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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.     4285 OF 2007

State of Jharkhand & Ors. ... Appellants

                                  Versus

Tata Steel Ltd. & Ors. ...Respondents

J U D G M E N T

Dipak Misra, J.

M/s. Tata Steel Limited, the 1st respondent herein, had

established  a  manufacturing  unit  for  production  of  HRP,

rounds,  structural  and  other  iron  and  steel  products  in

Dhanbad situated in erstwhile Bihar.  The State of  Bihar

had on 22.12.1995 formulated an industrial policy for tax

exemption and/or deferment to such industrial units which

started  production  between  01.09.1995  and  31.08.2000.

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The said policy was issued in exercise of power conferred by

Section 23A of the Bihar Finance Act, 1981 (for short, “the

1981  Act”)  and  the  purpose  of  framing  the  policy  was

industrial growth of the State.  The policy stipulated that

such industrial units should have the registration certificate

indicating that the unit was eligible to have the benefits of

the policy.  The policy was issued with a view to create an

atmosphere  conducive  for  growth  of  industries  and

optimum utilisation of the natural resources available in the

designated/stipulated  area.   As  is  evident,  by  the  said

policy, the Government intended to attract investors from

various parts of the country to invest in the identified areas.

The  major  incentive  under  the  policy,  apart  from others,

included  eight  years  sales  tax  exemption  on  sale  and

purchase  of  material  from the  date  of  commencement  of

production as stipulated in the policy.  Keeping in view the

purpose incorporated in the policy, exemption notification

under the 1981 Act was issued. The appellant expressed its

willingness to install a cold rolling mill in Jamshedpur by

investing Rs. 2000 crores.  After a final decision was taken

upon  due  deliberation,  the  1st respondent  sought  a

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confirmation  from  the  State  of  Bihar  to  assure  the

commitment to grant sales tax exemption as stated in the

policy  as  an  incentive.   Number  of  meetings  took  place

between the authorities  of  the State of  Bihar  and the 1st

respondent  and  in  pursuance  of  the  discussion,  certain

amendments in the policy took place, as a consequence of

which a communication was made to the 1st respondent for

setting up a cold rolling mill  with production capacity  of

1.02  million  tonnes  requiring  investment  of  Rs.  1874.04

crores on the project.  Regard being had to the discussion

and the communication, the 1st respondent invested nearly

Rs. 2000 crores on its own and the commercial production

commenced from 01.08.2000.

2. When the matter stood thus, the Bihar Reorganisation

Act, 2000 came into existence on 15.11.2000 as a result of

which  Jamshedpur  became  part  of  a  newly  carved  out

State, namely, Jharkhand.  After coming into force of the

new State, on 15.12.2000, the Governor of Jharkhand by

notification ordered that  the  1981 Act,  the  Central  Sales

Tax  (Bihar)  Rules,  1956  and  the  notifications  made

thereunder,  etc.  amongst  other  Acts,  Rules  and

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Regulations,  shall  be deemed to be in force in the entire

State of Jharkhand w.e.f. 15.11.2000.  On 21.12.2000, the

successor  State  issued  an  exemption  certificate  as

contemplated  in  earlier  notification  issued  by  the  Bihar

State  Finance  and  Commercial  Taxes  Department

exempting  the  new  units  which  also  included  the  unit

established by the 1st respondent, from the purchase tax as

well as the sales tax on purchase and sales made in regard

to the cold rolling mill.  Be it stated that the said certificate

was issued after holding proper enquiry by the concerned

Joint Commissioner.   After due enquiry, he had opined that

though  the  raw  materials  for  the  manufacture  of  CR

product is HR product, the CR product is totally different,

both in its metallurgical components and the end-use, and

the two products were commercially recognised as different

products. Hence, the cold-rolled products  manufactured by

the  new  unit  being  different  from the  hot-rolled  product

manufactured by the old unit, the appellants were entitled

to exemption of sales tax as provided under the industrial

policy.   On that  score,  he  had approved issuance of  the

certificate.   However,  the  Commissioner  of  Commercial

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Taxes,  Jharkhand  initiated  a  suo  motu revision  under

Section  46(4)  of  the  1981  Act  and  placing  reliance  on

Telangana Steel Industries v. State of A.P.1 held that the

two products must be treated as the same commodity and

the products not being different commodities, the benefit of

exemption was not available.  

3. Being  aggrieved  by  the  order  passed  by  the

Commissioner, the 1st respondent filed a writ petition before

the High Court of  Jharkhand which ultimately remanded

the matter to the competent authority to examine whether

HR product and CR product manufactured by the two units

of  the  company  are  one  and  the  same  or  two  different

products.   

