State Industries Promotion Corporation of Tamil Nadu, Represented by Its Managing Director, Egmore Vs. Thiru Arooran Sugars Limited and ors. - Court Judgment

Excerpt:
- orderv.s. sirpurkar, j1. an order, allowing the writ petition filed by m/s.thiru arooran sugars limited, passed by the learned single judge is the subject matter of consideration in this appeal, which has been filed by the state industries promotion corporation of tamil nadu. for the sake of convenience, we would refer to the parties by their original status in the writ petition. the petitioner shall be referred to as 'the petitioner company' whereas the appellant shall be referred to as 'sipcot' in the judgment. the original respondents 2, 3 and 4 represent the government departments, viz. commercial taxes department, chennai; industries department, government of tamil nadu, chennai, and office of the assistant commissioner (ct), central assessment circle iv, chennai.2. by their writ.....

Judgment:
ORDER

V.S. Sirpurkar, J

1. An order, allowing the writ petition filed by M/s.Thiru Arooran Sugars Limited, passed by the learned single Judge is the subject matter of consideration in this appeal, which has been filed by the State Industries Promotion Corporation of Tamil Nadu. For the sake of convenience, we would refer to the parties by their original status in the writ petition. The petitioner shall be referred to as 'the petitioner company' whereas the appellant shall be referred to as 'SIPCOT' in the judgment. The original respondents 2, 3 and 4 represent the Government Departments, viz. Commercial Taxes Department, Chennai; Industries Department, Government of Tamil Nadu, Chennai, and Office of the Assistant Commissioner (CT), Central Assessment Circle IV, Chennai.

2. By their writ petition, the petitioner company claimed an 'Eligibility Certificate' under G.O.Ms.No. 500, Industries (MIG-II) Department, dated 14.5.1990, which certificate entitled them for a 'full waiver of sales tax' for a period of five years with a ceiling of total investment made in the fixed assets. This certificate was denied to them by SIPCOT vide its order dated 8.11.1996 and that order was predominantly challenged in the writ petition. A direction was sought against SIPCOT to issue the eligibility certificate to the new unit of the petitioner company established at Thirumandankudi village, Papanasam Taluk, Thanjavur District. For the purposes of eligibility, the petitioner company had made an application dated 19.11.1991. It was held by SIPCOT in the aforementioned order dated 8.11.1996 that G.O.Ms.500 was not applicable to the said new unit of the petitioner company and the petitioner company was not entitled, for some other reasons also, to be granted the certificate of eligibility. The learned single Judge while allowing the writ petition of the petitioner company has held that the petitioner company can be aptly covered under G.O.Ms.500 and more particularly under Clause (3) thereof and that SIPCOT was not justified in refusing to grant the Certificate of Eligibility. The sole question that falls for consideration in this appeal is, therefore, whether SIPCOT was justified in refusing the Eligibility Certificate to the petitioner company. The question, which now boils thus, is what is the true interpretation of G.O.Ms.No. 500, dated 14.5.1990 and further, whether the petitioner company could claim the benefits thereunder for its new unit.

3. Few facts must first be stated to understand the controversy:

3.1. The petitioner company is a public limited company, registered under the Indian Companies Act, 1913 and is a manufacturer of sugar, industrial alcohol and is also engaged in generation of power. It had its old unit at Vadapathimangalam, Needamangalam Taluk whereas, its case is that it had set up a new unit at Thirumandankudi village, Papanasam Taluk, Thanjavur District.

3.2. The Tamil Nadu Government, with an object of giving impetus to the industrial development in the State of Tamil Nadu, provided certain measures. For this purpose, a policy was charted out under which, industrially backward areas in the State were spotted and it was decided to extend various concessions like Interest Free Sales Tax Loan (IFST Loan), Interest Free Sales Tax Deferral (IFST Deferral), State Capital Subsidy, Power Tariff Concessions, etc.

3.3. In G.O.Ms.No. 423, Industries, dated 7.7.1989, 105 taluks of the State came to be declared as 'industrially backward' and it was decided that the concessions of IFST Loan, IFST Deferral, State Capital Subsidy, etc. should be given to the industries in these taluks. This policy was more or the less followed and was executed through G.O.Ms.No. 563 and 564, Industries, dated 19.8.1989. However, by G.O.Ms.No. 500, which was issued on 14.5.1990, a major change was introduced and that was felt necessary as the Government wanted to correct the 'industrial regional imbalances' in the State. For this purpose, out of the earlier 105 industrially backward taluk declared under G.O.Ms.No. 423, 30 taluks were recognized as 'industrially most backward taluks'. The Papanasam taluk, where the petitioner company has a sugar mill, is one such taluk amongst those 30 industrially most backward taluks. The Government directed in G.O.Ms.No. 500 that a new industry to be set up in any of these industrially most backward taluks as also in, the three industrial complexes of SIPCOT would be entitled apart from the existing concessions for full waiver of sales tax dues for a period of five years. However, such waiver would be to the extent of the total investment made in the fixed assets in that new industry. It was also declared that the existing industries in the industrially most backward taluks and the three industrial complexes of SIPCOT if they undertake 'expansion/diversification' would also be eligible for a full waiver of sales tax dues for a period of five years subject to the ceiling of the total investment made in fixed assets for that expansion/diversification. Clause (9) of this Government Order provided that the General Manager, District Industries Center and SIPCOT will be the competent authorities to issue the Eligibility Certificates in respect of Small Scale Industries and major and Medium scale industries respectively. It is for that Certificate of Eligibility under G.O.Ms.No. 500 that the petitioner company filed an application, dated 19.11.1991.

3.4. A form was prescribed by the SIPCOT for making such application. The said application is to be found in the records of this appeal and thereby it was claimed that the petitioner company had set up a 'new unit' at Thirumandankudi village in Papanasam Taluk. It was described to be a large scale sugar mill and its licensed capacity was suggested to be 2500 TCD. It was declared that it was a private sector industry and was a new unit. The other details regarding the financial investments were also provided. In column 14 of the application, it was suggested that its 'trial production' had commenced on 23.3.1990 and 'commercial production' had commenced on 29.11.1990. In column 21, it was suggested that the existing product of the industry was sugar and that no sales tax was leviable on sugar, only purchase tax was leviable on sugarcane. In answer to the query made in column 25 of the prescribed application, it was suggested that concessions under IFST Loan/IFST Deferral/State Capital Subsidy schemes were not availed by the petitioner company.

3.5. SIPCOT, however, by letter dated 29.9.1992, informed the petitioner company that the sugar industries were not eligible for the incentives on purchase tax. The petitioner company, therefore, filed a writ petition (W.P.No. 19395 of 1993), challenging this order. Petitioner relied on Sulochana Cotton Spinning Mills (P) Limited v. State of Tamil Nadu 1998 S.T.C. 125 and contended that even if a sugar mill, it was still entitled to the benefits awarded by G.O.Ms.No. 500. In short, its contention was that G.O.Ms.No. 500 was applicable to the sugar industries also and the stand taken by the SIPCOT was not correct. This writ petition was allowed by this Court by order dated 7.8.1996.

3.6. The Division Bench set aside the aforementioned order of the SIPCOT on the ground that the relevant materials were not taken into consideration by the SIPCOT and, therefore, the decision could not be considered to be a valid one. The Division Bench took note of the contention raised by the SIPCOT in its counter-affidavit that the said unit was an 'expansion' of the existing unit and could not be said to be a 'new unit'. The Division Bench observed -'such a stand is not supported by any evidence'. The Bench further went on to hold:

Under these circumstances, we are of the view that the decision of the SIPCOT in question cannot be sustained and the matter is required to be considered afresh after taking into consideration the materials produced by the petitioner and also in the light of the decision of this Court referred to above. In the concluding paragraph, the Division Bench observed:

For the reasons aforestated, the writ petition is allowed. The communication dated 29.9.1992 bearing No. ID/ST/II.92 is quashed and the matter is remitted back to SIPCOT, with a direction to consider the case of the petitioner that the sugar mill at Thirumandankudi is a new industry, entitled to the benefits of G.O.Ms. No. 500 dated 14.5.1990 and in the light of the decision of a Division Bench of this Court in Sulochana Cotton Spinning Mills (P.) Ltd. v. State of Tamil Nadu and Ors. 1998 S.T.C. 725 and pass orders after hearing the petitioner or its counsel. Further, the petitioner is entitled to produce such material as is necessary to prove its case. The SIPCOT is directed to determine the issue within two months from today. No costs. In pursuance of this order, SIPCOT decided the question afresh and came to the conclusion that the petitioner company was not entitled to the Certificate of Eligibility, as it was not a 'new industry'.

3.7. The present writ petition, therefore, came to be filed before the learned single Judge who has chosen to allow the said writ petition by quashing the order passed by the SIPCOT. The learned single Judge has held that the new unit at Thirumandankudi village was a 'new industry' and was entitled to the benefits awarded under G.O.Ms.No. 500. In his findings, the learned Judge has declined to accept the contention raised on behalf of the petitioner company that the Division Bench judgment referred to earlier amounted to res judicata. The learned Judge found that the Division bench had not given any finality to its findings and had left the question open regarding the applicability of G.O.Ms.No. 500 to the petitioner company.

3.8. The learned Judge then took stock of eleven reasons given in the impugned order passed by the SIPCOT and found that the petitioner company had secured independent industrial licence, which was for the grant of new undertaking under the Industries (Development and Regulation) Act, 1951. Relying on Section 11, the learned Judge also took notice of the certificate issued under the said Act, which is dated 29.10.1991 wherein, the new unit was described and a free sale quota by way of incentive was sanctioned to the said new unit. The learned Judge observed that it was clear that the sugar industry was a 'new unit' with a licensed capacity of 2500 TCD and that it was eligible to avail of the incentives in accordance with the sugar incentive scheme announced by the Directorate of Sugar, vide letter dated 2.6.12.1988. The learned Judge also found that there was a demarcation of 'cane area' exclusively for the 'new unit' and this was another reason why the order passed by the SIPCOT was not correct. The learned Judge also took stock of the fact that an independent licence under the Factories Act, 1948 as also under the Central Excise Act, 1944 were awarded for this 'new unit'.

3.9. In paragraph 14, the learned Judge took stock of the language of Clause 3 of G.O.Ms. No. 500 and pointed out that the terminology used therein was 'existing industry', 'new unit' and 'existing unit'. The learned Judge accepted the argument that the identity or the personality of the entrepreneur was irrelevant and, therefore, SIPCOT was misconceived in stating that the petitioner company being an existing company running an old unit could never have set up a new unit for the company since the company was an 'existing industry'. The learned Judge further held that the new unit was an independent new sugar mill with its own plant and machinery, infrastructure, separate excise records, separate electricity licence and independent personnel which strengthen the case of the petitioner company.

