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CASE NO.:

Appeal (civil) 2188 of 2002

PETITIONER:

M/s. Tata Iron & Steel Co. Ltd.

RESPONDENT:

State of Jharkhand & Ors.

DATE OF JUDGMENT: 25/08/2004

BENCH:

N Santosh Hegde & A K Mathur

JUDGMENT:

J U D G M E N T

(With SLP ) No.9942/2003, 15419 of 2004, CA

No.1912/2004)

SANTOSH HEGDE, J.

CA No. 2188/02 :

The appellant in this apeal has challenged a judgment of

the High Court of Jharkhand, Ranchi, made in Civil Writ

Jurisdiction Case No.1426 of 2001 dated 30.8.2001 whereby

the High Court remanded the matter to the Commissioner of

Commercial Taxes, Jharkhand, to re-examine the question

whether in fact the appellant in its newly established industry

manufactures a product which is commercially different from

the product manufactured in its pre-existing unit of

manufacturing Hot Rolled Product (HRP).

The facts giving rise to this appeal, briefly stated for the

limited purpose of disposal of this appeal, are as follows :

The appellant company had established a manufacturing

unit for production of HRP, Rounds, Structurals and other iron

and steel products in Dhanbad which was then in the erstwhile

State of Bihar. The State of Bihar in the year 1995 evolved a

new industrial policy with a view to create an environment

conducive to growth of industries in the State and to utilise to

its optimum advantage all the resources available in the form of

surface and ground water, fertile land, mineral wealth,

disciplined and skilled manpower etc. By the said policy the

Government tried to attract investors from various parts of the

country to invest in identified thrust areas, as also for creation

of essential infrastructure including private generation. One of

the areas which the said industrial policy sought to develop was

in the field of metallurgical industries. As an incentive to attract

investment in the State among others, the said policy provided

for sales-tax incentives which included (exemption for new

units in category 'B' districts) 8 years' sales-tax exemption on

sale and purchase of materials from the date of commencement

of production by such units located in category 'B' districts. In

pursuance of the said policy, necessary exemption notifications

under section 7 of the Bihar Finance Act, were also issued.

The appellant having noticed the incentives offered by

the State Government, by letter dated 30.4.1997 intimated the

then Chief Minister of the State that it has a plan for installing a

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Cold Rolling Mill in Jamshedpur in which a sum of Rs.2,000

crores was to be invested if the financial climate in the State

was favourable. Therefore, before taking a final decision in this

regard, it sought a confirmation from the State of Bihar as to its

commitment to grant sales tax exemption as stated above. By

that letter the appellant also requested the Chief Minister to

authorise the Secretary of the Department of Industries and

other officials of the State to have a discussion with the

appellant about the plan in detail and to guide the appellant in

the manner in which it could enjoy the benefits of sales-tax

incentives.

Pursuant to the above request letter of the appellant, a

meeting of the High Power Committee under the Chairmanship

of the Chief Minister was summoned on 21.7.1997. Among the

persons present at the meeting were the Minister for

Commercial Taxes, Chief Secretary, Commissioner of Finance,

Secretary of Industrial Department, Commissioner of

Commercial Taxes and Director of Industries, Bihar, who were

also the members of the said High Power Committee. In the

said meeting the letter written by the appellant came to be

discussed and a decision was taken that even existing industries

which go in for diversification with an additional capital of

Rs.500 crores shall be deemed to be treated as new units and all

the benefits under the Industrial Policy of 1995 will be made

available to them. It is pursuant to the said decision of the High

Power Committee that a resolution was passed by the

Government of Bihar amending the Industrial Policy

Resolution, 1995 bringing it in conformity with the decision

taken at the meeting of the High Power Committee on

21.7.1997.

Subsequent to the above referred amendment, the

Commissioner and Secretary, Government of Bihar,

Department of Industries, wrote a letter on 11.11.1997 stating

that the Government has taken a decision that any investment

over Rs.500 crore would be taken as an

expansion/diversification or a new unit, as such the appellant

company will be entitled to all the reliefs under the Bihar

Industrial Policy. In the said letter the Secretary also expressed

the hope that the appellant will take necessary steps to set up a

unit in Bihar as soon as possible. As a follow-up action on

10.1.1998, the Director of Technical Development, Department

of Industries, State of Bihar wrote to the appellant expressing

the happiness on the decision of the appellant to put up a Cold

Rolling Mill of 1.2 million tons per annum capacity and

requested the appellant to go ahead with the project

implementation and to keep the Government informed of the

progress in this regard. By a letter dated 16.4.1999 the

Commissioner and Secretary, Government of Bihar, re-assured

the appellant that the Central sales-tax and Bihar sales-tax both

will be exempted as provided in the policy in regard to the

purchase and sale of Cold Rolling Mill. The said letter also

assured that if production in the new unit of the appellant

started in the year 1997 such benefit of exemption would be

available up to the year 2005. It also assured that even if the

industrial policy expired the facilities granted to the appellant

will continue till a period of 8 years from the date of

production.