4. The  aforesaid  order  came to  be  assailed  before  this

Court  in  Tata  Iron  &  Steel  Co.  Ltd.  v.  State  of

Jharkhand and others2.  The Court, taking note of various

aspects  and  the  submissions  raised  at  the  bar,  held  as

follows:-

“20. We are unable to accept this argument ei- ther. First of all, as noticed above, it is not the case of the State that the product manufactured

1  1994 Supp. (2) SCC 259 2  (2004) 7 SCC 242

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by the appellant in its new unit is not CRM. It is not the case of the State that the existing unit ei- ther by its machinery or by its process is capable of  making HRM and not  CRM or  is  capable  of manufacturing both. Of course, if such an issue were to be raised the burden would have been on the appellant to establish the same. When such an issue is not raised it is not necessary for the appellant to establish that fact by any such in- trinsic  evidence.  The  material  produced  before the Joint Commissioner was in our opinion suffi- cient  to  decide  whether  the  product  manufac- tured by the appellant is CRM or not and the said Joint Commissioner having given a positive find- ing and that finding having not been interfered with  by  the  Commissioner,  we  think  the  High Court erred in remanding the matter for fresh in- quiry.

21. It is true that normally as against an order of remand  this  Court  hesitates  to  interfere  since there  is  always  another  opportunity  for  an  ag- grieved  party  to  establish  its  case.  But  in  this case we should notice that the decision to estab- lish an industrial unit was initiated by the appel- lant as far back as in the year 1997. Based on a promise made in the industrial policy of the State of  Bihar,  at  every  stage  the  appellants  tried  to verify  and confirm whether  they are entitled to the benefit of exemption or not and they were as- sured of that exemption. It is based on these as- surances that the appellant invested a huge sum of money which according to the appellant is to the tune of Rs 2000 crores but the State says it may be to the tune of Rs 1400 crores. Whatever may be the figure, the fact still remains that the appellants have invested huge sums of money in installing its new industrial unit. At every stage of the construction, progress and installation of the machineries,  the  Government/authorities  con- cerned were informed and at no point of time it

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was suspected that  the  new unit  was  going  to manufacture HRM. The process of manufacturing HRM and CRM as could be seen from the experts’ opinion  is  totally  different  and the  material  on record also shows that the plant design for a new unit  is  for  the purpose of  manufacturing CRM. These  factors  coupled  with  the  fact  that  at  no stage of the proceedings which culminated in the judgment of the High Court, the respondent State had questioned this fact except for the technical ground  taken  by  the  Commissioner  which  is found to be erroneous, we find the ends of justice would not be served by remanding the matter for further inquiry.”

5. After so stating, this Court allowed the appeal and set

aside the order of the High Court and restored the proposal

made  by  the  Joint  Commissioner  for  grant  of  exemption

certificate to the company and also the exemption certificate

granted subsequently.

6. In  pursuance  of  the  aforesaid  judgment,  the  1st

respondent company availed the benefit of exemption.  As

the  facts  would  unveil,  on  01.04.2006,  Jharkhand Value

Added Tax  Act,  2005 (for  brevity,  “JVAT Act”)  came into

force.  Prior to that, through a notification SO no. 202 dated

30.03.2006 issued under Section 7(3) of the 1981 Act, the

State  of  Jharkhand  had  withdrawn notification  nos.  478

and 479 dated 22.01.1995 and SO nos. 57 and 58 dated

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02.03.2000  with immediate effect, as a result of which the

facility  of  exemption  from  payment  of  sales  tax  on  the

purchase of raw materials and also facility of exemption of

sales  tax  on  its  finished  products  was  withdrawn.   On

30.03.2006,  a  notification  bearing  SO  no.  202  under

Section  8(5)(a)  of  the  Central  Sales  Tax  Act,  1956  was

issued withdrawing notification no. 481 dated 22.12.1995.  

7. At this juncture, it is relevant to refer to Section 95(3)

(ii) of the JVAT Act which reads as under:-

“95. Transitional Provisions –

(3)(ii)  Where  a  registered  dealer  was  enjoying  the facility of exemption for payment of tax extended to him under the provisions of adopted Bihar Finance Act, 1981 for his having established new industrial unit  in  the  State  or  undertaken  expansion, modernization or diversification in such industrial units immediately before the appointed day, may be allowed  to  convert  the  facility  of  exemption  from payment of tax under the Act into getting the facility of deferment of payment of tax for the un-expired period  or  percentage  of  value  of  fixed  asset  as determined,  as  might  have  been  allowed  to  such dealer under that Act, by a notification published in Official Gazette by the State Government.”