3.10. The learned Judge thereafter referred to Clause 13 of G.O.Ms.No. 500 and found that since the said Government Order was in modification of all the previous Government Orders available on the subject matter, no reliance could have been placed by SIPCOT on the 'earlier Government Orders'. It needs to be stated here that SIPCOT has specifically referred to one Government Order, G.O.Ms.No. 989, dated 1.9.1988, under which the petitioner company had already obtained the 'purchase tax deferral' for a period of four years to the extent of Rs. 440 lakhs. Under this Government Order, this tax deferral was to be applicable for the 'purchase tax' (in contradistinction with the 'sales tax'). It is perhaps to that part of the order of SIPCOT that the learned Judge has made a reference at the end of paragraph 16 of his judgment. The learned Judge thereafter did not agree with the reasoning in the impugned order of SIPCOT to the effect that only new company with one industry could get the benefits of G.O.Ms.No. 500 and found that such an interpretation went against the very object of G.O.Ms.No. 500.

3.11. After considering the decisions cited before him in detail, the learned Judge summarised five features, which supported the claim of the petitioner company. They are as follows:

(i) The new sugar mill of 2500 TCD at Thirumandankudi in Papanasam Taluk, Thanjavur District for manufacture of sugar was licensed under Section 11 of the Industries (Development and Regulation) Act, 1951. The Government of India in their Letter of Intent by their proceedings dated 7.3.1990 certified that the said mill as 'new industrial undertaking';

(ii) The Government of Tamil Nadu while fixing the sugar cane cess, considered the said mill as new industry. The Government have also allotted separate command area for Thirumandankudi factory by their proceedings dated 25.11.1988;

(iii) The new sugar mill at Thirumandankudi secured infancy protection under Section 16 of the Provident Fund Act and the said benefit is given only to new establishments;

(iv) The abundant particulars, namely, the factory has a capacity to crush 2500 TCD of sugar cane per day, complete range of plant, machinery, implements, instruments, equipments, power connection, separate staff, workers, its own records, books of accounts, independent factory General Manager designating as Occupier for the purposes of Factories Act, separate registration for Central Excise, and separate licence under the Factories Act;

(v) The Certificate of the Government of India dated 29.10.1991 recognising the sugar factory at Thirumandankudi as a new unit which is eligible to avail of incentives in accordance with the sugar incentive scheme announced by the Directorate of Sugar.

3.12. The learned Judge in paragraph 22 held that it was a well-settled rule of construction that the purpose of the notification to promote industrialisation must be paramount in the interpretation and accordingly, the G.O.Ms. No. 500, which was brought into existence for encouraging new industries and for removing industrial regional imbalance in the State, should be construed liberally. The learned Judge also held that such a provision for promoting economic growth has to be interpreted broadly and the restriction has to be construed so as to advance the objective of the provision and not to frustrate it. On this logic, the writ petition came to be allowed.

4. Before we venture to deal with the arguments, it is required to be noted first that the appeal is filed only by SIPCOT though the other three original respondents have only chosen to support the appeal during the arguments before us. There is, however, no unanimity between the appellant and the three supporting respondents on one major issue. The appellant's counsel does not rely upon the logic in the impugned order passed by the SIPCOT to the effect that since the new unit is launched by the very same company, which was already in existence and was having its old unit somewhere else, the new unit cannot be considered to be a 'new industry' for the purposes of G.O.Ms.No. 500. According to the supporting three respondents, who are represented by the learned Additional Advocate General, the SIPCOT was justified and correct in taking that stand. We shall deal with this aspect later on.

5. The gravamen of the contentions by the appellant before us, as raised by the learned senior counsel, Mr. A.L. Somayajee, is as follows:

5.1. That the new unit established at Thirumandankudi village, Papanasam Taluk, Thanjavur District cannot be considered as a 'new industry' as it is clearly outside the language of Clause (3) of G.O.Ms. No. 500 in the sense that it is not set up on or before 14.5.1990. To buttress this argument, learned senior counsel points out that admittedly the 'trial production' in the new unit had commenced in March, 1990, i.e. almost two months prior to the promulgation of G.O.Ms.No. 500. He further suggests that the terminology in that clause (new industries to be set up) would only include the 'future industries' and not the industries that are already in existence and have gone into production.

5.2. The learned Counsel secondly says that this clause has to be read not in isolation but in harmony with Clause (10). According to him, Clause (10) covers the case of the petitioner company's unit, which has commenced production before 14.5.1990 and would, therefore, be entitled only for IFST Loan/IFST Deferral as per the Government Order existing on the date of commencement of the production. To buttress this argument, the learned senior counsel relied on an admitted fact that under G.O.Ms.No. 989 the present unit had actually availed of the 'purchase tax deferral' for four years. He, therefore, suggests that since the petitioner company's unit had availed the deferral facility under G.O.Ms.No. 989, it cannot have the additional benefit of G.O.Ms.No. 500 and cannot further claim a complete tax-holiday for five years from the date of commencement of production.

5.3. During his arguments, the learned senior counsel has pointed out that it was an admitted position that the petitioner company had availed of the purchase tax deferral for a period of four years. According to the learned senior counsel, the learned single Judge had not taken into account the obvious language of Clause (3) and Clause (10) of G.O.Ms.No. 500; nor had the learned single Judge realised that the so-called 'new unit' was not a 'new industry' since it was already set up before 14.5.1990 and had also gone into production before that date. The learned senior counsel further reiterated that the fact that the petitioner company had already availed of the benefit of purchase tax deferral for four years under G.O.Ms.No. 989 was also totally ignored by the learned single Judge.

6. The three supporting respondents, who have not chosen to file an appeal against the order of the learned single Judge, have chosen to rely upon the aforementioned arguments of Mr. A.L. Somayajee and have additionally reiterated the rationale in the order passed by the SIPCOT to the effect that for being covered under G.O.Ms. No. 500, it must be a 'new industry' in the sense that it must have been started by a new company or undertaking or any juristic person. If the concerned new unit at Thirumandankudi village was started by the petitioner company, which was already in existence and which was already having its industry in the same district, then, the new unit cannot be deemed to be the 'new industry' and would not be entitled to get the benefits out of G.O.Ms. No. 500. According to the three supporting respondents, the new unit is only 'an expansion' of the old unit, which is at Vadapathimangalam village, Needamangalam Taluk. However, since the old unit is not in the 30 industrially most backward taluks, even this expansion by way of a new unit would not entitle the petitioner company for the benefit of five years' tax waiver under G.O.Ms. No. 500. The three supporting respondents have also filed on record some documents supporting the claim of Mr. A.L. Somayajee and tried to argue that this so-called 'new unit' had already gone into 'commercial production' much before 14.5.1990 or at least from 23.3.1990 and the petitioner company had also made statements to that effect before the sale tax authorities for the purposes of sale tax deferral. According to the supporting respondents, the claim of the petitioner company that it was a 'new industry' having started its 'commercial production' after 14.5.1990 was also not correct.

7. The first respondent in this appeal (petitioner company) has raised a 'preliminary objection' to the plea raised by Mr. Somayajee. According to the respondent such a plea that the new unit at Thirumandankudi village was set up earlier to 14.5.1990 and had also commenced its production is a 'factual plea' and this objection was not raised either before the SIPCOT or before the learned single Judge. Both the learned senior counsel appearing on behalf of the respondent argue that this plea, which ought to have been raised and was not raised before the learned single Judge, cannot now be allowed to be raised in the appeal and that too, by SIPCOT.

7.1. The learned senior counsel for the respondent also point out that the second objection raised against the applicability of G.O.Ms.500 to the effect that the petitioner company had already availed purchase tax deferral for a period of four years under G.O.Ms.No. 989 and, therefore, under Clause (10) of G.O.Ms. No. 500, it would be entitled only to that tax deferral and nothing else, had also not been either raised or considered by SIPCOT or by the learned single Judge and, therefore, it cannot be argued here during the appeal for the first time. The learned senior counsel further reiterated that the matter had to be decided strictly on the reasons given by SIPCOT for refusing to grant the Certificate of Eligibility and fresh reasons could not be found out later on at the appellate state.

7.2. On merits, the contention by the petitioner company is that reading Clauses (3) and (8) of G.O.Ms.No. 500 together it was not necessary that the concerned new industry should have been set up only after 14.5.1990 to get the benefits of G.O.Ms.No. 500. The learned senior counsel also reiterated that in legal as well as common parlance, it is well understood that an industry could be taken to have commenced only when it commenced the 'commercial production'. In that behalf, Clause (8) of G.O.Ms. No. 500 was very heavily relied, which contains the following sentences:

The deferral/waiver period will commence from the date of commencement of the commercial production after the completion of the envisaged project. Such commencement shall be on or after the date of issue of this order for eligible units. The learned Counsel naturally argued that if the Government had the 'commencement of commercial production' in mind as the starting point for a period of five years, during which period the sales tax was to be completely waived, and if that date could be the date on which the G.O.Ms.No. 500 came into existence, i.e. 14.5.1990, then, it was obvious that even if an industry was set up earlier but had not commenced its commercial production, such an industry was well within the benefit zone of G.O.Ms.No. 500. Even otherwise, the learned Counsel relied on various provisions like Section 15(c) of the Income Tax Act to suggest that the only relevant date could have been the date of commencement of commercial production. The learned Counsel points out that in their application, which was in the prescribed form, they had specifically pleaded that their commercial production had not started on 14.5.1990 and it started only in November, 1990. We were taken through large number of documents to prove that though the trial production had commenced in March, 1990, the commercial production had commenced only in November, 1990. The main reason for this was that the necessary machinery was not available with the unit and, therefore, it had not reached its maximum capacity of production, which was 2500 TCD.

7.3. The learned senior counsel, Mr. C. Natarajan appearing for the petitioner company very fairly admitted that arguments were raised in respect of the G.O.Ms.No. 989 and the advantages taken by the petitioner thereunder and therefore, the resultant inapplicability of G.O.Ms.No. 500 to the petitioner company. He, however, contended that that argument had no force. According to the learned senior counsel, it had always been the case of the appellant and the supporting respondents that the new unit in Thirumandandkudi village was not a new industry and was only an expansion of the existing unit of the petitioner company in Vadapathimangalam. He also argued that though the petitioner company did reap the advantages under G.O.Ms. No. 989, it had no other alternative and was obliged to fall back upon that Government Order but, merely because of that, it could not be denied the benefit of G.O.Ms.No. 500. Learned Counsel very fairly conceded that the petitioner company could not take the advantage of both the Government Orders, i.e., G.O.Ms.Nos. 989 and 500 and offered to return the benefits reaped under G.O.Ms.No. 989 for getting the benefits under G.O.Ms.No. 500.

