IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR.

JUDGMENT

M/s Isuzu Garments Vs. The State of Rajasthan & Ors.

S.B. CIVIL SALES TAX REVISION NO.47/2008

against the order dated 1.2.2006 passed by Rajasthan
Tax Board, Ajmer in Appeal No.243/2005/Tonk-Isuzu
Garments Vs. State of Raj. & Ors.

Date of order : 24th July, 2008

PRESENT

HON'BLE DR. JUSTICE VINEET KOTHARI

Mr. Ramit Mehta for the petitioner.

Mr. Rishab Sancheti for Mr. V.K. Mathur for the respondents.
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REPORTABLE

BY THE COURT:-

1. Heard learned counsels.

2. The Tax Board by the impugned order dated 1.2.2006 upheld the decision of
the State Level Screening Committee Annex.2 dated 17.11.2004 whereby the said State Level
Screening Committee (SLSC for short) acting under the Rajasthan Sales Tax Incentive
Scheme, 1998 found that that since the assessee industrial unit manufacturing ready made
garments had shifted its some part of plant and machinery from Tonk to Bhilwara unit,
another unit of the same company, the benefit given to the assessee industrial unit under such
incentive scheme was to be reduced to that extent of plant and machinery shifted i.e. Rs.84.31
lacs. The assessee took the matter further before the Tax Board against the decision of the
SLSC and Tax Board vide its impugned order dated 1.2.2006 approved the decision of the
SLSC and being aggrieved of the same, the assessee has approached this Court under Section
86 of the RST Act, 1994 raising the question of law as to whether the SLSC was justified in
reducing the quantum of eligible investment for grant of benefit under the aforesaid incentive
scheme to that extent.
3. Learned counsel for the assessee Mr. Ramit Mehta has urged that mere
shifting of part of the plaint and machinery from Tonk to Bhilweara where both the units of
the petitioner-assessee manufacture same product i.e. ready made garment was not prohibited
either under the aforesaid Incentive Scheme, 1998 or under the provisions of RST Act, 1994.
He submits that the fixed capital investment made within the State of Rajasthan continued to
remain within the State of Rajasthan and for business expediency, if another unit requires
such plant and machinery and it was lying as idle capacity at Tonk, there was no reason why
the assessee should be prohibited from shifting its part of plant and machinery from Tonk to
Bhilwara. He submits that incentive scheme does not envisage eligible fixed capital
investment in any particular area of the State of Rajasthan nor there is any list of prohibited
areas where investment so made would be ineligible for benefit under the said incentive
scheme. He, therefore, submits that the SLSC was not justified in directing reduction of the
said quantum of eligible investment to be shifted from Tonk to Bhilwara on account of
aforesaid business necessity.
4. On the side opposite Mr. Rishab Sancheti for Mr. V.K. Mathur appearing for
the revenue submits that since the assessee was given benefit of incentive scheme for setting
up of an industrial unit at a particular place and shifting a part of plant and machinery
required approval of the competent Screening Committee, therefore, the Screening
Committee cannot be faulted in imposing the said condition while granting permission to
shift the said part of plant and machinery that the corresponding amount would be reduced
from the quantum of benefit available to the petitioner unit.
5. Having heard learned counsels and upon perusal of the impugned orders and
provisions of the Incentive Scheme, this Court finds considerable force in the submissions
made by the learned counsel for the petitioner assessee.
6. A perusal of the definition of “new industrial unit” in clause 2(k) of the
Incentive Scheme of 1998 which is reproduced hereunder and comparing the same definition
in the earlier schemes of 1987and 1989 which are also reproduced hereunder for ready and
comparative reference, would reveal that new Scheme of 1998 appears to have given more
broad based definition and to achieve the purpose of encouraging investment within the State
of Rajasthan earlier an industrial unit established by transferring or shifting or dismantling an
existing industry was not covered by the definition of “new industrial unit” as defined in
Incentive Scheme, 1987 and 1989 but now in the 1998 scheme includes a unit set up on the
site of existing industrial unit by making separate capital investment is also as covered by the
definition of “new industrial unit”. The intention of the State Government is reflected very
clearly by such broad definition of the “new industrial unit” and that to encourage the
industrial investment culture and promote investment within the State of Rajasthan obviously
for the betterment of economic conditions of people and industrial development of the State.
In the light of this, it can hardly be appreciated that the competent authorities comprising of
senior bureaucrats in the SLSC while dealing with this issue took such a pedantic and narrow
approach and decided to reduce the eligible capital investment merely on the basis of shifting
of plant and machinery from one place to another under the same ownership and management
on account of business and commercial expediency. The benefit of incentive scheme given to
the industrial unit as one assessee and it is not split unit wise in the scheme.

