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Judgment
Aftab Alam, J.—The petitioner before this Court is a company. Its case is that motivated by the State Government''s Industrial Policy, 1995 (hereinafter referred to as ''the Industrial Policy'') it set up a cold storage at Lakho in the district of Begusarai. For the cold storage it took from the Bihar State Electricity Board (hereinafter referred to as ''the Board'') a high tension electricity connection with the contract demand of 125 KVA. The contract for the connection was executed on 15.7.2000 and the electricity line was energized on 25.4.2001. Though the supply of electricity from the Board commenced much later, it is the case of the petitioner that the could storage had come into commercial production, with the aid of private generator, from 25.8.2000.
The petitioner claims that the cold storage is covered by the Industrial Police and is entitled to exemption from payment of minimum based charges in terms of the Industrial Policy and the Board''s Circular No. 652, dated 11.10.1996 issued in pursuance of the Government policy/direction. The petitioner contends that the Board''s demand for AMG charges for the cold storage connection was unauthorized and prays for a direction from this Court, restraining the Board from demanding any Annual Minimum Guarantee Charges from the petitioner for a period of five years from the date when the cold storage came into operation i.e. till 24.8.2005 and a further direction to the Board to withdraw its AMG bill, dated 6.4.2002 (Annexure-4) and not to take any coercive measures against the petitioner for the realization of the bill.
According to the Board, the claim of the petitioner is not tenable. The exemption from payment of minimum based charges was available only to the industrial units that came into production during the period 1.4.1993 to 31.8.2000. The emphasis is on coming into production. What is meant is that the power incentive of exemption from payment of AMG charges was available only to the industries engaged in production. A cold storage is not engaged in production and it does not produce anything. According to the Board, therefore, the cold storage was not covered by the Board''s circular, dated 11.10.1996 and the Industrial Policy on the basis of which the circular was issued. In the case of the petitioner it is further stated that the cold storage received the supply of electricity from the Board admittedly on 25.4.2001 i.e. after the expiry of the policy period on 31.8.2000. The petitioner was, therefore, in any event not entitled to be exemption and its case that the cold storage had come into operation on 25.8.2000 was not fit to be accepted.
Mr. Mrigank Mauli, Counsel appearing for the petitioner submitted that it was erroneous to assume and hold that the cold storage was not engaged in production and it did not produce any thing. He stated that the cold storage produced refrigerated goods. Ralying upon a Supreme Court decision in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, Mr. Mauli submitted that the word ''production'' had a wider meaning then the expression ''manufacturing of goods''. He submitted that the work of the cold storage was also related to production and the produce of the cold storage was the agriculture products with their freshness fully preserved. In support of his submission that the work of the cold storage was related to production, learned Counsel relied upon Supreme Court decisions, one in Chrestien Mica Industries Ltd. v. The State of Bihar and Anr. (1961) 12 STC 150 and the other in Delhi Cold Storage Pvt. Ltd. Vs. Commissioner of Income Tax, New Delhi, . He also relied upon a bench decision of the Rajasthan High Court in Commissioner of Income Tax Vs. Trinity Hospital,
I have carefully considered the submissions same by Mr. M. Mauli and have gone through the decisions cited by him. But it seems to me that in the choice of decisions to support his point learned Counsel has not been sufficiently carefully and discriminating. The decisions relied upon not only support the point but actually seem to disprove the proposition that the cold storage was engaged in production.
In N.C. Budharaja (supra) it was indeed held by the Supreme Court that the word production has a wider connotation than the word manufacture but this decision does not have any direct bearing on the case in hand.
In Chrestien Mica Industries Ltd. (supra) the Supreme Court noted in detail the process by which crude Mica is taken out of the Mines and processed into split mica which is a commercial commodity and held that process would obviously fall within the dictionary meaning of the word production. This decision too has no bearing on this case.