8. It is on these conflicting stands that we have to decide whether SIPCOT was justified in refusing the Certificate of Eligibility to the petitioner company and whether the learned single Judge was right in upsetting the said order and ordering the grant of Certificate of Eligibility to the petitioner company - in short, the question of applicability of G.O.Ms.No. 500 to the petitioner company alone.

9. First about the technical objections: Mr. K. Parasaran, learned senior counsel very vehemently argued that the earlier Division Bench, which had allowed the writ petition filed by the petitioner company, had itself finally held that G.O.Ms.No. 500 was applicable to the petitioner company and, therefore, that judgment would operate as res judicata against the present appellant.

10. We do not agree with the contention. When we consider the order passed by the Division Bench, it is clear that all that the Division Bench held finally was that the objection raised by SIPCOT that G.O.Ms.No. 500 would not be applicable to the sugar industries was not right in view of the judgment of this Court in Sulochana case 1998 S.T.C. 125. It is well-known that there is no tax on sugar whereas, the sugar mill has to pay the tax on the purchase of sugarcane The expression used in G.O.Ms.No. 500 is 'sales tax' alone. Perhaps, that is why the SIPCOT took the view that G.O.Ms.No. 500, which provided waiver of sales tax (meaning, sales tax on the finished goods), was not applicable to the petitioner company, which did not have to pay the sales tax on the finished goods and had only to pay the purchase tax on the raw material, i.e., sugarcane.

11. In Sulochana case 1998 S.T.C. 125, the Division Bench took the view that the term 'sales tax' included the 'purchase tax' on the raw material also. The Bench in that case has clearly observed in paragraph 9, referring to the expression 'sales tax', 'dealer' and 'total turnover' in Tamil Nadu General Sales Tax Act, that the term 'sales tax' included the 'purchase tax' such as the purchase tax on the raw material required for the production of sugar. In fact, in that case, the Government did not contend that the expression 'sales tax' used in G.O.Ms. No. 500 did not include tax on purchase. It is, therefore, only to that extent that the controversy was finalised by the Division Bench in the present case. However, the question of applicability of G.O.Ms.No. 500 on other counts was obviously left open. The learned single Judge has quoted extensively from the order and we are in agreement with the learned Judge that the other matters regarding the applicability of G.O.Ms.No. 500 excepting the one, which we have pointed out, were left open by the Bench. Of course, then and even before SIPCOT, the debate centered around the only question whether the new unit in Thirumandankudi village could be said to be the new industry and could be contemplated under G.O.Ms.No. 500. The learned Judge has made a reference to the ruling of the Supreme Court in Sobhag Singh v. Jai Singh : [1968]2SCR848 and has found that the Division Bench had directed the SIPCOT to consider afresh in the light of the materials furnished by the petitioner company whether the sugar mill at Thirumandankudi village is a new industry entitled to the benefits of G.O.Ms.No. 500. We agree with the learned Judge that the Division Bench did not finally decide the question of applicability of G.O.Ms.No. 500 and, therefore, that decision cannot be termed as res judicata on that question. The objection, therefore, must be rejected.

12. It was very vehemently argued by both the learned senior counsels, Mr. Parasaran and Mr. Natarajan, that the points raised by Mr. Somayajee were not raised before SIPCOT or before the learned single Judge and, therefore, they could not be raised before us for the first time. The learned senior counsels also argued that new reasons could not be found out to which SIPCOT was not alive while rejecting the application by the petitioner company. The learned Counsels also pointed out that the objections, which Mr. Somayajee were raising regarding the industry having been set up before 14.5.1990 and the further objection that it could not have an additional advantage under G.O.Ms.No. 500 once it had taken the benefit of G.O.Ms.No. 989 dated 1.8.1989, were not pleaded before the SIPCOT; nor has the SIPCOT rejected the application even distantly considering those questions. Therefore, the learned Counsels contended that all these materials cannot be used now at the appellate stage.

13. We have deliberately pointed out the findings of the learned single Judge to show as to for which precise considerations the petition was allowed by the learned single Judge. There can be no dispute that the question of inapplicability of G.O.Ms.No. 500 on account of the industry having been set up and the production having been commenced therein prior to 14.5.1990 is undoubtedly not to be found to have been considered in the judgment of the learned single Judge. The learned senior counsel for the appellant, Mr. Somayajee, was candid enough to argue that this aspect is not to be found in the order passed by the SIPCOT also. We have gone through the whole order passed by the SIPCOT and there can be no doubt that this aspect was not covered. The SIPCOT more or less rejected the application of the petitioner company for the following considerations:

(i) That the petitioner company had made incorrect representations to the Central Government that the proposed undertaking would be implemented by the new company promoted by the applicant.

(ii) Since it was the old company itself which had promoted the new unit and since the company had its old unit manufacturing sugar only and since the same activity was undertaken by setting up a new unit for the very same purpose, it could not be said that a 'new industry' was started so that it could be covered by G.O.Ms.No. 500.

(iii) It was only the old company which had set up a new unit and, therefore, it could not be said that it was a 'new industry'. It, therefore, came to the conclusion that the 'new unit' was only 'an expansion' and not 'starting of a new industry'.

14. Before finalising the matter SIPCOT had referred the matter to the Standing Committee, which had directed to examine and issue orders on the company's application in the light of the specific Government Order relating to the sugar industry. There is an observation made in the order to the following effect:

As per the direction of the Standing Committee, the file was examined under the said G.O. and it was found that the petitioner company considering itself to be eligible under G.O.Ms.No. 989 Inds. (MID II) dtd. 1.9.1988 has not paid the revenue due to Commercial Tax (C.T) Dept., amounting to Rs. 4,91,77,249 for the Assessment years 1989-90, 1990-91, 1991-92 and 1992-93 (upto Sept. 92). Under the said G.O. 'the purchase tax deferral will be restricted within the period of 4 years from the date of commencement of production to only those years in which dividend is not declared.' Since the petitioner company had declared dividend, C.T. Department served notice to pay the entire amount. The company filed a writ petition W.P.No. 17605 of 1992 against C.T. Department and Government which is pending before the Hon'ble High Court for disposal.

Though a reference thus has been made to G.O.Ms.No. 989, when we see the actual order, everything seems to have been turned on only a singular issue that since it was the 'existing company' which had started a 'new unit' and since no 'new industry' was set up, the 'new unit' could not be said to be a 'new industry' for the purpose of G.O.Ms.No. 500.

15. A great deal of debate went on this question itself before us. It is quite true that normally the parties should not be taken by surprise by raising altogether new points and objections. It is also true that the question regarding the industry having been started and set up prior to 14.5.1990 and, therefore, G.O.Ms.No. 500 not being applicable to it was not raised before the learned single Judge or considered by him. However, the question is whether the Court would be precluded from considering this aspect where the facts are 'admitted facts' and there is no dispute over the facts.

16. It cannot be forgotten here that the preliminary task would be to interpret G.O.Ms.No. 500, which Government Order is present before the Court and is being debated. It also cannot be disputed that the petitioner company had itself made an application on 19.11.1991 wherein, it has specifically stated that the 'trial production' in its new unit at Thirumandankudi village had already commenced on 23.3.1990. Therefore, that fact was always before the Court and that was an admitted fact. If the major task is to interpret G.O.Ms.No. 500 then some basic admitted facts have to be taken into consideration even if they are not technically raised. If it was an admitted position that on 14.5.1990 the industry had already gone in production and if the appellant wants to raise this question while interpreting Clause (3) of G.O.Ms.No. 500, in our opinion, the appellant cannot be stopped and the appellant would be perfectly justified in drawing our attention to the basic admitted facts. Same thing can be said regarding the question of applicability of G.O.Ms.No. 500 on account of the petitioner company having taken the advantages under G.O.Ms.No. 989. That fact is also an admitted fact. There is enormous evidence on record to suggest that not only had the petitioner company obtained tax deferral under G.O.Ms.No. 989 but, had also gone to the extent of further claiming that it was entitled to the 'tax subsidy' and not the 'tax deferral' alone as it had set up the industry in pursuance of the earlier Government Orders promising the tax subsidy.

17. A reference can be made to W.P.No. 9180 of 1993 filed earlier by the petitioner company, which is on the record of this appeal, wherein, the petitioner company says:

In this view the petitioners are entitled to subsidy as granted to the mills commenced prior to 1.9.1988 having obtained a Letter of Intent on 12.5.1987 having gone about committing for purchase of factory lands at Umayalpuram/Thirumandankudi village, having appointed architect on 11. 7.1988 and gone about placing orders with various engineers and civil contractors for construction, having placed firm orders on machinery manufacturers, M/s. K.C.P. Limited and others In this view, the petitioners state that the respondents 2 and 3 are bound to act fairly and reasonably and extend the benefit of tax subsidy as per the norms governing the factories set up prior to 1.9.1988 to which class the manufacturers belong. Accordingly, the petitioners are entitled to a Mandamus for the grant of benefit as already extended in G.O.Ms.No. 1414 dated 30.11.1984, G.O.Ms.No. 1497, dated 26.12.1984 and G.O.Ms.No. 268 dated 16.4.1987 to various other private sugar mills.

[italics supplied]

Petitioners further plead in the said writ petition:

Petitioners state that even assuming that G.O.Ms.No. 989 dated 1.9.1988 would operate to the prejudice of the petitioners still it cannot be operated so as to render meaningless and without substance.

That the petitioner had claimed the tax deferral under G.O.Ms.No. 989 was never disputed by the learned senior counsel Mr. C. Natarajan. The question is that if all these were the 'admitted facts' before the Court, could the appellant not show and argue that in the first place G.O.Ms.No. 500 could not be made applicable to an industry which was set up and had started its production before 14.5.1990 and that further, since the petitioner company had already reaped the benefits under G.O.Ms.No. 989, it could not further claim the benefits of G.O.Ms.No. 500 as the same was not intended to perpetuate the benefits given under the earlier Government Orders. In our view, it cannot be argued that the parties were taken by surprise if the appellant was allowed to address us on this question. Indeed, lengthy arguments were addressed on this question and a full opportunity was given by us to the petitioner company to meet these arguments raised by Mr. Somayajee. At this stage it will be better for us to deal with the case-laws cited by the parties.

