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Judgment
R.B. Misra, Judge
The present writ petition was heard on 18.6.2011 and thereafter again on 11.1.2012.
Present writ petition has been filed with the following prayers:-
(i). To issue a writ, order or direction in the nature of mandamus and prohibition restraining and prohibiting the respondents No. 1, 2 and 5 from demanding and realizing tax from the petitioner under the Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1999 in respect of the goods manufactured by it namely ''clinker'' and ''cement'' in its said new manufacturing unit;
(ii). To issue a writ, order or direction in the nature of mandamus directing the respondent No. 2 to refund the amount of got deposited from the petitioner against the tax under Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1999 along with interest @ 24% p.a.
(iii). To issue writ, order or direction in the nature of mandamus directing the respondents No. 1 and 2 to fulfill the commitment in its entirety as contained in Rule 19.1 of "Rules regarding grant of incentives and facilities to Industrial Units in Himachal Pradesh, 2004.
It appears the State of Himachal Pradesh after visualizing that the cost of production was higher in its hilly State in comparison to the production from Industrial Units in neighbouring States, as such, incentive in the form of concessions were required to be given to the Industrial Units.
The petitioner No. 1, is a Public Limited Company with petitioner No. 2 as Director In-charge of the said industrial unit has set up its unit in the backward Panchayat area of village Baga, Panchayat Mangal, Tehsil Arki, District Solan, Himchal Pradesh, known as Category-C area (Tax Free Zone). The State of Himachal Pradesh, vide its Industrial Policy 2004 (in short called ''Policy 2004'') has framed the "Rules regarding grant of incentives and facilities to Industrial Units in Himachal Pradesh, 2004" (in short called ''Rules 2004'') thereby promising to give incentives / exemptions / concessions, specifically to those Industrial Units set up in ''Tax Free Zone'' of the State of Himachal Pradesh.
In reference to the ''Policy 2004'', the petitioner established its Industrial set up in extreme remote and difficult hilly terrain of State of Himachal Pradesh where the approach roads to the village were ''kacha raasta'' and in shabby conditions. After such establishment, transport, medical, educational and other facilities were provided.
''Rule 19'' of the said ''Rules-2004'' provides that the goods manufactured in new Industrial Units set up in Tax Free Zones / (Category-C Area) shall be exempted from payment of any State taxes and duties (excluding levies in the shape of cess, fees, royalties etc.) for a period of 10 years from the date of commencement of commercial production or the date of notification by the concerned Department(s), whichever is later. Rule 19(1) reads as under:
19.1-All new industrial units set up in the Category-C areas of the State as notified from time to time shall be exempted from payment of any State Taxes and duties (excluding levies in the shape of cess, fees, royalties etc.) for a period of 10 years from the date of commencement of commercial production or the date of notification by the concerned Department(s), whichever is later.
The petitioner acted on the assurance of the State Government and started commercial production of ''clinker'' at its new Industrial Unit known as "Jaypee Himachal Plant" with effect from 15.2.2010. The first dispatch of ''clinker'' was made by the petitioner on 24.2.2000 by way of stock transfer from its new unit to its another unit situated at ''Nalagarh'' within and outside the State of Himachal Pradesh where the cement is being manufactured by the petitioner company.
The State of Himachal Pradesh has already enacted a separate Act, namely, Himachal Pradesh Taxation (on certain goods carried by Road) Act, 1999 (for short ''Act 1999'') whereby the Excise & Taxation Department is empowered to levy tax on certain goods.
The preamble of the ''Act 1999'' provides "An Act to provide for levy of tax on certain goods carried by Road in the State of Himachal Pradesh."
Not only the preamble but even the charging Section-3 of ''Act 1999'' makes it clear that it is a tax of every kind on goods specified in Column-2 Schedule-1 of ''Act 1999''. For sake of convenience, the provisions of Section-3, 4 and 4-A of ''Act 1999'' are quoted as below:
Levy and rate of tax.- (1) Subject to the provisions of this Act, there shall be levied and paid to the State Government a tax on every kind of goods specified, in column (2) of Schedule-1, carried by road by means of a mechanical vehicle or cart except railways and airways.
(2). Such tax levied on the goods specified in Schedule-I shall be payable for a distance of every two hundred and fifty kilometers or part thereof covered or being covered within the State and at the following rates namely:
a. Where the distance covered or being covered does not exceed 250 kilometers.
at the rates as specified in Column (3) of Schedule-I; and
b. Where the distance covered or being covered exceeds 250 kilometers
at twice the rates as specified in Column (3) of Schedule-I.
