1 IN THE HIGH COURT OF JHARKHAND AT RANCHI L.P.A No. 385 OF2013With L.P.A No. 386 OF2013--- ACC Limited, a company incorporated under the provision of Indian Companies Act, 1913 having its Registered Office at 121 Maharshi Karve Road, Mumbai – 400020 and having its works at Chaibasa Cememt Works, Jhinkpani, P.O. - Jhinkpani, P.S. Tonto, District Singhbhum West and Sindri Cement Works, District Dhanbad through Mr. Arun Kumar Saxena, Director Plant, Chaibasa Cement Works, ACC Limited. ... Appellant (in both cases) Versus 1.The State of Jharkhand through the Chief Secretary, Government of Jharkhand, Project Building, P.O. - Dhurwa, P.S. Dhurwa, District – Ranchi.(in both cases) 2. The Director of Industries, Department of Industries, Government of Jharkhand, Nepal House Complex, P.O.-Doranda, P.S.-Doranda, Ranchi.(in both cases) 3. Secretary, Commercial Taxes, Department of Revenues, Government of Jharkhand, Nepal House, P.O.- Doranda, P.S. Doranda, District Ranchi. (in both cases) 4. Secretary, Department of Industries, Nepal House, P.O.- Doranda, P.S. Doranda, District Ranchi (in LPA386113) … Respondents With L.P.A No. 129 OF20141. The State of Jharkhand through Director of Industries, Department of Industries, Government of Jharkhand, Nepal House Complex, P.O.-Doranda, P.S.-Doranda, Ranchi.
2. The Director, Department of Industries, Government of Jharkhand, Project Bhawan, H.E.C. Township, P.O. & P.S. Dhurwa, District - Ranchi … Appellant Versus 1. ACC Limited, a company incorporated under the provision of Indian Companies Act, 1913 having its Head Office at 121 Maharshi Karve Road, Mumbai – 400020 and having its works at Chaibasa Cememt Works, Jhinkpani, P.O. - Jhinkpani, P.S. Tonto, District Singhbhum West and Sindri Cement Works, District Dhanbad through Mr. Vasudeo Manohar Kulkarni, Chief Manager (Indirect Taxes), ACC Limited, son of Sri Manohar D.Kulkarni, resident of 6, Saraswati Chandra, opposite Lane No.5, Rambaug Main Road, Kalyan, District-Thane, Maharashtra-421301.
2. The Secretary, Commercial Taxes, Department of Revenues, Government of Jharkhand, officiating at Project Building, P.O. & P.S. Dhurwa, District – Ranchi.
3. The Secretary, Department of Industries, Government of Jharkhand, officiating at Project Building, P.O. & P.S. Dhurwa, District – Ranchi. ..... Respondents --- CORAM: HON'BLE MR.JUSTICE VIRENDER SINGH, CHIEF JUSTICE HON'BLE MR.JUSTICE APARESH KUMAR SINGH --- For the Appellant/ACC :M/s.T.R.Andhyarujina, Senior Advocate & (In LPA385 & 386/2013) Rajiv Ranjan, Ashok Kumar Yadav For the Respondent- State : M/s.Ajit Kumar, AAG, Chanchal Jain, (In LPA385 & 386/2013) Vikash Kumar, Kumar Sudaram, Shishir Suman & Kumar Shivam For the Appellant-State : M/s.Ajit Kumar, AAG, Chanchal Jain, (In LPA129/2014)) Vikash Kumar, Kumar Sudaram, Shishir Suman & Kumar Shivam For the Respondent/ACC :M/s.T.R.Andhyarujina, Senior Advocate, (In LPA1292014) Ujjwal, Rana, Rajiv Ranjan & Ashok Kumar Yadav --- 2 C.A.V On 19.01.2015 Pronounced on 24th February, 2015 Per Virender Singh, CJ.
The three Letters Patent Appeals on hand are directed against the judgment dated 1.10.2013 handed down by the learned Single Judge arising out of two writ petitions (W.P(C) Nos.4633/2010 and 5513/2011), filed by the Associated Cement Limited (for short ACC) and clubbed together. Both ACC and the State of Jharkhand are now aggrieved of the findings returned by the learned Single Judge on one or the other aspect; hence L.P.A Nos.385/2013 and 386/2013 by ACC and L.P.A No.129/2014 by the State of Jharkhand. We have also clubbed these three appeals, which are at admission stage. However, with the consent of the learned counsel of both sides, taken up for their final consideration. Admitted to hearing.
