# STATE.OF H.P. AND ORS v. GUJARAT AMBUJA CEMENT LTD. AND ANR

- **Citation:** [2005] Supp. 1 S.C.R. 684
- **Court:** Supreme Court of India
- **Decided:** 2005-07-18
- **Bench:** Rumapal, Arijitpasayat Andc.K. Thakker
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-h-p-and-ors-v-gujarat-ambuja-cement-ltd-and-anr-20814
- **Pages:** 46

## Headnote

Constitution of India, 1950:
Article 226-Writ petition-Alternative remedy-Availing/exhaustion
C of-Maintainability-High Court entertained· writ petition notwithstanding
the existence -Of the statutory remedy-Interference with-Held: In such
circumstances, the Supreme Court would not reconsider· the question of the
alternative remedy being efficacious or not.
D
H.P.:General Sales Tax Act, I968:
Sales Tax-"Prestigious cement unit"-Norification dated l.12.I994
granted exemption from payment of sales ·tax and certain incentives to
'prestigious cement units' registered with the Empowered Committee between
L5.1992 and 3I.3.1995-Such units were req~ired to commence commercial
E production on or after l.5.I992-However, extension of time to commence
commercial production beyond 1.5.1992 was granted to an industrial unitEntitlement to €Xemption-Held:_ Cement manufacturing units registered as
'prestigious unit' between l.5.I992 and 1.12.1994 were entitled to
exemption-Such units not required to seek re-registration as a 'prestigious
cement unit'-Once extension of time to commence commercial production
F was granted, such units entitled to the benefit of the Notification.
Sales Tax-AYs 1995-96 and 1996-97-Revisional order-Doctrine of
merger-Assessment order granted exemption from payment of sales tax fixing
certain dates of entitlement-Assessee questioned the dates by filing appeals,
which were dismissed-Revisional Authority did not take note of the said
G appellate orders-Correct'!~ss of-Held: The assessment order got merged
with the first appellate orders and, therefore, could not be revised without
noticing them-In such cases the Doctrine of merger applied.
H
Sales tax-Exemption-Notification granted exemption from· sales tax
684
STA TE OF H.P. v. GUJARAT AMBUJA CEMENT LTD.
685
and certain incentives to units registered with the Empowered Committee- A
Provisional registration certificate granted to assessee for a certain periodAssessee applied for renewal before expiry of the said period and deposited
the requisite fee-But renewal certificate was effectivefrom a date which was
about two months after the expiry of the provisional certificate-The said
renewal certificate was also issued much later-However, application for B
extension of period of validity never rejected-Entitlement to ExemptionHeld: In such cases the question of absence oj a valid provisional certificate
lost significance-Hence, assessee entitle to exemption from sales tax.
Central ·Sales Tax (Registration and Turnover) Rules, 1957:
Rule 12(7)-0bject of-Declaration Form-Form 'C'-Assessee was C
denied benefit of sales tax exemption on the plea that defective Form 'C' was.
filed-Assessee 's prayer to rectify the defects turned down-Held: Object of
R. 12(7) is to ensure that the assessee is not denied a benefit available to
it under law on a technical plea-Therefore, the provision of filling of
declaration form along with the return is directory and not mandatory-In D
a given case, the declaration form could even be filed before the Appellate
or Revisional Authority-Hence, assessee entitled to sales tax exemptionAssessing Officer directed to grant opportunity to the assessee to cure the
defects, if any, in the declaration form-Central Sales Tax Act, 1956.
Mines and Minerals (Regulation and Development) Act, 1957:
Section 9-Removal of minerals-Royalty paid-Purchase tax onLiability-Held: Royalty is an alternative to dead rent-It is nothing but a
measure of levy-Royalty is not a payment in respect of any mineral removed
or consumed-Hence, royalty does not attract levy of purchase tax.
Words & Phrases:
"Royalty" and "dead rent"-_Meaning of-In the context of Mines and
Minerals (Regulation and Development) Act, 1957.
E
F
The respondent was a public limited company incorporated under the G
Companies Act, 1956 and, inter alia, carried on the business of manufacture
and sale of cement. The Director of Industries issued a registration certificate
registering the respondent-company as

## Text

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A
STATE.OF H.P. AND ORS.
v.
GUJARAT AMBUJA CEMENT LTD. AND ANR.
JULY 18, 2005
B
[RUMAPAL,ARIJITPASAYAT ANDC.K. THAKKER,JJ.]
Constitution of India, 1950:
Article 226-Writ petition-Alternative remedy-Availing/exhaustion
C of-Maintainability-High Court entertained· writ petition notwithstanding
the existence -Of the statutory remedy-Interference with-Held: In such
circumstances, the Supreme Court would not reconsider· the question of the
alternative remedy being efficacious or not.
D
H.P.:General Sales Tax Act, I968:
Sales Tax-"Prestigious cement unit"-Norification dated l.12.I994
granted exemption from payment of sales ·tax and certain incentives to
'prestigious cement units' registered with the Empowered Committee between
L5.1992 and 3I.3.1995-Such units were req~ired to commence commercial
E production on or after l.5.I992-However, extension of time to commence
commercial production beyond 1.5.1992 was granted to an industrial unitEntitlement to €Xemption-Held:_ Cement manufacturing units registered as
'prestigious unit' between l.5.I992 and 1.12.1994 were entitled to
exemption-Such units not required to seek re-registration as a 'prestigious
cement unit'-Once extension of time to commence commercial production
F was granted, such units entitled to the benefit of the Notification.