8. Rule  64  of  the  Jharkhand  Value  Added  Tax  Rules,

2006 (for short “the Rules”) deals with deferment. The said

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rule reads as under:-  

“64. Deferment.-(1) (a) All  such  Industrial units,  which  were  availing  the  benefit  of deferment  of  tax  under  the  provisions  of  the Repealed  Act  and  notifications  issued there-under,  immediately  before  the  Appointed Day, and who are continued to be so eligible on such  Appointed  Day  under  the  Act,  may  be allowed to continue the benefit of such deferment of  payment  of  tax,  for  the  balance  un-expired period or un-availed percentage of gross value of fixed assets,  provided such Industrial  units file an  application  in  Form JVAT  121  for  grant  of fresh  eligibility  Certificate,  for  the  balance un-expired  period  or  un-availed  percentage  of gross value of fixed assets, before the In-charge of the Circle, in which such unit is registered.  

(b) All the procedure and provisions issued for availing deferment in the Repealed Act shall continue to be in operation and shall be deemed to have been adopted for the purpose of the Act.

(c) The In-charge  of  Circle,  on  receipt  of such application mentioned in sub-rule (a) shall issue  a  revised  eligibility  certificate,  indicating therein  the  balance  un-expired  period  or un-availed  percentage  of  gross  value  of  fixed assets.

Provided such Industrial  Unit  shall  file  an application  mentioned  in  sub-rule  (a)  within  a period of fifteen days from the date, on which the Act comes into operation.

Provided further the In-charge of the circle, shall issue a revised eligibility certificate, for the remaining un-expired period within fifteen days, from receipt of such application.

(2) All  such  industrial  units,  which  were availing the benefit of exemption from payment of

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tax  on  the  sales  of  their  finished  products, granted  under  clause  (b)  of  sub-section  (3)  of Section 7 of the Repealed Act, and who have not availed of their full entitlement as on Appointed Day,  may  be  allowed  to  opt  for  deferment  of payment of tax for the balance unexpired period or unveiled percentage of value of fixed assets as determined,  whichever  is  earlier,  in  accordance with sub-section (3)(ii) of Section 95 of the Act.

Provided no dealer  eligible  for  deferment  under sub-rule  (2),  shall  be  allowed  to  defer  his  tax liability under the Act, unless he applies to the concerned Registering Authority of the Circle in Form  JVAT  121,  and  upon  receipt  of  such application, the concerned Registering Authority of the circle shall issue a certificate of eligibility in Form JVAT 408.

Provided further such deferment as mentioned in sub-rule (2) shall be allowed in accordance with the  notification  issued  for  this  purpose  by  the State  Government  in  accordance  with  the provisions of  sub-section (3)(ii)  of  Section 95 of the Act.

Provided also that, if such notification is issued by  the  State  Government,  the  Industrial  Unit opting to changeover to deferment the tax for the remaining  unexpired  period  or  unveiled percentage  of  value  of  fixed assets,  shall  apply within  fifteen  days  of  publication  of  such notification before the In-charge of  the circle in which such unit is registered, and thereafter the In-charge  of  the  Circle  shall  issue  revised eligibility  certificate  for  the  balance  unexpired period  or  unveiled  percentage  of  value  of  fixed assets,  after  making  such  enquiry  as  he  may deem  fit & proper.”

9. In pursuance of the statutory provision and the rules

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framed thereunder,  the  1st respondent  on April  15,  2006

submitted an application for registration under deferment of

payment of tax.  In the said application it has been stated

thus:-

“With  the  enactment  of  “The  Jharkhand  Value Added Tax Act, 2005”, effective from 01.04.2006, exemptions have been converted to the deferment of  payment  of  tax.   We  expressed  our  strong protest  for  withdrawing  the  said  exemption  of Tata Steel and replaced by deferment of payment of Tax provision.  We also pray you to review the provision of the said deferment of payment of tax and  allow  us  to  continue  availing  the  existing Sales  Tax  exemption  on  purchase  of  raw materials and other goods for production of CR products as well as on selling the CR Products as per  the  Bihar  Industrial  Policy,  1995  and  the Notification made thereunder till 31st July, 2008.

In pursuance to the VAT Act and Rules, we have to  file  the  application  by  15th April,  2006  for converting  the  exemption  to  deferment  and  we are applying for the same under protest, as per the enclosed prescribed format JVAT 121.”

