# STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL INDIA LIMITED

- **Citation:** [2022] 12 S.C.R. 720
- **Court:** Supreme Court of India
- **Decided:** 2022-01-21
- **Case number:** Civil Appeal Nos. 7710-7714 of 2021
- **Bench:** M. R. Shah, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-gujarat-v-arcelor-mittal-nippon-steel-india-limited-35473
- **Pages:** 41

## Headnote

Gujarat Sales Tax Act, 1969: s. 49(2), 45 - Exemption from
payment of sales tax - ESL-assessee dealer, a steel manufacturing
unit made investments in the Scheme - ESL granted exemption from
payment of purchase tax on raw materials for Naphtha and Natural
Gas as per Entry No. 255 of the Notification dated 05.03.1992,
subject to fulfilling certain conditions - Amendment to Entry No.
255 vide two notifications - Under the said three Notifications, main
requirements was that the eligible unit furnishes to the selling dealer
a certificate in Form No. 26 declaring that the goods shall be used
by it as raw materials, processing materials or consumable stores in
its industrial unit for which it has obtained the eligibility certificate,
for the manufacture of goods in its industrial unit as per the
conditions provided under the three notifications - Said exemption
made available to steel manufacturing units and the units/entities
engaged in generating electricity placed in the list of industries
"Not Eligible" for this incentive - Natural Gas and Naphtha
purchased by the ESL, against declarations in Form No.26 were
sold to EPL and EPL utilized the Natural Gas and Naphtha
purchased from ESL for the purpose of generating/manufacturing
electricity, which came to be sold to the ESL by the EPL - Assessee
dealer seeking exemption from payment of the purchase tax as per
the original Entry No.255(2) vide notification dated 05.03.1992 -
Entitlement to - Held: As per the declaration furnished in Form
No.26, the eligible unit-ESL was required to actually use the goods
by him within the State of Gujarat as raw materials, for manufacture
of goods by him - Power producing companies were specifically
put in the list of 'ineligible' industries for any exemption from sale/
purchase tax on procurement of raw materials - Transfer of Naphtha
and Natural Gas by the eligible unit ESL to EPL, after availing the
exemption from payment of purchase tax and not using the raw
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material for its own use is in violation of the eligibility criteria/
condition mentioned in the Original Entry No. 255(2) - Basic
eligibility condition that the eligible unit "shall actually use the
goods" remain the same in amended Entry No.255(2) vide
notifications dated 14.11.2002 and 16.01.2002 - Subsequent
amended Entry can be said to be clarificatory and expanding the
scope of eligibility as it was - It cannot said to be taking away the
rights available to the eligible unit under the original Entry
No.255(2) dated 05.03.1992, or in anyway in conflict with the first/
parent notification/Entry No.255(2) - Thus, there was breach of
the declaration given in Form No.26 (Entry No.255) by the assessee
dealer - Demand of the purchase tax on and after 14.11.2000, not
hit by the principle of promissory estoppel - ESL not entitled to the
exemption from payment of the purchase tax as per the original
exemption notice - It was a case of false and wrong claim of
exemption, thus, levy of penalty justified - Assessee dealer, liable
to pay the penalty not exceeding one and one-half times.
Interpretation of statutes: Exemption notifications under
taxing statutes - Construction /Interpretation of - Held: Exemption
notification should be strictly construed and given meaning
according to legislative intendment - It is not open to the court to
ignore the conditions prescribed in industrial policy and the
exemption notifications - If any of the conditions laid down in the
notification is not fulfilled, the party is not entitled to the benefit of
that notification - Gujarat Sale Tax Act, 1969
Doctrines: Doctrine of promissory estoppel - Applicability
of, in taxing statutes - Held: Doctrine of promissory estoppel is an
equitable remedy and has to be moulded depending on the facts of
each case and not straitjacketed into pigeonholes - There cannot
be any hard and fast rule for applying the doctrine of promissory
estoppel but the doctrine has to evolve and expand itself so as to do
justice

## Text

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SUPREME COURT REPORTS
[2022] 12 S.C.R.
 [2022] 12 S.C.R. 720
720
 STATE OF GUJARAT
v.
ARCELOR MITTAL NIPPON STEEL INDIA LIMITED
(Civil Appeal Nos. 7710-7714 of 2021)
JANUARY 21, 2022
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Gujarat Sales Tax Act, 1969: s. 49(2), 45 - Exemption from
payment of sales tax - ESL-assessee dealer, a steel manufacturing
unit made investments in the Scheme - ESL granted exemption from
payment of purchase tax on raw materials for Naphtha and Natural
Gas as per Entry No. 255 of the Notification dated 05.03.1992,
subject to fulfilling certain conditions - Amendment to Entry No.
