STATE OF BIHAR AND ORS. versus M/S SUPRABHAT STEEL LTD. AND ORS.

Citation: [1998] SUPP. 2 S.C.R. 699 · Decided: 17-11-1998 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

STATE OF BIHAR AND ORS. 
v. 
MIS SUPRABHAT STEEL LTD. AND ORS. 
NOVEMBER 17, 1998 
[S.P. BHARUCHA, G.B. PATTANAIK AND 
S. RAJENDRA BABU, JJ.] 
Sales Tax : 
A 
B 
Bihar Finance Act, 1981 : Section 7-Jndustrial Policy of 1993- C 
Clause 10.4(1)-Sales Tax exemption on purchase of raw materials-
Notification dated 4.4.1994-Denial of sales tax exemption to old units 
started prior to 1.4.1993-High Court quashed the said notification to the 
extent it denied the exemption to old industrial units-On appeal, held, 
under sub-clause (b) of clause I 0.4(i) of the Industrial Policy, even old units 
started production prior to I .4. I 9!) 3 whose investment does not exceed Rs. D 
I 5 crores are entitled to sales tax exemption-Thus High Court fully justified 
in striking down that part of notification which is repugnant to clause 
J0.4(i)(b) of the Industrial Policy. 
The appellant-State with the object to promote industrial growth in the 
State, introduced Industrial Policy of 1993. Clause I0.4(i)(b) of the policy E 
deals with the sales tax exemption on purchase of raw materials. The State 
Government after introducing the industrial policy issued the notification 
dated 4th April 1994 in exercise of the powers under section 7 of the Bihar 
Finance Act, 1981. The said notification denied the facility of sales tax 
exemption to such old industries which had started production prior to 1.4.93 p 
but whose investment on plant and machinery did not exceed fifteen crores 
on 1.4.1993. The respondent-industrial units which had come into production 
prior to 1.4.93, approached the High Court for quashing the said notification 
to the extent it makes the old industrial units like respondents ineligible for 
,, 
the facility of sales tax exemption and for a direction to the State to extend 
the facility to them in terms of clause I0.4(i)(b). The said petition having G 
been allowed the appellant-State has preferred the present appeal. 
On behalf of the appellant-State it was contended that clause 10.4(i)(b) 
must be read subject to clause l(a) and industrial policy of 1993 which in 
no uncertain terms declares that the industrial policy will be applicable to 
699 
If 
700 
SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R. 
A those industrial units which had come into production from 1.4.93 to 31.3.98 
and thus High Court committed an error in holding that th~ respondents' 
old industrial units are entitled to the facility of sales tax exemption. 
Dismissing the appeals, the Court 
B 
HELD : I. The High Court was fully justified in striking down that part 
of the Notification dated 4th April 1994 which was repugnant to sub-clause 
(b) of clause 10.4(i) of the industrial policy and committed no error in 
granting the benefit of the clause 10.4(i) of the industrial policy to the 
respondents' industrial units. [705-B-C) 
C 
2. In exercise of its powers under section 7 of the Bihar Finance Act, 
1981, the State Government is not permitted to deny any benefit which is 
otherwise available to an industrial unit under the Industrial Incentive Policy. 
The Industrial Incenth e Policy is issued by State Government after it is 
approved by the Cabinet. The issuance of notification under section 7 of the 
Act is by the State Government in the Finance Department to carry out the 
D objectives and policy decisions taken in the industrial policy. Thus any 
notification issued by the Government order in exercise of power under 
section 7 of the Act, if found to be repugnant to the industrial policy, then 
the said notification must be held to be bad to that extent. In the instant case, 
the notification dated 4th April 1994 has been examined by the High Ctmrt 
E and has been rightly found to be contrary to clause 10.4(i)(b) of the Industrial 
Policy. (705-D to H; 706-A] 
3. Under sub-clause (a) of clause 10.4 of the Industrial Policy, the 
Industrial units which had come into production between 1.4.93 to 31.3.98 
whose investment on plants and machinery does not exceed Rs. 15 crores 
F were entitled to the facility of exemption on the purchase of raw material for 
a period of seven years from the date of production. However under sub-
clause (b ), even the old industrial units whose investment on plant and 
machinery does not exceed Rs. 15 crores on 1.4.93 would be entitled to the 
said facility of sales tax exemption for a period of seven years from 1.4.93. 
G Thus it is clear that generally the incentive under the 1993 policy would be 
available to the in

Excerpt shown. Read the full judgment & AI analysis in Lexace.