# STATE OF MADHYA PRADESH AND ANR v. G.S. DALL AND FLOUR MIJ.,LS

- **Citation:** [1990] Supp. 1 S.C.R. 590
- **Court:** Supreme Court of India
- **Decided:** 1990-09-19
- **Bench:** Sabyasachi Mukharji, S. Ranganathan, K.N. Saikia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-madhya-pradesh-and-anr-v-g-s-dall-and-flour-mij-ls-10956
- **Pages:** 35

## Headnote

M.P. Sales Tax Act, 1958/M.P. (Deferment of payment of Tax)
Rules, 1983. Section 12/Rule 13-Sales Tax-Eligibility for exemption
-Effect of Notification dated July J, 1987.
·
.,...
c
In exercise of the powers conferred by section 12 of the Madhya
Pradesh General Sales Tax Act, 1958 the State Government issued a
notification dated 23.10.1981 exempting the specified class of dealers
who had set up industry in any of the specified districts of Madhya
Pradesh and had commenced production after !st April, 1981 from
D
payment of tax under the said Act for a specified period subject to
certain restrictions and conditions. However, when the assessees
approached the Director of Industries for the certificate of exemption, it
was denied to them on the ground that the industries run by them were
....
"traditional industries" which were not eligible for exemption.
E
The assessees went to the court and urged that the concept of -
"traditional industries" was one unspecified in the notification; and
that the authorities had 110 jurisdiction to travel outside the terms of the
notification and import extraneous considerations to deny the assessees
an exemption they were entitled to under the notification.
F
The State on the other hand, relied on the provisions of the M.P.
~ •
(Deferment ~f payment of Tax) Rules, 1983, notified on 1.9.83 (in
'
particular, rule 13 thereof) and on certain instructions that had been
issued by the Government on 12.1.1983 pertaining to the "grant of
certificate of eligibility to new industrial units claiming exemption from
or deferment of payment of sales tax".
G
The assessee's claim for exemption from sales tax was accepted by
the Division Bench of the High Court in the case of G.S. Dhall & Flour
Mills and, following it, in the case of Mohd. Ismail. The Division Bench
took the view that these rules and instructions had no relevance to the
claim for exemption put forward under the notification of 23.10.1981
H
and that, in any event, the executive instructions could not override the
.. '
provisions of the statutory notification.
590
stATE OF M:P .•. o.s. oALL
591
Subseqil~ni th tile decision of the Division Bench, the Staie
Goverrtriierit issiieci a riotificaiioii oit 3. 7 .1987, intended obviously to
overcome the effect of the said decision.
StibseqiJeriily, however, a Full Bench of the High Court, in the
case ot Jagadamba industries disapproved the view taken by the DiviA
sioh Bench in G.S. bhait case. Tlie Full Bench attached iinpottance to
B
the ruies and iiisi~tictibi\s referreil to aiiove and relied considerably on
his history of the saies-iax ievy ih the Staie as turilishlng ptopet and
necessary background iii Wllich ilie ierins of the notification ot
. ..,
23. Hl.i98i had io be read arid iiiierprelM:
The Full Bench, atier codsideririg the scheme and irlsfructions of
the (;ovenirilerii, cariie to the conciusioriihat the scope of the exempiioli
notification of 1981 was noi intended tO be wider than that of the concessions granted earlier, arid that the 198i notification was intended to
brirtg about oilly a change iii the mode of relief to the same categories ot
industries as Wete covered iiy the earlier schemes.
The contention that "lns!tuctlons'; could noi override llie effect
of the statutory notiflcaticln was repelled by the Fuil Bench on the
ground that the validity and effectivehess of the ihStructiolis could be
supported by retetellce to Article 162 of the Constitution as filling up a
Jack of guidelines in the notitlcaticlh.
The Full Bench considered the 1983 instructions to be conclusive
on two grounds on the doctrine of contempotanea expositio and on the
principle that executive instructions could always be issued to supple·
ment statutory instrumf!llts so as to fill up areas on which the latter
were silent.
The State, aggrieved by the judgment of the Division Bench in the
two cases, and the assessee by the judgment of the Full Bench in the
other case, have filed the appeals and Special Leave Petitions

## Text

_Characters 0–39,606 of 81,929. This is a partial read: ask again with offset=39606 for what follows._

~
.•
A
STATE OF MADHYA PRADESH AND ANR.
V.
G.S. DALL AND FLOUR MIJ.,LS
SEPTEMBER 19, 1990
B
[SABYASACHI MUKHARJI, CJ., S. RANGANATHAN AND
K.N. SAIKIA, JJ.]
M.P. Sales Tax Act, 1958/M.P. (Deferment of payment of Tax)
Rules, 1983. Section 12/Rule 13-Sales Tax-Eligibility for exemption
-Effect of Notification dated July J, 1987.
·
.,...
c
In exercise of the powers conferred by section 12 of the Madhya
Pradesh General Sales Tax Act, 1958 the State Government issued a
notification dated 23.10.1981 exempting the specified class of dealers
who had set up industry in any of the specified districts of Madhya
Pradesh and had commenced production after !st April, 1981 from
D
payment of tax under the said Act for a specified period subject to
certain restrictions and conditions. However, when the assessees
approached the Director of Industries for the certificate of exemption, it
was denied to them on the ground that the industries run by them were
....
