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CASE NO.:

Appeal (civil) 8193 of 2003

PETITIONER:

State of Rajasthan & Anr..

RESPONDENT:

J.K. Udaipur Udyog Ltd. & Anr.

DATE OF JUDGMENT: 28/09/2004

BENCH:

RUMA PAL & ARUN KUMAR

JUDGMENT:

J U D G M E N T

WITH

C.A. Nos.8194-8201 OF 2003,

C.A. Nos. 8203-8206 OF 2003

RUMA PAL

A scheme was framed by the first appellant granting

exemption to industrial units from payment of sales tax on

intra-state and inter-state sale of goods and by-products

manufactured within the State of Rajasthan. By a subsequent

notification the extent of the percentage of exemption available

to sick industries was sought to be corrected. The

disputes in these appeals relate to the interpretation of the

scheme and the effect of the corrigendum.

The scheme was part of the New 4th Industrial Policy of the

State. The Policy stated that the object of the scheme was to

make Rajasthan "a most favoured destination for industries" and

to encourage the setting up of industries in the State. The policy

describes the nature of the exemptions which were sought to be

granted to the different kinds of industries with exemption/

deferment incentives for 11 years in respect of some industries

and 14 years for others. A greater incentive was granted to

industries being set up in the five industrial growth centres in the

State. The incentives available during the first year were to be

gradually tapered off to a particular percentage of the fixed

capital investment at different rates in respect of some industries.

However, in respect of cement industries the percentage of

exemption proposed was at a flat rate of 25% for 11 years.

According to the policy the scheme would also give benefits for

the first time to sick units. The sick units were classified into

two categories as follows:

(1) "Those units which have not availed

of any benefits in the past will get

full benefits at par with a new unit.

(2) Those units which have availed of

sales tax benefits in the past will get

ST benefit on a tapering basis up to

11 years (maximum 80% and

minimum10% exemption/deferment

on a tapering basis)".

Pursuant to this Policy the Rajasthan Sales

Tax/Central Sales Tax Exemption Scheme for Industries,

1998 (referred to as 'the scheme') was framed and

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notified in exercise of the powers conferred on the

State Government by section 15 of the Rajasthan Sales

Tax Act, 1994 (referred to as "RST Act") and by sub-

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

(referred to as 'the CST Act"), The scheme came into

force from 1st April 1998. Clause 1-(b) of the scheme

envisages that "an industrial unit which commences

commercial production during the operative period of this

scheme, shall be entitled to claim benefits under this

scheme." Clause 3(a) provides that the scheme shall be

applicable to:

(i) the new industrial units;

(ii) the industrial units going for

expansion;

(iii) the industrial units launching

diversification; and

(iv) the sick industrial units.

A "New Industrial Unit" has been defined in clause

2(k) as:-

(i) "New Industrial Unit" means an industrial

unit which commences commercial

production during the operative period of

this Scheme including a unit set up on the

site of an existing industrial unit by

making separately identifiable capital

investment; subject however, that where

an industrial unit manufacturing the same

product is established on the site of an

existing unit, the benefit permissible for a

new unit shall be available to it only on

the production in excess of 80% of the

installed capacity of the existing unit.

(ii) "New Industrial Unit" shall also include a

sick unit:-

(a) which has not availed of any

benefits of exemption from tax

or deferment of tax;

(b) which has been appraised by

financial institution and

appropriate rehabilitation plan

has been formulated; and

(c) which has been purchased by a

new management other than by

way of collusive transfer and

such management has made

additional fixed capital

investment not less than 25% of

the depreciated value of the

assets of such unit".

The respondents in these appeals viz M/s. J.K.

Udyog and J.K. Synthetics Ltd were writ petitioners before

the High Court of Rajasthan and are companies which

manufacture cement in different units within the State of

Rajasthan. The respondent-companies in these appeals

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are undisputedly 'sick'.

The description of the type of units, extent of the

percentage of exemption from tax liability, the maximum

exemption permissible under the scheme and the

maximum time limit for availing the exemption under the

scheme have been set out in Annexure 'B' to the Scheme.

We set out below the material portion of Annexure B

to the exemption scheme.

Sl.

No.

Type of Units

Extent of the

percentage of

exemption from

total tax liability

Maximum exemption

in terms

of percentage

of eligible fixed

capital investment(FCI)

Maximum availing

limit

for

exemption

from tax.

