SAURASHTRA CEMENT LIMITED Vs. STATE OF GUJARAT

JUDGEMENT

(1.) The Saurashtra Cement Limited, a company incorporated under the Indian companies Act has preferred this petition inter alia requesting for issuance of directions requiring the respondents no 1 to 3 to ensure that the petitioner is afforded a treatment similar to that is given to Digvijay Cement Company Limited ('Digvijay' for short) and to direct the respondent no. 1 to 3 to give similar benefits given to Digvijay by which better concession is given to it in the matter of payment of interest while entering into an agreement by the said company with the Government.

(2.) The facts leading to the present petition are as under: The petitioner company and Digvijay were operating in the same area. Both the companies adopted new technology. The State Government published a scheme known as Incentive Scheme. It appears that with a view to avail of the benefit of the Incentive Scheme offered by the Government of Gujarat, Digvijay decided to expand its unit. This new unit has been located on a separate piece of land though adjacent to the old unit. An application was made to the State Government for granting eligibility for incentive Scheme in respect of expansion and for granting recognition to the new process plant as a Pioneer Unit. The application for recognition of its new unit as a Pioneer Unit was not granted. It seems that repeated requests were made. However, the application was rejected on the ground that Digvijay's new unit was only an expansion and therefore, not eligible for registration as a Pioneer Unit. So far as the petitioner company is concerned, it had 3 plants for manufacturing cement prior to 1980. It seems that the petitioner decided to establish the new unit in view of the benefits declared by the Government by its Resolution dated 27.8.1980. On 5.11.1982, the petitioner company applied to the Government for sales tax benefit and grant of Pioneer Status. It transpires that the Government of Gujarat issued a certificate effective from the date of commissioning/date of diversification or expansion from 31.12.1982. It seems that under that certificate benefit of sales tax deferment was made available from 31.12.1982 to 31.12.1987. The company commenced its production in April 1985. In view of the new plant being operative, it discontinued manufacturing operation at the old plant. It seems that on 29.10.1987 the company submitted a detailed application for its new unit to the Industries Commissioner for grant of Pioneer Status. However, by letter dated 6.4.1988 said application was rejected on the ground that the petitioner company is an old unit in existence prior to 1.6.1980 and is located within 8 kms. from National High Way and that can be considered as a case of modernisation of the existing unit. It appears that since the petitioner company was not given the benefit of Pioneer Status, it had filed a writ petition in the High Court being SCA No. 398 of 1991. Similarly Digvijay also filed SCA before this High Court being SCA No. 4309 of 1990 on the same grounds as the said company was also denied Pioneer Status. Both the SCAs were heard together and by a common judgment dated 23.11.1992, the respondents were directed to reconsider the case of the petitioner as per the observations made in the judgment. However, it is interesting to note that after the matters were heard, the judgment was kept reserved and in the intervening period, the petitioner company entered into an agreement with the State Government by which the Government agreed to give certain benefit of installments in the payment of sales-tax and as per the agreement arrived at between the petitioner and the Government, the petitioner was, to withdraw the said SCA from the High Court. About entering into the said agreement there was mention in various correspondence between the petitioner and respondent-Government. However, said fact was not brought to the notice of the Court presumably because the hearing was already over and the matters were kept for judgment. We are of the opinion that it was the duty of the petitioner to point out the said fact to the Court (regarding aforesaid agreement arrived at between the petitioner and respondent State Government.)

