- (1.) These appeals are inter-linked and, therefore, are taken up together for disposal. Civil appeal nos. 2641 and 2642 of 2000 relate to respondent- Gujarat Ambuja Cement Ltd. (in short 'gujarat Ambuja') while civil appeal nos. 3744-46 of 2000 relate to respondent-Associated Cement Ltd. (in short 'acc'). The common question so far as the appeals are concerned linking the respondents in the appeals relates to one issue i. e. liability to pay purchase tax on the royalty paid by the respondents. As other issues are involved in Gujarat Ambuja's cases, the factual scenario in civil appeal nos. 2641-2642 of 2000 needs to be noted in some detail.
(2.) Challenge in these appeals is to the judgments rendered by a Division Bench of the HIMACHAL PRADESH HIGH COURT. Writ petitions were filed by the present respondents questioning the action taken by the sales Tax Authorities and the revisional orders passed setting aside the orders of assessment framed for the assessment years 1995-96 and 1996-97 underthe Central Sales Tax Act, 1956 (in short the 'central Act') and the Himachal Pradesh General Sales Tax Act, 1968 (in short the 'act').
(3.) So far as the Gujarat Ambuja is concerned, the factual and legal background was highlighted in the writ petitions before the High Court as follows: 3.1. It is a public limited company incorporated under the Companies Act, 1956 inter alia carrying on the business of manufacture and sale of cement under the name and style of "ambuja Cement" in the State of Himachal Pradesh and that it ranks amongst one of the best managed cement companies in India. It had been conferred various prestigious awards for its performance, pollution control and management including the award in the year 1991 by the prime Minister of India, namely. National award for Public Recognition of Outstanding Activity for prevention of control of pollution'. It submitted an application in the year 1989 for setting up a cement plant in himachal Pradesh and it was approved by the State Level Industrial Projects and Review Authority (hereinafter referred to as 'ipara') in their letter dated 19.2.1990. It invested more than Rs. 500 crores in setting up the cement plant at Darlaghat, solan District of Himachal Pradesh and it is the largest investment made by any private entrepreneur so far as the State is concerned. The said cement project also had the approval of the World Bank/international Finance Corporation, washington, which also financed the project by way of term loan in addition to the project being monitored by the Industrial development Bank of India too. All these brought substantial economic development in the state. 3.2. On 27.3.1991, the Industrial Development Department of Himachal Pradesh government issued an incentive scheme by their notification notifying the grant of certain incentives for new as well as already established units in the State in respect of deferment of payment of Sales Tax, Electricity Duty etc. Writ-petitioner obtained provisional Sales Tax registration from the himachal Pradesh General Sales Tax Department on 14.2.1992, which was extended from time to time upto 30. 6.1995 before ultimately being granted with permanent registration w. e. f. 11.8.1995, the date on which the petitioner started its trial production. On 31st July, 1992 the Industries Department issued another notification introducing the concept of "prestigious and Pioneer Industries" by amending suitably the earlier notification dated 27.3.1991, according to which "prestigious unit" meant any new industrial unit, which goes into commercial production in the State on or after 1.5.1992 and is registered with the empowered Committee appointed under rule 24 between 1.5.1992 and 31.3.1993, which has a fixed capital investment of at least Rs. 50 crores and employed at least 200 persons on regular basis. The Empowered Committee considered the issue of grant of registration certificate as Prestigious unit in its meeting held on 25.11.1992 and decided to grant the same to Gujarat ambuja treating it as a 'prestigious unit'. Consequently, the Director of Industries, himachal Pradesh issued on 13.1.1993 the required registration certificate registering the petitioner unit as a 'prestigious unit'. As the production of the unit could not be commenced by January 1995, which was one of the stipulated conditions, taking into account the substantial progress made by the company, the Industries Department by its letter dated 28.1.1995 approved the grant of further extension initially till 30. 6.1995 and thereafter upto 30. 9.1995 by their letters dated 28.1.1995 and 30. 