1

2

3

4

5

1

New Units other than

the units mentioned

at S.No.2 and

3 and units going in

for expansion

or diversification

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

8th year

9th year

10th year

11th year

100

%

90%

80%

70%

60%

50%

50%

40%

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40%

30%

30%

100%of eligible fixed

capital investment in

cases where

such investment

exceeds Rs.1,50,00 Iacs,

and 125% of eligible FCI

in cases where

such investment does

not exceed Rs.150,00 lacs

Eleven years

2

.

(a)New Units

of knitwears, gems

and jewellery, textile,

electronics

and telecommunications,

computer software,

foot wears and

leather goods,

and ceramic

(b) Very

Prestigious Units

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

8th year

9th year

10th year

11th year

12th year

13th year

100

%

100

%

90%

80%

70%

60%

50%

50%

40%

40%

30%

30%

30%

30%

125% of eligible fixed

capital investment

Thirteen years

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3

All categories of

cement Plants/

units

including pioneering

to Prestigious unit

Very prestigious/Premier

Units except

mini cement

plants mentioned

in Annexure-A

25% of

total

liability

100% of eligible FCI

Eleven years

4

Sick Units:

(a) Sick units which

have not availed

of benefits of exemption

from tax or determent

of tax previously,

Same

benefits

which

are

available

to new

Units at

S. No.1

Eleven years

(b) Other sick

units which have

availed of the benefits

of exemption from tax

or deferment of tax

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

8th year

9th year

10th year

11th year

80%

70%

60%

50%

40%

30%

20%

10%

10%

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10%

10%

100% of eligible

fixed capital investment

in cases where

such investment

exceeds Rs.150.00 lacs

and 125% of FCI in

cases where

such investment does

not exceed Rs.150.00 lacs

Eleven years

It is apparent from this annexure that for the

purposes of deferring the rate of exemption the industries

were classified into three categories under Srl. Nos. 1, 2

and 3 according to the kind of Industry. Cement

plants/units have been separately placed in Srl.No.3.

According to the respondent-companies, however,

sick units were treated as a special category, and

irrespective of the nature of the industry, were covered by

Srl.4. It is the respondent's case that as far as their

cement units were concerned they were not covered by Srl.

No 3 but by Srl. No.4 (a) and thus, according to them,

they were entitled to the higher benefits accorded to new

units under Srl. No.1. According to them the words under

column 3 against Srl. No.4 made this clear.

According to the appellants on the other hand, this

was never the intention of the State Government which had

wanted to treat sick industrial units of a particular kind on

par with new industrial units of that kind in the matter of

grant of exemption. But we are anticipating the dispute

which is considered in detail subsequently. Returning to

the scheme : - the procedure for obtaining exemption

under the scheme has been provided in clause 4, the

relevant extract of which reads as under:

"Sanction of benefits under the

Exemption Scheme and issue of Eligibility

Certificate:-

(a) In order to avail the benefit under

this Scheme, the applicant industrial

unit shall have to obtain sanction

from the State Level Screening

Committee or District Level

Screening Committee, as the case

may be. The Screening

Committees shall act as quasi-

judicial authorities whose decisions

shall be final subject to other

provisions provided for in this

Scheme.

(b) \005\005

(c) \005\005..

(d) \005\005.

(e) The appropriate Screening

Committee shall, after having

examined the application of an

industrial unit and after having

gathered or collected such other

information, documents or evidence

as may be considered necessary

and after having got conducted

such further enquiry as deemed

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proper in the circumstances of the

case, sanction the benefits under

this Scheme to the said unit if it is

found fully covered by the

provisions of this Scheme and is not

in any way debarred or disqualified

to claim the said benefits.

However, in particular, the said

Screening Committee shall reject

the application of the applicant,

unit\027

(i) where its case does not fall within

the parameters of this Scheme, or

(ii) where it has failed in spite of

adequate opportunity being given,

to supply any information asked for

or adduce any evidence required

for; or

(iii) where any case of avoidance or

evasion of tax is pending against it

at any forum or it is found penalized

for such offence, within a period of

two years immediately preceding

the date of the filing of the

application; however, the said

Screening Committee may waive

this disqualification in an

appropriate case if the offence is

technical or venial in nature or has

been compounded.

(f) In case of sanction of benefits under the

Scheme, such sanction shall be

communicated in writing to the

Assessing Authority of the applicant

unit, who shall issue Eligibility Certificate

to the said unit in Form\027C, appended

to this notification, within a period of

seven days from the date of the receipt

of the sanction, and a copy of such

Certificate shall also be sent to the

Member Secretary of the concerned

Screening Committee.