The  said  application  seeking  deferment  of  tax  was

rejected vide order dated 05.05.2006.

10. Though the 1st respondent filed the said application, it

moved  the  High  Court  in  W.P.(T)  No.  2664  of  2006

challenging  the  constitutional  validity  of  Section  95(3)(ii)

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and Section 96(3) of the JVAT Act.  It also challenged the

withdrawal  of  the  notification  and  asserted  that  the

company was entitled to get the benefit of exemption that

had  already  been  granted  and  that  there  was  no

justification  for  withdrawal  of  the  same.   The  Division

Bench of  the High Court took up the said petition along

with others and came to hold thus:-

“55. After holding that the principle of promissory estoppels is enforceable in the present case, the question arises  what  relief  the  petitioners  were entitled  to.   As  observed  by  us,  even  if  the impugned notifications had not been issued, the exemption notifications were otherwise to die in view  of  Section  96(3)  of  the  VAT  Act  and  the petitioners  were  not  entitled  to  the  benefit  of exemption thereafter.  We have declined to strike down the provisions of VAT Act, including Section 96(3) of the VAT Act.  Therefore, we are unable to uphold the exemption benefits to the petitioners on account of the provisions of Section 96(3) of the VAT Act.  However, the State cannot justify the  issuance  of  the  impugned  notifications  in view  of  our  findings  on  various  aspects, upholding  the  enforceability  of  doctrine  of promissory/equitable  estoppel  when  it  is intended to  even deny legitimate  tax deferment benefit  under  Sec.  95(3)  of  the  VAT  Act.  We, therefore, quash the impugned notifications S.Os. 201 and 202 both dated 30th March, 2006 as also order  dated  5th May,  2006  rejecting  claim  for deferment of tax under Section 95(3) of VAT Act and as a natural corollary the petitioners will be and are entitled to the benefit of deferment of tax

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in  terms  of  Section  95(3)  of  the  VAT  Act.  We, thus,  allow  these  writ  petitions  and  direct  the respondent-State  to  allow  the  benefit  of deferment  of  tax  to  the  petitioners  for  the remaining  period  under  1995  Industrial  Policy read  with  the  notifications  S.Os.  478,479  and 481 all dated 22nd December, 1995 and S.Os. 57 and  58  both  dated  2nd March,  2000,  in accordance with the provisions of Section 95(3) of the VAT Act.”

The aforesaid order is the subject matter of assail in

this civil appeal by special leave.   

11. We have heard Mr. Ajit Kumar Sinha, learned senior

counsel  for  the  appellants  and  Mr.  Dushyant  A.  Dave,

learned senior counsel for the 1st respondent.  

12. At the very outset, it is necessary to state that the 1st

respondent  had  enjoyed  the  benefit  of  exemption  from

payment of  sales tax on cold rolling mills  products w.e.f.

01.08.2000  to  31.03.2006.   Initially,  the  exemption  was

granted from 01.08.2000 to 31.07.2008.  It is not in dispute

that  the  1st respondent  had  applied  for  conversion  from

exemption  of  tax  to  deferment  of  tax  for  the  remaining

period i.e. 01.04.2006 to 31.07.2008.  The High Court, as is

manifest, while quashing the notification nos. 201 and 202

had directed the State to grant deferment of tax to the 1st

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respondent under Section 95(3) (ii) of the JVAT Act.  It is

pertinent to mention here as exemption was claimed and

not granted, the 1st respondent had preferred an appeal by

special leave but the same has already been disposed of.  It

has  been  fairly  stated  at  the  Bar  that  the  issue  that  is

seminal to the present lis is benefit of deferment and the

period of repayment.   

13. When  the  special  leave  petition  was  listed  on

04.05.2007, the following interim order was passed:-

“Till the hearing and final disposal of the matter the assessee will open a separate account and the tax  which  is  being  deferred  from today  will  be shown in that account which will  be subject to the result of the petition.”

14. It  is  the  admitted  position  that  the  assessee  had

collected  the  tax  from  the  consumers  for  the  period

01.04.2006 to 31.07.2008 and stopped collecting tax after

31.07.2008.  It is pertinent to note here that on 12.07.2013,

in IA No. 1 of 2013, the following order came to be passed:-

“After hearing learned counsel for the parties to the lis, we are of the opinion that the respondent no.1 herein should be directed to pay a sum of Rs.25 crores each in six monthly instalments till the entire amount of Rs.186.70 crores is paid to the appellant-applicant, excluding the amount of

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Rs.20  crores  already  paid  to  the appellant-applicant.  The first instalment of Rs.25 crores shall be paid by 31.8.2013.”