"traditional industries" which were not eligible for exemption.
E
The assessees went to the court and urged that the concept of -
"traditional industries" was one unspecified in the notification; and
that the authorities had 110 jurisdiction to travel outside the terms of the
notification and import extraneous considerations to deny the assessees
an exemption they were entitled to under the notification.
F
The State on the other hand, relied on the provisions of the M.P.
~ •
(Deferment ~f payment of Tax) Rules, 1983, notified on 1.9.83 (in
'
particular, rule 13 thereof) and on certain instructions that had been
issued by the Government on 12.1.1983 pertaining to the "grant of
certificate of eligibility to new industrial units claiming exemption from
or deferment of payment of sales tax".
G
The assessee's claim for exemption from sales tax was accepted by
the Division Bench of the High Court in the case of G.S. Dhall & Flour
Mills and, following it, in the case of Mohd. Ismail. The Division Bench
took the view that these rules and instructions had no relevance to the
claim for exemption put forward under the notification of 23.10.1981
H
and that, in any event, the executive instructions could not override the
.. '
provisions of the statutory notification.
590
stATE OF M:P .•. o.s. oALL
591
Subseqil~ni th tile decision of the Division Bench, the Staie
Goverrtriierit issiieci a riotificaiioii oit 3. 7 .1987, intended obviously to
overcome the effect of the said decision.
StibseqiJeriily, however, a Full Bench of the High Court, in the
case ot Jagadamba industries disapproved the view taken by the DiviA
sioh Bench in G.S. bhait case. Tlie Full Bench attached iinpottance to
B
the ruies and iiisi~tictibi\s referreil to aiiove and relied considerably on
his history of the saies-iax ievy ih the Staie as turilishlng ptopet and
necessary background iii Wllich ilie ierins of the notification ot
. ..,
23. Hl.i98i had io be read arid iiiierprelM:
The Full Bench, atier codsideririg the scheme and irlsfructions of
the (;ovenirilerii, cariie to the conciusioriihat the scope of the exempiioli
notification of 1981 was noi intended tO be wider than that of the concessions granted earlier, arid that the 198i notification was intended to
brirtg about oilly a change iii the mode of relief to the same categories ot
industries as Wete covered iiy the earlier schemes.
The contention that "lns!tuctlons'; could noi override llie effect
of the statutory notiflcaticln was repelled by the Fuil Bench on the
ground that the validity and effectivehess of the ihStructiolis could be
supported by retetellce to Article 162 of the Constitution as filling up a
Jack of guidelines in the notitlcaticlh.
The Full Bench considered the 1983 instructions to be conclusive
on two grounds on the doctrine of contempotanea expositio and on the
principle that executive instructions could always be issued to supple·
ment statutory instrumf!llts so as to fill up areas on which the latter
were silent.
The State, aggrieved by the judgment of the Division Bench in the
two cases, and the assessee by the judgment of the Full Bench in the
other case, have filed the appeals and Special Leave Petitions.
t
D
E
F
Before this Court the parties reiterated their submissions in support of either of the two judgnients. The main submission on behalf of G
the State was that, since the 1981 notification did not set out the CQnditions on which, and the procedure in accordance with which the Director of Industries was to issue the eligibility certificate, the earlier
scheme of subsidy /loan and its procedure should be read into the notification for this purpose. This contention was contested by the assessees
inter alia on the ground that the earlier scheme and the exemption now
H
592
SUPREME COURT REPORTS
[ 1990] Supp. 1 S.C.R.
.A
pfoJiosed were totally different in their object and scope.
Dismissing the appeals of the State, and allowing the appeals pre·
ferred by the assessees, this Court while observing that the Division
Bench laid down the correct law and not the Full Bench,
El
HELD: fl) The 1981 notification does not expressly, or even
c
D
by necessary implication, exclude "traditional" industries from its
scope.
(2) Prima facie. the Director of Industries cannot refuse the
exemption on a consideration not specified in the notification. All the
conditions for exemption have to be, and are, set out in the notification
itself and all that the Director of Industries has to do is to satisfy himself
that those conditions are fulfilled; he cannot travel beyond the terms of
the notification.
(3) Even granting that the 1981 policy was to replace the earlier
subsidy/loan by an exemption, it does not necessarily follow that the
units intended to be covered by the new scheme were only those that
were covc_red by the earlier scheme and that nu wider exemption was
contemplated.
(4) No factual foundation has been laid to establish the hypothesis
E
that the exemption conferred in !981 was to be a mere extension or
substitution of the benefits conferred earlier.
F
G
(5) The notification does not authorise the Director of Industries
to say that, though the applicant fulfils the terms of the notification, he
will not grant the eligibility certificate because,-under the previously
prevalent schemes, he could not issue an eligibility certificate to "traditional indust.ries". For granting a certificate that the applicant is eligible for exemption under the notification, the director has to look to the
t:nnditions set out in the notification and nowhere else.
(6) Changing definition of eligibility for exemption also shows
that there was no common or identical group of beneficiaries intended
under the various in.structions or notifications and that each set of
instructions or notification issued from time to time defined only the
categories exempted from its purview and nothing else. The exemption
iist under one was not meant to be carried over into another.
1-1
Hansraj Gordhan Das v. H.H. Dave, [1969) 2 SCR 253. referred
Ul.
