The main legal point established in the judgment is that the rule explaining the Industrial Policy cannot be repugnant to the policy itself. The court emphasized that the incentive of deferment of tax shall be limited to the incremental production, meaning production over and above the actual production capacity.

Chandramauli Kr.Pd., J.

1. In this writ application, prayer of the petitioner is to declare the Explanatory Note appended to Rule 3 of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990 as ultra vires and inconsistent with the provisions of the Bihar Finance Act, 1981 and the Industrial Policy Resolution, 1989. Its. further prayer is to quash the order dated 3.2.2000 of the State Level Committee whereby it had held that the petitioner shall be entitled for the incentive of deferment, not on the additional production but on the incremental production above the installed capacity.

2. A Division Bench of this Court by judgment dated 17th of September, 2001 dismissed the writ application. Aggrieved by the same, petitioner preferred Civil Appeal No. 1912 of 2002 before the Supreme Court. The Supreme Court by order dated 28th of November, 2007 set aside the judgment of this Court and remitted the matter back for fresh consideration in accordance with law.

3. Short facts giving rise to the present application are that the petitioner is a company registered under the Companies Act and engaged in the business of manufacturing cement. With a view to accelerate the pace of Industrial Development, achieve dispersal of the industries out of the urban industrialized areas and to attract them to the under-developed and developing areas of the State, the State Government in exercise of the power under Section 23A of the Bihar Finance Act adopted a policy known as Sales Tax Incentive Scheme, 1989 by resolution dated 6th of September, 1989 (Annexure- 1). According, to the Sales Tax Incentive Scheme, 1989, the incentive was to be available to the new industrial units starting commercial production from 1.4.1989 and also to the existing industrial units undertaking expansion.

4. Clause 4 of the said policy which concerns the existing industrial units undertaking expansion, which is the subject matter of this writ application, reads as follows:

"Subject.Adoption of Sales Tax Incentive Scheme for rapid industrialization of Bihar.

In order to accelerate the pace of Industrial Development, achieve dispersal of industries outside the Urban industrialized areas and to attract them to the under-developed and developing areas of the State, Government has taken the following decisions: (1)xx

(2) xx

(3) xx

(4) Existing industrial units undertaking expansion of 50% of their capacity with a minimum fixed capital investment of Rs. 20 lakhs in fixed assets will also be eligible for the deferment of payment of Sales Tax.

(5) xx

(6) xx

(7) xx

(8) The Sales Tax deferment scheme will be applicable from 1.4.1989 for a period of six years upto the end of the 8th Five Year Plan."

5. The Hindi version of the aforesaid resolution, however, reads as follows: LOCAL LANGUAGE

6. In order to give effect to the Sales Tax Incentive Scheme, 1989 the Governor of the State in exercise of the power under Section 7 of the Bihar Finance Act, 1981 framed the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990 (Annexure-3), hereinafter referred to as the Rules.

7. Rule 3 of the aforesaid Rule, which is relevant for the purpose, reads as follows:

"3. Eligibility and extent of deferred payment of Tax.The following industrial units will be eligible for deferred payment of tax in respect of sale of goods produced or manufactured by them in such industrial units for a period and to the extent specified in Rules 4 and 5: (a) new industrial units;

(b) existing industrial unit under expansion and which has come into commercial productions on or after 1st April, 1989 after such expansion subject to the following conditions: (i) that the said expansion programme has been duly licensed, registered or approved by the competent authority;

(ii) that the investment in such expansion is hot less than 50 per cent of the fixed capital investment and rupees twenty lakhs whichever is more;

(iii) that such expansion results in an increase of at least 50 per cent of the inst