Sales Tax-AYs 1995-96 and 1996-97-Revisional order-Doctrine of
merger-Assessment order granted exemption from payment of sales tax fixing
certain dates of entitlement-Assessee questioned the dates by filing appeals,
which were dismissed-Revisional Authority did not take note of the said
G appellate orders-Correct'!~ss of-Held: The assessment order got merged
with the first appellate orders and, therefore, could not be revised without
noticing them-In such cases the Doctrine of merger applied.
H
Sales tax-Exemption-Notification granted exemption from· sales tax
684
STA TE OF H.P. v. GUJARAT AMBUJA CEMENT LTD.
685
and certain incentives to units registered with the Empowered Committee- A
Provisional registration certificate granted to assessee for a certain periodAssessee applied for renewal before expiry of the said period and deposited
the requisite fee-But renewal certificate was effectivefrom a date which was
about two months after the expiry of the provisional certificate-The said
renewal certificate was also issued much later-However, application for B
extension of period of validity never rejected-Entitlement to ExemptionHeld: In such cases the question of absence oj a valid provisional certificate
lost significance-Hence, assessee entitle to exemption from sales tax.
Central ·Sales Tax (Registration and Turnover) Rules, 1957:
Rule 12(7)-0bject of-Declaration Form-Form 'C'-Assessee was C
denied benefit of sales tax exemption on the plea that defective Form 'C' was.
filed-Assessee 's prayer to rectify the defects turned down-Held: Object of
R. 12(7) is to ensure that the assessee is not denied a benefit available to
it under law on a technical plea-Therefore, the provision of filling of
declaration form along with the return is directory and not mandatory-In D
a given case, the declaration form could even be filed before the Appellate
or Revisional Authority-Hence, assessee entitled to sales tax exemptionAssessing Officer directed to grant opportunity to the assessee to cure the
defects, if any, in the declaration form-Central Sales Tax Act, 1956.
Mines and Minerals (Regulation and Development) Act, 1957:
Section 9-Removal of minerals-Royalty paid-Purchase tax onLiability-Held: Royalty is an alternative to dead rent-It is nothing but a
measure of levy-Royalty is not a payment in respect of any mineral removed
or consumed-Hence, royalty does not attract levy of purchase tax.
Words & Phrases:
"Royalty" and "dead rent"-_Meaning of-In the context of Mines and
Minerals (Regulation and Development) Act, 1957.
E
F
The respondent was a public limited company incorporated under the G
Companies Act, 1956 and, inter alia, carried on the business of manufacture
and sale of cement. The Director of Industries issued a registration certificate
registering the respondent-company as a 'prestigious unit' whereby certain
incentives were granted t<Ythe respondent subject to the condition that the
production should commence by January 1995. However, further extension H
686
SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.
A was granted to the respondent-company by the Department of Industries till
30.9.1995. Subsequently, by Notifications dated 27.3.1991and31.7.1992 the
concept of 'Prestigious cement industrial unit' was brought into existence
according to which an industrial unit must go into commercial production
after 1.5.1992 and registered with the Empowered Committee of the
Department of Industries. The respondent was declared as a 'prestigious
B cement industrial unit' in accordance with the said Notification.
In the light of all these, the 'Excise and Taxation Department issued a
Notification dated 31.12.1994 granting exemption from payment of sales tax
to the respondent-company under the Central Sales Tax Act, 1956 and
C Himachal Pradesh General Sales Tax Act, 1968.
The Assessing Authori-ty passed an order of assessment for the
Assessment Year 1995-96 and granted exemption from payment ofsales tax
w.e.f. 30.1.1996. The respondent-company filed an appeal before the Additional
Excise and Taxation Commissioner/Appellate Authority challenging the said
D assessment order on the ground that the exemption should have been granted
from the date of commencement of the commercial production, namely,
26.9.1995 and not from 30.1.1996, the date of issuance ofthe exemption
· Notification. Subsequently, the Sales Tax Department passed an assessment
order for the year 1996-97 granting exemption from payment of sales tax
w.e.f. 6.2.1996, which was the date on which the Notification was actually
E published instead of from 30.1.1996 with reference to which it was granted
earlier. Once again the respondent-company filed an appeal against this
assessment order also.
While the appeals were pending a show cause notice under Section 31(3)
F
of the State Act was issued to the respondent as to why the exemption granted
could not be revoked on the ground that the declaration of the respondent as
a 'prestigious cement unit' within the meaning of paragraph l(c) of the
Notification dated 31.12.1994 was not correct and, therefore the respondent
was not entitled to any exemption from sales tax either under the Central Act
or the State Act. The appeals filed by the respondent were also dismissed. A
G notice demanding payment of sales tax to the tune of Rs. 18.50 crores under
the Central Act as well as the State Act was also served on the respondentcompany.
