Rajasthan High Court - Jaipur
J.K. Udaipur Udhyog Ltd. vs State Of Rajasthan And Ors. on 11 December, 2001
Equivalent citations: [2003]131STC176(RAJ), 2003(1)WLN281
Author: H.R. Panwar
Bench: H.R. Panwar
JUDGMENT Rajesh Balia, J.
1. These appeals raise common issues of interpretation of the Rajasthan Sales Tax/Central Sales Tax Exemption Scheme, 1998/Rajasthan Sales Tax/Central Sales Tax Deferment Scheme, 1998, and effect of notification dated September 30, 1999 bringing about a change in the scheme affecting the claim of sick units which are engaged in manufacturing cement but have not availed benefit of exemption from payment of tax or deferment of tax previously. Hence are heard and decided together.
2. It will be appropriate that before we set out the issues requiring consideration, we notice the facts relevant to these appeals. The State of Rajasthan in exercise of powers conferred on it under section 15 of the Rajasthan Sales Tax Act, 1994 and Section 8(5) of the Central Sales Tax Act, 1956 notified a consolidated scheme extending exemption from payment of tax for certain industrial units known as the Rajasthan Sales Tax/Central Sales Tax Exemption Scheme for Industries, 1998 (hereinafter referred to as "the Scheme of 1998"). It envisages exemption to certain industrial units from payment of tax on the intra-State sales/inter-State sales of the goods manufactured by them within the State, including by-products and the waste items derived therefrom and the packing material used therein in the manner, to the extent and for the period as specified in the notification.
3. The appellants-petitioners in these two set of appeals are two manufacturers of cement, who claim that the respective cement units owned by them are sick industrial units. One is J.K. Udaipur Udhyog Limited having its unit at Udaipur and another is J.K. Synthetics Ltd. having a white cement plant at Gotan and a grey cement plant at Nimbahera in Rajasthan. Both of them have not availed benefit of exemption from payment of tax or deferment of tax, previously. The petitions relate to successive financial years of assessment in respect of which claim of exemption from payment of tax/deferment of tax payable is laid by them under the scheme at the rate mentioned in column 3 of item 1 read with item 4(a) of the annexure B of the Scheme. However, the State Level Screening Committee as well as the assessing authority has allowed exemption claim of each of the applicants only to the extent of 25 per cent of tax in each year as per column 3 of item 3 of annexure B of the Scheme.
4. So far as J.K. Udaipur Udhyog Limited is concerned, it submitted its application in all respects with all requisite details to the State Level Screening Committee claiming benefits under the said scheme as a sick unit on June 17, 1999 and completed application certificate was issued to the petitioner-company with effect from July 26, 1999. The company started availing the benefits of the exemption under the scheme with effect from August 1, 1999 in terms of Clause 4(h) of the scheme and it stopped charging/collecting the sales tax in proportion as per the scheme existing on that date. According to the Scheme as on July 26, 1999/August 1, 1999 the petitioner as a sick unit was entitled to 100 per cent tax exemption during the first year of specified period of eligibility and 90 per cent in the second year, 80 per cent in third year and 70 per cent in fourth year and so on at declining rate up to 30 per cent until last year of its eligibility period of exemption if the maximum limit of exemption is not reached earlier.
5. On December 13, 1999, the State Level Screening Committee, which is the sanctioning authority under the said Scheme, classified the petitioner as a sick unit under item No. 4(a) of annexure "B" annexed to the Scheme and eligibility certificate was issued on that basis to the petitioner. The exemption to which the company was entitled to avail was described thus :
"The maximum duration for availing the benefits shall be 11 years and the maximum benefits shall be limited to 100 per cent of the Eligible Fixed Capital Investment, i.e., Rs. 10,505.74 lacs. The quantum of benefits shall be 25 per cent of the tax liability which shall flow to the unit from the date of corrigendum issued by the Finance Department, Government of Rajasthan which is 30th September, 1999 as regards the difference of benefits availed by the unit on the basis of Application Completion Certificate issued in its favour and the quantum of tax available under the corrigendum dated 30th September, 1999. The Commissioner, Commercial Taxes Department, assured that the recovery of this amount shall not be pressed till a final decision is arrived at about the applicability of the date of corrigendum."
6. The notification, captioned as "Corrigendum under the Scheme dated 30th September, 1999", has not been published till that date but was published only on 7th January, 2000 after the decision of the State Level Screening Committee was made and communicated to the petitioner.
7. In the other case of J.K. Synthetics Ltd., the application was made for sanctioning the exemption under the Scheme as a sick industrial unit in 1998. The J.K. Synthetics Ltd. company was declared as a sick company by Board for Industrial and Financial Reconstruction under the Sick Companies (Special Provisions) Act, 1975. The claim was in respect of one of its units manufacturing white cement and grey cement. The application for claiming benefit of Scheme as a sick unit was certified to be complete in all respects as on November 20, 1998.
8. The State Level Screening Committee in the first instance was of the opinion that declaration of company as a sick company may not necessarily mean that it is also in respect of unit in question as a sick industry. Hence to remove this doubt, letter was addressed to Board for Industrial and Financial Reconstruction for clarification. The Board for Industrial and Financial Reconstruction has replied that since entire company has been declared sick, no separate declaration of sickness about individual units owned by the company is envisaged. The Board reiterated that entire company is sick. As a result, the application of the company has been kept pending but it has been clarified that the company may continue to avail exemption from payment of tax in terms of Clause 4(h) of the Scheme up to 25 per cent of the tax as envisaged under notification dated September 30, 1999. The company had stopped collecting and charging tax on sales made by it since date of completion of application, in the case of Grey Cement Division with effect from January 1, 1999 and started availing deferment benefit in the case of White Cement Division with effect from April 1, 1999. However, the assessing authority has issued notices for stating that petitioner has wrongly availed the benefit of exemption/deferment up to 100 per cent in the first year and at present benefit though it is entitled to exemption/ deferment only up to 25 per cent. Assessment was made applicable to a sick industrial unit governed by column 3 of item 1 of annexure B read with item 4(a) of the annexure, and computing exemption at 25 per cent of tax only as per item III of the annexure B read with item 4(a) as per the term of order passed by State Level Screening Committee, in the light of notification dated September 30, 1999. The Committee did not decide the application finally but deferred its consideration until BIFR approves rehabilitation scheme.
9. The petitioner-company has filed separate writ petitions for different periods for claiming relief under Rajasthan Sales Tax Act and Central Sales Tax Act.
10. The other facts which are not in dispute are that as on the date when the application was made complete in all respects in the case of both the petitioners and as on date when the sanction was accorded by the State Level Screening Committee in the case of J.K. Udaipur Udhyog Ltd., for availing benefits under the Scheme, publication of the notification dated 30th September, 1999 which was necessary to make it effective, had not taken place, and all sick industrial units including that of cement plants were treated as one class. For the purpose of extending exemption benefit the sick units were divided into two categories, viz., those which have availed exemptions previously and which have not availed such benefit. In end of these two categories, again all sick industries were treated as one class.
11. It will be apposite to reproduce hero annexure "B" as existing before the notification dated 30th September, 1999 was made effective.
Annexure B Eligibility extent, of exemption from tax under the Exemption Scheme S. No. Type of units Extent of the percentage of exemption from total tax liability Maximum exemption in terms of percentage of eligible fixed capital investment (FC1) Maximum time-limit for availing exemp-tion from tax 1 2 3 4 5
1. New units otherthan the units mentioned at items 2 and 3 and units going in for expansion or diversiiictition 1st year 100% 100% of eligible fixed capita investment in cases where such investment exceeds Rs. 150.00 lacs, and 125% of eligible fixed capital investment in cases where suchinvestment does not exceed Rs. 150.00 Lacs.
Eleven years 2nd year 90% 3rd year 80% 4th year 70% 5th year 60% 6th year 50% 7th year 50% 8th year 40% 9th year 40% 10th year 30% 11th year 30%
2.
(a) New units of knitwears, gems and jewellery, textile, electronics and telecommunications, com-pxiter software, footwears and leather goods, glass and ceramic.
1st year 100% 125% of eligible fixed capital investment.
Thirteen years.
2nd year .100% 3rd year 90% 4th year 80% 5th year 70% 6th year 60% 7th year 50% 8th year 50% 9th year 40% 10th year 40% 11th year 30% 12th year 30%
(b) Very presti-
13th year 30% gious units 100% of eligible 3. All categories of Cement plants/units including pionecri ng/prestigious/very prestigious/premier units, except mini cement plants mentioned in annexure A 25% of total tax liability fixed capital investment Eleven years. 4 Sick units Same benefits which are available to new units, at item No. 1. Eleven years (a) Sick units which have not availed of benefits of exemption from tax or deferment of tax previously. (b) Other sick units, which have availed of the benefits of exemption from tux or dfifer-ment of tax. 1st year 80% 2nd year 70% 3rd year 60% 4th year 50% 5th year 40% 6th year 30% 7th. year 20% 8th to llth year 10% 100% of eligible fixed capital investment in cases where such investment exceeds Rs. 150.00 lacs and 125% of eligible fixed capital investment in cases where such investment does not exceed Rs. 150,00 lacs. Eleven years 5 Pioneering units/ Prestigious units/ Exporting units with a minimum of 50% of their production. 1st & 2nd year 100% 3rd year 90% 4th year 80% 5th year 70% 6th year 60% 7th £ 8th year 50% 9th & 10th year 40% llth & 12th year 30% 13th year 30% 100% of eligible fixed capital investment Thirteenyears.
12. Columns Nos. 3, 4 and 5 respectively of the above table under annexure B provide the manner in which, extent up to which, and the specified period within which the exemption made available under the scheme is to be availed by the eligible units. Column 4 provides the maximum extent of exemption amount which can be availed by the exempted unit under the scheme. Column 5 provides the maximum period within which up to maximum amount of exemption from tax can be availed by the eligible unit. During this period the rate at which, that is to say, the manner in which the amount of exemption determined under column 4 can be availed from payment of tax by the concerned industrial unit is provided under column 3. This scheme would reveal the maximum extent up to which the exemption from payment of tax in terms of quantum can be availed by an industrial unit in respect of its turnover of goods manufactured by it, which are entitled to avail exemption is related to the Eligible fixed capital investment on percentage basis by availing exemption in the manner provided in column 3, viz., the rate at which the exemption can be claimed in the annual assessment from payment of tax which is otherwise payable by the industrial unit concerned. The amount of exemption availed every year is to be adjusted against the amount specified in column 4 with further limitation that such maximum limit has to be availed or exhausted within the period specified in column 5. After the expiry of that period, no further exemption can be availed by the industrial unit, even if the industrial unit has not been able to avail the exemption of maximum extent permissible. Likewise, even though the period specified in column 5 has not expired but an assessee has availed the maximum amount of exemption quantified in terms of column 4, he will still cease to draw any exemption after exhausting that limit forthwith. Thus, making it sure that an assessee avails the exemption in any circumstances neither more than what is quantified in column 4 nor beyond the period specified in column 5. The special feature of the scheme of 1998 which distinguishes it from past schemes is in the manner of availing the exemption. Instead of providing a flat rate of exemption from tax during the entire period within which the exemption can be availed by an industrial unit, it has adopted ordinarily a gradual declining rate of extending the exemption. It clearly delineates the policy under the scheme that for the initial periods when the exemption is extended, a higher rate of tax exemption is made available and gradually as the industry becomes mature and secure and gains in strength, the percentage of exemption that can be claimed in successive years from the full tax liability gradually declines. This also ensures that a new industry, expansion or diversification or a rehabilitation project, takes time to gather full momentum and during initial period due to its teething problem is likely to have lesser turnover. At the same time need of assistance is greater at the initial period. By providing that exempted unit gets relief from payment of tax at higher rate during earlier period of exemption, it gets the assistance more and most during that period.
13. However, a different note has been struck in the case of cement plants except mini cement plants and sick units amongst cement plants. Cement plants have been extended incentive of exemption at flat rate of 25 per cent for the full specified period.
14. Before amendment the maximum extent up to which exemption from payment of tax could be availed by any "sick unit", was fixed at 100 per cent of eligible fixed capital investment in all cases except where such investment is up to 150 lacs (1.5 crores) only, the exemption limit was 125 per cent of eligible fixed capital investment, and period specified for availing such benefit was 11 years. In the case of sick units which have not availed tax benefits previously, the graduated rate of exemption from payment of tax was as per Schedule provided in column 3 of item 1, which reveals that for the first year unit could avail tax exemption of 100 per cent, for 2nd year 90 per cent, for 3rd year 80 per cent, thus declining rate by 10 per cent every year until it reaches 50 per cent for the 6th year of specified period.
15. Thereafter for last 6 years of specified period for each succeeding couple of years the rate of availing exemption from tax is reduced by 10 per cent, that is to say, the rate at which exemption from payment of regular tax can be availed for 6th and 7th year is 50 per cent, for 8th and 9th year it can avail exemption at 40 per cent and for last two years at 30 per cent. Thus, at no stage exemption rate declines below 30 per cent of tax,
16. In the like manner, for all sick units the manner, extent, and period were laid in Clause (b) of item 4 of the annexure "B". It envisaged a uniform gradual declining rate for availing tax exemption up to 100 per cent of eligible fixed capital investment within 11 years.
17. By notification dated 30th September, 1999, published on 7th January, 2000 in item 4(a) under columns 2 and 3 for the expression "New Units" at serial No. 1, the words "new units at serial Nos. 1, 2 and 3, as the case may be" have been substituted which makes item 4(a) read,--
"All sick units which have not availed of benefits of exemption from tax or deferment of tax previously, shall avail benefits as are made available to new units at serial Nos. 1, 2 and 3 as the case may be."
18. Thus, the manner and the extent to which the benefits can be availed by a new unit falling in item Nos. 1, 2 and 3 respectively will be availed by a sick unit engaged in manufacture of goods falling respectively in item Nos. 1 to 3 of the like nature, if it has not already availed the benefit of exemption previously. However, Clause (b) of item No. 4 remains the same in respect of all sick units which have availed benefit of exemption or deferment previously.
