2005 Supreme(SC) 975

2005(5) Supreme 692
Supreme Court of India
(From Andhra Pradesh High Court)
Mrs. Ruma Pal & Tarun Chatterjee, JJ.
M/s. Vadilal Chemicals Ltd. —Appellant
versus
The State of Andhra Pradesh & Ors. —Respondents
Civil Appeal No. 1905 of 2004
Decided on 2-8-2005
Counsel for the Parties :
For the Appellant : D.A. Dave, Sr. Advocate, Anshul Singhal, Tarak Kapadia and Ms. Meenakshi Arora, Advocates.
For the Respondents : Rakesh Dwivedi, M.N. Rao, Sr. Advocates, Manoj Saxena, S.K. Mitra, Debojit Borkakati, Gaurav Liberham, Mohanprasad Meharia, T.V. Ratnam, A.V. Rangam, A. Ranganadhan and Buddy A. Ranganadhan, Advocates.

Headnote:Central Sales Tax Act, 1956—Section 9(2)—Andhra Pradesh General Sales Tax Act, 1957—G.O. M.S.No. 117 dated 17.3.1993—Section 20(2) —Claim of benefit notified by the 1993 G.O. issued by Industries and Commerce Department—Eligible industry for the benefits—Appellant set up a small scale industrial unit in State of Andhra Pradesh in 1994 and invested a sum of Rs. 93.99 lakhs for production of Liquor Ammonia and for refilling of Anhydrous Ammonia—Appellant commenced commercial production in 1994—Application filed to Industries Department for an eligibility certificate —Final eligibility certificate was issued —Appellant was granted exemption from payment of sales tax on the products sold from its unit upto a limit of Rs. 35 lakhs for the years from 1994 to 1999—About four years after the period of exemption expired, show cause notices under Section 9(2) of Central Sales Tax Act rw/s 20(2) of the State Act were issued to appellant—It was noticed that Assessing Authority had allowed irregular sales tax exemption on the first sales of anhydrous liquefied ammonia and adjusted the tax against the tax exemption granted under the Tax Holiday Incentive Scheme—Writ petition filed by appellant for a declaration that appellant was entitled to the benefits notified by the 1993 G.O. and that pre-revision show cause notices issued were illegal, void and unenforceable—No malafides has been alleged against appellant—Bottled ammonia had been subjected to excise duty and appellant had paid the levy as prescribed—Whether exemption was wrongly granted to appellant—(No).

       Held : Doubtless the 1993 G.O. which was issued by the Industries & Commerce Department had granted the sales tax holiday on products manufactured in industrial units set up by the State Government. But the interpretation of the word ‘manufacture’ as used in the 1993 G.O. by the DCCT was wholly incorrect. For one, the DCCT appears to have imported the definition of ‘manufacture’ from the law relating to excise. That was uncalled for having regard to the fact that the word had been used in a different context altogether. (Para 19)

       In this case the State Sales Tax Act contains no provision relating to ‘manufacture’. The concept only finds place in the 1993 G.O. issued by the Department of Commerce and Industries. It appears from the context of the other provisions of the 1993 G.O. that the word ‘manufacture’ had been used to exclude dealers who merely purchased the goods and resold the same on retail price. What the State Government wanted was investment and industrial activity. It is in this background that the 1993 G.O. must be interpreted. (Para 20)

       The Department of Commerce and Industries had by its letters dated 3rd June 1995 and 20th August 1996 clarified the issue. The exemption was granted in terms of the 1993 G.O. the thrust of which was to increase the industrial development in the State. The Commissioner, Commercial Tax had also in no uncertain terms accepted the interpretation put by the Industries Department on the 1993 G.O. and written to the DCCT to permit sales tax exemption to the appellant in accordance with the 1993 G.O. for a period of five years upto a limit of Rs. 35 lakhs. Besides the conclusion of the DCCT was based on an incorrect factual premise that the appellant had not paid excise duty on the bottled ammonia. The DCCT ignored the appellant’s clear statement in its reply to the show cause notices that the bottled ammonia had been subjected to excise duty and that it had paid the levy as prescribed under the Central Excise Tariff Act, 1985. (Paras 20 and 21)

       There is another reason why the action of the DCCT cannot be upheld. The primary facts relating to the processes undertaken by the appellant at its unit were known to the Department of Industries and Commerce and the DCCT. The only question was what was the proper conclusion to be drawn from these. The Department of Industries and Commerce which was responsible for the issuance of the 1993 G.O. accepted the appellant as an eligible industry for the benefits. Apart from the fact that it can be assumed that the Department of Industries was in the best position to construe its own order, we can also assume that in framing the scheme and granting eligibility to the appellant all the departments of the State Government involved in the process had been duly consulted. The State, which is represented by the Departments, can only speak with one voice. Having regard to the language of the 1993 G.O. it was the view expressed by the Department of Industries which must be taken to be that voice. (Para 23)