,·
•:
-~
STAIB OF M.P. v. G.S. DALL
593
(7) The 1983 document is not a statutory instrument~neither a A
notification nor a rule framed under the statute.
(8) It is true that the principle of contemporanea exposiiio is
invoked where a statute is ambiguous but is shown to have been cleariy
and consistently understood and explained by the administrators of the
law in a particular manner. But, to apply the doctrine to widen the
B
ambit of the statutory language would, however, virtually mean that
the State can determine the interpretation of a statute by its ipsi dixit.
That, certainly, is not; and cannot be the scope of the doctrine. The
-,
doctrine can be applied to limit the State to its own narrower interpretation to favour of the subject but not to clriim its interpretation in its
own favour as ~onclusive.
C
Verghese v. i. T.O., [1982) l SCR 629 and Doypack Systems P.
Ltd. v. Union of India, [1988] 2 SCC 299, referred to.
(9) Executive instructions earl supplement a statute or cover areas
to which the statute does not extend, But they cannot run contrary to
D
statutory provisions or whittle down their effect.
(10) There is nothing in the language of the notification to suggest
that anything further is needed to enable the Director of Industries io
grant the exemption. Without the guidelines, the requirement for an
exemption certificate would not become an "empty formality".
E
(11) If the statutory hotit'ication is construed as permitting the
State by rules or executive ihslructioiis lo prescribe otlier conditions for
exemption, whether new or iiased on past practice, it ts liable to be
/
struck down on the ground of impermissible deiegatiori Qf legisiative
power to the executive. This, certainly, they camioi di>.
·
F
(12) The 3/7 /87 notification cannot be treated as one merely
clarifying an ambiguity in the earlier one and hence capable of being
retrospectively; it enacts the resdssi<in of the earlier exemption anci,
hence, can operate only.prospectively. It cannot take away the exeinjltion conforreed by the earlier noiification.
d
CIVIL APPELLATB JURISDICTION: Civil Appeal No. 2211
(NT) of 1988 etc. etc.
"
From the Judgment arid Order dated 7 .10.1986 of the Matlttya
Ptadesli High Court in M.P. No. i86i df i983.
H
A
B
c
594
SUPREME COURT REPORTS
(1990] Supp. 1 S.C.R.
Prithvi Raj, R.B. Mishra, Uma Nath Singh, S.K. Gambhir,
Vivek Gambhir, Satish K. Agnihotri, Ashok Singh and Mrs. V.D.
Khanna for the Appellants.
Harish N. Salve, Ms. Lira Goswami and D .N. Misra for the
Respondent.
The Judgment of the Court was delivered by
RANGANATHAN, J. The Civil Appeal and S.L.P. 12054/87 are
by the Siate of Madhya Pradesh (M.P.). The respondents in these two
matters and the petitioners in the other five Special Leave Petitions
are certain concerns in M.P. assessable to sales tax (hereinafter
compendiously referred to as -'the assessees'). All these matters can be
conveniently disposed of by a.common judgment as they raise a common issue.
The assessees' claim for exemption from sales tax for certain
l) periods in question was accep,ted by the High Court in the case of G.S.
Dhall & Flour Mills and, following it, in the case of Mohd. Ismail (a
case where the exemption so1ight for was originally-gtanted-butsubseo._
quently revoked). However, subsequently, a Full Bench of the High
Court, in the case of Jagadamba Industries, disapproved the view
taken by the Division Bench in the G.S. Dhall & Flour Mills case and,
<-
E
following~he Full Bench, the writ petitions filed by certain other assessees were dismissed by the High Court. The State is aggrieved by the
judgment in the first two cases and the assessees by the High Court's
decision in the other cases. Hence these appeals and special leave
petitions.
f
Before dealing with the appeals on merits, an important circumstance needs to be referred to, which is this: The judgment of the
Full Bench in the case of Jagadamba Industries was itself the subject
matter of Special Leave Petitions in this Court but those petitions
(S.I'...P. Nos. 15688-90/87) were dismissed, at the stage of admission,
on 9.2.1988, with the observations: "We are in agreement with the
G
views expressed by the High Court. The Special Leave Petitions are
.dismissed". In view of this, the State submits that C.A. 2211/87 should
be allowed and that the assessees' S.L.Ps. should be dismissed in
limine. On the other hand, counsel for the assessees seek to distinguish
the Jagadamba case by contending that this Court had refused leave
against the Full Bench judgment on account of certain special facts
"'. _
H
which were considered sufficient to disentitle the assessees in those
STATE OF M.P. v. G.S. DALL [RANGANATHAN. J.)'
595
cases from claiming the exemption. They contend that, in view of this
and the fact that the G.S. Dhall & Flour Mills case is in appeal before'
us, we may grant leave in the S.L.Ps. and dispose of all the appeals on
merits. We accept this plea and grant leave in the S.L.Ps. condoning a
delay in the filing of S.L.P. 12054/87. We shall, however, touch upon
the above aspect of the matter in the course of our judgment.
The issue raised is, at first blush, a simple one. S. 12 of the M.P:
Sales Tax Act (hereinafter referred to as 'the Act') enables the State
Government to grant exemptiori from the levy of sales tax in certain
·-,
circumstances. It says:
"S. 12. Saving: (1) The State Government may, by notification, and subject to such restrictions and conditions as
may be specified therein, exempt, wheth.er prospectiv.ely or
·retrospectively, in whole or in part-
(i) any class of dealers or any goods or class of goods from
the payment of tax under this Act for such period as may be
specified in the notification;
(ii) any dealer or class of dealers from any provision of the
Act for such period as may be specified in the notification.