19. The alteration extends for greater benefit to a sick industry engaged in any industry governed by item 2 or a prestigious industry. It makes a graduated exemption available at a higher rate in the initial period of exemption period and higher amount of maximum limit of exemption for the units falling in item 2, viz., if the sick industrial unit engaged in the manufacture of knitwears, gems and jewellery, textile, electronics and telecommunications, computer software, footwears and leather goods, glass and ceramic or it is a very prestigious unit. The principal difference in item No. 2 and item No. 1 is that for industries falling in item No. 2 larger period is specified for availing the benefits by providing 13 years instead of 11 years, as in the case of item No. 5 which has been made available to pioneering, prestigious and exporting units. Under item No. 2 the extent of exemption which can be availed of by the industrial units is greater, viz., 125 per cent of eligible fixed capital investment instead of 100 per cent which is ordinarily available in the case of all other items. Thus, a sick industry which falls within the description of industries covered under item No. 2 whether manufacturing the goods mentioned therein or was a very prestigious unit on the basis of its eligible fixed capital investment outlay and number of persons employed, and has not availed the benefits of exemption or deferment previously have been extended the benefits for 13 years to the extent of 125 per cent of its eligible fixed capital investment instead for 11 years to the extent of 100 per cent. Moreover, for the extended period of two years, it will avail the 100 per cent exemption from payment of tax for the first two years instead of one year as in the case of item No. 1 and for the last three years of specified period will avail 30 per cent exemption from payment of tax payable. But it is to be noticed that a sick industry falling in the genre of item Nos. 1 and 2 would still avail the tax exemption at gradual declining rate only for the specified period as ordained, if it is a sick industry which has availed the benefit of tax exemption or tax deferment previously. In the case of sick industry falling in item 4(a) read with item 2 benefits have not been affected adversely.
20. Coming to the case of item No. 3 which relates to the cement plants. It has prescribed 100 per cent of the eligible fixed capital investment as the extent of exemption that can be availed within the period of 11 years. This is at par with item No. 1 except to the extent where eligible fixed capital investment does not exceed 150 lakhs or 1.5 crores but instead of availing that benefit at a gradual declining rate from 100 per cent to 30 per cent during each year of eligible period stipulating higher rate of exemption during initial period, it has provided for availing exemption from payment of tax at a flat rate of 25 per cent throughout the period which is less than the minimum rate of exemption from tax payment during each year of eligibility period envisaged in item No. 1 or item No. 2. The item 3 takes within its ambit expansion, diversion and also pioneering, prestigious, very prestigious and premier units, notwithstanding generally item 5 governs the case of exemption for this class of industries otherwise, except for the Very Prestigious and prestigious units for which the exemption is provided under item No. 2, up to a higher extent for a larger period.
21. Thus, by the amendment, the manner of availing benefits by a sick cement plant, which has not availed benefit of exemption or deferment previously, at a gradually declining rate, providing at initial stage, exemption at a higher rate and at a lower rate during the later period, in no case less than 30 per cent of tax in each year rate of exemption has been reduced considerably, on notification dated 30th September, 1999 becoming effective, to a flat rate of 25 per cent during each year of eligibility period, which is less than minimum rate at which exemption could have been availed by it, under the scheme originally framed. It results in drastically reducing the opportunity to avail maximum extent of exemption offered.
22. According to revenue a sick cement plant which has not availed the benefits of exemption from payment of tax or deferment of tax previously could avail the benefits of exemption in the manner provided under column 2 of item No. 3, viz., at a flat rate of 25 per cent of exemption from payment of tax for each year during the entire period of eligibility up to the extent of 100 per cent of its eligible fixed capital investment. However, the sick cement units which have availed the benefit of exemption from tax or deferment of tax previously, continue still to be governed by Clause (b) of item No. 4 of annexure "B". For the maximum amount of exemption available within a period of 11 years in the manner of graduated declining rate of availing exemption every year as stated in above table, which also ensures that at least until expiry of 6th year of specified period it could avail exemption from payment of tax at 30 per cent or more, which makes it much higher than has been made available to a sick cement plant which has not availed such benefits previously.
23. In the aforesaid scenario, the writ petitions were filed by the two companies which bad applied for claiming exemption under the Scheme of 1998 prior to 30th September, 1999 and whose applications were complete in all respects prior to the date of notification and which have started availing such benefit in the terms of scheme under Clause 4(h) with effect from the date their applications were complete in all respects as per certification by competent officer. In the case of M/s. J.K Udaipur Udhyog Ltd., sanction had also been made prior to 7th January, 20.00 the date on which the notification dated 30th September, 1999 was published. Both the petitioners have not availed benefit of tax exemption or deferment previously and fall in item 4(a) of annexure "B" of the scheme.
24. They are precisely aggrieved with the condition imposed on them for availing only 25 per cent of exemption each year of their eligibility period to claim full extent of their benefit instead of graduated declining rate of availing exemption prescribed under item No. 1 in the table reproduced above which ensured much higher rate of availing exemption each year, in fact between 4 times to 2 times up to first 7 years of specified period, which makes them more potent in availing full benefit as in case of all other sick industries. They claim that "sick cement plants" have been singled out for differential treatment amongst "sick industries" which has been recognised as a class by itself.
25. The issue in the present case is confined to substantive mode or manner in which the extent of exemption granted under the scheme is to be availed by a sick industrial unit which is engaged in manufacture of cement, and has not availed benefit of tax exemption or deferment previously within the specified period.
Contentions :
26. Firstly, it was urged that the amendment that was made in the scheme vide notification dated September 30, 1999 which came into operation only on January 7, 2000 is not retrospective. It did not affect the right of the petitioners to avail the limit of exemption from payment of tax by not paying taxes at gradual reducing proportionate rate of tax each year in the manner within specified period, which has already vested in them on the date their respective applications became complete in all respects. It is clearly postulated under Clauses (g) and (h) of Section 4 of the scheme that the benefits under the scheme shall be made available to any eligible unit from the date on which application filed by the applicant unit is complete in all respects, as certified by Member-Secretary of the appropriate Screening Committee and the eligibility certificate issued under the Scheme remains in force till the permissible exemption from tax in accordance with the provisions of the scheme is not exhausted or till such certificate is not amended, suspended or revoked and that any amendment in the scheme, making a dent in the eligibility of the industry during the operative period of the scheme does not affect any of those applicants whose applications are sanctioned or are pending consideration before concerned Screening Committee on that date. They are entitled to avail full benefits in accordance with the provisions of the scheme.
27. Secondly, it has been contended by the learned counsel for the petitioners before the learned single Judge as well as before us that the scheme in question is not merely an incentive scheme but has two distinct objects to achieve for two different class of industries. Firstly, certain tax benefits have been made available as incentive to invite new capital investment in the State to establish new production capacities in various areas particularly in industrial backward areas and rural areas. That encompasses new industrial units of all types, expansion and diversification. Another distinct object is not to provide incentive but is by way of rehabilitation programme of existing sick industries within the State, to save them from total decline. Benefits extended to any sick industry in the State are directly relatable to achieve the second objective stated above. For this reason the sick industrial units irrespective of their capital investment volume, have been dealt with as one single class irrespective of the commodity which they manufacture and irrespective of the area where they are situated. The two inhibitions attached with other class of eligible units to avail benefit of scheme as incentive and were treated distinctly for extending a general package of incentives.
28. In short, the contentions on behalf of the petitioners are that since the petitioners became entitled to avail benefits of exemption under item 4(a) with effect from the date of their respective applications became complete in all respects, which were so certified by the Member-Secretary of the State Level Screening Committee. Date of completion of application in each case was prior to the date of the notification. Eligibility certificate was in fact issued also to the J.K. Udaipur Udhyog Ltd., before the notification dated 30th September, 1999 could become effective on being published on January 7, 2000. It became their vested right to claim exemption from payment of tax in proportion as provided on and with effect from such date, for each year of specified period, in order to avail full extent of total exemption amount. Such rights once having accrued under a statutory scheme were not taken away or curtailed or altered because of a subsequent amendment which has no retrospective effect. Alternatively, it was contended that the amendment brought about by the notification dated 30th September, 1999 in the scheme violates constitutional limits in so far as it amends the scheme only in the case of the cement industry which is sick and which has not availed the benefit of exemption or deferment previously, resulting in reduction in the rate of availing exemption from tax in each year to make up the complete exemption limit within specified period, far less than existing rates of such exemption rate, inasmuch as the same is arbitrary, unreasonable and the amendment brought about does not have any rational nexus to the object sought to be achieved by extending exemption to sick industries. This is on the premise that all sick industries including a sick cement industry primarily constitute one class irrespective of the area in which it is established and irrespective of articles it manufactures but only one class of sick cement industry has been singled out to be treated differently from other sick industries which have not availed such benefit previously only on the basis of goods it produces, which has no rational nexus with the object of extending exemption as rehabilitating programme. The extent of eligibility and the specified period during which the exemption can be availed remains the same for all sick industries including the cement industry whether it falls in item No. 3 or item No. 4. All sick industries have been subjected to avail the benefit of exemption in a manner which provides them exemption at a graduated declining rate so as to make them available maximum assistance during the earlier part of the recovery period envisaged for them and lesser proportionate exemption is availed by them during the later part of their period of sickness. This mode is uniform in respect of all the sick industries including cement industry which have already availed the benefit of exemption or deferment at an earlier point of time.
29. It is contended by learned counsel that it is not open for the State to discriminate in extending benefits to a member of same class of persons/industry admitted to the benefit of exemption to avail the benefit in reduced or lesser proportion of exemption by amending substantive mode of availing the benefit for availing the full level, once it has been admitted to avail the benefit of exemption as a sick industry and not as an incentive for new capital investment or expanding existing production capacities for any specified commodity in any specified area.
30. Moreover, a sick cement industry cannot be treated differently solely in the case, if it has not availed earlier benefit of exemption or deferment when it is otherwise similarly treated with all other sick industries if it has earlier availed the benefit of exemption/deferment. This classification has no rational nexus with the object sought to be achieved by extending benefit of exemption or deferment of payment of tax to any sick industry.
31. On the other hand, it is contended by learned Advocate-General that the framing of tbe scheme is a matter of subordinate legislation which the State Government has authority to amend, abandon or abrogate at any time, and therefore, one does not secure a vested right under a scheme like the Scheme of 1998. Once, the State Government has thought it fit to amend the scheme by issuing corrigendum, it became operative and applicable with effect from the date of notification and the petitioners could avail the benefit of exemption under the current scheme only as ordained under the scheme as amended vide notification from the date such notification became effective. In selecting the area, the manner, the extent and terms for extending concessions or exemptions in taxes, the State enjoys greater freedom and laxity in exercise of discretion. In choosing a subject for extending benefit of tax concession for different treatment, ordinarily no question of violation of Article 14 can arise.
32. The learned single Judge held that the notification dated 30th September, 1999 was not in the genre of corrigendum but was a case of amendment and it could operate only prospectively. It also held that ordinarily such amendment operates with effect from the date of its publication. He accordingly held in favour of the appellants that they shall be entitled to avail benefit of the scheme as per column 3 in item No. 1 read with Clause 4 up to January 7, 2000. However, he held that with effect from the date of publication of notification dated September 30, 1999, the scheme stood amended and so also automatically the existing benefits which the petitioners were availing as provided under the scheme up to January 7, 2000 shall be availed thereafter, only in terms of amended provision. This change resulted in reduction of exemption from payment of tax from 100 per cent to 25 per cent for the first year and also for each successive subsequent year of specified period it stood reduced from the rate of exemption prescribed earlier to 25 per cent- Considering the principle of promissory estoppel at some length it was further held that no rule of estoppel inhibits the State Government from exercising its authority in modifying, reducing or enhancing the concession granted by it by amending the scheme prospectively. Since the notification issued on 30th September, 1999 was published on January 7, 2000, the petitioners could avail the benefit under the scheme only in the manner provided as per the amendment with effect from the date of its publication, viz., 7th January, 2000. Aggrieved with the aforesaid judgment dated 27th March, 2001 passed in S.B. Civil Writ Petition No. 1141 of 2000 J.K. Udaipur Udyog Ltd. v. State of Rajasthan and followed in other writ petitions, these appeals have been preferred by the respective companies owning the industrial units in question and the State.
33. To the extent the learned single Judge has held that the impugned notification is not a corrigendum but an amendment and that until the date of publication, the unit shall be entitled to avail benefit under unamended provision, the State Government has also filed appeals.
Whether notification dated September 30, 1999 is a corrigendum or an amendment in the Scheme ?
34. The questions had been raised before learned single Judge. Whether the notification dated September 30, 1999 is merely a corrigendum as it purports to be or an amendment resulting in altering the scheme substantively and substantially and whether notification dated 30th September, 1999 came into effect on the date of notification or on 7th January, 2000 when it was published ?
35. We are in agreement with the learned single Judge that the notification in question to be a case of amending the scheme substantially and not merely a case of correcting some typographical or obvious error in the notification dated April 7, 1998 framing the scheme in question and that it became effective only on its publication and not earlier to a date.
36. Plain meaning of "corrigendum" as per Oxford dictionary is "which is to be corrected, something requiring correction in errors or faults in a printed book, etc., of which the correction are given by the process of corrigendum."
37. The principle is illustrated through the two decisions referred to by the learned single Judge. In Commissioner, Sales Tax, U.P. v. Dunlop India Limited [1994] 92 STC 571 (All.), B.P. Jeevan Reddy, the Chief Justice of the Allahabad High Court, as his Lordship then was, was considering the corrigendum Notification No. 4841 dated June 25, 1986 for correcting a printing error of date in describing an earlier notification in the notification dated 11th June, 1974.