15. We  have  been  appraised  at  the  Bar  that  the  said

amount  has  been  paid.   We  may  repeat  at  the  cost  of

repetition that the issue of exemption is not alive and it has

been fairly accepted by Mr. Dave, learned senior counsel for

the  1st respondent.   The  singular  issue  that  arises  for

consideration is the interpretation of the deferment policy in

the context of provisions enumerated under the JVAT Act.

Section 95(3) (ii) envisages that a registered dealer who was

enjoying the benefit of exemption of tax is allowed to convert

the  facility  of  exemption  from payment  of  tax  under  the

JVAT Act into the facility of deferment of payment of tax for

the unexpired period.  The assessee-company has availed

the deferment and paid the amount of tax.  The gravamen of

the  grievance  pertains  to  the  period  within  which  the

amount was liable to be paid.  Submission of Mr. Sinha,

learned senior counsel appearing for the State is that the

deferment of tax has to be computed in such a manner so

that  the  period  of  thirteen  years  as  provided  in  the

notification is  calculated from the year 2000 ending with

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the year 2013.  In essence, his argument is, as the assessee

had failed to make the repayment of deferred tax within the

prescribed  period,  the  assessee  is  obligated  to  pay  the

interest for the delayed period.   

16. The aforesaid being the fulcrum of cavil, we are obliged

to  refer  to  the  relevant  paragraphs  of  SO No.  480 dated

22.12.1995.  They read as follows:-

“S.O. No. 480, dated 22-12-1995:- In exercise of powers  conferred  by  Section  23A  of  the  Bihar Finance Act, 1981(Bihar Act No. 5 of 1981) Part I, the Governor of Bihar on being satisfied that it is necessary to  do so in the interest  of  industrial growth,  is  pleased  to  permit  those  new  units which started production between 01-09-1995 to 31-08-2000  and  which  have  the  registration certificate  issued  from the  prescribed  authority and  been  given  eligibility  certificate  for  this purpose,  are allowed to defer  the payable sales tax on the sale of  manufactured finished goods for a prescribed period under the following terms and conditions:

x x x x x

  5. Repayment  of  deferred  tax  amount  by industrial units:-

Repayment of deferred tax amount by industrial units:-

(1) The repayment of deferred tax amount shall have to be done after the completion of eligibility period of deferment or the prescribed percentage

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limit  of  fixed  capital  investment,  whichever reaches  earlier.   Repayment  of  total  deferred amount  shall  have  to  be  done  in  ten  equal six-monthly instalments in such a manner so as to be completed within 13 years from the date of start of deferment.

(2)  In  case  of  non-payment  of  the  deferred amount after the expiry of the prescribed period as stated in part (1), a simple interest at the rate of 2.5 percent per month on repayable amount shall  be  payable  till  the  month  in  which payment is made. For the purpose of this part, a part of month will be treated as full month.

(3) If  any  unit  defaults  in  repayment  of  the deferred amount  within the  prescribed period, then for the recovery of due amount alongwith interest  as  stated  in  part(2)  above,  all  the suitable  provisions  of  the  Bihar  Finance  Act, 1981 Part I related to recovery of tax, realization of  dues  and  imposition  of  penalty  alongwith prosecution  under  Section  49  shall  be applicable  without  adversely  affecting  other actions taken under the Act.”

[Emphasis added]

17. Relying on the language employed  in the notification,

it is submitted by Mr. Sinha, learned senior counsel for the

appellant that deferment of tax as contemplated in the said

notification   has  to  commence  from  31.08.2000  for  the

purpose of  computation of  13 years.   The words used in

para 5(1) “from the date of start of deferment” are not to be

interpreted to convey to be determinative on the foundation

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of  individual  case  of  deferment  but  they  have  to  be

understood  that  the  grant  of  benefit  of  deferment  is

associated with the repayment of deferred tax and in that

context it has to be so done that the period of repayment is

completed within 13 years, that is, 31.08.2013.

18. Refuting  the  said  submission,  it  is  canvassed  by

Mr. Dave, learned senior counsel appearing for the assessee

that the date of start of deferment has to be the date when

deferment commences and the span of 13 years has to be

computed from that date.  On that basis, it is urged by him

that the period of  repayment will  come to end only after

expiry  of  13  years  from  2006,  the  year  in  which  the

deferment of  the tax commenced as  per  the  order  of  the

High Court.  Learned senior counsel has emphasised that

when  the  language  employed  in  the  notification  is

absolutely plain and clear, the meaning has to be attributed

to the clear words for the words employed therein.  For the

said purpose,  he has  placed reliance on the authority  in

Hansraj Gordhandas v. H.H. Dave, Assistant Collector

of Central Excise & Customs, Surat and Two ors.3.