A
B
c
D
(2) Any notification issued under this section 'mdy be reE
scinded before the expiry of the period for which it was to
have remained in force and on such rescission such notification shall cease to be in force: A notification rescinding an
earlier notification shall have prospective effect."
In exercise of this power, the State Government issued the following
F
notification on 23/26.10.1981 which it is necessary to extract in full
here along with its Annexure. It reads:
G
'
I
"In exercise of the powers conferred by section 12 of the Madhya·
Pradesh General Sales Tax Act, 1958 (No. 2 of 1959) the State
Government hereby exempts the class of dealers specified in column
(1) of the Schedule below who have set up industry in ahy ·of the
districts of Madhya Pradesh specified in the annexure to this notification and have commenced production after !st April, 1981, from payment of tax under the said Act for the period specified in column (2).
subject to the restrictions and conditions specified in column (3) of the·
said schedule:
H''
596
SUP!tEME COUR't ltEl'ORts
I t<J90l sti!'lll. 1 s.c.~.
1-
•
' A Class of dea~rs
Period
l
Resttktlons and conditions
subject to which exemp1ion
has been gtanted
3
B t dealers who--
1'wcr ye au
the dealer spe~ified In ooluml'l
( 11} hold. a certificate
of te11lstratlon under
the M.f'. General
Safe& fal. A~, 1'158:
ftottJ the
( 1) !>hall continue to furnish
date of
the prescribed return~ undet
eo111rrrencemenHht MJ•. General Sales fax
of ptoduction Aa, 19$8 and shall ptoooo:
{IY) are registered as
C Small Kale ind11strial
units with the tndustries
Department of Govt.
of M.P,, and
D (c) have set up industty
In' any of the di~I·
ric!~ specified In part t
of the t\nnexure
before tlle assessing authority
at the time of his assessment
a certificate issued by tire
Oirectc!t of fndusiries, Madhya
Pradesh or any offker autlio·
rised by l!im lot the purpose,
certifying that welt deafer is
eligible to claim: ilie eil:emptlot!
and that he has not opted for
;
the scheme of deferring the
payment of tax under the tule&
ftamed for this 15uqrose,
e 2. Dealet wlto .••
(a)' lwld"rtificate
(a} 3 years in ·d0>
of tegl!tration under the case of an
tire M,P, General Sale&industry lm:liled
Tu Act, 1958 (No. 2 ill a disttict
ot 1959);
S!'"ified in 'A'
p
of pattll of lhe
Ar111exure,
a
H
(b) arereglsteteda5 .(b')4yean,in ·do·
Small ale lnd11srrial the .:ase of an
unit§ with the Indusindustry ~ated
triet Department of
in categoty ·a·
the Govt, ofM.P.or of Patt ff of the
are regillfered with the the Annexure;
Direc10t General of
and
Technical Veveiapment a; an industrial
uni! ot ate registered
,.. -
-
-
)
S'l'A'lt OF M.i'. '" G.S. DALL l'RANGANA'fHAN, j,J . ·
S'l'I
as lndusinal units by
any authOtity duly em•
powered to do so by
the State Govt. ot Cett·
traf GoVt. or Mid a'
Hceilce undet the In•
dusties (Oevelopment
& Regulation) Act
1951 (No. 65of 1951);
and
(c)_Mvesetupindus. (c) Syeau;in ~
tryTil any Of the
the case of an
dlstrlcls specified in
Industry located
part 11 of the
ill a district
Aililexure
speeified in ctt~
· j, Dealers who•"
goty 'C' of part
11 of ihe Annex•
ute; ftOlll the
dateof<Xim'll!efi" ·
cemertt of ptoductkitt.
'
~- .
(a) ·hold certificate of (a) 3 years iii
the dealer spmfled 111 collllilil
tegistratlo11 unde'tthe tfie case ofa11 · (1) shall produce before the
M J1• General Sales
Industry located asse&Slttg authOrlfy at the time
Tax 1958 (No. 2 of
ln any of tilt
of his assesslllelit a cettit'it111!!
1959);
.
telisils ofa
·issuedbytheDiteetiitot'.
district specified lildustfie1, Madhyrt Pradesh
in f5litt I of the· or any officer authorised by
· Annexute;
liim fot the purpose of i:ettii'y•
,il\g that the dealer iuligible'
(il') areregistet;idas (b) 5yearslfi
todiiimsw:hexC'l)!JjtkmUlHftt
fodustiial units with
the case ofan
the sc:heme of the lnd\l!ttles.
the Oitectot General ·industry IOCllied Depatiillentbeiftg a tint .dealer
A
B
of technical Develop• iii any oftl\e
to have commem:ed ~
ment'.ot by any autbo· · tehsils of a
iii tire industry stt up 15y bilil
G
rityduly empowered diffiict specified 111 the tehsilsretetted to ill .
fo do so by Staie or
in Category·· A' · 6'illllflil (2J liild thatmd! cfealer
Ce nit al Govemme'ilt of Part Il oiiite Ila& not lipted for tile ~
or hold licence under Antteitute}
of detming tiil! piiyment at w
the Industrle~ (Deve•
· mr~f Ifie. fiile!I ftlllt!e'd for thlJ
loQm.ent and Regula·
?Utf>l!SI!•
.. (
ff
598
SUPREME COURT REPORTS
A
tion) Act, 1951 (No. 65
of 1951) have fixed a
capital investment
between Rs. 1 crore
and Rs. 10 crores and;
B
c
D
E
( c) are the first to
set up the industry
in any tehsil of the
district of Madhya
Pradesh specified in
the Annexure.