(3). On every kind of goods, specified in column (2) of Schedule-II, carried by road by means of a mechanical vehicle, cart, animal and human agency or any other means, except railways and airways, at any time, on or after the 17th day of July, 1976 but before the appointed day, there shall be deemed and always deemed to have been levied and paid to the State Government, a tax for a distance of every one hundred and fifty kilometers, or part thereof, covered within the State, and for the period mentioned in column (3) thereof and at the following rates, namely:
a. Where the distance covered does not exceed 150 kilometers.
at the rates as specified in Column (4) of Schedule-II;
b. Where the distance covered exceeds 150 kilometers but does not exceed 300 kilometers
at twice the rates specified in Column (4) of Schedule-II; and
c. where the distance covered exceeds 300 kilometers
at thrice the rates specified in column (4) of Schedule-II.
(4) The net weight, value, volume and species of the goods for the purpose of assessment of tax shall be determined in the manner prescribed.
Explanation.- The tax levied under this Act shall be in addition to any tax levied or leviable under the Himachal Pradesh Passengers and Goods Taxation Act, 1955 (15 of 1955).
Mode of Payment of tax.- The tax payable under this Act shall be paid by every person-in-charge of the mechanical vehicle or cart in or on which the goods are carried or the person-in-charge of the goods, as the case may be, in the prescribed manner, into the Government treasury or State Bank of India or to the taxing authority of the district through which the goods are carried subject to the condition that such authority shall issue him a receipt in the prescribed form, in token of having received the amount specified therein.
4-A. Collection of tax by a person selling or causing or authorizing to cause despatch of goods for carriage by road.-(1) Notwithstanding anything to the contrary contained in Section 4, a person selling or causing or authorizing to cause despatch of goods for carriage by road duly authorized by the State Government, by notification shall, in the prescribed manner, collect the amount of tax payable u/s 3 from the person incharge of the mechanical vehicle or cart in or on which the goods are to be carried or the person-in-charge of the goods, as the case may be, and the person making such collection shall, in the prescribed manner, make payment of the same into the Government Treasury.
The grievance of the petitioner is that ignoring Rule 19.1 of ''Rules-2004'', the Excise & Taxation Department is compelling the petitioner to deposit tax even on stock transfer of ''clinker'' manufactured in the new Industrial Unit of the petitioner. The repeated requests were made by the petitioner that under ''Act 1999'', charge of tax is levied on the goods which are carried by road by means of mechanical vehicle and since the petitioner unit is exempted from any State taxes and duties by virtue of ''Rule 19.1'', as such, charge and recovery of tax under ''Act 1999'' cannot be made.
The petitioner has made following main averments in present writ petition:
(i). That the Principal Secretary, Excise and Taxation, Government of Himachal Pradesh, Shimla has completely over-looked that the tax u/s 4 is payable not only by the person Incharge of the Mechanical vehicle, on which the goods are carried but even by the ''person Incharge of the goods'', which is admittedly the petitioner who is making stock transfers of clinker manufactured in the Industrial Unit; (Paragraph-40)
(ii). That in these circumstances, it is clear that it is the petitioner who is owner of the goods and person incharge of goods, who is subjected to tax u/s 4 of the aforesaid Act, even though it is entitled for exemption under Para 19.1 of the Scheme, referred to above, and the decision of the Principal Secretary, Excise & Taxation, Government of Himachal Pradesh, as communicated in the letter dated 22.11.2010, is contrary to the Scheme; (Paragraph-41)
(iii). That it may be mentioned here that the liability for payment of tax under the Act is on the goods specified in Column-2 of Schedule-I and the mode of collection of tax will not change the nature of tax levied by the State Government; (Paragraph-42)
(iv). That the liability for payment of tax u/s 3 of the Act is on the goods which are carried by road by means of Mechanical vehicle and cart and such tax is required to be paid in accordance with the procedure prescribed u/s 4 and 4A of the Act, as the case may be;
(Paragraph-43)
(v). That in accordance with Rule 19.1 of "Rules regarding grant of Incentives, Concessions & Facilities to Industrial Units in Himachal Pradesh 2004", no tax can be realized from the petitioner under Sections 3, 4 or 4A of the said Act; (Paragraph-44)
(vi). That admittedly, the goods "Clinker" which are presently being manufactured in the new Industrial Unit situated in Tax Free Zone are the goods referred to in Column-2 of Schedule-I of the Act, which are subjected to tax. Rule 19.1 which provides for exemption from payment of tax obviously includes tax which is levied u/s 3 of the said Act and the mode of collection from the person incharge of the vehicle or person Incharge of the goods will not change the nature of tax, as levied on goods as mentioned in Section-3 of the Act; (Paragraph-45)