In the case of Trinity Hospital (supra) a bench of the Rajasthan High Court examined whether a X-ray machine, an Ultra Sound Scanner/Ultra Sonographic Machine, a Foetal Monitor can be said to manufacture or produce an article or a thing for being entitled to the benefit u/s 32A of the Income Tax Act, 1961. The decision noted that these machines and equipments produced shadow-pictures, pictures and/or photographs of abdominal organs which were very useful for diagnostic purposes. The decision further held that though the shadow-pictures, pictures and photographs produced by the machines were not articles, those were clearly ''things'' within the meaning of Section 32A of the Income Tax Act. The ratio of this decision does not seem to have any bearing on the point whether the cold storage was engaged in production. But the learned Counsel appears to have overlooked that the Rajasthan decision in Trinity Hospital also takes not of two decisions, one by Madhya Pradesh High Court in Mittal Ice and Cold Storage Vs. Commissioner of Income Tax, and the other by the Calcutta High Court in S.B. Cold Storage Industries Pvt. Ltd. Vs. Commissioner of Income Tax, In both these decisions it was held that the claim of investment allowance u/s 32A of the Income Tax Act was not permissible in respect of the Machinery of the cold storage plant because the cold storage was not an industrial undertaking for the purpose of business of manufacture of production of article or thing.
Even more surprising is the reliance placed by the Counsel for the petitioner in the case of Delhi Cold Storage (supra), in this case, the Supreme Court examined the question whether the cold storage was an industrial company as defined in Section 2(7)(c) of the Finance Act, 1973, which was as follows :
Industrial company means a company which is mainly engaged in the business of...or in the manufacture or processing of goods or....
In paragraphs 6 and 7 of the decision, on which learned Counsel heavily relied the Supreme Court referred to a Calcutta decision in Commissioner of Income Tax Vs. Radha Nagar Cold Storage (P.) Ltd., . The Calcutta decision had indeed held that the cold storage was engaged in the act of processing of the goods in terms of the Finance Act. The Supreme Court decision further noted that an Allahabad decision in Addl. Commissioner of Income Tax Vs. Farrukhabad Cold Storage (P.) Ltd., , had taken a similar view. It was further observed that the Calcutta and the Allahabad decisions, directly supported the case of the assessee in Delhi Cold Storage. But it was then pointed out that a previous Supreme Court decision of a three Judge Bench in Chowgule and Co. Pvt. Ltd. and Another Vs. Union of India (UOI) and Others, had examined the true meaning of the two words manufacture and processessing and the Supreme Court decision in Chowgule & Co. ran counter to the conclusions reached by the Allahabad and Calcutta High Courts; further, that the view taken by the Allahabad and the Calcutta High Courts did not find favour with the three Judge Bench of the Supreme Court in Chowgule & Co. and the decision in Chowgule must be taken to have overruled the view of the Allahabad High Court and the Calcutta High Court.
The Supreme Court decision in Delhi Cold Storage expressly held that the cold storage cannot be said to be engaged in any work of processessing of goods. The decision rejected the appeal filed by the cold storage and affirmed the opinion of the Delhi High Court. The decision of the Supreme Court in Delhi Storage thus concludes the issue that the cold storage is not engaged in any work of processessing of goods.
In reply to the submissions made on behalf of the petitioner Mr. Mihir Kumar Jha, Standing Counsel for the Board submitted that the cold storage was not engaged in any production. In support of his submissions, he relied upon Supreme Court decisions (i) in the Indian Hotels Co. Ltd. and Ors. v. The Income Tax Officer Mumbai and Ors. AIR 2000 SCW 2807, (ii) Indian-Poultry v. Commissioner of Income Tax AIR 2001 SC 1235 and (iii) Rajasthan State Electricity Board v. Associated Stone Industries and Anr. AIR 2000 SC 2482.
I do not propose to consider in detail the submissions made by Mr. Jha or to examine the decisions cited by him because the proposition advanced on behalf of the petitioner fails on the basis of the very decisions cited in its support.
Mr. Mauli next contended that the power incentive of exemption from payment of Annual Minimum Guarantee Charges under the Industrial Policy was not limited to industrial units engaged in production but it was equally admissible to non-production and service based industries. It will be useful here to take a look at the different provisions of the Industrial Policy on the basis of which Counsel for the parties made their respective submissions.