(c) 7 years in
the case of an
industry located
in any of the
tehsils of a district specified in
category 'B' of
Part II of the
Annexure;
(d) 3 years ih
the case of an
industry located
in any of the
tehslls o a district specified in
category 'C' of
Part II of the
Annexure;
,
[1990] Supp. 1 S.C.R.
from the date of commencement
of production.
F
ANNEXURE
Part I
1. Indore 2. Ujjain 3. Bhopal 4. Jabalpur 5. Gwalior 6. Durg
. "
Part II
G
Catego;y 'A'
1. Bilaspur
2. Raipur
3. Dewas
4. Handsaur.
5. Morena
6. Vidisha
7. Hoshangabad
8. Ratlam
9. Khandwa
10. Satna ·
ll. Shahdol
H.
-
,
"
-
"
:.;,
STATE OF M.P. v. G.S, DALL [RANGANATHAN, J.]
599
Category 'B'
A
1. ·Geoni
2. Balaghat
3. Betul ·
4. Raigharh
5: Guna
6. Chindwara
.,
7. Dam oh
8. Sagar
9. Narsimhpur.
10. Senor
11. Rajmandgoo
B
Categoty 'C'
1.Panna
2. Sidhi
3. Rew a
..
4 . Chhatarpur
· 5. Tikamgarh
6. Khargone
'
7. Surguja.
8.Mandla
9. Bhind
10. Shivpuri
11. Datia
12. Raisen
13. Shajapur
14 .. .Phar
_ 15. Rajgarh. ·
16. Jhooua
17. Bastar
It is not in dispute that the assessees before us fulfif· the qualifications mentioned in the notification. However, when they approac
ched the Director of Industries for the certificate of exemption D'
envisaged under column (3) of the notification, it was denied to them
"'
on the ground that the industries run by them -are "traditional
industries" which were not eligible for exemption. The assessees went.
to Court contending that this was totally unjustified. They s·aid, the
concept of "traditional industries" was one unspecified in the notifica_,
tion. The authorities had no jurisdiction to travel.outside.theterms of E·
the notification and import extraneous considerations to deny the
assessees an·exemptfon ihey were entitleCl to under the notifiC:ation.·lt is
this conti:ntio11 that was accepted in the G.S. Dhall and Flour Mills
case. The State'had relied on the provisions of the M.P. (Deferment of
Payment of Tax) Rules, -1983; notified on 1.9.83 (in particular, rule 13
thereoO and on certain instructions thai had been issued by the
F.
Government on 12. L 1983 pertaining to the "grant of certificate of
eligibility .to new industrial units claiming exemption from/defenhent
of payment of sales tax". The High Court took the view that these
rules and in~~ructions had no relevance to the claim fot exemption put
furward under the .notification of 23.10.'1981 and that, in any event,·
the ·executive instructions could not override the pro~sions of the
Ge
statutory notification. This judgI!Jent was delivered on 7.10.1986 by
Sohani; C.J. and Faizanuddin, J.
The Full Bench, in its judgment of 2.11.1987 took a different
-
.J
view. It has; in effect, a_ttached importance to the' rules 'and instructions referred to above and. relied considerably on the history of the
l;I
600
I 1990] Supp. I S:'C.R.
tfJ:
,_
,,
SUl'REME COURT REPORTS
A
.sales-tax levy in .the State as furnishing a proper and nece~ry b.a~
ground in which .the terms of the notification of 23.10.1981 have to be
read and interpreted. This .history has, therefore, to be set out n(lw in
order te appt~ciate the validity -0f the conclusions of the Full Bench.
Before doing tlils, it m~y be mentioni:d .lhat the Full Bench comprised
of Ojha C.J ., Faizanuddin, J, .and Adhikari, J. In fact, thll judgment
B
was written by Faizanuddin, J. who has explained in detail the reasons
for bis change in view. It may also be mentioned, as a matter.of record,
that, subsequent to the decision of the Division Bench in G.S. Dhal/
and Flour Mills, the State Govemmerat appears to have issued a notification on 3. 7. )987, intended obviously to overcome the .effect of the
said decision. We shall refer to this!ater in this ju4gment.
