Allowed

Diamond Silicate v. State of Kerala

Kerala HC1 Nov 2013WA/1899/2006

Case brief

AI extract

What is this about?

The High Court of Kerala held that the District Industries Committee's rejection of a tax exemption claim was without application of mind. The court quashed the demand notices and directed authorities to reconsider the claim by distinguishing additional investment from expansion, modernization, or diversification under the relevant government order.

What did the court decide?

Exts.P12 and P13 quashed. Authorities directed to consider claim for exemption on additional investment within three months and hear the appellant.

Diamond Silicate Vs State of Kerala — Company and Corporate | Kerala HC (2013)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR

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THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE

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FRIDAY, THE 1ST DAY OF NOVEMBER 2013/10TH KARTHIKA, 1935

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WA.No. 1899 of 2006 (E) IN OP.28943/1999

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AGAINST THE JUDGMENT IN OP 28943/1999 DATED 24-03-2006 ................

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APPELLANT/PETITIONER :

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DIAMOND SILICATE, A REGISTERED PARTNERSHIP FIRM, REPRESENTED BY ITS MANAGING PARTNER KACHERI ROAD, CHELANNUR, KOZHIKODE-673 616.

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BY ADVS.SRI.S.V.BALAKRISHNA IYER (SR.) SRI.P.B.KRISHNAN

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RESPONDENTS/RESPONDENTS :

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THE STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.

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THE ADDITIONAL SALES TAX OFFICER, IV CIRCLE, KOZHIKODE.

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THE DIRECTOR OF INDUSTRIES AND COMMERCE, DIRECTORATE OF INDUSTRIES AND, COMMERCE THIRUVANANTHAPURAM.

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THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KOZHIKODE.

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BY GOVERNMENT PLEADER, SRI.BOBBY JOHNPULIKKAPARAMBIL

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THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 01-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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Manjula Chellur, C.J. & A.M. Shaffique, J.

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W.A. No. 1899 OF 2006

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- - - - Dated this the 1^st day of November, 2013

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JUDGMENT

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Manjula Chellur, C.J.

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Appellant/petitioner approached the learned Single Judge seeking quashing of Ext.P12 and P13 notices issued by the 2^nd respondent, on the ground that petitioner is entitled for tax exemption in terms of Exts.P4 and P5 for the years 1997-98 and 1998-99. According to the appellant-petitioner, it is a registered partnership firm engaged in the business of manufacturing 'Sodium Silicate'. Provisional registration certificate for a small scale industry was obtained by the appellant unit way back in 1992 by order dated 03.6.1992.

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According to them, in terms of Government policy, at the time of establishment of appellant's unit it was entitled for exemption of payment of General Sales Tax for a period of seven years to be reckoned from the date of commencement of production which happens to be 10.08.1993 to 09.08.2000. Subsequent to commencement of production in the unit of the appellant's establishment, the Government

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WA No. 1899 of 2006

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included soap grade sodium silicate in the negative list making the industrial unit manufacturing such goods ineligible for the benefit of investment subsidy and another exemptions provided by the Government. It is further contended that in the said order by keeping the item in question in the negative list itself, Government made it clear that units which were provisionally registered as such on or after 31.12.1993 were not eligible for some exemptions declared by the Government.

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It is further contention of the appellant that on

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account of commencement of production and having provisionally registered as a small scale industry long prior to 31.12.1993, in spite of inclusion of 'Sodium Silicate' in the negative list, they are not affected by the Government Order. This is further substantiated with the fact, that the Department allowed exemption prior to 1997-98 and for 1997-98 and 1998-99 assessment years only it was not allowed is the contention. On the other hand, sending demand notices claiming penal interest are not justifiable, therefore, they challenged the same in O.P.

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WA No. 1899 of 2006

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No.28943 of 1999. Learned Single Judge dismissed the petition on 24.03.2006.

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On going through the judgment of learned Single Judge we notice, the only ground on which learned Judge disposed of the matter holding against the assessee is as Sodium Silicate was introduced in the negative list, therefore, they are not entitled for any exemption. Aggrieved by the same, the present appeal is filed contending that the observation of the learned Single Judge is not justified and as a matter of fact the very fact that it was allowed for other periods, in spite of the appointed date as 31.12.1993, would also go to show that revenue was not justified in issuing such notices. Exts.P3, P6 and P7 are the exemption orders with reference to particular periods.

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So far as Ext.P3 is concerned, it is for the period between 10.08.1993 to 09.08.2000. Items manufactured in that period was 3000 tonnes of Sodium Silicate. So far as Ext.P6, it is with respect to the very same Sodium Silicate for the period between 01.02.1995 and 09.08.2000 for a quantity of 3.10 tonnes per

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WA No. 1899 of 2006

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day. Ext.P7 is for the period between 11.07.1996 and 09.08.2000 for 3100 Kgs per day in respect of Sodium Silicate.

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Ext.R2(c) is the minutes of the District Level

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Committee regarding sales tax exemption, conducted in the chambers of District Collector, Calicut held on 27.06.2003. As per this minutes, so far as the subject matter of the present appeal it was considered as item No.10. According to this Committee, the unit had already availed sales tax exemption to a tune of 23,34,606/- and they had applied for additional sales tax₹ exemption to a tune of 10,40,950/-. ₹

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When the case was placed before District Level Committee, on 27.11.1998, the Committee resolved to get clarification from District Industries Centre, Thiruvananthapuram regarding the eligibility of exemption so far as Sodium Silicate as it is in the negative list. The District Industries Committee sought clarification from the State Level Committee regarding the effect of including an item in the negative list and with reference to additional investment so far as giving the benefit of tax

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WA No. 1899 of 2006

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exemption. The State Level Committee clarified that the Unit is in negative list from 26.11.1993, they are not eligible to get sales tax exemption for the investment made after 31.12.1993. They also referred to the application pending before the High Court challenging the decision of the State Level Committee. The Original Petition was not yet decided.

