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. 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. 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. 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." 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. 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. 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. The petitioner-company has filed separate writ petitions for different periods for claiming relief under Rajasthan Sales Tax Act and Central Sales Tax Act. 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. It will be apposite to reproduce here 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. Type of units Extent of the Maximum exemption Maximum No. percentage of in terms of time-limit exemption percentage of for from total eligible fixed availing tax liability capital investment exemption (FCI) from tax ------------------------------------------------------------------------------------------ 1 2 3 4 5 ------------------------------------------------------------------------------------------ 1. New units other 1st year 100% 100% of eligible fixed Eleven than the units 2nd year 90% fixed capital years mentioned at items 2 3rd year 80% in cases where and 3 and units 4th year 70% such investment going in for expansion 5th year 60% exceeds Rs. 150.00 or diversification 6th year 50% lacs, and 125% of 7th year 50% eligible fixed capital 8th year 40% investment in cases 9th year 40% where such investment 10th year 30% does not exceed 11th year 30% Rs. 150.00 lacs. ------------------------------------------------------------------------------------------ 2. (a) New units of 1st year 100% 125% of eligible fixed Thirteen knitwears, 2nd year 100% capital investment. years. gems and 3rd year 90% jewellery, textile, 4th year 80% electronics and 5th year 70% telecommunications, 6th year 60% computer 7th year 50% software, 8th year 50% footwears and 9th year 40% leather goods, 10th year 40% glass and 11th year 30% ceramic. 12th year 30% (b) Very prestigious units 13th year 30% 100% of eligible ------------------------------------------------------------------------------------------ 3. All categories of 25% of total fixed capital investment Eleven cement plants/units tax liability years. including pioneering/prestigious/very prestigious/premier units, except mini cement plants mentioned in annexure A ------------------------------------------------------------------------------------------ 4. Sick units Same benefits, which are available to Eleven new units, at item No. 1. years (a) Sick units which have not availed of benefits of exemption from tax or deferment of tax previously. ------------------------------------------------------------------------------------------ (b) Other sick 1st year 80% 100% of eligible Eleven units, which 2nd year 70% fixed capital years have availed of 3rd year 60% investment the benefits of 4th year 50% in cases exemption from 5th year 40% where such tax or deferment 6th year 30% investment of tax. 7th year 20% exceeds 8th to 11th Rs. 150.00 year 10% lacs and 125% of eligible fixed capital investment in cases where such investment does not exceed Rs. 150.00 lacs. ------------------------------------------------------------------------------------------ 5. Pioneering units/Prestigious 1st & 2nd year 100% 100% of Thirteen units/Exporting 3rd year 90% eligible fixed years. units with 4th year 80% capital investment a minimum of 50% 5th year 70% of their production. 6th year 60% 7th & 8th year 50% 9th & 10th year 40% 11th & 12th year 30% 13th year 30% ------------------------------------------------------------------------------------------ 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. 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.
(3.) 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. 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. 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. 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." 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. 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. 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. 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. 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. In the aforesaid scenario, the writ petitions were filed by the two companies which had 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, 2000 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. ;