(vii). That it is settled principle of law that the mode of collection of tax will not change essential nature of tax which is on goods transported by mechanical vehicle and cart; (Paragraph-46)
(viii). That the petitioner has made investment of over Rs. 2000.00 Crore in setting up the said unit at Village Baga, Panchayat Mangal, Tehsil Arki, District Solan, in difficult hilly terrain requiring extra ordinary investment in creation of infrastructure & setting up of the plant and the economy of the unit is based on the incentives, concessions & exemptions as promised in the "Rules regarding grant of Incentives, Concessions & Facilities to Industrial Units in Himachal Pradesh 2004" (Paragraph-47)
(ix). Had the petitioner been aware that the petitioner shall have to pay the said tax, the petitioner would not have acted to its prejudice by establishing a new unit in the remote and difficult hilly terrain of village Baga, backward Panchayat, Mangal, District Solan by investing around Rs. 2000 Crore; (Paragraph-48)
(x). That had petitioner No. 1 has taken sizeable loans for setting up the said new industrial unit and has created considerable liabilities and commitments for the purpose based on the commitments of Government of Himachal Pradesh as made by it in "Rules regarding grant of Incentives, Concessions & Facilities to Industrial Units in Himachal Pradesh 2004" under its Industrial Policy 2004 which in turn, are based on the fulfillment of commitments of Government of Himachal Pradesh as made by it in the said policy; (Paragraph-49)
The petitioner had made a representation to the Principal Secretary, Excise & Taxation, Government of Himachal Pradesh, Shimla requesting for issuance of notification in consonance to Clause-19.1 of ''Rules 2004.''
The Excise & Taxation Commissioner vide its letter dated 5.4.2010 informed the petitioner that the tax under the ''Act 1999'' is payable by the person in-charge of the goods and not by the manufacturing industrial unit. It has also been indicated in the above letter that since the tax is not to be paid by the manufacturing unit, as such, there is no necessity for issuance of notification under the under ''Rule 19.1''.
The respondents No. 1, 2 and 5 i.e. Principal Secretary, Excise & Taxation Commissioner and In-Charge Multi Purpose Barrier-cum- Excise & Taxation Officer has contended in their reply in reference to paragraphs-42 to 50 of the writ petition as below:-
The tax under Act 1999 can be realized from the petitioner under Sections 3, 4 and 4A of Act 1999 as the said tax is not covered under para 19.1 of the Incentives Rules and, as such, the actions of the replying respondents were just, legal and valid and the doctrine of promissory estopple is not applicable in the facts and circumstances of the case and the realization of tax was not against the principles of equity and natural justice.
Whereas per reply of respondents No. 3 and 4 i.e. of Industries Department, admittedly, tax free zone is under category-C which is exempted from all taxes. The Industries Department i.e. respondents No. 3 and 4 in Para-52.1 of its reply has contended as below:
52.1 Rule 19.1 of the Rules regarding grant of Incentives. Concessions and Facilities to Industrial Units in Himachal Pradesh-2004 envisages that the industrial units set up on the "Tax Free Zone" (Category "C" Areas) shall be exempted from payment of all State taxes for a period of 10 years from the date of commencement of production or from the date of the notification to be issued by the concerned department(s), whichever is later.
The State Government vide its order dated 22.11.2010 (Annexure P-12) informed the petitioner that the State has neither with-held nor intends to with-hold any incentives whatsoever due to any business enterprise including the petitioner. The liability to pay tax under ''Act 1999'' cannot be covered under Para 19.1 of the aforesaid scheme as the tax liability under the ''Act 1999'' is payable by a person in-charge of mechanical vehicle on which the goods are carried.
It has been submitted by the petitioner that the fact of stock transfer has been specifically mentioned in the writ petition and in the letter dated 31.8.2010 to the Principal Secretary (Excise & Taxation) to the State of Himachal Pradesh. When the stock transfer was made from 24th February, 2010, the petitioner continued to be the owner of the goods. The stock transfers were made from the new unit to the other unit in order to keep the Plant running and to avoid the piling up of the goods manufactured in village Baga, however, the petitioners were compelled to deposit the tax under ''Act, 1999'', which is also a State Tax levied on goods manufactured in the new industrial unit set up in the Tax Free Zone of Category "C".
The attention of this Court has been invited by learned counsel for the petitioner in reference to Para 19.1 of Incentives ''Rules-2004'' as below:
(i). New Industrial Unit is exempt from payment of tax for 10 years situated in Category ''C'' Tax Free Zone.