3 (1969) 2 SCR 252

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19. We have already reproduced the relevant paragraphs

of  the  notification.  Regard  being  had  to  the  language

employed therein, we have to appreciate what has been laid

down in Hansraj Gordhandas (supra).  The passage from

which  Mr.  Dave,  learned  senior  counsel  has  drawn

inspiration reads as follows:-  

“It  was  contended  on  behalf  of  the  respondent that the object of granting exemption was to en- courage  the  formation  of  cooperative  societies which not only produced cotton fabrics but which also consisted of members, not only owning but having  actually  operated  not  more  than  four power-looms during the three years immediately preceding their having joined the society. The pol- icy was that instead of each such member operat- ing  his  looms  on  his  own,  he  should  combine with others by forming a society which, through the cooperative effort should produce cloth. The intention was that the goods produced for which exemption could be claimed must be goods pro- duced on its own behalf by the society. We are unable to accept the contention put forward on behalf of the respondents as correct. On a true construction of the language of the notifications, dated July 31, 1959 and April 30, 1960 it is clear that all that is required for claiming exemption is that  the  cotton  fabrics  must  be  produced  on power-looms  owned  by  the  cooperative  society. There is  no further  requirement  under  the  two notifications that the cotton fabrics must be pro- duced by the Co-operative Society on the power- looms “for itself”. It is well established that in a taxing statute there is no room for any intend- ment but regard must be had to the clear mean- ing of the words. The entire matter is governed

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wholly by the language of the notification.  If the tax-payer is within the plain terms of the exemp- tion it cannot be denied its benefit by calling in aid any supposed intention of the exempting au- thority.  If  such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different, but that is not the case here.”

[Underlining is ours]

20. Thus, the aforesaid decision makes it quite clear that

in a taxing statute there is no room for any intendment but

regard must be had to the clear meaning of the words. The

entire  matter  is  governed  wholly  by  the  language  of  the

notification.   It  has  also  been  held  by  the  Constitution

Bench,  if  the  tax-payer  is  within  the  plain  terms  of  the

exemption, it cannot be denied its benefits by calling in aid

any supposed intention of the exempting authority.  That

apart,  it  has  also  been  stated  therein  that  if  different

intention  can  be  gathered  from  the  construction  of  the

words  of  the  notification  or  by  necessary  implication

therefrom, the matter is different. The larger Bench has not

applied the said principle to the case involved therein.

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21. In this context, we may recapitulate the words of Lord

Reid in Maunsell v. Olins4 wherein it has been observed as

follows:-  

“Then rules of  construction are relied on.  They are  not  rules  in  the  ordinary  sense  of  having some binding  force.  They  are  our  servants  not our masters. They are aids to construction, pre- sumptions or pointers. Not infrequently one ‘rule’ points in one direction, another in a different di- rection. In each case we must look at all relevant circumstances and decide as  a  matter  of  judg- ment  what  weight  to  attach  to  any  particular ‘rule’.”

22. The said passage has been referred with approval by

the  Court  in  Utkal  Contractors  and Joinery  Pvt.  Ltd.

and others v. State of Orissa and others5

23. In  M/s Doypack Systems Pvt. Ltd. v. Union of India

& others6 a  two-Judge Bench while  emphasising on the

concept of interpretation opined thus:-  

“58. The words in the statute must, prima facie, be  given  their  ordinary  meanings.  Where  the grammatical  construction is  clear  and manifest and  without  doubt,  that  construction  ought  to prevail unless there are some strong and obvious reasons to the contrary. Nothing has been shown to warrant that literal construction should not be given  effect  to.  See  Chandavarkar  S.R.  Rao v.

4 (1975) 1 All ER 16, 21, 18 5 (1987) 3 SCC 279 6 (1988) 2 SCC 299

Page 22

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Ashalata7 approving 44  Halsbury’s Laws of Eng- land, 4th Edn., para 856 at page 552,  Nokes v. Doncaster  Amalgamated  Collieries  Limited8.  It must be emphasised that interpretation must be in  consonance  with  the  Directive  Principles  of State Policy in Article 39 (b) and (c) of the Consti- tution.