2. In order to appreciate the controversy cropped up for our consideration in its right perspective, it becomes imperative to have the facts of the case in brief:
3. State of Jharkhand formulated a new Jharkhand Industrial Policy (for short Policy of 2001) by notification no.1888/2001, which was made effective from 15.11.2000. Clause 29.11 of Policy of 2001 contemplated special packages for new projects (Mega Units) with an investment of more than Rs.50 crores on case to case basis through negotiation with prospective investors. Clause 17 of the said Policy classifies the State into three categories A, B and C based on location. ACC in terms of the Policy of 2001 wanted revival of its Industrial Unit running into losses and falling under the Category – C, i.e the most backward area. It is in “Chaibasa” as such, made an application to the then Chief Minister stating that since the Chaibasa 3 Unit was not economical/viable and incurring heavy losses for the last 5 years, it (ACC) proposes to install a 12 LTPA Clinkering Plant at Chaibasa with an investment of Rs.270 crores which would also ensure continuity of another unit of ACC at “Sindri” (falling under different category) which would also provide livelihood at Chaibasa and Sindri. The Government was thus requested for grant of incentives and subsidies for this Mega Unit in terms of Policy of 2001. In this regard, certain letters were also written from ACC to the Chief Secretary, Jharkhand, in which a request was made to consider sales tax incentives on total sale and not on incremental sale with a further request to grant interest subsidy. It continued for some time. Thereafter Secretary, Department of Industries (Jharkhand) issued a Notification No.1885 dated 10th June, 2003 specifying the quantum of Capital Investment Incentive Subsidy (to be referred to as 'Incentive Subsidy' only) to be available to different types of Mega Units and other incentives as well. In terms of the aforesaid Notification/Order, for granting Incentive Subsidies to Mega Units, they were classified under the following three categories:- (I) New Industrial Units – in which the capital investment of more than Rs.50 crores has been or is being made in terms of the Industrial Policy – 2001; (II) Existing Industrial Units – presently functioning industrial units in which, by way of expansion/diversification/modernization, capital investment above Rs.50 crores has been or is being made in terms of the Industrial Policy – 2001; and (III) Loss Making, Existing and Functioning Industrial Units – Those existing and functioning industrial units, which are, not sick but which 4 may fall under the category of weak industrial units. Such industrial units, which have been incurring cash losses continuously since last two years. In such industrial units, capital investment of more than Rs.50 crores has been or is being made for expansion/diversification/modernization in terms of the Industrial Policy – 2001.
4. The aforesaid three categories for the purpose of incentives were classified as under:- K - Category (new Industrial Units); Kh - Category (Existing Industrial Units) and Ga - Category (Loss Making Existing and Functional Industrial Units).
5. Within three months of the commencement of commercial production, industrial units were to be granted (up-front) Incentive Subsidy in terms of the classification of different areas of State as under:- (a) 10% - Rs.5 crores maximum (b) 15% - Rs.10 crores maximum (c) 20% - Rs.15 crores maximum 6. After expansion/diversification/modernization, in each financial year, an amount upto the extent of maximum amount of sales tax received from additional production was to be disbursed to the concerned units in the next financial year as Incentive Subsidy. The incentive as per the Policy was to be given to the concerned units from the date the unit commences commercial production, as per the classification of different areas of the State for the time limit, as for Category – A it was 9 years, Category – B10years and Category – C11years.
7. In terms of the Policy of 2001, Secretary, Department of 5 Industries (Jharkhand) prepared a memorandum for consideration of the Cabinet for the final approval of the special package of incentive to ACC. The case was considered by the High Level Committee which recommended grant of special package of incentive to ACC including Incentive Subsidy and other incentives as applicable to the loss making units falling under category–III formulated by the aforesaid Notification No.1885/Order dated 10.6.2003. The Cabinet ulimately approved the memorandum and granted special package of incentive to ACC including Incentive Subsidy and other incentives as applicable to the loss making units as per Clause 29.11 of Policy of 2001 read with Order No.1885 dated 10.6.2003. It reads:- Sl. Provision Estimated No. amount (Rupees in Crores) A Capital Investment Incentive Subsidy after the 15.00 date of commencement of commercial production [As per the Paras “C” (i.e. 'Ga') of Order Memo No.1885] B Electricity Duty Exemption for eleven years from 5.40 the date of commencement of commercial production (estimated on the basis of the project report) C Interest subsidy for 11 years from the 11.00 commencement of commercial production (upto the ceiling of Rs.1 Crore per annum) D Capital Investment Subsidy to be paid in the next 51.29 financial year upto the maximum limit of amount paid as additional incremental sales tax to the government till 11 years by Unit (Chaibasa & Sindri) (Estimated) Provided that above amount shall depend on the additional sales tax actually deposited by the company. Total 82.69 8. Subsequently, Department of Industries amended the provisions with regard to the exemption of electricity duty from 11 years to 10 years. This aspect, however is irrelevant for the purposes of the issue involved in the 6 present case. It is, thereafter Jharkhand Mega Project Incentive Rules, 2005 (for short 'Incentive Rules, 2005') were issued by the State, vide Government Notification No.2371 dated 2.8.2005, which were under Policy of 2001 and in consonance with the aforesaid order No.1885 dated 10.6.2003.
9. ACC started its commercial production on 9th of August, 2005 and in this regard, intimation was sent to Director Industries on 23 rd September, 2005. It is thereafter the unit of ACC was inspected by the Joint Investigation Team constituted, vide memo 458 dated 31 st August, 2005 by the Director of Industries, Ranchi, in which status of the unit was noted as under :- Sl. Details Pre-Expansion/ Under Post No. Modernization Expansion/ Expansion/ Scheme (under original modernization Modernizaton plan) scheme scheme 1 Items produced and 1.Clinker – 3.00 LMT900 LMT1200 LMT respective capacity 2. Cement – 6.12 LMT --------- 6.12 LMT3 Power – 10 MW15MW25MW2Production date 1947 09.08.2005 09.08.2005 3. Power Load J.A.E BO6000KVA2500KVA --------- CPP – 10 MW15MW10MW For New Power Plant 25W4 Employment 598 6 604 5. Fixed Capital Investment (in Lakhs) a. Land 18.95 ---- 18.95 b. Building 512.26 2364.65 2876.91 c. Plant & Machinery 6520.63 27008.64 33529.27 d. Others 115.60 677.26 792.86 Total 7167.44 30050.55 37217.99 10. ACC thereafter on 3rd of March, 2006 moved an application to Director of Industries for Incentive Subsidy annexing all the required documents in the shape of Annexure – A (available on writ court record). The matter was thereafter put up before the Screening Committee for its decision which took reasonably long time despite there being repeated reminders sent 7 by ACC. However, the matter remained pending at the end of the State for long five years which constrained ACC to file first writ petition being W.P(C) No.4633/2010.