Paragraph 9.6 of the Industrial Policy that dealt with power incentive is as follows:
9.6 Power Incentive.
(a) exemption from payment of minimum granted (sic guarantee) charge for new industrial units having connected load upto 500 KVA;
(b) exemption from Electricity Duty for 5 years on captive power generation upto 25 MW for own consumption to new industrial units;
(c) loads upto 99 H.P. to be made available on L.T. for new connection to industrial units;
(d) special arrangements for expeditious clearance for rebate for non-supply of power to industrial undertakings.
Paragraph 15 of the Policy had the marginal title "Identification of Thrust industries" and paragraph 15.1 is as follows:
15.1 The following industries have been identified as thrust industries for priority development in the State:
(i to xvi) omitted, not being relevant.
(xvii) Health Services.
(xviii) Food & Food Processing, Dairy, Fruits & Vegetable Processing.
Tissue Culture Products, Seeds and Planting Materials, Bio-Technological Processes & Products, Post Harvest Technologies.
(xix) xx xx
(xx) Tourism.
The definitions were given at the end of the Policy and Clause 1 of the definitions dealing with ''effective date'' is as follows:
(1) Effective Date-Effective date means the date on which the provision of this Policy came into force i.e. September, 1, 1995. This Policy will remain in force for 5 years from September 1,1995.
Clause 2 defined ''industrial unit/industrial concern'' which, in so far as relevant for the present, is as follows:
(2) Industrial Unit/Industrial concern-industrial unit/concern means any unit/concern engaged or to be engaged in manufacturing/processing/servicing industry belonging to the following categories:
(a) industries listed under the carts Schedule of the Industries (Development and Regulation) Act, 1951 and amended from time to time.
(b) Thrust industries listed in para 15 of the Policy Statement.
(c) Industries falling within the purview of the following Boards/Agencies:
(i to vi) omitted, not being relevant.
(d) Other categories:
(i to vi) omitted not being relevant.
Explanations:
(i) "For the purposes of concession/benefits relating to sales tax, only such units shall be deemed to be industrial units which carry on the business of manufacturing goods for sale.
For the above purposes, "manufacture", with all its grammatical variations and cognate expression, shall have the same meaning as defined in the Bihar Finance Act, 1981.
(ii) xx xx
(iii) xx xx
Clause 4 defined ''new industrial unit'' as follows:
(4) New Industrial Unit-New Industrial Unit means an industrial unit which has come into production between 1st September, 1995 and 31 August, 2000.
And Clause 11 defined. ''the date of production'' as follows:
(11) Date of Production.-The date of start of production of an industrial unit shall mean the date on which the unit actually starts commercial production of the item for which the unit has been registered. As regards the date of production of a SSI unit, the certificate issued by the respective General Manager, District Industries Centre or Managing Director, Industrial Area Development Authority will be accepted. In case of any dispute in the date of production the decision of the Director of Industries in this regard shall be final.
The English version of the policy statement from which the above quotations are taken uses the word ''production''. But the original policy statement is in Hindi in which the word ''Utpadan'' is used. Mr. Jha, stated that in the Vidhi Shabdavali, Bharat Sarkar Vidhi Aur Nayayae Mantralaya 1988 Edition, the word ''Utpadan'' is defined to mean (i) generation, (ii) production and (iii) Out put. In the Oxford Hindi-English Dictionary 3rd Impression 1998, the word ''Utpadan'' is defined as (i) production (2) a (commercial) product. With common consent, therefore, this judgment considers the dispute on the basis of the word ''production''.
Mr. Mauli submitted that the nature and character of an industry, that is to say, whether the industry was engaged in manufacture, production, mining, processing or servicing was one issue and when did the industrial unit commence manufacture or production or came into operation was a separate and different issue and it was necessary to consider the two issues separately without mixing one with the other. Learned Counsel further submitted that the nature of the industries which were covered by the Industrial Policy was to be judged from Clause 2 of the definitions read with para 15.1 of the policy statement enumerating the thrust industries. And clauses 4 and 11 of the definitions related to the date of start of manufacture/production etc. by the unit or its coming into operation, as the case may be for judging whether or not the unit fell within the five years period prescribed by the Policy.
