JUDGMENT
Vishnudeo Narayan, J.
1. In this writ petition the petitioner has prayed for issuance of appropriate writ in the nature of certiorari for quashing the orders dated 30.6.2000 (Annexure 16) and 1.7.2000 (Annexure 17) passed by respondent No. 3, the Joint Commissioner of Commercial Taxes (Admn.). Jamshedpur Division, Jamshedpur (hereinafter called as ‘JCCT’) in pursuant to the direction dated 6.1.2000 passed by this Court in CWJC No. 3248 of 1999(R) whereby and whereunder the prayer of the petitioner for refund of the Sales Tax of the year 1996-97 has been disallowed and for the year 1997-98 the petitioner was allowed to avail of the tax free purchase of raw materials in the form of HR Coil for the production of 8588 MT of CRM product over and above the 2/3rd incremental capacity of 60.000 MT fixed under S.O. 478 on proportional basis which works out to 9889 MT only and also a direction was made therein that the refund of the tax paid on purchase of raw materials during the period of exemption has to be routed through the seller company i.e. TISCO for the refund of the amount of the tax to the dealer company.
2. The case of the petitioner is that the petitioner is a Company incorporated under the Indian Companies Act having its factory at Golmuri, Jamshedpur and initially it was manufacturing Electrolytic Tin Plate (ETP) having its installed capacity of 90000 MT and its sole raw material was Tin Mill Black Plate (TMBP) which was totally imported by it from various countries. In pursuance of the Industrial Policy of 1995 which provides for grant of exemption from payment of sales tax on purchase of raw materials and on the sales of finished product in case of new industry in the state of Bihar or an existing unit comes for expansion/diversification/modernisation, the petitioner set up a plant in the said premises for manufacturing TMBP and other CR products on investment of Rs. 300 crores under a separate licence by Ministry of Industries. Government of Bihar. The State Government in terms of the industrial policy had made a statutory notification being S.O. No. 478 dated 22nd December, 1995 in exercise of its power under Section 7(3) (b) of the Bihar Finance Act which provides for the benefit of exemption from payment of sales tax on purchase of raw materials to the industry which has started production on or after 1,9.1995 upto 31.8.2000. The petitioner in terms of the said notification is entitled to full exemption from sales tax in respect of the raw materials i.e., HR Coils which the petitioner purchased for the manufacture of TMBP Coils used for manufacture of ETP. The said TMBP Coils were earlier imported from abroad but the same is now manufactured in the petitioner’s factory which is a new product, not manufactured earlier by the petitioner, and as such the raw materials, i.e., HR Coils, which were purchased for the manufacture of the said new product, i.e. TMBP Coils, are entitled to full exemption from sales tax on purchase of such raw materials. The petitioner by way of diversification of his factory set up a Cold Rolling Mill (CRM) having a total production capacity of 1.20.000 MT in which besides the TMBP it also manufactured FULL Hard Cold Rolled (FHCR), Cold Rolled Galvanized Corrugated sheet (CRGP) and other cold rolled products and the petitioner produced about 90.000 MT of TMBP which is used for manufacturing of ETP and for balance capacity of 30.000 MT. the petitioner manufactured other cold rolled products like FHCR, CRGC, CRGP and other CR products and the raw materials required for manufacturing of TMBP and other cold rolled products are HR coils which were purchased by the petitioner from TISCO and to some extent from SAIL and the petitioner has claimed exemption for payment of sales tax on the purchase of raw materials i.e., HR Coils and the production of the petitioner’s factory commenced from 5.4.1996 and made an application before the competent authority on 31.5.1996 for grant of exemption from payment of sales tax on purchase of the raw materials and the date of the aforesaid commercial production of TMBP in the factory of the petitioner is with effect from 5.4.1996 stands certified by the Director of Technical Development, Government of Bihar. The ACCT, Jamshedpur Circle vide order dated 23.6.1998 granted exemption to the petitioner in terms of SO No. 478 dated 22.12.1995 from payment of sales tax on purchase of raw materials from 5.4.1996 to 4.4.2004 only on incremental production in excess of 2/3rd of installed capacity of old plant ETP which compelled the petitioner to move the matter before JCCT (Amdn.), who by order dated 22.9.1998/23.9.1998 allowed the claim of the petitioner to exemption from payment of sales tax on purchase of raw materials for the period of eight years on the entire raw materials purchased for the manufacture of entirely new product, namely. TMBP. Since he exemption certificate was issued on 23.6.1998 the petitioner had paid sales tax on the purchase of the raw materials as at the relevant time the completion certificate which covered the period was not issued by the Department in time and the petitioner had paid sales tax thereon to the extent of Rs. 823.89 lacs and Rs. 23.94 lacs for the period from 5.4.1996 to 31.3.1998 to the seller i.e., TISCO and SAIL respectively. Thereafter on the application of the petitioner TISCO moved Deputy CCT, Urban Circle, Jamshedpur for grant of refund so that the amount may be refunded to the petitioner and the Deputy CCT informed TISCO that the refund can be granted in terms of Section 42 of the Bihar Finance Act only after the assessment is finalised