11. Since ACC was also entitled to claim Incentive Subsidy link to commercial tax revenue, it moved an application for the claim of interest subsidy of Rs.1 crore for the financial year 2005-2006 on 12.5.2007 before Director of Industries. Subsequently other applications in the similar nature were also filed for subsequent years also ending financial year 2009-2010. Director of Industries, vide its letter no.1162 dated 20.5.2011, raised the following objections:- (A) It is the Chaibasa clinker plant which is under expansion/modernization eligible for incentive and not the Sindri grinding plant; (B) The product under consideration is clinker and not cement; And (C) Equivalent amount of tax needs to be calculated in the form of clinker for which C.A certificate needs to be submitted duly supported with documentary evidence.
12. Responding to the aforesaid letter, ACC filed representation stating therein that the petitioner is entitled to get incentive as per the decision of the State Government. Thereafter, State Government granted Incentive Subsidy applicable to the existing industries (Category-II) which subsidy ACC accepted under protest. It was an amount of Rs.7 crores instead of Rs.15 crores. However, the decision taken by the State in not granting subsidy linked to the commercial tax revenue constrained ACC to file second writ petition W.P(C) No.5513/2011.
13. It is how both the writ petitions were clubbed together. 8 14. Stand taken by the State Government before the Writ Court as one finds from the counter-affidavit filed to first writ petition (W.P(C) No.4633/2010) was that after scrutinizing the case of ACC by the Screening Committee constituted under the chairmanship of Chief Secretary, Jharkhand, it was decided that ACC Unit (“Chaibasa”) did not incur cash losses since last two years (2003-2004 – 2004-2005) from the date of its commercial production, therefore it could not be termed as Loss making Existing and Functional Industrial Unit, instead, it fell under the category of Existing and Functional Industrial Unit, accordingly the Screening Committee recommended entitlement to Incentive Subsidy of Rs.7 crores instead of Rs.15 crores.
15. With regard to the entitlement of the ACC to get Incentive Subsidy on the amount paid towards additional incremental sales tax to the Government for the sale, it was decided that the ACC was entitled to the said subsidy on the sale of clinker by “Chaibasa Unit” and was not entitled to Incentive Subsidy on incremental sales tax on the sale of cement either by “Chaibasa Unit” or “Sindri Unit”.
16. From the pleadings of the parties and the documents submitted by the either side in both the writ petitions (clubbed together), learned Writ Court formulated the following three points for its determination:- (I) Whether petitioner is eligible for incentive/subsidy as existing functional industrial unit (category II unit) or loss making, existing and functional unit (category III unit)? (II) Whether plea of the State Government that petitioner is entitled to get tax relief only on the sale of clinker and not on the sale of cement is sustainable? 9 (III) Whether petitioner is entitled to get capital investment subsidy only on the amount paid to the State Government as additional incremental sales tax on the sale of cement produced both by the Chaibasa and Sindri units or only by Chaibasa Unit? 17. Findings have been returned in favour of the ACC vis-à-vis question No.I and question No.II providing that it is entitled to get Incentive Subsidy as category (III) Mega Industrial Unit i.e. Loss making Existing and Functional Industrial Unit. It is also held entitled to get Incentive Subsidy on the amount paid to the State Government as incremental sales tax on the sale of clinker and cement also from its Unit at Chaibasa. However, finding returned on question No.III is against ACC in as much as that ACC has not been held entitled to Incentive Subsidy on the amount paid as additional incremental sales tax to the Government on the sale of cement by its “Sindri Unit”.
18. This is how L.P.A No.385/2013 and L.P.A No.386/2013 by ACC and L.P.A No.129/2014 by State of Jharkhand.
19. At the very outset, Mr.T.R.Andhyarujina, learned Senior Advocate, appearing for ACC stated that L.P.A No.385/2013, which is arising out of W.P(C) No.4633/2010, could be avoided as the finding is returned in favour of ACC and it appears that on account of finding on one point (question No.III) being returned against ACC and both the writ petitions being clubbed and decided by a common judgment, ACC, perhaps, in order to avoid any procedural lapse, has filed two separate appeals, whereas it is aggrieved of the finding returned on point No.III only which was made subject matter of adjudication in the second writ petition bearing W.P(C) No.5513/2011. The State, however, is aggrieved of the finding returned on 10 point Nos.I and II through its separate appeal (L.P.A No.129/2014).
20. Heard Mr. T.R.Andhyarujina, learned Senior Advocate assisted by Mr. Ujjwal Ram, Mr. Rajiv Ranjan and Mr. Ashok Kumar Yadav, Advocates and Mr. Ajit Kumar Additional Advocate General representing the State. We have also gone through the impugned judgment and the Writ Court records.
21. Since State of Jharkhand is the main aggrieved party, Mr. Ajit Kumar, Additional Advocate General, addressed the Court. He submitted that ACC, although granted sanction of special package for Mega Industries, vide letter dated 27th July, 2003, as Loss making Existing and Functional Industrial Unit, but in fact, it turned out to be one falling in the category of Existing and Functional Industrial Unit as it did not incur cash losses in the last two years i.e. 2003-2004 and 2004-2005, before it asked for grant of subsidy disclosing the date of its commercial production at “Chaibasa” as 09.08.2005. According to learned State Counsel, may be ACC Unit at Chaibasa had earned any meagre profit before it started commercial production which fact was verified after scrutinizing all the documents, still it was not a case falling in Category III, therefore changed to Category II, as such entitled it to Incentive Subsidy to Rs.7 crores instead of Rs.15 crores, which amount has been accepted by ACC also, may be under protest.