6.1995. On 1.12.1994, the Industries department made further amendments to the notification dated 27.3.1991 and 31.7,1992, and brought into existence the concept of 'prestigious Cement Unit', according to which the unit must go into commercial production after 1.5.1992 and registered with the Empowered Committee under Rule 24 between 1.5.1992 and 31.3.1995. By the said amendment, it was also notified that such unit should have a fixed capital of Rs. 50 crores and employ at least 200 persons on regular basis. It is to be noted that by Notifications dated 27.3.1991 and 31.7.1992 Rules were notified. They were called Revised rules regarding grant of Incentives to Industrial units in Himachal Pradesh, 1991 (in short '1991 Rules') and Revised (Amendment) rules regarding grant of Incentives to Industrial Units in Himachal Pradesh, 1992 (in short '1992 Rules'). The Revised Rules were further amended by notifications dated 1.12.1994 and 6.7.1995 and these amended rules were called Revised (Amendment II) Rules regarding grant of incentives to Industrial Units in Himachal pradesh, 1994 (in short '1994 Rules') and revised (Amendment-III) Rules regarding grant of Incentives to Industrial Units in himachal Pradesh, 1995 (in short '1995 rules'). The 1991 Rules, as the notification of 27.3.1991 shows, were made after supersession of Rules-1 dated 4.10. 1976, rules 9-4/73-SI-IV dated 14.5.1980, No. 10- 27/71-SI dated 28.8.1984 and No. 9-4/73- v dated 5.1.1985. 3.3. In the light of all these, the Excise and taxation Department issued a notification dated 31.12.1994 to grant exemption from payment of Sales Tax to pioneer industries, bifurcated in different categories with effect from the date of their commercial production against the periods as enumerated in the notification, which was further amended on 27.3.1995 introducing para 1 (a) and 1 (b). On 6.7.1995, the Department of Industries again amended rule 27 (1) regarding the grant of incentive to Prestigious cement Units notifying that sales tax exemption/deferment under both Central Tax and Himachal Pradesh General Sales Tax shall be available for a period of 12, 9 and 7 years in respect of category A, B and C blocks, respectively, to new Prestigious cement Units excluding from its purview the only existing cement unit, as per which the eligible cement units were those, which had come into commercial production within the State of Himachal Pradesh on or after 1.5.1992. 3.4. On 11.8.1995, Gujarat Ambuja started trial production and on 26.9.1995 regular commercial production was started. This entitled the Company to exemption from sales Tax in terms of the notifications referred to supra. A formal certificate was also issued by the Department of Industries on 24.1.1996 specifying the commencement of the commercial production on 26.9.1995 confirming at the same time about the investment of about Rupees 391 crores and employment of 353 persons on regular basis. Sales tax due was paid to the Department for the intervening period from 11.8.1995 to 25.9.1995. The Excise and Taxation Department issued an amendment on 30. 1.1996 to the earlier notification dated 31.12.1994 and introduced para 1 (c) which was published in the Official Gazette on 6.2.1996, whereunder the state Government had specifically given exemption to Gujarat Ambuja from payment of sales tax subject to the fulfillment of certain conditions enumerated in the notification being a company classified and placed in the category of Industrial Block 'b' in terms of which it was shown to be eligible to avail of the concession of exemption for 108 months (9 years). 3.5. Since the unit was already registered as a 'prestigious unit' on 13.1.1993 in accordance with the notification issued by the state Government on 31.7.1992 by the empowered Committee in its meeting held on 25.11.1992 and inasmuch as the requirements of the 'prestigious unit' and the 'prestigious Cement Unit' were absolutely one and the same, unit was mentioned and referred to in the notification dated 30. 1.1996 and a formal declaration was also made by the Industries Department on 2.2.1996 declaring the petitioner to be a 'prestigious Cement Industrial Unit' keeping in view the satisfaction of all the requisite eligibility criteria. The unit fulfilled all the conditions as required under Rule 2 (rrr) , as mentioned in the notification dated 6.7.1995 as well as 30. 1.1996 issued by the Industries Department as also the Excise and Taxation Department of the State government having regard to the fact that the unit has come into commercial production after 1.3.1992, that it was registered with the Empowered Committee as a 'prestigious unit' on 13.1.1993, that it has already made investment of more than Rupees 50 crores and had also employed more than 200 persons on regular basis. The Director of Industries has issued a certificate in form STH-III on 15.2.1996 certifying that the unit had been registered as a 'prestigious Cement Industrial Unit' with the empowered Committee, pursuant to which an application was made to the Excise and taxation Department for the grant of exemption certificate in STH-II before the assessing authority and thereupon on 11.6.1996, the prescribed authority after due enquiry issued a certificate of exemption in form STH-II for the period from 30. 1.1996 to 31.3.1996 and the same was extended further from time to time upto 31.3.1998. 3.6. On 14.3.1997, the assessing authority passed an order of assessment for the assessment year 1995-96 and granted exemption w. e. f. 30. 