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Supreme Court’s Judgment in Favour of Tata Steel Supreme Court Restores Exemption of Sales Tax To Tata Steel

Jamshedpur, August 26, 2004

On August 25, 2004, the Hon’ble Supreme Court pronounced the judgment and order on the matter of Cold Rolling Mill (CRM) Sales Tax, which was pending since 2001 before the above Court, restoring the exemption of Sales Tax order in favour of Tata Steel. The exemption had earlier been granted by the Joint Commissioner, Commercial Taxes (JCCT), by his Order dated 16 December, 2000, but was subsequently set aside by the Commissioner, Commercial Taxes on April 3, 2001, under its suo-moto revisional powers.

The above Order has finally delivered justice in an issue that the Steel Company had steadfastly pursued with the State Government and the Jharkhand High Court despite the vindictive and discriminatory attitude of the Commercial Taxes Department of the State Government in the matter. The matter was also highlighted time and again in the media with the intention of bringing down the reputation of the Steel Company as a defaulter, while the Company was at all times seeking justice and continued to abide by the law of the land and espoused the cause of the State’s industrialization at all national forums by paying all taxes and duties lawfully payable to the authorities concerned.

It may be recalled that in pursuance to the Bihar Industrial Policy, 1995, Tata Steel had approached the State Government of Bihar to extend the benefit of Industrial Policy, 1995, for installing a CRM plant at Jamshedpur. The State Government of Bihar amended the Industrial Policy, 1995 on December 27,1997, based on the recommendation of the High Power Committee of the State Government and approved the project in the year 2000. Tata Steel invested in the installation of the plant and it started trial production during the last week of February 2000. On March 02, 2000, the Bihar Government amended the Industrial Policy by incorporating a clause that the ultimate product should be a new product not being manufactured by the industry. The CRM plant started commercial production on August 01, 2000. On November 15, 2000, the Jharkhand State came into existence. Based on the application for exemption, the JCCT, Jharkhand issued the order for granting exemption for commercial taxes to Tata Steel on December 16, 2000. The Dy. Commissioner, Commercial Taxes issued the exemption certificate on December 21, 2000. But soon after, for reasons not known, the Commissioner, Commercial Taxes, Jharkhand, under suo-moto revisional powers, stayed the exemption on January 22, 2001 and set aside the exemption order of the JCCT on April 03, 2001 on the ground that CR product was not different from HR product under the amended Notification dated March 02, 2000 and as both the products fall under same Chapter heading of Central Sales Tax Act.

Tata Steel challenged the order of the Commissioner, Commercial Taxes, Jharkhand, before the Hon’ble Jharkhand High Court at Ranchi. The High Court, after hearing the matter, remanded the same to the Commissioner to decide on the issue whether CR product and HR product are same or different, vide its order dated August 30, 2001, fixing the guidelines for such a decision.

Tata Steel challenged the said order before the Hon’ble Supreme Court which was admitted on February 15, 2002 on the ground that the State Government has made a commitment and approved the project through several letters based on which Tata Steel invested in installing the plant at Jamshedpur prior to March 02, 2000 i.e. prior to amended notification and now the State Government be stopped from detracting from such a stand.

In the meantime, the State Commercial Tax authorities started harassing Tata Steel by assessing ex-parte and demanded Sales Tax for the period from August, 2000 till January, 2003. To further vitiate the issue, they stopped issuance of all statutory forms including road permits, ‘C’ forms etc. on March 26, 2003, which were not at all related to CR products, thereby stalling the business of the Company through arm-twisting techniques, which was subsequently turned down and reprimanded by the Hon’ble Jharkhand High Court. The Commercial Tax authority had also refused to issue other related statutory forms for availing the exemption by Tata Steel on March 26, 2003. The said order of the State Government of non-issuance of statutory forms was challenged and stayed by the Supreme Court subsequently.

The Hon’ble Supreme Court finally heard the CRM Sales Tax matter on August 17, 2004 and the judgment was reserved which was pronounced on August 25, 2004. The Hon’ble Supreme Court observed that the order of the JCCT granting exemption is justified as the State Government had already gone deep into the matter while approving the project by granting exemption under Bihar Industrial Policy, 1995 and Tata Steel had already spent on it prior to March 02, 2000. Hence, the Commissioner’s setting aside of the said order was unjustified. The High Court order remanding the matter on the issue of whether CR & HR products are different or not, was also not justified. The Hon’ble Supreme Court vide its aforesaid judgment restored the exemption order dated December 16, 2000 granted by the JCCT.