KALYANPUR CEMENT LTD Vs. STATE OF BIHAR

JUDGEMENT

(1.) The petitioner, a company registered under the Companies Act and engaged in manufacturing cement, has filed the present writ application for declaration that the explanatory note in Clause 3 of the Bihar Sales Tax Supplementary (Deferment of Tax) Rules, 1990 (hereinafter referred to as "the Rules") explaining the meaning of incremental production, is arbitrary and inconsistent with the Industrial Policy Resolution, 1989 contained in No, 46 AIDC, Government of Bihar, Department of Industries, dated September 6, 1989, for quashing the part of the decision taken by the State Level Committee on February 3, 2000 holding that the petitioner is entitled to incentive of deferment of sales tax only on the additional production made pursuant to the expansion of the company above the installed capacity and not on the additional production above the production prior to expansion and for a direction to the respondents to give the benefit of the deferment of sales tax on the additional production above the production which was being made prior to expansion by it.

(2.) The factual matrix necessary for disposal of the present application are that the State Government with a view to accelerate the pace of industrial development, achieve dispersal of industries outside the urban industrialised areas and to attract them to the under-developed and developing areas of the State, came out with a policy of sales tax incentives scheme for industrialisation of Bihar. The said scheme is known as Sales Tax Deferment Scheme. Under the aforesaid scheme, incentives were given to the new industrial units which would start commercial production from April 1, 1989 and thereafter, or to the existing industrial unit undertaking for expansion. Regarding existing industrial units undertaking Clause 4 of the said Policy provides that the existing industrial units undertaking expansion of 50 per cent of their capacity with a minimum fixed capital investment of Rs. 20 lakhs in fixed assets will also be eligible for deferment of payment of sales tax. A copy of the English version of the said policy has been annexed as annexure 1 to the writ application, and the Hindi version thereof has been annexed as annexure 1/A to the writ application. In Hindi version of the said policy, Clause 4 further provides that the benefit of deferment of sales tax will be available to the existing industries on expansion only with regard to the additional production and not with regard to entire production made by it.

(3.) The Governor of Bihar in exercise of power under Sub-section (1) of Section 58 of the Bihar Finance Act, 1981 framed the Rules to give effect to the aforesaid Industrial Policy dated August 6, 1989. Clause 3 of the aforesaid Rules contains provision with regard to eligibility and extent of deferred payment of tax. Clause 3(b) contains provision with regard to existing industrial unit under expansion. It required certain conditions to be fulfilled for the benefit of deferment of payment tax. The relevant conditions are that the investment in such expansion should not be less than 50 per cent of the fixed capital investment or rupees twenty lakhs, whichever is more and such expansion will result in an increase of at least 50 per cent of the installed capacity of the unit and the facility of deferment of tax will be limited to the incremental production. Explanatory note was also appended to the said clause wherein incremental production was defined to mean production over and above the installed capacity. The Rules also provide that existing industrial unit undertaking has to obtain a certificate of eligibility in accordance with the procedure provided under the Rules for claim of deferment of payment of tax. Such eligibility has to be granted in accordance with the provision either by the District Level Committee or the State Level Committee whichever is applicable in the case of a particular unit.