The Hindu Business Line : Blowing hot and cold on cold-rolled product

A SIMPLE definition of temperature is that it is the degree of `hotness' of a body. Another definition is that it is a property of matter that reflects the quantity of energy of motion of the component particles. It is the physical property of a system that underlies the common notions of `hot' and `cold', explains a Web site. "Looking at textbooks and related references and even Web sites for a definition of temperature can be very frustrating," says www.temperatures.com. "There seems to be a real difficulty in defining or agreeing with the meaning of the word and concept of `temperature'," it adds.

For the clearest and best-explained definition, you may see the `HyperPhysics Web site at Georgia State University', but let's get busy with why the issue of what's hot and what's cold came up before the apex court in a recent case, Tata Iron and Steel Co Ltd vs State of Jharkhand.

So, rewind to 1995 when the Bihar Government evolved a new industrial policy, providing sales-tax exemption for eight years.

Motivated by the incentive, TISCO, which had a unit in Dhanbad for manufacturing hot rolled product (HRP), offered to install a cold rolling mill (CRM) in Jamshedpur, at an outlay of Rs 2,000 crore.

According to a decision of a High Power Committee under the chairmanship of the Chief Minister, it was decided that "even existing industries which go in for diversification with an additional capital of Rs 500 crore shall be deemed to be treated as new units and all the benefits under the Industrial Policy of 1995 will be made available to them." Commercial production at the CRM, with a capacity of 1.2 million tonnes per annum, began on August 1, 2000.

In November 2000, under the Bihar Reorganisation Act, Jamshedpur became part of Jharkhand. However, the new State ordered that Bihar's Finance Act, and also other Acts, and notifications would be deemed to be in force in Jharkhand. In December 2000, the Joint Commissioner of Commercial Taxes conducted `an elaborate enquiry' and observed that TISCO's new unit was manufacturing cold rolled product (CRP), while the company's old unit was engaged in HRP. The two are "totally different both in metallurgical components and the end-use", he observed. Therefore, TISCO was entitled to sales-tax exemption, he opined. Following this, the State announced exemption for the new unit from purchase tax and sales tax.

Things took a sudden U-turn for the worse when the Commissioner of Commercial Taxes, Jharkhand, initiated suo motu revision and concluded that CRP and HRP "have to be treated as one and the same commodity for the purpose of levy of tax" and so TISCO was "not entitled to the sales-tax exemption". For him, the basis was that a Schedule to the Central Sales Tax Act "enumerated both hot and cold rolled products in the same entry". Also, he relied on an earlier judgment of the apex court in the Telengana Steel Industries case, where it was held that two products found in the same Entry in the Schedule to the Central Sales Tax Act "will have to be treated as the same".

TISCO pointed out to the Commissioner that the decision in the Telengana case "was subsequently held to be contrary to an earlier Constitution Bench judgment of this court and declared to be not good law in K.A.K. Anwar & Co. v. State of Tamil Nadu." But he stuck to his — stand that unless the products were two different commodities the benefit of exemption was not available.

When the company knocked the doors of the Jharkhand High Court, the court held it was necessary to decide whether "on facts" HRP and CRP "manufactured by the two units" are "one and the same". The matter was remanded back to the Commissioner saying that TISCO "had not produced enough material whereby it could be satisfactorily held" that CRP is "a product commercially different" from HRP.

The scene then changes to the apex court, where Mr Dushyant A. Dave argued for TISCO to say that the `promised exemption' from the State government was "an unambiguous offer, if not a fervent request by the State".

Otherwise the company "was thinking of putting up its project in Orissa, Gujarat, and so on, which also had promised certain benefits". After nearly Rs 2,000 crore had been invested by the company, "the respondent-State is precluded by the principle of promissory estoppel from retracting its promise," he contended.

Justices N. Santosh Hegde and A. K. Mathur of the apex court observed that the only question that arose was "whether the product manufactured by the appellant in its new unit is a Cold Rolled Mill product or as it is termed in some parts of the judgment and orders as CRM or it is the same product as is being manufactured by the appellant in its old unit which is known as Hot Rolled Mill product or HRM". From the reports and other documents submitted, the court noted: "It is clear that the product they manufacture in the new unit is only CRM".

Mr Altaf Ahmad, appearing for the State of Jharkhand, submitted that the High Court "was justified in remanding the matter to the Commissioner with liberty to lead fresh evidence". But the Supreme Court observed: "The High Court was in error in remanding the matter to the Commissioner to decide the question of fact which in our opinion was already conclusively decided by the Joint Commissioner and not disagreed on facts by the Commissioner". So, the order of the High Court was set aside and exemption restored for the company.

All's well that ends real swell! Fine, but what's the moral of the story? When a government gives you something with the right hand, be prepared to be waylaid by its left hand!

Tailpiece

When a weatherman met a taxman...

Weatherman: You think it will rain?

Taxman: Yes, definitely!

Weatherman: Then, I'm sure it won't.

Detaxification@TheHindu.co.in

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