JUDGMENT
L.N. Ray, Judicial Member
1. A short but important question involving interpretation of Rule 3(66) of the Bengal Sales Tax Rules, 1941, has been raised in this case.
2. Applicant No. 1, Sima Banerjee, is the proprietress of Uniplast Industries, in which plastic goods are manufactured. Applicant No. 2, Tapas Chatterjee, is the constituted attorney of the first applicant. The first applicant is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 (hereafter called “the BFST Act”). She obtained registration of her unit as a small-scale industrial unit under the Directorate of Cottage and Small-scale Industries, Government of West Bengal. In short, her case is that she had obtained eligibility certificate under Rule 3(66) of the Rules framed under the BFST Act (hereafter called “the BST Rules”) up to March 31, 1984, the first date of sale having been accepted as August 14, 1980. Under the said rule she claims to be entitled to exemption and consequently eligibility certificate therefor up to August 14, 1985, i.e., for five years from the first date of sale. She had applied for renewal for the period from April 1, 1983 to March 31, 1984, on August 21, 1983, and had fulfilled all the conditions for being granted the eligibility certificate (hereafter called “the E.C.”). The prayer was rejected with effect from December 7, 1983 to March 31, 1984, but granted for the period from April 1, 1983 to December 6, 1983. The E.C. was rejected for the said period on the ground that on and from December 7, 1983, she had exceeded the investment limit under Rule 3(66), which was at the time Rs. 20 lakhs. The cost of generator set and moulds purchased by the applicant was taken into account while calculating the investment limit. (The investment limit was, however, raised to Rs. 35 lakhs with effect from March 18, 1985). Against the aforesaid rejection the applicant moved the Calcutta High Court in an application under Article 226 of the Constitution of India, which was disposed of on June 1, 1988, by Bhagawati Prasad Banerjee, J., a xerox copy of whose order is made annexure C to the application before us. Under that order the first applicant got the E.C. for the period from December 7, 1983 to March 31, 1984. The Assistant Commissioner of Commercial Taxes rejected the prayer of renewal of the E.C. for the period from April 1, 1984 to March 31, 1985, by an order dated March 8, 1989, made annexure D, on the same ground that the cost of generator and moulds should be included in the cost of “plant and machinery” and that being done, the amount of investment came to more than the limit of Rs. 20 lakhs. A revision was filed under the provisions of the BFST Act, 1941, against the said order of March 8, 1989, before the Additional Commissioner of Commercial Taxes and that is still pending. The applicant chose to invoke our jurisdiction allegedly on the ground that being a creature of statute, the revisional authority was incompetent to interpret the statutory provisions of Rule 3(66). It is alleged that the applicant could not realise any sales tax for the period from April 1, 1984 to August 14, 1985, in view of Rule 3(66). On January 2, 1987, two applications for renewal for the aforesaid period, one, up to March 31, 1985, and the other up to August 14, 1985, had been filed before the Assistant Commissioner. The generator was purchased on account of erratic supply of power and the moulds were bought in aid of the manufacturing job. In view of the guidelines of the Government of India and the practice of the Directorate of Cottage and Small-scale Industries of the Government of West Bengal in regard to excluding the cost of generator and moulds from the investment limit on “plant and machinery”, the Assistant Commissioner ought to have granted the E.C., ignoring the cost of the same. Thus, the applicant prays for setting aside the order dated March 8, 1989, of the Assistant Commissioner and directing renewal of the E.C. for the periods from April 1, 1984 to March 31, 1985 and April 1, 1985 to August 14, 1985.
3. A copy of the earlier writ application under Article 226 of the Constitution of India filed and disposed of in the High Court was furnished by the applicant, as desired by us. Having gone through that application, we find that the earlier order of rejection dated April 11, 1986, was challenged on two grounds, namely, the ground of delay and the ground of including the cost of generator and moulds at the time of computing the investment limit on “plant and machinery” under Rule 3(66), but the prayer in that writ petition was confined to the rejected period from December 7, 1983 to March 31, 1984, with a prayer for direction for disposal of the applications for renewal for the periods which are under our consideration in the present application. The order dated June 1, 1988, of the High Court is brief and quoted below :
“1-6-1988 : In this case, the petitioner was enjoying tax holiday/ exemption and was praying for eligibility certificate which was being allowed to her from year to year. For the said purpose, respondent authority disallowed the prayer of the petitioner, by order dated April 11, 1986, for the period from December 7, 1983 to March 31, 1984. As a result thereof, petitioner could not and did not realise sales tax for the said period, but such point of law is fully covered by the judgment dated July 16, 1987, passed by Suhas Chandra Sen, J., in C.O. No. 11048(W) of 1986 which was followed by me in the case of Satyabrata v. State of West Bengal in judgment dated March 18, 1988. There I held that the petitioner is entitled to get all the reliefs of tax holiday/exemption and eligibility certificate. Further, petitioner herein was allowed such reliefs for the period April 1, 1983 to December 6, 1983, and in continuation thereof for the period December 7, 1983 to March 31, 1984, in similar facts and circumstances is entitled to get such reliefs.
