Important Point
Under the Bihar Sales Tax Deferment Rules, ‘Plant’ would not include bottles and crates employed by an industrial unit manufacturing soft-drinks and beverages for carrying on its business.

Headnote:(i) Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990-Rule 2(v) - Plant-Meaning of-Respondent Company manufacturing soft-drinks and beverage claimed bottles and crates as plant and sought to include investment thereon in fixed capital asset for benefit of deferred tax-Held, in respect of industry manufacturing soft-drinks and beverages plant would mean that apparatus which is used for manufacturing soft-drinks and beverages-Articles like crates and bottles used for storing manufactured product cannot be termed as plant.
       (ii) Words and Phrases-Plant as occurring in Rule 2(v) of Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990.
       Held : The High Court was wrong in interpreting the word plant in Rule 2(v) so widely. It failed to consider whether the object and scheme of the Deferment Rules permit such a wide interpretation. The High Court also failed to appreciate that the decisions of this Court in Taj Mahal Hotel (supra) and Scientific Engineering House (supra) were under the Income Tax Act and the observations made and the test indicated therein were in the context of the wide definition of the word plant given in that Act and, therefore, not of universal application. Obviously, if plant is defined differently under a different provision or if the context so requires, it may have to be given a different and a narrower meaning. The Deferment Rules do not define plant and, therefore, what should have been considered by the High Court was what meaning should be given to it in the context of the Deferment Rules. ((Para 5)
       As disclosed by the industrial policy and the Deferment Rules, the State agrees to suffer temporary loss of revenue by not requiring immediate payment of sales-tax on sale of goods produced or manufactured by an industrial unit if it makes new fixed capital investment in the State. What the State desires and what the Deferment Rules require for getting the benefit thereunder, is not capital investment but fixed capital investment. Rule 2(v) defines ‘fixed capital investment’ to mean investment in land, building, plant and machinery. Thus, the nature of investment contemplated by the Deferment Rules is investment in fixed assets which are ordinarily considered essential for production or manufacture of goods and have some degree of permanency. The second proviso to Rule 3 makes this position further clear. It states that “Deferment shall be limited to 90 per cent of the fixed capital investment in fixed capital assets”. To explain how in business accounting “fixed capital” and “fixed assets” are understood, Mr. Singh, learned counsel for the State, drew our attention to the book titled “Advanced Accounting” by Jamshed R. Batliboi. Therein, it is stated that “fixed capital of a business consists of its fixed assets” and “fixed assets are those which are acquired and intended to be retained permanently for the purpose of carrying on a business, such as land, buildings, plant and machinery etc. Therefore, the context in which the word ‘plant’ is used in Rule 2(v) indicates that it is not used in its wider sense and does not include within its meaning land, building and machinery. It also appears that the rule-making authority did not intend ‘plant’ to mean what is not a fixed asset. For all these reasons, we are of the view that by ‘plant’ what is intended by the rule-making authority is that apparatus which is used by the industry for carrying on its industrial process of manufacture. In respect of an industry manufacturing soft-drinks and beverages, it can be said that plant would mean that apparatus which is used for manufacturing soft-drinks or beverages and not articles like crates and bottles used for storing the manufactured product. (Para 7)

Judgment

Nanavati, J.-A short question which arises for consideration in this appeal is whether investment made by Steel City Beverages Limited, (respondent No. 1 herein and hereafter referred to as “the Company”), in bottles and crates can be said to be investment in “Plant” so as to amount to “Fixed Capital Investment” under the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990 (hereinafter referred to as “the Deferment Rules”).

2. The Company is engaged in the business of manufacturing soft-drinks and beverages. It is a registered dealer under the Bihar Finance Act, 1981. It filed a writ petition being Civil Writ Jurisdiction Case No. 1118 of 1992, through its Director-respondent No. 2 in Patna High Court for a direction to the State Government and its officers, appellants herein, to accord permission under Rule 42(7) of the Bihar Sales Tax Rules, 1983 and exempt it from using Form No. XXVIII-B. While the petition was pending before the High Court, it made an application under the Deferment Rules to the competent authority for grant of an eligibility certificate which would enable it to claim benefit of deferment of payment of sales-tax scheme declared under the Deferment Rules. It was stated in the application that under the Resolution of the State Government dated 6.9.1989 and the Deferment Rules, it was qualified to seek the benefit of deferment. The High Court by its order dated 13.7.1992 directed the Deputy Commissioner of Commercial Taxes, respondent No. 4, to place that application before the District Level Committee for Singhbhum District for its consideration. The District Level Committee decided on 9.1.1995 that the Company was entitled to the benefit of deferment of payment of sales-tax to the extent of 90% of its fixed capital investment in fixed-capital assets. However, it rejected the Company’s claim that investment in bottles, crates, electrification and tools was an investment in “Plant” and, therefore, it was also a “fixed capital investment”. The Company, therefore, amended the writ petition and challenged that part of the decision of the District Level Committee which was against it.

3. The High Court after considering that under the Deferment Rules “fixed capital investment” means investment in land, building, plant and machinery and that they do not define the word “Plant”, observed that it was required to be construed according to its dictionary meaning or as understood in common parlance and not in its technical sense. It then held that the word “Plant” would include whatever apparatus is used by a businessman for carrying on his business; not his stock in trade which he buys or makes for sales, but all goods and chattels fixed or movable which he keeps for employment in his business and which have some degree or durability. Considering the nature of business of the Company, namely, manufacturing soft drinks and beverages, the High Court held that bottles and crates employed by it for its business are also `Plant’ and, therefore, the Company is entitled to get the benefit of deferment on the investment made in them. The High Court quashed the decision of the District Level Committee which was under challenge and directed the State and its officers to grant the benefit of deferment after taking into account the investment made in bottles and crates also. The claim in relation to electrification and tools was not pressed before the High Court. Aggrieved by the decision of the High Court, the State has filed this appeal.

4. It was contended by Mr. B.B. Singh, learned counsel for the appellant-State that the High Court has mis-interpreted the word “Plant” in Rule 2(v) of the Deferment Rules. It was submitted by him that unless a thing is of durable nature and fixed like land, building or machinery, it cannot be said to be `Plant’ and, therefore, bottles and crates have been wrongly held as `Plant’. He also submitted that all the decisions relied upon by the High Court were under the Income-T

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1998 Supreme(SC) 1154

Important PointUnder the Bihar Sales Tax Deferment Rules, ‘Plant’ would not include bottles and crates employed by an industrial unit manufacturing soft-drinks and beverages for carrying on its business.

Cases Referred (2)

Important Point
Under the Bihar Sales Tax Deferment Rules, ‘Plant’ would not include bottles and crates employed by an industrial unit manufacturing soft-drinks and beverages for carrying on its business.