ORDER
In the circumstances stated above, M/s. Peekay Re-rolling Mills (P) Ltd. Koyassan Koya Road, Kozhikode is not eligible for STE for the additional investments made for the period 1.7.95 to 31.3.96 and 1.4.96 to 31.3.97 and hence the STE applications for the above period of the unit is hereby rejected.
Sd/-
Director of Industries & Commerce.'
14. A perusal of the above order shows that the appellant's claim had been rejected on the basis of the clarification issued vide letter dated July 5, 2000. A copy of this letter is on record as Annexure 13. In this letter, it was observed as under:
'On the basis of the views of the State Level Committee, Government decided to give the following clarifications to the 7th item in the negative list of industries of the G.O. (MS) No. 169/ 98/IDdated24.11.1998.
(a) All the units based on Electro thermal/Electro chemical processes are not coming under the negative list.
(b) Units having total connected load more than 2500 KVA but cost of power is less than 25% of cost of production are coming under negative list.
(c) Units having total connected load less than 2500 KVA but cost of power is more than 25% of the cost of production are also coming under negative list.
(d) The units having total connected load of less than 2500 KVA and also cost of power is less than 25% of the cost of production will not come under negative list.'
15. It was in view of the above clarification that the benefit of exemption was denied to the appellant. The ground was that the unit had a total connected load of more than 2500 KVA. The cost factor as mentioned in the notification of November 27, 1993 was totally ignored.
16. Mr. Giri contends that this reason was wholly irrelevant and could not be the basis of the rejection of the claim. However, on behalf of the respondents, Mr. Raju Joseph has submitted that this condition had been laid down vide notification dated November 27, 1993. It had been rightly invoked by the authority and that the order was in conformity with the conditions stipulated in this order.
17. A perusal of the notification dated November 27, 1993 shows that it was issued by the Department of Industries. The notification refers to Government Orders dated December 6, 1991 and May 28, 1993. A reference has also been made to D.O. Letter dated July 15, 1993 issued by the Director of Industries and Commerce. This notification does not refer to the statutory notification regarding the reduction in the rate of tax to industrial units. It did not refer to the Act. Under the statute, the Department of Industries had no power to deny or grant any relief. Still further, in this notification, it was inter alia provided as under:
'In the Government Order read as 1st paper above, the pattern of State Investment Subsidy has been laid down. There are certain industries, which would develop on their own without investment subsidy or any other kind of Governmental assistance. Due to over-all power shortage in the State, power-intensive units cannot be encouraged by giving subsidy. There is also the need for protecting the existing units by ensuring that more units do not come up in sectors, which are suffering from excess capacity. Hence, after considering the matter, Government issued orders in the Government Order read as 2nd paper above, making certain industries ineligible for State Investment Subsidy and certain other assistance. Representations have been received from some industries against the inclusion in the negative list. Government have reviewed the matter carefully and decided that certain modifications are necessary and accordingly they order that the following industries will not be eligible for State Investment Subsidy:-
1. XX XX XX xx6. XX XX XX XX7. Power intensive units based on Electro thermal/Electro chemical processors or units where total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of cost of production of the items manufactured except where the units generate their power requirements in excess of 2500 KVA of contract load by own captive power.'
18. A perusal of the above extract from the notification shows that due to power shortage, the Government did not want to encourage the power intensive units 'by giving subsidy'. The allied object was to discourage the setting up of new units 'in sectors which are suffering from excess capacity'. Thus, the Government had decided that power intensive units as mentioned in Clause 7, 'will not be eligible for State Investment Subsidy.' Still further, in paragraph 2, it was provided that 'all units in the above list provisionally registered on or after 31.12.1993, will not be eligible for the State Investment Subsidy.' Despite these categoric conditions stipulated in the order, Mr. Raju Joseph contended that in view of this notification, the appellant was not entitled to the grant of exemption. Is it so?
19. Mr. Giri has pointed out and we think rightly, that the notification dated November 27, 1993 does not refer to the Sales Tax Act at all. In fact, it does not refer to the notification dated November 4, 1993. A perusal of the documents shows that the reference has been made only to the two Government Orders dated December 6, 1991 and May 28, 1993. Reference has also been made to the D.O. Letter dated July 15, 1993. However, the document clearly shows that the authority was not even remotely adverting to the notification issued under Section 10 of the Kerala General Sales Tax Act, 1963. Thus, there was no intention to modify the notification dated November 4, 1993. Another fact, which deserves mention, is that the notification dated November 27, 1993 had not been issued by any authority under the Sales Tax Act. Still further, it is the admitted position that the Industries Department, even under the Rules of Business, has no connection with the Department of Taxes.