for the period 1996-97 and 1997-98 and TISCO, accordingly, informed the petitioner in respect thereof and a request to JCCT (Amdn.) in the matter also did yield no result. Since the petitioner claims to be entitled for exemption from payment of sales tax on purchase of the raw materials from 5.4.1996 to 31.3.1998 and it was deprived of the benefit of the exemption as per the guidelines of the Industrial Policy, the petitioner moved this Court by filing CWJC No. 3248/99 (R) for issuance of a writ of mandamus directing the respondent to refund the amount of sales tax on purchase of raw materials which was recovered from the petitioner during the period from 5.4.1996 to 31.3.1998 and a Division Bench of this Court vide order dated 6.1.2000 directed JCCT, Jamshedpur to determine the amount of sales tax paid on purchase of raw materials and directed that after satisfying himself that the sales tax has, in fact, been paid and accounted for, the JCCT will pass appropriate order directing the refund of sales tax paid by the petitioner on purchase of raw materals during the period from 5.4.1996 to 31.3.1998 and it was further ordered that the refund order shall be issued within 10 days to the petitioner upon determination by JCCT.
3. In pursuant to the order dated 6.1.2000 of this Court the petitioner moved the JCCT, who by the impugned order dated 30.6.2000 virtually rejected the claim of the petitioner of refund of the sales tax on the ground that the petitioner is entitled exemption only in respect of incremental production above 60.000 MT i.e., 2/3rd of its original capacity of the ETP plant and as such the petitioner is entitled to refund of sales tax in respect of 9889 MT only. It has also been held in the impugned order that the petitioner has come into production from 1.10.1996 and not from 5.4.1996 thereby negating the claim of the petitioner to any benefit of tax exemption for the period with effect from 5.4.1996 to 30.9.1996. It has also been held that the petitioner has not fully produced TMBP Coils for which exemption was granted to the petitioner and the part of the HR Coils purchased were utilised for the production of semi- processed goods in the form of FHCR. The JCCT further held in the impugned order that the procedure of the refund will be guided by Section 42 of the Bihar Finance Act where refund of tax paid on purchase of raw materials has to be routed through seller companies i.e., TISCO and SAIL and the amount would be refunded to the petitioner through them.
4. Being aggrieved with the impugned order dated 30.6.2000 passed by the JCCT the petitioner has filed this writ petition and it has been stated that the JCCT (respondent No. 3) has gone beyond his jurisdiction and has misinterpreted the order of this Court and also the Industrial Policy and S.O. 478 dated 22.12.1995 and the impugned order is arbitrary, illegal and against the direction of this Court as respondent No. 3 has wrongly interpreted the Industrial Policy as well as notification issued in pursuant thereto and has wrongly held that the petitioner is entitled for tax emption only to incremental production above 2/3rd of its original production capacity. It has been alleged that the JCCT failed to take into consideration that the plant which the petitioner has now established is totally a new plant producing TMBP which is used for manufacture of ETP which was totally imported earlier and as such there is no question of granting of benefit of above capacity of 2/3rd of its original production. In view of the fact that Clause 15.4 of S.O. 478 dated 22.12.1995 clearly stipulates that in respect of diversification the facility of tax emption would be available in respect of such goods which was not earlier manufactured by the petitioner. It is stated that the petitioner is entitled to the benefit of sales tax exemption for the entire purchase of raw materials. It has also been stated that petitioner has commenced production from 5.4.1996 which stands verified and testified by the certificate of commercial production (Annexure 4) issued by the Director Technical Development, Department of Industries. Government of Bihar and the finding of the JCCT contrary to that is wrong and perverse. It is stated by the petitioner that as per Indian Accounting Standard issued by Institute of Chartered Accountants of India it is a prerequisite to segregate the total production into two parts i.e., preoperative and post operative for the year of capitalization of plant and the income/expenses of the pre-operative period is required to be booked under the heading of capital expenses which is forming part of the balance sheet whereas income/expenses of post- operative period is treated as a revenue and forming part of profit and loss account and as per norms the plant was capitalized in 1996-97 and in this context the cut off date was taken as 1.10.1996 and the production made during the period 5.4.1996 to 30.9.1996 was also sold as finished products as well as tax was duly deposited on this sale and similarly the petitioner also purchased raw materials and duly paid sales tax on them. It is stated that in the earlier writ petition the respondents have never objected regarding the date and it is for the first time that the respondents are coming up with this plea of date of production being 1.10.1996 instead of 5.4.1996. It is also stated that Section 42 of the Bihar Finance Act relates to the refund after assessment proceeding and it is not being an assessment proceedings the provisions of Section 42 will not apply in this case and the refund has to be made directly to the petitioner.