7. The definition of New Industrial Unit in clause 2(k) of the Incentive Scheme
of 1998 is as under:-

“2(k)(i) “New Industrial Unit” means an industrial unit which commences

commercial production during the operative period of this Scheme including a unit set up on
the site of an existing industrial unit by making separately identifiable capital investment;
subject however, that where an industrial unit manufacturing the same product is established
on the site of an existing unit, the benefit permissible for a new unit shall be available to it
only on the production in excess of 80% of the installed capacity of the existing unit.
(ii) “New Industrial Unit” shall also include a sick unit,-
(a) which has not availed of any benefit of exemption from tax or deferment of tax:
(b) which has been appraised by financial institution and appropriate rehabilitation plan has
been formulated; and
(c) which has been purchased by a new management other than by way of collusive transfer
and such management has made additional fixed capital investment not less than 25% of the
depreciated value of the assets of such unit.
 Provided that where an existing industrial unit transferred for being run by State
Government / RIICO /RFC on lease by a new management, fulfills the above conditions
except the condition of additional fixed capital investment, and the new management
undertakes to discharge all its outstanding statutory liabilities towards any Department of the
State Government, as specified by such Department and undertakes to clear all its outstanding
dues payable to the financial institutions, as fixed by such institutions, shall also be deemed
to be a new industrial.”

8. The definition of “New Industrial Unit” in clause 2(b) of the Incentive Scheme
of 1987 is as under:-

“2(b) “New Industrial Unit covered by 1985 dispensation” means an industrial unit, which
commenced commercial production on or after 1.4.1985 and was entitled for interest free
sales tax loan scheme under the 1985 dispensation.”

9. The definition of “New Industrial Unit” in clause 2(a) of the Incentive Scheme
of 1989 is as under:-

“(a) “New Industrial Unit” means an industrial unit which commences commercial
production during the operative period of the New Incentive Scheme but will not include,-
(i) an industrial unit established by transferring or shifting or dismantling an existing
industry; and
(ii) an industrial unit established on the site of an existing unit manufacturing similar goods.”

10. In the absence of statutory prohibition contained in the Incentive Scheme, it

was not expected of the competent Screening Committee to impose condition bereft of
context and statutory definition. Such attitude on the part of competent Screening bodies
discourages rather than encouraging investment and the objective of State Government can
hardly be achieved by such an approach.
11. The Hon'ble Supreme Court in Manglore Chemicals & Fertilizers Ltd. Vs. Dy.
Commissioner of Commercial Taxes and Ors. - AIR 1992 SC 152 has held as under:-

“The choice between a strict and a liberal construction arises only in case of doubt in regard
to the intention of the Legislature manifest on the statutory language. Indeed, the need to
resort to any interpretative process arises only where the meaning is not manifest on the plain
words of the statute. If the words are plain and clear and directly convey the meaning, there
is no need for any interpretation. It appears to us the true rule of construction of a provisions
as to exemption is the one stated by this Court in Union of India v. M/s. Wood Papers Ltd.,
(1991) 1 JT 151 at p.155 : (AIR 1991 SC 2049 at pp.2501-525):
“.......Truly speaking liberal and strict construction of an exemption provision is to be invoked
at different stages of interpreting it. When the question is whether a subject falls in the
notification or in the exemption clause then it being in nature of exception is to be construed
strictly and against the subject but once ambiguity or doubt about applicability is lifted and
the subject falls in the notification then fully play should be given to it and it calls for a wider
and liberal construction....”

12. In Bajaj Tempo Ltd., Bombay Vs. Commissioner of Income Tax, Bombay
City-III, Bombay (1992) 3 SCC 78, while dealing with a case under Section 80-J of the
Income Tax Act, 1961 available to the new industrial undertakings, however not to such new
industrial unit which were formed by transfer of building, machinery or plant previously used
in any other business, the Hon'ble Supreme Court in para 5 observed as under:-

“The section, read as a whole, was a provision, directed towards encouraging industrialisation
by permitting an assessee setting up a new undertaking to claim benefit of not paying tax to
the extent of six per cent in a year on the capital employed. But the legislature took care to
restrict such benefit only to those undertakings which were new in form and substance, by
providing that the undertaking should not be, 'formed' in any manner provided in clause (i) of
sub-section (2) of Section 15-C. Each of these requirements, namely, formation of the
undertaking by splitting up or reconstruction of an existing business or transfer to the
undertaking of building, raw material or plant used in any previous business results in denial
of the benefit contemplated under sub-section (1). Since a provision intended 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 section and not to frustrate it.”

13. In National Insurance Co. Ltd. Vs. Laxmi Narayan Dhut – (2007) 3 SCC 700
while dealing with a case arising under Section 147 and 149 of the Motor Vehicles act, 1988,
the Apex Court reiterated the principles relating to interpretation of statutes in the following
manner:-

“Golden rule” of interpretation of statues is that statutes are to be interpreted according to

grammatical and ordinary sense of the word in grammatical or literal meaning unmindful of
consequence of such interpretation. It was the predominant method of reading statues. More
often than not, such grammatical and literal interpretation leads to unjust results which the
legislature never intended. The golden rule of giving undue importance to grammatical and
literal meaning of late gave place to “rule of legislative intent”. The world over, the principle
of interpretation according to the legislative intent is accepted to be more logical.
When the law to be applied in a given case requires interpretation of statute, the court
has to ascertain the facts and then interpret the law to apply to such facts. Interpretation
cannot be in a vacuum or in relation to hypothetical facts. It is the function of the legislature
to say what shall be the law and it is only the court to say what the law is.
It is also well settled that to arrive at the intention of the legislation depending on the
objects for which the enactment is made, the court can resort to historical, contextual and
purposive interpretation leaving textual interpretation aside.
Francis Bennion: Statutory Interpretation, referred to
More often than not, literal interpretation of a statute or a provision of a statute results
in absurdity. Therefore, while interpreting statutory provisions, the courts should keep in
mind the objectives or purpose for which statute has been enacted.”