255 vide two notifications - Under the said three Notifications, main
requirements was that the eligible unit furnishes to the selling dealer
a certificate in Form No. 26 declaring that the goods shall be used
by it as raw materials, processing materials or consumable stores in
its industrial unit for which it has obtained the eligibility certificate,
for the manufacture of goods in its industrial unit as per the
conditions provided under the three notifications - Said exemption
made available to steel manufacturing units and the units/entities
engaged in generating electricity placed in the list of industries
"Not Eligible" for this incentive - Natural Gas and Naphtha
purchased by the ESL, against declarations in Form No.26 were
sold to EPL and EPL utilized the Natural Gas and Naphtha
purchased from ESL for the purpose of generating/manufacturing
electricity, which came to be sold to the ESL by the EPL - Assessee
dealer seeking exemption from payment of the purchase tax as per
the original Entry No.255(2) vide notification dated 05.03.1992 -
Entitlement to - Held: As per the declaration furnished in Form
No.26, the eligible unit-ESL was required to actually use the goods
by him within the State of Gujarat as raw materials, for manufacture
of goods by him - Power producing companies were specifically
put in the list of 'ineligible' industries for any exemption from sale/
purchase tax on procurement of raw materials - Transfer of Naphtha
and Natural Gas by the eligible unit ESL to EPL, after availing the
exemption from payment of purchase tax and not using the raw
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material for its own use is in violation of the eligibility criteria/
condition mentioned in the Original Entry No. 255(2) - Basic
eligibility condition that the eligible unit "shall actually use the
goods" remain the same in amended Entry No.255(2) vide
notifications dated 14.11.2002 and 16.01.2002 - Subsequent
amended Entry can be said to be clarificatory and expanding the
scope of eligibility as it was - It cannot said to be taking away the
rights available to the eligible unit under the original Entry
No.255(2) dated 05.03.1992, or in anyway in conflict with the first/
parent notification/Entry No.255(2) - Thus, there was breach of
the declaration given in Form No.26 (Entry No.255) by the assessee
dealer - Demand of the purchase tax on and after 14.11.2000, not
hit by the principle of promissory estoppel - ESL not entitled to the
exemption from payment of the purchase tax as per the original
exemption notice - It was a case of false and wrong claim of
exemption, thus, levy of penalty justified - Assessee dealer, liable
to pay the penalty not exceeding one and one-half times.
Interpretation of statutes: Exemption notifications under
taxing statutes - Construction /Interpretation of - Held: Exemption
notification should be strictly construed and given meaning
according to legislative intendment - It is not open to the court to
ignore the conditions prescribed in industrial policy and the
exemption notifications - If any of the conditions laid down in the
notification is not fulfilled, the party is not entitled to the benefit of
that notification - Gujarat Sale Tax Act, 1969
Doctrines: Doctrine of promissory estoppel - Applicability
of, in taxing statutes - Held: Doctrine of promissory estoppel is an
equitable remedy and has to be moulded depending on the facts of
each case and not straitjacketed into pigeonholes - There cannot
be any hard and fast rule for applying the doctrine of promissory
estoppel but the doctrine has to evolve and expand itself so as to do
justice between the parties and ensure equity between the parties -
In taxing matters, the doctrine of promissory estoppel as such is not
applicable and the Revenue can take a position different from its
earlier stand in a case with established distinguishing features -
Rules of promissory estoppel and estoppel by conduct may not be
applied to alter or amend the specific terms and against statutory
provisions.
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED
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Allowing the appeals, the Court
HELD: 1. The respondent-the eligible unit was not entitled
to the exemption from payment of purchase tax under the original
Entry No.255(2) dated 05.03.1992, firstly, on the ground that it
did not fulfill the eligibility criteria/conditions mentioned in the
original Entry No.255(2) dated 05.03.1992 and secondly that there
was a breach of declaration in Form No.26 furnished by the
respondent - eligible unit - ESL. The order passed by the
Assessing Officer levying the demand of purchase tax and
imposing the penalty is hereby restored. [Para 24][760-D-F]
2.1 The original Entry No.255(2) dated 05.03.1992 does
not provide that the eligible unit after purchase of the raw
materials instead of using the same by itself or himself can transfer/
sold to another unit and the another unit can use the said raw
materials. If it is accepted, in that case, it would be varying the
conditions imposed in the original Entry No.255(2) and it shall
tantamount to adding something more than what is not provided
in the exemption notification/original entry, which is not
permissible. The original notification does not at all permit such
transfer and use of the raw materials after availing the exemption
for use of another unit, who, as such is otherwise not entitled to
any exemption as per the incentive policy. [Para 11.1][752-F-G]
2.2 As per the incentive policy, the actual benefit of
exemption was available to certain industries as per the list of
'eligible' industries. The power producing companies were
specifically put in the list of 'ineligible' industries for any
exemption from sale/purchase tax on procurement of raw
materials. Thus, the EPL being a power producing company was
not eligible at all for any exemption from sale/purchase tax on
procurement of raw materials. Therefore, as such, by such transfer
and sale of raw materials by ESL to EPL, EPL got the benefit of
exemption, which otherwise being a power producing company
was not eligible for such an exemption. [Para 12][752-H; 753-AB]
2.3. Transfer of Naphtha and Natural Gas by the eligible
unit - ESL to another unit - EPL, after availing the exemption
from payment of purchase tax and not using the Naphtha and
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Natural Gas (raw materials) for its own use for manufacture of
the goods so manufactured by it, it can be said to be violating the
eligibility criteria/condition mentioned in the original Entry
No.255(2) dated 05.03.1992 and it can be said that the respondent
-ESL committed a breach of the declaration given in Form No.26.
