LLOYD ELECTRIC AND ENGINEERING LTD Vs. STATE OF HIMACHAL PRADESH AND ORS
Supreme Court of India (Full Bench (FB)- Three Judge)
Appeal (Civil), 6838 of 2015, Judgment Date: Sep 03, 2015
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6838 OF 2015
(Arising from S.L.P. (C) No. 26751/2013)
Lloyd Electric and Engineering Limited … Appellant (s)
Versus
State of Himachal Pradesh and others … Respondent (s)
J U D G M E N T
KURIAN, J.:
Leave granted.
Whether the appellant is liable to pay Central Sales Tax (hereinafter
referred to as “CST”) @ 2 per cent on the inter-State sales for the period
01.04.2009 to 17.06.2009 or @ 1 per cent in view of the Industrial Policy
of the State, is the dispute arising for consideration in this case. It is
not in dispute that as per the Industrial Policy of the State of Himachal
Pradesh, the appellant had been enjoying the concessional rate in CST @ 1
per cent upto 31.03.2009. It is also not in dispute that the Cabinet had
taken a policy decision to extend the period of concession upto 31.03.2013
or till the CST is phased out. Still further, it is not in dispute that the
Department of Industries had, accordingly, issued a notification extending
the concessions from 01.04.2009 to 31.03.2013 or till the time the CST is
phased out. The dispute arose on account of the Notification dated
18.06.2009 issued by the Excise and Taxation Department granting the
concessional rate of the CST @ 1 per cent wherein the expression “… with
immediate effect for the period ending 31.03.2013” was used.
The High Court, as per the impugned judgment, took the view that the
expression “… with immediate effect” has to be given a plain meaning, and
therefore, the appellant is not entitled to the concession which it had
been enjoying upto 31.03.2009 till the Notification dated 18.06.2009 is
issued by the Excise and Taxation Department.
Heard Shri M.P. Devanath, learned Counsel appearing for the appellant and
Shri Suryanarayana Singh, learned Additional Advocate General appearing for
the respondent-State.
In order to appreciate the contentions advanced by the parties, it is
necessary for us to refer to the background of the dispute. Industrial
Policy-2004 was notified by the State of Himachal Pradesh, providing for,
inter alia, at Clause 10.3 concessional rate in Central Sales Tax:
“10.3 Central Sales Tax at a concessional rate of 1% shall be leviable on
the goods manufactured by new and existing industrial units (as defined
under these Rules) unless provided otherwise elsewhere under these Rules,
upto 31-03-2009. This incentive will not be provided to industrial unit
engaged in the production of breweries, distilleries, non-fruit based
wineries and bottling plants (both for country liquor and Indian made
foreign Liquor).”
It is not in dispute that the appellant was found eligible for the said
concession since it satisfied the parameters prescribed in the notification
till 31.03.2009. It is seen from the Cabinet Note on extension of the
incentive of concessional rate of CST @ 1 per cent beyond 31.03.2009 to
industrial enterprises of the State of Himachal Pradesh prepared on
19.05.2009, the issue whether the concession should be extended beyond
31.03.2009 for some more time, was specifically addressed. To quote the
relevant discussion:
“3. … The State Government has been vigorously pursuing at various levels
with Government of India the case for the extension of the Special Package
for our State announced in January 2013 till at least March 2013 as it
expires in March 2010. In the absence of any decision or any positive
indications so far, it is imperative that the State Government also at its
own level considers taking such initiatives by way of which Industrial
Enterprises being set up in our State could be provided some basic
attraction in the form of tax incentives and a facilitating environment.
Availability of such incentives in the neighbouring State such as
Uttarakhand where the incentive of 1% CST is available to the industrial
units till March, 2014 renders our State uncompetitive and Unattractive to
industrial investors. During the year 2007-08 the Industrial Enterprises of
the Ste had contributed a sum of Rs.113.47 Crores to State exchequer
through 1% CST. In case the incentive of 1% CST is not restored till the
time the CST is phased out by Central Government it will affect the
viability of units adversely and majority of big Enterprises may resort to
branch transfer/consignment sales outside the State to avoid 2% CST to
maintain their competitiveness. It is therefore proposed that the incentive
of concessional rate of Central Sales Tax @ 1% be allowed to be continued
beyond 31st March, 2009 till March 2013 or till the time CST is phased out.