(ii). No State Tax can be realized from the Units situated in Tax Free Zone. (except cess, fees & royalty)
[Royalty on Lime Stone, Fees and registration fees, licence fees; Cess - Water cess - education cess are the exception].
(iii). Unit situated in Tax Free Zone has to produce goods and transport goods since it cannot store and pile up goods in the Unit itself and the unit has to make stock transfer of the goods to other Units.
(iv). New Unit is not liable for tax under ''Act 1999''.
(v). Had the Unit of petitioner not been situated in Tax Free Zone, petitioner could have made the payment of the tax under ''Act 1999''.
(vi). Though the ''Act 1999'' is not challenged but ''Act 1999'' would not apply to a new Industrial Unit situated in Tax Free Zone.
(vii). No Tax can be realized from the petitioner in view of Para 19.1 of ''Rules-2004''.
In reference to the submission of Mr. Bharatji Aggarwal, learned counsel for and on behalf of the petitioner, following aspects are highlighted:
(i)The tax is laid on passengers and goods, whereas, the amount varies in the case of passengers according to the distance travelled. Attention of this Court has been invited to a decision of Supreme Court in Sainik Motors, Jodhpur and Others Vs. The State of Rajasthan, where in reference to Rajasthan Passengers & Goods Taxation Act, 1959 the tax is levied on passengers and goods and not on income or fares and freight where Hon''ble Supreme Court vide Paragraphs-7, 9 and 10 held as under:-
The petitioners challenged the Act, the Rules and the notification from many angles, in the petition; but at the hearing before us, the arguments were more restrained. The main objection to the Act is that the tax has not been laid upon "passengers and goods" as authorized by Entry No. 56 but upon "fares and freights", which are different entities, and in support of the contention that there is a difference, reference is made to Entry No. 89 of the Union List, where power is conferred to tax "fares and freights". It is submitted that a tax on fares and freights being a different tax, cannot be levied under the Entry, and thus, the tax is without authority of law."
9... .... It is clear that if the tax were laid on passengers irrespective of the distance travelled by them, it would lead to anomalies if the amount charged be the same in every case. This is additionally clear in the case of goods where the weight, bulk or nature of the goods may be different, and a scale of payments must inevitably be devised. Though the tax is laid on the passengers and goods, the amount varies in the case of passengers according to the distance travelled, and in case of goods because the freight must necessarily differ on account of weight bulk and nature of the goods transported. The tax, however, is still a tax on passengers and goods, and the argument that that not so, is not sound.
We are also of the opinion that no inter State trade, commerce or intercourse is effected. The tax is for the purposes of State, and falls upon passengers and goods carried by motor vehicles within the State. ... .....
The expression "Carried by Road" is an adjective clause qualifying goods and passengers of the said description that have to be taxed under the entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so, taxes levied on goods have to be recovered from some persons having an intimate and direct connection or nexus with the goods. While dealing with the Bihar Taxation on Passengers Carried by Public Service Motor Act, enacted under entry 56 list II of schedule 7 of the Constitution of India, the Constitution Bench of Supreme Court has considered that entry 56 list II refers to taxes on goods and passengers carried by road or on inland water ways. It is clear that the State Legislature is authorized to levy taxes on goods by this entry. The Hon''ble Supreme Court in Rai Ramkrishna and Others Vs. The State of Bihar, , (At Page 1672 in Para-9), has observed as below:
.... .... The entries in the Seventh Schedule conferring legislative power on the Legislatures in question must receive the widest denotation. This position is not disputed. Entry 56 of the Second List refers to taxes on goods and passengers carried by road or on inland waterways. It is clear that the State Legislatures are authorized to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression "carried by road or on inland waterways" is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so, taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers, who are carried are taxed under the entry. But, usually, it would be inexpedient, if not impossible to recover the tax directly from the passengers and so, it would be expedient and convenient to provide for the recovery of the said tax from the owners of the vehicles themselves. That is why it is not disputed by Mr. Setalvad that in enacting a law under entry 56 in respect of taxes imposed on passengers carried by road or inland waterways, it would be perfectly competent to the Legislature to devise a machinery for the recovery of the said tax by requiring the bus operators or bus owners to pay the said tax.
(iii) The question about the validity of levy and collection of tax on passenger and goods carried by State carriage and public carrier vehicles was challenged in reference to Kerala Motor Vehicles (Taxation of Passengers & Goods) Act. The Constitution Bench of Hon''ble Supreme Court in A.S. Karthikeyan and Others Vs. State of Kerala and Another, has held that the incidence of tax is on the goods and the power to enact such legislative measure can be derived from Entry 56 of the State List which provides for levy of taxes on goods and passengers carried by road or on inland waterways, hence, it is a tax on the owners of the goods and the owners of the goods are liable to pay tax to the Government but the tax is on the owner of the goods.
