HIGH COURT OF JAMMU & KASHMIR AND LADAKH

AT JAMMU

Reserved on: 01.11.2022

Pronounced on :09 .11.2022

OWP No.1520/2013

IA No.2091/2013

M/s Chenab Textile Mills ...Petitioner(s)

Through:- Mr. C.S.Azad, Advocate

V/s

State of J&K and others ...Respondent(s)

Through:- Mr. K.D.S.Kotwal, Dy. AG

Coram: HON’BLE MR. JUSTICE SANJEEV KUMAR, JUDGE

HON’BLE MR. JUSTICE RAJESH SEKHRI, JUDGE

JUDGMENT

Sanjeev Kumar-J

1. The petitioner is an industrial unit registered with the Department

of Industries and Commerce. In the year 2005, the Director, Industries and

Commerce, J&K, Jammu vide order No.85-Acctts of 2005 dated 16

th

May, 2005 declared the petitioner-Unit as “prestigious unit” for availing

all the benefits envisaged in the Industrial Policy issued by the

Government in the year 2004. The petitioner-Unit was established and

permanently registered in the year 1966. Ever since its establishment, the

petitioner-Unit has gone for substantial expansion from time to time. The

petitioner obtained the requisite permission and approval of the competent

authority for expansion of its existing spinning mill from 102992 spindles 2022:JKLHC-JMU:5506-DB

2 LPA No.1520/2013

to 128336 spindles by making an investment of Rs.108.00 Crores in the

year 2006.

2. As is claimed, the petitioner undertook substantial expansion of the

existing spinning mill and, therefore, became eligible for exemption from

payment of additional toll under the New Industrial Policy, 2004 and

package of incentives for development of industries in Jammu & Kashmir

issued by respondent No.1 vide Government Order No.21-Ind of 2004

dated 27.01.2004 read with SRO 22 of 2004 dated 31.01.2004 issued by

the Government in exercise of the powers conferred by Section 5 of the

Jammu and Kashmir Levy of Tolls Act, Samvat 1995 [“the Act”]. When

the claim of the petitioner for exemption from payment of additional toll

on the plant and machinery imported by it for undertaking substantial

expansion of the mill was not accepted, the petitioner filed OWP

No.161/2007 in this Court claiming, inter alia, a direction to the

respondents to allow the toll tax exemption to the petitioner-Mill for its 9

th

expansion programme in terms of SRO 22 of 2004 read with Government

Order No.432-I&D of 1998 dated 02.12.1998. The writ petition was

disposed of by this Court vide order and judgment dated 12.02.2013 and a

direction was issued to the respondents to examine the case of the

petitioner in light of the request already made by the petitioner and make

a decision while keeping in view order dated 5

th

March, 2007. On review

petition moved by the petitioner, the order aforesaid was reviewed to the

extent of substituting order dated 5

th

March, 2007 by order dated 15

th

2022:JKLHC-JMU:5506-DB

3 LPA No.1520/2013

May, 2010, which was passed at the motion hearing stage by the Court in

OWP No.161/2007.

3. In compliance to the judgment passed by this Court in OWP

No.161/2007 (supra), Deputy Excise Commissioner, Toll Post Lakhanpur

considered the entire matter and vide order No.1719/A/LKP dated

03.04.2013 rejected the claim of the petitioner for exemption of toll tax

payable on the components, plant and machinery, building material and

other equipments procured from outside the State in connection with

substantial expansion programme undertaken by the petitioner. The

Deputy Excise Commissioner Toll Post Lakhanpur did not find the

petitioner entitled to the tax exemption in view of the provisions of SRO

22 of 2004 dated 31.01.2004. It is this consideration order, which is

primarily in question in this petition.