18. Mr. C. Natarajan has very strongly relied on (i) Shanbaggakannu v. Muthu Bhattar : AIR1971SC2468 ; (ii) Municipal Corporation of the City of Jabalpur v. State of Madhya Pradesh : [1963]2SCR135 and also (iii) Kurukshetra University v. Rural College of Education . A reference has also been made to Bharat Singh v. State of Haryana : AIR1988SC2181 .

19. As regards the first mentioned case, the reliance was placed on the observations in paragraph 5. The Apex Court had disapproved of the Division Bench allowing a point involving law and facts to be agitated when that point had never been taken even in the plaint or before the trial court, the first appellate court and the High Court in the second appeal. However, those observations cannot be read bereft of the background. There, the admitted position was that the alienation evidenced by Ex.B-9 by Parvathiammal was one by way of a gift and was without consideration and it was never pleaded by the plaintiff that any consideration had passed for the properties which were the subject matter of the gift by Parvathiammal in favour of Duraiswami. The Apex Court goes on to hold in the same paragraph that in such a situation it was not open to the Division Bench of the High Court to allow the question of consideration to be raised for the first time. Such is, indeed, not the case here where the appellant has been allowed to address us on the basis of the facts which are already on record and which are the 'admitted facts'.

20. In the second mentioned case, the reliance was placed on the observations in paragraph 9. There the Apex Court held that where a factual position was not stated in the writ petition, it should not be permitted to travel beyond the facts stated at the stage of arguments. It is significant to note that the Supreme Court further holds:

Save in exceptional cases, parties should be held strictly to their pleadings and if owing to discovery of new matter of grounds, there is need to add to or to modify the allegations either in the petition or in the counter-affidavit, the Court should insist on formal amendments being effected, for this would enable each party to state its case with precision and definiteness and the other side would have a proper opportunity to know this case and meet with appropriate defences.

[Italics supplied]

Precisely that was allowed to be done by us in the present case also. This is apart from the fact that the learned Counsel urged what was actually on the record and what was an admitted position.

21. In the third mentioned case, the Full Bench, in paragraph 11, has observed that the question of invalidity of a provision was tried to be raised though the said question was not even distantly raised in the writ petition, nor was least foundation laid for the submission for that question and that such an argument was not made even before the learned single Judge. There can be no dispute with the proposition. However, the situation is entirely different here where the factual basis was already available before the Court. The question was only of its application to the express language of the concerned Government Order.

22. In the fourth mentioned case also the Apex Court has, in paragraph 13, observed that though a specific point was pleaded in the writ petition, there was no reference to any material in support thereof; nor was the point argued at the hearing of the writ petitions and before the Apex Court also no particulars and no facts were given in the Special Leave Petition or in the writ petitions or in any affidavits. The Apex Court holds:

When a point which is ostensibly a point of law is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evidence which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter-affidavit, as the case may be, the court will not entertain the point.

A very heavy reliance was placed by Mr. C. Natarajan on these observations. However, we wish to point out that all the facts, on the basis of which a point was raised, are almost in the nature of admitted facts, requiring no further proof. The question is only of their application to the concerned Government Order. In our opinion, even this case would not help the petitioner company.

23. On the other hand, Mr. Somayajee relied on number of authorities, including Bauribandhu Misra v. I.G. of Police and Ors. : AIR1970Ori213 . Here the Division Bench had permitted to raise the question, which was based on the facts, which were the admitted facts. This is how the Bench observed:

The only contention urged by Mr. Patnaik was on the basis of certain facts not mentioned in the writ application. Ordinarily, such a contention would not have been permitted to be urged as it would involve a question of fact. But as the learned Advocate General did not dispute the accuracy of the factual basis of the statement, the contention was permitted to be urged.

We respectfully agree with the Division Bench.

24. Mr. Somayajee also pointed out from G. Tatayya v. Jagapathiraju : AIR1967SC647 and more particularly from paragraph 7 thereof that the Apex Court had permitted a question to be raised, which was not agitated in the High Court. The question was regarding the interpretation of certain provisions of Madras Estates Land Act. It being a question of law, the Apex Court has allowed the question to be raised before it.

25. In the present matter also, the question is as regards the true interpretation of Clauses (3), (8) and (10) of G.O.Ms.No. 500 in the light of the admitted facts and, therefore, it is a 'pure question of law' as to what is the true interpretation of those clauses. We, therefore, allowed the learned senior counsel to argue that question. We are of the clear opinion that since the facts, on the basis of which contentions were raised, were admitted facts, both the objections could be considered by us in appeal.

26. It was also argued by the learned Counsel for the respondent (petitioner company), reference to which argument has been made in paragraph 7.1 earlier, that even if this was an admitted fact, the same could not be supplied as the additional reasons to supplement the reasons given by SIPCOT. The learned Counsel argued that the order passed by the SIPCOT being in the nature of an 'administrative order', it could not be further improved upon by the appellant and the matter will have to be viewed necessarily on the basis of the reasons considered by the SIPCOT and all these objections, which were being raised as a defence to the petition, should have been found in the order of SIPCOT. Heavy reliance was placed on M.S. Gill v. Chief Election Commissioner : [1978]2SCR272 as also the earlier cases Rohtas Industries Ltd. v. S.D. Agarwal : [1969]3SCR108 and Barium Chemicals v. A.J. Rajan : [1972]2SCR752 .

27. Replying to this, the learned Counsel for the appellant relied on the observations of the Supreme Court in paragraph 26 of the decision reported in Shri Sachidanand Pandey v. The State of West Bengal : [1987]2SCR223 . The said paragraph is as under:

Dr. Singhvi cited before us the well known decisions of this Court in Rohtas Industries Ltd. v. S.D. Agarwal : [1969]3SCR108 ; Barium Chemicals v. A.J. Rajan : [1972]2SCR752 and Mohinder Singh Gill v. Chief Election Commissioner : [1978]2SCR272 to urge that even an administrative decision must be arrived at after taking into account all relevant considerations and eschewing irrelevant considerations and that the reasons for an order must find a place in the order itself and those reasons cannot be supplemented later by fresh reasons in the shape of an affidavit or otherwise. The submission was that neither the Cabinet memorandum of January 7, 1981 nor the Cabinet memorandum of September 9, 1981 revealed that relevant considerations had been taken into account. What was not said in either of the Cabinet memoranda, it was said, could not later be supplemented by considerations which were never present to the mind of the decision making authority. We do not agree with the submission of Dr. Singhvi. The proposition that a decision must be arrived at after taking into account all relevant considerations, eschewing all irrelevant considerations cannot for a moment be doubted. We have already pointed out that relevant considerations were not ignored and, indeed, were taken into account by the Government of West Bengal. It is not one of these cases where the evidence is first gathered and a decision is later arrived at one fine morning and the decision is incorporated in a reasoned order. This is a case where discussions have necessarily to stretch over a long period of time. Several factors have to be independently and separately weighed and considered. This is a case where the decision and the reasons for the decision can only be gathered by looking at the entire course of events and circumstances stretching over the period from the initiation of the proposal to the taking of the final decision. It is important to note that unlike Mohinder Singh Gill's case : [1978]2SCR272 where the court was dealing with a Statutory Order made by a statutory functionary who could not, therefore, be allowed to supplement the grounds of his order by later explanations, the present is a case where neither a statutory function nor a statutory functionary is involved but the transaction bears a commercial though public character which can only be settled after protracted discussion, clarification and consultation with all interested persons. The principle of Mohinder Singh Gill's case has no application to the factual situation here.

28. We find that the situation is identical in the present case. Though the earlier Division Bench had directed the SIPCOT to hear the petitioner company on the question of the Eligibility Certificate, it is obvious that the SIPCOT had to take into consideration various factors which it was bound to independently and separately weigh and consider. The grant of Eligibility Certificate was certainly a case which could be considered only by looking at the entire course of events and circumstances stretching over the period from the initiation of the proposal to the taking of the final decision. In this behalf, we may point out that the original application was made on 19.11.1991 and then the litigation ensued thereupon and it is only then that the decision came to be given. It cannot be forgotten that though the SIPCOT was duty bound to hear and consider the objections raised, the function was essentially an 'administrative function' and the SIPCOT could not be said to be a 'statutory authority' nor could the decision-taking process could be said to be a 'statutory function'. The said decision of the Supreme Court is a complete answer to the question raised in paragraph 7.1.

29. It will now be our endeavour to interpret G.O.Ms.No. 500 and to see whether the two objections raised by the appellant would divest the petitioner company of the benefits conferred thereupon. This Government Order comes as a sequel to G.O.Ms.No. 305, Industries, dated 22.5.1989, G.O.Ms.No. 423, Industries, dated 7.7.1989, G.O.Ms.No. 563, Industries, dated 19.8.1989 and G.O.Ms.No. 564, Industries dated 19.8.1989. Shortly stated, in G.O.Ms.No. 305, dated 22.5.1989, on the basis of the suggestions by a Long Term Strategic Planning Committee, the Government wanted to make the working of Interest Free Sales Tax Loan scheme more attractive. It also provided that the ten conventional industries would not be eligible for Interest Free Sales Tax Loan. 'Sugar Industry' is one such industry, which was declared not to be eligible for Interest Free Sales Tax Loan. Then comes G.O.Ms.No. 423, dated 7.7.1989. The only relevance of this Government Order is that in supersession of the earlier Government Orders on classification of the taluks, the Government directed that 105 taluks of the State as annexed to the order should be declared as 'industrially backward' for the purpose of concessions like Power Tariff Concession, IFST Loan, IFST Deferral, State Capital Subsidy and the Special Subsidy. However, it must be noted here that sugar industry, which was one of the ten conventional industries, was outside the benefit zone even of this Government Order. By G.O.Ms.No. 563, dated 19.8.1989, it was notified that the industrial units, which had started production upto 8.5.1988, were eligible for IFST Loan to a certain limit and later on, the scheme underwent a change whereby, the new small scale industrial units, commencing production from 9.5.1988 were also deemed entitled for the benefits of deferral of sales tax. The Government Order then takes note of the suggestions given by the Industries Commissioner to the Government that IFST Deferral scheme to be continued for six years instead of three years as covered in the earlier schemes and provides that the new small scale industries would be eligible for the sales tax deferral for five years with certain limit. Under G.O.Ms.No. 564 also, the Government took further note of the suggestions made by the Industries Commissioner and Director of Industries and Commerce to extend the benefits for such units which take steps to carry out expansion. The modalities of the scheme were also provided for the expanded units. Again, it must be noted that the sugar industry was kept out of this arena or at least the earlier policy to keep the conventional industries out of the benefit zone was not varied by the Government.

