M/S. VADILAL CHEMICALS LTD. versus THE STATE OF ANDHRA PRADESH AND ORS.

Citation: [2005] SUPP. 2 S.C.R. 1 · Decided: 02-08-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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MIS. VADILAL CHEMICALS LTD. 
A 
V. 
THE STATE OF ANDHRA PRADESH AND ORS. 
AUGUST 2, 2005 
[MRS. RUMA PAL AND TARUN CHATTERJEE, JJ.] 
B 
Central Sales Ta< Act, /9j6-Section 9(2)-Andhra Pradesh General 
Sales Tux Act, 1957-Section 20-State Industries Departn1ent granting 
Eligibility Certificate to company for claiming Sales Ta. &emption/or five 
years under Tax Holiday Incentive Schen1e introduced for new industrial 
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units set up in notified Districts-Deputy Con1n1issioner Conunercial .Ia,\: 
issuing pre-revision shou·cause notices/or n·ithdrawal a/Sales Tax Exen1ption 
on the ground that the activity of the company carried out does not amount 
to 'manufacture '--Writ Petition filed before 1-ligh Court by the company for 
quashing the shov.-' cause notices lvas disn1issed----Correctness of-Held, the 
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Deputy Con1missioner does not ha1.:e jurisdiction under the A.ct to cancel the 
Sales Tax exe111ption granted by Stale Industries Department-On facts, the 
co11;pany 1ras granted e/ig;bi/ity certificate by State Industries Department 
after consideration of entit/e1nen1 under the Scheme and no ma la tides has 
been alleged against the company. 
State Industries Department issued a Government Order notifying 
Tax Holiday Incentive Scheme granting various incentives and rebates 
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for new industrial units set up in different districts of the State. Appellant-
company set up a small scale industrial unit for production of Liquor 
Ammonia and for refiliing of Anhydrous Ammonia into cylinders and 
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applied for an eligibility certificate under the Scheme. The Industries 
Department granted an eligibility certificate to the appellant for sales tax 
_exemption for a period of five years, and the same was communicated 
to the State Commercial Tax Department by the State Industries 
Department. 
The Deputy Com1nissioner of Commercial Taxes issued pre-revision 
show cause notices to the appellant for different assessment years under 
section 9(2) of the Central Sales Tax Act, 1956 read with section 20(2) 
of the Andhra Pradesh General Sales Tax Act, 1957 for withdrawal of 
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the sales tax exemption granted under the Scheme on the ground that the 
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SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R. 
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process of refilling anhydrous ammonia into cylinders did not amount 
to 'manufacture' as no new commodity emerged and that such activity 
was also not recognised as 'manufacture' under the Central Excise Act. 
The appellant replied to the show cause notices questioning the jurisdiction 
of the Deputy Commissioner to issue such notices since the Sales Tax 
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Exemption had been granted by the State Industries Department under 
the Government Order and clarifying that the activity of the appellant 
had been treated as •manufacture' by the Central Excise Department 
and had been paying Central Excise Duty on both Ammonia and Liquor 
Ammonia manufactured by it under the Central Excise Tariff Act, 1985. 
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The appellant filed a Writ Petition before High Court for a 
declaration that the appellant was entitl~d to .the benefits notified by the 
Government Order and that the pre-revision notices issued by the Revenue 
were illegal, void and unenforceable. The High Court dismissed the Writ 
Petition. 
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Jn appeal, the appellant contended that the eligibility certificate 
under the Scheme was granted by the State Industries Department after 
exhaustive consideration; that the word "manufacture" as used in the 
Government Order must be given a liberal construction and must be 
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understood in the context of the incentive scheme and the objects sought 
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to be fulfilled thereby; and that the Andhra Pradesh General Sales Tax 
Act, 1957 does not contain the definition of 'manufacture' and that the 
Act is not concerned with whether goods sold were manufactured or not. 
The respondents contended that 'manufacture' for the purpose of 
sales tax does not include repackaging, rebottling etc. and that if the 
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commodity remains the same irrespective of the process, it would not 
amount to manufacture; that the patent error of giving sales tax exemption 
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under the Scheme to the appellant could be corrected under section 20 
of the Andhra Pradesh General Sales Tax Act, 1957; that the language 
in the Scheme should be given a strict interpretation. 
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Allowing the appeal, the Court 
HELD : 1.1. The grant of the eligibility certificate by the State 
Industries Department was not the outcome of an unconsidered decision

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