3. The impugned order has been assailed by the petitioner primarily

on the following grounds:-

i) That the order impugned is in violation of the interim order passed

by this Court on 15

th

May, 2010 in OWP No.161/2007 and is

contrary to the provisions of SRO 22 of 2004 dated 31.01.2004.

ii) That the impugned order of consideration is non-speaking and

clearly an outcome of total non-application of mind by the

authority. It is submitted that while considering the provisions of

SRO 22 of 2004 dated 31.01.2004, the Deputy Excise 2022:JKLHC-JMU:5506-DB

4 LPA No.1520/2013

Commissioner ignored to take note of the New Industrial Policy,

2004.

iii) That the Deputy Excise Commissioner also did not appreciate that

the petitioner-Unit was declared as prestigious unit by the

competent authority and, therefore, was entitled to toll exemption

on the items like plant and machinery, construction material etc

imported from outside the State for undertaking substantial

expansion of the petitioner-Unit.

4. The writ petition is vehemently contested by the respondents. In the

reply affidavit, the respondents have taken a categoric stand that in terms

of SRO 22 of 2004 dated 31.01.2004 which was issued by the

Government in exercise of powers conferred by Section 5 of the Act, the

petitioner-Unit, which was registered in the year 1966 with the

Department of Industries, is not entitled to any exemption from payment

of additional toll on the material like plant and machinery, components

and construction material imported from outside the State for undertaking

its 9

th

substantial expansion programme. It is further submitted that it was

only in the year 2008, SRO 22 dated 31.01.2004 was amended vide SRO

85 of 2008 dated 24.03.2008 and for the first time exemption from

payment of additional toll chargeable on capital goods to be imported by

the existing industrial units for substantial capacity expansion for a period

of one year w.e.f. 01.04.2008 to 31.03.2009 was provided. It is further

submitted by the respondents that issuance of SRO 85 of 2008 giving

benefit of exemption only for a period of one year i.e. financial year 2008- 2022:JKLHC-JMU:5506-DB

5 LPA No.1520/2013

09 makes it abundantly clear that prior to 24

th

March, 2008 i.e. the date of

issuance of SRO 85 of 2008, such benefit was not envisaged or provided

under SRO 22 of 2004 dated 31.01.2004. It is, thus, submitted that the

Deputy Excise Commissioner rightly considered the matter in proper

perspective and rejected the claim of the petitioner giving cogent reasons

in support of its decision. The impugned order of consideration, therefore,

is perfectly valid and does not call for any interference by this Court.

5. Having heard learned counsel for the parties and perused the

material on record, we are of the view that the petitioner is not entitled to

the benefit of exemption of additional toll on components, plants and

machinery, building material and other equipments procured from outside

the State for undertaking substantial expansion of the Unit either under

the Industrial Policy, 2004 promulgated vide Government Order No.21-

Ind of 2004 dated 27.01.2004 or under SRO 22 of 2004 dated 31.01.2004.

This we say for the reasons given hereinafter.

6. With a view to boost industrialization and provide concessions and

incentives to the entrepreneurs, the Government of Jammu & Kashmir

came up with package of incentives in the form of New Industrial Policy,

2004, which was promulgated vide Government Order No.21-Ind of 2004

dated 27.01.2004. As per the Industrial Policy, 2004, apart from other

incentives that were given to the existing and future industrial units, there

was exemption from additional toll. Clause 3.11 of the Government Order

No.21-Ind of 2004 dated 27.01.2004, which deals with Toll Taxes

exemption reads thus:- 2022:JKLHC-JMU:5506-DB

6 LPA No.1520/2013

“3.11 Toll Taxes

i) There will be no additional toll tax on the raw materials,

fuel and consumables, procured from outside the state by

the existing or new SSI units fill 31-01-2015 except for

items brought on the negative list from time to time.

ii) ii) There will be no additional toll tax on finished goods

manufactured by the existing or new SSI, Medium and

Large units and sent outside the state upto 31-03-2015

except for items brought on the negative list from time to

time.

iii) There will be no additional toll tax on the Raw materials,

fuels, consumables brought from the existing new medium

and large units upto 31-03-2015 except in case of items

brought on the Negative list from time to time.

iv) There will be no additional toll tax on components,

machinery, plant and other equipments procured from

outside the state for building the factory, for a period of five

years from the date of registration of the unit in SSI,

Medium or large sector.

v) There will be no additional toll tax on 100% export oriented

units on the goods exported under proper export documents

from the state to any foreign country.

vi) There will be no additional toll tax on empty containers

brought into the state which are used for stuffing products

of industry for export out of the state.”