The respondent-company filed an appeal against this demand before the
Additional Excise and Taxation Commissioner. The Revisional Authority
H cancelled and annulled the sales tax exemption certificate with retrospective ·
STATE OF H.P. v. GUJARATAMBUJA CEMENT LTD.
687
effect and also made a reference to certain defec.ts in the declaration form i.e. A
'Form C' to highlight as to how the respondent had failed to comply with the
requirements for entitlement of sales tax exemption benefits.
The High Court allowed the writ petition filed by the respondent and
quashed the orders of the Sales Tax authorities and also held that the levy of
purchase tax on the royalty paid was not legally sustainable. Hence the appeal. B
On behalf of the appellant, it was contended that the High Court ought
not to have entertained the writ petition when alternative remedy was available
under the Central Ad and the State Sales Tax Act, if the respondent-company
was aggrieved by the revisional orders; that several factual controversies were C
involved and the High Court was not justified in holding that no factual
controversy was involved; that whether the exemptions claimed were available
in factual background needed factual adjudication and, therefore, the High
Court should not have entertained the writ petition; that the respondentcompany was not a 'new industrial unit' registered with the Empowered D
Committee between 1.5.1992 and 31.3.1995 and had not commenced
CO!Jlmercial production on or after 1.5.1992; that there was no evidence before
the revisional authority that the respondent-company was registered with the
Empowered Committee on 13.1.1993 and, therefore, the High Court should
not hnve taken the same into account; that the High Court confused between
'prestigious units' and 'prestigious cement units'; that the question of E
declaring the respondent-company as a 'prestigious cement unit' did not arise
till it had started commercial production; that the Notifications clearly showed
that at different points of time either no benefit was granted to cement
industries or such industry was entitled to only deferent of payment of sales
tax and exemption; that submission of defective declaration form (Form 'C') F
clearly indicated that the respondent-company had not complied with the
various Statutes, Rules and Notifications; that even if there was a registration
with the Empowered Committee on 13.1.1993, the same was of no consequence
after the new definition of' prestigious cement industrial unit' was introduced
by the notification dated 1.12.1994; that the High Court erroneously held that
royalty paid did not attract levy of purchase tax; that there was a contrast G
between sale and purchase and the definition of purchase is wider; that
according to Section 9 of the Mines and Minerals (Regulation and
Development) Act, 1957 what was being taxed was the consideration as
minerals were being removed; and that in any event, purchase tax on royalty
had not been paid and, therefore, that also amounted to violation of the H
688
SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.
A conditions stipulated.
On behalf of the respondent-company, it was contended that the
revisional authority clearly acted without jurisdiction; that there was really
no factual dispute involved; that resort to the statutory remedies would have
been an exercise in futility as the Appellate Authority was only subordinate
B to the Revisional Authority; that this Court should not interfere since the
High Court had entertained the writ petition indicating reasons as to why the
writ petition was entertained when alternative remedy was available; and that
the respondent's prayer before the Revisional Authority for grant of an
opportunity to rectify the defects, if any, in the Form 'C' was turned down.
c
Allowing the appeal, the Court
HELD: I. Except for a period when Article 226 of the Constitution was
amended by the Constitution (42nd Amendment) Act, 1976; the power relating
to alternative remedy has been considered to be a rule of self-imposed
D limitation. It is essentially a rule of policy, convenience and discretion and
never a rule of law. Despite the existence of an alternative remedy it is within
the jurisdiction of discretion of the High Court to grant relief under Article
226 of the Constitution; at the same time, it cannot be lost sight of the fact
that though the matter relating to an alternative remedy has nothing to do
E with thejurisdiction of the case, normally the High Court should not interfere
if there is an adequate efficacious alternative remedy. [703-E, F)
K.S. Rashidv. Income Tax Investigation Committee, AIR (1954) SC 207,
Sangram Singh v. Selection Tribunal, AIR (1955) SC 425, Union of India v.
T.R. Verma, AIR (1957) SC 882, State of UP. v. Mohammad Nooh, AIR (1958)
F SC 86, Mis. K.S. Venkataraman (P) Ltd v. State of Madras, AIR (1966) SC
1089, State of MP. v. Bhailal Bhat, AIR (1964) SC 1006, N. T. Ve/uswamy
Thevar v. G. Raja Nainar, AIR (1959) SC 422, Municipal Council v. Kamal
Kumar, AIR 1965 SC 1321, Siliguri Municipality v. Amalendu Das, AIR
(1984) SC 653, S. T. Muthusami v. K. Natarajan, AIR (1988) SC 616, R.S.R. T.C.
G v. Krishna Kant, AIR (1995) SC 1715, Kera/a State Electricity Boardv. Kurien
E. Kalathi/, AIR (2000) SC 2573, A. Venkatasubbiah Naidu v. S. Che/lappan,
[2000) 7 SCC 695, L.L. Sudhakar Reddy v. State of A.P., (2001) 6 SCC 634,
Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdjha
Utpadak Sanstha v. State of Maharashtra, (2001) 8 SCC 509, Pratap Singh
v. State of Haryana, (2002) 7 SCC 484, G.k.N. Drive Shafts (India) Ltd. v.