Therefore, the High Court has committed an error in holding
that the respondent did not commit any breach of any of the
conditions mentioned in the original Entry No.255(2) dated
05.03.1992. [Para 14][753-D-F]
2.4. While the exemption notification should be liberally
construed, beneficiary must fall within the ambit of the exemption
and fulfill the conditions thereof. In case such conditions are not
fulfilled, the issue of application of the notification does not arise.
It is settled law that the notification has to be read as a whole. If
any of the conditions laid down in the notification is not fulfilled,
the party is not entitled to the benefit of that notification. An
exception and/or an exempting provision in a taxing statute should
be construed strictly and it is not open to the court to ignore the
conditions prescribed in industrial policy and the exemption
notifications. The Statutory provisions providing for exemption
have to be interpreted in the light of the words employed in them
and there cannot be any addition or subtraction from the statutory
provisions. Eligibility clause, it is well settled, in relation to
exemption notification must be given effect to as per the language
and not to expand the scope deviating from the language. There
is a vast difference and distinction between a charging provision
in a fiscal statute and an exemption notification. [Para 14.1-14.3,
14.6][753-G-H; 754-A-B,G]
2.5. In the instant case, the intention of the State to provide
the incentive under the incentive policy was to give benefit of
exemption from payment of purchase tax was to the specific class
of industries and, more particularly, as per the list of 'eligible
industries'. Exemption was not available to the industries listed
in the 'ineligible' industries. It was never the intension of the
State Government while framing the incentive policy to grant the
benefit of exemption to 'ineligible industries' like the power
producing industries like the EPL, which as such was put in the
list of 'ineligible' industries. [Para 14.5][754-D-E]
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED
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2.6. Second notification dated 14.11.2000/the amended
Entry No.255(2), is clarificatory in nature and there is no change
in the basic eligibility criteria/conditions mentioned in the original
Entry No.255(2). As per the original Entry No.255(2) dated
05.03.1992 and even as per the Form No.26 appended thereto,
the eligible unit was required to actually use the raw materials
purchased. In the subsequent notification, it is made explicitly
clear that the raw materials so purchased are to be used by the
eligible unit in its industrial unit. Therefore, the basic requirement
that the eligible unit has to actually use such raw materials
purchased by him is in no way modified and/or amended. On the
contrary, the subsequent amended Entry No.255(2) dated
14.11.2000 can be said to be expanding the scope of eligibility as
it was. Earlier the eligible unit was required to actually use the
goods purchased within the State of Gujarat and as per the
subsequent amended Entry No.255(2) dated 14.11.2000 even if
such goods are used by it outside the State of Gujarat in that case
also such eligible unit was held to be eligible for exemption. Even
as per the condition No.6 in the amended Entry No.255(2) dated
14.11.2000, it is specifically mentioned that the eligible unit shall
actually use the goods purchased, which was the requirement in
the first notification also. Therefore, the subsequent amended
Entry No.255(2) vide notification dated 14.11.2000 can be said to
be clarificatory and/or expanding the scope of eligibility, but in
no case, it can be said to be taking away any right under the
original Entry No.255(2) dated 05.03.1992. Similarly, even the
third amended Entry No.255(2) dated 16.01.2002 also cannot be
said to be taking away any right available under the original Entry
No.255(2) dated 05.03.1992. [Para 15.1, 16][755-B-G]
2.7. Subsequent amended Entry No.255(2) vide notification
dated 16.01.2002 also can be said to be expanding the scope of
eligibility and in no way can be said to be taking away the rights
available to the eligible unit under the original Entry No.255(2)
dated 05.03.1992. The eligibility criteria/condition that the eligible
unit "shall actually use the goods" remain the same even in the
said amendedEntry No.255(2) dated 16.01.2002. Therefore, the
subsequent notifications/amended Entries cannot be said to be
in any way in conflict with the first/parent notification/Entry
No.255(2). [Para 16.1][755-H; 756-A-B]
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2.8. Even under the first/ original Entry No.255(2) dated
05.03.1992 and even as per the declaration furnished in Form
No.26, the eligible unit - respondent - ESL was required to
actually use the goods by him/within the State of Gujarat as raw
materials, for manufacture of goods by him. But by actually not
using the raw materials so purchased by which it got the benefit
of exemption from payment of purchase tax, sold the said raw
materials, which in fact were required to be used by him, to
another unit/entity, which another unit used it for manufacture of
its goods - generating the electricity and which in turn the EPL
sold to the ESL. Thus, the ESL- eligible unit did not comply with
and/or fulfilled the eligibility criteria/conditions even as per the
original Entry No.255(2) and therefore, was/is not entitled to the
exemption from payment of the purchase tax as per the exemption
notification dated 05.03.1992 vide original Entry No.255(2).