Hence, I direct that the petitioner is entitled to get all benefits including declaration forms and clearance certificates in accordance with law for December 7, 1983 to March 31, 1984.
The writ petition is thus disposed of without costs.
B.P. Banerjee, J.”
4. It was rightly argued by the learned State Representative that the above order simply proceeded on the ground of delay and the ground of computation of investment limit was not at all considered. The judgment dated July 16, 1987, of Suhas Chandra Sen, J., in C.O. No. 11048 (W) of 1986 which was followed in making the above order dated June 1, 1988, has been reported in [1988] 71 STC 220 (Cal) (Standard Vacuum Equipment v. Commissioner of Commercial Taxes), from which we find that delay in rejecting the prayer for renewal in the circumstances of that case was the ratio of that judgment. In the earlier case of the applicant decided fay the High Court, the renewal application for the period from April 1, 1983 to March 31, 1984, was filed on August 21, 1983. The rejection for the period from December 7, 1983 to March 81, 1984, was made by an order dated April 11, 1986, and communicated to the applicant by letter No. 3660 dated July 14, 1986. In that context of inordinate delay, B.P. Banerjee, J., passed the order dated June 1, 1988, without touching the question of computation of investment limit with reference to the cost of generator and moulds, Mr. S.N. Bose, Advocate, appearing for the applicant sought to raise the question of constructive res judicata, as it were, the question of inclusion or exclusion of the cost of generator and moulds had already been decided or deemed to have been decided by B.P. Banerjee, J. An application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 (like the present one) stands on the same footing as that of an application under Article 226 of the Constitution of India, It is settled that a second petition under Article 226 could be entertained and not barred by the rule of res judicata where the cause of action is different (Aditya v. Principal, Rajendra Medical College AIR 1971 SC 1005 at page 1010) ; and where there has been a decision on merits, the rule of constructive res judicata will be applicable to bar a second application founded on the same cause of action (Devilal v. Sales Tax Officer [1965] 16 STC 303 (SC) ; AIR 1965 SC 1150, Gulabchand v. State of Gujarat AIR 1965 SC 1153 at page 1166). In this case, the reliefs sought for in the former and present proceedings are different, causes of action are different (the instant application challenges the second rejection order for a different period), there was no decision on the issue (except delay) on merits, and the material issue, namely, computation of investment limit after excluding or including the cost of generator and moulds was not decided or even discussed at all. In the absence of a decision on that issue, the respondents could not appeal therefrom. Hence, from all points of view the order of B.P. Banerjee, J., dated June 1, 1988, does not operate as res judicata in any form as against the present respondents. On the other hand, the order of B.P. Banerjee, J., is silent about the prayer for a direction (in the former application under Article 226) for disposal of the pending applications for the periods now under our consideration (April 1, 1984 to March 31, 1985 and April 1, 1985 to August 14, 1985) which prayer was, thus, not allowed. However, the applicant has also come before us on a new cause of action, i.e., the second rejection order and hence is not inhibited by the rule of res judicata.