On 2.3.2000 exercising the power conferred under sub-

section 3(b) of section 7 of the Bihar Finance Act, 1981, an

amendment was brought about in the notification which came

into existence pursuant to the industrial policy of 1995. This

amendment also provided the benefit to the new industries

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which came into existence by way of expansion/modernisation/

diversification provided the investment in such expansion/

modernisation/diversification was done on an additional

investment of Rs.500 crore. On 20.5.2000 pursuant to a

decision taken on 26.4.2000 by the Commissioner, Finance,

Director of Industries, Bihar, conveyed to the appellant that the

Government has granted approval for setting up of Cold Rolling

Mill with production capacity of 1.20 million tons on an

investment of Rs.1874.04 crores put by the appellant on this

project. On 9.8.2002, the Director Technical Development,

Department of Industries (Director of Technical Development)

wrote to the appellant that the team of Technical Officers

constituted by his Department to determine the date of

commercial production of appellant's Cold Rolling Mill made

the site verification and examined the related papers, thereafter,

they had submitted a report of inspection observing that the

date of commercial production has been recommended as

1.8.2000, hence, the commercial production at CRMs is

declared as from 1.8.2000.

From the above, it is noticed that relying on the industrial

policy of the Government of Bihar of 1995 and the assurance

given by the Government pursuant to the said policy and the

notification made thereunder, the appellant invested nearly

Rs.2000 crores on its new unit for the manufacture of CRMs,

the commercial production of which commenced from 1.8.2000

which was verified by the Technical Officers of the Department

of Industries, Bihar and certified as such by them.

On 15.11.2000 under the Bihar Re-organisation Act,

2000, a part of Bihar which included Jamshedpur, became a

new State named as Jharkhand State. On 15.12.2000 by a

notification, the Governor of Jharkhand ordered that the Bihar

Finance Act, 1981, Central Sales Tax (Bihar) Rules, 1956 and

the notification made thereunder, among other Acts, Rules and

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, namely, the State of

Jharkhand issued the exemption certificate as contemplated

under Notification Nos.478 and 479 dated 22.12.1995 by the

Bihar State Finance (and Commercial Tax) Department

exempting the new unit of the appellant from purchase tax as

well as sales-tax on purchases and sales made in regard to the

Cold Rolling Mill. This was pursuant to an order made by the

Joint Commissioner of Commercial Taxes dated 16.12.2000

wherein after an elaborate inquiry and after hearing the

departmental representatives, the Joint Commissioner came to

the conclusion among other findings that the product

manufactured by the appellant in its new unit is entirely a new

product called Cold Rolled Products while the product

manufactured in its old unit was a separate product called

HRPs; both of which required distinctly different

manufacturing processes and equipments. He also held that

though the raw-material for the manufacture of CR product is

HR product, the CR product is totally different both in its

metallurgical components, 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 and the notifications,

therefore, he approved the issuance of certficate.

However, the Commissioner of Commercial Taxes,

Jharkhand, initiated suo motu revision purporting to act under

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section 46(4) of the Bihar Finance Act against the said approval

granted by the Joint Commissioner and after an inquiry and

hearing the parties concerned, came to the conclusion that the

hot rolled steel i.e. the HR product and cold rolled steel i.e. the

CR product have to be treated as one and the same commodity

for the purpose of levy of tax, therefore, the appellants are not

entitled to the sales-tax exemption. In this process, he did not

disagree with the finding of fact arrived at by the Joint

Commissioner as to the nature of product and how they are

different but relied on an entry found in the Schedule to section

14 of the Central Sales Tax Act, which enumerated both hot

and cold rolled products in the same entry. Then relying on a

judgment in Telengana Steel Industries [93 STC 187(SC)] held

merely because the two products are found in the same Entry in

the Schedule to the Central Sales Tax Act, both the products

will have to be treated as the same. Though it was pointed out

to the Commissioner that the judgment of this Court in

Telengana's case (supra) was subsequently held to be contrary

to an earlier Constitution Bench judgment of this Court and

declared to be not good law in K.A.K. Anwar & Co. v. State of

Tamil Nadu [108 STC 258 (SC)], the Commissioner seems to

have lost sight of the same and chose to rely upon Telengana

Steel (supra) to come to the conclusion that the two products

must be treated as the same commodity merely because they are

found in the same Entry in the Act for the purpose of levy of

sales-tax and if that be so under the policy and the notification

unless the products are two different commodities the benefit of

exemption was not available.