20. In this context, it deserves mention that Section 10 specifically provides that the Government can, if it is satisfied that it is in public interest to do so, grant exemption or reduction in rate of tax 'by notification in the Official Gazette.' The relief can be granted 'either prospectively or retrospectively in respect of any tax payable under the Act'. It can be made 'subject to such restrictions and conditions as may be specified in the notification.' Still further, under Clause (3), the Government can 'cancel or vary any notification issued under Sub-section (1) 'by notification in the Gazette.' On a perusal of the notification dated November 27, 1993, it appears clear to us that no intention to modify or vary the notification dated November 4, 1993 can be inferred from the document.
21. There is yet another aspect of the matter. In Section 2(xvA) of the Act, the definition of notification was inserted with effect from April 1, 1998. It was provided as under:
'(xvA) 'Notification' means a notification issued by the Government, under the provisions of this Act and published in the Gazette.'
A perusal of the above definition shows that any notification relating to the provisions of this Act has to be published in the Gazette. The apparent intention was that such a notification should be referable to the provisions of the Act and that the decision must be taken by an authority under the Act. A number of notifications have been collectively placed on record at Annexure 19. These clearly indicate that whenever the Government wanted to vary any earlier notification, it specifically issued a notification with reference to the relevant provision. The notification always indicated that it was under the Kerala General Sales Tax Act. Every amendment of the notification at Annexure 2 was duly notified. By way of illustration, the notification issued in 1994 may be re-produced. It reads as under:
'NOTIFICATIONS UNDER THE K.G.S.T. ACT
Amendment to S.R.O. No. 1729/93
S.R.O. No. 404/94:- In exercise of the powers conferred by Section 10 of the Kerala General Sales Tax Act, 1963 (Act 15 of the 1963), the Government of Kerala having considered it necessary in the public interest so to do, hereby make the following amendment to the Notification G.O. (P) No. 155/93/TD dated 3rd November 1994, published as S.R.O. No. 1729/93 in the Kerala Gazette Extraordinary No. 1122 dated 4th November 1993, namely:
In the said notification, after Sub-clause (ix) of Clause 11 of the following shall be inserted, namely:-
'(x) Industrial units manufacturing the following items shall not be eligible for the concessions under this notification:-
1. biscuits
2. cement paints
3. packing cases, tea chests, plywood, splints, veneers, wooden crates and wooden cable drums
4. bricks and tiles'
This notification shall come into force on the 1st day of April, 1994.
Explanatory Note
(This does not form part of the notification but is intended to indicate its general purport)
In the Budget Speech 1994, while announcing tax concessions on biscuits manufactured by small scale industrial units, cement paint and soft wood purchased for the manufacture of packing cases, tea chest, plywood splints and veneers it was also announced that tax exemption now available for industrial units manufacturing these items would not be available from 1.4.1994. The above notification is intended to achieve this object.
(Notn. G.O. (P) No. 49/94/TDdt. 30.3.1994)'
Such instances can be multiplied. It appears that from 1994 to 2000, various notifications had been issued. The latest one, which has been placed on record as part of Annexure 19, was made effective from January, 2000. The relevant portion may be extracted. It reads as under:
'NOTIFICATIONS OF 2000 & 2001
Modification to the exemptions granted to S.R.O. No. 1729/93
S.R.O. No. 1029/99:- In exercise of the powers conferred by Section 10 of the Kerala General Sales Tax Act, 1963(Act 15 of the 1963), the Government of Kerala, having considered it necessary in the public interest so to do hereby make the following modification to the exemptions granted in Clauses 1 to 7 of the nidification issued in G.O. (P) No. 155/93/TD dated 3rd November, 1994 and published as S.R.O. No. 1729/93 in the Kerala Gazette Extraordinary No. 1122, dated 4th November, 1993, namely::-
xxx xxx xxx xxx xxx xxx xxx xxx 3. This notification shall come into force on the 1st day of January, 2000.'
22. A perusal of the above clearly shows that whenever the Government wanted to amend the notification at Annexure 2, there was a specific reference to S.R.O. No. 1729/1993. There was a clear recital of the provision under which the notification was being issued. An inference of variation could be clearly and categorically drawn. However, the notification dated November 27, 1993 does not even remotely indicate that there was any intention to modify S.R.O. No. 1729/1993 (Annexure 2). Taking all these factors into consideration, we find that the contention as raised on behalf of the respondents that the notification dated November 4, 1993 was modified vide notification dated November 27, 1993, cannot be sustained. It has also not been shown that the Industries Department was competent to amend the Notification dated November 4, 1993 under any provision of the Kerala General Sales Tax Act, 1963.
23. Despite the above position, Mr. Giri has contended that even if it were to be assumed that the notification dated November 27, 1993 was applicable, the appellant could not be denied the benefit. On the other hand, Mr. Joseph submitted that the case is clearly covered by Clause 7.