5. The case of the respondents, inter alia, is that in accordance with the Industrial Policy, 1995 read with S.O. 478 and 479 dated 22.12.1995 the tax free purchase of raw materials and tax free sale of finished product in case of expansion/diversification/modernisation are admissible only in respect of incremental production i.e., 2/3rd of the original capacity or the highest production during the last preceding three year whichever is higher and the exemption is only admissible regarding incremental production in respect of the diversification also which is fixed at production over and above 2/3rd of the original capacity i.e., 60,000 MT since it was on higher side of actual production for 1995-96. 1994-95 and 1993-94. It is stated that ACCT (Administration), Jamshedpur had approved the exemption proposal under S.O. 478 and 479 dated 22.12.1995 holding that the facility of tax free raw material purchase will be admissible in respect of incremental production only and there shall be no exemption for production upto 60,000 MT, vide orders dated 20.5.1998 and 29.5.1998. In pursuance of the order of this Court passed in CWJC No. 3248 of 1999 (R) and after examination of the books of accounts of the petitioner and the balance sheet it was found that the production of the CRM Unit during 1996-97 and 1997-98 was 52443 MT and 68588 MT respectively and it also further transpired that the substantial portion of the HR Coil purchased as raw material for production of TMBP Coils for which exemption was granted were diverted for production and sale of FHCR for which exemption certificate was neither sought nor granted. 26382 MT of FHCR was produced by the petitioner during 1996-97 out of the total production of 52443 MT of CR products and during 1997-98 out of the total production of 68588 MT only 51600 MT of TMBP Coils were produced and the balance has been diverted for production of FHCR and other products. It is stated that the petitioner with an ulterior motive of obtaining wrongful gain by way of refund has filed wrong statement of fact before this Court in CWJC No. 3248 of 1999 (R) and also the authorities that the entire HR Coils purchased have been utilised for production of TMBP Coils only. It is stated that it also transpired in course of examination of the books of accounts of the petitioner that in 1996-97 a consumption of only 13921 MT of HR Coils has been incorporated in the balance sheet and profit and loss account against a total claim of refund in respect of 53582.510 MT HR Coils for which refund has been claimed. It is also stated that date of commercial production of the petitioner is 1.10.1996 and not 5.4.1996 as disclosed at a time of seeking exemption under SO 478/479 and on explanation the petitioner has stated that the petitioner was under trial run up to 30.9.1996 and, therefore, the consumption and purchase of HR Coils upto 30.9.1996 have been shown as capital expenditure in the books of accounts. It has been stated that in view of the aforesaid only 8588 MT production could be “treated as incremental production for which tax free purchase of raw material is admissible and, accordingly, a claim of 9889 MT purchase of HR Coils was allowed on prorate basis. Further, it has been stated that the petitioner has not exhausted the alternative and efficacious statutory remedy of revision provided under Section 46 of the Bihar Finance Act, 1981 and in this view of the matter the writ application is not maintainable. Lastly it has been stated that the procedure for refund is to be governed as per provision 42 of the Bihar Finance Act and no prejudice is likely to be caused to the petitioner on account of manner of refund and the claim of refund is to be routed through the supplier to whom the taxes were paid in accordance with the existing legal procedure.
