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Judgment
Refusal of the State Government to extend to the petitioner Electricity Tax Exemption in respect of a caustic soda manufacturing unit owned and run by it is what has been brought under challenge in this writ petition. The controversy arises in the backdrop of the following facts:
The petitioner-company has set up a caustic soda manufacturing unit at Binaga in Karwar District of the State of Karnataka. The unit has been in production ever since the year 1975. By an order dated 4th of April, 1975, the Government issued a revised package of incentives with a view to accelerate the process of industrialisation in the State. The revised package came in pursuance of the recommendations made by a high powered co-ordination committee appointed by the Government. One of the incentives offered to entrepreneurs was exemption from payment of electricity tax in respect of New Industrial Investment for a period of 5 years. The petitioners case in the present writ petition is that pursuant to the sanction granted by the Government of India, to the expansion of its existing unit, the petitioner made further investments so as to raise the capacity of the said unit from 100 Metric Tonnes to 150 Metric Tonnes per day. According to the petitioner, since ''effective steps'' had been taken for substantial expansion of the unit between 1-1-1975 and 31st March, 1977, it was entitled to the benefit of exemption from payment of electricity tax in terms of the packages of incentives referred to above for a period of 5 years from July, 1979. A claim for the grant of the benefit was made, which after prolonged correspondence was approved by the respondent-Board, by its Memos dated 18th June and 4th July, 1984. Based on the said Memos the petitioner claims to be entitled to a refund of Rs. 87,00,000/- paid by it towards the electricity tax on the additional power consumed by the unit. Instead of granting the said refund, however the Memos issued to the petitioner were by a communication dated 13th of December, 1984, withdrawn without giving any reason but ostensibly on the ground that the petitioner was not entitled to the benefit claimed. The petitioners appear to have taken up the matter with the Government in terms of two representations dated 15th June and 6th of July, 1984, which upon consideration were turned down in terms of a communication dated 8th January, 1987 addressed to the petitioner with the remark that the benefit of the exemption from payment of electricity tax could not be extended to it. Aggrieved the petitioner has questioned in the present writ petition Memo dated 13th of December, 1984 issued by the Board and letter dated 8th of January, 1987 from the State Government holding it to be ineligible for the grant of the incentive in question.
Mr. Ramaswamy Iyengar, learned Counsel appearing for the petitioner strenuously argued that the denial of the benefit claimed by the petitioner was illegal having regard to the fact that the petitioner had in terms of the notification introducing the incentives taken effective steps during the period stipulated by the said order i.e., between 1st January, 1975 and 31st of March, 1977. He contended that the expression ''effective steps'' was defined by the Central out right grant of Subsidy Scheme 1971, and included placement of firm orders for a substantial part of the plant and machinery required for the Industrial Unit. He urged on the basis of the averments made in the writ petition that the petitioner had placed firm orders for plant and machinery within the stipulated period for the expansion of the unit which fact, argued the learned Counsel had not been disputed by the respondents in the counter-affidavit filed by them. The conditions prescribed for the grant of the incentive were according to Mr. Iyengar, fulfilled by the petitioner thereby rendering the refusal of the respondent illegal and arbitrary. He urged that looking to the purpose behind the introduction of the revised incentives the case set up by the respondents that the said incentives were available only where new Industrial Units are established was wholly untenable and denial of the benefit on that ground unjustified. The petitioner-company according to Mr. Iyengar, could have set up a New Industrial Unit in some other area qualifying for the grant of an incentive instead of utilising the available resources for expanding the existing unit had it known that the investments made on expansion of existing units would not qualify for the grant of the benefit.
Mr. Narasimha Murthy, learned Counsel appearing for the respondents-Board, on the other hand urged that the benefit in question was available only to New Industrial Units and not in cases where an entrepreneur made additional investment for the expansion of any existing unit. He submitted that on the language employed in the Government Order, the only interpretation possible was the one suggested by the respondents and that since the petitioner had not admittedly set up any New Industrial Unit, the question of extending the benefit of any one of the incentive included in the package did not arise. He relied upon the judgment of the Supreme Court in Union of India and Others v M/s. Wood Papers Limited and Another, AIR 1991 SC 2049, in support of his submission that in interpreting exemption notifications the Court has to give a restricted meaning and interpretation to the document at the stage of examining the eligibility of the unit to the grant of any such benefit.
