STATE OF KERALA versus M/S AKAY FLAVOURS AND AROMATICS LTD.

Citation: [2023] 2 S.C.R. 339 · Decided: 02-02-2023 · Supreme Court of India · Bench: S. RAVINDRA BHAT · Disposal: Case Partly allowed

Judgment (excerpt)

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   [2023] 2 S.C.R. 339
339
STATE OF KERALA
v.
M/S AKAY FLAVOURS AND AROMATICS LTD.
(Civil Appeal No(s). 7330 of 2009)
FEBRUARY 02, 2023
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Circulars/Government orders/Notifications: Tax Exemption
Notification SRO 1727/1993 – Exemption for period of five years
from levy of sales tax on purchase of raw materials – Entitlement to
exemption – Commencement of exemption, from the date of approval
of the project by the Central Government or from the date of
commencement of production – Assessing Authority commuted the
period of five years from 16.12.1993 – Held: Letter dated
16.12.1993 on a plain reading appears to be a mere permission –
Letter of permission contained standard conditions which described
the commercial assent “letter of intent” – Actual approval in clear
terms enabling the benefit of exemption was issued on 27.10.1994,
when “Green Card” was issued by the Central government – Thus,
the term “approval” was issued in the letter dated 27.10.1994 –
Date of approval was 27.10.1994 and that would be the reckonable
date for grant of exemption under the Notification and the assessee
could have availed exemption after 27.10.1994 – Assessee’s case
that it commenced production only on 10.10.94 which is the
reckonable date, is not persuasive.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.7330
of 2009.
From the Judgment and Order dated 12.11.2008 of the High Court
of Kerala at Ernakulam in STR No.388 of 2005.
With
Civil Appeal Nos.7329/2009, 7328/2009 and 1383/2023.
Pallav Sisodia, Sr. Adv., M. P. Vinod, C. K. Sasi, Abdulla Naseeh
V T, Ms. Meena K Poulose, Advs. for the appearing parties.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. Leave granted in SLP(C) No. 36394/2011.
2. This Court while issuing notice and admitting the appeals had
observed that an important question of law with respect to interpretation
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SUPREME COURT REPORTS
[2023] 2 S.C.R.
of SRO 1727/1993 which is an exemption notification issued by the State
of Kerala, is involved.
3. The appeals have been preferred both by the State (Revenue)
as well as by the Industrial unit. The short controversy is with respect to
the entitlement to exemption. The Revenue contends that the exemption
limit by five years in point of time was to commence from the date of
approval by the Central Government, to the approval to the project. The
assesses had on the other hand contended that the exemption would
commence from the date of commencement of production.
4. The relevant notification, granting the exemption in question,
reads as follows:
“SCHEDULE -VI
Goods the sale of which to Industrial undertakings/ manufacturers/
dealers or the purchase of goods by industrial undertakings/
manufacturers is exempt under sub-clause (5) Clause I.
5. The assessees claimed exemption from levy of tax on purchase
of raw material such as pepper, ginger, turmeric, etc. to several years.
The assessing authority completed assessment of those years granting
exemption. Thereafter, it attempted to re-open assessment. Ultimately,
penalty was imposed in the reassessment proceedings. In the meanwhile
the State had questioned the observations of the Tribunal with respect to
the interpretation of the notification. The Tribunal had concluded that
there was no logic in the stand of the revenue that the period of exemption
from sales tax on purchase of raw materials should be commuted prior
to the setting of the unit. The assessing authority had commuted the
period of five years from 16.12.1993. The Revision to the High Court
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was time barred. The High Court refused to condone the delay.
Consequently the Revenue is in appeals and the appeal arising out of
SLP(C) No.36394 of 2011 is filed by the assessee. The Division Bench
had remitted the matter for fresh consideration, even though the single
Judge had granted some measure of relief by reducing the penalty.
6. It is contended on behalf of the Revenue by relying on the
terms of the notification that in the present case, the Central Government
had in fact, granted its approval when the permission letter was issued
on 16.12.1993 to the assessees which enabled it to proceed further to
import capital goods and start exporting the finished product. It was also
highlighted that the assessee appears to have even purchased raw
materials as well as plant and machinery after December, 1993 and in
this circumstance to allow it the benefit of such exem

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