In view of above observations in present case, since it is a State tax, which has not been excluded from para / Rule 19.1, and since it is a tax on goods manufactured in the new industrial unit, set up in a tax free zone, hence no tax can be realized for a period of 10 years from the date of commencement of the commercial production, even if a notification is not issued by respondent No. 2 under Para 19.1. In A.S. Karthikeyan''s case (supra), the Hon''ble Supreme Court, in Paragraphs-27 and 28, has observed as below:-
The three principal contentions on behalf of the operators with regard to the legality of Acts 18 and 34 of 1971 are these First, the impugned provisions amount to a tax not on passengers and goods but on the income of operators. Second, the impugned provisions as to retrospective validation of levy and collection are a tax on amounts which are collected as fare and, therefore retrospectively it is a tax on fare and fare alone. Third the retrospective validation is unreasonable because the operators are made liable for tax which they did not in fact collect. All these contentions turn on the question as to whether tax was included as an element in the fare, which became effective from 1 July, 1963."
"28. The question whether the statutes, viz., Act 25 of 1963 and Act 18 of 1971 impose a tax on passengers and owners of goods or is a tax on the income of operators has been rightly held by the Kerala High Court in Thomman case (supra) and this case to be a tax on passengers and goods. This Court in M/s. Sainik Motors, Jodhpur & Ors. Versus The State of Rajasthan, construed the Rajasthan Passengers & Goods Taxation Act, 1959 and held that the incidence of the tax was upon passengers and goods and not upon the income of the operators of stage carriages though "the measure of the tax is furnished by the amount of fare and freight charged." The power to enact such legislative measure is derived from Entry 56 of the State List. The Entry provides "Taxes on goods and passengers carried by road or on inland waterways." In Sainik Motors case (Supra), Section 3 provided "there shall be levied, charged and paid to the State Government a tax on all fares and freights in respect of passengers carried and goods transported by motor vehicles at such rates which are thereafter set out." Section 4 in Sainik Motors case (supra), provided that the "tax should be collected by the owner of the motor vehicles and paid to the State Government in the prescribed manner." Though there is no comparable provision in the present case to Section 4 in Sainik Motors case (supra) as to method of collection of tax the various provisions like levy and payment before amendment of Section 3 and levy and collection after amendment of that section, composition of tax in Section 4, submission of return in Section 5, procedure where no payment is made in Section 7, fares and freights escaping assessment in Section 8, penalty for non payment of tax in Section 9 indicate that the tax is on passengers and owners of goods and the operators collect the tax. It is obvious that when passengers and owners of goods pay the tax the Government requires an agency to collect such tax because these taxes are payable to the Government. The operators of stage carriage and public carriers are agents of the Government to collect these taxes. The composition of tax which is allowed to operators also shows that it is a tax on passengers and owners of goods and the composition is a convenient mode of payment by operators who collect the tax.
(iv) (a) The method of collection does not necessary change the nature of tax in view of observation of Hon''ble Supreme Court in STC (Vol.VIII) 666, Adarsh Bhandar versus Sales Tax Officer, Aligarh.
(b) Under ''Act 1999'', the tax is on goods specified in Column (2) of Schedule-15, carried by road by vehicle u/s 3 of ''Act 1999'' and mode of payment of tax (under Section 4 of ''Act 1999'') is by every person in charge of (vehicle or goods) nevertheless it is tax on goods.
(c) In present case, the respondent / State is imposing taxes on goods which is manufactured in new Unit which is exempted for all State taxes for 10 years.