H Income Tax Officer, (2003) 1 SCC 72, Harbans Lal Sahnia v. Indian Oil
Corporation Ltd., [2003) 2 SCC 107, G. Veerappa Pillai v. Raman & Raman
t,
STATE OF H.P. v. GUJARAT AMBUJA CEMENT LTD.
689
Ltd., AIR (1952) SC 192, Assistant Collector of Central Excise v. Dunlop A
(India) Ltd, AIR (1985) SC 330, Ramendra Kishore Biswas v. State ofTripura,
Am (1999) SC 294, Shivgonda Anna Patil v. State of Maharashtra, AIR
(1999) SC 2281, C.A. Abraham v. ITO., AIR (1961) SC 609, Titaghur Paper
Mills Co. Ltd. v. State of Orissa, AIR (1983) SC 603, H.S. Gandhi v. Mis.
Gopinaih and Sons, [1992) Supp. 2 SCC 312, Whirlpool Corporation v.
Registrar of Trade Marks, AIR (1989) SC 22, Tin Plate Co. of India Ltd v. B
-'
Stateo/Bihar, AIR(1999)SC74,SheelaDeviv.JaspalSingh, (1999) 1 SCC
=t
209, Punjab National Bank v. O.C. Krishnan, (2001) 6 SCC 669 and Ram
and Shyam Co. v. State of Hary_ana, AIR (1985) SC 1147, referred to.
2. In the instant case, the· writ petitioners had indicated the reasons as c
to why they thought that the alternative remedy would not be efficacious. Since
the High Court has elaborately dealt with the question as to why the statutory
remedy available was not efficacious, it would not be proper for this Court to
consider the question again. When the High Court had entertained a writ
petition notwithstanding the existence of an alternative remedy this Court
~1
while dealing with the matter in an appeal should not permit the question to D
be raised unless the High Court's reasoning for entertaining the writ petition
i is found to be palpably unsound and irrational. (705-C-E)
First Income Tax Officer v. Mis. Short Brothers (P) Ltd, [1966)3 SCR
84 and State of UP. v. Mis. Indian Hume Pipe Co. Ltd., (1977) 2 SCC 724,
relied on.
E
..
- 3. There are two well-recognized exceptions to the doctrine of exhaustion
of statutory remedies. First is when the proceedings are taken before the
forum under a provision of law which is ultra vires, it is open to a pa1rty
aggrieved thereby to move the High Court for quashing the pro·ceedings on
the ground that they are incompetent without a party being obliged to wait F
until those proceedings run their full course. Secondly, the doctrine has no
application when the impugned order has been made in violation of the
-•,
principles of natural justice. Further, where the proceedings itself are an
abuse of the process of law the High Court in an appropriate case can
entertain a writ petition. [705-F-H)
G
4. Wher.e under a statute there is an allegation of infringement of
'
fundamen~lrights or when on the undisputed facts the taxing authorities
are shown to have assumed jurisdiction which they do not possess, these can
be the grounds on which the writ petitions can be entertzined. But normally,
~
the High Court should not entertain writ petitions unless it is shown tha~
there is something more in a case, something going to the root of the H
690
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A jurisdiction of the officer, something which would show that it would be a case
of palpable injustice to the writ petitioner to force him to adopt the remedies
provided by the statute. {706-A-B]
B
c
L. Hirday Narain v. Income Tax Officer, AIR (1971) SC 33, relied on.
[706-C)
R. Hil/ington, London Borough Council (1974) 1 QB 720 and Hanson
v. Church Commissioner, (1978) QB 823, referred to.
5. Therefore, the plea that the High Court should not have entertained
the writ petition is without any merit. [707-B]
6. It is not disputed that the registration of the respondent-company with
the Empowered Committee on 13.1.1993 was within the knowledge of the
appellants. In fact the certificate was a part of the record before the High
Court. Therefore, this establishes that the respondent-company was registered
with the Empowered Committee within the period prescribed in the incentive
D Notification. [707··D]
7.1. In terms of the Notification dated 31.7.1992, the cement units
became eligible for exemption as provided in various incentives Notifications.
A significant change was also made by the Notification to the effect that the
concept of "Prestigious cement unit" was introduced. Subject to fulfilment
E of certain conditions a 'prestigious unit' was eligible for both sales tax
exemption and deferment. (707-G; 708-A)
.
7.2. Under Rule 24 (of 31.7.1992 Notification) it was open to the
Empowered Committee to register a unit prior to its going into the commercial
production. It was stipulated that the unit was to commence production latest
F by January, 1995. Changes were introduced by the Notification dated
1.12.1994. By this Notification, the roncept of"prestigious cement unit" was
introduced. A unit to be eligible as a 'prestigious cement unit' must be a new
industrial unit registered with the Empowered Committee between 1.5.1992
and 31.3.1995 and must go into commercial production on or after 1.5.1992.
G
[708-F-H]
7.3. After coming into force of the new definition of"prestigious cement
industrial unit", the Director of Industries extended the date for commencement
of commercial production up to 3.6.1995 and subsequently up to 30.9.1995.
(709-B]
H
8.1. There is no substance in the contention of the appellant-State that
..
-
STA TE OF H.P. v. GUJARAT AMBUJA CEMENT LTD.