38. The facts of the case were that on October 10, 1968 the State Government of Uttar Pradcsh issued Notification No. 4748 under Section 4-B of the U.P. Sales Tax Act, 1948. This notification was sought to be superseded by Notification No. 3867 dated June 11, 1974. However, in describing the aforesaid Notification No. 4748 dated October 10, 1968, a printing error crept in and the date of that notification was mentioned as October 10, 1969 instead of October 10, 1968. This printing error was sought to be corrected by corrigendum Notification No. 4841 issued on June 25, 1986. The assessee has claimed exemption contending that notification dated October 10, 1968 was not superseded until notification dated June 25, 1986 was issued correcting the date of first notification in notification dated June 11, 1974. The contention was that as the notification correcting the date in notification dated June 11, 1974 was issued only on June 25, 1986, it could not have retrospective effect so as to take away the vested right flowing from the notification dated 10th October, 1968.
39. Repelling the contention, the court hold that the power to correct an accidental printing error in any notification is ancillary and incidental to the substantive power conferred upon the Government to issue notifications. The court further held rejecting the claim of the assessee and upholding the plea of the petitioner--Commissioner of Sales Tax, that every law must be reasonably interpreted. No interpretation should be adopted which tends to defeat the very purpose of the law. Even a taxation law must be reasonably construed and the same principle applies to a notification issued under the taxation statute. With these precincts, the court held that since it was a case of correction of the printing error, the notification dated 11th June, 1974 must be read in its correct form since the beginning, the corrigendum was only clerical in nature.
40. In contrast, question had arisen before this Court in Kandoi Kabliwala v. Assistant Commercial Taxes Officer, Pali [1989] 75 STC 316. It was a case of two separate notifications issued in 1969 granting exemption to "desi sweetmeats" and "namkins" respectively. Exemption on "namkin" was withdrawn by notification dated April 26, 1972. A notification titled as a "Corrigendum" was issued on October 5, 1972 purporting to be correcting some error in notification dated April 26, 1972 for withdrawing exemption on sweetmeats also.
41. It was contended that the notification dated 5th October, 1972 was not a corrigendum but was an independent notification, and could not have retrospective effect so as to affect exemption up to the date of notification on sweetmeats. At the relevant time Section 4 of the Rajasthan Sales Tax Act, 1954 also did not empower the State Government to issue notification to rescind it with, the retrospective effect.
42. The court, upholding the contention, of the assessee held that the two notifications of 1969 as well as two notifications of 1972 dealt with two different commodities, there was no question of any correction of an error in the notification relating to "namkin" by issuing a subsequent notification relating to "sweetmeats".
43. Same view was expressed by the Tamil Nadu Taxation Special Tribunal in Citadel Fine Pharma.ceutic.als v. State of Tamil Nadu [2000] 119 STC 315. In that case, the Tamil Nadu Government while purporting to issue an errata on July 25, 1990 and May 29, 1991 altered the rate of taxation on different commodities, as notified in Notification No. 724 dated May 9, 1988 issued under Section 17(1) of the Tamil Nadu General Sales Tax Act, 1959. The Special Tribunal held that the erratas published on July 25, 1990 and May 29, 1991 may have the effect only with regard to mistake in the spelling ; beyond that, it has no effect of withdrawing the concession granted in the original notification. Therefore, abridging the meaning and scope of entry "drugs" mentioned in item 9 of the list, by inserting dihydro streptomycin in their pure form or as salt, the derivatives of penicillin and streptomycin which the State intended to remove from the list, could not be deemed to have been removed from the list retrospectively. The Tribunal noticed that by a later notification issued on September 4, 1991 the exemption was withdrawn prospec-tively. The errata for amending the rates or exemption operating under an earlier notification were held to be illegal.
44. Principle that a notification amending a previous notification of exemption takes effect only on its publication in official gazette is too obvious. Section 15 of the Rajasthan Act envisages the issue of notification in the public gazette. So also Sub-section (5) of Section 8 envisages the exercise of authority of the State Government under the said provision by notification in the official Gazette. Under Section 21 of the General Clauses Act, 1897 and Section 23 of the Rajasthan General Clauses Act, 1955, power to issue notification includes power to add, amend, vary or rescind the notification in the like manner and subject to like conditions. Being part of the same power to issue notification, the notification adding, amending, varying or rescinding earlier notification can also be exercised only in the like manner in which the power is ordained to be exercised under the concerned statute. Therefore, a notification having the effect of altering earlier notification issued under respective provisions can only be deemed to have come into existence when it was published in the manner envisaged under the rules.
45. In this connection, attention may be drawn to Union of India v. Ganesh Das Bhojraj [2000] 119 STC 293 (SC) ; AIR 2000 SC 1102. The court said :
"Section 25 of the Customs Act empowers the Central Government to exempt either absolutely or subject to such conditions, from the whole or any part of the duty of customs leviable thereon by a notification in the official Gazette. The said notification can be modified or cancelled. The method and mode provided for grant of exemption or withdrawal of exemption is issuance of notification in the official Gazette."
46. In the present case also, what is purported to be corrected is not a clerical or printing error in the exemption Scheme, 1998 issued on 7th April, 1998 but was clearly intended to alter the substantive provisions relating to the rate at which exemption from total tax liability could be claimed by an assessee who is entitled to avail benefit under the scheme in each successive year during which he could avail the exemption at the rate prescribed in column 3 of annexure B. In the case of sick units, which have not availed of benefit of exemption from tax or deferment of tax previously otherwise would be falling in column 2 or 3 of the said annexure. In that view of the matter, we are in agreement with the learned single Judge that the notification dated 30th September, 1999 was not a corrigendum but was a case of amendment and became effective only on its publication.
47. Learned Advocate-General has also referred to the Supreme Court decision in Major G.S. Sodhi v. Union of India (1991) 2 SCC 382 in this connection. This case, in our opinion, is of little relevance inasmuch as it merely states that a printed copy of the regulation placed before the court raises rebuttable presumption that official acts like publishing has been regularly performed.
48. In the aforesaid case, the publication of the notification itself was in doubt. We are not concerned herewith where the publication of notification is denied. In the present case, the date of publication of notification is not a matter of dispute so as to call in aid of presumption.
Whether a prospective statute affects vested right to be enjoyed over a specified period ?
49. Having come to this conclusion that the notification dated 30th September, 1999 was not a corrigendum but in fact was amending the substantive provisions of the scheme, could it affect the rights which have already come into existence and have vested in the petitioners ?
50. The principle about retrospectivity of the statutes affecting rights appears to be well-settled. The rights--whether private or public, cannot be taken away or hampered by implication from the language employed in statute unless the Legislature distinctly and clearly authorises for doing of a thing which is physically inconsistent with and cutting across an existing right. The principles that have to be applied for interpretation of statutory amendments taking away substantive rights are well-settled. The first of these is that statutory provisions creating substantive rights arc ordinarily prospective ; they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective. The retrospective operation will be limited only to the extent to which it has been so made by express words or necessary implication. The second rule is that the intention of Legislature has always to be gathered from the words used by it giving to the words their plain, normal grammatical meaning. Thirdly, if in any legislation, the general object of which is to benefit a particular class of persons, any provision is ambiguous so that it is capable of two meanings, one which would preserve the benefit and another which would take it away, the meaning which preserves it should be adopted. The fourth rule is that if the strict grammatical interpretation gives rise to an absurdity or inconsistency, such interpretation should be discarded and an interpretation which will give effect to the purpose, the Legislature may reasonably be considered to have had will be put on the words, if necessary even by necessary modification of the language used.
51. In this connection, reference may be made to Mahadeolal Kanodia v. Administrator-General of West Bengal AIR 1960 SC 936 and Mst. Rafiquennessa v. Lal Bahadur Chetri AIR 1964 SC 1511.
52. To prove the alternation in the vested right, in the words of Lord Blackburn in Metropolitan Asylum District v. Hill (1881) 6 AC 193, the burden lies on those who seek to establish that the Legislature intended to take away the private rights of individuals to show that by express words or by necessary implication, such an intention appears.
53. According to Crawford (Crawford's Statutory Construction, page 622) a mandatory statutes are subject to the general principles relating to retroactive operation. Like original statutes, they will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no application to prior transaction, in the absence of an expressed intent or an intent clearly implied to the contrary. Indeed there is a presumption that an amendment shall operate prospectively.
54. The principle concerning the retrospective effect of amendment as enunciated by Crawford was approved by the Supreme Court in K.S. Paripoornan v. State of Kerala AIR 1995 SC 1012. The court said :
"A statute dealing with substantive rights differs from a statute which relates to procedure or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect........................ A statute is regarded as retrospective if it operates on cases or facts coming into existence before its commencement in the sense that it affects, even if for the future only, the character or consequences of transactions previously entered into or of other past conduct. By virtue of the presumption against retrospective applicability of laws dealing with substantive rights transactions are neither invalidated by reason of their failure to comply with formal requirements subsequently imposed, nor open to attack under powers of avoidance subsequently conferred."
55. In Maharaja Chintamani Saran Nath Shahdeo v. State of Bihar AIR 1999 SC 3609 the apex Court reiterated that a statute which affects substantive rights is presumed to be prospective in operation unless made retrospective, either expressly or by necessary intendment, whereas a statute which merely affects procedure, unless such a construction is textually impossible, is presumed to be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits. The court was concerned with the determination of compensation payable to the appellant under the Bihar Land Reforms Act, 1950. By Act of 1974, compensation payable for mines and minerals was restricted to three times of net income. The appellant contended that the date on which he became entitled to compensation was prior to the amending Act, 1974 came into effect. The State contended that Section 6 of the amending Act of 1974 was retrospective in its effect and would affect the determination of the compensation in the case of appellant which has to be determined after 1974. The court negatived the contention by holding :
"As the essential idea of a legal system is that current law should govern current activities. We hold that rate of compensation shall have to be determined in accordance with the provisions of the Act which was in force at the time compensation was payable, i.e., unamended Sub-section (4) of Section 25 of the Act would apply. Moreover, the amending Act affects the substantive right of the appellant, therefore, it would have prospective operation."
56. The distinction between the sovereign power of the original Legislature to enact laws with retrospective date effecting substantive rights and the restricted rights of the subordinate legislation by framing rules or by issuing notifications, has been clearly brought about by the Supreme Court in Income-tax Officer, Alleppey v. M.C. Ponnoose [1970] 75 ITR 174 (SC) ; AIR 1970 SC 385 :
"It is open to a sovereign Legislature to enact laws which have retrospective operation........................... Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the Legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect."
57. For this proposition, the court referred to the case of Dr. Indramani Pyarelal Gupta v. W.R. Natu AIR 1963 SC 274 and other cases. This proposition has a vital bearing on the question of retrospective operation of the notification in question since it has been issued by the delegated authority.
58. It is to be noticed that the composite notification in question has been issued by the State Government as a delegate under the Rajasthan Sales Tax Act as well as a delegate of the Central Legislature under the Central Sales Tax Act. While under Section 15 of the Rajasthan Sales Tax Act, 1994 the State Government has been given authority to exempt fully or partially, whether prospectively or retrospectively, sale or purchase of any goods from tax, no such power has been conferred to grant exemption retrospectively under the Central Sales Tax Act. Section 8(5) of the Central Sales Tax Act, 1956 does not authorise the State Government to issue notification to have retrospective effect. In these circumstances, a legitimate question does arise whether in pursuit of common object any State Government, by issuing one composite notification both as a delegate of the State Legislature as well as the Parliament for conferring certain benefits vide notification dated April 7, 1978, can have power to modify the same retrospectively by issuing a composite notification subsequently under the very same powers or at any rate such notification can be read, without any clear expression to that effect, to have retrospective effect.
59. A division Bench of the Rajasthan High Court in Union of India v. State of Rajasthan [1993] 91 STC 284 has held while considering the like provision of Section 4(2) of the Rajasthan Sales Tax Act, 1954 that State Government can issue the notification granting exemption retrospectively with any condition it likes, but the said section does not contemplate withdrawal of exemption later on by putting any condition. This view appeal's to be open to doubt inasmuch as the law appears to be settled that a delegate having empowered to do an act or issue notification or frame rules or regulation as a delegated legislation has a like power to act to modify, amend, rescind or revoke its act or notification or rule or regulation framed. Such power is co-extensive and similar in its scope and ambit, as while exercising such power originally. The provisions of the General Clauses Act, which govern the interpretation of statutes in question, are clear in this regard.
60. The difficulty that arises in the case of the respondents is that it being a composite notification, it operates cumulatively. It is not possible to segregate the exercise of power under the Rajasthan Act and the Central Act. There being no authority to issue notifications having retrospective effect under the Central Sales Tax Act such composite exercise of power to issue notification with common objective cannot have retrospective operation in part and prospective operation at the same time. In the case of inconsistencies, the Central enactment must prevail. Moreover, when a composite notification has been issued under two enactments to achieve very same object of State policy, it cannot act differently for the purposes of two enactments.
61. The learned single Judge after referring to Kasinka Trading v. Union of India (1995) 1 SCC 274, State of Rajasthan v. Mahaveer Oil Industries [1999] 115 STC 29 (SC) ; AIR 1999 SC 2302, Union of India v. Godhawani Brothers (1997) 11 SCC 173, State of Rajasthan v. Bhatnagar Cement Co. (Pvt.) Ltd. [2002] 125 STC 290 (SC) ; (1999) 3 SCC 264, Shree Chemical & Minerals v. State of Rajasthan (2000) 1 RLW 378 and applying the rule of strict and literal construction in interpreting fiscal statute, held :
"The scheme has been altered by issuing the amendment and altering the contents of the scheme was within the competence of the authority. As there was nothing in the scheme that it would not be altered/modified, petitioner cannot claim to enjoy the benefits granted under the original scheme. It was merely a notification granting relief of tax exemption to certain industries on fulfilment of conditions incorporated therein. The learned Advocate-General has informed that the scheme itself had been abandoned vide notification dated January 19, 2001 ; however, it has protected the interest of the industrial units which had already been conferred benefits. It was within the competence of the State Government to alter/modify the same as required in public interest. Petitioner is held entitled for the relief as per the original scheme up to the date of amendment and subsequent thereto as provided in the corrigendum."
62. It is apparent that the learned single Judge held that modification in the scheme has to be held prospective in operation so as not to affect the vested rights. He has upheld the power of the State Government to modify or alter the scheme and that the petitioner cannot claim to enjoy the benefits granted under the original scheme for the entire period as it is. With effect from the date of the publication of the notification the petitioner shall enjoy the benefits as per amended scheme.