7. From a reading of Clause 3.11, it is clearly evident that the

Industrial Policy envisages grant of exemption from payment of

additional toll on components, plant and machinery and other equipments

procured from outstate the State for building factory for a period of five

years from the date of registration of the Unit as SSI, Medium or Large. 2022:JKLHC-JMU:5506-DB

7 LPA No.1520/2013

Indisputably, the petitioner-Unit was registered with the Department of

Industries in the year 1966 and, therefore, Clause-3.11 reproduced herein

above was not in any way applicable. At this juncture, it is necessary to

make a reference to SRO 22 of 2004 dated 31.01.2004. Needless to say

that the Government while promulgating Industrial Policy may declare

and pronounce a package of incentives, which may include exemption

from payment of various taxes including toll. However, with a view to

give effect to these promises and declarations made in the Industrial

Policy, necessary statutory notifications are required to be issued by the

Government under the relevant legislation. In this way and with a view to

give effect to the promise of grant of exemption from payment of

additional toll, the Government in the exercise of powers conferred by

Section 5 of the Act issued SRO 22 of 2004 dated 31.01.2004. Clause 3 of

SRO 22 of 2004 dated 31.01.2004 is relevant for the discussion on hand

and the same is, therefore, reproduced hereunder:-

“3. There shall be no additional toll on components, plant

and machinery, building material and other equipments

procured from outside the State for construction of factory

for a period of five years from the date of registration of the

units in Small, Medium or Large Scale Sector (including

prestigious units)”

8. From a reading of Clause-3 reproduced above, it is abundantly

clear that additional toll on components, plant and machinery, building

material and other equipments imported from outside the State for

construction of factory is exempted for a period of five years from the

date of registration of the Units in Small, Medium or Large scale sector 2022:JKLHC-JMU:5506-DB

8 LPA No.1520/2013

(including prestigious units). The ambiguity, if any, in the Industrial

Policy, 2004 is completely removed and Clause 3, which is part of a

statutory notification issued under Section 5 of the Act clearly provides

that benefit of exemption from payment of additional toll on components,

plant and machinery etc shall be available to industrial units, small,

medium and large scale and prestigious units only for a period of five

years from the date of registration of the unit(s). Obviously, the petitioner

is not covered by Clause-3. As is rightly pointed out by the Deputy Excise

Commissioner in its impugned order that the petitioner-unit was

registered with the Department of Industries and Commerce in the year

1966 and, therefore, the benefit of Clause-3 of SRO 22 of 2004 dated

31.01.2004 is not available to it.

9. Strong reliance is placed by Mr. C.S.Azad, learned counsel

appearing for the petitioner, on Clause 3.14 of Industrial Policy, 2004,

which deals exclusively with special provision for prestigious Units and

the same reads thus:-

“3.14 Special Provision for Prestigious Units

Prestigious units shall avail of full exemption from payment

of GST (Till VAT is implemented)/CST and additional toll

tax until 31-3-2015 or until such amount of exemption

reaches the levels of 150% of capital investment in the project

whichever occurs earlier. It may be clarified that negative lists

issued for various tax related incentives for medium and large

industries shall also be applicable mutatis mutandis to

prestigious units.”

2022:JKLHC-JMU:5506-DB

9 LPA No.1520/2013

10. From a plain reading of Clause 3.14, it comes out that prestigious

units like the petitioner-Unit have been held entitled to full exemption

from payment of GST and additional toll tax until 31.03.2015 or until

such amount of exemption reaches the level of 150% of capital

investment in the project whichever occurs earlier.