5. In paragraphs 13 and 28 of the present application the applicant has maintained that she has moved our forum, though her revision petition before the Additional Commissioner is pending, because she has been advised that being a creature of statute, the revisional authority will be incompetent to interpret a statutory provision, which is Rule 3(66) in the present case. This point was also argued by Mr. Bose appearing for the applicant. But the learned State Representative, Mr. Majumdar, contended that the present application is not maintainable in view of Clauses (a) and (b) of Sub-section (3) of Section 8 of the West Bengal Taxation Tribunal Act, 1987, and also because the revision is still admittedly pending. Clauses (a) and (b) of Section 8(3) of the said Act actually codify the principles laid down in a number of decisions of the Supreme Court and different High Courts in regard to maintainability of writ petitions under Article 226 of the Constitution of India. The revision before the Additional Commissioner was filed by the applicant by virtue of Section 20 of the BFST Act, 1941. It is not possible to agree with Mr. Bose that the revisional authority is incompetent to interpret Rule 3(66). In fact, he is required to interpret any provision of law which becomes necessary for decision of the dispute before him. The case would have been otherwise, for example, had the dispute been with regard to the vires of a statutory provision or a statutory rule. That being so, we hold that the revisional authority is competent to interpret Rule 3(66) in course of disposing of the revision which was filed before him. Having taken that view and having regard to Section 8(3)(a) and (b) of the West Bengal Taxation Tribunal Act, 1987, the present application becomes not maintainable. But we do not like to throw the applicants out of court, since they might have been led to file this application, because the High Court had earlier entertained a similar application under Article 226 in the similar circumstances, which application was disposed of by B.P. Banerjee, J., on June 1, 1988. Moreover, in view of Section 8(3)(c) of the West Bengal Taxation Tribunal Act, 1987, this application is maintainable, as interpretation of a statutory rule is involved.
6. Rule 3(66) of the BST Rules undoubtedly grants certain “benefits” (this word having been used in the first proviso) to “a newly set up small-scale industry” mentioned in Clause (i) and defined in the explanation to that clause. Admittedly, the first pre-requisite was the limit of investment on “plant and machinery”. Such limit was initially Rs. 20 lakhs when the grant of the E.C. to the applicant commenced. That limit was raised to Rs. 36 lakhs with effect from March 18, 1985. That being the admitted position, the Assistant Commissioner of Commercial Taxes certainly fell into an error in refusing the E.C. for the period from March 18, 1985 to March 31, 1985, by his order dated March 8, 1989. Thus, even if the cost of generator and moulds is considered a part of investment on plant and machinery for the purpose of the explanation to Rule 3(66)(i), the E.C. could not have been refused on that account for the period from March 18, 1985 to March 31, 1985. To that extent the order dated March 8, 1989, is bad and must be set aside. The other application for the period from April 1, 1985 to August 14, 1985, was also made on January 2, 1987. That has not yet been disposed of. There is the prayer (d) in the present application for direction to renew the E.C. for that period as well. We shall direct the Assistant Commissioner to dispose of that application having regard to the higher limit of investment (Rs. 35 lakhs).
7. One of the conditions for claiming benefits under Rule 3(66), is that no tax should have been realised in respect of the sales in question. Mr. Bose contended on behalf of the applicants that since no tax was realised for all such sales for the period from April 1, 1984 to August 14, 1985, the applicants would doubly suffer for such delayed rejection as has been done by the impugned order of March 8, 1989. In this connection he relied on the decision in [1988] 71 STC 220 (Cal) (Standard Vacuum Equipment v. Commissioner of Commercial Taxes). In that case, the ground of delay was one of the grounds in the particular circumstances of that case, where on March 2, 1983, application for renewal of E.C. under Rule 3(66) was made for the period from April 1, 1983 to March 31, 1984. The Assistant Commissioner rejected the prayer by order dated July 26, 1984. In such a situation and taking other attending circumstances into consideration, S.C. Sen, J., of the Calcutta High Court held that the prayer for renewal ought to have been granted. In the present case, however, the circumstances are quite different. Admittedly, on January 2, 1987, two applications were made by the first applicant for renewal of the E.C. for the periods April 1, 1984 to March 31, 1985 and April 1, 1985 to August 14, 1985. The first of the two applications was rejected on March 8, 1989, i.e., after more than two years. Under Clause (iv) of Rule 3(66) the applicant was required to apply for renewal of the E.C. “ordinarily within a month from the date from which such certificate is required to be renewed”. The applicant made the application for April 1, 1984 to March 31, 1985, on January 2, 1987, namely, after roughly two years and nine months from the date from which such certificate was required to be renewed. In the case decided in [1988] 71 STC 220 (Cal) (Standard Vacuum Equipment v. Commissioner of Commercial Taxes), the prayer for renewal was made on March 2, 1983, which was prior to the commencement of the period for which renewal was sought. Mr. Bose appearing for the applicants tried to explain the delay in making the applications by arguing that the delay occurred because it was realised from the decision reported in [1987] 65 STC 37 (Cal) (Dwarkesh Engineering Works v. Assistant Commissioner, Commercial Taxes), that renewal applications ought to be made for every year. But such an explanation is not at all acceptable to us because of the clear provision to the same effect in Rule 3(66)(iv). Having committed delay in filing the applications, the applicants cannot in equity contend that the Assistant Commissioner’s order of rejection should be set aside on the ground of delay on his part. Although we feel that the Assistant Commissioner ought not to have committed such delay in disposing of the first application dated January 2, 1987, we do not feel inclined to set aside the order of rejection dated March 8, 1989, on this ground alone, because the applicants themselves are guilty of the identical lapse.