30. A major change brought in G.O.Ms.No. 500 was that out of 105 industrially backward taluks, it carved out of 30 taluks as the 'industrially most backward' taluks. In addition to it, it also provided that there would be a complete tax holiday for five years in the sense that the sales tax would be completely waived and such waiver would begin in the case of industries which would be set up in pursuance of G.O.Ms.No. 500. There does not seem to have been any variation in the earlier Government policy to keep the conventional industries out of the benefit zone. However, the Government wanted to correct the industrial regional imbalance in the State and, therefore, wanted to give 'further' incentives to attract more industries in the industrially most backward taluks and, therefore, in Clause (3) of G.O.Ms.No. 500, a general term 'new industries to be set up' is used. Clause (3) of G.O.Ms.No. 500 reads as under:

3. The Government direct that the new industries to be set up in the 30 most backward taluks ordered in para.2 above and also in the three industrial complexes of State Industries Promotion Corporation of Tamil Nadu at Pudukottai, Cuddalore and Manamadurai be eligible apart from other existing concessions, for full waiver of sales tax dues for a period of five years upto a ceiling of the total investment made in fixed assets. Existing industries in the most backward taluks and in the three State Industries Promotion Corporation of Tamil Nadu (SIPCOT) complexes undertaking expansion/diversification are also eligible for full waiver of sales tax dues for a period of five years subject to a ceiling of the total investment made in fixed assets under expansion/diversification.

Therefore, the intention of the Government was clear that it had decided to give the sales tax holiday for five years to 'all the industries', which were 'to be set up' in the 30 industrially most backward taluks in pursuance of this Government Order.

31. Clause (5) of the G.O.Ms.No. 500 reads as under:

The sales tax deferral/waiver of expansion/diversification ordered in paras.3-4 above is subject to the sales tax payable on products manufactured by the capacity created by expansion/diversification units only.

[Italics supplied]

It was perhaps, because of Clause (5) of G.O.Ms.No. 500 as also because of the user of the words 'sales tax payable on products manufactured' in this Clause that the Government took a stand in Sulochana's case, 1998 S.T.C. 125, that G.O.Ms.No. 500 would not be applicable to the sugar industries, which were required to pay not the 'sales tax', but the 'purchase tax' on the raw materials purchased by it. The Division Bench, in that case, took the view that the words 'sales tax' would also include 'purchase tax' and that position was not debated by the Government as would be evident from the observations in paragraph 9. The real controversy in Sulochana s case, was of a dual nature, which would be clear from the issues framed by the Division Bench in that case. The issues were:

(i) What is the true scope and ambit of the Government Order. G.O.Ms.No. 500, dated May 14, 1990?

(ii) What is the effect of the Government Order, G.O.Ms.No. 500 dated May 14, 1990 and also on the new industries commenced pursuant to G.O.Ms.No. 500, dated May 14, 1990 and the expansion and diversification undertaken by the existing industries pursuant to the aforesaid G.O.Ms.No. 500?

(iii) If the answer to point (ii) is to the effect that G.O.Ms.No. 92, dated February 22, 1991 affects the operation of G.O.Ms.No. 500, dated May 14, 1990, whether the State Government can be estopped from giving effect to the same in respect of the new industries commenced pursuant to G.O.Ms.No. 500 and the diversification and expansion undertaken by the existing industries pursuant thereto?

The Division Bench was examining the true scope and nature of G.O.Ms.No. 500 only to examine as to whether the term 'sales tax' used in that Government Order included the 'purchase tax' also so that a conventional industry like the sugar industry, which was, not required to pay the sales tax on the finished product like sugar and was required to pay only the purchase tax on the raw materials, could take the advantage thereof. The whole issue centered round the interpretation of Clause (5) and not Clause (3) of G.O.Ms.No. 500 as would be evident from the following observations of the Division Bench:

The main difference of opinion between the Government and the petitioners relates to the scope of paragraph 5 of the G.O.Ms.No. 500 dated May 14, 1990 which states that the sales tax deferral/waiver of expansion/diversification ordered in paragraphs 3 and 4 above is subject to the sales tax payable on products manufactured by the capacity created by expansion/diversification only.

32. The contention of the Government was that Clause (5) modified Clauses (3) and (4) and, therefore, G.O.Ms.No. 500 was applicable to new industries as well as expansion/diversification of the existing industries. The incentives, which were available to both, in respect of the sales tax was only on the sale of products manufactured by them. The Division Bench did not accept this argument and held that the term 'sales tax' on manufactured product was not to be understood as was sought to be canvassed by the Government and the Division Bench also made a reference to the booklets by the Government wherein, a statement was made that the sales tax deferral and sales tax waiver will include Tamil Nadu General Sales Tax, Commercial Sales Tax, surcharge and additional surcharge and additional sales tax (turnover tax). The Division Bench, therefore, came to the conclusion that all new industries were given the concessions by G.O.Ms.No. 500 for a period of five years.

33. The second aspect of the Sulochana's case 1998 S.T.C. 125, was whether the Government was justified in cutting down the concessions granted to the industries, which had started their production in pursuance of G.O.Ms.No. 500, by freshly introducing G.O. P. No. 92, dated 22.2.1991. The Division Bench went on to hold that there would be a promissory estoppel against limiting the concessions granted earlier by G.O.Ms.No. 500 by introducing G.O. P.No. 92, dated 22.2.1991.

34. It is on this backdrop that we have to understand G.O.Ms.No. 500 and the application of that Government Order to the sugar industries, which question had become final by the judgment in Sulochana's case 1998 S.T.C. 125. We must hasten to add that in G.O.Ms.No. 500 there is not even a distant reference to the various Government Orders by which concessions of subsidy and tax deferral were given to the sugar industries. In that way when we look at G.O.Ms.No. 989, we find that G.O.Ms.No. 989 deals with sugar industry alone. In the first paragraph of that Government Order, the Government refers to the reliefs given to the new sugar industries in co-operative and public sector by G.O.Ms.No. 1294, dated 24.10.1975. It then refers that the said benefits were given to the sugar mills in private sector also by G.O.Ms.No. 1497, dated 26.12.1984 and G.O.Ms.No. 268, dated 16.4.1987. The Government Order then goes on to say that the Government had reviewed the existing scheme on grant of purchase tax subsidy in view of the new industries coming up in cooperative and private sectors in the next two years. The Government also mentions that after a careful re-examination of the scheme of providing subsidy to the sugar mills in respect of the purchase tax, it is decided to bring about uniformity in the type of assistance given to the industrial units and, therefore, the scheme of tax subsidy would be modified to one of the deferral of the purchase tax. In Clause 2, the Government has provided the tax deferral for four years subject to the modifications as announced from time to time and also subject to the ceilings in so far as the factory which has the capacity of 2500 TCD. The ceiling of tax deferral was to be Rs. 440 lakhs. On this backdrop, now the real import of G.O.Ms.No. 500 is to be understood.

35. The dates are very relevant. G.O.Ms.No. 989 is dated 1.9.1988 and the benefits thereunder were to be available to the new sugar units, which were to come up in the next two years, i.e., upto 1.9.1990. It is obvious from the voluminous evidence on record that the petitioner company's unit was conceptualised on the basis of this very Government Order. We have already quoted the stand taken by the petitioner company in W.P.No. 9180 of 1993. The process of setting up the unit had, therefore, not in pursuance of G.O.Ms.No. 500 but, in pursuance of G.O.Ms.No. 989. It is an admitted position that the petitioner company's sugar mill at Thirumandankudi village became ready before 14.5.1990 and even the 'trial production' of that sugar mill commenced in the month of March, 1990. Not only this but, even the trial production of the petitioner company was taken advantage of for the purposes of the free sale of sugar. We need not go into the details of the benefits taken by the petitioner company in respect of the free sale of sugar since that is an admitted position. As if this was not sufficient, the petitioner company also took the full benefit of the tax deferral for four full years, which is again an admitted fact. It is quite a different story that on account of the petitioner company having declared dividend, the State Government sought to withdraw the benefits. However, it is reiterated at the Bar that that attempt of the Government has been foiled, thanks to the writ petitions earlier filed and subsequently transferred to the Tribunal, which had quashed the notice sent by the Government in that behalf seeking to recover all the tax at one stroke.

36. It is undoubtedly true, however, that after the advent of G.O.Ms.No. 500 on the scene, the petitioner company had started inching forward to resile from G.O.Ms.No. 989 and tried to get a sneaking entry into the arena opened by G.O.Ms.No. 500, but the fact cannot be forgotten that the petitioner company's new mill at Thirumandankudi village was already set up before 14.5.1990, the date on which G.O.Ms.No. 500 was promulgated and, therefore, the express language of Clause (3) and more particularly the first line therein, would exclude the petitioner company from the benefit zone of that Government Order. We cannot forget that in Sulochana 's case 1998 S.T.C. 125, the Division Bench has relied on the express and explicit language of G.O.Ms.No. 500. We would have to do the same. It could never be said that the Government had any other industry already set up in mind when it used the term 'new industries to be set up'. This is apart from the fact that the G.O.Ms.No. 989 and the earlier Government Orders, which were applicable only to the sugar industries are not even referred to in the present Government Order while those which have been referred by necessary implication excluded the sugar industries. It was perhaps, because of this that the initial stand taken by the SIPCOT was that G.O.Ms.No. 500 was not applicable to the sugar industries. Be that as it may, we are not on the question as to whether G.O.Ms.No. 500 would be applicable to the sugar industries as that question is no more rex integra but the fact remains that the new unit was set up not in pursuance of G.O.Ms.No. 500, but in pursuance of G.O.Ms.No. 989 and the petitioner company went to the extent of suggesting that since it had already started its preparations to set up the industry prior to 1.9.1988, it should be given the advantage of the 'purchase tax subsidies' instead of 'purchase tax deferral' for four years as suggested in G.O.Ms.No. 989 and in that sense the petitioner went to the extent of attacking the G.O.Ms.No. 989 and seeking its quashing in W.P.No. 9180 of 1993. The petitioner company cannot now be allowed to take a complete somersault and to take up a position that its new mill at Thirumandankudi village was set up only on or before 14.5.1990 much less on the technical ground that admittedly the petitioner has also reaped the benefits under G.O.Ms.No. 989.