691
even ifthere was a registration with the Empowered Committee on 13.1.1993, A
the same was of no consequence after the new definition of" prestigious
cement industrial unit" was introduced by the Notification dated 1.12.1994.
There was nothing in the Notification dated 1.12.1994 which required that
those units which had obtained registration between 1.5.1992 and 1.12.1994
were required once again to seek registration as a "prestigious cement unit". B
In fact the extension granted was up to 30.9.1995 and there is no dispute that
the respondent-company commenced its production on 25.9.1995. Para 27 of
the Notification dated 1.12.1994 provided that a 'prestigious cement unit' was
entitled to deferment of sales tax as well as from exemption of payment of the
electricity duty. By Notification dated 6.7.1995, incentives of sales tax
deferment/exemption were restored to cement units. [709-C-F]
C
8.2. The definition of 'prestigious cement industrial unit' as introduced
on 1.12.1994 was. not intended to provide that there has to be a registration
either as a 'prestigious unit' or as a 'prestigious cement industrial unit'. It
only required registration as a new industrial 'Unit with the Empowered
Committee. Furthermore, the preconditions for grant of the prestigious unit D
status and prestigious cement unit status were materially identical.
(710-G-H]
9.1. The Notification dated 1.12.1994 contemplates registration from
1.5.1992. To put it differently, registration with the Empowered Committee
prior to 1.12.1994 was permissible in terms of the Notification and that is E
why 13.1.1993 registration cannot be said to have lost its currency after the
promulgation of 1.12.1994 Notification. (711-A]
9.2. Further, in the Notification dated 13.1.1993 respondent-company
was clearly and specifically named as one of the units to which the exemption
from payment of sales tax for a period of 9 years was available. That being so, F
there is no question of the .appellant-State subsequently raising a question
that the respondent-company was not registered between the specified dates.
[711-D)
9.3. From a perusal of Para 1-C introduced in the Notification dated
31.12.1994 by the Notification dated 31.1.1996, it is clear that the appellant's G
plea about non~ntitlement of the respondent-company of the sales tax benefits
and exemptions is misconceived.
10.1. There are two additional factors which also made the revisional
order indefensible. Firstly, assessments were made for the assessment years
1995-96 and 1996-97 fixing the date of entitlement first to be 31.1.1996 and H
692
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A subsequently from 7.2.1996. The respondent-company had questioned the
correctness of the fixation of the dates by filing appeals which came to be
dismissed. In other words, the assessment orders merged with the first
appellate orders, so far as the date of entitlement is concerned. Therefore,
the assessment orders which had got merged with first appellate orders could
B not have been revised. [715-H; 716-A]
10.2. The provisional registration certificate under the Himachal
General Sales Tax Act, 1968 was originally valid up to 14.2.1994 and was
revalidated up to 30.6.1995. On 17.6.1995 an application was made for its
renewal up to 31.12.1995 and the requisite fee had been deposited and the
renewal was granted on 1.1.1996 and the same was made effective from
C 11.8.1995. [716-C-D]
D
10.3. The plea about absence of the validity of provisional certificate of
registration for two months actually loses significance because the application
for extension of period of validation had not been turned down at any
subsequent point of time. [716-El
11. Undisputedly, before the revisional authority a prayer was made for
grant of opportunity to rectify the defects in the declaration forms i.e. Form
'C', if any. That was turned down. Under Rule 1297 of the Central Sales Tax
(Registration and Turnover) Rules, 1957 the declar~tion form can be filed at
a subsequent point of time and not necessarily along ~ith the returns. On an
E application being made before the Assessing Officer the exemption can be
granted. The object of the Rule is to ensure that the assessee is not denied a
benefit which i~ available to it under the la~ on a technical plea. The
Assessing Officer is empowered to grant time. That means that the provisions
requiring flling of declaration forms along. with the return is a directory
F
provision and not a mandatory provision. In a given case, even the declaration
forms can be filed before the appellate authority as a~ appe.al is a continuation
of the assessment proceedings. In a given case, ,if the app.ellate authority is
satisfied that the assessee was prevented by reasonable and sufficient cause
which disenabled him to file the forms in time, it can be accepted. It can also
be accepted as additional evidence in support of the claim for deduction.
G Therefore, the question of non-compliance with the relevant statutes does not
arise. Therefore, the assessing officer shall grant opportunity to the
respondent-company to cure the defects, if any, in the Declaration Forms.
[716-G; 717-A, B,C]
Sahney Steel and Press Works Ltd v. Commercial Tax Officer, 11985) 4
H sec t 73, relied on.
STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD.
693
12.1. Though Section 9 of the Mines and Minerals (Regulation and A
Development) Act, 1957 refers to "minerals removed" it does not mean that
the royalty is paid on removal. It is point of time of payability. Royalty in the
context of the agreement is an alternate to dead rent. Section 9 speaks of
rates of royalty. It is nothing but a measure of levy. The charging of dead rent
and royalty is under different situations. It is shifting of the measure. Both B
"dead rent" and "royalty" are returns to the lessor. The stand of the appellant
that under Section 9 of the Minerals Act royalty is a payment in respect of
any mineral removed or consumed or that royalty is a money consideration
for transfer of property is clearly untenable. The decision in D.K. Trivedi's
case is a complete answer to the appellant's plea that the High Court
erroneously held that royalty paid did not attract levy of purchase tax.