(g) The Eligibility Certificate issued under

this Scheme shall remain in force till the

permissible exemption from tax in

accordance with the provisions of this

scheme is not exhausted, or till such

Certificate is not amended, suspended

or revoked.

(h) The benefits under this Scheme shall be

available from the date of the application

filed by the applicant unit completed in

all respects, as certified by the member

Secretary of the appropriate Screening

Committee.

(i) During the currency of the Eligibility

Certificate, the unit concerned shall be

exempted from payment of tax on the

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intra-State sales/inter-State sales of the

goods and by-products manufactured by

it within the State including the waste

items derived therefrom and the packing

material used therewith."

The order in which the steps envisaged for grant of benefits

under this clause of the scheme was therefore;

1) making of an application by the industrial unit;

2) the certification of the application as complete and the

provisional availability of the benefits (clause 4(h) );

3) The examination of the application by the Screening

Committee after collecting information/enquiry etc

Clause (4( e));

4) The sanction or rejection of the application by the

Screening Committee . (Clause (4(e));

5) In case of sanction, the communication of the sanction

to the Assessing Authority. (Clause (4 (f))

6) The issuance of Eligibility Certificate by the Assessing

Authority within seven days. (Clause 4( f));

7) The availability of exemption from payment of tax

during the currency of the Eligibility Certificate until the

exemption was either exhausted or unless the

certificates were amended, suspended or revoked.

(Clauses 4(i)).

The respondent companies applied for exemption under

the scheme claiming benefits at par with units under Srl.No.1. As

far as M/s. J.K. Synthetics Limited is concerned, the Director of

Industries certified that the application was complete. The

certificate issued under Section 4(h) on 20th February, 1999

made it clear:

"This certificate will not be treated as

sanction of incentive under the Sales Tax

Exemption Scheme, 1998. Incentive if

any availed under Clause 4(h) of the

aforesaid scheme will be entirely at the

risk of the unit, subject to decision of the

State level Screening Committee. A

suitable undertaking shall be taken by the

concerned assessing authority in this

regard from the unit."

In terms of the requirement, M/s. J.K. Synthetics Limited

gave an undertaking in writing to the effect that the incentives

availed by the company from the date of completion of the

application till the grant of sanction of eligibility certificate would

be entirely at the risk of the company and in case the company's

application was rejected for any reason, the company shall pay

the tax which was being availed of on the basis of the certificate

of completion.

While the application of M/s. J.K. Synthetics was pending

for consideration by the Screening Committee, the corrigendum

was issued on 30th September, 1999, by the Finance Department

inter-alia, amending the third column against Srl.No.4 of

Annexure B by replacing the phrase "New units at Srl. No. 1"

with "New units at Srl. No. 1,2 and 3 as the case may be". Thus

sick cement units under Srl.No.4 (a) were expressly put on par

with new cement units under Srl.No.3.

M/s. J.K. Synthetics Limited submitted a representation

to the Screening Committee that the corrigendum should not

affect the company. The Screening Committee deferred its

decision on the ground that as the particular unit of M/s. J.K.

Synthetics Limited in respect of which the exemption was

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claimed was not sick, although the company itself had been

declared sick, it should await the rehabilitation programme duly

approved by the BIFR providing the benefit of sales tax

incentives scheme to all such units. While deferring the case till

the approval of the rehabilitation programme by BIFR, the

Screening Committee said that the unit could avail of the benefit

under the scheme to the extent permissible under the

corrigendum. Neither any sanction under clause 4(e) and

consequently no Eligibility Certificate under clause 4(f) have

been issued to M/s. J.K. Synthetics Limited under the scheme till

today.

As far as M/s. Udaipur Udyog Limited is concerned, its

application under the scheme was certified as complete under

Clause 4(h)on 26th July, 1999 and was sanctioned on 30th

December, 1999. However the quantum of benefit was granted

in terms of the corrigendum from the date of issuance of the

corrigendum. The eligibility certificate was issued to M/s. J.K.

Udyog on 29th February, 2000 also restricting the benefits under

the scheme on the basis of the corrigendum.

Since the respondent had been availing of the higher rates

of exemption against Srl.No.1, consequent upon the decision of

the Screening Committee granting the benefits under the

corrigendum, provisional assessment orders and notices were

issued to both the respondent companies by the Sales Tax

Authorities over the differential sales tax.