4. With this proposal there would be no adverse financial implication
and State will continue to earn the same rate of revenue through CST sale
as Industrial Enterprises will prefer to pay 1% CST instead of resorting to
branch transfer of goods.
5. The Department of Excise & Taxation and Finance Department have
concurred with proposal.
6. Permission of the Hon’ble Chief Minister has been obtained through
the Chief Secretary to place the matter before the Council of Ministers.
POINTS FOR CONSIDERATION
Whether to extend the incentive of concessional rate of CST @ 1% for all
the Industrial Enterprises beyond 31st March 2009 till 31st March 2013 or
till the time the CST is phased out by the Central Government?”
The Council of Ministers, in the Meeting held on 20.05.2009, approved the
above proposal and, accordingly, the State Government through Principal
Secretary (Industries) issued the following Notification on 29.05.2009:
“Government of Himachal Pradesh,
Department of Industries (A)
No. Ind.A(F) 6-3/2008 Dated Shimla – 02,29th May, 2009
NOTIFICATION
In partial modification of this department notification No. Ind.A(F)6-
7/2004 dated 30th December, 2004 notifying Industry Policy 2004 regarding
grant of Incentives, Concessions and Facilities to Industrial Units
Himachal Pradesh – 2004, the Governor, Himachal Pradesh is pleased to
extend the incentive of validity of concessional rate of CST @ 1% upto
31.03.2013 in Rules 10.3 of Industry Policy, 2004 or till the time CST is
phased out, whichever is earlier.
By Order
Sd/-
Pr. Secretary (Inds.) to the
Govt. of Himachal Pradesh.”
(Empyhasis supplied)
Thereafter, the Excise and Taxation Department of the State Government
issued statutory Notification under Section 8(5)(b) of the Central Sales
Tax Act, 1956 (hereinafter referred to as “the Act”). The relevant portion
of the Notification reads as follows:
“2. Now, therefore, in exercise of the powers conferred by clause (b) of
sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central
Act No. 74 of 1956), the Governor of Himachal Pradesh is pleased to direct
that in respect of the sale in the courses of inter-State trade or commerce
of the goods (other than those manufactured by the breweries, distilleries,
nonfruit/vegetable based wineries and bottling plants (both of country
liquor and Indian made foreign liquor) manufactured by the dealers running
any existing industrial unit or new industrial unit (other than those new
industrial units which are located in the tax free industrial zone) in the
State of Himachal Pradesh, and are registered as dealer with Excise and
Taxation Department, Himachal Pradesh, the tax levied under sub-section (1)
of section 8 of the said Act shall be calculated and payable at the rate of
1% of the taxable turnover of such goods with immediate effect for the
period ending 31.03.2013.”
(Emphasis supplied)
The whole thrust of the contention advanced by the State is that since the
notification under the Act providing for tax concession was issued only on
18.06.2009 wherein it was specifically mentioned that the notification
would have immediate effect and would operate for the period ending on
31.03.2013, the appellant is not entitled to the CST concession @ 1% for
the intervening period between 01.04.2009 to 18.06.2009. The appellant,
however, submits that in view of the policy decision taken by the State
Government extending the tax concession beyond 31.03.2009 to 31.03.2013,
the Excise and Taxation Department of the State Government cannot take a
different view and deny the tax concession for the period between
01.04.2009 to 18.06.2009-the date of the notification issued under Section
8(5)(b) of the Act. Heavy reliance is also placed on the decision of this
Court in State of Bihar and others v. Suprabhat Steel Limited and
Others[1].
