STATE OF RAJASTHAN AND ANR. versus J.K. UDAIPUR UDYOG LTD. AND ANR.

Citation: [2004] SUPP. 4 S.C.R. 812 · Decided: 28-09-2004 · Supreme Court of India · Bench: RUMA PAL · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
ST A TE OF RAJASTHAN AND ANR. 
v. 
J.K. UDAIPUR UDYOG LTD. AND ANR. 
SEPTEMBER 28, 2004 · 
[RUMA PAL AND ARUN KUMAR, JJ.] 
Rajasthan Sales Tax Exemption Scheme for Industries, 1988: Annexure 
'B', Sri. Nos. I, 2, 3. 4(a) & (b). 
Sales Tax-Exemption--F ourth Industrial Policy-Scheme framed under 
Sought to make Rajasthan "a most favoured destination for industries"-
Scheme provided for exemption from sales tax for certain industrial units~ 
Industries were classified into three categories under Sri. Nos. I, 2 and 3 
of Annexure 'B '-Such industries entitlecf to exemption at a flat rate of 2 5% 
for eleven years-New units were placed at Sri. No. I-Two companies 
manufacturing cement applied for exemption on par with units under Sri. No. 
I-While the said applications were pending a corrigendum was issued 
replacing the words "new units at Sri. No. I" by "new units at Sri. Nos. I, 
2 and 3 as the case maybe" Corrigendum was to take effect prospective/j;-
Sick units were thus placed under Sri. No. 4(a) on par with cement units under 
Sri. No. 3-Validity of-Held: Scheme was notified under S. I 5 RST Act and 
S. 8(5) CST Act and, therefore, Government was competent to modify or 
revoke the grant of exemption-It is more so as there was no promissory 
estoppe/-The cement units had no indefeasible rights for the grant of 
exemption Apart from this, exemption being a creature of the Scheme 
Government had the right to review or modify the Scheme-The Fourth 
Industrial Policy wasframed in public interest-Therefore the corrigendum 
issued with the intention to effectuate the policy is in public interest-Benefits 
given to sick industrial units which had not availed of such benefits in the 
past at par· with new units did not refer to industries at Sri. No. I-Sick 
cement plants would be covered by the words "all categories" of cement 
plants/units at Sri. No. 3-Since the original scheme did not declare the 
intention of the Government to make Rajasthan a "most favoured destination 
for industries" the corrigendum was issued to remove this ambiguity-Hence, 
corrigendum not violative of Art. I 4 of the Constitution--Rajasthan Sales Tax 
Act, 1994,- S. 15--Central Sales Tax Act, 1956, S. 8(5). 
Sales Tax-Exemption-High Court quashed notification reducing rate 
812 
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STATE v. J.K. UDAIPUR UDYOG LTD. 
813 
of exemption-Appeal against the said decision admitted-But no stay was 
A 
granted-Ultimately High Court's decision reversed-Liability to tax-Held: 
the primary liability to pay sales tax is on the seller-Although the seller 
could not recover sales tax from its customers till the High Court's decision 
was reversed, yet they are liable to pay the differential amount of tax-
However, no interest or penalty could be charged during the period the 
B 
matter was subjudice before the Supreme Court provided the principal 
amount is paid within the time specified by the Government. 
Words & Phrases: 
"Exemption "-Meaning and nature of-Explained. 
C 
The appellant-State framed a scheme granting exemption to 
industrial units from payment of sales tax on intra-state and inter-state 
sale of goods and by-products manufactured within the State. The scheme 
was part of the New Fourth Industrial Policy of the State. D 
The Policy stated that the object of the scheme was to make the State 
"a most favoured destination for industries" and to encourage the setting 
up of industries in the State. Pursuant to this Policy the Rajasthan Sales 
Tax/Central Sales Tax Exemption Scheme for industries. 1998 was framed 
and notified under Section 15 of the Rajasthan Sales Tax Act, 1994 and 
Section 8(5) of the Central sales Tax Act, 1956. The scheme came into 
E 
force on 1.4.1998. 
For the purpose of exemption. Annexure 'B' to the Scheme classified 
the industries into three categories under Sri. Nos. 1, 2 and 3 accordi~g 
to the kind of industry. All categories of cement plants/units were placed 
F 
under Sri. No. 3 and were entitled to exemption at flat rate of 25% for 
eleven years. Sick units were placed under Sri. No. 4; Clause (a) thereof 
covering sick units, which had not availed of benefits, previously, provided 
for same benefits, which were available to "new units at Sri. No. 1". The 
benefits ranged from 100% in 1st year to 30% in 11th year. Clause (b) 
covering other sick units provided for lesser benefits which were, however, 
G 
higher than those available to units under Sri. No. 3. Clause 4 further 
provided for ob
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