G.S. Singhvi, J.
1. This is a petition for quashing of the order dated April 24, 1998 vide which the Deputy Excise and Taxation Commissioner (East), Gurgaon (respondent No. 2) cancelled the exemption granted to the petitioner on August 19, 1994 under rule 28A of the Haryana General Sales Tax Rules, 1975 (for short, “the Rules”). The petitioner has also prayed for quashing of the orders dated April 22, 1999 and July 26, 1999 passed by the Excise and Taxation Commissioner (Appeals), Rohtak (respondent No. 5) and the Sales Tax Tribunal, Haryana (respondent No. 6) respectively dismissing the appeals filed against the order dated April 24, 1998.
2. The facts necessary for deciding the issues which arise for determination in this case are that on an application submitted by the petitioner under rule 28A(2) of the Rules, respondent No. 2 issued certificate No. 70 dated August 19, 1994 (annexure P1) entitling it to sales tax exemption to the tune of Rs. 855.77 lakhs for the period from May 30, 1992 to May 29, 2001. Thereafter, the petitioner applied for annual renewal as required by rule 28A(7)(a). Respondent No. 2 declined to accept the bank guarantee furnished by the petitioner on the premise that it was not in conformity with rule 28A(6)(a)(ii) of the Rules and vide notice, annexure P7, dated June 14, 1996, he called upon the petitioner to furnish bank guarantee valid for the period extending to five years after the expiry of total period of tax exemption. After about 6 months, respondent No. 2 issued notice dated December 18, 1996 informing the petitioner that application for renewal for the period from July 1, 1994 to June 30, 1995 has not been received in his office. In reply to the said notice, the petitioner sent letter, annexure P9, mentioning therein that the application for renewal of exemption certificate for the disputed period had been sent by registered AD post on May 31, 1994 along with necessary documents, such as form S.T. 71, certificate from CA regarding notional sales tax liability and fixed assets, memorandum and articles of association and balance sheet and, therefore, it cannot be accused of non-compliance of rule 28A(7). After one year and about 3 months, respondent No. 2 passed order dated March 9, 1998 and gave the following directions to the petitioner :
“(a) It should pay tax for the period from July 1, 1994 to June 30, 1995 which the unit has not applied for the renewal of exemption certificate.
(b) The date of validity of bank guarantees should be extended till May 20, 2006.
(c) The bank guarantees should be in proper formats, i.e., in form S.T. 50 under the HGST Act and in form III under the CST Act.”
3. The appeal filed by the petitioner against the order dated March 9, 1998 was allowed by the Prohibition, Excise and Taxation Commissioner on February 3, 1999.
4. In the meanwhile, respondent No. 2 issued notice dated March 31, 1998 proposing cancellation of the exemption certificate on the ground of non-compliance of rule 28A(6)(a)(ii) and 28A(9)(iii) and vide order dated April 24, 1998, he cancelled the exemption certificate on the ground that the bank guarantee submitted by the petitioner had not been renewed in accordance with the relevant rule. The petitioner challenged that order by filing appeal under rule 55 of the Rules. Simultaneously, it filed C.W.P. No. 8032 of 1998 for quashing of that order. The same was disposed of by a division Bench on December 21, 1998 with the direction that the appeal filed by the petitioner be decided at an early date and till then the bank guarantee furnished by it shall not be encashed. The appeal filed by the petitioner was dismissed by respondent No. 5 on April 22, 1999. The appellate order was challenged by the petitioner in C.W.P. No. 8779 of 1999 which was dismissed on July 6, 1999 on the ground of availability of alternative remedy of appeal. However, the encashment of bank guarantee was again stayed by the High Court. Immediately thereafter the petitioner filed appeal before respondent No. 6. That was also dismissed on July 26, 1999.
5. We have heard learned counsel for the parties and perused the record. The Haryana General Sales Tax Act, 1973 (for short, “the Act”) was enacted by the State Legislature to provide for and validate the levy of tax on the sale or purchase of certain goods in the State of Haryana. The literal implementation of the Act created several bottle-necks and hindered the industrial growth of the State. Therefore, with a view to provide relief to the industries and to create ground for accelerated development of the State, the Act was amended and section 13-B was inserted for conferring power upon the State Government to grant exemption to the specified class of industries from payment of tax subject to the fulfilment of the prescribed conditions. For giving effect to the object sought to be achieved by the enactment of section 13-B, the State Government, in exercise of its rule-making power under section 64 of the Act, inserted Chapter IV-A (rule 28A) in the Rules. Extracts of sub-rules (6) and (7)(a) of rule 28A of the Rules, which have bearing on the decision of this case read as under :
“Sub-rule (6) of rule 28A of the Rules :
(6)(a) An eligible industrial unit which has been issued with an eligibility certificate (hereinafter referred to as the applicant unit), shall, within sixty days of its receipt make an application for the grant of exemption or entitlement certificate, as the case may be, in form S.T. 71 to the Deputy Excise and Taxation Commissioner of the District in which his unit is located. The application shall be accompanied with an attested copy of the eligibility certificate and other documents mentioned in the application.