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N-OW, to tum t-0 the history relied on by the Full Bench, we sl\lrt
with a "scheme for the grant 9f ~ubsidy/interest free loan to new
indil5tries ~t up in Madhya Prades,h". The scheme was to be effective
fr-Orn lS.9,69 and till the end of the fourth Five Year Plan period
(1970) ''or Such further period as may be eJ1:tended by the State
Government ff.om time to time". lt would appear ,that the scheme was
being administered informa)ly under executive instructions even
beyono 1970. Though certain "rules" appear to ha11e been framed for "
the first time on 30.8. 73, these mies, it would seem, were not statutory
but were only in the nature of executive .instructions. We shall, however, rekt !Q ;them as "rules". Rule 3 was dear as to the persons
eligible, w av!lil ofit. It read:
"
"Rule. 3-"It shall be applicable to all new industrial ·units
e;ccept traditional .industries like oil mill, flour mill, dall
mill, .rice mill, ginning and printing facJOries, who set .up in
Madhya Pradesh, pr-0vided further that such applicants <
register themselves with the department after 15.9.69 but
before 31.3. 74 and in case of SSI units go into production
within a period of one year . and in case .of ·Large and
Me4ium Industries go intci production within 3 years of
their date of registration provided further :th3t in case of
delay in going into production the period of availability of
subsidy or concession will be reduced by the period of
delay in going inta production. This will come lnto force
from 1.4.74.
Note:-Small Scale Industr,ies who are alre-.idy registered
with the department need not register separately for this
\_
,
com;ession."
•
601
U .wiluld al$<! 11ppe.ar ~hal lbe di$tr!Qts 0f the :State wete dMde1Bnto . A
tw!I caaj\ones-adva~lld and bl\Ckwar<1.,;,:,and ·the· .latter int() clhree
categories 'A'.; 'B', 'C' .. The amPunt 11nd periP4 .of tile subsidy/loan
·depended upon tl)is i:lilssificati0n and wllS ·elabilrll~ly ~tout .in para 8 .
wb.ich need not •be .extracted her.e. A note .added 10 para 8 l!ad this to
•ay:
N.cte:-{l) Unit wlto' is otherwise .. e.ntitled «i .1ub5idy may
l)n his r~est be ~n~idered fo~grant 9f i.nterest free foan to
the e~tent-0! entitlementchhe sul:tsidy. .
·
I
(2) No 11nit available ~11cession under the 'Wbeme will be
:allowed ta .change the l!!C3t4m of the who~ or a11y pJm.of C
.the industrial unit or eff\lCl any subst4il\tiat part pf lta •wtlll
fixed .i:apital ·investment withip a period pf five year lifter its
going in t0 prQduction..
·
1 · Ol IJ'I i:ase the .llwners!lip of a new unit changed during
the. period of 11vailllbhity ()f this .concession; the 11Qw· D
.owner w.!luld be .entitled t!l this -co.ncession for tile balance
period.
(4) A ~olied unit, which is re•starUid by an .entreprene11r
Mil :nllt bl: ~nsi~.reii to ·J>e a !!CW ,unit for ilte pwpose of
itbis 4'1,lnce~il)n."
·
.8
Ailother set,of ''Nies" .came into force with effe!:l .fromt.4 .. 1977
ani!. ~upersede1f.the .earlier rules. Tll11se weri: on more or le~ the Sl!llle
'•
~.ines as 1be ;eadier ones anc;I were to ap!)ly 10 "new ind11strial units";
and "existing industiial units'', as .defiped in rull!s 2(a) .anll (b), •on
fo'lfillmeni of certain tetrns and conditions blit indll5tries enumerated
f
in rule J were ~ecifically cll'cluded from the purview of the ·definition.
Rule .~ made it clear that ,th~ l'Uie~ shall not be lip,plice.ble to "tbe
fo!l9wlng traditionl!l 'industries", The 'list cf sucll industries'. firi lld4ition
iii> tho.se meniia11ed in the .earlier i;et ·of t11les {excl11din3 toiler ai,,ur
mills .and ~!vent exttaetilln plan~ in .oil mills), t()ok in .a}S(l •SllW mills,
lice factories ,and "'slicli .l)ther 'industries as may be notifiell by th11
G
Government ftllm 'time ,to time" .. The period and extent of Ute sub$idy/
' loan here :again .\!ependeII up1m t~e .di~lri¢t--'.a4v.anced .or bPC!>war4,
and in tile J~tter ,~tegllry •,\•.or 'B' .or ~.c•,...,jp whieb the in4UJ!tly .vu
s.et ;up Rule 7 is.,f1some relevance and m~y be,set1:1u11
·"'i. AnJndugtr<al :unit eligible for ,thiu~enee~l.cm wm .. app!y
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SUPREME COURT REPORTS
[1990] Supp. 1 S.C.R. I'
to the Asst. Director of Industries of the district concerned
for verification of the date of going into commercial
production and other particulars of new industrial unit or
substantial expansion in respect of which the concession ·is
sought. The Asst. Director of Industries will make verification in accordance with rules 5(1) and send within 15 days
of the receipt of the application his report to the sanctioning authorities, Dy. Director of Industries or Director of
Industries indicating the date of going into commercial
production of the unit. A copy will be furnished to the
applicant."
/'
The form of the certificate to be issued by the office of the Dire9tor of
Industriesread thus:
"No. --------~·-Date:-----~-
The particulars furnished by Mis ............... , .
. · ........... have been checked and verified from records
including those of consumption of power and raw materials
and output of finished products. The date of·commence- "
ment of commercial production by the industria.1 unit is
The date from which the unit has exceeded, on a sustained
basis production over the licensed or installed capacity of
the unit is ............. .