(3.) The Division Bench thereafter disposed of both the SCAs and our attention was drawn by the learned counsel for the petitioner to the observations made by the Division Bench of this Court on page 18 of its judgment. On page 18 of the judgment, the Division Bench of this Court has observed as under: " As stated above, the 1980 Scheme was introduced with a view to accelerate development of industries and strengthen the trend of the industries going to developing areas. The Cash Subsidy Scheme linked with Fixed Capital Investment was retained as it was, but the schemes of Sales Tax Exemption and interest free sales tax loan were found to be not sufficiently attractive and, therefore, they were replaced by the new Scheme of Sales Tax Exemption and Sales Tax Deferment. The exemption incentive was made available to all units-SSI, medium and large-except that this benefit was not to be available in respect of purchase of machinery and equipment. The exemption was also extended to sale of goods manufactured by such units to the extent specified in the scheme. It appears that as the benefit of exemption from sales tax was made available to all such types of new industrial units, the old incentive of interest free loan to a new, medium and large scale unit was discontinued. By way of an alternative to the Sales Tax Exemption, the 1980 Scheme permitted the new units to opt for the scheme of Sales Tax Deferment. In substance, such units were permitted to recover sales tax and retain the same with them for certain number of years. No interest was to be charged on amounts so deferred. All these benefits were made available to new industrial units going to backward areas. It is in this context that we shall have to inter pret and construe paragraph 7 of the 1980 Scheme." The Division Bench has further observed in pages 41 and 42 as under " Digvijay Cement Co. was refused pioneer status on the grounds that :(i) its new unit could not be considered as a new industrial unit; ,(ii) the project was by way of expansion, and (iii) the unit was situated within 8 kms from its existing unit. Saurashtra Cement Co. was denied that status on the grounds that: (i) its unit was an old unit since it has been existing before 1.6.80; (ii) it had installed new machinery in its existing unit and, therefore, it was a case of modernisation, and (iii) its unit was situated within 8 kms. from the National High Way. Thus, both the petitioners were denied the pioneer status on the ground that what they did was either expansion or modernisation and not setting up a new large industrial unit. In view of the correct interpretation of paragraph 7, as held by us, it will have to be held that the respondents were not right in treating the new industrial units set up by the petitioners as expansion or modernisation of their old units. They were wrong in interpreting paragraph 7 of the 1980 Resolution and also applying the two impugned circulars to the petitioners. As the petitioners were thus denied pioneer status on such wrong interpretation of the 1980 Resolution and the two impugned circulars, proper course to adopt would be to direct the respondents to reconsider the case of the petitioners in light of the interpretation of paragraph 7 of the 1980 Resolution and the observations made in this judgment. At pages 43 to 46 of the judgment, the Division Bench further observed as under: " Before we direct the respondents as to which facts and circumstances they should bear in mind while reconsidering the case of Saurashtra Cement Co. one more ground, on which the pioneer status was denied to it, is required to be dealt with. It was denied that status also on the ground that its unit is situated within 8 kms from the National High Way. It is an admitted position that no such conditions was laid down by the 1980 Resolution. While announcing further liberalisation of the incentives for pioneer units, the Government by its Resolution dated 13/03/1981, imposed a condition that the additional benefits declared by that Resolution would be available to the pioneer units which are located outside the corridor of 24-24 KM on both sides of the National Highway from the border of Maharashtra and Gujarat upto Ahmedabad and corridor of 8-8 KM on both sides of other National Highway passing through the State. What was done by the Government by this Resolution was to do away with the earlier limitation that special incentives were to be available to pioneer units going to backward districts and under-developed talukas. By this Resolution, liberalised incentives were made available to all pioneer units, even if they were set up in other areas also, except within the banned distance of six metropolitan cities. Another change that was made by this Resolution was that the ceiling of 10 percent or Rs. 10 lacs. whichever was less, was removed and the sales tax incentives were to be given on the amount upto 90 percent of the investment in gross fixed assets. But the pioneer units which were located within the corridor prescribed by it were to get the incentives as per the Resolution of 1980. It is now an admitted position that the unit set up by Saurashtra Cement Co. is within a distance of 8 kms from National Highway No.8-B, which originates at Porbandar and ends at Bamnbor, where it joins National Highway No.8-A. Though laying down on such a condition is challenged on the ground that it is discriminatory and arbitrary, it is not necessary to consider the said challenge as we are of the opinion that in the context of the sales tax incentive scheme and the object with which further liberalisation was made by the Resolution dated 13.3.81, the representation, which can be said to have been made to the entrepreneurs, was that the limitation of the corridor was to apply to the corridor attaching to the other portion of National Highway No.8 passing through the State. This Resolution was meant for the entrepreneurs setting up new industries within the State. It is a Resolution of the Government and not a piece of legislation. The object of the scheme and also the resolution dated 13.3.81 was to grant more incentives to pioneer units going to under-developed areas. In view of all these factors, the March 1981 Resolution will have to be interpreted reasonably and liberally. Even if we accept as true as contended by the learned Advocate General that the words "National Highway" would include not only National Highway No.8 but also National Highways nos 8-A and 8-B and that the expression "other National Highway" would mean other portion of the National Highway, what we have to consider is what an entrepreneur would have understood on reading the said Resolution. After the words "corridor of 24-24 KM on both sides of the National Highway from the border of Maharashtra and Gujarat upto Ahmedabad" the words which follow are, and corridor of 8-8 KM on both sides of other National Highway passing through the State" The Highway, which is referred to is the Highway, which comes from Maharashtra into Gujarat. Upto Ahmedabad, the corridor was to consist 24-24 KM on either side and thereafter it was to consist 8-8 KM on either side. Moreover the words, "passing through the State" also would create an impression that the National Highway, which was referred to was National Highway No.8. An entrepreneur would have understood the said Resolution only in this manner, particularly because it was well known then that industrial development was between the border of Gujarat and Ahmedabad. Beyond Ahmedabad, the industrial development was quite meagre. Even though the construction which is suggested by the learned Advocate General, appears to be the one which the Government could have had in mind and that becomes more clear from the fact that subsequently the Government removed this limitation also, what we have to consider is: How it was likely to be understood by the entrepreneurs ? It is no doubt true that Saurashtra Cement Company had started taking steps to establish their new industry at Ranavav which is within 8 kms from National Highway No.8-B, prior to the issuance of this Resolution i.e. before 13.3.81. But we cannot construe this Resolution in a different manner in respect of those entrepreneurs who had taken steps to establish new industries before 13.3.81 and those who had acted upon the representation made in the Government Resolutions dated 27.8.80 and 13.3.81. As stated in the petition, this condition of setting up a new industry beyond the corridor was waived in some case. That is the reason why imposition of this condition is also challenged by the company as discriminatory in addition to its challenge that it is also arbitrary. Therefore, while reconsidering the case of Saurashtra Cement Co., the respondents will have to bear those aspects also in mind. Further, the respondents will also have to consider that an entirely a new plant using different technology was set up on adjoining land; that the process of establishing new unit was initiated in the year 1980; that though it had initially planned to go for expansion or modernisation, it had decided to establish a new industrial unit, in view of the Resolution dated 27.8.80; that the new unit was not at all connected with the old unit; that the new unit was complete by itself and had its own independent identity; that it had spent a huge amount of Rs. 60 crores for setting up this new plant; that its new unit has been considered as a new unit for the purpose of exemption from electricity duty; it is treated as a separate factory and separate factory licence has been issued by the Government, and it was also given relaxation from the cement levy obligation on the basis that it was a new cement unit."