We do not think it necessary to go into the various contentions raised by
the parties in view of the undisputed factual position we have referred to
above. The State Government cannot speak in two voice. Once the Cabinet
takes a policy decision to extend its 2004 Industrial Policy in the matter
of CST concession to the eligible units beyond 31.03.2009, upto 31.03.2013,
and the Notification dated 29.05.2009, accordingly, having been issued by
the Department concerned, viz., Department of Industries, thereafter, the
Excise and Taxation Department cannot take a different stand. What is given
by the right hand cannot be taken by the left hand. The Government shall
speak only in one voice. It has only one policy. The departments are to
implement the Government policy and not their own policy. Once the Council
of Ministers has taken a decision to extend the 2004 Industrial Policy and
extend tax concession beyond 31.03.2009, merely because the Excise and
Taxation Department took some time to issue the notification, it cannot be
held that the eligible units are not entitled to the concession till the
Department issued the notification. It has to be noted that the Finance
Department of the State Government had concurred with the proposal of the
Department of Industries to extend the tax concession beyond 31.03.2009
till 31.03.2013 and the Council of Ministers had accordingly taken a
decision also. No doubt, the statutory notification issued by the Excise
and Taxation Department under Section 8(5)(b) of the Act on 18.06.2009 has
stated that the eligible units will be entitled to the concession with
immediate effect. Merely because such an expression has been used, it
cannot be held that the State Government can levy the tax against its own
policy. The State Government is bound by the policy decision taken by the
Council of Ministers and duly notified by the Department concerned, viz.,
Department of Industries.
That apart, it appears, the Excise and Taxation Department itself has not
actually intended the notification to take effect from 18.06.2009. The
definition given to the new and the existing industrial units in the
Notification dated 18.06.2009 would indicate so. To quote:
“Explanation I:- For the purposes of this notification,-
‘new industrial unit’ means an industrial unit located in Himachal Pradesh
which commenced/commences production on or after 31.012.2004, but will not
include any industrial unit which is formed as a result of reestablishment,
mere change of ownership, change in the constitution, re-structuring or
revival of an existing industrial unit;
‘existing industrial unit’ means an industrial unit which commenced
production before 31.12.2004;”
Even otherwise, it is not altogether a new concession that has been
notified by the Excise and Taxation Department in the impugned Notification
dated 18.06.2009. As we have noted above, it is an extension of the 2004
Industrial Policy and the resultant tax concession to the eligible units
which was available upto 31.03.2009. Therefore, for all purposes, what is
notified by the Excise and Taxation Department on 18.06.2009 is an
extension of the said concession beyond 31.03.2009 and that is why the
notification has used the expression “… for the period ending 31.03.2013”
without otherwise indicating the concession already being enjoyed by the
eligible units till 31.03.2009.
The High Court, with great respect, has gone wrong in not appreciating the
background of the case and the decision of the Council of Ministers to
extend its own Industrial Policy announced in 2004 and the tax concession
beyond 31.03.2009. Once the Council of Ministers takes a policy decision,
the implementing Department cannot issue a notification contrary to the
policy decision taken by the Government. The High Court also erred in
analyzing and understanding the Notification dated 18.06.2009 as if it
introduced the CST concession @ 1 per cent with effect from the date of
issuance of notification. As we have already clarified, it is not the
introduction of a new policy but an extension of the benefits under the
extended policy. It is in this context, the decision of this Court in
Suprabhat Steel Limited (supra) and State of Jharkhand and others v. Tata
Communications Limited and another[2] become relevant.
Accordingly, the appeal is allowed, the impugned judgment is set aside. It
is declared that the appellant shall be entitled to the concessional rate
of CST @ 1 per cent with effect from 01.04.2009 till 31.03.2013 until it is
duly varied by the State Government.
There shall be no order as to costs.
………..…….…..…………J.
(ANIL R. DAVE)
.……....……………………J.
(KURIAN JOSEPH)
……....…….…..…………J.
(ADARSH KUMAR GOEL)
New Delhi;
September 3, 2015.
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[1] (1999) 1 SCC 31
[2] (2006) 4 SCC 57
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REPORTABLE
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