(d) The mode of payment of tax shall not change the nature of tax to be paid in view of the decision of Hon''ble Supreme Court in Venkateshwara Theatre Vs. State of Andhra Pradesh and Others, wherein Hon''ble Supreme Court has observed in Paragraph-15 as under:-
In the instant case, we find that prior to the enactment of Act 24 of 1984, Section 4 provided for levy of entertainment tax on the basis of each payment for admission to the cinema theatre and u/s 4-C, in respect of entertainments held within the jurisdiction of a local authority whose population did not exceed 25,000 the tax was levied on the basis of the prescribed percentage of the gross collection capacity per show. In other words, there were two modes for levy of the tax, one on the basis of the actual number of persons admitted to each show and the other on the basis of the percentage of the gross collection capacity per show. As a result, of the amendments introduced by Act 24 of 1984, the system for levy of tax on the basis of number of persons actually admitted to each show was dispensed with and the tax was to be levied on the basis of the percentage of the gross collection capacity per show and different percentages were prescribed depending on the type of the theatre and the nature of the local area where it was situated. u/s 5, an option was given to pay a tax on the basis of the prescribed percentage fixed for a fixed number of shows in a week irrespective of the number of shows actually held. It is not disputed that the tax as it was being levied prior to January 1, 1984, i.e. before the amendment of Section 4 by Act 24 of 1984, was a tax on entertainment falling within the ambit of Entry 62 of List II. The question is whether the alteration in the said mode of levy of tax by Act 24 of 1984 has the effect of altering the nature of the tax in a way that it has ceased to be a tax on entertainments and falls beyond the field of legislative competence conferred on the State Legislature by Entry 62 of List II. In our view, the said question must be answered in the negative. The fact that instead of tax being levied on the basis of the payment for admission made by the persons, actually admitted in the theatre it is being levied on the basis of the gross collection capacity per show calculated on the basis of the notional aggregate of all the payments for admission which the proprietor would realize per show if all the seats or accommodation in respect of the place of entertainment are occupied and calculated at the maximum rate of payments for admission, would not, in our opinion, alter the nature of the tax or the subject-matter of the tax which continues to be a tax on entertainment. The mode of levy based on ''per payment for admission'' prescribed u/s 4(1) prior to amendment by Act 24 of 1984 necessitated enquiry into the number of shows held at the theatre and the number of persons admitted to a cinema theatre for each show and gave room for abuse both on the part of proprietor as well as other officers incharge of assessment and collection of tax. The mode of levy or measure of the tax prescribed u/s 4(1), as substituted by Act 24 of 1984, is a more convenient mode of levy of the tax inasmuch as it dispenses with the need to verify or enquire into the number of persons admitted to each show and to verify the correctness or otherwise of the returns submitted by the proprietor containing the number of persons admitted to each show and the amount of tax collected.
(v) In respect of Rule 19.1 of Incentive Rules, the Industrial Department of the State of Himachal Pradesh in its reply of Para-52.1, has indicated that the petitioner is entitled for exemption of payment of any State taxes including the tax which has been illegally realized, as such, in view of the decision of Hon''ble Supreme Court in Vadilal Chemicals Ltd. Vs. The State of Andhra Pradesh and Others, the petitioner is entitled for the exemption of any State taxes. For convenience, Para-23 of Vadilal''s case (supra) is extracted as below:-
... .... The Department of Industries and Commerce which was responsible for the issuance of the 1993 G.O. accepted the appellant as an eligible industry for the benefits. Apart from the fact that it can be assumed that the Department of Industries was in the best position to construe its own order, we can also assume that in framing the scheme and granting eligibility to the appellant all the departments of the State Government involved in the process had been duly consulted. The State, which is represented by the Departments, can only speak with one voice. Having regard to the language of the 1993 G.O. it was the view expressed by the Department of Industries which must be taken to be that voice.
(vi) The principle of Promissory Estoppel also applies regarding exemption of all State taxes to the petitioner being a new unit situated in tax free zone for 10 years from the date of commercial production. In this respect, reliance could be placed on the decision of Hon''ble Supreme Court in State of H.P. & Ors. Versus Gujarat Ambuja Cement Ltd. & Anr. (2005) 6 SCC 499 and for convenience relevant extract of Para-9 and Para-34 is given as below:
... .... ... The High Court allowed the writ petitions by the impugned judgment and quashed the orders of the Sales Tax Authorities, inter alia, holding as follows:
''So long as the petitioners satisfied the eligibility criteria prescribed in the Revised Incentive Rules, as amended from time to time, they would be entitled to the benefits and incentives extended under the Rules and the statutory notification is not a must or an essential prerequisite for the petitioners to assert/enforce such rights. The statutory notifications issued under the relevant taxing enactments only go to ratify and accord statutory recognition also to what was originally, planned and proclaimed as a policy decision and guidelines. Viewed thus, the petitioners would in our view be entitled to the benefit of the incentives from the date of commencement of commercial production on 26.9.1995. As held in State of Bihar V. Suprabhat Steel Ltd. It would not be permissible for even the State Government to override or negate the incentives and benefits which any industrial unit would be otherwise entitled to under the incentive policy, proclaimed by the Government itself.
Xxx xxx xxx
Xxx xxx xxx
Judged from the above background, the appellant''s plea about non-entitlement of Respondent 1 Company to the sales tax benefits and exemptions is clearly misconceived. The High Court''s judgment does not suffer from any infirmity to warrant interference.