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The unit had filed another application seeking exemption towards the additional investment for the period between 1997 and 1999 to the tune of 4,40,372/-. But as the₹ production of the Unit was coming under negative list and Government has already clarified not to admit investment made after 31.12.1993 by granting sales tax exemption, the unit was not entitled for sales tax exemption. Therefore, the unit was directed by registered letter to appear before the District Level Committee to place material in the case and they have filed a letter claiming that they are eligible for assistance as per Government Order dated 19.04.1994. The claim is examined in detail by the Committee and resolved to reject the same as the

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WA No. 1899 of 2006

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Government has already clarified that the Unit was not eligible for any exemption.

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Reading of the reasoning of the District Industries Committee, it only clarifies the position that on account of rejection by State Level Committee opining that any additional investment made after 31.12.1993, which will not come to the benefit of claiming exemption, they have rejected the claim of Unit. After going through Ext.P4 dated 26.11.1993, no doubt, a list of industries which were not eligible for state investment subsidy includes an industry engaged in manufacturing of Sodium Silicate, but, however, paragraphs 2 & 3 of the order are very relevant which clearly indicate, the benefit is not available for all the units provisionally registered on after 31.12.1993. Paragraphs 2 & 3 of Ext.P4 read as under:

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“2. All the units in the above list provisionally registered on or after 31.12.1993 will not be eligible or the State Investment Subsidy. Provisional registration for the purpose of large and medium units will be taken to mean, the date of S.I.A registration/filing I.E.M with Government of India/Letter of Intent/submission of

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WA No. 1899 of 2006

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application for financial assistance, as the case may be.

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Expansion/modernization/diversification of existing units in the areas included in the list above shall also not be eligible for any financial assistance/loan/tax exemption from government unless application has been made by the unit for the purpose and received on or before the cut off date viz. 31.12.1993.”

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Reading of paragraphs 2 and 3 clearly indicate that any unit which got provisional registration on or subsequent to 31.12.1993 are not entitled for investment subsidy claiming any tax exemption. Reading of paragraph 2 clearly indicates what happens to those units registered on or after 31.12.1993. Paragraph 3 reflects that Expansion/modernization/diversification of existing units in the areas included in the list shall not be eligible for any financial assistance.

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They say that unless the application has been made by the Unit for the purpose of tax exemption and unless it is received on or before the cut off date 31.12.1993, such exemption pertaining to expansion/ modernization/diversification will not be available to the units, if it is in respect of the negative

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WA No. 1899 of 2006

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items as classified at Ext.P4. In order to understand paragraph 3 of Ext.P4 one has to refer to Annexure R2(a) to know whether additional investment is also described at paragraph 3 of Ext.P4. The State Level Committee has clarified this at Ext.R2(a) with reference to the very appellant unit regarding additional investment. They say the cut off date is 31.12.1993 and the condition of submission of application before 31.12.1993 would only apply to expansion/ modernization/diversification of the unit but not 'additional investment'.

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In other words, reading of Ext.P4 along with the opinion expressed by State level committee at Ext.R2(a) would only lead to a conclusion that unless the claim is towards expansion/modernization/diversification, there was no requirement of submission of application claiming such exemption prior to 31.12.1993. Therefore, the claim for exemption regarding additional investment has to be factually verified with reference to investment of additional amounts, whether it is towards Expansion/modernization/diversification of the unit or

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WA No. 1899 of 2006

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not. If additional investment is with reference to any of these three items, paragraph 3 of Ext.P4 would clearly indicate the condition of claiming exemption by application which should reach the authority concerned on or before 31.12.1993. If additional investment is not in respect of any of these three items, there is no such condition to be complied with. Hence the additional claim with reference to 10 lakhs and odd by the₹ appellant unit has to be considered only with reference to the details furnished by the appellant assessee whether the additional investment is other than for Expansion/ modernization/diversification. In the light of rejection, only with reference to the opinion of State Level Committee without even factually disclosing whether additional investment could be distinguished from Expansion/ modernization/diversification, the District Industries Committee at Ext.R2(c) has opined without reference to any factual situation. Therefore, we are of the

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opinion, rejection of the claim of appellant assessee at item No.10 of Ext.R2(c) was without application of mind, in the light

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WA No. 1899 of 2006

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of clear discussion held by the State Level Committee at Ext.R2(a).

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Therefore, Exts.P12 and P13 deserve to be quashed

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and the authorities concerned have to consider the claim of exemption by the appellant assessee regarding additional investment with reference to the clarification at Ext.R2(a). This exercise has to be done within three months from the date of receipt of copy of the judgment. Exts.P12 and P13 are quashed. We direct the respondent authorities to hear the appellant assessee before disposing of the matter. Appellant assessee is at liberty to place on record before the authorities all the materials required for such consideration in the light of the above observations.

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Manjula Chellur, Chief Justice.

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A.M. Shaffique, Judge.

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ttb

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WA No. 1899 of 2006

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Diamond Silicate v. State of Kerala

Case brief

What is this about?

What did the court decide?

Diamond Silicate v. State of Kerala

Case brief

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