M/s. J.K. Synthetics Limited and J.K. Udyog Limited filed

separate writ petitions before the High Court of Rajasthan

challenging the corrigendum dated 30th September, 1999; in the

alternative a prayer was made to hold that the corrigendum had

no application to the respondent companies; for quashing the

decisions of the Screening Committee in so far as the

respondent companies were given the benefit of the exemption

scheme on the basis of the corrigendum and for quashing the

provisional assessment orders and notices.

The submission of the respondent companies before the

High Court inter alia was that the scheme as originally framed

allowed the companies to avail of the benefit of the exemption

scheme under the Srl.No. 4(a) read with Srl. No. 1 for a period of

11 years up to a maximum limit of hundred percent of the

companies' eligibility fixed capital investment at percentages of

the total tax liability ranging from 100% in the first year to 30% in

the 11th year. These rights of the companies under the scheme

were claimed to be crystalised with effect from the date of the

certification of their applications under clause 4 (h), which could

not be taken away by the corrigendum with retrospective effect.

The learned single judge accepted the submission of the

respondent companies that the impugned corrigendum really

amounted to an amendment of the scheme. But it was held that

the State Government was competent to modify the scheme

and, therefore, the respondent companies were entitled to relief

in terms of the scheme as originally notified up to the date of

amendment and subsequent thereto as provided in the

corrigendum. Since the corrigendum had been published in the

Official Gazette on 7th January, 2000 it was held that it would be

applicable with effect from that date.

Several appeals were preferred both by the State of

Rajasthan as well as by the respondent companies from the

decision of the learned Single Judge. The Division Bench

disposed of all the appeals by the judgment impugned before

us. The Appellate Court agreed with the learned Single Judge

that the corrigendum notification was in fact an amendment of

the scheme and therefore, this would operate only prospectively

i.e. from 7th January, 2000. The plea of the respondent

companies that the State Government was bound by the

principles of promissory estoppel from modifying or amending the

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scheme was negated by the Division Bench. The respondent

companies have not sought to challenge this conclusion before

us. The Division Bench however held that the rights of the

respondent companies of enjoying the benefit under the original

scheme including the maximum amount of exemption, the

maximum period of exemption, and the percentage of exemption

were available to the respondent companies with effect from the

date of certification of their applications under clause 4(h) and

were substantive and that these rights could not be affected

adversely unless the subsequent notification clearly manifested

an intention to do so. It was held that the corrigendum did not

contain any such explicit provision nor could any inference be

drawn that accrued rights were to be affected. It was held that

even if this proposition was unacceptable, the amendment was

arbitrary and violative of Article 14 being discriminatory vis-`-vis

other sick industries. It was further held that the amendment

could not discriminate against sick cement plants which had not

availed of benefits of tax exemption earlier, so that such sick

industries were treated in a manner worse than sick cement

industries which had availed of exemptions from sales tax earlier.

The Division Bench accordingly held that the respondent

companies were entitled to avail of the benefits under the

scheme as originally notified in the manner provided in column 3

of Serial No. 1 of Annexure B read with Serial No. 4(a) and that

such rights were not affected by the corrigendum published on

7th January, 2000. However. the corrigendum notification itself

was not quashed as had been prayed for.

The appellants have impugned the decision of the Division

Bench and have contended that the Division Bench had erred in

fact and in law in coming to the conclusion that the respondent

companies had a vested right to the benefits of the scheme as

available to new units under Srl. No. 1 of Annexure 'B' to the

scheme. It is pointed out that as far as J.K. Synthetics is

concerned its application has not been sanctioned at all. It is

contended that the corrigendum notification was in fact a

corrigendum and not an amendment, and that the corrigendum

merely made explicit the intention of the State Government to

treat the sick units of a particular industry on par with new units

of such industries. It is further contended that even if the

corrigendum were construed as an amendment, the State

Government had the power to withdraw or modify the benefit of

the scheme not only under Section 15 of the RST Act read with

Section 8(5) of the CST Act but also under clause (9) of the

scheme which provides for the power to the State Government to

review or modify the exemption scheme "as and when needed in

public interest". It is submitted that an exemption is in the nature

of a concession and was by that reason a defeasible right. It is

submitted that exemptions granted could not create any vested

right in the beneficiaries of the exemption to the continued grant

of the exemption until and unless the beneficiary was able to

establish that the State Government was bound by the principles

of promissory estoppel from modifying or withdrawing the

concession. It is submitted that since the respondent companies

had failed to establish any promissory estoppel on the part of the

State Government, the Government could withdraw or modify the

concession given at least from the date of the publication of the

corrigendum notification. As far as the High Court's findings on

the issue of discrimination is concerned, it is submitted that in

fact there were no other cement units in the State in comparison

with which it could be said that the respondents-companies were

being unfairly treated. The language of Srl. No.3 in Annexure B

was also relied upon to contend that the corrigendum was not

discriminatory and merely treated sick cement units and new

cement units equally.