1.1996. Aggrieved by a portion of the order, Gujarat Ambuja filed an appeal before the Additional Excise and taxation Commissioner/appellate authority on the ground that the exemption should have been allowed from the date of commencement of the commercial production, namely, 26.9.1995 and not from 30. 1.1996, the date of issuance of exemption notification. On 27.5.1997, the Sales Tax department passed an order of assessment for the year 1995-96 granting exemption from payment of the sales tax w. e. f. 6.2.1996, which is the date on which the notification was actually published instead of from 30. 1.1996 with reference to which it was granted earlier. Once again, in respect of this order also, an appeal was filed before the Additional Excise and Taxation Commissioner/appellate Authority challenging the same on the ground that the exemption should have been granted from the date of commencement of the commercial production, namely, 26.9.1995 and not as is sought to be given by the authorities concerned. For the assessment year 1996-97, the assessing authority passed an order dated 24.10. 1997 after considering all the relevant material on record granting exemption from the payment of sales tax. 3.7. While matter stood thus, according to the respondents on 24.3.1998 when two political parties formed a coalition Government in the State of Himachal Pradesh, the excise and Taxation Minister who belonged to a political party and the leaders of that party started issuing number of statements against the respondent-company by prejudging the issue and questioning its entitlement for exemption under the Incentive scheme announced. These statements in the shape of press cuttings were annexed to the writ petition. It was contended that on account of such extraneous reasons and influence and with ulterior motive, action was initiated by the Commissioner of Sales tax without any justification in law and in an arbitrary manner proposing to revise the orders passed by the assessing officer in exercise of the powers conferred under section 31 (1) of the Act and for that purpose on 29.4.1998 issued a show cause notice calling upon the respondents to show cause as to why the exemption granted cannot be revoked on the ground that the declaration of the petitioner as a "prestigious Cement Unit" within the meaning of para 1 (C) of the notification was not correct for the reasons set out in the said notice. It was also proposed to revoke STE- ii. On 4.5.1998, the revisional authority issued three other show cause notices being revision nos. 2, 3 and 4, both under the central Act for the year 1995-96 and Act for the year 1996-97 and the Central Act for the year 1996-97 questioning the legality and propriety of the earlier assessment orders granting exemption on the ground that the petitioner was not a Prestigious cement Unit within the meaning of para 1 (C) of the notification dated 31.12.1994 and, therefore, was not entitled to any exemption from Sales Tax either under the state Act or the Central Act. It was also indicated in the show cause notices about the non-payment of the tax payable under section 5a of the Act. As a sequel of the said notices issued by the revisional authority, the assessing authority also issued show cause notice proposing to withdraw the exemption accorded earlier in form ste-II for the assessment year 1997-98 on similar grounds as were assigned by the revisional authority in its notices, calling upon the respondent-company to appear before the said authority on 18.6.1998. So far as the two appeals filed by the petitioners before the Additional Commissioner (Appeals) against the assessment orders dated 14.3.1997 and 27.5.1995 for the assessment year 1995-96 are concerned, the appellate authority by its order dated 3.10. 1998 and 9.10. 1998 respectively dismissed the appeals upholding the assessment framed by the assessing officer and endorsed the view that the assessee was entitled to exemption from payment of sales tax with effect from 6.2.1996, the date of publication of the notification only and not from the date of commencement of commercial production, namely, 26.9.1995. In the light of the replies filed in response to the notices issued by the revisional authority, the respondent requested the assessing authority to adjourn the proceedings relating to the assessment year 1997-98, but on 1.12.1998, the Sales Tax Officer passed an order withdrawing the exemption earlier granted and directed the assessee to pay the sales tax to the tune of Rs. 18.50 crores under the Act as well as the Central act. It is stated that since para 1 (C) of the notification dated 30. 