Mr. M. Mauli submitted that a cold storage was plainly covered by "Post Harvest Technologies" listed at Serial No. XVIII in paragraph 15.1 of the policy statement. He further submitted that the listing of Health Services at Serial No. XVII and Tourism at Serial No. (XX) in paragraph 15.1 of the policy statement conclusively indicated that non-production and service based industries were also included as thrust industries. Further, the entire list of thrust industries was specifically included in the definition of ''industrial unit'' as provided in Clause 2 of the definitions which by express words included ''servicing industries'' under the policy statement.
He submitted that the definition of ''Industrial Unit'' in Clause 2 having extended the policy to cover service industries, the definitions of ''new industrial unit or ''the date of production'' could not be given a restricted meaning to exclude industries other than those engaged in production. Clause 4 and 11 had got nothing to do with the nature and character of industries covered by the policy. But the provisions of Clauses 4 and 11 related to the period prescribed by the policy during which the industrial unit must come into production or operation, as the case may be. Learned Counsel submitted that an industrial unit as defined in Clause 2 of the definition read with paragraph 15.1 of the policy statement in order to be covered by the policy must be a new industrial unit, that is to say, it should have come into commercial production/commercial operation between September 1995 and August 31, 2000. The contention was that the word ''production'' was used rather loosely in Clauses 4 and 11 and with reference to Clause 2 of the definitions read with paragraph 15.1 of the policy statement the expression ''coming into production'' must be read to include ''coming into operation''.
Mr. M. Mauli lastly submitted that in case there was some ambiguity in the policy statement and if two views were possible, the provisions of the policy statement were required to be construed liberally to extend the benefit of the policy to more industrial units in order to sub-serve the larger goal of encouraging industrial growth in the State. Arguing in support of a liberal construction of the provisions he relied upon two Supreme Court decisions in Commissioner of Income Tax, Amritsar Vs. Straw Board Manufacturing Co. Ltd., and in Bajaj Tempo Ltd., Bombay Vs. Commissioner of Income Tax, Bombay City-II, Bombay,
In reply Mr. Jha submitted that the Board was not bound by the Industrial Policy per se; in fact the Board had no concern with the policy until the State Government gave it a direction in the regard u/s 78A of the Electricity Supply Act, 1948. Mr. Jha stated that with regard to the Policy the State Government had issued necessary directions to the Board u/s 78A of the Electric Supply Act vide its Resolution No. 3493, dated 3.9.1996 (Annexure-B). In paragraph 1 of the resolution it was stated that it was decided by the State Government that such of the industrial units that came into production between 1.4.1993, 1.4.1993 instead of 1.9.1995 was stated in order to cover the previous Industrial Policy of the year 1993 to 31.8.2000 and such defined industrial units that undertook expansion or diversification and the connected load of which was upto 500 KVA would be allowed exemption from payment of annual minimum guarantee charges.
Mr. Jha further stated that in pursuance of the direction issued by the State Government the Board took its Resolution No. 6917, dated 23.9.1996 following which circular letter No. 652, dated 11.10.1996 was issued. In the Board''s circular too it was stated that industrial units coming into production between 1.4.1993 to 31.8.2000 and defined industrial units undertaking expansion/diversification will be given exemption from payment of minimum base charges, provided the connected load of the industrial unit was upto 500 KVA.
Mr. Jha contended that the petitioner''s claim for exemption from payment of minimum base charges was against the Board and, therefore, in order to Judge the claim it was not required to advert to the provisions of the Industrial Policy with which the Board did not have any concern and the claim of the petitioner could be Judged only on the basis of the Government resolution and the Board''s circular, in both of which the exemption from payment of minimum base charges was extended to industries engaged in production. In short, the submission of Mr. Jha was that the word ''Utpadan'' used in the Government resolution, dated 3.9.1996 (Annexure-B) and the Board''s notification, dated 11.4.1996 (Annexure-1) must be understood on its own and not in the light of the meaning that may be assigned to the word in the Industrial Policy.