Being aggrieved by the said order of the Commissioner,

the appellant preferred a civil writ petition before the High

Court of Jharkhand. The High Court by the impugned

judgment, accepted the appellants' case in all other respects

including the effect of the judgment of this Court in K.A.K.

Anwar & Co.'s case (supra) and came to the conclusion that

merely because two commodities are shown in the same Entry

in the Central Sales Tax Act, it would not ipso facto make the

two commodities the same commodities. It also recorded the

concession made by the learned Additional Advocate General

appearing for the respondent-State who had submitted that all

other issues raised in the writ petition have to be answered in

favour of the appellant. The Court also held that the only issue

to be decided was whether on facts the HR product and CR

product manufactured by the two units of the appellant are one

and the same product or are two different products, and not on

the basis of law as held by the Commissioner.

On the above basis, the High Court without there being a

challenge to the finding of the Joint Commissioner as to the

comparability of the two products on facts, and which finding

being based on material produced before the said authority, still

remanded the matter to the Commissioner holding that the

appellant had not produced enough material whereby it could

be satisfactorily held that the CRM is a product commercially

different from HRM. It is because of this limited finding that

the appellant is now before us.

Mr. Dushyant A. Dave, learned senior counsel appearing

for the appellants, raised various grounds, attacking the

judgment of the High Court including the ground that after the

amendment which permitted diversification with an investment

of Rs.500 crore, nature of product manufactured by the new

product has no relevance for the purpose of promised

exemption. He also contended that the correspondence between

the State of Bihar and the appellant which culminated in the

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certificate of exemption granted by the successor State, clearly

shows that there was an unambiguous offer, if not a fervent

request by the State of Bihar to the appellant to invest large

sums of money in an industrial project for which all assistance

and exemptions as available under the 1995 policy were

promised by the State of Bihar and it was because of this

representation, request and promise that the appellant which

otherwise was thinking of putting up its project in other States

like Orissa, Gujarat etc. which also had promised certain

benefits, chose to come to Bihar and invest nearly Rs.2,000

crores. In such circumstances, the respondent-State is precluded

by the principle of promissory estoppel from retracting its

promise.

We, however, do not think it is necessary for us to go

into these questions since in our opinion as recorded by the

High Court in the impugned judgment, the only question that

arises for our consideration is whether the product

manufactured by the appellant in its new unit is a Cold Rolled

Mill product or as it is termed in some parts of the judgment

and orders as CRM or it is the same product as is being

manufactured by the appellant in its old unit which is known as

Hot Rolled Mill product or HRM.

In this regard, learned counsel for the appellant submits

the correspondence between the State of Bihar and the appellant

clearly shows that the new unit was being established for the

manufacture of CRM and the appellant had no intention to

increase the production of its HRM in the existing factory. It

accepted the proposal of the State Government to invest such a

huge amount of money because CRM is a new product used in

the manufacture of certain sophisticated equipments for which

HRM cannot be the raw-material. He submitted that from the

various reports furnished by the appellant making known the

process of manufacture, the inputs and the equipments required

for such manufacture, it is clear that the product they

manufacture in the new unit is only CRM. He further submitted

that even the report submitted after inspection by the

representatives of the Industries Department also establishes the

same fact. Learned counsel pointed out that the Joint

Commissioner while holding the two products to be different

commodities had considered various materials to come to the

said conclusion, and has given reasons for the same. He also

pointed out that the Commissioner in his suo motu revisional

order did not disagree with the Joint Commissioner on this

question of fact but on an erroneous interpretation of the

placement of the product in the same entry in the Central Sales,

and following an overruled judgment of this Court, the said

Commissioner came to an erroneous conclusion on a

technicality, therefore, the High Court having found that

technical reasoning of the Commissioner is unsustainable and

having noticed the concession of the Additional Advocate

General, it could not have allowed the writ petition on a ground

which was neither raised nor argued before it and remanded the

matter to the tribunal for a de novo inquiry by the

Commissioner which would only amount to the harassment to

the appellant.

Mr. Altaf Ahmad, learned senior counsel appearing for

the State of Jharkhand, however, contended that while it is true

that the only question which arose for consideration before the

High Court was in regard to the nature of product manufactured

by the new unit of the appellant. He contended that none of the

parties had led sufficient evidence for establishing this fact,

therefore, the High Court was justified in remanding the matter

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to the Commissioner with liberty to lead fresh evidence. He

submitted that the appellant would not be put to any prejudice if

really the product manufactured by it in the new unit is a new

product because it can establish its case before the

Commissioner. He also pointed out that this Court normally

does not interfere in an order of remand.