Asst. Director of
Industries''
F
It appears that the Government had announced "concessions''
regardfo:g the payment of sales tax by new industrial units including
pioneer units going into production after 1-4-1981 not only under the
notification dated 23/ 10/81 but also under other notifications dated
1-5-82 and 29-6-82. Two of ihese notifications are on record before
us. It is, however, unnecessary to extract them here. It is sufficient to
G
set out their purport, quoting from the "instructions" of 12, 1-83; .reH
ferred to a little later:
·
"According to the first notification, the new industrial
units are exempted from the payment of sales tax. This
notification covered sales tax payable by them on the pro-
< ·
ducts manufactured by them. It entitled them to exemption
~.
'
_,
STATE OF M.P. v. G.S. DALL IRANGANATHAN. J.]
603
from payment of purchase tax on purchase made by them
from unregistered dealers. According to the second notification an industrial unit making purchases of its raw material from a registered dealer is exempted from payment of
.sale.s tax on the raw materials so purchased by him from
A
the registered dealer. In other words, registered dealers
selling raw materials to a new industrial unit are not B
required to charge any sales tax from the new industrial
unit on sales made by them to such unit. The third notification exempts the goods manufactured by the new industrial
units from the levy of sales tax even when these goods are
sold by the dealers who have purchased these goods from
the new industrial units. In other words, by issue of this C
notification, the goods manufactured by the new industrial
units are fully exempted from the payment of sales tax right
upto the stage they reach the consumer. These three notifications only deal with the grant of exemption from payment of sales tax under the M.P. General Sales Tax Act.
that is to say from the payment of the State Sales Tax.
D
The fourth notification exempts the new industrial
units from payment of the Central Sales Tax on the sale of
goods manufactured by them in the course of interstate
trade or commerce. This notification has exempted the new
units from payment of sales tax w.e.f. 1-7-82."
E
In view of these notifications, the Government considered it necessary
to issue certain instructions "fo°r the grant of certificate of eligibility to
new industrial units claiming exemption from/deferment of payment
of sales tax" on 12-1-1983. These instructions also proceed on the same
lines as the earlier ones. "Traditional" industries, as listed in para 5, F
are said to be outside the purview of the scheme. Para 5 enumerated
the following as "traditional industries": flour mills (excluding roller
flour mills), oil mills (excluding solvent extraction plants, dall mills,
saw mills, rice mills, printing presses of all types, cotton ginning and
pressing factories, in factories and such other industries as may be
notified from time to time. It also stated (a) that "industrial units G
undertaking expansion/modification or diversification will not be eligible for these concessions, (b) that a closed unit revived by the
entrepreneur will not be considered as a new unit for the purpose of
availing of these concession and (c) that units claiming interest free
Joans as an existing unit will not be eligible for these concessions. A
certificate of eligibility had to be obtained in the prescribed manner H
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SUPREME COURT REPORTS
[1990] Supp. I S.C.R.
and this procedure was made more elaborate. District Level Committees and a State Level Committee were constituted for this purpose
and they took a decision on the application of the unit read with the
comments thereon by the Director of Industries, though.the certificate
was actually issued by the Director of Industries or the General
Manager of the District Industries Centre in a prescribed form.
The Full Bench, after considering the scheme and instructions of
the Government discussed above, came to the conclusion that the
scope of the exemption notification of 1981 was not intended to be
wider than that of the concessions granted earlier. The 1981 notification was intended to bring about only a change in the mode of relief to
the same categories of industries as were covered by the earlier
schemes. The Court observed:
"It appears that the mode of concessions granted by the
aforesaid instructions involved some inconvenience to the
industrial units and duplication of procedure inasmuch as
the industrial unit had to first collect the sales tax and the
tax so collected and paid along with the returns were later
on refunded to the industrial unit in the shape of subsidy.
To avoid the duplication of procedure the State Government thought it fit to altogether exempt the industrial units
from payment of sales tax or defer the payment of sales
tax.··
The Court observed, vis-a-vis the various instructions referred to
above:
"12 ......... These instructions also contain a complete
procedure for application and grant of eligibility certificate
by the Industries Department. Thus it is clear from these
instructions that the question of grant of eligibility certificate by the Industries Department is not an empty formality but before granting the certificate the Industries Department has to see whether all the requirements as contained in the instructions are fulfilled and complied with or
not.
13. All the Government Instructions discussed above,
issued from time to time right from 1973 onwards till 1983
(Annexure R-I, II and III) clearly indicate not only the
consistent Government policy in the matier of grant of
•
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f-
• r
!
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STATE OF M.P. v. G.S. DALL (RANGANATHAN, J.J
605
Sales Tax concessions to the New Industrial Units but also
A
the consistent practice that has been followed throughout
whereby these concessions were not at any time made
available to the Traditional Industries like Flour Mills and
Dall Mills etc. Not a single instance is available to show
that any of these concessions were ever made available to
any Traditional Industries. It may be pointed out that all
B
these facts and the Government policy as also all the
af()resaid Government Instructions on the subject were not
••
placed before the Division Bench which heard and decided
'
Misc. Petition No. 1861of1983 (G.S. Dall Mills v. State of.
:
M.P.). However, after\the decision of M.P. No. 1861/83
the State Government while issuing a Notification No. 351 c
dated ·21st October, 1986 under section 12 of the Act, a
photostat copy of which has been filed on record of M.P.
No. 2710/87 (See at page 94 of the paper book) exempting
the Industrial Units specified therein from payment of tax
under section 6 and 7-AA of the Act again specifically
provided in clause (xiii) of the said Notification that the D
said exemption shall not'be available to the Industrial Units
. enumerated therein including Flour Mills and Dall Mills
etc."