6. The petitioner had earlier field CWJC No. 3248 of 1999 (R) for issuance of writ of mandamus directing the respondents to refund the amount of sales tax paid by it on purchase of raw materials between the period 5.4.1996 to 31.3.1998 on the basis of the exemption certificate dated 23.6.1998 with effect from 5.4.1996 pursuant to the Industrial Incentive Policy of the year 1995. After hearing the parties this Court vide order dated 6.1.2000 while disposing of the writ petition has made the following direction :
“The Joint Commissioner of Commercial Taxes, Jamshedpur (respondent No. 3) is directed to consider the matter afresh. The petitioner shall furnish the materials before him with a view to calculate the amount paid by the petitioner by way of sales tax on purchase of raw materials. The petitioner shall furnish the full particulars thereof including the name of the supplier of raw materials and the period during which the amount was paid by way of sales tax on purchase of raw materials. This the petitioner shall do within a period of 15 days from today. The petitioner must also produce all the relevant materials to satisfy the respondent No. 3 that such taxes have actually been paid.
Within six weeks thereafter, the Joint Commissioner of Commercial Taxes. Jamshedpur, shall determine the amount of sales tax paid by the petitioner by way of sales tax on purchase of raw materials. If necessary, the Joint Commissioner may verify the fact from the supplier to whom such sales tax has been paid by the petitioner. After satisfying himself that such sales tax has, in fact, been paid and accounted for, the Joint Commissioner will pass appropriate order directing refund of sales tax paid by the petitioner on purchase of raw materials during the period 5.4.1996 to 31.3.1998. The refund order shall be issued within ten days to the petitioner of the determination by the Joint Commissioner of Commercial Taxes.”
7. In obedience to the order of this Court referred to above the petitioner approached JCCT, Jamshedpur, who after verification of all the documents and books of accounts and after physical verification of the factory of the petitioner virtually rejected the claim of the petitioner vide order dated 30.6.2000. The relevant portion of the impugned order of JCCT. Jamshedpur runs hereunder :
“In view of the foregoing facts no refund is due to the Dealer Company during 1996-97 for the following reasons :
(a) Actual commercial production of the CRM Plant has started from 1.10.1996 whereas the Dealer Company is claiming refund from all purchases w.e.f. 5.4.1996 which has been capitalised as expenses of the CRM project.
(b) The Dealer Company has not exceeded the 2/3rd installed capacity of the CRM Plant during 1996-97, which was fixed at 60.000 Matric Ton Per Annum (MTPA).
(c) The Dealer Company has not fully produced the TMBP Coils for which the exemption was granted to the Dealer Company and the part of the HR Coil purchased were utilised for the production of semi-processed goods in the form of FHCR.”
x x x x
“During 1997-98 the Dealer Company’s CRM unit has produced 68.588 matric ton of CR Coils and consumed HR Coil worth 78.978 matric ton. In view of the express provision of the Industrial Policy 1995, SO 478 and the exemption certificate granted to the Dealer Company, the Dealer Company may be entitled for tax free purchase of raw materials over and above the 2/3rd incremental capacity of the unit which has been fixed at 60,000 MTPA. However, the Dealer Company has not fully produced TMBP Coils out of the CR Coils purchased. Nevertheless Dealer Company has, exceeded the 2/3rd capacity of production fixed at 60,000 MT towards incremental production qualifying for tax free purchase of raw materials. As per the notes attached to the Balance Sheet and Profit and Loss Account, actual production of CRM plant during the year was 68,588 against the raw material consumption of 78,978 MT during the year. Therefore, the Dealer Company can avail of the tax tree purchase of raw material in the form of HR Coil for the production of 8,588 MT of CRM product over and above the 2/3rd incremental capacity of 60,000 MT fixed under SO 478 on proportional basis which works out to 9,889 MT only.”
