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2002 DIGILAW 753 (PNJ)

State Of Haryana v. Anil Pesticides Limited

2002-08-05

N.K.SODHI, VIRENDER SINGH

body2002
Judgment N.K.sodhi, J. 1. Whether the items manufactured by the respondent-company, namely, "Monocrotophos (technical) and Dichlorvos (technical)" are covered by entry 43 of the negative list as contained in Schedule III to the Haryana General Sales Tax Rules, 1975 (for short "the Rules") so as to disentitle the company from claiming sales tax exemption under Rule 28A of the Rules is the primary question which arises for our consideration in this petition filed under Article 226 of the Constitution. 2. M/s. Anil Pesticides Limited (hereinafter referred to as "the company") is a company incorporated under the provisions of the Companies Act, 1956 arid during the year 1994-1995 it set up an industrial unit at Village Badgodam Tehsil Kalka District Panchkula. The company is manufacturing amongst others "Monocrotophos and Dichlorvos (technical)". Since the company was a newly set up industrial unit, it claimed sales tax exemption in terms of the industrial policy of the Sate of Haryana and applied for the grant of an "eligibility certificate" under Rule 28A of the Rules. This application was considered by the Higher Level Screening Committee (for short, "the Committee") in its 59th meeting held on August 25, 1999. The Committee observed that the items of manufacture, viz., i.e., Monocrotophos (technical) and Dichlorvos (technical)" were covered under the category of "pesticides" which fall in entry 43 of the negative list dated December 16, 1996 and, therefore, the application of the company for the grant of benefit of sales tax exemption was rejected. Feeling aggrieved by this decision, the company filed an appeal before the Commissioner and Secretary to Government of Haryana, Industries Department who by his order dated May 21, 2001 allowed the same and held that the items manufactured by the company do not fall in the category of "pesticides and formulations" as referred to in entry 43 of the negative list and that they are chemicals entitling the company to claim sales tax benefit. He ordered that the "eligibility certificate" as applied for by the company be issued. It is against this order that the present petition has been filed by the State of Haryana which is the petitioner before us. 3. An eligible industrial unit, short of other details with which we are not concerned, means a new industrial unit which is not included in Schedule III appended to the Rules. It is against this order that the present petition has been filed by the State of Haryana which is the petitioner before us. 3. An eligible industrial unit, short of other details with which we are not concerned, means a new industrial unit which is not included in Schedule III appended to the Rules. It is not in dispute that the company is a new industrial unit which was set up in the year 1994-1995 and went into commercial production with effect from February 18, 1997. It would be entitled to an "eligibility certificate" under the Rules to enable it to claim sales tax exemption provided the items manufactured by it do not fall in Schedule III to the Rules. Entry 43 of Schedule III with which we are concerned reads as under: "43. Pesticides manufacturing and formulations." This entry in the negative list was brought in Schedule III for the first time with effect from December 16, 1996 by the Haryana General Sales Tax (Fifth Amendment) Rules, 1996. While adding this entry to the Schedule the State Government also added Note 2 in the Schedule which reads as under: "Note 2.--The industrial units in which investment has been made up to 25 per cent of the anticipated cost of the project and which have been included in the above list for the first time shall be entitled to the sales tax benefit related to the extent of investment made up to the 3rd of January, 1996. Only those assets will be included in the fixed capital investment which have been installed or erected at site and have been paid for. The anticipated cost of the project will be taken on the basis of documents furnished to a financial institution or bank for drawing a loan and which have been accepted by the financial institution or bank concerned for sanction of loan." 4. The Rules were again amended on May 28, 1997 and Note 2 which was added in the year 1996 was omitted with retrospective effect by the Haryana General Sales Tax (Third Amendment) Rules, 1997. Rule 3(iii) of these Rules reads as under : "3(iii). Note 2 shall be omitted and shall be deemed to have always been omitted." 5. The Rules were again amended on May 28, 1997 and Note 2 which was added in the year 1996 was omitted with retrospective effect by the Haryana General Sales Tax (Third Amendment) Rules, 1997. Rule 3(iii) of these Rules reads as under : "3(iii). Note 2 shall be omitted and shall be deemed to have always been omitted." 5. Learned Deputy Advocate-General appearing on behalf of the State strenuously urged that the aforesaid two items manufactured by the company clearly fall in the negative list inasmuch as they are "pesticides" and, therefore, the appellate authority erred in law in allowing the appeal filed by the company and directing the department to issue the "eligibility certificate" to it. She referred to the report obtained by the department from the International Testing Centre, Panchkula which is a Government approved testing centre which has declared the two items as "pesticides". She also placed reliance on the application submitted by the company for registration under the Act wherein it had stated that it would be manufacturing "pesticides". Shri Rajiv Atma Ram, learned Senior Counsel appearing for the company refuted the contention of the learned State counsel and contended that the question as to whether the two items manufactured by the company were "pesticides" or "chemicals" being highly technical, the department had referred the matter to a committee of technical experts of the department who opined that the items manufactured by the company were chemicals but the department did not accept that report and referred the matter to the International Testing Centre, Panchkula which is a private testing centre. He further contended that even the appellate authority on the request of the department referred the matter to another expert and after obtaining technical opinion held that the items manufactured were chemicals and, therefore, this Court in the exercise of its jurisdiction should not interfere with the appellate order. He forcefully argued that "Monocrotophos (technical) and Dichlorvos (technical) which are being manufactured by the company are basically chemicals which are raw materials for "pesticides manufacturing and formulations". He also submitted that these chemicals cannot be directly used by the farmers as "pesticides" for crop protection and that these are only the inputs for the manufacture of "pesticides". 