22. Learned State Counsel submitted that the basis object of this special package for Mega Industries falling under the category of Loss Making, Existing and Functional Industrial Unit was to make it profit making and if any unit was capable of making profit from its own investment, the special package was altogether different, therefore these different 11 categories were carved out in this regard and altogether three different yardsticks for granting Incentive Subsidy were fixed. Learned State Counsel submitted that the segregation done by the State for the purposes of grant of incentives has its rationale, otherwise there will be no difference between 'Kha' category and 'Ga' category in the context of Incentive Subsidy. Learned State Counsel submitted that there appears to be no justification for granting Incentive Subsidy to ACC to the tune of Rs.15 crores for “Chaibasa Unit” which did not fall in category-III before it started its commercial production, therefore, the view favouring ACC in this regard as already taken by learned Writ Court, does not appear to be a correct one as such deserves to be disturbed instead ACC was entitled to Rs.7 crores only as Incentive Subsidy which has already been accepted by it.
23. With regard to the other issue, whether ACC is entitled to get tax relief only on the sale of clinker and not on the sale of cement from Chaibasa unit, on which point also finding has been returned against the State, Mr.Ajit Kumar, learned State Counsel submitted that learned Writ Court failed to appreciate that it was a clinker plant at Chaibasa and not the cement plant for which ACC undertook modernization and it will only be the clinker plant which would be contributing towards the wellbeing of the State by generating employment, tax etc. and not the cement plant. According to the learned State Counsel, ACC never undertook modernization of the cement plant, therefore there was no occasion for the State to grant incentive on the sale of cement from this Unit. Learned State Counsel thus submitted that ACC, therefore, is not entitled to get Incentive Subsidy on the amount paid to the State Government as incremental sales tax on the sale of cement at least, whereas 12 the State is ready and willing to give all types of subsidies as incremental sales tax on the sale of clinker and that the finding returned to that extent in favour of ACC by the learned Writ Court vis-a-vis question No.-II again deserves to be disturbed, being unsustainable on the facts of the present case.
24. With regard to the finding returned on question/point No.III by the learned Writ Court, Mr. Ajit Kumar, supports the same and prays for its reaffirmation.
25. Per contra Mr. Andhyarujina, Senior Advocate, appearing for ACC, submitted that State of Jharkhand has turned around denying benefit to ACC under its own Industrial Policy 2001 after ACC had invested a huge amount in expansion/diversification/modernization of its Unit at Chaibasa, a loss making unit for five years, which fact was ascertained and thereafter only under the category of Loss Making Existing Unit ACC was sanctioned Rs.15 Crores as Incentive Subsidy, as such there appears to be no justification with the State to shift the category from Loss Making Existing Unit to Existing Industrial Unit simply on the ground that prior to giving intimation of date of production i.e. 09.08.2005, ACC unit at Chaibasa had shown some marginal profit for two consecutive financial years i.e. 2003-2004 and 2004-2005. Learned Senior Counsel submitted that the crucial date for qualification to get incentive is the date of giving information to the State and applying for sanction as at that time all the aspects have to be verified before any Mega Unit is brought in one of the three categories and not in strict sense the date of commercial production for the reason that till the commencement of commercial production of any Mega Industrial Unit falling in category III, it will not be entitled to subsidy already sanctioned in favour of the Unit. He 13 thus submitted that the finding returned by the learned writ court on question No.I deserves to be affirmed.
26. Adverting to the question No.II, learned Senior Counsel submitted that on this issue also the finding returned by the learned Single Judge deserves to be upheld on a very simple rationale that may be the Chaibasa plant manufactures clinker but clinker is used for manufacturing cement which is the final product. Clinker by itself is a raw material is not thrown in the market. He submitted that it is how the Cabinet had approved this plant under the Industrial Policy and ultimately sanction also granted vide its letter dated 25.7.2003 wherein it is stated that incentive was confined to the product of clinker only and would not be applicable to cement. He thus submitted that the decision taken by the State Government that the incentive could be given only for the clinker and not for cement is not sustainable on any rationale which aspect has been thoroughly dealt with by the learned writ court and ultimately returned a finding against the State which deserves to be upheld.
27. Joining issue with regard to question No.III, which has been answered against ACC, learned Senior Counsel submitted that the learned Single Judge, while returning the said finding against ACC, perhaps has considered clause 22 of Policy of 2001 whereby limiting the definition “Unit” only to a part of an industrial project i.e. Chaibasa Plant and denied Incentive Subsidy to “Sindri Plant” of ACC.
28. Learned Senior Counsel submitted that Policy of 2001 refers to an Industrial Project which undertakes expansion/diversification/ modernization and not any part of the Industrial Project. Elaborating this 14 aspect further, learned Senior Counsel submitted that the unit cannot be said to be a particular plant, rather it is a complete unit of ACC, may be in two parts Chaibasa and Sindri, therefore, ACC has to be taken as a whole and not a particular plant at a particular place of the State. Learned Senior Counsel submitted that it is quite common that an industrial project can have several plants or manufacturing premises located at different places of the State; one plant supplying raw materials and the other plant giving the final product. He, by giving an example, submitted that automobile manufacturers normally have separate plants within the State for manufacturing different parts of a vehicle like engine, wheel, axle and other parts and the Industrial Project of that automobile manufacturer may undertake expansion/diversification/ modernization of one of these separate plants which feeds such component for the purposes of final product, it cannot be said that the Industrial Policy would give the monetary benefit of refund of sales tax etc. to the product from where the expansion/diversification/modernization of investment in a particular plant of the manufacturer within the State is undertaken as it may be possible that an item produced in a particular plant, by itself, is not marketable product and is a raw material but it is useful to the final product produced by the Industrial Project. Learned Senior Counsel thus submitted that the word, “unit” connotes in the context of Industrial Policy as Industrial Project as a whole and not as a particular plant, which undergoes expansion/diversification/modernization. Learned Senior Counsel submitted that taking all these aspects into consideration, the State prepared memorandum of consideration and thereafter the sanction was accorded in favour of ACC wherein it was specifically mentioned that the Incentive 15 Subsidy will be paid in the next financial year upto the maximum limit of the amount paid as additional incremental sales tax by the unit Chaibasa and Sindri and on that understanding alone, the basic plant at Chaibasa, which was clinker manufacturing plant had gone for expansion/diversification/modernization with the huge investment running into crores so that ACC as a complete Industrial Project could get the tax relief on the sale of cement within the State from Chaibasa plant as well as Sindri plant.