The impugned order further states regarding the mode of refund as per statutory provision 42 of the Bihar Finance Act which runs as follows :
“In this case the Dealer Company has purchased the raw materials from Tata Iron & Steel Company Limited (TISCO) and Steel Authority of India Limited (SAIL), Bokaro Steel Plant on payment of tax during the period covered under exemption scheme and those companies have collected and deposited the sales tax into the Government Treasury. In view of the above instructions and circular of the Commissioner of Commercial Taxes, the refund of the tax paid on purchase of raw materials during the period of exemption has to be routed through the Seller Company i.e. TISCO and SAIL. Since the entire amount refundable can easily be refunded through Tata Iron & Steel Co. Ltd., it will be convenient to pass an order to the Tata Iron & Steel Co. Ltd., to refund the amount of tax to the Dealer Company and accept the requisite forms of exemption for the requisite amount and file the same with their assessing authorities i.e. Deputy Commissioner of Commercial Taxes. Urban Circle, Jamshedpur. The TISCO can seek the adjustment of the amount so refunded from the department against any of the outstanding dues of the department or claim cash refunds directly, if any, after quantification of their tax liability for the relevant period i.e. 1997-98. Accordingly, a separate order is being issued to TISCO to accept the tax exemption forms for 9,889 matric ton of HR Coil during 1997-98 and work out the exact price of those HR Coits and the taxes collected thereon and paid into the Government Treasury and thereafter refund the amount of the collected taxes to the Dealer Company and file a revised return in respect of the year 1997-98 to their respective assessing authority and file applications for refund/adjustment of the amounts so refunded to the Dealer Company.”
8. It has been submitted by the learned counsel for the petitioner that respondent No. 3 (JCCT) has gone beyond his jurisdiction and has mis-interpreted not only the order of this Court referred to above but also the Industrial Policy and the notification bearing S.O. No. 478 dated 22.12.1995 and also the order of the JCCT dated 22/23 September. 1999 and the finding of the JCCT in the impugned order that the petitioner is entitled for exemption only to the incremental production above 2/3rd of its original production capacity is wrong. It has been submitted by the learned counsel for the petitioner that the plant which the petitioner has established is totally a new plant producing TMBP which is used for manufactures of ETP which it was totally importing earlier and as such there is no question of granting of benefit of above capacity of 2/3rd of its original production. It has further been submitted that Clause 15.4 of S.O. 478 dated 22.12.1995 is very explicit and it provides that in respect of diversification, the facility of exemption of sales tax would be available in respect of such goods which was not earlier manufactured by the petitioner. It has also been submitted that the petitioner is entitled for benefit of exemption with effect from 5.4.1995 and not from 1.10.1996, as stated in the impugned order as date of production is 5.4.1996 which will be evidenced by the certificate granted by the Director, Technical Development (Annexure 4). It has been submitted that as per Indian Accounting Standard issued by Institute of Chartered Accountants of India it is a prerequisite to segregate the total production into two parts, i.e., pre-operative and post-operative for the year of capitalization of plant and the income/expenses of the pre-operative period is required to be booked under the heading of capital expenses which forms parts of the balance sheet whereas income/ expenses of post-operative period is treated as a revenue and forming part of profit and loss account as per norms aforesaid. The plant of the petitioner was capitalized in 1996-97 and in this context the cut off date was taken as 1.10.1996 and the production made during the period between 5.4.1996 to 30.9.1996 was also sold as finished products as well as tax was duly deposited on this sale. Similarly the petitioner had also purchased raw materials and had duly paid sales tax on them and relevant documents in respect thereof were placed before the authorities who were completely satisfied about the genuineness of the same and respondent No. 3 in the impugned order has on extraneous reason and just to defeat the petitioner’s genuine claim gave a finding contrary to the aforesaid established facts. It has also been submitted that Section 42 of the Bihar Finance Act has no application in this case as Section 42. (supra) relates to refund after assessment proceeding and the claim of the refund of sales tax of the petitioner is not based on any assessment proceeding but as a result of the Industrial Policy read with S.O. No. 478 (supra). It has also been submitted that the impugned order of respondent No. 3 (JCCT) is contrary to the direction of this Court passed in CWJC No. 3248/1999 (R) which amounts to clear contravention and breach of the direction of this Court. Lastly it has been submitted that Clause 15.4 of S.O. No. 478 dated 22.12.1995 explicitly and in the most unequivocal terms lays down that in case of diversification the facility of exemption will be available on such raw materials which has been used in commercial production and which has not been earlier produced by the Unit and that the product manufactured was a new one and in case of diversification there cannot he any incremental production which proceeds on the basis that the production of the relevant year would not exceed 2/3rd of the production capacity and in case of diversification which postulates the production for the first time of the new product and the raw materials are used for the first time in case of diversification and there cannot be any application of the principle of incremental production. It has been submitted that in ease of modernisation and expansion of the Unit the principle of incremental production only applies. On the basis of the aforesaid submissions it has been contended for the petitioner that the petitioner is entitled for full exemption from payment of sales tax on the purchase of raw materials i.e., HR Coils and in this view of the matter the order of JCCT is perverse.