The only question that falls for consideration is as to whether the petitioner was on a true and proper construction of Government Order dated 4th April, 1975, entitled to the benefit of exemption from payment of electricity tax. Shorn of details, the Government Order reads thus:
"In modification of the Government Orders read above, the Governor of Karnataka is pleased to sanction the following revised package of incentive and concessions to entrepreneurs for starting new Industry in Karnataka State.
xxx xxx xxx xxx
Item No. 7. Electricity Tax: Full exemption of electricity tax will be given for all New Industrial Investment for the first five years in all groups.
xxx xxx xxx xxx
The revised package of incentive and concessions will be available to New Industrial Investment in which effective steps have been taken on or after 1st of January, 1975 and within 31st of March, 1977.
Note:-The term ''Effective Steps'' shall have the meaning assigned to it in the central outright grant of Subsidy Scheme 1971".
A plain reading of the provisions extracted above, would show that the revised package of incentives and concessions is sanctioned for such of the entrepreneurs to start ''New Industries'' in the State of Karnataka. The expression ''New Industries'' would not obviously include Industries that are already established but are under some expansion programme expanded either in relation to their installed capacity or in relation to the related infrastructure or modernisation of the technology used. This is so not only on a plain reading of the order and the meaning that can be assigned to the expression "New Industries" but also in the light of the purpose underlying the grant and the introduction of incentives. The entire effort behind the introduction of the revised package was to make the same attractive so as to achieve rapid industrialisation of the State by alluring entrepreneur from other State and preventing those already in the State from fleeing to the greener pastures elsewhere. The emphasis in both the situations was upon new industries being set up as distinct from ''Industries'' that are already there but were simply being expanded. There is therefore considerable merit in the submission made by Mr. Murthy, that the package did not envisage extending the benefit of the incentives to the units that were already existing but were simply expanded in the matters of their installed manufacturing capacity.
On behalf of the petitioners it was urged that the expression used in Clause VII, supra and in other parts of the order was "New Industrial Investments" and not ''New Industries''. It was urged that New Industrial Investments could be made even in relation to an existing Industrial Unit and did not necessarily comprehend only a New Industrial Unit as contended by the respondents. The argument does appear attractive but is not equally sound. It is true that Clause VII as also the other parts of the order particularly the ones extracted herein above refer to the incentives and concessions being available to ''New Industrial Investment'' which need not necessarily be made in setting up New Industries, but in the absence of any definition of the expression of ''New Industrial Investment'' the same has to be understood to mean only such investment as is made for the first time, in any industrial venture. Such an investment shall treated to be new in case it is made in respect of a New Industry. The position would have been indeed different if the expression used was the same throughout the order so that it could be given a liberal meaning to include investments made for the first time even on an existing unit. The difficulty however arises because of the expression used in the operative portion of the Government Order which sanctions the revised incentives and concessions to entrepreneurs for starting ''New Industries''. On a harmonious construction of the Government Order the expression ''New Industrial Investment'' shall have to take its colour from the expression ''New Industries''. Any other interpretation would render the order otiose for while in one part it may sanction the incentive only for starting new industries in the other it may be interpreted to be available to even such industries as are already in existence, but are being modernised or expanded. I may recall what Justice Holmes has said about the relation between a word and the context in which it is used.
"A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used".
In M/s. Wood Papers Limited''s, case, supra, the Supreme Court has laid down the rule of interpretation that the Courts are supposed to follow and the approach to be adopted while interpreting an exemption notification. The following passage from the decision is apt in this regard.
"Literally exemption, is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact an exemption provision is like any exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment state revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly, speaking liberal and strict constructions of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction."
In the circumstances, therefore the notification will have to be interpreted strictly for purposes of determining the eligibility of the unit claiming benefit under the same. Interpreted harmoniously in the light of the view expressed by the Supreme Court, it is difficult to hold that the benefits admissible under the notification would be available even to existing industries as contended by the petitioner. In that view of the matter therefore the question whether the petitioner had taken any ''effective steps'' by placing firm orders for the plant and machinery required for its expansion programme, recedes into the background. Since the notification did not on a proper interpretation of the same, extend any promise to the existing unit holders, the question of any such benefit becoming due to them, on the principles of the equitable or promissory estoppel also does not arise.
In the result, there is no merit in this petition which is dismissed but in the circumstances without any orders as to costs.