By TIOL News Service

NEW DELHI, OCT 07, 2016: THE appellant is a private limited company engaged in the business of blending and packing of tea. After some modernisation, it commenced its production in April, 1988. The case of the Appellant-Company was with regard to availing sales tax concession declared by the Respondent-State. The respondent -State had notified its Industrial Policy in 1982, which had thereafter been revised in 1986. The said Policy had been framed so as to increase economic and industrial growth in the State.

In pursuance of the Policy, the Respondent-State enacted Assam Industries (Sales Tax Concession) Act, 1987. By virtue of the provisions of the Act, certain new industries, subject to certain conditions, were to be given exemption from payment of sales tax but the exemption was not to be given in respect of certain commodities.

The case of the Appellant-Company was that the Company was made eligible for certain concessions in pursuance of the Industrial Policy framed by the government, which had been declared in 1982, but ultimately the benefits had been denied to the company under the Act.

The reason for not giving the benefits under the Act, as stated by the respondent- Authorities, was that ‘tea' was a raw material, in respect of which no exemption was to be given and the appellant -Company was merely blending and packing tea and was not having any manufacturing activity.

As the sales tax exemption had been denied to the appellant-Company, the appellant-Company filed petitions before the High Court challenging denial of the tax exemption but the petitions had been rejected by a common Judgment dated 9th September, 2003 and being aggrieved by the rejection of the petitions, the appellant-Company had also filed writ appeals, which have been dismissed by a common Judgment dated 14th November, 2006, and the said judgment has been challenged in these appeals in the Supreme Court.

Rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1986 reads as under:-

"2(f) 'Raw material' means any material or commodity capable of being used for manufacture of any other product specified in any authorisation certificate as intended by the holder for use by him as raw material in the manufacture of goods in the State for sale by him but shall not include the following commodities namely :

(a) tea, (b) coal, (c) liquefied petroleum gas, (d) plywood, (e) petrol, diesel oil and lubricants."

In view of the above Rule, the Supreme Court observed that it is crystal clear that tea is not to be included in “raw material” and therefore, no exemption could have been claimed by the Appellant Company in respect of ‘tea' as a raw material for purchase as well as sale of tea.

The Supreme Court further observed,

It is also pertinent to note that the appellant had earlier preferred Civil Rule No.4162 of 1991 before the High Court challenging validity of the aforestated Rule. The learned Single Judge, while rejecting the petition, vide order dated 17th August, 1988 held that Rule 2(f) of the 1988 Rules was legal and valid and the plea of promissory estoppel raised by the appellant was also not accepted. Against the said judgment, no appeal was filed by the appellant and therefore, the said issue had attained finality.

Another important thing is with regard to certificate of authorisation. It is an admitted fact that so as to avail the benefit as per Section 4 of the Act, certificate of authorisation is a must.

It is an admitted fact that no certificate of authorisation, as provided under the Act, had ever been granted to the appellant -Company and therefore, the courts below were absolutely right to the effect that the appellant was not entitled to any sales tax exemption.

No Estoppel against Law : So far as the averments with regard to estoppel are concerned, it is a settled legal position that there cannot be any estoppel against law. When there is a legal provision to the effect that when tea is used as raw material, no tax exemption would be available under the provisions of the Act, none can claim tax exemption in respect of sales tax payable on purchase or sale of tea. It is true that an eligibility certificate had been issued to the appellant -Company in pursuance of the 1986 Incentive Scheme of Government of Assam but when the said Scheme was given a statutory form under the Act, ‘tea' had been excluded from the definition of raw material and therefore, on the basis of the eligibility certificate issued under the 1986 Incentive Scheme of Government of Assam, the appellant cannot claim any benefit.

It is also pertinent to note that the respondent -Authorities have rightly held that the appellant was not in the business of ‘manufacturing' tea but was merely blending and packing tea, which does not amount to ‘manufacturing' of tea. We find substance in the said stand taken by the respondent-Authorities as the said view has been fortified by a decision of this Court in Commissioner of Income Tax, Kerala v. Tara Agencies - 2007-TIOL-124-SC-IT .

The appeals are accordingly dismissed.

(See 2016-TIOL-169-SC-CT)