[721-H; 722-B; 725-C]
D.K. Trivedi & Sons v. State of Gujarat, (1986) Supp. SCC 20, State of
Orissa v. Titaghur Paper Mills Co. Ltd., [1985) Supp. SCC 280, Inderjeet Singh
Sia! v. Karam Chand Thapar, [1995) 6 SCC 166 and State of West Bengal v.
c
Kesoram Industries Ltd., JT (2004) 1 SC 375, relied on.
D
State of M.P. v. Orient Paper Mills Ltd., [1977] 2 SCC 77 and CoochBehar Contractors' Association v. State of West Bengal, (1996) 10 SC:C 380,
overruled.
Raja Bahadur Kamakshya Narain Singh of Ramgarh v. CIT, (1943) 11
ITR 513 (PC), Chotabhai Jethabai Patel v. State of M.P., [1953) SCR 476 E
and State of M.P. v. Yakinuddin, AIR (1962) SC 1916, cited.
HRS Murthy v. Collector ofChittor, AIR (1965) SC 177, referred to.
Wharton's Law Lexicon, 14th Edn., p. 300, Black's Law Dictionary, 5th
Edn., p. 359, Jowitt's Dictionary of English Law, 2nd Edn., p. 555 and F
Halsbury's Laws of England, 4th Edn., Vo. 31, paras 224, 235, 236, 238,
referred to.
12.2. A mining lease is an interest in immovable property. The
extraction and removal of minerals is essentially an extension of the enjoyment
of immovable property. The right conferred by the lease deed to extract and G
remove the minerals is a profit a prendre. [722-B]
State of Orissa v. Titaghur Paper Mills Co. Ltd., (1985) Supp. SCC 280,
relied on.
CIVIL APPELLATE JURJSDICTION : Civil Appeal No. 2641 of 2000.
H
694
SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.
A
From the Judgment and Order dated 17.8.99 of the Himachal Pradesh
High Court at Shimla in C.W.P. No. 52 of 1999.
Anoop G. Chaudhary, J.S. Attri, Additional Advocate General L.R. Seth,
Atul Sharma and Ms. June Chaudhary with him for the Appellants.
B
Harish N. Salve, Dr. A.M. Singhvi, Manmohan, R.F. Nariman, Manmohan
c
D
Khanna, Ms. Bina Gupta, Manish Jha, Mrs. Divya Roy, U.A. Rana, Ms.
Sumathi K., Biju Mattam, C.P. Pandey, B.K. Satija and Varinder Kumar Shanna,
with them for the Respondents.
The Judgment of the Court was delivered by
ARIJIT PASAYAT, J. These appeals are inter-linked and, therefore, are
taken up together for disposal. Civil Appeal Nos. 2641 and 2642 of 2000 relate
to respondent- Gujarat Ambuja Cement Ltd. (in short 'Gujarat Ambuja') while
Civil Appeal Nos.3744-46 of 2000 relate to respondent-Associated Cement
Ltd. (in short 'ACC'). The common question so far as the appeals are concerned.
linking the respondents in the appeals relates to one issue i.e. liability to pay
· purchase tax on the royalty paid by the respondents. As other issues are
involved in Gujarat Ambuja 's cases, the factual scenario in Civil Appeal
Nos.2641-2642 of 2000 needs to be noted in some detail.
E
Challenge in these appeals is to the judgments rendered by a Division
Bench of the Himachal Pradesh High Court. Writ Petitions were filed by the
present respondents questioning the action taken by the Sales Tax Authorities
and the revisional · orders passed setting aside the orders of assessment
framed for the assessment years 1995-96 and 1996-97 under the Central Sales
Tax Act, 1956 (in short the 'Central Act') and the Himachal Pradesh General
F Sales Tax Act, 1968 (in short the 'Act').
So far as the Gujarat Ambuja is concerned, the factual and legal
background was highlighted in the . writ petitions before the High Court as
follows:
G
It is a public limited Company incorporated under the Companies Act,
1956 inter a/ia carrying on the business of manufacture and sale of cement
under the name and style of "Ambuja Cement" in the State of Himachal
Pradesh and that it ranks amongst one of the best managed cement Companies
in India. It had been conferred various prestigious awards for its performance, ·
H pollution control and management including the award in the year 1991 by the
'>
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STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 695
Prime Minister of India, namely, 'National Award for Public Recognition of A
Outstanding Activity for prevention of control of pollution'. It submitted an
application in the year I 989 for setting up a cement plant in Himachal Pradesh
and it was approved by the State Level Industrial Projects and Review
Authority (hereinafter referred to as '!PARA') in their letter dated 19.2.1990.
It invested more than Rs.500 crores in setting up the cement plant at Darlaghat,
Solan District of Himachal Pradesh and it is the largest investment made by B
any private entrepreneur so far as the State is concerned. The said cement
project also had the approval of the World Bank/International Finance
Corporation, Washington, which also financed the project by way of term
loan in addition to the project being monitored by the Industrial Development
Bank of India too. All these brought substantial economic development in the C
State.