1.1996 published on 6.2.1996 prohibited by virtue of Clause 5 therein the assessee from charging tax on the sale of cement manufactured in the new unit and any collection of the sales tax would have exposed to penal consequences under Section 35 of the Act, the assessee had not actually collected any sales tax at all and in spite of all these, it was being made to pay huge amount, which is an illegal demand on account of the arbitrary, illegal and mala fide nature of the action initiated by the authorities. Against the order of the Sales Tax Officer dated 1.12.1998, an appeal was filed before the additional Excise and Taxation Commissioner, Himachal Pradesh. The assessing authority in the meantime issued a notice dated 4.1.1999 for the assessment year 1997-98 calling upon the assessee to pay sales tax in a sum of Rs. 18.50 crores under both the Act as well as Central Act, stipulating coercive action under Section 14 (8) of the Act, in default thereof. In spite of the representations made before the appellate authority, the assessee was directed to make an initial deposit of Rs. 1.50 crores before the appeal filed could be heard on merit. Appeals were filed before the Finance Commissioner against the orders passed by the appellate authority dated 3.10. 1998 and 6.10. 1998, which are said to be pending. Even in spite of all these, the assessing authority issued another show cause notice dated 9.2.1999 calling upon the assessee to pay a sum of rs. 5.50 crores excluding interest and penalty towards the liability of sales tax for the period from April 1998 to December 1998. In the meantime, the revisional authority has issued four more notices being revision nos. 7, 8, 9, 10 under the Act as well as Central Act for the years 1992-93 to 1995-96 alleging that the orders passed by the assessing authority for those periods are neither legal nor proper and calling upon the assessee to show cause as to why penalty for the assessment year from 1992-93 to 1995-96 equivalent to one and half time of the tax that would have been payable on purchase of materials should not be levied in view of the fact that the provisional registration certificate under the Act expired on 30. 6.1995 and regular registration certificate was only obtained on 11.8.1995. On 8.2.1999, the revisional authority cancelled and annulled the exemption certificate issued in form STE-II with retrospective effect and held that the assessee-company was liable to pay tax under both the Central Act and the Act in addition to its liability to pay the purchase tax under Section 5a of the State Act on the limestone extracted. The revisional authority was of the view that the respondents were not entitled to any exemption as they did not fulfill the requisite conditions. Additionally it was held that there was no compliance with the statutory requirements which was a condition precedent for grant of benefit. That was treated to be an additional ground for holding that the respondent was not entitled to any benefit. Reference was made to certain defective 'c Forms' to highlight as to how the assessee had failed to comply with the requirements for entitlement of the benefits. Accordingly, the revisional authority directed fastening of additional tax liability. Apprehending that the appellate authority, which is only subordinate to the revisional authority is likely to follow the view expressed by the revisional authority and the remedy of appeal would be merely an empty formality in view of the order of the revisional authority, the writ petitions were filed. The High Court allowed the writ petitions by the impugned judgment and quashed the orders of the Sales Tax authorities; inter alia, holding as follows: "so long as the petitioners satisfied the eligibility criteria prescribed in the Revised Incentive rules, as amended from time to time, he would be entitled to the benefits and incentives extended under the rules and the statutory notification is not a must or an essential pre-requisite for the petitioners to assert/enforce such rights The statutory notifications issued under the relevant taxing enactments only go to ratify and accord statutory recognition also to what was originally, planned and proclaimed as a policy decision and guidelines Viewed thus, the petitioners would in our view be entitled to the benefit of the incentives from the date of commencement of commercial production on 26 9 1995 as held in State of Bihar and Ors. v. Suprabhat Steel Ltd. and Ors. (1991 (1) scc 31) , it would not be permissible for even the State Government to override or negate the incentives and benefits which industrial unit would be otherwise entitled to under the incentive policy, proclaimed by the Government itself" 3.8. Additionally, it was held that the levy of purchase tax on the royalty paid is not legally sustainable. 3.9. The High Court held that the approach of the authorities was clearly erroneous, on a mis-reading of the various Notifications and keeping out of consideration certain relevant materials Particular reference was made to the Registration Certificate dated 13th January, 1993 issued by the Empowered Committee. Taking note of the fact that the notifications were issued by promulgating rules, the High Court was of the view that they are to be considered in the background of Section 42 of the Act the emphasis on defects in 'c' forms was held to be clearly without any basis, and the same was held to be totally insignificant for the purpose of denying benefits in terms of the policy of the State to encourage setting up of cement industries.;