37. We will have to also examine the objective of G.O.Ms.No. 500 while interpreting its language. This Government Order provided very large benefits such as a complete waiver of sales tax for five years. The objective of this Government Order was to correct the industrial regional imbalances in the State and the Government had, for that purpose, carved out 30 taluks, which were considered to be 'industrially most backward taluks' meaning probably the taluks which did not have any industries or had very few industries. Obviously, the Government wanted to attract the entrepreneurs and companies to set up more industries in the said taluks and therefore, had provided very attractive package vide G.O.Ms.No. 500. It is probably in this spirit that the language of Clause (3) has to be read when the said Government Order mentions that the new industries to be set up in the 30 industrially most backward taluks would be entitled to the full waiver. Therefore, it is certain that the Government did not intend to give the benefits to the already existing industries as on 14.5.1990. We have deliberately given the history of G.O.Ms.No. 500 to suggest as to how the Government went after the industrialisation of the State generally and industrialisation of the industrially most backward taluks in particular. Seeing in this light, the intention of the Government is clear that the benefits were meant only for the industries which were to be set up in the 30 industrially most backward taluks.

38. The arguments were raised against this aspect on behalf of the respondent (petitioner company). The first is referable to the interpretation of the terminology 'set up industries'. According to the learned Counsel, an industry could not be said to have been set up unless it starts its 'commercial production'. This argument was then tried to be developed into a second aspect by asking us to rely on Clause (8) of G.O.Ms.No. 500 which provides that the tax waiter would begin from the date of 'commercial production' which could be on or before the date on which G.O.Ms.No. 500 comes into existence, i.e., 14.5.1990. It was questioned by both the learned Counsel that if the benefits under G.O.Ms.No. 500 were to start even in case of an industry, which started its commercial production on 14.5.1990 then by necessary implication it must mean that the said sugar mill should have been set up earlier to that date because it is a well-known fact that sugar mills do not come up in a day. The argument is undoubtedly attractive but lacks substance in our opinion.

39. Let us first take up for consideration 'what is to set up of an industry'. Learned senior counsel Mr. C. Natarajan, painstakingly took us through the various documents to suggest that this industry had not started in full bloom and had not commenced the 'commercial production'. Various documents were brought to our notice suggesting that this unit had the capacity to crush 2500 TCD of sugarcane a day meaning thereby, that for a viable commercial production it had to crush 2500 TCD of sugarcane. In fact, that is also an admitted position.

40. Our attention was invited to the application dated 19.11.1991 wherein the petitioner company has stated as under:

The site for establishing this new 2500 TCD factory was acquired during October/November, 1988 and thereafter the work relating to construction of the factory and installation of the plant and equipment was taken up and the same was completed in full only during June, 1990. While substantial progress in the installation of the machinery was achieved by March, 1990 one critical item, viz., the power generating equipment was delivered and commissioned by the suppliers only during June, 1990 and hence the installation of the plant and equipment as a whole was completed only during June, 1990....

Therefore, unless the power generating equipment is erected and commissioned, the factory itself cannot normally be commissioned. However, considering that the rest of the plant-barring the power generation equipment - was ready in March, 1990 itself, and the factory was commissioned for trial production on March 23, 1990 with hired diesel generators to supply the power requirements, with the primary objective of evaluating the functioning of various sections of the plant and also to effect such adjustments/modifications to the equipment as warranted. After crushing only 2080 M.Ts., of cane at a daily average of 140 TCD - i.e., capacity utilisation of only 5.94% - the plant had to be shut down on April 5, 1990 due to innumerable technical problems. During this period the highest crush achieved on any single day was only 316 M.Ts. Though a small quantity of 39.600 M.Ts. of sugar was produced during this period of 14 days, the same was below ISS grade and hence not commercially saleable. The plant was recommissioned on April 20, 1990, again with the help of hired diesel generating sets and an additional 11682 M.Ts. of cane was crushed at a daily average of only 403 TCD - i.e., capacity utilisation of 16.11% before the plant had to be shut down again on May 19, 1990, due to severe constraints in running the plant with diesel generators. The highest crush achieved on any single day during this period was only 871 M.Ts. The plant was recommissioned with the requisite power generation equipment on June 15, 1990 but due to technical problems, the power turbine was not allowed by the supplier to be loaded beyond 2 M.W., as against its rated capacity of 3 M.W. As such the plant was again incapable of being operated at its rated capacity of 2,500 TCD. By the close of the season on August 9,1990, a total of 53,245 M.Ts., of cane had been crushed since June 15, 1990 at a daily average of only 951 TCD as against the rated capacity of 2500 TCD working out to a capacity utilisation of only 38,03%.

Therefore, it was pointed out that not even on a single day upto August, 1990 did the plant work in its full capacity of 2,500 TCD. It was pointed out that during this period 4,205.7 M.Ts. of sugar was produced and the first commercial sale of sugar from out of the production from this factory was effected on 6.6.1990 pursuant to the Sugar Release Order of the Government of India, dated 18.5.1990. It is also claimed in this letter that the company did not claim the free sale quota in respect of the sugar produced during trial production from March 23, 1990 till August 9, 1990.

41. We were also shown the various other documents which suggested that the power generating equipment was not received by the petitioner company in time and that because of this, the full production on the commercial scale had not commenced at all. From this material, the learned senior counsel Mr. C. Natarajan, developed an argument that unless the 'commercial production' starts in an industry, the said industry cannot be said to have been 'set up'. Taking the argument further, the learned senior counsel contends that if the set up of the industry could be coincided with the commencement of the commercial production then, that date would be in the last week of November, 1990 and as such, the objection taken by Mr. Somayajee of the non-applicability of G.O.Ms.No. 500 cannot sustain. The learned senior counsel relied on (i) Commissioner of Wealth Tax v. L.S. Cotton Mills : [1967]63ITR478(SC) ; (ii) Commissioner of Wealth Tax v. Dalmia Dadri Cement Ltd. 60 I.T.R. 158; (iii) Metropolitan Springs Pvt. Ltd. v. Commissioner of Income Tax : [1981]132ITR893(Bom) and (iv) Madras Fertilizers Ltd. v. Commissioner of Income Tax : [1994]209ITR174(Mad) .

42. In the first mentioned case, the phrase 'set up' fell for consideration of the Supreme Court while it was interpreting Section 5(1)(xxi) of the Wealth Tax Act, 1957. The learned senior counsel invited our attention to the observations in paragraphs 3 and 4 to the following effect:

A unit cannot be said to have been set up unless it is ready to discharge the function for which it is being set up. It is only when the unit has been put into such a shape that it can start functioning as a business or a manufacturing organisation that it can be said that the unit has been set up. The expression used in the proviso under which the period for which the exemption is available is to be determined, is not the same as used in the principal clause. In the proviso, the period of five successive years of exemption has to commence with the assessment year next following the date on which the company commences operation for the establishment of the unit. Operations for the establishment of a unit, from the very nature of that expression, can only signify steps that have to be taken to establish the unit. The word 'set up' in the principal clause, in our opinion, is equivalent to the word 'established' but operations for establishment cannot be equated with the establishment of the unit itself or its setting up. The applicability of the proviso has, therefore, to be decided by finding out when the company commenced operations for establishment of the unit, which operations must be antecedent to the actual date on which the company is held to have been set up for the purposes of the principal clause.

The Supreme Court then approved the observations of the Bombay High Court in the case of Western India Vegetable Products Limited v. Commissioner of Income Tax, Bombay : [1954]26ITR151(Bom) . The learned Counsel also relied very heavily on the second mentioned case of Dalmia Dadri Cement Ltd 60 I.T.R. 158, a judgment of the Division Bench of the Punjab High Court again on the interpretation of Section 5(1)(xxi) of the Wealth Tax Act. Since both the cases pertain to the interpretation of Section 5(1)(xxi) of the Wealth Tax Act, it will be better to consider these two cases together.

43. Section 5(1)(xxi) of the Wealth Tax Act, 1957 as it then was as under:

5(1)(xxi): that portion of the net wealth of a company established with the object of carrying on an industrial undertaking in India within the meaning of the Explanation to Clause (d) of Section 45, as is employed by it in a new and separate unit set up after the commencement of this Act by way of substantial expansion of its undertaking: Provided that-

(a)....

(b)....

Provided further that this exemption shall apply to any such company only for a period of five successive assessment years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit.

44. The question was whether an asset worth Rs. 1,43,727 was exempt under the second proviso to Section 5(1)(xxi). The High Court had accepted the claim of the assessee and the Supreme Court was considering the appeal filed by the Department. In that case, the assessee company had established a new spinning unit for which orders were placed to purchase the necessary machinery in the months of January-February, 1956. The construction of the factory was completed in the year 1957, the construction of factory buildings was taken up in the month of March, 1956 and completed by December, 1957 while the licence was obtained in 1958. The question was of the assessment of wealth tax payable for the assessment year 1957-58 where-for, the company claimed that in computing the wealth tax on the valuation date, i.e., 30th September, 1956, the amount spent in laying out the new unit should be exempted on the basis of the proviso. The Wealth Tax Act had come into force on 1st April, 1957. Therefore, naturally, the question which fell for consideration was whether the exemption could be had for a unit like the one in question. The High Court took the view that though the construction activity of the said new unit had started much earlier to 1st April, 1957, it could not be said that it was not a unit set up after the commencement of the Act as the expression 'set up' in Section 5(1)(xxi) would mean 'ready to commence business' and in that sense it was clear that since the commercial production of the said new unit had started after 1.4.1957, Section 5(1)(xxi) was applicable and the company was entitled to the exemption thereunder. The argument on behalf of the Department was that a new and separate unit is set up only when the company commenced operation for the establishment of such a new unit. If that argument had been accepted, it would have meant that the company which had commenced the establishment of the new unit much earlier than 1.4.1957, would not be covered in the language of Section 5(1)(xxi) as it would not be a new and separate unit set up after the commencement of the Act. The observations of the court have already been quoted by us.