24. The said clause provides as under:
'Power intensive units based on Electro thermal/Electro chemical processors or units where total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of cost of production of the items manufactured except where the units generate their power requirements in excess of 2500 KVA of contract load by own captive power.'
We are not concerned with any Electro thermal or Electro chemical processors. Thus, this part of the stipulation can be overlooked. The remaining provision contemplates that in the case of a unit where total power requirement exceeds 2500 KVA of contract load and where cost of power is more than 25% of the cost of production, the unit will fall in the negative list. In other words, the stipulation was that the requirement of power must be in excess of 2500 KVA and the expense of the power must exceed 25% of the cost of production. Both the factors had to coexist.
25. Mr. Raju Joseph submits that the two provisions have to be read disjunctively. If so read, every unit consuming electricity in excess of 2500 KVA as well as the units where the consumption was below 2500 KVA but the cost of power exceeded 25% of the cost of production, the concession was not available. This contention cannot be accepted. Firstly, nothing has been placed on record to show that the Department had ever taken such a view in any case. Despite being asked, Mr. Raju Joseph has not been able to show that even when the appellant's contract load of power was only 1500 KVA, the expense on electricity was taken into account while granting exemption vide order dated December 19, 1997. Secondly, a perusal of Clause 7 shows that the expressions 'or' as well as 'and' have been used. The use of different expressions indicates that in a case where Electro thermal or Electro chemical processors were not being used, the twin requirements of load and cost had to be collectively taken into consideration. Admittedly, under the notification of November 4, 1993, the benefit of tax exemption was available to large-scale units. There was stipulation regarding a limit on the use of power. Thus, it is difficult to draw an inference from the plain language of the order dated November 27, 1993 that the Government was taking away the benefit that it had granted only a few days earlier.
26. Faced with this situation, Mr. Raju Joseph has contended that the benefit of tax exemption had been specifically dealt with in paragraph 3. Thus, in the case of the appellant, the claim for tax exemption could not be sustained.
27. Even this contention cannot be sustained. The stipulation in paragraph 2 clearly shows that the provisions of the notification were to govern cases of those units, which had been provisionally registered on or after December 31, 1993. The appellant's unit had been admittedly registered on September 6, 1991. This position is further borne out from paragraph 3 also wherein it was specifically provided that the benefit of tax exemption etc. shall not be admissible 'unless application has been made by the unit for the purpose and received on or before the cut off date viz. 31.12.1993.' Thus, we find that the notification dated November 27, 1993 was not applicable, as the unit had been clearly registered in September, 1991. In any case, even if it were to be assumed the rigour of the notification was attracted, the appellant's case did not fall within the mischief of Clause 7, as nothing has been placed on record to show that its expense on electricity exceeds 25% of the total cost of production. In fact, the impugned order itself indicates that the authority had proceeded on the assumption that the unit was included in the 'negative list even if the cost of power is less than 25% of the cost of production.'
28. There is another aspect of the matter. It is the admitted position that before passing the order dated October 21, 2000 the Director of Industries had not straight away taken the view that the appellant was not entitled to the benefit of tax exemption in the light of the notification dated November 27, 1993. He had felt constrained to seek clarification. This clarification was given by the Government in the Industries Department vide letter dated July 5, 2000. While doing so, the views of the State Level Committee were taken into account. It was observed that the units having connected load in excess of 2500 KVA were included in the negative list even when the 'cost of power is less than 25% of the cost of production.' This was & mere expression of opinion. It was not a decision of the Government. It cannot be read to mean that by the expression of this opinion, the statutory notification dated November 4, 1993 as also the notification dated November 27, 1993 were modified. In fact, a statutory notification cannot be modified by an executive order. Resultantly, the impugned order, which is solely based on the communication dated July 5, 2000, cannot be sustained.
29. Lastly, it deserves mention that the notification dated November 27, 1993 is general. It primarily deals with the grant of subsidy. As against this, the notification dated November 4, 1993 is specific. It deals with the grant of exemption from payment of tax under the Act. In these cases, the special would override the general.
30. No other point has been raised.
31. In view of the above, we find that the order dated October 21, 2000, a copy of which is at Annexure 12 does not conform to the statutory notification dated November 4, 1993. The appellant's case does not fall within the mischief of Clause 7 of the notification dated November 27, 1993. Still further, it is held that the impugned order is based only on a clarificatory letter and not on the statutory notification. It is, thus, vitiated.
32. Resultantly, the appeals are allowed. The impugned order is set aside. The respondent-authority is directed to consider the appellant's claim for grant of exemption in accordance with the observations made above. The needful shall be done within three months from the date of the receipt of a certified copy of this judgment. In the circumstances, the parties are left to bear their own costs.