59. It has to be reiterated that the object of inter- pretation of a statute is to discover the intention of  the  Parliament as expressed in the Act.  The dominant purpose in construing a statute is to ascertain the intention of  the legislature as ex- pressed in the statute, considering it as a whole and in its context. That intention, and therefore the  meaning  of  the  statute,  is  primarily  to  be sought  in  the  words used  in  the  statute  itself, which must, if they are plain and unambiguous, be applied as they stand. …”

The  aforestated  principle  has  been  reiterated  in

Keshavji Ravji and Co. and others  vs. Commissioner of

Income Tax9.

24. In  this  regard,  reference  to  Mahadeo  Prasad Bais

(Dead) vs. Income-Tax Officer ‘A’ Ward, Gorakhpur and

another10 would be absolutely seemly.  In the said case, it

has been held that an interpretation which will result in an

anomaly or absurdity should be avoided and where literal

construction  creates  an  anomaly,  absurdity  and

7 (1986) 4 SCC 447, 476 8 1940 AC 1014, 1022 9 (1990) 2 SCC 231 10 (1991) 4 SCC 560

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discrimination, statute should be liberally construed even

slightly  straining  the  language  so  as  to  avoid  the

meaningless anomaly. Emphasis  has  been  laid  on  the

principle that if  an interpretation leads to absurdity, it is

the duty of the court to avoid the same.  

25. In  Oxford  University  Press  v.  Commissioner  of

Income Tax11 Mohapatra, J. has opined that interpretation

should  serve  the  intent  and  purpose  of  the  statutory

provision. In that context, the learned Judge has referred to

the authority in State of T.N. v. Kodaikanal Motor Union

(P)  Ltd.12 wherein  this  Court  after  referring  to  K.P.

Varghese v. ITO13 and Luke v. IRC14 has observed:-

“The courts must always seek to find out the in- tention  of  the  legislature.  Though  the  courts must find out the intention of the statute from the language used, but language more often than not is an imperfect instrument of  expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make a fortress  out  of  dictionary  but  remember  that statutes  must  have  some  purpose  or  object, whose  imaginative  discovery  is  judicial  crafts- manship. We need not always cling to literalness

11 (2001) 3 SCC 359  12 (1986) 3 SCC 91 13 (1981) 4 SCC 173  14 (1964) 54 ITR 692 : 1963 AC 557 (HL)

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and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye ‘some’ violence to language is permissible.”    

26. Sabharwal, J. (as His Lordship then was) has observed

thus:-  

“… It is well-recognised rule of construction that a  statutory  provision  must  be  so  construed,  if possible,  that  absurdity  and  mischief  may  be avoided. It was held that construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature. It was said that the literalness in the interpretation of Section 52(2) must be eschewed and the court should try to ar- rive at an interpretation which avoids the absur- dity and the mischief and makes the provision ra- tional,  sensible,  unless of  course,  the hands of the court are tied and it cannot find any escape from  the  tyranny  of  literal  interpretation.  It  is said that it is now well-settled rule of construc- tion that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even “do some violence” to it, so as to achieve the obvious intention of the legislature and produce a rational construction. In such a case the court may read into  the  statutory  provision  a  condition  which, though not expressed, is implicit in  construing the basic assumption  underlying  the statutory provision. …”

27. Keeping in view the aforesaid principle, the language

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employed in the notification has to be appreciated. Benefit

of  deferment  of  tax  is  granted  under  certain  terms  and

conditions.  One  of  the  terms  and  conditions  pertains  to

repayment  of  deferment  of  tax  amount  by  the  industrial

unit. The first part of sub-para (1) of para 5 stipulates that

the repayment of deferred tax amount shall have to be done

after the completion of eligibility period of deferment or  the

prescribed  percentage  limit  of  fixed  capital  investment,

whichever reaches earlier. In the case at hand, the period of

exemption has been converted to period of deferment of tax.

It is for 8 years. There is no dispute that the assessee had

availed  the  exemption  for  a  period  of  6  years  and  he  is

entitled to deferment of tax for the rest of the period which

commenced in 2006.  It is the next part of the said sub-para

which requires to be understood.  The notification lays a

clear  postulate  that  repayment  of  total  deferred  amount

shall have to be done in ten equal six monthly instalments

in such a manner so as to be completed within 13 years

from the date of  start  of  deferment.  The words “from the

date  of  start  of  deferment”  have  to  have  nexus  with  the

policy stated in the beginning. The policy would apply if the

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unit has commenced between 01.09.1995 and 31.08.2000;

that it has a registration certification from the prescribed

authority and that, most importantly, it has been given an

eligibility certificate for the said purpose.  The policy would

come into  play  only  if  these  conditions  are  satisfied  and

then  the  assessee  will  be  allowed  to  have  the  benefit  of

deferment of sales tax on the sale of manufactured finished

goods for a prescribed period.  Therefore, the authority has

been given the power to lay down the prescribed period for

grant of  deferment.   In the beginning,  the 1st respondent

was  granted  exemption.  The  concept  of  exemption  is

distinct  from the  concept  of  deferment  of  tax.   After  the

JVAT Act came into force, under the statutory provisions,

there was no exemption and beneficiaries were entitled to

convert  to  the  scheme  of  deferment.  The  period  remains

intact, that is, 8 years.  The repayment has to be done in

equal six monthly instalments and that period is 5 years.