6. He forcefully argued that "Monocrotophos (technical) and Dichlorvos (technical) which are being manufactured by the company are basically chemicals which are raw materials for "pesticides manufacturing and formulations". He also submitted that these chemicals cannot be directly used by the farmers as "pesticides" for crop protection and that these are only the inputs for the manufacture of "pesticides". 6. We have given our thoughtful consideration to the rival contentions of the parties and are of the view that the dispute herein is highly technical in nature and the court does not possess the requisite expertise to determine whether items manufactured by the company are "chemicals" as alleged by it or "pesticides" as claimed by the department. The court has necessarily to depend on technical opinion in such matters. The dispute between the parties is not only technical but quite complicated and intricate and only experts on the subject can decide these issues. When the application of the company for the grant of "eligibility certificate" came up for consideration before the committee, the matter was deliberated at great length and it was decided that the issue be referred to a two member committee. The two member committee consisting of experts with chemical background gave their opinion that the products manufactured by the company were chemicals and did not fall in the negative list. That committee further advised the department to adopt the same codification as adopted by the Customs and Central Excise Department for the purpose of charging Central excise duty. The Excise Department treats these products as chemicals and levies excise duty at the rate of 18 per cent whereas the excise duty on "pesticides" is 8 per cent. The Committee did not accept this report and instead relied upon the report of its own technical expert who advised that "all pesticides are chemicals and the items mentioned are pesticides and its formulations which is clear from the project report and certificate of registration for CST". The Committee declared that items manufactured by the company were covered by entry 43 inasmuch as they were "pesticides and formulations". It accordingly rejected the application for the grant of "eligibility certificate". When the matter was in appeal before the Secretary, Industries he found that there was conflict of opinion amongst the experts as to whether the two products were "pesticides" or "chemicals". It accordingly rejected the application for the grant of "eligibility certificate". When the matter was in appeal before the Secretary, Industries he found that there was conflict of opinion amongst the experts as to whether the two products were "pesticides" or "chemicals". He decided to seek opinion of the Plant Protection Wing of the Directorate of Agriculture. The Director, Agriculture gave a clear finding that the items manufactured by the company were chemicals and observed that "Monocrotophos (technical) and Dichlorvos (technical), are the technical grade pesticides and are not used as such in agriculture by the farmers. However, these are used as one of the ingredients for manufacturing Monocrotophos 36 per cent SL and Dichlorvos 76 per cent EC which are approved formulations for use in agriculture". The appellate authority accepted this report given by a technical expert and held that products of the company did not fall in negative list and it was entitled to the grant of "eligibility certificate". As already observed, the issue is rather technical and the appellate authority having relied upon the report of the technical expert cannot be said to have acted arbitrarily so as to warrant our interference under Article 226 of the Constitution. In such matters, opinion of the technical experts must weigh with the authorities in deciding the issue. It is true that even the technical experts have given different opinions but this Court would not be justified in interfering with the finding of the appellate authority because that finding is also based on the expert opinion and there is no material before us. to show that the report of the technical expert relied upon by the appellate authority was not correct. The report of the International Testing Centre, Panchkula which is a Government approved testing centre on which reliance was placed by the Committee is one opinion of the experts but there was other opinion to the contrary to which a reference has already been made. Government of India too while levying excise duty had been treating these products as chemicals and was levying excise duty at a higher rate. Moreover, the parties have agitated their view points before the departmental authorities and the appellate authority whose decision is final has accepted the contentions of the company after relying on the experts opinion. This Court will not interfere with the said finding when they are based on technical opinion. Moreover, the parties have agitated their view points before the departmental authorities and the appellate authority whose decision is final has accepted the contentions of the company after relying on the experts opinion. This Court will not interfere with the said finding when they are based on technical opinion. There is, thus, no legal infirmity in the impugned order. 7. In fairness to Shri Rajiv Atma Ram, learned Senior Counsel, we must notice the other contentions advanced by him and the reply given by the learned Deputy Advocate-General. Shri Rajiv Atma Ram went on to argue that even if the two products are treated to be covered by the negative list, the company is entitled to the tax benefit in view of Note 2 which was added with effect from December 16, 1996. He further contended that Note 2 which gave a tax incentive to a new industrial unit like the company could not be withdrawn retrospectively because a right which came to vest in the company by virtue of that Note on the basis of which it had made investments could not be taken away. He also contended that the Act does not give any power to the rule-making authority to make Rules retrospectively and, therefore, withdrawal of Note 2 with retrospective effect was illegal. He also pressed into service the principle of promissory estoppel on the basis of which it was urged that the State was estopped from withdrawing tax benefit from a new industrial unit like the company. He cited some judgments of the apex Court and of this Court in support of his contentions. Learned State Counsel, on the other hand, replied that the tax benefit given to the dealers was a concession which could be withdrawn at any time and that there was no vested right in the company as alleged by it. She also referred to some decisions of the apex Court to contend that tax could be levied retrospectively. 8. Since we are upholding the order of the appellate authority, wherein the products manufactured by the company have been held to be chemicals and not pesticides falling in the negative list, it is not necessary for us to deal with other contentions advanced by the counsel for the parties. In the result, the writ petition fails and the same is dismissed with no order as to costs.