On 27.3.1991, the Industrial Development Department of Himachal
Pradesh Government issued an incentive scheme by their notification notifying
the grant of certain incentives for new as w~ll as already established units
in the State in respect of deferment of payment of Sales Tax, Electricity Duty D
etc. Writ-petitioner obtained provisional Sales Tax registration from the
Himachal Pradesh General Sales Tax Department on 14.2.1992, which was
extended from time to time upto 30.6.1995 before ultimately being granted with
permanent registration w.e.f. 11.8.1995, the date on which the petitioner started
its trial production. On 3 I st July, 1992 the Industries Department issued E
another notification introducing the concept of "Prestigious and Pioneer
Industries" by amending suitably the earlier notification dated 27 .3 .I 991,
according to which "Prestigious unit" meant any new industrial unit, which
goes into commercial production in the State on or after 1.5.1992 and is
registered with the Empowered Committee appointed under Rule 24 between
1.5.1992 and 31.3. I 993, which has a fixed capital investment of at least Rs.50 F
crores and employed at least 200 persons on regular basis. The Empowered
Committee considered the issue of grant of registration certificate as Prestigious
unit in its meeting held on 25.11.1992 and decided to grant the same to Gujarat
Ambuja treating it as a 'Prestigious Unit'. Consequently, the Director of
Industries, Himachal Pradesh issued on 13 .1.1993 the required registration
certificate registering the petitioner Unit as a 'Prestigious Unit'. As the G
production of the unit could not be commenced by January 1995, which was
one of the stipulated conditions, taking into account the substantial progress
made by the Company, the Industries Department by its letter dated 28.1.1995
approved the grant of further extension initially till 30.6.1995 and thereafter
upto 30.9.1995 by their letters dated 28.1.1995 and 30.6.1995. On 1.12.1994, the H
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SUPREME COURT REPORTS (2005] SUPP. I S.C.R.
A Industries Department made further amendments to the notification dated
27.3.1991 and 31.7:1992, and brought into existence the concept of 'Prestigious
Cement Unit', according to which the unit niust go into commercial production
after 1.5.1992 and registered with the Empowered Committee under Rule 24
between l.5.1992 and 31.3.1995. By the said am~ndment, it was also notified
that such unit should have a fixed capital of Rs.50 crores and employ at least
B 200 persons on regular basis. It is to be noted that by Notifications dated
27.3.1991 and 31.7.1992 Rules were notified. They were called Revised Rules
regarding grant of Incentives to Industrial Units in Himachal Pradesh, 1991
(in short '1991 Rules') and Revised (Amendment) Rules regarding grant of
Incentives to Industrial Units in Himachal Pradesh, 1992 (in short '1992
C Rules'). The Revised Rules were further amended by notifications_ dated
1.12.1994 and 6.7.1995 and these amended Rules were called Revised
(Amendment II) Rules regarding grant of Incentives to Industrial Units in
Himachal Pradesh, 1994 (in short •1994 Rules') and Revised (Amendment-III)
Rules regarding grant of Incentives to Industrial Units in Himachal Pradesh,
1995 (in short '1995 Rules'). The 1991 Rules, as the notification of27.3.1991
D shows, were made after supersession of Rules-I dated 4.10.1976, Rules 9-4/
73-SI-IV dated 14.5.1980, No.I 0-27171-SI dated 28.8.1984 and No.9-4n3-V dated
5.1.1985.
In the light of all these, the Excise and Taxation Department issued a
E notification dated 31.12.1994 to grant exemption from payment of Sales Tax to
pioneer industries, bifurcated in different categories with effect from the date
of their commercial production against the periods as enumerated in the
notification, which was further amended on 27.3.1995 introducing para l(a)
and l(b). On 6.7.1995, the Department of Industries again amended Rule 27(1)
regarding the grant of incentive to Prestigious Cement Units notifying that
F sales tax exemption/deferment under both Central Tax and Himachal Pradesh
General Sales Tax shall be available for a period of 12, 9 and 7 years in respect
of category A, Band C blocks, respectively, to new Prestigious Cement Units
excluding from its purview the only existing cement unit, as per which the
eligible cement units were those, which had come into commercial production
G within the State ofHimachal Pradesh on or after 1.5.1992.
On l l.8.1995, Gujarat Ambuja started trial production and on 26.9.1995
regular commercial production was started. This entitled the Company to
exemption from Sales Tax in terms of the notifications referred to supra. A
formal certificate was also issued by the Department of Industries on 24.1.1996
H specifying the commencement of the commercial production on 26.9.1995
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STATE OF H.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT, J.] 697
confirming at the same time about the investment of about Rupees 391 crores A
and employment of 353 persons on regular basis. Sales tax due was paid to
the Department for the intervening period from 11.8.1995 to 25.9.1995. The
Excise and Taxation Department issued an amendment on 30.1.1996 to the
earlier notification dated 31.12.1994 and introduced para l(C) which was
published in the Official Gazette on 6.2.1996, whereunder the State Government
had specifically given exemption to Gujarat Ambuja from payment of sales tax B
subject to the fulfilment of certain conditions enumerated in the notification
being a company classified and placed in the category of industrial Block 'B'
in terms of which it was shown to be eligible to avail of the concession of
exemption for 108 months (9 years).