Counsel for the respondent-companies has submitted

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that there was no power in the State Government to issue the

corrigendum with retrospective effect. It is submitted that the

scheme was issued not only under Section 15 of the RST Act but

also under Section 8(5) of the CST Act. The exercise of the

power was thus, to use counsel's language, 'inseverable'. It is

argued that as there is no power under Section 8(5) of the CST

Act to withdraw an exemption with retrospective effect the entire

exercise of issuing the corrigendum must fail. In addition, it is

submitted that even Section 15 of the Act did not allow the State

Government to withdraw an exemption with retrospective effect.

It is stated that under clause 4(h) read with clause 5(g), on the

date on which the respondents-companies' application was

certified as being complete, rights accrued to the industrial units

which could not be withdrawn and it was not necessary to rely

upon the principle of promissory estoppel for the purpose of

claiming continued exemption. It is submitted that the

subsequent notification was not a corrigendum but an

amendment of the scheme and could not be construed as

amounting to withdrawal of the rights conferred under the

scheme as originally published. It is submitted that sick units

have been treated as a class apart irrespective of the nature of

industry. It is also submitted that the corrigendum if construed in

the manner advocated by the appellants, would be violative of

Article 14. Finally, it is submitted that in any event this Court

should protect the respondent-companies in so far as they had

availed of the benefits of the scheme as originally published at

least from the date of the order of the High Court. It is submitted

that the High Court had struck down the corrigendum notification,

Therefore, Annexure B as originally notified would revive. The

decision of the High Court not having been stayed by this Court,

the respondent-companies had not and indeed could not recover

the sales tax from their customers by virtue of Section 14(2) of

the RST Act and it would in these circumstances be inequitable

to saddle them with sales tax liability for the period subsequent to

the decision of the High Court. Reliance has been placed on the

decision of this Court in State of Rajasthan V. Mahaveer Oil

Industries and Ors. 1999 (4) SCC 357 in support of the

submission.

The issue whether the subsequent notification should be

read as a correction or an amendment of the scheme as

originally notified would be relevant only if the appellants sought

to give retrospective effect to it. Since the appellants have stated

before us that they do not intend to take away the benefits which

may have actually been enjoyed by the respondent companies

prior to the date of publication of the corrigendum viz 7th January,

2000, a determination of the issue would be an academic

exercise and a consideration of the several decisions cited with

regard to the principles for deciding whether a statutory provision

has retrospective effect, is unnecessary. The question is whether

the subsequent notification could operate as far as the

respondent companies are concerned with effect from 7.1.2000.

The answer to this question would depend upon the nature of the

rights of the respondent companies under the scheme.

An exemption is by definition a freedom from an obligation

which the exemptee is otherwise liable to discharge. It is a

privilege granting an advantage not available to others. An

exemption granted under a statutory provision in a fiscal statute

has been held to be a concession granted by the State

Government so that the beneficiaries of such concession are not

required to pay the tax or duty they are otherwise liable to pay

under such statute. The recipient of a concession has no legally

enforceable right against the Government to grant a concession

except to enjoy the benefits of the concession during the period

of its grant. This right to enjoy is a defeasible one in the sense

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that it may be taken away in exercise of the very power under

which the exemption was granted. [See: Shri Bakul Oil

Industries & Anr. V.State of Gujarat; 1987 (1) SCC 31;

Kasinka Trading v. Union of India (1995)1 SCC 274; Shrijee

Sales Corpn. v. Union of India (1997) 3 SCC 398].

In this case the scheme being notified under the power in

the State Government to grant exemptions both under Section

15 of the RST and Section 8(5) of the CST in the public interest,

the State Government was competent to modify or revoke the

grant for the same reason. Thus what is granted can be

withdrawn unless the Government is precluded from doing so on

the ground of promissory estoppel, which principle is itself

subject to considerations of equity and public interest.