9. It has been contended by the learned Additional Advocate General that in terms of Clause 15.4 of S.O. No. 478 the facility of tax exemption to the Unit undergoing expansion/ modernisation/diversification will he available only on the extra incremental production as a result of such expansion/modernisation/ diversification and the incremental production means the, excess of actual production over 2/3rd of the original installed capacity of the highest production in three preceding years. It has also been submitted that the installed capacity of production of the Company was 90000 MT and accordingly the petitioner is entitled to get raw materials over the production of 60000 MT i.e., incremental production over 60000 MT. Lastly, it has been contended that the petitioner used the raw materials for production of FHCR instead of producing TMBP and exemption was granted only for producing TMBP which is a new product and not for FHCR and the impugned order of JCCT is not against the direction of this Court.
10. Admittedly, the petitioner was manufacturing initially ETP having installed capacity of 90000 MT and its sole raw material was TMBP coils which was totally imported by the petitioner from various countries. Government of Bihar announced the Industrial Policy of 1995 to accelerate the growth of the Industry in the State of Bihar and the said Industrial Policy provides various incentives amongst others for grant of exemption from payment of sales tax on purchase of raw materials and also on sales of finished product in case new industry is set up in the State of Bihar and also the industrial unit which has undertaken expansion/modernisation/diversification. The said Industrial Policy of 1995 provided for grant of exemption from payment of sales tax on purchase of raw materials and also on sales of finished product to the Industrial Unit which commenced its production on or after 1.9.1995 and also the Industrial unit which has undertaken expansion/modernisation/diversification. The State of Bihar in terms of the Industrial Policy of 1995 also made a statutory notification being S.O. No. 478 dated 22.12.1995 in exercise of power under Section 7(3)(b) of the Bihar Finance Act which also provides for the same benefit of exemption from payment of sales tax on purchase of raw materials to the industry which has started production on or after 1.9.1995 upto 31.8.2000. The petitioner in order to take advantage of the incentives contained in Industrial Policy read with S.O. No. 478 dated 22.12.1995 set up a new plant in its premises for manufacturing TMBP and other CR products under the licence granted by the Ministry of Industry, Government of Bihar. The total production capacity of the new plant i.e., CRM of the petitioner is 1,20,000 MT in which besides TMBP the petitioner also manufactured FHCR, CRGC, CRGP and other cold rolled products and the petitioner produced 90000 MT of TMBP which was used for manufacturing of ETP and for balance capacity of 30000 MT the petitioner manufactured other cold rolled products as stated above and the said TMBP is being used as raw materials in the old plant to manufacture ETP. Admittedly the raw materials required for manufacture of TMBP and other cold rolled products are HR Coils which it purchased from TISCO and SAIL and the petitioner claimed exemption from payment of sales tax on the purchase of raw materials i.e., HR coils aforesaid in terms of industrial Policy read with S.O. No. 478 as aforesaid. It is relevant to mention here that the petitioner came into commercial production with effect from 5.4.1996 which stands testified by the Director, Technical Development (Annexure 4). The finding in the impugned order regarding production of TMBP in the new unit of the petitioner with effect from 1.10.1996 is incorrect and against the weight of the materials on the record. The petitioner had paid sales tax on the purchase of the raw materials to the seller i.e., TISCO and SAIL during the period from 5.4.1996 to 31.3.1998. The petitioner applied for the exemption certificate from payment of sales tax on the purchase of the raw materials which was finally issued to it vide order dated 22.9.1998/23.9.1998 passed by JCCT, Jamshedpur (Annexure 6).
