finding on the basis of the materials disclosed in the said writ petition that the petitioner is entitled to the benefit under the said scheme. Such decision should be taken at the appropriate level by the respondents and the writ court should not usurp those functions. But the petitioner has disclosed various materials which have been indicated in the judgment hereinbefore and they should be considered by the authority while deciding the petitioner's claim. Merely the dictionary meaning will not do. In such cases, the meaning given in the dictionary is often misleading and the understanding in the trade and commerce should have a primacy and the cases cited by the petitioner on this score are relevant and should be considered.
26. In the cases considered in the impugned order namely in Chhatar Extractions [1986] 61 STC 374 (P&H), the notification prescribed the lower rate of tax in respect of "edible oil" and not in respect of edible rice bran oil. In that context, the question came up for consideration whether the rice bran oil used in the manufacture of vegetable oil is an edible oil. That is not the point in issue.
27. Similarly, in the case of Chandausi Oil Mills [1961] 12 STC 310 (All.), the court considered what is meant by edible oil and in the case of Girdharmal the honourable Supreme Court considered what is meant by edible oil seeds and whether the same can be included within the definition of food stuff. Those cases are not relevant for deciding the controversy in this case.
28. In that view of the matter, this Court quashes the impugned order dated January 25, 1999. But the matter is sent back to the authority once again for the purpose of consideration of the petitioner's case. Since the matter is an old one it is expected that the same should be considered by the appropriate authority within three months from the date of communication of this order in the following manner :
(i) Notice should be given to the parties immediately. After getting the notice, the petitioner-company can, if it wants to, file an additional representation in which it can deal with the contents of the memo dated January 5, 1999 issued by the Assistant Commissioner of Commercial Tax, copy of which has already been supplied to the petitioner in the course of hearing. But such representation is to be submitted within two weeks of receiving the notice.
(ii) The petitioner must disclose all materials which have been disclosed in the writ petition before the concerned authorities.
(iii) Similarly, a chance is given to the respondents to produce relevant materials in support of their contentions. The authorities will not rely on any undisclosed materials in the course of hearing.
(iv) Such hearing should be concluded quickly so that the authorities could pass the order within three months from the commencement of hearing. The authority must deal with all the materials produced before him on merits and pass a speaking order.
29. The writ petition is, thus, allowed to the extent indicated above.
30. There will be, however, no order as to costs.
Later :
31. Xerox certified copy of this judgment and order be made available to the parties expeditiously, if applied for.