Since the unit was already registered as a 'Prestigious unit' on 13.1.1993
in accordance with the notification issued by the State Government on 31. 7 .1992
by the Empowered c;ommittee in its meeting held on 25.11.1992 and inasmuch
as the requirements of the 'Prestigious Unit' and the 'Prestigious Cement
Unit' were absolutely one and the same, unit was mentioned and referred to
c
in the notification dated 30.1.1996 and a formal declaration was also made by D•
the Industries Department on 2.2.1996 declaring the petitioner to be a
'Prestigious Cement Industrial Unit' keeping in view the satisfaction of all the
requisite eligibility criteria. The unit fulfilled all the conditions as required
under Rule 2(rrr), as mentioned in the notification dated 6.7.1995 as well as
30.1.1996 issued by the Industries Department as also the Excise and Taxation E
Department of the State Government having regard to the fact that the unit
has come into commercial production after 1.3. l J92, that it was registered with
the Empowered Committee as a 'Prestigious Unit' on 13.1.1993, that it has
already made investment of more than Rupees 50 crores and had also employed
more than 200 persons on regular basis. The Director of Industries has issued
a certificate in form STH-III on 15.2.1996 certifying that the unit had been F
registered as a 'Prestigious Cement Industrial Unit' with the Empowered
Committee, pursuant to which an application was made to the Excise and
Taxation Department for the grant of exemption certificate in STH-II before the
assessing authority and thereupon on 11.6.1996, the prescribed authority after
due enquiry issued a certificate of exemption in form STH-II for the period C
from 30.1.1996 to 31.3 .1996 and the same was extended further from time to
time upto 31.3 .1998.
On 14.3.1997, the Assessing Authority passed an order of assessment
for the assessment year 1995-96 and granted exemption w .e.f. 30.1.1996.
Aggrieved by a portion of the order, Gujarat Ambuja filed an appeal before I
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SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
• A the Additional Excise and Ta~ation Commissioner/Appellate Authority on the
ground that the exemption should have been allowed from the date of .
commencement of the commercial production, namely, 26.9.1995 and not from
30.1.1996, the date of issuance of exemption notification. On 27.5.1997, the
Sales Tax Department passed an order of assessment for the year 1995-96
granting exemption from payment of the sales tax w.e.f. 6.2.1996, which is the
B date on which the notification was actually published instead of from 30.1.1996
with reference to which it was granted earlier. Once again, in respect of this
order also, an appeal was filed before the Additional Excise and Taxation
Commissioner/Appellate Authority challenging the same on· the ground that
the exemption should have been granted from the date of commencement of
C the commercial production, namely, 26.9.1995 and not as is sought to be given
by the authorities concerned. For the assessment year 1996-97, the Assessing
Authority passed an order dated 24. l 0.1997 after considering all the relevant
material on record granting exemption from the payment of sales tax.
While matter stood thus, according to the respondents on 24.3.1998
D when two political parties formed a Coalition Government in the State of
Himachal Pradesh, the Excise and Taxation Minister, who belonged to a
political party and the leaders of that party started issuing number of
statements against the respondent-company by prejudging the issue and
questioning its entitlement for exemption under the Incentive Scheme
E announced. These statements in the shape of press cuttings were annexed
to the writ petition. It was contended that on account of such extraneous
reasons and influence and with ulterior motive, action was initiated by the
Commissioner of Sales Tax without any justification in law and in an arbitrary
manner proposing to revise the orders passed by the Assessing officer in
exercise of the powers conferred under Section 3 l ( 1) of the Act and for that
F purpose on 29 .4.1998 issued a show cause notice calling upon the respondents
to show cause as to why the exemption granted cannot be revoked on the
ground that the declaration of the petitioner as a "Prestigious Cement Unit"
within the meaning of para 1 (C) of the notification was not correct for the
reasons set out in the said notice. It was also proposed to revoke STE-II. On
G 4.5.1998, the revisional authority issued three other show cause notices being
Revision Nos. 2, 3 and 4, both under the Central Act for the year 1995-96 and
Act for the year 1996-97 and the Central Act for the year 1996-97 questioning
the legality and propriety of the earlier assessment orders granting exemption
on the ground that the petitioner was not a Prestigious Cement Unit within
the meaning of para l(C) of the notification dated 31.12.1994 and, therefore,
H was not entitled to any exemption from Sales Tax either under the State Act
.•
••
STATEOFH.P. v. GUJARAT AMBUJACEMENTLTD. [PASAYAT,J.] 699
. or the Central Act. It was also indicated in the show causeAl'lotices about the A
non-payment of the tax payable under Section 5A of the Act. As a sequel
of the said notices issued by the revisional authority, the assessing authority
also issued show cause notice proposing to withdraw the exemption accorded
~.
~
.
earlier in form STE-II for the assessment year 1997-98 on similar grounds as
were assigned by the revisional authority in its notices; calliqg upon the B
· respondent-company to appear before the said authority on 18.6.1998. So far
.