45. We are afraid that though the observations of the Apex Court and more particularly regarding the interpretation of the term 'set up' wherein, the view taken by the Bombay High Court was confirmed by the Apex Court appear to be decisive in favour of the petitioner company but, on a deeper consideration of those observations, it has to be said that the observations are not much helpful. In the first place, the backgrounds of Section 5(1)(xxi) of the Wealth Tax Act and the present Government Order have no similarity. While the former is a taxing statute, the latter only declares the policy of the State Government, which was chartered out by the State Government with certain objections. We have already, in the earlier paragraphs, mentioned as to what those precise objectives were. The State Government had felt that there was an industrial regional imbalance in the State and the State Government wanted to correct that industrial regional imbalance which could not have been corrected but for the advent of the new industries in the industrially backward regions. Obviously, the State Government was not satisfied with the number of industrial units in the thirty taluks, which were carved out as 'industrially most backward taluks' from the 105 industrially backward taluks. Therefore, the thrust of G.O.Ms.No. 500 was on attracting 'new industries'. There is no doubt that Section 5(1)(xxi) of the Wealth Tax Act did provide an exemption from the payment of tax and, therefore, is comparable to some extent with Clause (3) of G.O.Ms.No. 500, but, the background of the two provisions is entirely different. This is apart from the fact that the wordings in both the provisions are slightly but, decisively different. While, Section 5 refers to the new and separate units set up after the commencement of the Act, Clause (3) of G.O.Ms.No. 500 refers to the new industries to be set up. Again the main reason why the rulings would not be applicable would be that apart from Clause (3), even Clause (10) would have to be read along with Clause (3). The other distinguishing factor will be the presence of the proviso in Section 5 regarding which the Supreme Court says:

In the case before us, the proviso does not even refer to commencement of the unit. The criterion for determining the period of exemption is based on the commencement of the operations for the establishment of the unit. These operations for the establishment of the unit cannot be simultaneous with the set up of the unit as urged on behalf of the Commissioner but, must precede the actual setting up of the unit. In fact, it is the operations for establishment of a unit which ultimately culminate in the setting up of the unit.

[Italics supplied]

Thus, the criterion for eligibility is also entirely different in G.O.Ms.No. 500.

46. Again, in paragraph 4, the Supreme Court has dealt with the factual matrix of the case to hold that the unit was completed and became ready to go into business only after 1st April, 1957, when the Act had already come into force. The Supreme Court in the same paragraph, has further mentioned:

In the statement of the case and in its appellate judgment, the Tribunal did not specifically record any finding as to the date when the unit was ready to go into business and to start production.

47. In sharp contradistinction to these facts, in the present case, it is an admitted position that the production of this unit began on 23.3.1990 and the company also reaped benefits in respect of the purchase tax, which purchases must have been much earlier to the dates on which dates, the petitioner company became liable to pay the purchase tax and the petitioner company maintained a discreet silence as to when those purchases were actually made.

48. As if this is not sufficient on those purchases the petitioner company also reaped the benefits. There is a document on record, which purports to be a certificate, which suggests:

The concerned unit at Thirumandankudi village is a 'new unit' with licensed capacity of 2500 TCD., which has commenced production for the first time on 31.3.1990 in the sugar year 1989-90 is eligible to avail of the incentives in accordance with the sugar incentive scheme announced by the Directorate of Sugar, Letter No. F3(6)88-PC, dated 26.12.1988.

[Italics supplied]

49. In addition to this, it would be seen that specific areas were chartered out by the Government and demarcated them as 'cane areas' as would be evident from the proceedings of the Director of Sugar, dated 25.11.1988. Again, it is apparent that by letter dated 12.8.1991, the State Government awarded the concessional cess at the rate of Rs. 2 instead of Rs. 5 per ton for a period of three years from the date of 'commencement of crushing' which was much prior to 14.5.1990. In this very letter, it is mentioned that the date of declaration of local area was 28.3.1990 and the factory commenced production on 23.3.1990. Therefore, it is definitely a case where the petitioner company's new unit at Thirumandankudi village had already gone into production even prior to 14.5.1990. We therefore, hold that the decision of the Apex Court is not of any help to the petitioner company.

50. In Dalmia Dadri Cement Company's case 60 I.T.R. 158 also, which we have referred to earlier, there is a clear finding that the assessee company though had commenced operations for the establishment of the new and separate unit in June, 1955, the completion of the unit was only by February, 1958, which was after the advent of the Wealth Tax Act on 1.4.1957.

51. According to us, the plea raised by the petitioner company that the production between 23.3.1990 and November, 1990 was only a 'trial production' because of the non-availability of the power generating equipment is too lame a plea to be accepted. It cannot be denied that the petitioner company had not only started crushing the sugarcane but, had also started producing the sugar, which it sold in the open market. To suggest that the company was not equipped with the power generating unit and, therefore, it had not started the 'commercial production' would be a travesty. For reaping the benefits under G.O.Ms.No. 989, the petitioner company did not lag behind by not paying even a farthing towards 'purchase tax' under the specious plea that it was entitled to the 'purchase tax deferral' for a period of four years under that Government Order.

52. The learned Additional Advocate General, Mr. T.R. Rajagopalan, pointed out to us with reference to certain documents, which were not disputed by the petitioner company, that in the monthly statements filed by the petitioner company before the authorities under the Tamil Nadu General Sales Tax Act, the petitioner company boldly stated that it had commenced 'commercial production' on 23.3.1990, The statements are undoubtedly about both the units, viz., the unit which was already in existence and the new unit at Thirumandankudi village. Statement for the month of March, 1990 shows that the quantity of sugarcane purchased during March was 1418.009 M.Ts. and the purchase tax for the period from 23.3.1990 to 31.3.1990, which was barely for eight days, was Rs. 67,221.10. This also suggests the tremendous extent of purchase of cane made by the petitioner company in the month of March. Again in the month of April, the quantity of sugarcane purchased was 3375.244 M.Ts. and the 'purchase tax liability' for the period between 23.3.1990 and 30.4.1990 rose upto Rs. 2,31,899. The statement for the month of May, 1990 suggests that the 'purchase tax liability' for the period between 23.3.1990 and 31.5.1990 rose upto Rs. 6,50,128 because in the month of May, the petitioner company had purchased 8572.066 M.Ts. of sugarcane for its new unit too.

53. We will have to understand the whole thing on the backdrop of the facts. At that time, it was not a question of 'sales tax' on the finished goods but, 'purchase tax' on the purchase of the raw materials like sugarcane and the petitioner company was all through enjoying the 'tax deferral' under G.O.Ms.No. 989. In all the three statements, it is specified that the petitioner company's new unit at Thirumandankudi village had commenced 'commercial production' from 23.3.1990. This state of affairs continued in the months of June, July, August and right upto November, 1990. All the statements do suggest that the 'commercial production' was commenced only on 23.3.1990. One wonders that when G.O.Ms.No. 500 was already on the scene on 14.5.1990 how was it that the petitioner company could take a stand that the 'commercial production' itself had started in March, 1990 and can that stand now be allowed to be changed merely because it suits the petitioner company. Perhaps, what is being tried to be done is to forsake minor benefits of 'purchase tax deferral for four years' on the basis of G.O.Ms.No. 989 in preference to the major benefit of 'total exemption from the sales tax for a period of five years' and that appears to be the clear attempt. There is also an indication to that effect in the affidavit sworn in support of the writ petition. Very interestingly, in paragraph 7 of the affidavit, the petitioner company pleads:

The first respondent was totally unjustified in creating doubts about the integrity of the petitioners when it actually observed that the petitioners were tried to avail the benefits of G.O.Ms.No. 989 besides seeking the benefits of G.O.Ms.No. 500, whereas, it has been submitted consistently that the petitioner had no alternative except to temporarily avail the benefits under G.O.Ms.No. 989, dated 1.9.1988 since the respondents were not willing to give the benefits of G.O.Ms.No. 500 after all the petitioners cannot go without any relief pending disposal of the writ petition.

[Italics supplied]

This is rather a puzzling stand and was rightly rejected by the SIPCOT and is also to be rejected by us. Again, the petitioner company cannot be allowed to blow hot and cold at the same time. It cannot be ignored that the petitioner company kept on making representations that it had started 'commercial production' on 23.3.1990 even after the promulgation of G.O.Ms.No. 500.

54. In this behalf, it would be interesting to see that the words in Clause (2) of G.O.Ms.No. 989 are significant. They are to the following effect:.Government direct that the purchase tax payable by the newly established sugar mills be deferred for a period of four years subject to the modifications announced from time to time from the date of commencement of production.

[Italics supplied]

What is significant to note from these words is that the term 'commencement of production' for the purposes of G.O.Ms.No. 989 was always interpreted by the petitioner company to be the 'commercial production' while reaping the benefits of that Government Order. It then turns around after the advent of G.O.Ms.No. 500 and tries to suggest that the 'commencement of production' has to be understood as 'commencement of commercial production' which 'commercial production' started not in the month of March, 1990 but, in the month of November, 1990. There is then an inherent contradiction in the plea raised by the petitioner company in respect of the so-called 'commercial production' as against the 'trial production'.

55. Mr. C. Natarajan, learned senior counsel has relied on a number of cases to suggest that it is only the 'commercial production' which is relevant for the taxing statutes. He has also pointed out certain cases to suggest that the concepts of 'trial production' and 'commercial production' are not unknown to the 'taxing statutes. Heavy reliance was placed by both the learned senior counsels, Mr. K. Parasaran and Mr. C. Natarajan on Column 14 of the prescribed application where the particulars were asked about 'trial production' and 'commercial production'. It seems that it is only at that moment that the concept of 'trial production' was conceived. Otherwise, we do not see any claim on the part of the petitioner company anywhere that the production from March, 1990 was the 'trial production' in sharp contradistinction with the 'commercial production' commencing in the month of November, 1990. The plea of 'trial production' is therefore, clearly an 'afterthought plea' that too, on the admitted representations by the petitioner company that the 'commercial production' of its new unit at Thirumandankudi village had already commenced in the month of March, 1990. On the backdrop of this specific finding of fact, the contention of the learned Counsel that the relevant date for Clause (3) of G.O.Ms.No. 500 would be the commencement of the 'commercial production' and not of the 'trial production' has to be rejected as having no basis.

56. Some more circumstances were tried to be pressed into service to suggest that some better machinery was brought into service only after the relevant date of 14.5.1990. It was suggested that the technical committee of the Development Council for Sugar Industries had suggested that for an industry like the one in question a cogeneration system employing a Boiler with a 3 M W Turbo Generator would be required. It was further tried to be shown that the Turbo Alternator was inspected only on 3.5.1990 in the West Bengal factory and it was despatched from Calcutta only on 7.5.1990. This was in order to show that the said Turbo Alternator arrived much after 20.3.1990 and, at any rate, after 14.5.1990. It was also tried to be suggested that the Boiler. Inspectorate inspected the Boilers and issued a Boiler Certificate much later. We are afraid, merely because some machinery, which helped the petitioner unit to work more efficiently, was made available later on and that by itself cannot suggest that the industry was set up only after the relevant date. Thus, it will be clear that the petitioner company's unit at Thirumandankudi village was erected much earlier to the advent of G.O.Ms.No. 500 and had also gone in production even prior to the promulgation of that Government Order and, therefore, it could not be said that it was an industry 'to be set up' within the meaning of Clause (3) of G.O.Ms.No. 500.