14. In Reserve Bank of India V. Peerless General Finance and Investment Co. Ltd.
MANU/SC/0073/1987 this Court stated:-

If a statute is looked at, in the context of its enactment, with the glasses of the statute-
maker, provided by such context, its scheme, the sections, clauses, phrases and words may
take colour and appear different than when the statute is looked at without the glasses
provided by the context. With these glasses we must look at the Act as a whole and discover
what each section, each clause, each phrase and each word is meant and designed to say as to
fit into the scheme of the entire Act.
 In the Interpretation and Application of Statutes, Reed Dickerson, at p.135 discussed
the subject while dealing with the importance of context of the statute in the following terms:
... The essence of the language is to reflect, express, and perhaps even affect the
conceptual matrix of established ideas and values that identifies the culture to which it
belongs. For this reason, language has been called “conceptual map of human experience.
In Balram Kumawat Vs.Union ofIndia and Ors. MANU/SC/0628/2003 this
Court held that if special purpose is to be served even by a special statute, the same may not
always be given any narrow and pedantic, literal and lexical construction nor doctrine of
strict construction should always be adhered to.

15. Cautioning against judicial heroics, in Standard Chartered Bak and Ors. Etc. V.
Directorate of Enforcement and Ors. etc.-(2005)4 SCC 530 ; AIR 2005 SC 2622, the Court
said:-

“67. We are unable to subscribe to the view that by 'judicial heroics' it is open
to the Court to remedy an irretrievable legislative error by resort to the theory of presumed
intention of the legislature. It was contended that the Court should adopt a purposive
construction of statutes. The dicta of Denning L.J. in Seaford Court Estates Ltd. V.
Asher,(1949) 2 ALL ER 155, p. 164 were pressed into service for emulation. The view of
Denning L.J., that 'judicial heroics' were warranted to cope with the difficulties arising in
statutory interpretation, was severely criticized by the House of Lords in Magor & st. Mellons
R.D. C. V. Newport Corporation, (1951) 2 ALL ER 839 (HL). Lord Simonds said, “the duty
of the Court is to interpret the word that the legislature has used. Those words may be
ambiguous, but, even if they are, the power and duty of the court to travel outside them on a
voyage of discovery are strictly limited.” “It appears to me”, said Lord Simonds, “to be a
naked usurpation of legislative function under the thin disguies of interpretation”. Lord
Morton observed: “these heroics are out of place”. Lord Tucker said, “Your Lordships would
be acting in a legislative rather than a judicial capacity if the view put forward by Denning,
L.J., were to prevail.” This disapproval of Denning L.J.'s approach was cited with approval
by this Court in Punjab Land Development and Reclamation Corporation Ltd. V. Presiding
Officer, Labour Court – MANU/SC/0479/1990.”

16. In both constitutional and statutory interpretation, a judge must sometimes

exercise discretion in determining the proper relationship between the subject and objective
purposes of the law. Indeed, a theory of interpretation cannot be constructed without
interpretive discretion as its foundation. Interpretation without judicial discretion is a myth.
Any theory of interpretation—intentionalism, orginalism, purposivism, and so on –must be
based on an inherent internal element of interpretive discretion. Discretion exists because
there are laws with more than one possible interpretation. In such circumstances, the judge
undertakes “the sovereign prerogative of choice,” bounded by the fundamental views of the
legal community. This conceptualization of the view of the “legal community” is, by its
nature, imprecise. There are many borderline cases with no clear resolution. Still, judicial
discretion is always limited, never absolute. The limitations imposed on interpretive
discretion are procedural and substantive. The procedural limitations guarantee the fairness
of the exercise of judicial discretion. The judge must treat the parties equally. He must base
his decision on the evidence presented to the court, and he must give reasons for that
decision. Above all, the judge must act impartially, without appeal to personal biases or
prejudices. The substantive limitations mean that the exercise of discretion must be rational,
consistent and coherent. The judge must act reasonably, taking into account the institutional
constraints imposed by other parts of the legal system.
17. Thus, in view of aforesaid judgments for the purposive and meaningful
interpretation and reasonings given above, this Court is of the firm and clear belief that the
SLSC and Tax Board have erred in reducing the quantum of benefit under the Incentive
Scheme, 1998 available to the petitioner assessee upon shifting of part of plant and
machinery from Tonk to Bhilwara unit of the same assessee.

18. In view of the aforesaid, this revision petition is allowed and the impugned
order of SLSC dated 17.11.2004 and Tax Board dated 1.2.2006 are quashed and set aside.

[ DR. VINEET KOTHARI ], J.

item No.3
babulal/