(vii) The Hon''ble Supreme Court has also held in Pepsico India Holdings P. Ltd. Vs. State of Kerala and Others, that the respondent / State is bound by doctrine of promissory estoppel to grant the sales tax exemption promised to the entrepreneurs. The relevant paragraph is extracted as below:
It was furthermore observed U.P. Power Corporation Ltd. and Another Vs. Sant Steels and Alloys (P) Ltd. and Others,
In this 21st century, when there is global economy, the question of faith is very important. The Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the short-sightedness of governance. Therefore, in order to keep the faith of the people, the Government of its instrumentality should abide by their commitments. In this context, the action taken by the appellant Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith.
(viii) Even though ''Rule 19.1'' refers the words "shall be exempted from payment of any State taxes and duties for a period of 10 years from the date of commencement of commercial production of the goods", the word "any" shall be treated as "all States taxes" as mentioned by the Industries Department in its reply. Relying on the decision of Lucknow Development Authority Vs. M.K. Gupta, , Hon''ble Supreme Court has observed that the word "any State taxes" means "all State taxes" and the word "any" has to be read as "all". Similar view has also been taken by the Hon''ble Supreme Court in P. Prabhakaran Vs. P. Jayarajan, In K.Prabhakaran (supra), question was whether in reference to Representation of Peoples Act, 1951, the word "any offence" mentioned in Section 8(3) of the Representation of Peoples Act, 1951 should mean "a single offence" or the word "any" shall include "all offences". The Hon''ble Supreme Court has observed that the word "any" qualifying the noun, offence shall not be for single offence. In view of the above observations, made by the Hon''ble Supreme Court, in the present case also, ''Rule 19.1'' of the Incentive Rules, the exemption from payment of any State taxes for a period of 10 years shall include "all State taxes" as admitted by the Department of Industry.
Department of Industries has admitted in its reply (para 52.1) that the petitioner shall be exempted from all State taxes while Excise & Taxation Department is saying that the petitioner is liable for payment of tax in respect of the goods transferred by it by way of stock transfer from the new industrial unit at Baga to the petitioner''s other unit at Nalagarh, hence, the different interpretation given by the Taxation Department cannot be accepted.
Industrial Policy was framed by the State Govt. and the Rules regarding Industrial Policy granting incentive, exemption and concession to the new industrial units established in the Tax Free Zone was directly concerned with the Industries Department, hence, the Industries Department was responsible for interpreting the Industrial Policy. In this respect, it is necessary to refer the case of State of Bihar and Others Vs. M/s. Suprabhat Steel Limited and Others, , where the Hon''ble Supreme Court, in para-7, has observed as below:-
Coming to the second question, namely the issuance of notification by the State Government in exercise of power u/s 7 of the Bihar Finance Act, it is true that issuance of such notifications entitled the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the Incentive Policy itself. The Industrial Incentive Policy is issued by the State Government after such Policy is approved by the Cabinet itself. The issuance of the notification u/s 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the Industrial Policy itself. In this view of the matter, any notification issued by the Government Order in exercise of power u/s 7 of the Bihar Finance Act, if is found to be repugnant to the Industrial Policy declared in a Government Resolution, then the said notification must be held to be bad to that extent. In the case in hand, the notification issued by the State Government on 4th of April, 1994 has been examined by the High Court and has been found, rightly, to be contrary to the Industrial Incentive Policy, more particularly the Policy engrafted in Clause 10.4(i)(b). Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant to sub-clause (b) of Clause 10.4(i) and we do not find any error committed by the High Court in striking down the said notification. We are not persuaded to accept the contention of Mr. Dwivedi that it would be open for the Government to issue a notification in exercise of power u/s 7 of the Bihar Finance Act, which may override the incentive policy itself. In our considered opinion the expression "such conditions and restrictions as it may impose" in sub-section (3) of Section 7 of the Bihar Finance Act will not authorize the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general Policy Resolution itself. In this view of the matter, we see no illegality with the impugned judgment of the High Court in striking down a part of the notification dated 4th of April, 1994.
In its representation dated 1.4.2010 to the Excise & Taxation Commissioner, the petitioner has very categorically submitted before the respondents that the petitioner''s unit is situated in Category "C" area i.e. Tax Free Zone and its unit and goods manufactured is exempted from any State taxes. However, ''Act 1999'' is for the purpose of levy of tax on certain goods carried by road and Section 3 of ''Act 1999'' is charging section which provides for levy of tax on goods specified in Column 2 of schedule 1. Charge of tax is on goods u/s 3(2) of ''Act 1999'', whereas, Section 4 of ''Act 1999'' provides for mode of payment by person in-charge of goods or person in-charge of mechanical vehicle and the petitioner has very categorically mentioned that while making stock transfer of ''clinker'' from the new unit of the petitioner situate at Baga in Tax Free Zone to the petitioner''s another unit situate at Nalagarh, the petitioner continues to be the owner and person in charge of the ''clinker'' manufactured in the new industrial unit situate in Tax Free Zone, whereas, the respondent is also not denying the fact that the unit is located in backward Panchayat and is eligible to tax exemption / concession as per notified scheme.