11. Admittedly, the petitioner has paid sales tax on the raw materials purchased from TISCO and SAIL during the period between 5.4.1996 to 31.3.1998 as exemption certificate was granted to the petitioner thereafter. The petitioner accordingly moved for the refund of the sales tax paid to the authorities of the TISCO and SAIL and when the sales tax paid was not refunded to the petitioner it moved this Court vide CWJC No. 3248/99(R) and this Court has issued certain directions to the JCCT, Jamshedpur fur the refund of the sales tax paid by the petitioner to the petitioner. A Bench of this Court has directed the JCCT to consider the matter with a view to calculate the amount paid by the petitioner by way of sales tax on the purchase of raw materials on the basis of full particulars thereof furnished by the petitioner and on satisfying himself that such sales tax has been paid and accounted for the JCCT will pass appropriate order directing the refund of sales tax paid by the petitioner on purchase of raw materials during the period 5.4.1996 to 31.3.1998 and refund order has been directed to be issued within 10 days to the petitioner on determination by the JCCT. The direction of the Bench of this Court has been mentioned in detail above. It appears from the impugned order that JCCT has deviated in the course of enquiry and considered extraneous matters which were not at all within the scope of enquiry as directed by the Division Bench. The JCCT in the impugned order came to the finding that the petitioner may be entitled for tax free purchase of raw materials over and above 2/3rd incremental capacity of the Unit which has been fixed at 60000 MT in view of the expressed provision of Industrial Policy, 1995 read with S.O. No. 478 dated 22.12.1995 and the exemption certificate granted to the petitioner. The contention of the petitioner is that the petitioner will be entitled to full exemption in respect of the sales tax paid on the purchase of raw materials as per the provision contained in Clause 15:4 proviso 3 of S.O. 478 which lays down that in case of diversification, the facility of exemption will be available on such raw materials which has been used in commercial production and which has not earlier been produced by the unit and the products manufactured was a new one and it was a case of diversification. The contention of the learned counsel for the petitioner is that in case of diversification there cannot be any incremental production which proceeds on the basis that the production of the relevant year should not exceed 2/3rd of the production capacity. This applies only in case of expansion and modernization and it can never apply in the case of diversification which postulates the production for the first time of the new products and the raw materials are used for the first time in the case of diversification and there cannot be any application of the principle of incremental production.
12. Therefore, the core of contention between the parties is as to whether in case of diversification there can be any incremental production over and above 2/3rd of the production capacity for exemption of the sales tax paid on the purchase of the raw materials for the production of new product. Let us now advert to the Industrial Policy of 1995. Clause 16.3 of the Industrial Policy, 1995 runs as follows :
“UNITS UNDERTAKING EXPANSION/DIVERSIFICATION Such units should be given identical treatment as new units for their expanded/diversified capacity and incremental production both in purchase of raw materials and for sales tax on finished goods. All such incentives will be admissible to such units which are covered by the definition of expansion/ diversification as given in the Annexure.
Incremental production means.–The incremental production shall mean the excess of actual production over 2/3rd of the originally installed capacity or the highest production in 3 years immediately preceding the year in which such expansion/diversification commenced, whichever of the two is higher.”
In pursuance of the Industrial Policy, 1995 the State Government made statutory notification being S.O. 478 dated 22.12.1995 in exercise of its power under Section 7(3)(b) of the Bihar Finance Act, Clause 15 of this statutory notification is relevant which is quoted hereunder :
“For the purpose of exemption in respect of Expansion/Diversification/ Modernisation, the following condition will be essential :
(i) For Diversification/Expansion/ Modernisation the unit has made an investment of 50% or more of the total undepreciated value of the immovable property of the present unit in plant and machinery.
(ii) The result of such Diversification/Expansion/Modernisation should lead to incremental production capacity not less than 50% from the original established production capacity.
(iii) In case of small Industrial unit, the plan for Expansion/Diversification/ Modernisation being formed before starting work to General Manager, District Industry Centre/Managing Director, Industrial Area Development Authority and concerned Circle-incharge, Finance Department (Commercial Taxes) and in case of medium and heavy industry, the Director. Industry/Director. Technical Development and Commissioner, Commercial Taxes, Bihar with this information showing definite period of proposed extra property investment the proposal in details in Diversification/Extension/ Modernisation should be attached.
(iv) The facility of tax exemption on the unit undergoing Expansion/Diversification/Modernisation will be available only on the extra incremental productions as a result of such Expansion/Diversification/Modernisation or the use of this part incremental production would mean “the excess of actual production over two third of the originally installed capacity or the highest production in three year preceding the year in which such Expansion/Modernisation/Diversification commenced, whichever of the two is higher.
