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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.    

2. 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

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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.

3. 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.  

4. Heard Shri  M.P.  Devanath,  learned Counsel  appearing

for  the  appellant  and  Shri  Suryanarayana  Singh,  learned

Additional  Advocate  General  appearing  for  the

respondent-State.  

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5. 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).”

6. 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:

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“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.  

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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?”

7. 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

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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)

8.  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

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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)

9. 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

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placed on the decision of  this  Court  in  State of Bihar and

others v. Suprabhat Steel Limited and Others1.

10. 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 1 (1999) 1 SCC 31

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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.

11. 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:

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“Explanation  I:- For  the  purposes  of  this

notification,-

(i) ‘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;

(ii) ‘existing  industrial  unit’  means  an industrial  unit  which  commenced production before 31.12.2004;”  

12.  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

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concession  already  being  enjoyed  by  the  eligible  units  till

31.03.2009.  

13. 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 another2

become relevant.  

2 (2006) 4 SCC 57

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14. 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.

15. 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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