29. Learned Senior Counsel, on the strength of the aforesaid submissions, submitted that the learned Single Judge has gone wrong in holding that the sanction by the Government by its letter dated 21.7.2003 by granting Incentive Subsidy to ACC on the amount paid as additional incremental sales tax on the sale of cement by Sindri plant is against the Industrial Policy, thus erred in limiting the incentive by way of refund of the sales tax etc. to only the products produced from Chaibasa plant because modernization was only for the plant of Chaibasa and not at Sindri.
30. We would also like to answer all the three questions as formulated by the learned Single Judge individually.
31. Since the issue herein relates to Mega Industrial Units, let us advert to clause 29.11 of J.I.P.
2001. It reads :- “Special packages shall be formulated for the new projects with an investment of more than Rs.50 crores on case to case basis through direct negotiation with prospective investors”.
32. Thereafter, State of Jharkhand through Department of Industries vide its letter no.1885 dated 10.6.2003 notified clear and transparent guidelines and classified the Mega Units in three categories as referred to hereinabove. It is thereafter, vide Gazette Notification dated 02.08.2005 16 Jharkhand Mega Incentive Rules 2005, which are in tune with the aforesaid letter No.1885/2003, were brought in. The aforesaid Rules came into force with effect from 15th day of November, 2000. In terms of rule 3.2, the benefit under the Rules would be available to only those units which had gone into commercial production or after 15th November, 2000. As per the Rules, there is methodology/procedure for Incentive Subsidy. An application has to be made in the prescribed form within six months from the date of commencement of commercial production or the incentive rules coming into force, whichever is later, to the Director of Industries.
33. In the context of the case on hand, rule 2.7 of Incentive Rules 2005 has also its significance and it reads:- “Existing Loss Making Units It refers to those units, which are weak but not sick, and have been incurring cash loss for last two consecutive years. To be eligible for incentive under these rules, such unit should undertake expansion/diversification/modernization and invest more than fifty Crores in the fixed assets with incremental production capacity of at least 33% of the existing capacity”.
34. Admittedly when ACC applied on 29th October, 2002 under Policy of 2001 stating in its application that its Chaibasa Unit was not economically viable and incurring heavy losses since past five years, therefore, it proposed to install 12 LTPA clinker plant at Chiabasa with an investment of Rs.270 crores, Notification/Order No.1885 dated 10th June, 2003 was nowhere in existence and it came to be passed afterwards when the State was considering the case of ACC. However, the entire matter was ultimately considered by the State in terms of Policy of 2001 and the aforesaid order No.1885 as is clear from the sanction letter No.2318 dated 17 21.07.2003 whereby Incentive Subsidy is sanctioned to the tune of Rs.15 crores by considering Chaibasa Unit falling in the category of Loss Making, Existing and Functioning Industrial Units. Before ACC could start its commercial production, Incentive Rules of 2005 also came into being vide Notification dated 2nd August, 2005, but these Rules were made effective on all new industrial units or industrial units undertaking expansion/diversification/modernization on or after 15.11.2000, therefore, for the purposes of Incentive Subsidy, theses Rules will also have their applicability.
35. As per Rule 2.10 of Incentive Rules, 2005, date of production refers to date of commercial production of new unit and in respect of expansion/diversification/modernization it refers to commercial output from such expansion/diversification/modernization of the Unit. It is further made clear in Rule 2.10 that commercial production or commercial output means when the product is ready for sale to the customers and Director of Industries, Government of Jharkhand, after verification, has to issue a certificate to this effect and in the case of dispute, the matter will go before Principal Secretary/Secretary – Industry, Government of Jharkhand whose decision will be final. With regard to applicability of Incentive Rules, it is made clear in Rule 3.2 that this Rule shall be available to only those units which has gone into commercial production on or after 15.11.2000 or undertakes expansion/diversification/modernization after this date.
36. Virtually aforesaid Order/Notification No.1885 dated 10.06.2003 was formulated into Incentive Rules, 2005.
37. Undoubtedly, a Mega Unit qualifying for Incentive Subsidy in 18 terms of Clause 29.3 of Policy of 2001 read with Notification No.1885 dated 10.06.2003, would be entitled to it only when it starts commercial production after expansion/diversification/modernization and not before that, but it would not mean that the said Unit would be deprived of the Incentive Subsidy if it makes some profit on account of the huge amount invested by it on its own for the purposes of expansion/diversification/modernization as by that time the Unit has not asked for any Incentive Subsidy. Refusal on this count by the State would be against the basic object of the Policy of 2001 under which special package was granted to Mega Units which has to be formulated on a case to case basis. In the case of Chaibasa Clinker Plant, the State on verification of all the documents, found it to be a Loss Making Existing and Functioning Unit which required expansion/diversification/modernization and that ACC was also ready and willing to invest initially from its own as per the Policy of 2001 and the aforesaid Order No.1885 dated 10.06.2003, therefore, qualify for the sanction of Incentive Subsidy to the tune of Rs.15 crores after it starts the commercial production. Therefore, the relevant aspect in the entire case is the commencement of commercial production as grant of Incentive Subsidy was dependent upon commercial production only and not before that and in the case of ACC, it started on 9th of August, 2005.