Therefore, even assuming that the subsequent amended Entries
vide second and third notifications are not to be made applicable
in that case also the respondent -Essar Steel Ltd. being eligible
unit was required to comply with and/or fulfill all the eligibility
criteria/conditions mentioned in the original Entry No.255(2), by
not actually using the raw materials by himself and transferring/
selling the same to the non-eligible unit, the respondent was not
entitled to avail the benefit of exemption even under the original
Entry No.255(2). [Para 17][756-C-F]
2.9. Even as per Form No. 26 (Entry No.255), as per the
declaration filed by the respondent, being 'eligible' unit while
purchasing goods for use in manufacturing goods, it was declared
that the raw materials so purchased will be used by it in the
manufacture of goods for sale. Thus, by not using the raw materials
so purchased by it, the respondent - eligible unit - ESL has
violated the declaration given in Form No.26. Therefore, the
respondent was not entitled to the exemption even under the
first/parent notification. [Para 18][756-G]
2.10. In the instant case, first of all, the principle of
promissory estoppel to the exemption sought ought not to have
been applied at all. Each assessment year/period is independent.
Even otherwise, in the facts and circumstances of the case, the
principle of promissory estoppel shall not be applicable. In the
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED
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SUPREME COURT REPORTS
[2022] 12 S.C.R.
instant case, the respondent - eligible unit as such was not
entitled to the exemption even under the first notification as it
violated the declaration given in Form No.26 as well as did not
comply with and/or fulfilled the eligibility criteria/conditions
required to be fulfilled while availing benefit of exemption. The
respondent did not actually use the raw materials purchased by
him/it and availed the exemption and after availing the exemption
sold the said raw materials to 'ineligible' unit - EPL and the EPL
used the same for manufacture of its goods - generating the
electricity, which subsequently again sold to the ESL - eligible
unit on payment of sale consideration. [Para 19][757-A-C]
2.11. As per the incentive policy declared by the State
Government, the power generating company was put in the list
of 'ineligible industries' and thus, independently was not entitled
to the exemption under the original Entry No.255(2). Thus, by
such a transfer/sale from the eligible unit to another unit the benefit
of exemption is availed by the 'ineligible' industry, which is wholly
impermissible and that cannot be said to be the intention of the
Government while providing the incentive in the form of
exemption from payment of purchase tax. Such a benefit of
exemption was available only to eligible units/industries and the
steel industry of which ESL belonged being one of the eligible
industries. Therefore, there was no question of applicability of
principle of promissory estoppel. [Para 20][757-D-E]
2.12. ESL had furnished wrong and false declarations. In
the original notification/entry, it was not provided that even if the
raw materials so purchased is not used by itself after availing the
exemption, the same can be sold to another entity, which is
'ineligible' industry. It did not provide that in such a situation
also and despite the fact that raw material is not actually used by
the eligible unit, which was required to be used even as per the
declaration in Form No.26, such eligible unit shall be entitled to
the exemption. No such promise was given. The wordings and
the language used in the exemption notifications are very clear,
simple and unambiguous. Therefore, when there was no such
promise and/or representation, the demand cannot be said to be
hit by the principle of promissory estoppel as observed and held
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by the Tribunal as well as the High Court in the impugned
judgment and order. [Para 20.1][757-F-H; 758-A]
2.13. The doctrine of promissory estoppel is an equitable
remedy and has to be moulded depending on the facts of each
case and not straitjacketed into pigeonholes. There cannot be
any hard and fast rule for applying the doctrine of promissory
estoppel but the doctrine has to evolve and expand itself so as to
do justice between the parties and ensure equity between the
parties. In the present case, the principle of promissory estoppel
shall not be applicable. [Para 20.2][758-B-C]
2.14. In taxing matters, the doctrine of promissory estoppel
as such is not applicable and the Revenue can take a position
different from its earlier stand in a case with established
distinguishing features. The rules of promissory estoppel and
estoppel by conduct may not be applied to alter or amend the
specific terms and against statutory provisions. All the terms and
conditions contained in the exemption notification shall prevail
and the person claiming the exemption has to fulfil and satisfy all
the eligibility criteria/conditions mentioned in the exemption
notification. [Para 20.3, 20.4][758-C-E]
2.15. The Scheme of the Statute does not in any manner
indicate that the incentive provided has to continue for the
consecutive years irrespective of the fulfilling of the eligibility
conditions. Applicability of the incentive is directly related to the
eligibility and not dehors the same. If it is found that the industrial
undertaking does not fulfil the eligibility criteria, it cannot claim
the incentive/exemption. The submission that as in the earlier
assessment years benefit of exemption was granted to the
respondent and, therefore, in the subsequent assessment years
also, despite the fact that it is found that the respondent was/is
not eligible for the benefit of exemption under the original
Notification/Entry No.255(2) cannot be accepted. If such a
submission is accepted in that case it will be perpetuating the
illegality and granting the benefit of exemption to 'ineligible
industry', who did not fulfill and/or comply with the eligibility
criteria/conditions mentioned in the exemption notification. The
principle of promissory estoppel shall not be applicable contrary
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INDIA LIMITED
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SUPREME COURT REPORTS
[2022] 12 S.C.R.