In case of diversification this facility will be available only on such raw materials which has been used for such commercial production and which has not been produced earlier by the unit.
(v) In case of Diversification/Expansion/Modernisation, this exemption in Sales Tax will only be available which besides the incremental production the original production would also continue.”
There has been amendment of statutory notification No. 478 dated 22.12.1995 by S.O. No. 57 dated 2nd March. 2000 with retrospective effect of the date of the Industrial Policy, 1995 Clause (Ga) of Sub-clause 4 of S.O. 57 dated 2nd March, 2000 is relevant. The English translation of which is as follows :
“In case of diversification this facility will be available only on such raw material which has been used for such commercial production and which has not been produced earlier by the Unit and this facility shall be available to the Unit to the extent of the actual production as a result of diversification.”
13. In view of Clause 15 of S.O. 478 read with S.O. 57 dated 2nd March, 2000, diversification of a unit is quite distinguishable from expansion/modernisation of the unit and diversification of the unit cannot be equated with expansion/modernisation of the unit. In case of diversification the facility of exemption of sales tax will be available on such raw materials which has been used in the commercial production and which has not been earlier produced by the Unit and that the product manufactured is a new one. Therefore, in case of diversification there cannot be any incremental production which proceeds on the basis that the production of the relevant year should not exceed 2/3rd of the production capacity. In case of expansion/ modernisation the principle of production exceeding 2/3rd of the production capacity is only applicable. It is relevant to mention here that this principle of production exceeding 2/3rd of the production capacity cannot apply in case of diversification of the unit which postulates the production for the first time of the new products as the raw materials are used for the first time in case of diversification. Viewed thus, the principle of incremental production has no application in the case of diversification of the unit. This interpretation stands fortified due to the amendment of S.O. 478 by S.O. 57 dated 2nd March, 2000 referred to above which is to the effect that “and this facility shall be available to the Unit, to the extent of the actual production as a result of diversification”. There can however, be no doubt that exemption made with a beneficient object for encouraging investment in new machinery or plant have to be liberally construed. The provision in S.O. 478 read with S.O. 57 (supra) is made permitting exemption of tax for the purpose of encouraging an industrial activity. The said provision has to be liberally construed for all intent and purposes. It is the settled principle of law that an exemption provision cannot be denied full effect by a circuitous process of interpretation and the liberal language used in a notification must be given due weight. So if the tax payer is within the plain terms of the exemption notification, he cannot be denied the benefit calling in aid, any supposed intention, and the language of the notification has to be given effect to. Based upon the facts aforesaid and the interpretation of Clause 15.4 of S.O. 478 read with Clause (Ga) of S.O. 57 dated 2nd March, 2000 the petitioner is entitled to full exemption in respect of the sales tax paid on the purchase of the raw materials i.e., HR Coils for the production of the new product i.e., TMBP which was not earlier produced in the unit of the petitioner for manufacture of ETP. It is equally relevant to mention here that Section 42 of the Bihar Finance Act has no application for the refund of the sales tax in this case in view of the fact that Section 42 relates to the refund after assessment proceedings and the claim of the refund of the petitioner is not being an assessment proceeding. Hence, provision 42 of the Bihar Finance Act will not apply in this case. Therefore, the impugned order of the JCCT (respondent No. 3) is improper and illegal and contrary to the direction of the Bench of this Court passed in CWJC No. 3248/99(R).
14. Viewed thug, the writ application of the petitioner is hereby allowed. The impugned order dated 30th June, 2000 passed by the JCCT, Jamshedpur is set aside.
15. Respondent No. 3 (JCCT) is hereby directed to consider the claim of refund of the petitioner afresh within four weeks from the date of this order confining himself only within the specific direction given by the earlier Division Bench of this Court, on 6th January, 2000. Respondent No. 3 (JCCT) will satisfy himself that the amount of sales tax on the purchase of raw materials have been paid by the petitioner to TISCO and others and he should also be satisfied that TISCO and SAIL have paid the amount to the State Government and on being satisfied in view of the materials already before him, supplied by the petitioner and TISCO, respondent No. 3 will pass speaking and reasoned order in accordance with law for the refund of the amount of sales tax paid on the purchase of raw materials from 5.4.1996 to 31.3.1998 in terms of the direction of earlier Division Bench dated 6th January. 2000. No order as to costs.
V.K. Gupta, C.J.
16. I agree.