38. The arguments advanced by Mr. Ajit Kumar, learned Additional Advocate General that Mega Unit falling under category-III, if incurs profit for continuously two years before it starts its commercial production, would not be entitled to Incentive Subsidy even if sanction is accorded in its favour finding it to be a case requiring expansion/diversification/modernization from its own for the purposes of making it viable for commercial production, will 19 not qualify for the Incentive Subsidy to the tune of Rs.15 crores, do not appeal to us at all on a simple rationale that if the said contention is accepted, then the entire provision made for granting Incentive Subsidy to a Mega Industrial Unit falling in category-III, would not only become superfluous but an unworkable exercise because no unit, till it is made functional, could assess as to whether it will make profit or run into losses. It is always dependent upon the commercial output when the product is ready for sale to the customers. It is in this context only, date of commercial production after expansion/diversification/modernization of the Unit is to be seen and not by any other yardstick. It is with this objective only, under Policy of 2001 provision for various incentives have been made for new industrial units or industrial units undertaking expansion/diversification/modernization on or after 15.11.2000. It is in this backdrop only, the case of ACC for Chaibasa Unit was examined by the State and finding it to be a weak Unit running into losses falling under category-III, which accorded expansion/diversification/ modernization, the State ultimately accorded Incentive Subsidy of Rs.15 crores in terms of letter No.2318 dated 21.07.2003 and with this legitimate expectation ACC invested huge amount from its own and undertook expansion/diversification/modernization of its Chaibasa Unit, it cannot now back out and play unfair to avoid the promise committed by it in terms of sanction letter. It would be unjust at the end of the State on the principle of equity if it goes back on its own promise.
39. Viewed thus, we do not find any infirmity in the finding returned by the learned Writ Court while answering to question No.-I in favour of ACC, whereby holding it entitled to get Incentive Subsidy to the tune of 20 Rs.15 crores falling under category-III i.e. Loss Making, Existing and Functioning Industrial Units and confirm the same. Since ACC has already accepted Rs.7 crores, may be under protest, it shall also be entitled to another sum of Rs.8 crores (total Rs.15 crores) as already sanctioned in terms of aforesaid letter No.2318 dated 21.07.2003.
40. Adverting to question No.II, what appears to us is that there is no justification with the State to give tax relief only on the sale of clinker and not on the sale of cement at Chaibasa Unit of ACC.
41. ACC prayed for exemption from Sales Tax and other incentives for undertaking expansion/diversification/modernization of Chaibasa clinker plant so that he could manufacture cement out of the clinker produced at Chaibasa plant and the same proposal was placed before the Cabinet which was accordingly approved and it is thereafter only, ACC started expansion/diversification/modernization by installing 12 LTPA clinkering plant at Chaibasa Unit. It is nowhere mentioned in the sanction letter that the incentive was only confined to the product of clinker and would not be applicable to cement. Undoubtedly, the final product of ACC Unit at Chaibasa is cement which is the commercial output and not the clinker. In fact clinker is a raw material for manufacturing cement, therefore, it would be wrong on the part of the State to decline ACC incentive on the amount paid to the State Government as Sales Tax on the sale of cement and to entitle it for the same relief only on the sale of clinker which is hardly a marketable product. It is surprising that the State has taken a decision against its own interest. The learned Writ Court, in our considered view, therefore rightly rejected the decision of the State in this regard and held ACC entitled to get 21 Incentive Subsidy on the amount paid to the State Government as incremental Sales Tax on the sale of clinker as well as cement and we hereby confirm the said view.
42. Finding returned vis-a-vis question No.III against ACC by the learned Writ Court whereby the prayer of ACC for grant of Incentive Subsidy on the amount paid as additional incremental Sales Tax to the Government on the sale of cement by its Sindri Unit is rejected solely on the ground that the promise made by the State to pay aforesaid incentive on the Sales Tax to the Sindri Unit is against the Industrial Policy, therefore, ACC cannot claim the same on the basis of principle of legitimate expectation, does not appear to be a correct view if tested on the facts of the case on hand.