to the Statute. Merely because erroneously and/or on
misinterpretation, some benefits in the earlier assessment years
were wrongly given, cannot be a ground to continue the wrong
and to grant the benefit of exemption though not eligible under
the exemption notification. [Para 21.1, 22][758-G-H; 759-A-C]
2.16. The penalty is leviable under Section 45 and such a
penalty is leviable under sub-sections (5) and (6) of Section 45 of
the Act, 1969 and the penalty is leviable on purchase tax assessed.
It provides that if the difference of tax paid and tax leviable/
assessed is more than twenty- five percent, in that case, the dealer
shall be deemed to have failed to pay the tax to the extent of the
difference between the amount so assessed/re-assessed and the
amount paid and, in that case, there shall be levied on such dealer
a penalty not extending one and one-half times the difference as
per sub-section (5). Therefore, there being difference of more
than twenty five percent, penalty to the said extent shall be
leviable. This is a clear case of false and wrong claim of exemption,
as the exempted goods were transferred to a third person and
used in an 'ineligible' industry. This is a case of deliberate violation
and evil doing. [Para 23][759-D-E]
2.17. As the difference between total tax paid and the
purchase tax is more than twenty-five percent, the respondent is
deemed to have failed to pay the tax as per sub-section (5) of
Section 45 and, therefore, liable to pay the penalty not exceeding
one and one-half times. The words used in sub-section (6) of
Section 45 is "there shall be levied on such dealer a penalty not
exceeding one and one-half times the difference". In the instant
case, the modus operandi which was adopted by the respondent
warrants a penalty. Though, the raw material was required to be
used by itself for the manufacture of their goods, after availing
the exemption as eligible unit and instead of using the same for
itself/himself, the ESL sold the raw materials to an 'ineligible'
entity - EPL, who used it for manufacture of its own goods -
generating the electricity, which again came to be sold to ESL
under the power purchase agreement. [Para 23.1][759-F-H; 760A]
2.18. As such the EPL, under the incentive scheme, was
not eligible at all for exemption from payment of purchase tax as
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in fact power generating companies were put in the list of
'ineligible industries'. Therefore, by such a modus operandi, the
benefit, which was not available to the EPL was made available
by such transfer of raw materials by the ESL to EPL. There is a
breach of declaration in Form No.26 also. Therefore, in the facts
and circumstances of the case, the levy of penalty is justified and
warranted. [Para 23.2][760-B-C]
2.19. The impugned common judgment and order passed
by the High Court as well as that of the Tribunal quashing and
setting aside the demand of purchase tax from the respondent
are hereby quashed and set aside. [Para 24][760-D]
Commissioner of Central Excise, Bangalore-1 v. Bal
Pharma Limited, Bangalore and Ors., (2011) 2 SCC
620 - relied on.
Commissioner of Customs (Import), Mumbai v. Dilip
Kumar and Company and Others, (2018) 9 SCC 1 :
[2018] 7 SCR 1191; Union of India and Anr. Etc. Etc.
v. V.V.F. Limited and Another, Etc. Etc., (2020) SCC
Online SC 378; Bengaluru Development Authority v.
Sudhakar Hegde and Ors., (2020) 15 SCC 63; Kothari
Industrial Corporation Limited v. Tamil Nadu Electricity
Board and Anr., (2016) 4 SCC 134 : [2016] 1 SCR 564 ;
Committee of Creditors of Essar Steel India Limited v.
Satish Kumar Gupta & Ors., (2020) 8 SCC 531 : [2019]
16 SCR 275; Assistant Commissioner (CT) LTU and
Anr. v. Amara Raja Batteries Limited, (2009) 8 SCC 209
: [2009] 11 SCR 953; Hindustan Steel Ltd. v. State of
Orissa, (1969) 2 SCC 627 : [1970] 1 SCR 753; Excel
Crop Care Limited v. Competition Commission of India
and Anr., (2017) 8 SCC 47 : [2017] 5 SCR 901 -
referred to.