63. This is also now not seriously challenged before us that the notification is by way of amendment and is not retrospective in operation.
64. We recall what Lopes, C.J., tersely said while considering the ambit and scope of rule against retrospectivity of a law unless distinctly and expressly designed otherwise In re Pulborough Parish School Board Election, Bourke v, Nutt (1894) 1 QB 725 :
"Every statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty or attaches a new disability in respect of a transaction already past must be presumed to be intended not to have a retrospective effect."
65. This was echoed by Supreme Court in Amireddi Raja Gopala Rao v. Amireddi Sitharamamma AIR 1965 SC 1970 when it was said :
"A construction that affects vested rights should never be adopted if the words are open to other construction."
66. A rule subsidiary to general rule against retrospective operation of statute affecting existing rights was stated in Reid v. Reid (1886) 31 Ch D 402 that a statute or a section in it is not to be construed so as to have larger retrospective operation than its language renders necessary.
67. The principle was stated by Shah, J., in S.S. Gadgil v. Lal and Co. [1964] 53 ITR 231 (SC) ; AIR 1965 SC 171, while considering effect of an amending provision :
"In the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned.............."
68. In the aforesaid circumstances, the questions that really arise, what are the vested rights under the scheme, and whether such rights are affected ? According to the State and as upheld by the learned single Judge, right to claim exemption once the scheme is applicable to a sick industrial unit in the manner provided, to the extent the benefit is made available within the specified period under the scheme as a whole are not rights vested on the date the benefit of scheme is extended to the petitioners and right to enjoy the benefits for succeeding years are the rights that come into existence in future, and therefore, can be affected by subsequent modification or alteration in the scheme which is not retrospective. This would need examination of questions. What is meant by vested right ? Whether it is different from an existing right and the right which is to come in existence in future and when does and what are the rights that vests in a unit under a scheme ?
69. Before we examine the scheme to find answer to this question, it would be appropriate to consider the principle.
70. The "vested right" has been explained in Law Lexicon as "a right is said to be vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest, independent of a contingency. It is a right which cannot be taken away without the consent of the owner. Vested rights can arise from cotxtracts, from statute and from operation of law."
71. This was the principle adopted by a Full Bench of this Court in R. Dayal v. State of Rajasthan 96 (3) WLC 513 while considering the question of an employee's right to be appointed on a post, the process of which has commenced. The court said :
"The settled principle of service jurisprudence is that no person possesses any vested right for appointment to a published post. He only possess a right to be considered for appointment provided he fulfils and possesses the requisite eligibility and suitability on the date of appointment."
72. The expression "vested right" has been explained in Black's Law Dictionary as under :
Vested rights : In constitutional law, rights which have so completely and definitely accrued to or settled in a person that they are not subject to be defeated or cancelled by the act of any other private person, and which it is right and equitable that the Government should recognise and protect, as being lawful in themselves, and settled according to the then current rules of law, and of which the individual could not be deprived arbitrarily without injustice, or of which he could not justly be deprived otherwise than by the established methods of procedure and for the public welfare. Such interests as cannot be interfered with by retrospective laws ; interests which it is proper for state to recognise and protect and of which individual cannot be deprived arbitrarily without injustice..................................... Immediate or fixed right to present or future enjoyment and one that does not depend on an event that is uncertain. A right complete and consummated, and of such character that it cannot be divested without the consent of the person to whom it belongs, and fixed or established, and no longer open to controversy.
73. In this connection, we notice that the Supreme Court in Shri Bakul Oil Industries v. State of Gujarat [1987] 64 STC 304 (SC) ; (1987) 1 SCC 31 posed for itself two questions :
"(1) Whether the appellants had acquired a vested right of exemption from payment of sales tax under the Gujarat Sales Tax Act, 1969 (for short the "Act") for a period of 5 years from the date of commissioning of their oil mill in respect of purchases and sales relating to the business of their oil mill ? and (2) Whether in any event the appellants are entitled to claim tax exemption for a period of 5 years under cover of the doctrine of promissory estoppel ? "
74. Facts noticed by the court were that the Government of Gujarat had issued a notification on April 29, 1970, exempting wholly or partly from payment of sales tax or purchase tax, as the case may be, certain specified classes of sales and purchases described in the entries in the Schedule. When the assessec became eligible and entitled to avail exemption under this notification, no specific period was provided during which the exemption could continue. After that, the said notification was amended by another notification dated November 11, 1970, the scheme of exemption, was amended. Among other amendments, the period for availing benefit of exemption was specified to be five years. By another notification dated July 17, 1971, amendment was made in the notification dated November 11, 1970. The amendment provided that the new industry shall not include industries set out in the table which included decorticating, expelling, crushing, roasting, parching, frying of oilseeds and colouring, decolouring and scenting of oil. This was founded on the satisfaction of the Government that oil industry is sufficiently dispersed in rural areas in respect of which the existing capacity of the existing industries was more than adequate.
75. In these background, the appellant before the Supreme Court contended that notification dated July 17, 1971 would have no effect on the eligibility already acquired by them to claim exemption from payment of tax. As per the commencement certificate issued to the appellants, the assessee had commissioned the plants on May 17, 1970 that is to say prior to the exemption notification dated November 11, 1970 by which the period for availing benefit was prescribed as five years from the date of issue of eligibility certificate. The assessee sought the benefit of the notification dated 11th November, 1970 for a period of five years as the vested right. He also claimed relief by invoking doctrine of promissory estoppel alleging that because of assurance contained in notification dated April 29, 1970 he has invested capital and altered his position to his detriment.
76. In the aforesaid facts and circumstances, repelling both contentions, the court said :
"The merit of these contentions has to be determined with reference to the date of commissioning of the appellants' oil mill as well as the dates of the notifications and their contents. Admittedly, the appellants' oil mill was commissioned on May 17, 1970 and, therefore, it follows that the oil mill was commissioned after the first notification but long- before the second notification. It is indisputable that the first notification, though it provided for exemption of tax under the Act, did not provide any period of exemption. In other words, the notification did not stipulate as to how long the exemption from sales tax would remain in operation. The position emerging therefrom is that the exemption granted under the notification was to have operative force only till such time that the exemption was allowed to remain before being withdrawn by a subsequent notification. The second notification no doubt set out that the exemption granted would be for a period of 5 years from the date of the commissioning of the industry at any time during the period from 1st April, 1970 to 31st March, 1975 (both days inclusive). But this provision cannot be invoked by the appellants for claiming the benefit of tax exemption for five years because the second notification was prospective in operation as has been rightly pointed out by the High Court in its judgment. Since the second notification was prospective in operation the period of 5 years mentioned therein would apply only to those new industries which were commissioned subsequent to the issuance of that notification. As admittedly, the appellants' unit was commissioned several months before the second notification was made, the second notification cannot afford a basis to the appellants to raise a claim for exemption for a period of 5 years from the date of the commissioning of their plant................................. Much of the arguments of the appellants' counsel proceeded on the assumption that the appellants had acquired a vested right under the notification issued by the Government on November 11, 1970, to claim exemption from payment of sales tax for a period of five years and consequently the Government had no right to take away the appellants' vested right. The contentions are untenable because of the fallacy contained in them, viz., the wrong assumption that the appellants had acquired a vested right. The High Court has rightly repelled the plea that the appellants had acquired a vested right and were, therefore, entitled to claim exemption from payment of tax for a period of five years notwithstanding the revocation of the exemption under the notification dated July 17, 1971. The High Court has further taken the view that the earlier notifications granting exemption of tax only created existing rights and such existing rights can always be withdrawn by means of a revocation notification and that is exactly what has happened in this case."
77. The court also found that the notification was issued on April 29, 1970 and the plant was commissioned on May 17, 1970, the second notification would not apply because that was prospective in operation and in respect of the first notification it was found that it was not the appellants' case and indeed it could never be so contended that they launched the project and commenced the construction of the oil mill only after the notification of April 29, 1970 was made and that the entire construction was completed in about two weeks' time so as to enable the appellants to commission the plant on May 17, 1970. Thus, the very foundation for invoking doctrine of promissory estoppel that the person seeking the State Government to bind by its assurance has altered his position to his detriment relying on the assurance, did not exist. In view of that, the court did not answer whether the notification has created vested right or existing rights. Therefore, neither the petitioner was found to have a definite right of claiming exemption for specified period of five years under the second notification nor he had a right to claim exemption for a continued period ad infinitum under the first notification under which alone he could claim exemption. There being no right vesting in the appellants for any specified period when the oil industry was declared to be ineligible, the right to claim exemption in respect of tax liability arising thereafter for oil industry came to end on issuance of notification.
78. In Trimbak Damodhar Raipurkar v. Assaram Hiraman Patil AIR 1966 SC 1758, which was a case where a contractual tenancy was created in favour of tenants in 1943 which was to expire on 31st March, 1953. Before the lease in favour of tenants could expire, by virtue of the amending Act of 1952, it got extended for 10 years and unless it was terminated by valid notice, or a surrender made by the tenant as specified by the statute, the tenancy would be extended from time to time at every stretch of 10 years. The landlord had given a notice to terminate the tenancy on 31st March, 1953 when the lease was expired. A contention was raised that the amending Act of 1952 was not an Act retrospective in operation, it merely affect any future existing rights and all leases whether executed before or after the said date. The court found that right of the appellant to eject the tenants under the existing lease arose only on termination of the tenancy and that right would have made available to tenant only on 31st March, 1953. As on the date the Act came into force the landlord had no right to evict the tenants. Therefore, it did not affect any existing rights. Any right to evict after the commencement of Act, the right to ejection which would come into existence after the Act came into force, would obviously be governed by the Act which is prospective in operation. It is in that context, the court referred to "future existing rights under a lease".
79. The principle was applied by the Supreme Court in Govinddas v. Income-tax Officer [1976] 103 ITR 123 ; AIR 1977 SC 552. It was a case where the Income-tax Officer sought to apply the provisions of Section 171 of the Income-tax Act, 1961 to the pending proceedings for the assessment years 1950-51 to 1956-57. The court applying the principle "unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure" and held that the Income-tax Officer was not entitled to avail of the provision enacted in Sub-section (6) read with Sub-section (7) of Section 171 of the new Act for the purpose of recovering the tax or any part thereof personally from any member of the joint family for the aforesaid assessment years prior to 1962-63.
80. In Mohd. Rashid Ahmad v. State of U.P. AIR 1979 SC 592, the court emphasised :
"Perhaps no rule of construction is more firmly established than this--that retrospective operation is not to be given to a statute so as to impair an existing right or obligation other than as regards the matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in a language which is fairly capable of either interpretation, it ought to be construed as prospective only."
81. In K.S. Paripoornan v. State of Kerala AIR 1995 SC 1012, a five Judge-Bench again said the question "whether a particular statute operates prospectively only or has retrospective operation also will have to be determined on the basis of the effect it has on existing rights and obligation".
82. The same principles were given effect to by the Supreme Court in Mohd. Rashid Ahmad v. State of U.P. AIR 1979 SC 592 to which we have already made reference above.
83. From the above, it is apparent that vested right or existing right expressions have been used without distinction. Where under any law any right vest in someone today to enjoy some benefit or which obligate someone to act for one's benefit in future remain vested or existing rights. On the other hand, a right which can be enjoyed as per the law for the time being in force at any given time cannot be said to be vested or existing right in praesenti. The question of availing benefit at any given point of time will in the latter case depend upon the law in force at the time right or benefit is sought to be availed or obligation is required to be discharged.
84. In view of the aforesaid principles, we may now examine the scheme of 1998 as before amendment and after amendment so as to find out whether any rights vest under the scheme in favour of any sick industry in present to be enjoyed in future and if so, on what date such rights vest and effect of subsequent amendment on such rights.
Relevant features of the scheme :
85. The essential features of the Scheme of 1998 reveal that exemption from payment of tax under the Rajasthan Sales Tax Act and Central Sales Tax Act has been offered on the basis of Eligible Fixed Capital Investment (EFCI) in the industry. EFCI becomes the foundation of quantifying the maximum amount of exemption that can be availed by an industrial entity allowed entrance to the portals of the scheme. Such exemption from payment of tax up to a maximum amount of tax under the two enactments is to be availed for a specified period. The exemption from payment of tax up to the said amount is to be availed by way of being absolved from payment of tax at such per cent of total tax liability for each year of the specified period within which the exemption could be availed up to the maximum extent fixed with reference to EFCI. If that limit is exhausted by availing exemption in above manner before expiry of specified period, no further exemption from payment of tax can be availed for remainder of specified period. Likewise, even after availing the exemption from payment of tax in above manner for the specified period of exemption for such unit, the unit is not able to exhaust maximum permissible limit up to which he is entitled to avail exemption, it cannot avail any further exemption from payment thereafter. This is made clear firstly from the preamble of the scheme which provides "the State Government............... notifies...............this scheme and exempt the industrial unit from payment of tax............... in the manner, to the extent and for the period as specified in this notification". It becomes further clear from Clause 5(d) of the scheme which provides that "where the limit of exemption specified in annexure B is exhausted, all intra-State sales/inter-State sales made thereafter shall become subject to tax automatically............... and the industrial unit shall become liable to discharge all obligations and duties relating to taxability under the Rajasthan Sales Tax Act/Central Sales Tax Act and prescribed in the Rules as if there were no exemption scheme application in the case". The manner, the extent and the period have been specified in annexure B.
86. The substantive right of enjoying exemption under the scheme has three components : (i.) the maximum total amount of exemption, (ii) the maximum period during which exemption from payment of tax can be availed, (iii) between the two limits stated above lie the core of scheme, the availing of actual exemption from payment of tax at the percentage ratio fixed under column 3 of annexure B with the amount of tax that becomes due during each year of specified period under the provisions of two enactments. Sick units have been allowed benefits under the scheme with no precondition about any new investment or inhibition about site of unit or nature of industry.