43. May be at the cost of repetition, but it is worth noting that after Government of Jharkhand formulated Policy of 2001, ACC on 29th of October, 2002 made an application to the Chief Minister that since its Chaibasa Unit was not economical, viable and incurring heavy losses since past five years, therefore it (ACC) proposes to install 12 LTPA clinkering plant at Chaibasa at the investment of Rs.270 crores which would ensure continuity of Sindri Unit also and provide livelihood at Chaibasa and Sindri. Undoubtedly, it was within the Policy of 2001. It is worth noting that the applications made by ACC were for Incentive Subsidy for the increased production of cement and ACC clearly stated that the incentive would be for the continuity of the Sindri Cement Grinding Plant by catering to its main and basic raw material i.e. clinker which was to be manufactured at Chaibasa plant only. Acting on these representations by ACC, the Memorandum for the consideration of the Cabinet was prepared on 07.07.2003 in which it was 22 stated that the Incentive Subsidy would be paid for 11 years by the Unit (Chaibasa and Sindri). It was accordingly approved by the Cabinet by a Memorandum dated 16.07.2003 and thereafter the sanction was accorded in favour of ACC vide letter dated 21.07.2003 in which it is clearly stated that the additional incremental Sales Tax to the Government for 11 years would be paid on account of increased production by the Unit (Chaibasa and Sindri establishments). The said sanction letter No.2318 dated 21.07.2003, available on Writ Court record is reproduced in extenso. It reads :- “Letter No. 2318 / Ranchi, Dated 21.07.2003 9/DDI/Mod/Expansion (ACC) 231/2002 From Shri Rajesh Agarwal Director of Industries. To The Vice President M/s Associated Cement Co. Ltd. Chaibasa Cement Works Post Jhinkpani, West Singhbhum. Sub: Regarding sanction of Special Package to M/s ACC Ltd., Jhinkpani, Chaibasa on undertaking capital investment for expansion / diversification in light of Para 29.11 of Jharkhand Industrial Policy-2001. Sir, In relation to the above mentioned subject, capital investment of Rs. 270 crores as proposed by you for expansion / diversification of M/s ACC Cement, Jhinkpani, I am directed to state that after due review of the proposal submitted by yourself, the State Government in light of the provisions of Para 29.11 of Jharkhand State Industrial Policy-2001 and Departmental Memo No. 1885 dated 10.06.2003 has taken a policy decision to grant the following incentives to your Unit for the investment being undertaken by the said Unit:- S. Provision Estimated amount payable No. A Capital Investment Incentive Subsidy after the date Rs. 15.00 crores of commencement of commercial production (As per the Para “x”of Order Memo No. 1885) B Electricity Duty Exemption for elecven years from Rs. 5.40 crores the date of commencement of commerical production (estimated on the basis of the project report) C Interest subsidy for 11 years from commencement Rs. 11.00 crores of commercial production (upto the ceiling of Rs. 1 crores per annum) 23 D Capital Investment Subsidy to be paid in the next Rs. 51.29 crores financial year upto the maximum limit of amount paid as additional incremental sales tax to the government till 11 years by the Unit (Chaibasa & Sindri) (Estimated) Provided that above amount shall depend on the additional sales tax actually deposited by the company. Total Rs. 82.69 crores 2. Above incentive shall become due on making the investment amounting to Rs. 270 crores in M/s ACC Ltd, Jhinkpani Cement Plant and after the commencement of the commercial production. Sincerely Rajesh Agarwal Director of Industries”
44. What appears to us is that the learned Single Judge, while referring to Clause 22 of Policy of 2001, has considered the word “such unit” only as a part of the industrial project which undertakes expansion/diversification/modernization so as to deny Incentive Subsidy to Sindri Unit of ACC, instead taking it as a complete Industrial Project, and accordingly held that the promise of the State to pay incentive on the Sales Tax to the Sindri Unit was against the industrial policy itself.
45. We are not inclined to accept the said view as in the case on hand, when ACC applied for expansion/diversification/modernization of its Chaibasa Unit thereby installing 12 LTPA clinkering plant at an investment of Rs.270 crores, ACC knew that clinker is a raw material which has to be used for manufacturing of cement, the final product to be thrown in the market and that the clinker manufactured at Chaibasa would also be used for the purpose of manufacturing cement at Sindri Unit. According to ACC, it was one Industrial Project only, expansion/diversification/modernization of which was sought for after Policy of 2001 was made effective by Government of 24 Jharkhand and not any part of the industrial project as is clear from the initial application moved in this regard on 29.10.2002 and subsequent applications as well. Undoubtedly, the State also took it as one Industrial Project and put in the Memorandum for the consideration of the Cabinet accordingly which was subsequently approved also.
46. Word “Unit”, in the context of Industrial Policy, connotes an industrial project as a whole which undertakes expansion/diversification/ modernization and not merely one part of the project. There is sufficient indication and intrinsic evidence in Policy of 2001 to establish that the industrial project as a whole is considered as a Unit for the benefit of the policy.
47. It is also significant to note that special package referred to in para-29.11 of Policy of 2001 was to be formulated on case to case basis through direct negotiation with prospective investors for an investment of more than Rs.50 crores and for which all the incentives were formulated by the Government notification/order No.1885 dated 10.06.2003. It is stated therein that after the expansion/diversification/modernization, every year, the State would receive tax etc. from the sale of incremental produce by the industrial Unit and in every financial year the entire commercial tax received on sale of incremental produce would be given to concerned Unit in the next financial year as Incentive Subsidy from the date of commercial production. This clearly indicates that the incentive is for the incremental produce by the industrial unit/project as a whole within the State and not from the produce of any part of the industrial unit/project. In this regard, the relevant extract of the application dated 29.10.2002 moved by ACC becomes relevant and 25 reproduced hereunder:- “ Notwithstanding the above, we had indicated that ACC's management would be open to installing a new 1.2 MT state- of-the art semi-dry process clinkering unit at Chaibasa and discontinuing the operation of the old obsolete wet process kilns. Further, it would also be willing to set up a new 15-20 MW Captive Power Unit (CPP) to support its operations. This clinkering unit would also ensure continuity of Sindri Cement Grinding Unit by catering to its main and basic raw material, i.e. clinker, which is also under threat of drying up from its current sources, thus jeopardizing its very survival also. ….. The setting up of the new unit at Chaibasa Works would apart from protecting the employment of existing employees, also entail creating additional direct employment for around 200 people ….. Further indirect employment for additional 1300 persons .… at both Chaibasa and Sindri Works, would also be created. Besides the above, the growth potential for indirect ancillary business to support such a large capacity cement unit as also the indirect employment potential there from is immense.”