Case Law Reference
[2018] 7 SCR 1191
referred to
Para 3.7
(2020) 15 SCC 63
referred to
Para 3.10
[2016] 1 SCR 564
referred to
Para 3.12
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED
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[2019] 16 SCR 275
referred to
Para 4.1
[2009] 11 SCR 953
referred to
Para 4.10
[1970] 1 SCR 753
referred to
Para 4.29
[2017] 5 SCR 901
referred to
Para 4.29
(2011) 2 SCC 620
relied on
Para 20.3
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.77107714 of 2021.
From the Judgment and Order dated 06.05.2016 of the High Court
of Gujarat at Ahmedabad in Tax Appeal Nos.136 to 140 of 2016.
Maninder Singh, Sr. Adv., Prabhas Bajaj, Ms. Deepanwita
Priyanka, Advs. for the Appellant.
Ritin Rai, Sr. Adv., Vishal Gehrana, Ashutosh P. Shukla, Ms. Kritika,
M/s Karanjawala & Co., Advs. for the Respondent.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court of Gujarat dated 06.05.2016
passed in Tax Appeal Nos. 136 of 2016 to 140 of 2016 by which the
High Court has dismissed the said appeals preferred by the State and
has upheld the common order dated 29.01.2015 passed by the Gujarat
Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as the
"Tribunal") in Second Appeal Nos.420 to 423 of 2013 by which the
Tribunal held that the respondent is entitled to the exemption from payment
of amount of sales tax as per the original Entry No.255(2) vide F.D.'s
Notification dated 05.03.1992, which was issued under Section 49(2) of
the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "Act, 1969"),
the State of Gujarat has preferred the present appeals.
2. That the respondent herein - assessee -dealer (earlier known
as Essar Steel Ltd.) is engaged in the activity of manufacture and sale
of Hot Briquetted Iron (HBI)and Hot Rolled Coil (HRC) at its two units
located atHazira in Surat, Gujarat. The respondent holds registration
certificate under the Gujarat Sales Tax Act, 1969 and also under the
Central Sales Tax Act, 1956. The respondent made eligible investment
in Unit No.1 pursuant to Resolution dated 07.05.1986 issued by the
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Industries, Mines and Energy Departmentof the Government of Gujarat.
Therefore, the respondent was certified as entitled to avail incentives
during the eligible period from 01.08.1990 to 31.07.2004 up to the upper
monetary limit of Rs.237.59 crores.
2.1 The Government of Gujarat vide Resolution dated 26.07.1991
announced a scheme known as "The Scheme for SpecialIncentives to
Prestigious Units 1990-95 (modified)" for attracting investments in core
sector industries. Under the said scheme, a prestigious unit was eligible
for incentives up to 90% of the fixed capital investment. That pursuant
to the said Scheme, the respondent - Essar Steel Ltd. (hereinafter referred
to as "ESL") invested approximately Rs.5000 crores formanufacture of
HRC. That the said exemption was provided as per Entry 255 of the
notification issued by the Government of Gujarat under Section 49(2) of
the Act, 1969. That the Unit No.2 of the ESL was granted Sales Tax
exemption in terms of Entry No.255(2) of the Notification dated
05.03.1992 issued under Section 49(2) of the Act, 1969 for the period
from 22.02.1993 to 21.02.2007 up to a maximum monetary limit ofRs.
2050 crores.
2.2 At this stage, it is required to be noted that the said exemption
as per Entry No.255(2) vide Notification dated 05.03.1992 was subject
to fulfilling certain conditions provided in the said original Entry No.255(2),
which shall be dealt with hereinafter below.
2.3 That the exemption granted to Unit No.2 of the respondent
was an exemption from payment of purchase tax on raw materials for
(i) Naphtha; and (ii) Natural Gas. The applicable purchase tax at the
relevant time on Naphtha was @16% on the taxable value and for Natural
Gas, it was @20% on taxable value. At this stage, it is also required to
be noted that this exemption had been made available to steel
manufacturing units and the units/entities engaged in generating electricity
were specifically excluded from this exemption by placing them in the
list of industries "Not Eligible" for this incentive.
2.4 As per the original Entry No.255(2) dated 05.03.1992, the
condition No.6 required the eligible units to actually use the goods
purchased within the State of Gujarat as raw materials, processing
materials or consumable stores in the manufacture of goods for sale
within the State of Gujarat or outside the State of Gujarat or as packing
materials in packing of the goods so manufactured.
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED [M. R. SHAH, J.]
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2.5 That thereafter vide Government Notification dated 14.11.2000,
Entry No.255(2) came to be amended w.e.f. 14.11.2000 whereby it was
provided that the goods were to be actually used by the eligible units as
raw materials, processing materials or consumable stores in its industrial
units for which it has obtained the eligibility certificate. That thereafter
Entry No.255(2) came to be further amended vide Notification dated
16.01.2002, which provided that the eligible units, who claim exemption
from purchase tax on purchase of the goodseven if the goods are used
as raw materials, processing materials or consumable stores in its
industrial units for which it has obtained the eligibility certificate in the
manufacturing of goods for dispatch to its another unit or division situated
within the State of Gujarat or outside the State of Gujarat for use in the
manufacture of other goods for sale by such other unit.