87. Clause 3 of the scheme in its relevant context reads as under :--
Applicability of the exemption scheme :--(a) This scheme shall be applicable to,--
(i) the new industrial units,
(ii) the industrial units going for expansion,
(iii) the industrial units launching diversification, and
(iv) the sick industrial units.
(b) The ineligible industries shall not be entitled to claim any benefits under this scheme.
(c) the industrial units claiming benefits under this scheme shall be established or should have been established in the areas other than banned areas. However, this restriction shall not apply to sick units.
88. While all industrial units falling in Sub-clauses (a), (b) and (c) of Clause 3 do not become eligible for exemption if the same are established in a banned area as defined under Clause 2(a) or the industries classified under annexure "A" as the industries as arc not eligible for exemption under the scheme, but the sick industrial unit whether or not deemed to be a new industrial unit becomes entitled to avail benefit notwithstanding the fact that it is situated in a banned area or an industry enlisted in annexure "A" as ineligible industry.
89. The industrial units which have been allowed entry into its operative field are classified under the category of (i) new industrial units, (ii) the industrial units going for expansion, (iii) the industrial units launching diversification, and (iv) the sick industrial units.
90. The new industry has further been classified for the purposes of fixing extent of exemption commensurating with importance assigned to respective categories into (i) the pioneer unit which has special feature of being established in any Panchayat Samiti of the State during the period of scheme having a fixed capital investment exceeding Rs. 3 crores and minimum regular employment of 50 persons each. This benefit is available only to first 10 units established in the Panchayat Samiti, or (ii) a premier unit which envisages the industrial unit which has fixed capital investment exceeding 150 crores with a minimum regular employment of 500 persons, (iii) prestigious unit, and (iv) very prestigious unit have the characteristic of capital investment exceeding 15 crores and fixed capital investment exceeding 50 crores respectively with minimum regular employment of 100 and 200 persons respectively.
91. Installation of new production capacity in the State in such areas which are not "banned areas" and in that nature of industries which are not listed as "ineligible industries" are the necessary insignia of an industrial unit seeking exemption as "a new industrial unit" or "an expansion" or "diversification". This is discernible from Clause 2(k) defining "new industrial unit". Including the new investment up to 25 per cent of existing value of fixed capital is a condition for treating the sick industry to be a new industry though the disability of "banned area" and ineligible industry is not attached to it. Clause 2(c) defining "diversification" and Clause 2(g) defining "expansion".
92. A sick industry on the other hands has been defined in Clause 2(q) as under :
Clause (q) : "Sick industrial unit" means, (i) an industrial unit which has incurred cash losses in the two complete and consecutive financial years immediately preceding the commencement of this scheme or during the operative period thereof, and is likely to continue to incur cash losses in the next financial year and has an erosion on account of cumulative cash losses to the extent of 50 per cent or more of its net worth, and being potentially viable is taken up by a Central or State level financial institution or a bank under a programme of rehabilitation ; or
(ii) an industrial unit which is declared sick during the operative period of this scheme, by the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, and by the State Level Committee or the appropriate District Level Committee, in the Industries Department, in case of non-BIFR cases ; or
(iii) an industrial unit which is taken over and sold during the operative period of this scheme to a new management by the State Government or RIICO or RFC.
93. The extension of benefit to a sick industry is apparently a part of the State policy to rehabilitate such industries which are ailing and suffering cash losses. In such case question of fresh capital investment or adding new production capacity is apparently not a necessary condition for it.
94. In this connection we may notice Clause 2(e) defining "eligible fixed capital investment". It reveals that generally for computing EFCI, the cost paid for land and cost incurred in constructing new buildings, or acquiring new plant and machinery or second hand plant and machinery imported form outside country or if purchased from existing unit within India on fulfilment of conditions detailed in aforesaid provision is to be taken into consideration. So also capitalised interest, technical know-how fees, drawing fees are also included in EFCI amongst other fixed assets. As against this, Explanations II and III appended to Clause 2(e), which read as under, the EFCI for a sick industry, whether deemed to be a new industry as defined in Clause k(ii), or otherwise, is the depreciated value of fixed assets.
95. Explanations.--
I........................
II. In case of a new industrial unit covered by Clause (k)(ii) the depreciated value of the fixed assets on the date of its purchase or lease, as the case may be, shall be considered as eligible fixed capital investment.
III. In case of sick units, following investment shall be considered as eligible fixed capital investment :
"(a) In case of sick units, the depreciated value of fixed assets on the date of declaration of sickness by the Board for Industrial and Financial Reconstruction (BIFR) in BIFR cases and by the State Level Committee or the appropriate District Level Committee, in the Industries Department, in non-BIFR cases and the new investment made on the construction of new building and the new investment made on the purchase of additional new plant and machinery.
(b) In case of units sold by the State Government, or RIICO, or RFC, value of the fixed assets on which the unit was purchased by the entrepreneur and the new investment made on construction of new building and the purchase of additional new plant and machinery."
96. This indicates that while for a sick industry which is deemed to be a new industry on fulfilment of criterion stated in Clause 2(k)(ii) the EFCI is to be computed by taking the depreciated value of assets of the unit as on the date of purchase as against the EFCI in the case of sick industry which is not deemed to be a new industry is to be taken at depreciated value as on the date of its declaration as sick unit. However, where the sick unit is sold by State Government or RIICO or RFC, instead of depreciated value of assets, purchase price paid by the buyer is to be taken as EFCI.
97. The invitation to fresh capital and installation of new production capacity is projected by confining the exemption under the scheme to eligible industries which have been newly installed, expanded or had diversified in such areas where new growth is felt most. This has been projected in Clause 2(a) and (h) defining banned area and ineligible industries respectively which read as under :
2.(a) "Banned Area" means the areas under the urban agglomeration limits of cities, as notified by the competent authority and Municipal/UIT limits of all cities/towns excluding,--
(i) the lands duly converted by the competent authority for industrial purposes, or
(ii) the lands in the industrial areas developed by the State Government or its Corporations ; or
(iii) the lands developed by co-operative sector or private sector in the industrial areas declared by the competent authority.
Explanation.--Sick units, located anywhere in the State, shall be eligible for the benefits provided under the Scheme.
2(h) "Ineligible industries" means the industries listed in annexure "A" to this notification, which shall not be eligible for the benefits under this scheme ; however, this restriction shall not apply to sick industrial units as defined in this clause.
98. The "sick industry" has been kept free from both inhibitions.
99. From the aforesaid it is clear that for the purpose of applicability of exemption scheme, a sick industrial unit has been separately classified distinctly from "a new industrial unit", the industrial unit going for "expansion" and the industrial unit launching "diversification". As noticed by us above, the new industrial unit, in all its manifestation whether pioneering unit, premier unit, prestigious unit and very prestigious unit, are treated s one class for the purpose of Clause 3(1).
100. The above provisions lay the contours of area within which the exemption is made applicable and the classification for extending such exemptions. With the object of providing a recovery therapy, the sick industrial units have been classified in two classes, viz., (1) one which has not availed benefit of exemption from payment of tax or deferment of payment of tax previously, or the sick unit which has availed such benefit previously for the purpose of providing separate package. The former class has further been classified as a new industrial unit if it has not availed any benefit of exemption from tax or deferment of tax and has been appraised by financial institution and appropriate rehabilitation plan has been formulated and a sick industrial unit has been, purchased by a new management other than by way of collusive transfer and such management has made additional fixed capital investment not less than 25 per cent of the depreciated value of the assets of such unit. In other words, when a new entrepreneur takes over a sick unit and makes additional fixed capital investment to the extent prescribed under Clause 2(k)(ii), he becomes entitled to avail benefit of the scheme as a new unit, without inhibition of area and eligibility of industry, as fulfilment of conditions, viz., that the industry has not availed earlier the benefits of exemption from tax or deferment and has been appraised by financial institution and an appropriate rehabilitation plan has been formulated. Otherwise, it remains a sick industrial unit simplicter which may or may not have availed any benefit to the exemption from tax or deferment of tax earlier thereto.
101. The next question that need consideration is when the scheme in a given case becomes operative upon an industrial unit to which exemption is extended and what is the extent of such exemption. This invites specific attention to Clause 4(g) and (h) and also Clause 5(g) which read as under :
4(g) The eligibility certificate issued under this scheme shall remain in force till the permissible exemption from tax in accordance with the provisions of this scheme is not exhausted, or till such certificate is not amended, suspended or revoked.
(h) the benefits under this scheme shall be available from the date of the application filed by the applicant-unit completed in all respects, as certified by the Member Secretary of the appropriate Screening Committee.
5(g) Wherever an industry is included in the list of ineligible industries in annexure "A" on any date during the period of operation of this scheme, the units of such,
(i) of which the applications for sanction of the benefits are pending before any Screening Committee, on the said date,
(ii) which have been sanctioned benefits under this scheme before the said date, or
(iii) which have already been availing of benefits under this scheme on such date, shall be entitled to avail full benefits in accordance with the provisions of this scheme.
102. Clause 4 deals with sanction of benefits under the exemption scheme and issue of eligibility certificate, Clause 5 deals with general terms and conditions for exemption from sales tax, A perusal of Sub-clauses (g) and (h) of Clause 4 makes it clear that the benefits under the scheme do not wait to be availed of by the unit until eligibility certificate is issued or sanction is ordered by the concerned screening committee but it becomes operative as soon as its application is complete in all respects. It is to be certified by the Member Secretary of the appropriate screening committee that the application filed by the applicant unit is complete in all respects. The date on which certification is made is not relevant. Relevant is what date is certified as the date on which application became complete. Certificate may be issued on a later date.
103. The eligibility certificate issued under the scheme to remain in force to avail the exemption from tax in accordance with the provisions of the scheme till permissible exemption is not exhausted or till certificate is amended, superseded or revoked.
104. It is apparent that availing of the benefits of the scheme in accordance with the provisions of the, Scheme is not kept in abeyance until the eligibility certificate is issued, but becomes operative to be availed by the assessee immediately on the completion of the application. Since the maximum benefit quantified under the scheme is to be availed within specified period in column (5) of Schedule B, and a dealer starts availing benefit with effect from the date of completion of application, the period for availing benefit commences from that date only. The specified period during which the exemption can be availed too therefore, commences from the date of such completion of application as may be certified by the member secretary of concerned screening committee and not from a date thereafter. By necessary implication the eligibility certificate issued pursuant to sanctioning of the exemption by concerned screening committee also relates back to date when the application was complete for the purpose of availing the benefit sanctioned in the manner, up to extent and for the specified period. It follows that such benefit must flow as per the provisions of scheme existing on the date of commencement of the exemption and continue for the period specified in annexure "B". Change in the manner of availing benefit, once period starts running is not envisaged.
105. What benefits can be operative and availed by the applicant-unit with effect from the date its application is complete ? Obviously the maximum amount up to which extent the benefit of exemption can be availed is determined by the Screening Committee at a later date. Therefore, the maximum extent of availing benefit is not known though it stands determined ex hypothesi simultaneously when the provision of Clause 4(h) becomes operative. Period for availing total benefits stands specified in annexure "B", as per the category in which the applicant may fall when the application becomes complete and the beneficiary commences availing benefits of exemption from payment of tax.
106. Thus, the percentage ratio in which the exemption is to be availed each year of specified period to avail the total exemption that can be availed comes into operation immediately. The amount of exemption so availed is to be adjusted against the extent to which the exemption is permissible under column (4) of annexure "B" as may be finalised by the Screening Committee. The volume ratio of availing benefit for each year of specified period for which such benefit could be availed to exhaust the limit to be quantified become known on the date of completion of the application and that right is crystallised. The quantum up to which benefit can be availed is too ex hypothesi is determined at the same time, though becomes known on being quantified by Screening Committee later on, and must find place in the eligibility certificate in terms of Sub-clause 2(g) and (h) of Clause 4. The eligibility certificate, obviously, will have to be issued in consonance with the scheme which was operative on the date the unit commences availing the benefit that is to say the date on which the application is said to be completed.
107. This becomes further apparent from Clause 5(g) which makes it clear that subsequent inhibition against grant of exemption after the application is completed and is pending consideration, is not affected by subsequent amendments. It postulates that once an application is made by an eligible industrial unit and is pending consideration, even its inclusion in list of ineligible industries, docs not affect its right of consideration and availing benefit of the scheme, if it otherwise fulfils other conditions. Thus, subsequent withdrawal from eligibility list altogether does not affect rights of applications made prior to such withdrawal is very strong indication that all the rights flowing under the scheme to an applicant, are not to be affected adversely unless such intention is manifest in clear terms by subsequent notification amending the scheme. Such amendment applies only to application made thereafter. This provision fortifies us in our conclusion that the manner, extent and the period within which the exemption envisaged under the scheme is to be availed by an eligible unit ex hypothesi becomes determined on the date of completion of the application and remains unaffected by subsequent amendments unless clearly expressed.
108. If the subsequent amendment excluding any industrial unit from availing the benefit altogether can only act prospectively as held by learned single Judge, it cannot affect the right of the applicant whose application is pending on the date of amendment to avail the benefit in the manner provided to the extent envisaged within the period specified under the scheme. It cannot be otherwise in the case where such application is decided before any amendment takes place, unless by clear stipulation the exemption to which a unit has become entitled is expressly withdrawn by statute.
109. A scheme or concession or exemption can be withdrawn by its author at any time, or modified or altered, is not in doubt. But such withdrawal, amendments or modification, unless otherwise provided for and backed by policy change in public interest cannot operate retrospectively, so as to affect the rights which have come into existence, too is a well-settled principle.
110. In the case of J.K. Synthetics the applications were completed on November 20, 1998. There is no dispute that it became entitled to avail exemption with effect from that date as per column (3) of item I of annexure "B". The J.K. Synthetics was declared sick by BIFR in April, 1998. The Screening Committee in the first instance had doubt and sought clarification from BIFR, whether such declaration would apply to all units owned by the company or each unit has separately to be examined for being declared sick. The BIFR made it clear that when the company has been declared as a sick company it means whole company and no separate declaration or clarification for each unit is needed. On receiving this clarification the Screening Committee has deferred its decision.
