2022 Supreme(SC) 38

SUPREME COURT OF INDIA
(From the High Court of Gujarat at Ahmedabad)
M.R. SHAH, SANJIV KHANNA, JJ.
State of Gujarat – Appellant
Versus
Arcelor Mittal Nippon Steel India Limited – Respondent
Civil Appeal Nos. 7710-7714 of 2021
Decided on : 21-01-2022

IMPORTANT POINTS
(1) Eligibility clause in relation to exemption notification must be given effect to as per language and not to expand the scope deviating from language – There is a vast difference and distinction.
(2) Applicability of incentive is directly related to eligibility and not de hors the same – Principle of promissory estoppel shall not be applicable contrary to Statute.
(3) In taxing matters, doctrine of promissory estoppel as such is not applicable and Revenue can take a position different from its earlier stand in a case with established distinguishing features.

Headnote:

(A) Taxation – Gujarat Sales Tax Act, 1969 – Section 49(2) – Original Entry No.255(2) vide F.D.’s notification dated 05.03.1992 – Exemption from payment of amount of sales tax – Only in a case where raw materials, processing materials or consumable stores are used by eligible unit and eligible unit actually uses goods purchased within State of Gujarat as raw materials, processing materials or consumable stores in manufacture of goods, there shall be exemption from payment of purchase tax/sales tax to the extent provided in said Entry – In present case, it is an admitted position that after furnishing a declaration in Form No.26, goods - raw materials, processing materials or consumable stores so purchased were to be used by ESL, but respondent - ESL after purchase of raw materials – Naphtha and Natural Gas and after availing benefit of exemption from payment of purchase tax did not himself/itself used the same, but, instead, sold the same to another entity – EPL and the said another entity – EPL used said raw materials for generating electricity, which thereafter came to be sold to respondent - ESL pursuant to power purchase agreement – Original Entry No.255(2) dated 05.03.1992 does not provide that eligible unit after purchase of the raw materials instead of using the same by itself or himself can transfer/sold to another unit and another unit can use said raw materials – Original notification does not at all permit such transfer and use of raw materials after availing exemption for use of another unit, who, as such is otherwise not entitled to any exemption as per incentive policy – Essar Power Limited being a power producing company was not eligible at all for any exemption from sale/purchase tax on procurement of raw materials – Respondent-Essar Steel Ltd. Committed breach of declaration given in Form No.26 – High Court has committed error in holding that respondent did not commit any breach of any of conditions mentioned in original Entry No.255(2) dated 05.03.1992. (Paras 10.1, 11, 11.1, 12 and 14)

(B) Taxation – Gujarat Sales Tax Act, 1969 – Section 49(2) – Original Entry No.255(2) vide

F.D.’s notification dated 05.03.1992 – Exemption from payment of amount of sales tax – Intention of State to provide incentive under incentive policy was to give benefit of exemption from payment of purchase tax was to specific class of industries and, more particularly, as per list of ‘eligible industries’ – Exemption was not available to industries listed in ‘ineligible’ industries – It was never the intension of State Government while framing incentive policy to grant benefit of exemption to ‘ineligible industries’ like power producing industries like EPL, which as such was put in list of ‘ineligible’ industries – It will be for assessee to show that he comes within purview of notification – Eligibility clause in relation to exemption notification must be given effect to as per language and not to expand the scope deviating from language – There is a vast difference and distinction – Second notification dated 14.11.2000 is clarificatory in nature and there is no change in basic eligibility criteria/conditions mentioned in original Entry No.255(2) – In facts and circumstances of case, principle of promissory estoppel shall not be applicable – Wordings and language used in exemption notifications are very clear, simple and unambiguous – When there was no such promise and/or representation, demand cannot be said to be hit by principle of promissory estoppel as observed and held by Tribunal as well as High Court in impugned judgment and order – Scheme of Statute does not in any manner indicate that incentive provided has to continue for consecutive years irrespective of fulfilling of eligibility conditions – Applicability of incentive is directly related to eligibility and not de hors the same – If it is found that industrial undertaking does not fulfil eligibility criteria, it cannot claim incentive/exemption – Principle of promissory estoppel shall not be applicable contrary to Statute – Merely because erroneously and/or on misinterpretation, some benefits in earlier assessment years were wrongly given, cannot be a ground to continue the wrong and to grant benefit of exemption though not eligible under exemption notification – This is a case of deliberate violation and evil doing – Levy of penalty is justified and warranted – Joint Commissioner, Tribunal as well as High Court have committed a grave error in quashing and setting aside penalty imposed by Assessing Officer – Impugned common judgment and order passed by High Court as well as that of Tribunal quashing and setting aside demand of purchase tax from respondent quashed and set aside – Order passed by Assessing Officer levying demand of purchase tax and imposing the penalty restored. (Paras 14.5, 14.6, 20.1, 21.1, 22, 23, 23.2 and 24)

(C) Interpretation of Statute – Taxing Statute – While exemption notification should be liberally construed, beneficiary must fall within ambit of exemption and fulfill conditions thereof – In case such conditions are not fulfilled, issue of application of notification does not arise – Notification has to be read as a whole – If any of conditions laid down in notification is not fulfilled, party is not entitled to benefit of that notification – An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to court to ignore conditions prescribed in industrial policy and exemption notifications – Exemption notification should be strictly construed and given meaning according to legislative intendment – Statutory provisions providing for exemption have to be interpreted in light of words employed in them and there cannot be any addition or subtraction from statutory provisions – In taxing statute, it is plain language of provision that has to be preferred, where language is plain and is capable of determining defined meaning – Strict interpretation to the provision is to be accorded to each case on hand – Purposive interpretation can be given only when there is ambiguity in statutory provision or it alleges to absurd results, which is so not found in present case. (Paras 14.1 to 14.4)

(D) Doctrine – Promissory Estoppel – Doctrine of promissory estoppel is an equitable remedy and has to be moulded depending on facts of each case and not straitjacketed into pigeonholes – There cannot be any hard and fast rule for applying doctrine of promissory estoppel but doctrine has to evolve and expand itself so as to do justice between parties and ensure equity between parties – In taxing matters, doctrine of promissory estoppel as such is not applicable and Revenue can take a position different from its earlier stand in a case with established distinguishing features – Rules of promissory estoppel and estoppel by conduct may not be applied to alter or amend specific terms and against statutory provisions – All terms and conditions contained in exemption notification shall prevail and person claiming exemption has to fulfil and satisfy all eligibility criteria/conditions mentioned in exemption notification. (Paras 20.2, 20.3 and 20.4)

Facts of the case:

Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by High Court of Gujarat dated 06.05.2016 passed in Tax Appeal Nos. 136 of 2016 to 140 of 2016 by which the High Court has dismissed the said appeals preferred by State and has upheld the common order dated 29.01.2015 passed by Gujarat Value Added Tax Tribunal, Ahmedabad in Second Appeal Nos.420 to 423 of 2013 by which Tribunal held that the respondent is entitled to exemption from payment of amount of sales tax as per the original Entry No.255(2) vide F.D.’s Notification dated 05.03.1992, which was issued under Section 49(2) of the Gujarat Sales Tax Act, 1969, State of Gujarat has preferred the present appeals.

Findings of Court:

Modus operandi which was adopted by the respondent – Essar Steel warrants a penalty. Though, the raw material was required to be used by itself for the manufacture of their goods, after availing the exemption as eligible unit and instead of using the same for itself/himself, the ESL sold the raw materials to an ‘ineligible’ entity – EPL, who used it for manufacture of its own goods – generating the electricity, which again came to be sold to ESL under the power purchase agreement.

Result : Appeals allowed.