2.6 At this stage, it is required to be noted that under all the aforesaid
three notifications, one of the main requirements was that the eligible
unit furnishes to the selling dealer a certificate in Form No. 26 and obtained
from the registering authority, declaring inter alia that the goods shall be
used by it as raw materials, processing materials or consumable stores
in its industrial unit for which it has obtained the eligibility certificate,
forthe manufacture of goods in its industrial unitas per the conditions
provided under the three notifications.
2.7 On commissioning of the Unit No.2, the Natural Gas and
Naphtha purchased by the respondent - ESL, against declarations in
Form No.26 were sold to Essar Power Limited (another company)
(hereinafter referred to as "EPL") and the EPL utilized the Natural Gas
and Naphtha purchased from ESL for the purpose of generating/
manufacturing electricity, which came to be sold to the ESL by the EPL.
It is the case on behalf of the respondent - ESL that the said electricity
generated by EPL was used by it for the purpose of manufacturing
HRC in its industrial unit.
2.8 The Officers of the Sales Tax conducted a surprise visit at the
premises of the respondent - ESL in the month of July, 2001. A notice
was issued by the Sales Tax Officer calling for certain information
including details of branch transfers, deemed exports, transfer of finished
goods etc. The Sales Tax Department thereafter raised a dispute inter
alia regarding breach of declaration given in Form No.26 while purchasing
Naphtha/Natural Gas having been committed by the respondent - ESL
on the ground that the goods so purchased were transferred to EPL for
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generation of electricity, which was then used in Unit No.2 for the
manufacture of HRC. A notice was issued on 30.06.2002 by the Sales
Tax Officer calling upon the ESLto give clarification in respect of the
purported breach of conditions of exemptions, including the transfer of
Naphtha/Natural Gas to EPL for generation of electricity. That the
Assessing Officer passed the Assessment Orders in respect of Unit
No.2 for Assessment Years 1995-1996 to 1997-1998 and 2000-2001
holding inter alia that no tax was due and payable by the respondent -
ESL on account of any purported breach of the conditions of the exemption
admissible under Entry 255(2).
2.9 Subsequently, a notice dated 30.05.2005 came to be issued by
the Deputy Commissioner of Sales Tax for initiating levy of purchase
tax of Rs.480.99 crores and for levying penalty for the period 1995-1996
to 2005-2006 on the ground that the respondent - ESL has contravened
the provisions of the Act, more particularly, Entry No.255 and availed
the exemption wrongly. The respondent -ESL filed a writ petition before
the High Court challenging the notice issued by the Deputy Commissioner.
By order dated 28.03.2006, the High Court restrained the departmental
authorities fromimplementing or enforcing the assessment orders subject
tothecondition that in respect of Unit No.2, the respondent - ESL
shoulddeposit 50% of the tax dues within the time stipulated in the order.
The assessment orders by the Deputy Commissioner of Sales Tax came
to be challenged by way of appeals before the Joint Commissioner. The
Joint Commissioner - the first Appellate Authority vide order dated
30.04.2013 imposed purchase tax under Section 50 of the Act for the
years 1998-1999 and 1999-2000. However, the first Appellate Authority
accepted in the first appeal that till the amendment took place in Entry
No.255 on 14.11.2000, even if the purchased goods were used for
manufacture at any place in the State of Gujarat, there was no breach of
the conditions stipulated in Form No.26 and for the said assessment
years, the purchase tax together with interest and penalty imposed came
to be set aside. Thus, the Joint Commissioner/first Appellate Authority
confirmed the levy of purchase tax in respect of the purchase of goods
till 14.11.2000.
2.10 Being aggrieved against the order passed by the Joint
Commissioner dated 30.04.2013, both, the respondent -dealer - ESLand
the State Government preferred the appeals before the Tribunal. That
by order dated 29.01.2015, the Tribunal allowed the second appeals
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED [M. R. SHAH, J.]
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preferred by the respondent-ESL holding that the respondent - ESLis
not liable to pay any tax, interest or penalty on the disputed transactions
and dismissed the cross objections of the State.
2.11 Feeling aggrieved and dissatisfied with the orders passed by
the Tribunal allowing the second appeals preferred by the respondent -
dealer - assessee and dismissing the cross objection preferred by the
State and holding that the respondent - ESL is not liable to pay any tax,
interest or penalty on the disputed transactions, the State preferred the
present appeals before the High Court being Tax Appeal Nos. 136 of
2016 to 140 of 2016. By impugned common judgment and order, the
High Court has dismissed the said appeals mainly on the ground of
promissory estoppel and also observing that the respondent - ESL has
not violated any of the conditions provided under the original Entry
No.255(2) dated 05.03.1992.