111. In the case of J.K. Udaipur Udhyog, the application was completed on July 26, 1999 and sanction has also been issued prior to the date the notification was published and became operative on completion of application on December 13, 1999.
112. About the basic feature that all units which have applied for availing benefit start availing benefit of exemption from payment of tax with effect from the date of completion of application in all its aspects, and does not have to await sanction by the Screening Committee and issue of eligibility certificate, there is no contention. There is no option about the date from which exemption is to be availed. In fact, the scheme obligates the applicant not to collect and charge the tax with effect from the date of completion of application. This obligation is not postponed, On grant of sanction and issue of eligibility certificate, the same relates back to the date of completion of application. The specified period within which the full exemption can be availed, therefore, begins with the date of completion of application. There is no provision that such features of exemption are modified later on. On the other hand, Clause 4(g) ensures that the eligible unit avails all actual benefits unaltered until the maximum limit is exhausted or specified period expires, whichever is earlier. The scheme, we have noticed, also envisage in no uncertain terms that pending application remains unaffected even in case such industry is included in the category of ineligible industry because of amendment in the list of ineligible industries or by including of the site within banned area. There is no provision which affects adversely the substantive availing of benefit physically in the manner provided until either the limit of maximum amount or time is scaled, after the scheme has operated in the case of any applicant unless express provision to that effect is made.
113. We are not considering the case of a unit which has started availing benefit under Clause 4(h) but is ultimately found to be ineligible or falling in a different category then the one applied for as on the date of application. In such event, change takes place not because of any subsequent alteration in the scheme, but because under the scheme only such benefit in its comprehensive sense become vested ex hypothesi on the date of completion of application on the basis of its actual classification as eligible unit as per the scheme as on that date. What is ex hypothesi stands determined, gets reflected only in adjustment that takes place as per actual physical determination of those facts by concerned Screening Committee. It is akin to application of principle of determination of tax liability. It is cardinal in construing tax statutes that any charging provision determines the liability ex hypothesi when the taxing event occurs and though its levy and computation is done at a later date in accordance with assessment to be made later on.
114. In the like manner, when a concession is declared which determines what person in respect of what subject-matter on fulfilment of which condition a person is absolved from taxation, the right to avail exemption up to extent in the mode envisaged stands ex hypothesi determined, when such person fulfils the condition for availing concession and enters the portals of concession scheme.
115. This result can further be explained from within the scheme. Clause l(a) of the scheme lays down the period during which scheme remains operative. The period of the scheme itself is 1st April, 1998 to 31st March, 2003. Thus, notwithstanding the notification under which scheme came into existence itself was issued only on April 7, 1998 but by specifically naming the earlier date of its operative period, brought to it into effect with an earlier date. Not only this, the application filed prior to April 1, 1998 but were still pending consideration under Incentive Scheme, 1987 or New Incentive Scheme, 1989 were too brought within its fold to the extent it was meant to be brought within it by making express provisions in that regard in Sub-clauses (g) and (h) of Clause 1.
116. More importantly, the scheme read in its totality reveals unmistakably that notwithstanding the scheme shall cease to be operative on March 31, 2003, a unit which has made an application prior to March 31, 2003 and started availing benefit under the scheme under Clause 4(g) and (h), or whose applications have already been sanctioned prior to March 31, 2003, will not cease to avail benefit for the requisite period up to limit as per its EFCI by availing the exemption from payment of tax as per annexure B read with Clause 4 even thereafter until the limit of exemption is exhausted or specified period expires whichever is earlier by not paying tax at the rate specified in column 3 of annexure B, Thus, a unit which has once admitted into benefits of the scheme during the operative period of scheme shall continue to enjoy such benefits in all its contents during the period when scheme was ceased to exist. Status of an amendment cannot be greater and larger than cessation of scheme. In either case, it shall need an express withdrawal of the scheme benefits for those units which have already gained admittance to such benefit. Else, no meaning could bo given to operative period. If the benefits to which a unit get its admittance were to come to an end the terminus of operative period would not have stated at. all as was the case of notification under which the unit has availed benefit in Shri Bakul Oil Industries' case [1987] 64 STC 304 (SO ; (1987) 1 SCC 31 which makes a distinction between a notification granting concession/ exemption in rate of tax without prescribing any period, and a notification conferring benefit of a scheme for a fixed period. Where without circumscribing limit of benefit, a benefit is extended, it lasts only until a new notification supersedes it or it is withdrawn with effect from new notification. But where a compact scheme is ploughed circumscribing both volume and period, once the object enters the circle of those limits, subsequent abandonment or change in the scheme does not affect it unless expressly ordained.
117. It is thus apparent that under the scheme the right which is acquired by an industrial unit in any of its category is acquired on the date application is complete in all respects. The right which is vested or comes into existence in favour of a unit as on the date application is complete in all respects is not merely a right to avail exemption from payment of tax at a particular rate or for a particular period. But it also includes a right to claim exemption within the specified period up to an amount which is quantified under column No, 4 of annexure B with reference to eligible fixed capital investment. The exemption from payment of tax is granted for specified period at the rate prescribed in Clause 3 of the Schedule of annexure B for the purpose of availing exemption to that extent. Therefore, the rate at which the exemption can be availed during each year of the eligibility period specified in column 5 of annexure "B" is integrally connected with exhausting the benefits up to maximum limit which can be availed by the claimants within the specified period by claiming exemption every year at the rate prescribed in column 3. One cannot be severed from the other. It is not disputed before us, nor there is any alteration in the scheme in that regard that for a sick industry including the cement plant also, no change has been affected in the quantum subject to which benefit can be availed by the sick unit nor there is any change in the specified period during which the unit has opportunity to avail the maximum benefit under the scheme. Thus, by reducing the annual rate of exemption in the case of sick cement plant it has totally altered its right by substantially reducing the availability of opportunities to exhaust the total permissible exemption within specified period. Right to avail maximum benefit within specified period, through opportunities offered on the date the limit specified period commences, became vested in such industry on the date of such commencement under the scheme.
118. The right of the petitioners to avail the benefit up to the extent it has been made available by seeking exemption from payment of tax at the present rate as per column 3 of annexure B every year in the case of cement plants falling under Clause 4(a) becomes part of the right vesting in the unit as on the date of completion of application. If during the existence of such right the annual rate of exemption, by which maximum unit of benefit is to be obtained is reduced during the currency of speciiied period, it amounts to affecting vested right by a retrospective statute. It does not amount merely application of law in future on rights that accrue in future on past events, such right has accrued to the petitioners in praesenti in terms of Clause 4(g) and (h) of the scheme.
119. That being the position, we are not persuaded to agree with the learned single Judge that the modification in the scheme has not affected any existing or vested right but has merely resulted in affecting the rights to avail exemption in future.
120. None of the cases relied on by the learned Advocate-General deals with a situation and the scheme like one on hand, in the facts and circumstances as they exist presently.
121. In State of Rajasthan v. Mahaveer Oil Industries [19991 115 STC 29 (SC), the court was dealing with a case where right of the claimants to benefit under the scheme arose only after the amendment came into force. Therefore, it was not a case of affecting vested or existing rights which had already accrued. It was a case relating to the scheme under notification dated May 23, 1987, called the Sales Tax Incentive Scheme, 1987. The oil industry was eligible for benefit under the scheme of May 1987. By notification dated May 7, 1990 issued under the Rajasthan Sales Tax Act, 1954 the notification of 1987 was amended and the oil industry was put into the list of ineligible industries. The respondents had commenced commercial production on February 17, 1991 only and had applied for eligibility certificate also after the notification of 1990 withdrawing the benefit of scheme for oil industry under the Rajasthan Sales Tax Act so issued. The High Court had invoked the doctrine of promissory estoppel for giving relief to the claimant on the premise that it had started production prior to the issuance of notification of 1987. Therefore, it was not a case in which any vested right had accrued under the scheme. The claim was founded purely on the doctrine of promissory estoppel which was held to be not substantiated. Moreover, it was found by the court that the exemption in the case of oil industry under the State enactment has been withdrawn as a result of satisfaction about public interest in doing so and in that event doctrine of promissory estoppel cannot be invoked.
122. Arvind Industries v: State of Gujarat [1995] 99 STC 333 (SC) ; (1995) 6 SCC 53 was too a case where no factual foundation was laid for having acquired any vested right. It was a usual exercise of modifying the rate structure which becomes operative with effect from the date such rates are introduced. In doing so, the duty was brought under the rate structure by withdrawing concession granted earlier.
123. Likewise, reliance on State of Rajasthan v. Bhatnagar Cement Co. (Put.) Ltd. [2002] 125 STC 290 (SO ; (1999) 3 SCC 264 is also misplaced. It was a case of giving retrospective effect to the amendment in express terms. Under the 1987 Incentive Scheme, a cement plant was found eligible for benefits under the scheme and was entitled to 100 per cent tax exemption for a period of 7 years. By amendments of January 11, 1990 and February 22, 1990 the benefit under the scheme in the case of mini cement plants of a certain category was sought to be restricted to 50 per cent from August 6, 1988 for a period of 7 years. Thus, it was not a case of interpreting the notification to be retrospective in operation or prospective in operation. Once, the power to amend the scheme retrospectively is granted and the scheme has been amended retrospectively expressly in fact, there can be no impediment in reducing the exemption retrospectively. However, it was not a case in which question whether the right to avail exemption from payment of tax for a period of 7 years or 100 per cent of the fixed capital investment whichever was reached earlier was vested right, and which could not be altered by a prospective amendment, was not at all in issue.
124. Another case on which the reliance has been placed by learned Advocate-General and which has also been discussed by the learned single Judge is Kasinka Trading v. Union of India (1995) 1 SCC 274. Having perused and considered that judgment, we are of the opinion that the controversy raised before us was neither raised nor decided by the Supreme Court in the aforesaid decision also. The appellants before the Supreme Court had invoked the doctrine of promissory estoppel and urged that the Central Government could not have withdrawn the exemption notification because relying on the exemption notification the appellants had placed orders for import of PVC resin on the understanding that the PVC resin was totally exempt from excise duty. It was argued that the Government must be held bound by the representation it had made through the exemption notification and it was estopped from going back on its promise. This plea did not find favour with the apex Court on the ground ; firstly, that Notification No. 66 of 1979 under which exemption was claimed was neither designed or issued to induce the appellants to import PVC resin nor it was ever intended as an incentive for import. Thus, the basic foundation for invoking promissory estoppel namely existence of a promise or an assurance to grant concession on imports was found lacking. Secondly, the court held that it is not possible to postpone the compulsions of public interest till after March 31, 1981 if the Government was satisfied as to the change in the circumstances before that date. Since the Government in that case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn, it was free to act in the manner it did. Thus, the court found that the promise, even, if any existed, could be withdrawn because a case for withdrawal in public interest was made out by the State Government.
125. In this connection, it will be apposite to notice a recent decision of the Supreme Court in Union of India v. Indian Charge Chrome (1999) 7 SCC 314. Under the scheme of notification extending exemption from payment of excise duty in the case of power projects, the court has found that merely making of an application for registration did not confer any right on the application. The application has to he decided in accordance with the law applicable on the date on which the authority granting the registration is required to apply its mind on the prayer made for registration and the application for registration was not ripe for consideration until the main amendment. It was further held to be merely clarificatory in nature. In these circumstances, the question of saving the rights already accrued before the amendment so brought into scheme did not arise and decided by the court. Case was almost similar as was the case of Kasinka Trading v. Union of India (1995) 1 SCC 274 and the court applied ratio of that decision in deciding the Indian Charge Chrome's case (1999) 7 SCC 314.
126. The other cases referred to by the learned Advocate-General are State of Bihar v. Bihar Chamber of Commerce 11996] 103 STC 1 (SC) and Shree Chemicals & Minerals v. State of Rajasthan (S.B. Civil Writ Petition No. 3019 of 1999, decided on July 14, 2000) do not deal with the controversy as has been raised in connection with the amendment brought about in the existing scheme by the notification in question and its effect and the rights which have already accrued.
127. The present case, is not at all founded and could not be founded on doctrine of promissory estoppel The petitioners are not claiming any right to the incentive or the benefits offered under the scheme on the doctrine of promissory estoppel nor perhaps they could claim. The necessary condition for invoking a promissory estoppel in the first remains existence of an assurance or promise by the State held out to others to act or alter their position in the light of promise or assurance to their detriment. Secondly, the claim of benefit under such promise or assurance held out by the State must have actually induced the claimant to alter his position to his detriment relying on such promissory estoppel. In the very nature of things offering such a package cannot amount to holding out a promise to any healthy unit to change its position by becoming sick to their detriment to avail the benefit of the scheme nor it can be envisaged that a healthy unit in order to avail the benefit extended to a sick unit would alter its position to become a sick so as to raise even an issue about doctrine of promissory estoppel for availing benefit under the scheme.
128. The petitioners are claiming rights which have accrued to them under a scheme which is in the nature of the delegated legislation by issuing a notification, by publishing in the official gazette in exercise of authority conferred upon State Government under Section 15 of the Rajasthan Sales Tax Act, 1994 and Section 8(5) of the Central Sales Tax Act, 1956. The question is only whether under the existing law on a particular date any rights have come to be vested or accrued to the petitioners which gives rights not only to avail the benefits in present but also to avail such benefits in future up to a specified limit and within specified period ? If such right has come into existence, whether as a result of any subsequent amendment, which is not retrospective in operation, can such right be truncated or altered ? Such controversy as appears from the report was neither raised nor decided by the court in Kasinka Trading case (1995) 1 SCC 274. The question raised in the present case will have to be answered in the light of scheme of 1998.
129. The rights which have vested in the petitioners as on the date of the completion of their application for availing benefit under the scheme is the composite right of availing the benefit in the manner, to the extent and within the specified period prescribed under annexure B to the notification dated April 7, 1998 such vested right, in our opinion, in its composite form cannot be altered by treating one part of it. independent of other, so as to alter the mode and manner in which the maximum extent of benefit can bo availed within specified period.