48. The aforesaid application dated 29.10.2002 was in tune with the objective of the Policy of 2001 and it is thereafter only, State entered into a special package with ACC and agreed to pay Incentive Subsidy to ACC on the amount paid as additional incremental sales tax to the Government on the sale of cement by Chaibasa as well as Sindri Unit. State knew it that ACC in fact, was one Industrial Unit. This aspect becomes more clear from Annexure-1 attached with Policy of 2001 wherein the definition to “Industrial Unit/Industrial Concern” is given as industrial project in large and medium scale. From that angle also, ACC has to be considered as an industrial project as a whole running in the State of Jharkhand and not as a single unit at Chaibasa only. 26 49. We are conscious of the fact that ACC Unit at Sindri falls in category 'A' (Least Backward) whereas Chaibasa Unit falls in category 'C' (Most Backward) as one finds from Annexure-1 relating to definitions where classification of backward areas are made for the purpose of quantum of incentive available under Policy of 2001 by classifying three different categories viz; Least Backward; Backward and Most Backward, but that aspect again cannot be said to be a ground to deny ACC, the Incentive Subsidy on the amount paid as additional incremental sales tax to the Government on the sale of cement by its Sindri Unit falling in category 'A' (Least Backward). Admittedly, this package is not on the sale of the cement outside the State. It is a combined package of various incentives to ACC in terms of its sanction letter No.2318 dated 21.07.2003.
50. There is also weightage in the submissions of Mr. Andhyarujina, learned Senior Counsel, that one industrial project can have several plants located at different places in one State and one plant would supply the raw material or the intermediate product for the final product, which can be produced at a different place (another plant in the State) and it is quite possible that an item produced in a particular plant, by itself, is not a marketable product as a raw material but it is useful to the final product produced by the industrial project, therefore, the word “Unit', connotes an industrial project as a whole and in this case also, may be ACC was having its two different units for manufacturing of cement one at Chaibasa and other at Sindri, but it was only one industrial project which had sought expansion/diversification/modernization under Policy of 2001 and claimed different incentives. 27 51. Viewed thus, it cannot be said that the promise to pay incentive on the Sales Tax on the sale of cement from Sindri Unit is against the Industrial Policy as held by learned Single Judge, rather, ACC is within its legitimate right to claim the same on the basis of principle of legitimate expectation. Doctrine of legitimate expectation imposes in essence a duty on public authority to act fairly by taking into consideration all relevant factors relating to such legitimate expectation. It is well settled that doctrine of legitimate expectation is founded on the principles of reasonableness and fairness. In the case of Monnet Ispat and Energy Limited Vs. Union of India and Others reported in (2012) 11 SCC Page-1, the Hon'ble Supreme Court after thorough review of the precedents laid down on the doctrine of legitimate expectation culled out the principles as are found to be well established at paras 188 to 188.5. The same are reproduced hereunder:
"88. It is not necessary to multiply the decisions of this Court. Suffice it to observe that the following principles in relation to the doctrine of legitimate expectation are now well established:
188. 1. The doctrine of legitimate expectation can be invoked as a substantive and enforceable right. 188.2 The doctrine of legitimate expectation is founded on the principle of reasonableness and fairness. The doctrine arises out of principles of natural justice and there are parallels between the doctrine of legitimate expectation and promissory estoppel. 188.3 Where the decision of an authority is founded in public interest as per executive policy or law, the court would be reluctant to interfere with such decision by invoking the doctrine of legitimate expectation. The legitimate expectation doctrine cannot be invoked to fetter changes in administrative policy if it is in the public interest to do so. 188.4 The legitimate expectation is different from anticipation and an anticipation cannot amount to an assertable expectation. Such expectation should be justifiable, legitimate and protectable. 188.5. The protection of legitimate expectation does not require the fulfillment of the expectation where an overriding public interest requires otherwise. In other words, personal benefit must give way to public interest and the doctrine of legitimate expectation would not be invoked which could block public interest for private benefit. 28 52. We have tested this case on the aforesaid settled principles and find that there appears to be no reason for the State to make a departure from its earlier decision incorporated in its sanction letter which, undoubtedly, is based on Policy of 2001.
53. We may note here that the judgments relied upon by the learned Single Judge while returning a finding against ACC, in our considered view, are not applicable to the facts of the present case and the State now cannot commit breach of a solemn undertaking to the prejudice of ACC.
54. As a sequel to the aforesaid discussion, the net result now surfaces is that ACC is justified in claiming additional incremental sale tax on the sale of cement produced by it both from Chaibasa and Sindri Units. We accordingly disturb the finding returned by the learned Writ Court against ACC while answering to question No.III and hold that ACC is entitled to get Incentive Subsidy on the amount paid to the State Government as additional incremental sales tax on the sale of cement produced both by Chaibasa and Sindri Units as one Industrial Project and not by Chaibasa Unit only. Question No.III is thus answered in favour of ACC and against the State. On filing of an application by ACC in the prescribed form for Incentive Subsidy on incremental Sales Tax qua both the units, needful shall be done at the end of the State without any delay.
55. The net result is that LPA No. 385 of 2013 and LPA No.386 of 2013 filed by ACC are allowed as prayed for whereas LPA No.129 of 2014 filed by the State is hereby dismissed.
56. During the course of arguments, we were informed by Mr. Andhyarujina, learned Senior Counsel appearing for ACC, that the State has 29 not implemented the directions of the learned Writ Court favouring ACC as contained in operative part of the impugned judgment till date, which constrained ACC to initiate contempt proceeding against the State. State is directed to comply with the said directions without any further delay. No order as to costs. (Virender Singh, C.J.) (Aparesh Kumar Singh, J.) th Dated the 24 day of February, 2015. dey/Birendra A.F.R.