I am unable to accept the submission. Any attempt to view the Government resolution, dated 3.9.1996 in isolation and dehors the Industrial Policy would be destructive of the very object and purpose of the policy, for the implementation of which the resolution was made. I am, therefore, of the considered opinion that the word ''Utpadan'' (production) used in the Government policy and the Board''s circular must take its colour from the Industrial Policy and must receive the same meaning as given to the word in the Industrial Policy.
Coming then to the Industrial Policy, Mr. Jha submitted that the policy allowed different incentives to different kinds of industries. He cited in particular the sales tax incentive and makings reference to explanation 1 of the Clause 2 of the definitions he pointed out that the concessions/benefits relating to sales-tax were admissible only to industrial units which carried on the business of manufacturing goods for sale. Learned Counsel submitted that exemption from AMG charges was similarly admissible only to industries engaged in production and service based industries could claim power incentives other than exemption from AMG charges, namely, those enumerated at Clauses (b), (c) and (d) of paragraph) 9.6 of the policy statement.
The submission of Mr. Jha appears to be highly laboured and it does not appeal to me. If non-production and service based industries were intended to be excluded from the exemption from payment of AMG charges and the only sops available to them were those enumerated at Clause (b) to (d) of paragraph 9.6 then that could have been said simply and straightly in paragraph 9.6 of the policy statement itself or in Clause 2 of the definitions, as in the case of sales-tax incentive. The exclusion of non-production industries from exemption from payment of AMG charges by using the word ''production'' in the definitions of new industrial unit'' (Clause 4) and the ''date of production'' (Clause 11) appears to be highly far-fetched, to say the least.
On a careful consideration of the entire matter I find myself in agreement with the submission of Mr. M. Mauli that the nature and kind of industries to which the power incentive of exemption from payment of AMG charges is extended is to be Judged on the basis of Clause 2 of the definitions read with paragraph 15.1 of the policy statement and Clauses 4 and 11 of the definitions relate to the period of time for judging whether the industrial unit came within the period fixed by the Industrial Policy. In Clauses 4 and 11 the expression ''gone into production'' and ''starts commercial production'' are used also to mean going into operation and starting commercial operation, in the case of non-production, service based industrial units.
On the basis of the discussions same above, I come to the conclusion that the cold storage is also covered by the Industrial Policy and consequently by the Government resolution, dated 3.9.1996 and the Board''s circular, dated 11.10.1996.
Then comes the question whether or not the cold storage of the petitioner came into operation, as claimed, on 25.8.2000. On behalf of the Board it was stated that the electricity line of the cold storage was admittedly energized on 25.4.2001 and hence, there is no question of the cold storage coming into operation from a date prior to 31.8.2000, the outer limit prescribed by the Industrial Policy. Mr. M. Mauli submitted that the date of first production was not dependent upon the date when electricity connection was given by the Board and in support of the submission he relied upon a Supreme Court decision in M/s. Vijay Enterprises and anothers Vs. State Tax Officer and others, He brought to my notice a number of documents in support of the case that the cold storage had come into operation from 25.8.2000. Mr. Jha tried to pick many holes in the documents relied upon by the petitioner.
The question whether the cold storage came into commercial operation from 25.8.2000 is a question of fact which is required to be determined on the basis of relevant materials. I, therefore, leave this issue to be decided by some competent authority in the Board. The petitioner is directed to appear before the Member Finance (Revenue) of the Board within a fortnight from today and to produce before him all materials in support of his claim that the cold storage had come into commercial operation from 25.8.2000. The Member Finance will examine the materials produced by the petitioner and the Board and after hearing both the sides pass an order recording the finding whether or not the cold storage came into commercial operation from 25.8.2000. The petitioner''s claim for exemption from payment of AMG charges shall abide by the decision of the Member Finance. It is expected that the Member Finance will pass a final order within three months from the date of appearance of the petitioner before him.
In the result, this writ petition is allowed partly and to the extend indicated above. There will be no order as to costs.