Having heard learned counsel for the parties, we think in

the facts and circumstances of this case, the High Court was in

error in remanding the matter to the Commissioner to decide

the question of fact which in our opinion was already

conclusively decided by the Joint Commissioner and not

disagreed on facts by the Commissioner. In this process, if we

see from the narration of facts recorded hereinabove that right

from the beginning, it is the case of the appellant that they

wanted to establish a new unit for the manufacture of CRM.

The correspondence also shows at every stage even the State

and the concerned Department accepted the proposal for the

said purpose. No case has been made out, leave alone an

attempt on behalf of the State has been made that the appellant

misled the Department or by any sort of camouflage tried to put

up a plant which only manufactures HRM. As a matter of fact,

it was not the case of the respondent-State that in fact the

product manufactured by the appellant in the new unit is not

CRM. It could not have been the case either because in our

opinion a careful reading of the letter of the Director of

Technical Developent, Bihar, dated 9.8.2000 wherein he has

referred to a team of Technical Officers who visited the unit of

the appellant, had reported that the commercial production was

CRM and on verification, production of the same was found to

have started hence they recommended that a declaration be

given in regard to the same w.e.f. 1.8.2000. These Technical

Officers who we must presume have seen the product, have

nowhere stated that the products manufactured were not CRM

nor has the respondent-State repudiated this letter or challenged

the correctness of the same.

As noticed above, even the Commissioner who initiated

suo motu revision, did not disagree with the finding of the Joint

Commissioner given on facts that the product is CRM. He only

proceeded on a technicality relying on an erroneous judgment.

In the writ petition filed by the appellant the State has filed a

counter affidavit. Even in the counter affidavit the factual

aspect of the product being CRM is not questioned nor do we

find any argument addressed on behalf of the respondent-State

before the High Court that the product manufactured by the

appellant in its new unit is not CRM. It is for the first time the

High Court having come to the conclusion that the finding of

the Commissioner based on the judgment of this Court in

Telengana Steel (supra) is erroneous, on its own proceeded to

examine the material available on facts to establish whether the

product manufactured by the appellant in its new unit is CRM

or HRM. Even the High Court on such material that was

available before it did not come to a definite conclusion that the

finding of the Joint Commissioner was erroneous but it

proceeded to weigh the quantity of evidence and thought it

more prudent to remand the matter to take more evidence in this

regard. We think in a writ petition filed under Article 226 or

227, the High Court ought not to have done such an exercise.

Mr. Altaf Ahmad, learned senior counsel cotnended that

the finding of the Joint Commissioner in regard to the nature of

product only refers to certain literature produced by the

appellant and certain feasibility report, project data and the

correspondence between the Government of Bihar and the

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appellant. This by itself according to learned counsel, would not

in fact indicate that the actual product that is manufactured by

the appellant is CRM. He submitted that the appellant ought to

have either by summoning the officers to the site or by other

materials established that the new unit produced only CRM and

not HRM.

We are unable to accept this argument either. First of all,

as noticed above, it is not the case of the State that the product

manufactured by the appellant in its new unit is not CRM. It is

not the case of the State that the existing unit either 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 intrinsic evidence. The material produced before

the Joint Commissioner was in our opinion sufficient to decide

whether the product manufactured by the appellant is CRM or

not and the said Joint Commissioner having given a positive

finding and that finding having not been interfered with by the

Commissioner, we think the High Court erred in remanding the

matter for fresh inquiry.

It is true that normally as against an order of remand this

Court hesitates to interfere since there is always another

opportunity for an aggrieved party to establish its case. But in

this case we should notice the decision to establish an

industrial unit was initiated by the appellant 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 assured of that exemption. It is

based on these assurances that the appellant invested a huge

sum of money which according to the appellant is to the tune of

Rs.2,000 crore but the State says it may be to the tune of

Rs.1,400 crore. 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

concerned Government/authorities were informed and at no

point of time it 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 are 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 Joint Commissioner which is

found to be erroneous, we find ends of justice would not be

served by remanding the matter for further inquiry.

We are convinced that the issue before the High Court

was not whether in fact the new unit of the appellant

manufactures HRM or CRM. That being the case, the High

Court ought not to have raised the issue suo motu and remanded

the matter to the Commissioner.

For the reasons stated above, this appeal succeeds; the

impugned order of the High Court is set aside. We restore the

proposal made by the Joint Commissioner for grant of

exemption certificate to the appellant as also the exemption

certificates granted consequently.

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