2.12 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court, the State has preferred
the present appeals.
3. Shri Maninder Singh, learned Senior Advocate appearing on
behalf of the appellant - State of Gujarat has vehemently submitted that
the impugned common judgment and order passed by the High Court is
patently erroneous and unsustainable.
3.1 It is vehemently submitted by Shri Maninder Singh, learned
senior counsel appearing on behalf of the State that in the present case,
the Notification dated 05.03.1992 can be said to be a parent notification
and all other subsequent Notifications dated 14.11.2000 and 16.01.2002
were either clarificatory in nature and/or expanding the scope of
exemption. It is submitted that in any case, subsequent Notifications
dated 14.11.2000 and 16.01.2002 amending the original Entry No.255(2)
cannot be said to be taking away any rights, which were conferred under
the parent Notification dated 05.03.1992. It is submitted that therefore
there is no question of the promissory estoppel as applied by the High
Court and the Tribunal.
3.2 It is submitted by Shri Singh, learned Senior Advocate appearing
for the State that as per the original Notification dated 05.03.1992 and
as per the original Entry No. 255(2) and the statutory Form No.26, it is
abundantly clear that the parent Notification dated 05.03.1992 extends
the exemption only to 'the eligible unit' for utilizing the raw materials for
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manufacture of goods in that unit itself. It is submitted that the wordings
used in the notification are clear and unambiguous that the exemption
shall become available only if the said eligible unit utilizes the raw
materials for manufacture of goods in the very same 'eligible unit'. It is
submitted that therefore the raw materials - Naphtha and Natural Gas
were required to be used by the 'eligible unit - Essar Steel Ltd.' in the
very same steel unit and for manufacture of the steel only.
3.3 It is submitted that if the interpretation made by the High
Court and the Tribunal is accepted, in that case, even when the eligible
unit does not itself utilizes the raw materials, it may, after availing the
exemption, simply transmit the raw materials to any other unit or entity,
even the said entities are 'not eligible' to the exemption and such entities
though are 'not eligible' would then get the benefit of exemption. It is
submitted that that could not be the object and purpose of granting
exemption to the 'eligible units' only.
3.4 It is submitted that while introducing the incentive scheme,
the Department issued the list of industries of 'eligible units' and 'non
eligible units' for any exemption from sale/purchase tax on procurement
of raw materials. It is submitted that in the present case the power
generating companies were specifically put in the 'non eligible units'
category. It is submitted that in the present case despite being fully aware
of the clear and unambiguous terms and conditions of the notifications
wherein the power producing companies were specifically made
'ineligible' for availing the exemptions and though ESLwas required to
use the raw materials - Naphtha and Natural Gas in their own unit, after
availing the exemption from payment of purchase tax, the ESL did not
use the said raw materials in its unit but sold the said rawmaterials to
another company - EPL,and EPL used the said raw materials - Naphtha
and Natural Gas for generating the electricity, which came to be
subsequently sold to the ESL.It is submitted that, thus, through such
circuitous method, the ESL passed on the benefit of exemption to EPL,
which otherwise the EPL was not eligible and/or entitled to.
3.5 It is submitted that, thus, the interpretation advanced by the
assessee - ESLaccepted by the High Court and the Tribunal would
completely defeat the purpose of exemption notifications and would be
giving premium to such dishonest assessee/dealer, who after availing
the exemption would sell the raw materials to another industry/entity,
who as such are not entitled to and/or eligible for such an exemption. It
 STATE OF GUJARAT v. ARCELOR MITTAL NIPPON STEEL
INDIA LIMITED [M. R. SHAH, J.]
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is submitted that if the interpretation advanced by the assessee is
accepted, in that case, it would permit industries, which are eligible for
exemption to simply purchase the raw materials; not use them for any
manufacturing in their own units, and then simply transmit them for use
and manufacture by other units, even though such units are not eligible
for exemption under the notification/policy.
3.6 It is further submitted by Shri Maninder Singh, learned Senior
Advocate appearing on behalf of the State that in the present case, the
wordings used in the parent exemption notification and Entry No.255(2)
dated 05.03.1992 are very much clear and unambiguous. It specifically
provides the conditions for availing the exemption and the eligible units
have to fulfill all the conditions stipulated in the parent Entry No.255(2)
dated 05.03.1992.
3.7 It is submitted that as per the law laid down by this Court in
catena of decisions, the provisions of an exemption notification are to be
construed strictly. It is submitted that even in the case of any perceived
ambiguity, the provision has to be construed in favour of the Revenue.
Reliance is placed on the decision of the Constitution Bench of this Court
in the case of Commissioner of Customs (Import), Mumbai Vs.
Dilip Kumar and Company and Others,(2018) 9 SCC 1(para 66)
as well as another decision of this Court in the case of Union of India
and Anr. Etc. Etc. Vs. V.V.F. Limited and Another, Etc.