11. There is no denying the fact that as per the Industrial Policy,

2004, particularly Clause 3.14, the petitioner is entitled to toll tax

exemption but Clause 3.14 is required to be read subject to SRO 22 of

2004. Levy of toll is regulated by the Act of legislation known as the

Jammu and Kashmir Levy of Tolls Act, Samvat 1995. Section 3 of the

Act is a charging Section and provides that levy of toll on various items

brought in or taken out of the established check posts under the Act.

Section 5 of the Act confers upon the Government power to grant

exemption from payment of toll levied under the Act. In the exercise of

this power, the Government of Jammu & Kashmir has been coming up

with requisite notifications exempting toll levied under the Act. As is

stated above, with a view to give effect to the promises held out to the

existing and prospective entrepreneurs in the Industrial Policy, 2004, the

Government, inter alia, came up with a notification in exercise of the

powers conferred by Section 5 of the Act as well. This was done by the

Government in terms of SRO 22 of 2004.

12. At the cost of repetition, we may say that SRO 22 of 2004 is

statutory in nature and, therefore, would govern the exemption from

payment of additional toll to the exclusion of any other policy decision of 2022:JKLHC-JMU:5506-DB

10 LPA No.1520/2013

the Government. From a plain reading of SRO 22 of 2004, in particular

Clause 3 reproduced above, we could not persuade ourselves to agree with

the learned counsel for the petitioner that the petitioner-Unit is entitled to

toll exemption on the import of components, plant and machinery,

building material and other items for undertaking substantial expansion.

13. The stand of the respondents that the petitioner was not entitled

to such exemption is supported by the fact that the Government in the

year 2008 for the first time decided to give benefit of exemption of

additional toll chargeable on capital goods to be imported by the existing

industrial units for undertaking substantial expansion. This benefit was

given only to the units undertaking substantial expansion in the financial

year 2008-2009. SRO 85 of 2008 dated 24.03.2008, which so provides, is

also reproduced hereunder:-

“Provided that there shall be no additional toll chargeable

on capital goods to be imported by the existing industrial

units (directly linked to the manufacturing process) for

substantial capacity expansion, for a period of one year with

effect from 1.04.2008 to 31.03.2009. Provided further that

such exemption shall available only on import of capital

goods, which are not available locally and is certified as

such by the concerned authority at the Toll Post.”

14. In view of the aforesaid discussion, we are absolutely convinced

that the impugned order of consideration is fully in consonance with law

and the petitioner was rightly held not entitled to the benefit of exemption

from payment of additional toll chargeable on capital goods imported by

it for undertaking substantial expansion of its unit in the year 2006. Such 2022:JKLHC-JMU:5506-DB

11 LPA No.1520/2013

exemption came to be provided only with the issuance of SRO 85 of 2008

and was to remain in operation w.e.f. 01.04.2008 to 31.03.2009.

15. The communications relied upon by the petitioner, particularly

those made by the Department of Industries in favour of the petitioner are

interdepartmental communications incapable of conferring any right on

the petitioner to claim exemption from payment of additional toll under

the Act and SRO 22 of 2004 issued thereunder. In terms of Article 265 of

the Constitution of India, no taxes can be imposed, levied or collected

save by authority of law. The authority of law shall mean Act of

legislature or delegated legislation. No Government order or executive

instructions can be a substitute for the Act of legislature or delegated

legislation. Taxes and levies can be imposed or collected only by

authority of law and exemption, if any envisaged therein, too, can be by

authority of law.

16. For the foregoing reasons, we find no merit in this petition. The

same is, accordingly, dismissed.

(Rajesh Sekhri) (Sanjeev Kumar)

Judge Judge

JAMMU

09.11.2022

Vinod,PS

Whether the order is speaking : Yes

Whether the order is reportable: Yes 2022:JKLHC-JMU:5506-DB