8. The most important question is the limit of investment. Mr. Bose appearing for the applicants submitted by referring to [1988] 70 STC 248 (Cal) ; (1988) 21 STA 1 (Cal) (Daga Metal Industries v. Commercial Tax Officer) that the explanation to Rule 3(66)(i) should be understood in the background of Clause (i) alone. In the aforesaid decision, S.C. Sen, J., was considering the said explanation in a different context. It has no direct bearing on the present dispute. There is no doubt that the explanation is linked with Rule 3(66)(i), but Clause (i) of Rule 3(66) cannot be read or interpreted independently of the other clauses. Mr. Bose contended that the word “dealer” appears in clauses other than Clause (i). But we find that even in Clause (i) the word “dealer” has been used in all the provisos thereto. The learned State Representative rightly argued that the expression “newly set up small-scale industry” has been defined in the explanation and that definition cannot be ignored while considering the rest of the clauses of Rule 3(66). Having regard to Rule 3(66)(iv) and the decision in [1987] 65 STC 37 (Cal) (Dwarkesh Engineering Works v. Assistant Commissioner, Commercial Taxes), which lays down the correct law to the effect that application for renewal should be considered afresh every year, we hold that the limit of investment prescribed in explanation (i) of Rule 3(66)(i) shall have to be considered afresh for renewal for every year. We find ourselves unable to agree with the contention of Mr. Bose that the investment limit of Rs. 20 lakhs could be interpreted as fresh investment up to Rs. 20 lakhs in every successive year for the period during which E.C. is allowable. We are of the view that such an interpretation will be wholly contrary to the object of Rule 3(66).
9. The decision in this case depends upon the correct interpretation of Rule 3(66) of the BST Rules. The material part of Rule 3(66) as amended, is quoted below :
“3. In calculating his taxable turnover a dealer liable to pay tax under Section 4 or 8(3) of the Act may deduct from his gross turnover, his turnover on the following, namely :–
(66) (i) sales by a newly set up small-scale industry of goods manufactured by it during the period of five years, if the said industry is situated within the area of the Calcutta Metropolitan District…………… since the date of its first sale of such manufactured goods :
Provided that…………………………………
Provided further that………………………
Provided also that……………………………
Explanation.–For the purpose of this clause ‘newly set up small-scale industry’ means a new industrial unit,–
(i) with an investment up to rupees thirty-five lakhs on plant and machinery, excluding the value of land and building,
(ii) which is registered with the Cottage and Small-scale Industries Department of the Government of West Bengal on or before the 14th March, 1983,
(iii) to (v)…………………”
10. In Commissioner of Sales Tax v. Auraiya Chamber of Commerce [1986] 62 STC 327 ; [1987] 167 ITR 458, the Supreme Court took the view that even in a fiscal statute, equity should prevail wherever the language permits. In Petron Engineering Construction P. Ltd. v. Central Board of Direct Taxes [1989] 175 ITR 523, the Supreme Court observed that it is true that an exemption provision should be liberally construed, but this does not mean that such liberal construction should be made even by doing violence to the plain meaning of such exemption provision. Liberal construction will be made wherever it is possible to be made without impairing the legislative requirement and the spirit of the provision.