Since exemption has been granted from all State taxes excluding Cess, Fees and Royalties and since the tax under ''Act, 1999'' is also a State tax, which has not been excluded in Rule / Para 19.1 of the Incentive Rules, hence, the petitioner is not liable for payment of any State tax for a period of 10 years from the date of starting the commercial production of the goods i.e. 24th February, 2010.
On analysis of letter dated 22.11.2010 (Annexure P-12) of Principal Secretary (E&T), it appears that the State Government does not intend to withhold any incentives whatsoever due to any business enterprise including the petitioner as the State Government in its letter dated 22.11.2010 has specifically mentioned as below:
The liability to pay the tax is with the transporter by over-looking the words "the person in charge of the goods". The benefit of exemption is being denied to the petitioner, which is admittedly manufacturing the goods in the Tax Tree Zone.
Admittedly, ''Act 1999'' has been enacted under Entry 56 List II of the Seventh Schedule of the Constitution of India, which provides as under:-
Taxes on goods and passengers carried by road or on inland waterways.
The aforesaid entry 56 refers to the taxes on goods carried by road or on inland waterways. It is clear that the State Legislature is authorized to levy taxes on goods by this entry. The words "carried by road" or "on inland waterways" are only an adjective qualifying the "goods".
It is a tax on goods under this entry and it is the person / owner in-charge of the goods who has to pay the taxes.
The following aspects which emerge from the above analysis are as below:
(i). Section 3(1) and 3(2) of ''Act 1999'' clearly establishes that it is a tax on goods specified in Column-2 of Schedule-I which are carried by road by means of mechanical vehicle or Cart except by Railways or Airways.
(ii). The tax is either to be paid by the person incharge of goods or person in-charge of the mechanical vehicle or cart in or on which goods are being carried;
(iii). The mode of transportation and distance up to which the goods are carried is only for the purposes of calculation of tax which is imposed on the goods specified in Column-2 of Schedule-I.
(iv). In reference to ''Act 1999'' the tax is paid by the petitioner who is the owner as well as incharge of the goods and even in the other case the incidence of tax is to be borne by the petitioner who is to reimburse the same to the transporter who at that time is the incharge of the mechanical vehicles. Thus, in both the cases the incidence of tax is on the petitioner.
(v). The mode of collection cannot determine the nature of the tax and the liability.
(vi). In the present case, for all intents and purpose, the liability to pay tax is of the petitioner who is the owner / incharge of the goods.
(vii). Admittedly, the goods which are being manufactured by new Industrial Unit of the petitioner situated in the Tax Free Zone of backward Panchayat Mangal are the goods which cannot be subjected to state taxes for a period of ten years from the date of its commercial production and hence no tax under ''Act 1999'' can be realized from the petitioner.
This Court is aware of the observations of Hon''ble Supreme Court in Rai Ramkrishna (supra) that the goods as such cannot pay taxes, and so, taxes levied on goods have to be recovered from some persons and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. In the present case also, since the petitioner is the person in charge of the goods which are being sent by way of stock transfer and since it is a tax on the goods under the State ''Act 1999'' and admittedly it is a State tax which has not been excluded from para / Rule 19.1 of the Incentive Rules, hence the petitioner is exempted from paying any State taxes for 10 years from the date of starting commercial production and no tax can be legally realized from the petitioner by way of realizing tax on goods or the vehicle carrying goods under the provision of ''Act 1999''.
In view of the aforesaid analysis, this Court is of the considered view that the petitioners are not liable to pay any tax to the respondents. Therefore, respondents have not to realize in future any tax or State taxes from the petitioners in respect of goods manufactured by it, namely, ''clinker'' and ''cement'' in its new Industrial unit established in backward Panchayat area of village Baga, Tehsil Arki, District Solan to fulfill and meet out the commitment made to the petitioners by the State Government under ''Rules-2004''. The respondents have to refund within three months from the date of judgment the amount earlier realized from the petitioners or the amount deposited by the petitioners under protest. As such, the amount deposited has to be returned to the petitioners along with simple interest at the rate of 9% per annum. In view of the above observations, the writ petition is partly allowed. No order as to costs.