6. No application shall be entertained if not received within time. An application with incomplete or incorrect particulars including the documents required to be attached therewith shall be deemed as having been not made if the applicant fails to complete it on an opportunity afforded to him in this behalf. On receipt of application, the Deputy Excise and Taxation Commissioner shall ask the applicant unit seeking benefit of :
(i) tax deferment to either execute a mortgage deed in form S.T. 74 creating a pari-passu first charge along with financial institutions/banks on the assets of the unit, or to furnish a bank guarantee for 15 per cent of the total benefit to be availed of in a year and a surety bond in form S.T. 50 for the balance amount of 85 per cent. The mortgage deed/agreement or bank guarantee shall be valid till the recovery of the entire deferred amount of tax. The bank guarantee, if expiring early or if furnished on annual basis shall be renewed two months before the date of expiry failing which the unsecured deferred tax shall become due for payment immediately;
(ii) tax exemption to either execute a surety bond in form S.T. 50 equivalent to 15 per cent of the amount of notional sales tax liability sought to be exempted or a bank guarantee for that amount in a year, which shall be valid for the period extending to five years after the expiry of total period of tax exemption.
(b) The Deputy Excise and Taxation Commissioner shall after satisfying himself that the applicant unit is holding a genuine and valid eligibility certificate, has furnished adequate security and that his application is in order will issue him the exemption/entitlement certificate, as the case may be within thirty days of the receipt of the application. One copy of the certificate shall be sent to the Director of Industries or the General Manager, District Industries Centre as the case may be and one copy shall be retained in the record. The certificate issued shall be valid unless cancelled or withdrawn from the date of commercial production or from the date of issue of entitlement/exemption certificate, as the case may be, to the 30th June next or when notional sales tax liability first exceeds the quantum of tax exemption/deferment fixed for the unit, whichever is earlier.
Sub-rule (7)(a) of Rule 28A of the Rules :
(7)(a) The exemption certificate or the entitlement certificate, as the case may be, shall be renewed from year to year for which the industrial unit shall make an application to the Deputy Excise and Taxation Commissioner in-charge of the district by the 31st May in form S.T. 71. The application shall be accompanied with exemption/entitlement certificate, additional security as specified in sub-clauses (i) and (ii) of clause (a) of sub-rule (6) equal to fifteen per cent of the declared notional sales tax liability of the current year and the difference between the actual and the declared notional sales tax liability of the previous year in the case of sales tax exemption and equivalent, to the extent of estimated tax liability of the current year and difference between actual and estimated tax liability of previous year in case of tax deferment, as also other documents mentioned in the application.
The Deputy Excise and Taxation Commissioner after making such enquiries as are necessary, and after satisfying himself that the applicant is a bona fide industrial unit and has not misused the exemption/entitlement certificate, shall renew the exemption/entitlement certificate within 30 days of the making of the application for renewal failing which the certificate shall remain valid unit the renewal is refused or the certificate otherwise expires. The exemption/entitlement certificate on renewal shall unless cancelled or withdrawn be valid from 1st of July of the year in which the application is made if it is in time or otherwise from the date of application to 30th June, next or when the eligibility certificate expires or the cumulative notional sales tax liability first exceeds the quantum of tax exemption/deferment fixed for the unit, whichever is earlier.”
7. An analysis of the above extracted sub-rules of rule 28A shows that on receipt of the application for grant of exemption, the Deputy Excise and Taxation Commissioner is required to ask the applicant-unit seeking benefit of tax exemption either to execute a surety bond in form S.T. 70 or furnish a bank guarantee having validity for the period extending to 5 years after the expiry of total period of exemption and the applicant has to seek annual renewal of the exemption certificate by making an application to the competent authority in form S.T. 71 and furnishing the required documents.
8. In the light of the above, we shall now decide whether the order dated April 24, 1998 passed by respondent No. 2 cancelling the exemption certificate on the ground of petitioner’s failure to furnish bank guarantee in accordance with rule 28A(6)(a)(ii) and the orders passed by respondents Nos. 5 and 6 dismissing the appeals filed by it are legally correct and justified.
9. Shri J. K. Sibal, learned Senior Counsel, appearing for the petitioner laid considerable emphasis on the fact that initially the petitioner had furnished the bank guarantee with requisite validity period but due to financial crunch, it had opted to provide adequate surety for protecting the State interest and argued that the order of cancellation passed by respondent No. 2 without giving effective opportunity to the petitioner to prove its bona fides in the matter of submission of bank guarantee/furnishing of surety bond should be declared illegal. He then argued that respondent No. 5 has erred in interpreting rule 28A(6)(a)(ii) as imposing a bar on the change of option from bank guarantee to surety bond. Learned counsel submitted that the object underlying the requirement of executing a surety bond or furnishing a bank guarantee is to protect the public revenue and if an appropriate surety bond is furnished in the prescribed form equivalent to 15 per cent of the notional sales tax liability, the respondents cannot refuse to entertain the same. He also assailed the order dated July 26, 1999 passed by respondent No. 6 by arguing that it had taken an extremely technical view of the petitioner’s request to be allowed to furnish surety bond.