130. There is no dispute that the applications of both the petitioners-appellants in two sets of appeals had been made much prior to the date of notification in question dated 30th September, 1999 and it has been so certified by the concerned authority. The learned Judge has also found in favour of the appellants that the so called corrigendum was in substance a substantive amendment in the scheme and became operative only when the notification dated September 30, 1999 was published on January 7, 2000 but not before. He also accepted the claim of the petitioners that until January 7, 2000 the two petitioners were entitled to avail benefit of exemption from payment of tax as per the rate provided in column 3 of item 1 in the annexure "B" from the date of completion of applications filed by respective units and will continue to do so until the amendment came into force on January 7, 2000.
131. It does not stand to reason why the benefit which has become crystallised in favour of the units as on the date of completion of its application would be altered by subsequent alteration in the manner of availing the benefit quantified for the unit within the specified period but the mode shall be altered to a less favourable method than the prevailing one, when there is no such explicit provision nor any implicit inference can be drawn.
132. It was also faintly stated by learned Advocate-General that scheme itself has been withdrawn by subsequent notification dated January 19, 2000. A perusal of said notification reveals that it has no bearing on the issue. In fact that is a notification, by Clause 1 of which the operative period of scheme which was originally fixed from April 1, 1998 to March 31, 2003 has been restricted to April 30, 2000. By Clause 2 of the notification dated January 19, 2000 it has further classified that such industries which has been prior to April 30, 2000 (a) registered with the registering authority of the industries department, (b) has been allotted or has acquired lands for the factory, (c) has applied for financial assistance from a regular financial institution, and (d) is expected to commence commercial production by December 31, 2000, will continue to be covered under the scheme for enjoying benefit of the scheme, notwithstanding the application completed in all fours may have been filed after April 30, 2000 or December 31, 2001. The notification rather allows entry to portals of such units, which become otherwise eligible under the scheme, after April 30, 2000 the date the operative period of scheme, and but for such provision would not have become entitled to benefit. This supports petitioner-appellant rather than respondents, that the right to benefit accruing under the scheme in one compact form once having vested are not envisaged to be altered by subsequent amendment. Rather it assures that those industries who have taken some effective steps as envisaged under the scheme will still be allowed entry to benefits of the scheme.
133. In these circumstances, we are of the opinion that the exemption from payment of tax to which the applicant becomes entitled physically as an eligible industry on the completion of application in the manner, up to total amount as quantified within the specified period cannot be affected by subsequent amendment in the scheme unless expressly provided for and subject to other constitutional limits. The two petitioners, in our opinion, are entitled to avail benefit in the same proportion during each year of specified period as they became entitled to avail as on the dates their respective applications were complete and that remains unaffected by the amendment that came into existence and became operative only on January 7, 2000.
134. Assuming that aforesaid premise is not accepted, whether the amendment result in indicting the amendment as arbitrary and violative of Article 14 being discriminatory vis-a-vis other sick units ?
135. Assuming that aforesaid conclusion be incorrect, the alternate contention that requires consideration is whether there exist any ground having rational nexus with object of extending benefit of exemption to a sick unit in the case of sick cement industry which has not availed benefit previously, differently than others sick industries in providing a different substantive mode of availing benefit of exemption under the scheme, to deprive it such benefit at a higher rate during initial period of assistance than in the later part and that too less than the minimum provided to other industries throughout eligibility period and even lower than a sick cement plant falling in Clause 4(b), where such distinction is not maintained in the case of a cement plant, which has already availed such benefit previously ?
136. Obviously, this question arise on assumption that the petitioner fails on the first ground, viz., it has acquired a vested right on the date application made by him is certified to be complete in all respects by the secretary of the concerned Screening Committee to avail the exemption during the specified period up to the maximum limit in the manner provided under the scheme.
137. We have noticed that the beneficiary units have been classified in two categories with two distinct objectives. On the one band are the industries where incentive has been extended as incentive with an object of inviting new capital investment in the State in the eligible areas for production of eligible commodities by installing new production capacity, either by way of setting up a new industry or by expanding the production capacity of existing industry or by seeking diversification of the existing industrial units in the State in other eligible products.
138. On the other hand are sick industrial units which are necessarily existing industrial units within the State which have incurred cash losses, whose capital has been eroded and are likely to continue to incur cash losses in future. Tax exemption has been extended to such units not as an incentive but as a rehabilitation programme of such units which are considered to be potentially viable and are taken by a Central or State level financial institution or by a bank under programme of rehabilitation or are such industrial units which are declared sick during the operative period of this scheme by the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 or by the State Level Committee or the appropriate District Level Committee in the Industries Department in case of non-BIFR cases, or industrial unit which is taken over and sold during the operative period of the scheme to a new management by the State Government or RIICO or RFC.
139. The definition of "sick industrial unit" in Clause 2(q) makes it abundantly clear that in order to come in the field of "sick industrial unit" it must be a pre-existing industry and must have suffered cash loss for at least two years consecutively either immediately before the commencement of the scheme or thereafter. When a sick unit is taken, over by a new management and makes additional capital investment which is at least 25 per cent of the depreciated value of the existing assets in given circumstances is stated to enter the scheme as a new industrial unit under Section 2(k)(ii). Relevant characteristic of the sick industrial unit which is treated as "a new industrial unit" are that either it should have been a sick industrial unit which has been taken up by the Central or State Level Financial institution or bank under a programme of rehabilitation or should have been so declared to be sick by the BIFR or the State Level Screening Committee or appropriate District Level Screening Committee. The potentiality of revival being the key factor for extending the benefit and also when the unit is taken over by the State Government or RIICO to RFC in terms of the statutory powers and sold to a now management to be run by it.
140. In this connection, the important feature of the scheme as noticed above, is that whenever industry is transferred to a new management and new investment of at least 25 per cent of depreciated value of assets is made by the new management, it is classified as a new industrial unit for the purpose of benefiting the industry under Clause 2(k)(ii).
141. The object of making available exemption to sick industrial unit is clearly relatable to a programme of rehabilitation of an existing manufacturing unit envisaged by extending aid to help it survive from the crisis and to revive to a healthy condition. This is also reflected in annexure "B", the Schedule prescribing incentives extended to various type of units.
142. It may be noticed that item No. 1 of annexure "B" is a general provision. It applies to all new units, their expansions or diversifications other than those provided in other entries specifying in column 5 the 11 years period within which the exemption is to be availed up to 100 per cent of the eligible fixed capital investment, the maximum extent, envisaged in column 4 and in the manner provided in column 3. For each year of eligible period within which it can avail the benefit, the industrial unit is entitled to avail exemption at a gradual reducing rate of tax. For the first year it can avail 100 per cent exemption from payment of tax whereas in the 10th and 11th year it can avail the benefit of exemption up to 30 per cent of tax. Item Nos. 2 to 5 all are in exception to item No. 1.
143. It is pertinent to notice that item 1 does not include within its fold specially the premier, pioneer or prestigious units though unless otherwise specified they may fall in item No. 1 as a new industrial unit simpliciter. Item No. 2 on the one hand is extended to new units of specified commodities and also to very prestigious units for a greater volume of exemption for a longer period up to the extent of 125 per cent of eligible fixed capital investment. The special feature of item 2 is that for first two years of its existence the new units of the specified commodities and very prestigious units arc allowed to avail 100 per cent exemption from payment of tax for that period and gradually declining rates from the third year at the same rate until it reaches 30 per cent. Item No. 2 does not extend to expansions or diversifications, even if they are engaged in manufacture of goods specified in column 2 of said item and continue to be governed by item No. 1. Item No. 3 is confined to cement as such where new capital investment by way of new industrial unit or by expansion or diversification or the industrial unit is of a pioneer, prestigious, very prestigious or a premier unit. Item No. 5 like item No. 2 deals distinctly with pioneer, prestigious and exporting units with a minimum of 50 per cent of their production. Thus, new industries which fell within the description of pioneering units or prestigious units have been extended the benefit envisaged under item No. 5 along with the exporting units which are engaged in exporting minimum 50 per cent of its products. The difference between item Nos. 2 and 5 can be discerned from the fact that item No. 2 extends the maximum benefit limit up to 125 per cent of the eligible fixed capital investment, it is stated for very prestigious unit only. Item No. 5 while envisages the exemption to be availed in the manner during the same specified period ef 13 years as item No. 2 but the extent of exemption up to which exemption can be availed is confined to 100 per cent of the eligible fixed capital investment and not more. A premier unit has been kept out of straitjacket formulae for extending benefit under the scheme. Instead, as per note 5 to annexure B in case of a premier unit, customised package may be worked out on the basis of merit of each case.
144. In contrast, item No. 3 is exclusively made applicable to cement which includes pioneer, prestigious, very prestigious and even a premier unit except mini cement plants mentioned in annexure "A", Significantly, in its wide net it does not include a sick cement plant within its ambit. The significant difference for extending the benefit of exemption to cement industries is that instead of making available exemption in a gradual declining rate as has been extended in all other cases, it has been extended at a flat rate of 25 per cent of tax every year throughout the 11 years of eligibility period. Significantly, while including other units it has included all kinds of units, namely, pioneer, prestigious and very prestigious and premier units and has also accepted mini cement plants and by not using the words new industrial units has also included within its field the expansion and diversification units but has not made mention of "sick unit" which is governed by item 3.
145. A sick industrial unit has not been identified with any of the units which become eligible for exemption because of new fixed capital investment for establishing new production capacity within the State and has been treated as a separate class by itself of whatever genre to which it belongs.
146. The analysis of scheme reflects a distinction between object in extending exemption on the one hand to the now industrial units, the units going for expansion and the units launching diversification, is to provide incentives to fulfil the need of the State to achieve a balanced economic growth through new investment and addition of new production capacities in the State within eligible area in the industries other than ineligible industries. On the other hand, the sick industrial units have been extended benefits of the scheme to save the existing investment and production capacities within the State by providing timely assistance for staging recovery from the set back. This difference in object becomes very relevant for the present purpose.
147. One belongs to realm of nurturing a new born for a healthy growth, the other to providing sustenance for survival and prevent from dying. Amongst the diseased unit gasping for oxygen, there cannot ordinarily be any reason for treating them differently in packaging fiscal oxygen by way of tax concession unless some specific purpose for administering different treatment becomes discernible.
148. Item No. 4 in this perspective, if seen, reveals that it has classified all sick units cumulatively for the purpose of extending alike rehabilitation package under the exemption scheme and has been classified in two categories on the basis of previously availing benefits of exemption or deferment.
(i) Those who have not availed the benefits of exemption from tax or of deferment previously, and
(ii) those sick industries which have availed such benefit previously.
149. The former have been offered a more soft paddling scheme than to those which have already availed such benefit in past, but have still been infected with sickness. The former have been treated at par with new industrial units as under item No. 1 irrespective of the goods, it may be manufacturing as envisaged under Clause (a) and those who have already availed the exemption from tax or deferment of tax previously have been classified in Clause (b) for extending the alike benefits to any industry without distinction up to the extent of 100 per cent of eligible fixed capital investment to be availed within 11 years to be availed in the manner specified in column No. 3.
150. There is no dispute between the parties either that all the sick units including cement plants which are sick are governed by item No. 4 only. But for the impugned notification dated September 30, 1999, which had come into operation on its publication on January 7, 2000 only, all sick units which fell in item No. 4(a) were to avail total exemption -up to 100 per cent of eligible fixed capital investment within 11 years and would avail in 1st year of eligibility at 100 per cent and 90 per cent in second year, 80 per cent in third year, 70 per cent in 4th year, 60 per cent in 5th year and 50 per cent in 6th year and 7th year. Thereafter, 40 per cent in 8th and 9th year and lastly 30 per cent in last two years, The sick unit manufacturing cement also fall in item No. 4 only and does not fall in item No. 3 even if it is manufacturing cement or item No. 2 if it is a unit manufacturing knitwears, gems and jeweller, textile, electronics and telecommunications, computer software, footwear and leather goods and glass and ceramic.
151. In the package of exemption to sick industries which have availed benefits previously are still categorised as one class under item No. 4(b) without any distinction.
152. The differentiation has been made only in the case of sick industry falling under item No. 4(a).
153. The key question zeroes down to one whether there exists a rational nexus with object sought to be achieved in classifying sick cement unit as different from other sick industrial unit making amendment in the scheme vide notification dated September 30, 1999 on the basis that it has not availed the benefit of exemption from payment of tax or deferment of tax ?
154. With this premise, if one turns to the effect of change which is alleged to have been brought out by the notification dated 30th September, 1999, it reveals that it has sought to bring certain change in Clause (a) of item 4 and Clause (b) remain unchanged.
155. As a result of amendment in question all sick industrial units, which have not availed the benefits previously, except in the case of a sick cement plant falling in that category, continue to avail benefit at higher level than the units falling in Clause (b). But only a sick cement industry which has not availed benefit previously is relegated to avail lesser amount of benefit every year than it could avail under item 4(b) if it had already availed benefit of exemption previously. So also regularly lesser percentage benefit is made available to only a sick cement unit than any other industries falling under item 4(a). Throughout eligibility period the sick cement plant gets benefit only up to 25 per cent of tax, which is less than minimum available tax exemption prescribed under item 1 or item 2 read with item 4(a). Not only this but even for first six years of eligibility, when the need is most, it can avail lesser tax exemption than had it availed such exemption previously and been entitled to avail such exemption under item 4(b).
156. This apparently defies rationale and lacks any nexus with the object of extending the benefit of scheme to ailing industries in singling out a sick cement plant for such differential treatment.
157. Treating distinctly a sick cement plant from other sick plants, in our opinion, would not save it from vice of hostile discrimination, in the particular facts and circumstances and provisions of the scheme. It is common ground that an industry which is established in banned area is not entitled to exemption at all. Non-inclusion of industry established in specified banned area affecting them is founded on principles of a policy decision for balanced geographical growth. Yet a sick industry established in such ineligible area, is included in the eligibility sphere to avail exemption to full extent as provided in item 1 or item II at a graduated declining rate of exemption during each year of specified period at a rate exceeding 25 per cent even in last year.