11. The BFST Act, 1941, the BST Rules and Rule 3(66) do not define “plant and machinery”. Mr. Majumdar, the State Representative, argued that generator and moulds fall within the term “plant and machinery”. He relied on [1979] 43 STC 338 at pages 342-43 (Ambica Wood Works v. State of Gujarat), in which a Division Bench of the Gujarat High Court considered certain tests to consider whether a particular article is “machinery”. Mr, Bose, appearing for the applicants, did not advance any counter-argument on this point, but contended that these are to be excluded from computation of investment limit for the purpose of Rule 3(66) in view of the guidelines laid down by the Government of India and the practice followed by the Directorate of Cottage and Small-scale Industries, Government of West Bengal. He relied on “Nabhi’s Small-scale Industries Guidelines, 1983-84” and “Planning A Small-scale Industry, A Guide to Entrepreneurs”, by Rajiv Jain, 3rd Revised and Enlarged Edition, 1988, to show that according to the industrial policy of the Government of India, cost of generator and moulds is to be excluded from the calculation of investment limit on plant and machinery. Mr. Bose also submitted that one of these books was produced before the Assistant Commissioner who rejected the renewal application. Mr. Bose produced a brief pamphlet entitled “Guidelines for setting up of New Small-scale Industrial Units” published by the Directorate of Cottage and Small-scale Industries, Government of West Bengal. In this pamphlet, under the heading–“State Incentives”– item (xii) reads–“Sales tax exemption as per statute and return for 2 years”.
12. Mr. Bose referred to a decision of G.N. Ray, J., in Hiodfast Rubber Industries v. Assistant Commissioner of Commercial Taxes, Howrah (1982) 15 STA 505 (Cal). to the effect that a pragmatic view should be adopted while considering the conditions for an eligibility certificate. He also relied on another judgment of G.N. Ray, J., in Nayek Associate v. Additional Commissioner of Commercial Taxes [1985] 59 STC 295 (Cal) ; (1983) 16 STA 277 (Cal). Provisions in the West Bengal Sales Tax Act, 1954, read with relevant Government notifications being provisions parallel to those of Rule 3(66) of the BST Rules, 1941, came up for interpretation in the second case. The question was whether or not cost of installation should be included in the computation of cost of plant and machinery. It was held that cost of installation should be excluded from the cost of plant and machinery. G.N. Ray, J., came to this finding on the basis of the criteria for getting a small-scale industry registered with the State Government and having regard to the Government of India guidelines in this connection. In the absence of any definition or indication in Rule 3(66) of the BST Rules, 1941, and in the absence of anything else to the contrary and in the background of the overall scheme of offering a package of incentives for setting up small-scale industrial units, we are inclined to agree with the aforesaid decisions of G.N. Ray, J., and give a practical and liberal construction to explanation (i) to Rule 3(66) (i) and we hold that the cost of generator and moulds should be excluded from the cost of plant and machinery. We have noted that the Government of India’s relevant guidelines are to the above effect and that the amounts of investment limit in explanation (i) to Rule 3(66)(i) as also in the relevant guidelines issued by the State Government’s Directorate of Small-scale Industries (ibid) have followed the amount of investment limit laid down (as amended from time to time) by the Government of India. It is also to be noted that in explanation (ii) to Rule 3(66) (i), registration under the Cottage and Small-scale Industries Department of the State Government is an essential factor, which naturally establishes a nexus to the interpretation adopted by us. Such construction is a possible and reasonable construction, and being favourable to the assessee, should be preferred. If the rule-making authorities had any other intention, they might have amended Rule 3(66) to give effect to such intention after the judgment of G.N. Ray, J., was delivered on June 14, 1983 ( [1985] 59 STC 295 (Cal) ; (1983) 16 STA 277 (Cal) Nayek Associate v. Additional Commissioner of Commercial Taxes), We hold, therefore, that for the purpose of Rule 3(66), cost of generator and moulds is to be excluded from the cost of plant and machinery for computation of the investment limit, although we have little doubt that a generator set is a machinery and a mould for such an industry comes within the expression “plant and machinery”. A mould is required to manufacture plastic goods with the help of the required machinery.
13. That being the position, the Assistant Commissioner ought to have allowed the prayer for renewal of the E.C. for the period from April 1, 1984 to March 17, 1985, or for that matter, up to March 31, 1985. The other application for renewal for the period from April 1, 1985 to August 14, 1985, has been pending since January 2, 1987. There is no reason why that could not be disposed of along with the application for the period from April 1, 1984 to March 31, 1985.
14. We, therefore, allow this application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, without costs. We direct the Assistant Commissioner (respondent No. 1) to forthwith grant renewal of the eligibility certificate to the first applicant for the period from April 1, 1984 to March 31, 1985. We set aside the Assistant Commissioner’s impugned order of March 8, 1989. We further direct the Assistant Commissioner to dispose of the application for renewal of the E.C. for the period from April 1, 1985 to August 14, 1985, within four weeks, having regard to our findings and observations in this judgment.
B.C. Chakrabarti, Chaiman
15. I agree.
P.C. Banerji, Technical Member
16. I agree.