10. The learned Deputy Advocate-General argued that the option given to the applicant to furnish surety bond or bank guarantee cannot be changed during the currency of the exemption period and, therefore, the cancellation of the exemption certificate by respondent No. 2 on the ground of non-furnishing of bank guarantee in terms of rule 28A(6)(a)(ii) of the Rules was legally correct and justified and the appellate authorities have rightly declined to interfere with the order dated April 24, 1998.
11. We have thoughtfully considered the respective submissions. In our opinion, the plain language of rule 28A(6)(a)(ii) does not admit of the interpretation placed by respondents Nos. 2, 5 and 6. A conjoint reading of rule 28A(3) and 28A(6)(a)(ii) shows that while under sub-rule (3), a statutory bar has been imposed on the change of option once exercised except to the limited extent of change from exemption to deferment for the remaining period and balance quantum of benefit, sub-rule (6) does not contain any such prohibition and keeping in view the object underlying the requirement of executing a surety bond in the prescribed form or furnishing a bank guarantee, i.e., to safeguard the public revenue, we are convinced that while seeking renewal, the applicant can make a request for acceptance of surety bond instead of bank guarantee.
12. We are also of the opinion that keeping in view the object underlying section 13-B of the Act and rule 28A of the Rules, i.e., to provide incentives to the industrial units by way of tax exemption for achieving the goal of rapid industrialisation, the provisions regarding exemption/deferment cannot be so interpreted as to defeat the intention of the Legislature.
13. Rather, a purposive and constructive interpretation has to be adopted in such cases. In this connection, we may refer to the following decisions of the Supreme Court :
(i) Bajaj Tempo Ltd. v. Commissioner of Income-tax, Bombay City, Bombay  196 ITR 188 (SC); (1992) 3 SCC 78;and
(ii) Belapur Sugar and Allied Industries Ltd. v. Collector of Central Excise, Aurangabad (1999) 4 SCC 103.
14. In the case of Bajaj Tempo Ltd. (1992) 3 SCC 78, their Lordships interpreted the provisions of section 15-C of the Income-tax Act, 1922 and held as under :
“Section 15-C of the 1922 Act, 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. Clause (i) is a restrictive clause. The Legislature by this clause intended to control any attempt or effort to abuse the benefit intended for new undertaking by change of label. The intention was not to deny benefit to genuine new industrial undertaking but to control the mischief which might have otherwise taken place. A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. 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. It is necessary to resort to a construction which is reasonable and purposive to make the provision meaningful.”
15. In the case of Belapur Sugar and Allied Industries Ltd. (1999) 4 SCC 103, the Supreme Court interpreted the provisions contained in the circular issued by the Government for grant of concession/exemption/rebate to the sugar industries and upheld the claim of the appellant for refund of the amount and duty which it was not bound to pay. While doing so, their Lordships held as under
“Unless there is anything to the contrary in the Act, Rules or notification, if there be two possible interpretations, it is that interpretation which subserve the object and purpose should be accepted. The objective of the notification in question is that by conferring rebate in excise duty, an incentive is given to a factory for increasing the sugar production during the lean period. One has to scrutinise the two notifications, keeping this in mind. Significantly, the language used in the second notification is : ‘For para 4, following paragraph shall be substituted.’ It is significant that while substituting this para 4 on June 11, 1982, it admits to confer rebate for the period preceding the date of this notification, viz., from May. So this notification clearly indicates to confer benefit which is covered by the first Notification No. 132. Substituted para 4 has two parts, first ‘where production during three preceding years was nil’ and second ‘the entire production during May to September, 1982 will be exempted’. The appellant’s case is covered under both parts. Its production in the last three preceding years was nil and in terms of Notification No. 132 read with this substituted para 4, in terms of the 2nd part the entire sugar produced during May to September, 1982 would be exempted. Thus, the interpretation suggested by the Revenue cannot be accepted as it defeats the very object of the notification.”
16. On the basis of above discussion, we hold that the order dated April 24, 1998 passed by respondent No. 2 cancelling the exemption certificate as also the orders passed by respondents Nos. 5 and 6 dismissing the appeals filed by the petitioner are illegal and are liable to be quashed.
17. In view of the above conclusion, we do not consider it necessary to deal with the petitioner’s plea that the order dated April 24, 1998 should be declared void on the ground of violation of the principles of natural justice.
18. For the reasons mentioned above, the writ petition is allowed. Orders annexures P-11, P-17 and P-21 are declared illegal and quashed with the direction that the surety bond furnished by the petitioner shall be accepted by the competent authority subject to its satisfaction about the genuineness thereof. If the concerned authority comes to the conclusion that the security furnished by the petitioner is not genuine or adequate, then it may reject the same after hearing its representative.
19. Writ petition allowed.