158. Likewise, an industry engaged in manufacture of articles, or an industrial activity as has been included in annexure A, has not otherwise been subjected to exemption at all. Yet a sick industry of that class gets the full benefit of availing at a graduated declining rate of exemption as any other eligible industry.
159. All sick industries including sick cement plants have been made subject to singular manner of availing benefit of exemption limit under Clause 4(b).
160. If that be so, there does not appear to be any reason having rational nexus to object sought to be achieved in singling out a sick cement plant which has not availed benefit of exemption from payment of tax and deferment of tax previously and otherwise fall in Clause 4(a) to club it with other healthy cement plants to avail benefit of exemption at much slower pace of exemption each year of its eligibility period than other sick industry. Not only this, this placed a sick cement unit falling under item 4(a) in a position lower than a sick cement plant which had previously availed benefit of exemption.
161. As noticed above, those sick industries which fall in category of item No. 2 read with Clause 4(a) can avail higher maximum limit for longer period, and in the same manner of availing exemption from payment in each year during specified period at a gradual reducing rate, ensuring higher exemption in initial period and lesser exemption as the specified period passes on. It starts with 100 per cent in the first two years and does not go below 30 per cent in the last three years. So also no change is effected in any sick industries other than falling under item 1 read with Clause 4(a). The only adverse change is brought about in the case of a sick cement plant which has not availed benefit of exemption from payment of tax or deferment of tax previously in the manner of availing benefit. It does not bring about change in maximum extent up to which exemption can be availed, nor it reduces the specified period.
162. Reliance placed on decision of this Court in Aditya Cement's case [2001] 121 STC 113 to which one of us was a party, as affirmed by the apex Court, Aditya Cement v. Commercial Taxes Officer [2001] 123 STC 425 also in our opinion is beside the issue raised in this case. Undoubtedly, in the aforesaid decision, this Court has held that cement industry as a class has been treated differently for the purposes of granting incentives under the Incentive Scheme 1987 and the New Incentive Scheme, 1989 and it was held that a new cement plant is entitled for such incentives only as has been made applicable to it specifically by carrying out exception from general ineligibility of the cement and not to the general scheme of incentives applicable to a new unit which is a very prestigious unit engaged in any other industry. It may be recalled that Incentive Scheme 1987 as well as New Incentive Scheme 1989 issued under the Rajasthan Sales Tax Act, 1954, cement industry as such was included in the list of ineligible industries. By amendment, specific benefits were extended to cement industry through inducting substantive provision in the scheme. For the purpose of extending such benefits, separate incentives were not extended to different categories of new industrial unit. The petitioner in that case has claimed higher benefit as a new unit which was very prestigious unit under the scheme and under the general scheme.
163. The present case, as has been noticed by us above, concerns with the sick industrial units which have been identified as a distinct class for the purpose of scheme as part of rehabilitation project. For this purpose in the matter of offering package of rehabilitation measure the sick industries have been further classified into two classes, viz., those sick units which have availed benefit of exemption from payment of tax or deferment of tax previously and those who have not. The question is whether there exists a reasonable nexus with purpose sought to be achieved in farther singling out a sick cement plant which has not availed previously such exemption, vide notification dated September 30, 1999 to offer reduced opportunities to avail the full rehabilitation dose within specified period ? If not, what is its consequence ?
164. We are not impressed with contention that in no circumstance a statute governing tax concession can be treated as violative of Article 14. No law whether made by primary legislative action or by subordinate legislation is immune from the constitutional constraints. Declaration under Article 13 of the Constitution is unequivocal. It declares all existing laws in force at the commencement of Constitution inconsistent with Part III of the Constitution to be void to the extent of inconsistence. It ordains and prohibits State from making any law taking away or abridging rights conferred by Part III and declared law made in contravention to be void. Law for that purpose includes notification having force of law. The notification excepting something from the purview of tax in exercise of power conferred under Section 15 of the Act of 1994 or Section 8(5) of the Central Sales Tax Act, 1956 is a matter of subordinate legislation. Hence it cannot be beyond the reach of Article 14. Even if the notification be taken to be an executive action, no act of State is beyond the reach of Article 14 which not only forbids discrimination by classification without having rational nexus with object sought to be achieved, but is antithesis of arbitrariness in all spheres of State action. That has been well-established since the decision of the Supreme Court in E.P. Royappa v. State of Tamil Nadu AIR 1974 SC 555.
165. Therefore, like any other laws, tax laws are also subject to Article 13 and shall be void if it contravenes any of the provisions included in Part III, is well-settled. Equality before law, which ensures every State action to be free from arbitrariness and unreasonableness, finds place in Article 14 of the Part III of the Constitution. Taxing law is no exception to the doctrine of equal protection of laws and inhibition against arbitrariness and unreasonableness. It has been held by the Supreme Court in Khandige Sham Bhat v. Agricultural Income-tax Officer [1963] 48 ITR 21 ; AIR 1963 SC 591 and in a chain of decisions thereafter. It was held in New Manek Chowk Spinning and Weaving Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad AIR 1967 SC 1801 that taxation will be struck down as violative of Article 14 if there is no reasonable basis behind classification made by it.
166. In Anandji Haridas and Co. (P) Ltd. v. S.P. Kushare Sales Tax Officer Nagpur [1968] 21 STC 326 (SC) ; AIR 1968 SC 565, the court stuck down the main provision of taxing statute because differentiation was made between a tax evader of the same class merely because detection by different methods or because similar situated person subjected to unequal taxation. Looking to the complexities of the fiscal measure and multiple factors going into making of fiscal policy by the State, the courts have laid a wide latitude to taxing statutes dealing with the fiscal measure in determining the nexus under Article 14, the principle enunciated by the apex Court in Twyford Tea Co. Ltd. v. State of Kerala (1969) 1 SCC 633 deserves to be noticed.
"Taxation law is not an exception to this doctrine...................... But in the application of the principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the Legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of 'wide range and flexibility' so that it can adjust its system of taxation in all proper and reasonable ways."
167. Thus, though Legislature is free to select the objects and there is no violation of the equal protection clause merely because other objects could have been but are not taxed by the Legislature. The latitude is still greater in the matter of construing the provisions relating to exemption from tax. But such law does not enjoy any exception from scrutiny at the touchstone of Article 14 in absolute.
168. Such exemption from tax in any form, while relieves the burden of benefited tax-payer, correspondingly it increases burden on the persons who have not been so exempted. Therefore the exemption being a matter of legislative policy by way of exception to general rule, the court would not normally interfere to enlarge the field of exemptions. However, this does not postulate that any statute whether by parent legislation or by subordinate legislation is immune from constraints of constitutional provisions including Part III of the Constitution. The law is trite that though wide field of discretion is enjoyed by State in choosing the subject of tax, still it is as much inhibited by constitutional limits as any other statute. In this connection we may notice the observations made in Mohinder Kumar v. State of Haryana (1985) 4 SCC 221.
169. That was a case where constitutional validity of Section 1(3) of the Haryana Urban (Control of Rent and Eviction) Act, 1973 had been challenged. While holding that the court will not ordinarily interfere in the matter of legislative policy underlying the exemption nonetheless upheld that the nature and character of incentive and the nature of exemption allowed should conform to constitutional restraint under Article 14 namely it should not be unreasonable. The court said :
"This will ordinarily be a matter of legislative policy and this Court will not normally interfere unless the court is of the opinion that the period of exemption or the date from which the exemption is to operate is unreasonable and arbitrary."
170. One of the basic principle of equality before law is inhibition against classification not founded on grounds having rational nexus with objects sought to be achieved. In the present case, the ground for invoking of Article 14 or examining the plea of hostile discrimination is that reduction in the quantum of benefit during each year of specified period for which a sick cement industry which has not availed benefit of exemption from payment of tax or deferment of tax previously in comparison to other sick industries, particularly when no such distinction is made between a sick cement industry and other sick industries which have previously availed such benefit, has no nexus with the object for which such benefits have been designed.
171. There is no doubt that there is wide latitude in choosing the matter of taxation for treating distinctly and such latitude applies also in the matter of granting exemption. However, while devising different policy for taxing the subject differently is relatable to object of taxation, the matter of granting incentives or tax exemptions are wedded to different object of State policy to be achieved through such exemptions. The question, therefore, would still arise whether once an industry has been granted entry into portals of exemption and it belongs to same class or group, can further classification be made without having rational nexus to object sought to be achieved by extending the benefit of exemption to such class for differential treatment. In other words, whether in treating cement industry which is sick and falls in item 4(a) of annexure B, differently from other sick industry there exist any ground which can be said to have a rational nexus with such object sought to be achieved.
172. If the cement industry as a class had been ruled out for exemption or as a class has been treated differently for devising a package of exemption different from other commodities, perhaps challenge on the ground of violation of Article 14 would fail. The case of Aditya Cement v. Commercial Taxes Officer [2001] 123 STC 425 (SC) fell in that category and therefore, the court upheld the special treatment given to the cement industry as a whole in the matter of devising a separate package for extending benefit under the Incentive Scheme, 1987 or New Incentive Scheme, 1989. The question raised in the present case is entirely different and has been raised under a different scheme in a different context. We have already noticed while examining the contours of the scheme in detail that two distinct purposes are discernible as objects of the scheme firstly to devise a package of exemption incentive for industries bringing in State new fixed capital investment and new production capacities within the existing one. Those industries are classified as "new industrial units", "expansion units", and "units going for diversification". For this purpose it is conditioned with eligibility of area and industries to be outside a list of ineligible industries, which commences production on or after commencement of scheme. Secondly, on the other hand, the sick units as a class have been extended the package of tax exemption under the scheme not as a part of incentive but as a part of rehabilitation programme. The sick industries have been extended the benefit of exemption irrespective of new investment, new production capacity and irrespective of the area in which it has been situated and the type of industry in which it is engaged even if the same is situated within the banned area or is an industry falling in the ineligible industries.
173. With this background, if any particular type of industry inviting new capital, new production capacity is kept out of the benefit altogether or even if allowed entry to the exemptions but is given a different package than other industries in its entirety, perhaps no ground on the anvil of Article 14 to indict such classification can be raised. So also if a particular type of sick industry are not at all extended benefit or particular type of sick industry in a given class is treated differently than other sick industries, still no grievance on account of differentiation can be raised. But where the entry into the portals of exemption is given to cement industry as a member of very same class, viz., sick industry but differential treatment is given in extending the package of exemptions resulting in very anomalous situation between the same type of industry, question of hostile and invidious discrimination do arise for consideration.
174. Here is a case where sick industry as a class has been firstly sub-divided into two categories for the purpose of extending the package; firstly those sick industries which have not availed benefits of tax exemption previously and secondly those sick industries which have availed benefits of exemptions earlier also. A cement industry by itself can fall into either of the categories of sick industry. In case it is a cement industry which is "sick industry" and has availed benefit of exemption or deferment previously, it remains in the general fold of sick industry. But if the very same industry falls in category 4(a) because it has not availed benefit of such exemption previously, it is picked up singularly by extending benefit of availing exemption at the rate of 25 per cent of tax every year, which is less than the other sick industry generally avail even last two years of specified period to avail full benefit of the scheme as a rehabilitation programme and is even less than the benefit that can be availed during first six years of specified period if it falls in category 4(b). Industry which is a sick industrial unit within the meaning of the scheme, is classified as an independent while extending package to the sick industries which have not availed the benefit of exemptions earlier than the sick cement plant which has previously availed the benefits and this results in the later unit of the same genre availing the exemptions at a higher rate than the cement plant falling in the former category which not only results in classification between a cement plants itself not founded on any intelligible differentia but results in anomalous situation. In the entirety of scheme except cement industry, in no other case a sick unit, which has already availed the tax exemption previously, can avail more liberal package for availing the same amount of tax benefit within the specified period on the rates prescribed for that purpose than the one which has not availed the benefit previously. We see no criterion much loss any criteria founded on intelligible differentia based on reasonable nexus with object sought to be achieved. None has been pointed out by learned Advocate-General except that it is a matter of policy.
175. In these circumstances, a case is made out by the claimants that the sick cement plants which have not availed the benefit of sick cement plant previously have been singled out for reducing the rate of tax exemption as has been extended to all the sick industries and also the very like cement plant which has availed such exemption previously without there being any reason or having any rational nexus with the object sought to be achieved. Therefore, the amending notification dated 30th September, 1999 in so far as it relates to providing separate scheme for sick cement plant falling under item 4(a) which results in reducing the benefit of tax exemption, infringes Article 14 of the Constitution and to that extent notification would violate Article 14 of the Constitution of India and the cement plant which has not availed benefit of exemption from tax or deferment of tax previously remain classified in general category of sick industrial unit governed by item (I) of the annexure B.
176. The notification dated 30th September, 1999 cannot be held to have retrospective effect so as to affect adversely the package of tax exemptions to which such unit has become entitled to avail in terms of Clause 4(g) and 4(h) of the Scheme in any of its aspects.
177. As a result, the appeals filed by M/s. J.K. Udaipur Udyog Ltd. DBCSA No. 337 of 2001, 338 of 2001, 339 of 2001, 340 of 2001 and appeal by J.K. Synthetics Ltd. D.B. CSA No. 298 of 2001 are allowed and we hold that the petitioner had acquired a right to avail the benefits of the scheme of 1998 as a sick industrial unit in the manner provided in column (3) of item No. 1, annexure B, read with item 4(a) to the extent quantified in column 4, within the specified period in column (5) as on the date applications of the respective petitioners were completed in all respects which was prior to September 30, 1999 and such rights in any respect are not affected by the amendments brought into effect on January 7, 2000 when notification dated September 30, 1999 was published in any of its aspects. The petitioner-appellants in each case shall continue to enjoy the benefits of the package under the scheme which has accrued to them on the date of completion of their applications as per the provisions of the scheme in force on that date.
178. The appeals No. 523 of 2001, 524 of 2001, 525 of 2001, 546 of 2001, 534 of 2001, 560 of 2001, 570 of 2001 and 577 of 2001 by the State are dismissed.
179. There shall be no orders as to costs.