[See: Sales Tax Officer v. Shree Durga Oil Mills (1998) 1 SCC

572]. The vesting of a defeasible right is therefore, a

contradiction in terms. There being no indefeasible right to the

continued grant of an exemption (absent the exception of

promissory estoppel), the question of the respondent companies

having an indefeasible right to any facet of such exemption such

as the rate, period etc. does not arise.

In any event, the High Court erred in fact in holding that

M/s. J.K. Synthetics had a vested right to the benefits of the

scheme. Clause 4 of the scheme clearly provides that the

benefits under the scheme were subject to the sanction of the

Screening Committee. No sanction has been issued to M/s. J.K.

Synthetics till date.

Apart from this, the exemption being a creature of the

scheme is subject to the scheme. Clause 9 of the scheme makes

it clear that the right under the scheme was temporary in the

sense that the scheme could be modified or reviewed. It is true

that clause 9 also provides that such review or modification could

take place only in the public interest. But nevertheless the right

conferred was a modifiable or revocable one. If any right under the

scheme is held to be unmodifiable it would be contrary to the

scheme itself. Therefore even if one were to assume that the

respondent companies were entitled to the benefits of the scheme

on par with new units under Srl.No.1 with effect from the date of

the certification of their application under clause 4(h), the right

could be modified with effect from the date on which the scheme

was modified. The further argument of the respondent that the

subsequent notification could not be construed as a modification

and would apply only to subsequent applicants is unacceptable.

There is no ambiguity in the language of the subsequent

notification. On the contrary the use of the word corrigendum

itself indicates the intention was to correct and to rectify what the

State Government thought had been erroneously done.

Coming now to the question of public interest. The 4th New

Industrial Policy pursuant to which the scheme had been framed

by the State Government was indisputably in the public interest.

Therefore, if the intention of the State Government was to

effectuate the policy by issuing the subsequent notification it

cannot be said that the State Government was not acting in the

public interest. The Industrial Policy which resulted in the

exemption scheme expressly provided that the rate of benefits

which were to be given to sick industrial units which had not

availed of any such benefits in the past would be at par with a new

unit. But does this mean that the words "new unit" in the policy

referred to industries under Srl. No.1 ? We think not. New units of

different kinds of industries had been separately classified both

under the policy and under Srl.Nos.1,2 and 3 of Annexure B to

the scheme. Each of the three categories at Srl.Nos.1,2 and 3

have been granted different rates of exemption Serial No.1

relates to new industries not covered by Srl.No.2 and 3. It is

therefore, the residuary category and any new industry covered by

Srl. Nos. 2 and 3 would not be covered by Srl.No.1. Serial No.2

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speaks of particular industries such as knitwears, gems and

jewellery, textile, electronics telecommunications, computer

software, footwear and leather goods and ceramics. This

category of industries has been sub-classified under the heads of

(a) "new units" and (b) very prestigious units". A very prestigious

unit is not defined in the scheme itself but is referred to in the

industrial policy as those industries which have a fixed capital

investment of Rs.50 crore or more and regular employment of 250

persons. Srl.No.3 makes no such distinction and refers to "all

categories" of cement plants except mini cement plants

mentioned in Annexure 'A' to the scheme. Subject to the

exception of Annexure A all categories of cement plants/units

including new units have been allowed exemption of 25% of the

total tax liability for 11 years. There is no tapering of the incentive

for the 11 years that the benefit was to be available as is the case

under the other Serial Numbers. "All categories" would

necessarily include new cement plants and sick industrial units

falling within the definition of Clause 2(k)(ii), which was also

entitled to the same level of benefit as all other new cement units.

It would be incongruous to grant sick industrial units which do not

fall within clause 2(k)(ii) higher benefits than sick industrial units

which do. Since a sick industrial unit is granted a particular

benefit subject to the fulfillment of various conditions, it implies

that the industry which fulfils the conditions would be better off

than the one which does not. If we were to accept the

respondents' interpretation of the original notification under

Srl.No.4(a) and (b), higher benefits would be available to sick

industrial units which did not comply with the conditions imposed

under clause 2(k)(ii). Such a conclusion is not only illogical but

would serve to make a distinction between sick industrial units on

an irrational basis. Clause 2(k)(ii) therefore indicates that the

highest benefit that a sick industrial unit can claim under the

scheme, is to be treated at par with new industries.