The  repayment  commences  after  completion  of  eligibility

period of  deferment  or  the  prescribed percentage  limit  of

fixed  capital  investment,  whichever  is  earlier.   The

prescribed authority can grant an eligibility certificate but

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he has to keep in view the terms and conditions stipulated

in the notification.  The said authority cannot travel beyond

the stipulations of the notification.  The language employed

in the notification conveys that the grant of certificate has

to be such that after expiration of the eligibility period, the

amount has to be paid back within a span of 5 years but

the gap cannot exceed 13 years from the date of start of

deferment.  The  postulate  enshrined  therein  has  to  be

appositely appreciated. It does not flow from the notification

that if a benefit is granted for 8 years or for a lesser period,

the  assessee  cannot  claim that  the  repayment  has  to  be

completed within 13 years from the date of grant.  In the

case at hand, the claim of the assessee that the repayment

schedule  has  to  continue  for  a  period  of  13  years  from

2006, for the deferment commenced only in 2006.  Such an

interpretation  not  only  causes  serious  violence  to  the

language employed in the notification but if it is allowed to

be understood in such a manner, it shall lead to an absurd

situation.  That apart, the intention can be gathered from

the  notification  that  it  has  to  relate  back  to  the  date  of

eligibility with a maximum limit of 13 years. It cannot be

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construed to mean 13 years from the date of completion of

the eligibility period.  The repayment schedule is 5 years

from the expiry of eligibility period of deferment. The period

of 5 years has to be so arranged that it does not go beyond

13 years from the date of deferment.  Language employed in

para 5(1) has to be understood in this manner to give it an

appropriate  meaning.  Otherwise,  the  interpretation

propounded  on  behalf  of  the  assessee  will  lead  to  an

anomalous  situation  because  as  regards  fixation  of

schedule  of  repayment  within  5  years  from  the  date  of

completion of the eligibility period, will become totally otiose

and, in a way, irrelevant.  Words “from the date of start of

deferment” cannot be conferred a meaning in the manner

suggested by the learned senior counsel for the assessee.  It

is a well-known principle of statutory interpretation that if

an  interpretation  leads  to  absurdity,  the  same  is  to  be

avoided.  And we have no hesitation here to say that if the

notification is read as a whole, the intention, purpose and

working  of  it  is  absolutely  clear.   The  ingenious

interpretation placed  on the  words are  really  beyond the

context and, therefore,  we are not disposed to accept the

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same.  Thus analysed, the irresistible conclusion is that the

repayment  schedule  has  to  end  on  31.08.2013  within  a

span of 5 years from the expiration of the eligibility period.  

28. Having  said  that,  we  may  proceed  to  deal  with  the

imposition  of  interest  and  penalty  under  the  JVAT  Act.

Rule 66 of the Rules provides for payment for breach of the

Rules. We may immediately make it clear that the question

of levy of penalty as envisaged under Rule 66 of the Rules

should not be made applicable to the case at hand.  We say

so  as  the  present  case  projects  special  features.   It  is

submitted  by  Mr.  Sinha,  learned  senior  counsel  for  the

State that the revenue is entitled to 2.5% interest per month

as per sub-para 2 of paragraph 5 of the notification.  It is

argued on behalf of the assessee that it is not a case for levy

of interest.  Regard being had to the special features of the

case  and  taking  note  of  the  fact  that  the  assessee-1st

respondent had already deposited the amount in pursuance

of  the  order  of  this  Court  and  regard  being  had  to  the

nature  of  litigation,  we  direct  that  the  1st

respondent-assessee shall pay 12% interest per annum and

the  said  amount  shall  be  deposited  with  the  competent

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authority of the revenue within three months hence.

29. Resultantly,  the  appeal  stands  disposed  of  in  above

terms.  There shall be no order as to costs.

…………………………..J. [Dipak Misra]

……………………….…J. [N.V. Ramana]

 New Delhi; February 12, 2016