It was true, the Court agreed, that a notification has generally to be
construed on its plain language. But, here:
E
"as pointed out earlier, column 3 of the 198LNotification
. (Annexure B) does not contain any guidelines or a proce-
-,
dure in the matter of grant of eligibility certificate or tefusal thereof by the Industries Department and as the grant or
refusal of such certificate cannot be an empty formality F
· and, therefore, in order to avoid the possibility of arbitrariness and injustice to any one the State Governni.ent was
justified in issuing executive instructions laying down the
guidelines and procedure for the same."
The Full Bench, therefore, observed:
G
"16. From what has been stated and discussed above it is
clear that at no point of time any concession or exemption
~4 : •
from payment of sales tax was ever given to the Traditional
;:
Industries and not a single example to that effect is available. The State Government while issuing instruction from
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606
SUPREME COURT REPORTS
[1990] Supp. I S.C.R.
time to time have been specifically excluding the Traditional Industries. Thus the executive authorities and the
highest agency and its officers charged with the duty for the
administration and enforcement of the said Notification are
not only conversant with the underlying policy of the
Government but they are also intimately acquainted with
the economic significance of the tax in question and exemption thereof. The interpretation of the Government regarding the construction of 1981 Notification read with the
instructions (Annexure R. I, II and III) excluding the Traditional Industries, which has been consistently followed
and acted upon accordingly for a period over a decade
cannot be given a go-by but has to be accepted.
17. In view of the above discussion the impugned Notification dated 4-7-1987 (Annexure G) is hardly of any consequence. More or less it is a clarificatio1wf 1981 Notification
and not rescission of any grant."
The contention that "instructions" could not override the effect of the
statutory notification was repelled by the Court on the ground that the
validity and effectiveness of the instructions can be supported by reference to Article 162 of the Constitution as filling up a lack of guidelines
in the notification. An argument based on the doctrine of promissory
E
estoppel was also rejected as "the petitioners were well aware of the
fact that the exemption was not available to their new units and they
h"ad not established their units because of the exemption'): The Court
explained the position thu.s:
"20. In this behalf firstly it may be pointed out that all the
F
petitioners had established'their Industrial Units after the
Government issued the executive instructions ( Annexure
R. III) dated 12-1-1983, of which clause 5(b) specifically
speaks that the concessions will not be available to Traditional Industries like Flour Mills and Dall Mills etc. To say
that the petitioners were not aware of these executive
G
instructions would be incorrect because clause 6 of these
instructions contemplates that New Industrial Units desirous of availing the said concessions shall have to apply in
Form I accompanied with a declaration in Form II
appended to the said Instructions and the petitioners
H
applied in Form I with declaration in Form II (See Annexure D, D/l and D/2 in M.P. No. 2710/87). Further these
,.
STATE OF M.P. v. G.S. DALL [RANGANATHAN, J.]
607
A
applications for exemption were made by the petitioners
only after the order dated 7-i0-1986 was passed in G1S.
Fiour Mills v. State (Mf) No. 1861 of 1983) which
sbows that the petitioners were aware of the fact that they
were not entitled to exemption and it was only after the
aforesaid decisions that they considered to apply for
exemption. This fact is further fortified from the conduct of B
the petitioners themselves as they continued to submit
returns right from 1983 onwards. and continued to pay the
tax as assessed against them without taking any steps to
claim exemption. In this behalf paragraphs 8 and 9 of the
petitions are self explanatory. Thus having regard to all
these facts, the question of application of principle of C
promissory estoppel in the present case does not arise and
the petitions deserve to be dismissed.''
Sri Harish Salve, appearing for the G. S. Dhal/ & Flour Mills,
apart from pleading that the view taken in this case is the correct one
and not that enunciated by the Full Bench, also raised an alternative D
contention on the footing that, at best, the notification of 1981 was
ambiguous and lent itself to two plausible interpretations; Assuming
that there was initially some ambiguity regarding the applicability of
the Notification .of 23.10.81 to traditional indus•ries, it had been dispelled by the instructions of 12, 1.83. Once these instructions were
published, any assessee setting up a traditional industry took a B
calculated risk on the issue as to whether the Notification should be
confined, on proper interpretation, only to non-traditional industries
and could not rely on the ·doctrine of equitable estoppel. Pointing out
that the assessees in the Full Bench case were persons who had set up
their industry after 12.1.83, Sri Salve argued that the dismissal of the
Special Leave Petition against the Full Bench judgment will not affect F
his case as this assessee had set up its industry, admittedly, before
12.1.1983. The position is similar in the case of Mohd. Ismail. Learned
counsel, therefore, submitted that,.even if the 1983 instructions were·
rightly held by the High Court to have validly supplemented the terms
of the 1981 Notificat\on; they can have no application to the two
earlier cases which had to be decided solely on the terms .of the 1981 G
Notification.
To answer these contentions, one has to look first at the statu·
tory instruments in this case viz. S. 12 of the Act and the notification
thereunder. S. 12(1)(i), with which we are concerned, lays down four
requirements for the grant of exemption from the provisions of the
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Ac.t:
A
B
c
D
608
SUPREME COURT REPORTS
[1990] Supp.