The thrust of the industrial policy was to give an incentive to

new entrepreneurs. It is true that there are separate provisions for

'sick industries' but given the main object of the policy to make

Rajasthan a "most favoured destination for industries", it could not

have been the intention of the State Government to give a lower

benefit to new industries and to give higher benefits to sick

industrial units already established in the State. However, when

the scheme was first notified although the body of the scheme

effectuated the objective, the entry under column 3 against

Srl.No.4 in Annexure B did not clearly reflect this. Doubtless the

interpretation put by the respondent companies and accepted by

the High Court on the entries against Srl.No. 4 as it originally

stood in Annexure B, is a possible interpretation, but in our opinion

Annexure B was equally susceptible of the interpretation put

forward by the appellants before us particularly in the context of

the Industrial Policy.

It was to clarify this ambiguity that the subsequent

notification was issued by the State Government to correct or

amend Annexure B to the extent that it could be interpreted in a

manner not in keeping with the published industrial policy of the

State and the substantive provisions of the scheme.

For these reasons also the corrigendum cannot be said to

be violative of Article 14. On the contrary, if the corrigendum were

not to be given effect to, the entire scheme would operate

irrationally by making an invidious distinction between sick cement

units as we have already said. The irrationality is also apparent

vis-a-vis industries referable to Srl.No.2. Under the scheme, the

highest rate of exemption and greatest benefits is granted to new

units under Srl.No.2. If the respondents' interpretation of the

corrigendum is accepted, a sick industry of a particular kind which

otherwise falls under Srl.No.2 would, by virtue of the entry against

Srl.No.4, be entitled to much lesser than new units of the same

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kind of industry as it would be treated on par with new units of

different kinds of industries under Srl.No.1. This is perhaps the

reason why the corrigendum was not challenged by those

industries covered by Srl. No.2 which are sick and which are not

new industrial units within the meaning of clause 2(k)(ii) of the

scheme. Although it appears to us that Srl.No.3 would include all

categories of cement industries, the question whether Srl. No. 4(b)

would relate to sick cement industries not covered by clause 2(k)

(iii) or Srl. No.4(a) is not an issue which requires to be finally

decided in this case, particularly when there is no such industry

before us which claims the benefit of clause 4(b).

Learned counsel for the respondents' additional contention

is that the Screening Committee had proceeded on the basis that

the sick cement units were covered under Srl.No.4 and not

Srl.No.3. It is argued that such decision of the Screening

Committee being final in terms of Clause 4(a) of the scheme, it

was not open to the State to contend otherwise. The argument is

without force. The finality given to the decision of Screening

Committee in terms of Clause 4(a) is "subject to other provisions

provided for in the scheme". Any decision of the Screening

Committee cannot be contrary to the provisions of the scheme.

Besides all that the Screening Committee has held is that the

respondent companies are to be treated on par with other cement

companies, with effect from the date of the subsequent

notification. That is also what the appellants contend, namely that

Srl.No.4(a) expressly puts sick cement units on par with new

cement units under Srl.No.3.

The respondent companies are therefore required to avail of

the benefits under the scheme on the basis of the corrigendum

with effect from 7.1.2000. Learned counsel for the respondent

companies may be right in his contention that if a sanction is

granted and an Eligibility Certificate issued on the basis of the

sanction, then having regard to the provisions of Section 4(h) the

period of exemption under the sanction ought to cover the date of

the certification of the application as complete under Clause 4(h).

But it is again unnecessary to decide the ambit of the Screening

Committee's power, as the appellants have not argued that the

benefits of the higher rate of exemption already availed of by the

respondent companies with effect from the date of certification

under clause 4(h) up to 7th January, 2000 should be taken away

from them.

This brings us to the last argument of the respondent

companies viz. that they should not be made liable for the sales

tax on the basis of the corrigendum for the period they had availed

of the exemptions after the decision of the High Court. The

submission proceeded on the basis that the High Court had

quashed the corrigendum Notification. As we have noted earlier

the Division Bench had not quashed the corrigendum notification

but had contented itself with construing it. The mere fact that this

Court has not granted a stay of operation of the decision of the

High Court would not give the respondent companies any right to

the fruits of that decision if the decision is ultimately reversed by

this Court. Besides the respondent-companies should have been

aware that with the admission of the appeal from the High Court's

order their rights thereunder were precarious. [See: Union of

India v. West Coast Paper Mills Ltd. 2004(2) SCC 747, 753].

The mere circumstance that the respondent companies

having availed of the exemption scheme were prohibited from

collecting the tax from its customers or that they had not

collected the sales tax from their customers, (which assertion is

strongly disputed by the appellants), is of no consequence. The

primary liability to pay the Sales Tax is on the seller. The seller

may or may not be entitled to recover the same from the

purchaser. The State Government is entitled to recover the same

from the respondent-companies irrespective of the fact that the

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respondent-companies may have lost the chance of passing on

their liability to pay sales tax to their purchasers.