57. Heavy reliance was placed by both Mr. Natarajan and Mr. Parasaran on Clause (8) of G.O.Ms.No. 500, which is as under:

The above scheme will be applicable to small, medium and major industries as the case may be. The deferral/waiver period will commence from the date of commencement of commercial production after the completion of the envisaged project. Such commencement shall be on or after the date of issue of this order for eligible units.

We have, in fact, already dealt with this submission though in a different context. However, the total meaning of Clause (8) could only be that the waiver period was to commence only after 14.5.1990 and not before it. This Clause has been provided only to avoid the industries which were already in existence and whose production had already started. Much stress was laid on the last sentence to suggest that the commencement of the waiver could start on 14.5.1990 also. We do not think, such an interpretation can be given to that sentence. The sentence only means that the waiver period would start after the said G.O.Ms.No. 500 came into being. The last sentence, according to us, does not have reference to a particular date. It only suggests that the commencement of waiver period cannot be earlier to that of 14.5.1990. We have already shown that the production had already commenced in the petitioner company's new unit at Thirumandankudi.

58. Mr. A.L. Somayajee and Mr. T.R. Rajagopalan invited our attention to Clause (10) and contended that the reliefs which could be claimed by a unit, which had already gone into production, would be limited to Clause (10). Clause (10) reads as under:

All eligible units which have commenced production before the date of issue of this will be eligible for interest free sales tax loan/deferral as per the order existing on the date of commencement of production. Units which have availed interest free sales tax loan under existing schemes, may opt for the deferral facility to the extent of uncompleted period and unutilised amount of the earlier scheme.

The learned Senior Counsel contended that it is to be seen that Clause (10) refers to the 'commencement of production' in contradistinction to the 'commencement of commercial production'. The learned Counsel therefore, contend that once it was accepted by the petitioner company that the production in its new unit started on 23.3.1990, it would only this clause which would be applicable to the petitioner company's new unit and that all that it would be entitled to would be either the Interest Free Sales Tax Loan or Interest Free Sales Tax Deferral, which was available to it on the date of commencement of production. It has to be said that this interpretation is in accord with the scheme of G.O.Ms.No. 989 under which the petitioner company had claimed and availed of the tax deferral. The plain meaning of the said clause would only suggest the total eligibility of the petitioner company. The petitioner company also does not dispute that Clause (3) and Clause (10) are 'mutually exclusive'. Their case is specific that the petitioner company falls only within the parameters of Clause (3) and not Clause (5). According to the petitioner company, for application of Clause (10), the industrial unit should be such which was already set up and already in operation and functional on 14.5.1990. We have already shown that the petitioner company's new unit was actually set up and was functional even prior to 14.5.1990. We have already shown as to why this claim cannot be accepted. Apart from this, we cannot read an additional word in the specific language of Clause (10). That will be doing violence to the language of the said Government Order.

59. An attempt was made also to suggest that the rights accrued under the previous Government Orders were meant to be preserved under Clause (10) while Clause (13) modified all the previous orders available on the subject matter to the extent to which the scheme has been covered by this Government Order. The learned Counsel for the petitioner company, therefore, argued that Clause (10) was not meant to operate instead of G.O.Ms.No. 989 as G.O.Ms. No. 989 was still available wherever the new sugar mill was located. We do not agree. The meaning of both Clauses (10). and (13) is clear enough to entertain any doubts and Clause (13), which has the effect of modifying the previous Government Orders would be only to the extent to which the scheme is covered by G.O.Ms. No. 500, which would naturally exclude all the industries contemplated by Clause (10).

60. Much was canvassed regarding G.O.Ms.No. 989 and it was tried to be suggested that the industry did not come within G.O.Ms.No. 989, dated 1.9.1988 because it was not firstly an 'established sugar mill' meaning thereby that it was not complete since it had not started the 'commercial production'. We have already pointed out that the concept of 'commercial production' for a sugar mill would be rather strange because for availing the benefits the production was unnecessary. In case of sugar mills, the contemplated tax was 'purchase tax' which became due on the purchase of raw material and the incidence for the same was those purchases and not the production of sugar.

61. It was again reiterated that even the expression 'production' in Clause 2 of G.O.Ms.No. 989 was only a 'commercial production' and not 'ordinary production'. We do not agree because that would be again doing violence to the language of G.O.Ms.No. 989. This is apart from the fact that we have already held that even the 'commercial production' of the unit had started much earlier to 14.5.1990 and on that precise representation, the petitioner company had availed of the purchase tax deferral. A letter dated 27.4.1993 was tried to be relied upon to show that even the authorities considered that G.O.Ms.No. 989 was applicable only in case of 'commercial production'. The relied upon portion reads as follows:

As per A1 Return filed in the month of March, 1990 you have deferred payment of Rs. 67,221 stating that the Unit has commenced production on 23.3.1990. Now you are coming out with a later date 23.3.1990. If 23.3.1990 is the date of commencement of trial production only, you should not have availed deferral scheme from that day. Inasmuch as you urged to defer payment of tax from 23.3.1990, it is beyond doubt that 23.3.1990 is the date of commencement of production.

The relied upon portion would, on the other hand, show that from the beginning the case of the petitioner company was that it had started the 'commercial production' on 23.3.1990, which demolishes the case of the petitioner company completely.

62. It was tried to be suggested that merely because the petitioner company's new sugar mill had claimed the benefit of 'purchase tax deferral' under G.O.Ms.No. 989 that by itself could not demolish its rights created in its favour by G.O.Ms.No. 500, dated 14.5.1990. It was suggested further that the statutory rights are not lost on the ground of estoppel. There would be no question of considering this argument in view of our finding that G.O.Ms.No. 500 created no rights in favour of the petitioner company. We have already elaborately discussed that aspect of its non-applicability to the petitioner company.

63. Lastly, learned Counsel for the petitioner company urged that these being the incentive schemes for the 'new industries' and they being of beneficial nature, a liberal construction should be favoured by the court. The learned Counsel relied on the decisions reported in Commissioner of Income Tax v. Straw Board . : [1989]177ITR431(SC) , Bajaj Tempo Ltd. v. Commissioner of Income Tax 196 I.T.R. 198, Commissioner of Sales Tax v. Industrial Coal Enterprises : [1999]1SCR871 and Gujarat Ambuja Cements Ltd. v. Assessing Authority 117 S.T.C. 315.

64. In the first mentioned case, observations in paragraph 5 were relied upon. There the Supreme Court, was considering the question whether 'strawboard' can be said to fall within the expression 'paper and pulp'. The Supreme Court observed:

It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging industrial activity a liberal construction should be put upon the language of the statute.

65. In the second mentioned case, the observations are more or the less to the same effect. They are:

A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.

The learned Counsel suggested that the objective of the concerned Government Order was to promote the growth of industries in the industrially most backward taluks and, therefore, a liberal interpretation should be there so as to include the petitioner company's unit.

66. In the third mentioned case also in paragraph 11, the above mentioned two cases have been followed by the Apex Court and it proceeded to hold in paragraph 12:

We find that the object of granting exemption from payment of sales tax has always been for encouraging capital investment and establishment of industrial units for the purpose of increasing production of goods and promoting the development of industry in the State. If the test laid down in Bajaj Tempo Ltd., case : [1992]196ITR188(SC) , is applied ... If the construction sought to be placed by the appellant is accepted, the very purpose and object of the grant of exemption will be defeated.

The Supreme Court then proceeds to hold, however, that there were no mala fides on the part of the respondent in obtaining exemption and that the bona fides of the respondent have never been questioned by the appellant.

67. Speaking particularly about this case, it was severely commented upon by the learned Counsel for the appellant that the present is a case where the bona fides of the petitioner company have been seriously questioned. The learned Counsel pointed out that the petitioner company had been changing its stand from time to time. It took the advantages under G.O.Ms.No. 989 and then took a complete somersault to suggest that it had to take that advantage under compulsion. Not only this, it then went to the extent of even attacking G.O.Ms.No. 989.

68. There could be no question about the first principles laid down in the first two cases. However, all these questions would become relevant where there is any difficulty or ambiguity about the interpretation. Where the words are extremely clear and unambiguous, they cannot be given unnatural meaning in the name of liberal construction. As for the spirit expressed by the Apex Court in the two cases, it cannot be forgotten that already substantial relief had been given to this very industry and the industry had already benefitted itself on the basis of the G.O.Ms.No. 989. The case of the petitioner company also was that the two Government Orders were 'mutually exclusive' and any eligible unit could not have been given the benefits of both the Government Orders, viz., G.O.Ms.No. 989 and G.O.Ms.No. 500. Even the learned senior counsel has very fairly admitted that. Once this position is obtained, there would be no question of any ambiguity or any liberal construction. It was an admitted position that the petitioner company had taken the advantage under G.O.Ms.No. 989 of 'purchase tax deferral' for a period of four years. It is also an admitted position that it had represented to the sales tax authorities that it had started its 'commercial production' on 23.3.1990 perhaps, with an idea to reap the 'maximum benefit' out of the total benefit of Rs. 4,40,00,000, which was allowable in case of the industries having capacity of 2500 TCD.

69. On this backdrop, there would be no question of stretching the meaning of the words to an unreasonable extent so as to confer the 'double benefit' to the petitioner company. The liberal construction suggested by the Apex Court is not of a nature whereby, a totally undeserving industrial unit could be granted the tax benefits not at all deserved by it. We have already shown earlier as to how the petitioner company's unit could not have the benefit of G.O.Ms.No. 500. The learned senior counsel, Mr. C. Natarajan, very magnanimously offered that the benefits derived by the petitioner company under G.O.Ms.No. 989 could be withdrawn now so that the benefits under G.O.Ms.No. 500 could be conferred upon the petitioner company. In fact, he showed his complete readiness during the arguments. We only say that the petitioner company, by this offer, is trying to have a better deal in its favour which it does not deserve, firstly, on account of the clear language of G.O.Ms.No. 500 and secondly, on account of the lack of bona fides on its part.

70. In the result, we are of the clear opinion that the petitioner company did not deserve to be granted the 'Certificate of Eligibility' under G.O.Ms.No. 500 and the decision of SIPCOT to refuse the same to it was right. We also hold that the judgment of the learned single Judge awarding the 'Certificate of Eligibility' to the petitioner company is unacceptable to us and we find ourselves unable to agree with the learned single Judge. That judgment has to be set aside. It is accordingly set aside and the writ petition filed by the petitioner company is ordered to be dismissed. The writ appeal is allowed. In the circumstances, however, we do not inflict any costs on the respondent. Connected C.M.P.Nos. 549 of 1999 and 8882 of 2000 are closed.