It is true that this Court has on some occasions granted

relief from payment of sales tax to an assessee despite having

found against the assessee on equitable considerations. But on

every occasion there was something more than the mere

impossibility of the assessee passing on the tax to its

purchasers. Thus in the case of British Physical Lab India Ltd.

V. State of Karnataka and Anr. 1999 (1) SCC 170, the State

Government had itself issued a notification reducing the rate of

tax. The notification was struck down by Court. The State

Government then sought to recover the difference between the

reduced rate as had been notified by it and the rate generally

applicable. This Court granted relief to the assessee since the

State Government had itself issued the notification concerned.

Similarly in Shree Cement Limited and Anr. v. State of

Rajasthan and Others 2000(1) SCC 765, relief was granted

having regard to the peculiar history of the case. By three

notifications covering 1990 to 1994 issued by the State of

Rajasthan the rate of tax payable by local dealers in respect of

inter-state sales had been reduced. The notifications were

challenged by cement manufacturers from outside the State.

The High Court rejected the challenge. When the non local

cement manufacturers came to this Court, this Court held that

the notifications were void and quashed them. [Shri Digvijay

Cement Companies v. State of Rajasthan, 1997 (5) SCC 406].

A fourth notification was subsequently issued by the State of

Rajasthan similar to the earlier three notifications which had

been quashed. The fourth notification was challenged directly

before this Court by means of a writ petition under Article 32.

This time the Bench which entertained the writ petition

disagreed with the view expressed earlier by this Court in respect

of Shri Digvijay Cement and referred the matter to a larger

Bench. The Constitution Bench overruled the decision in Shri

Digvijay Cement. The question then was whether the local

manufacturers would be entitled to the benefit of the decision of

the Constitution Bench despite the fact that the notifications

under which they had availed of a lower rate of tax had been

decided against them in Shri Digvijay Cement. This Court held

in favour of the local manufacturers. The circumstance that the

notifications were subsequently held to be valid by a larger

Bench operated to protect them from liabilities which had arisen

by virtue of the earlier erroneous decision.

In State of Rajasthan and anr. v. Mahaveer Oil

Industries & others 1999(4) SCC 357, this Court allowed the

assessee to retain benefits under a scheme upto 4.4.1994

despite the fact that the assesses were held not entitled to such

benefits, on the ground that in another proceeding this Court had

allowed similar industries to retain the benefit up to 4.4.1994.

What is of significance is that the assesses were denied further

benefit even though they had been successful before the Single

Judge, before the Division Bench of the High Court and no stay

had been obtained from this Court at any stage. It was said:

"The respondents have been aware

throughout that the judgment of the Single

Judge was appealed against. Even after the

Division Bench dismissed the appeal the

matter was carried further by filing the present

special leave petition/appeal before this Court.

The respondents continued to enjoy the

benefits of the said two Schemes since no

stay was obtained. Nevertheless, the

question whether the respondents are entitled

to the said benefits, has been sub judice

throughout. Since the appeal is now being

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decided against the respondents, they cannot

claim the benefit of an eligibility certificate

which was granted entirely on account of a

judgment of a Single Judge in their favour

which is now being set aside."

As far as M/s. J.K. Synthetics is concerned, their right to

obtain benefits under the scheme by reason of clause 4(b) was in

any event provisional. The undertaking given by this company

was to the effect that the benefits of the scheme were being

availed at the risk of the company till the sanction was granted by

the Screening Committee. Since no sanction has been granted to

the company, the company was aware that its rights to the

benefits under the scheme were conditional and that it might be

called upon to meet its sales tax liabilities in the event sanction

was not granted on its application.

In such circumstances it must be open to the State

Government to recover sales tax dues as it is entitled to under the

RST Act allowing the respondent companies to only keep such

benefits as had been already availed of by then upto 7th January,

2000 and thereafter at the rates specified and according to the

provisions of the scheme as modified by the corrigendum

notification. However no interest or penalty will be charged from

the respondent companies by the appellants on the differential

amounts for the period the matter was sub judice before this

Court provided the respondent companies pay the principal

amount of sales tax within such time as may be specified by the

appellants in this regard.

We, therefore, allow the appeals and set aside the

impugned decision without any order as to costs.