1986 (2) TMI 295 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Sales Tax Officer to question the eligibility certificate.
2. Validity of the eligibility certificate issued prior to the notification dated 26th December, 1985.
3. Power of the Sales Tax Officer to cancel the eligibility certificate.

Summary:

1. Jurisdiction of the Sales Tax Officer to question the eligibility certificate:
The petitioner challenged the show cause notice issued by the Sales Tax Officer u/r 41(5) of the U.P. Sales Tax Rules, arguing that the Sales Tax Officer had no jurisdiction to question the eligibility certificate granted u/s 4-A(2)(d) of the U.P. Sales Tax Act, 1948. The court held that the Sales Tax Officer does not have the authority to question or cancel the eligibility certificate, as this power is vested exclusively with the State Government or the designated officers. The court stated, "The Sales Tax Officer, has no jurisdiction to call in question the grant of eligibility certificate."

2. Validity of the eligibility certificate issued prior to the notification dated 26th December, 1985:
The eligibility certificate in question was issued on 6th February, 1985, before the notification specifying the procedure for granting such certificates came into effect on 26th December, 1985. The court clarified that the notification dated 26th December, 1985, is not retrospective and applies only to certificates granted after its issuance. The court concluded, "The notification dated 26th December, 1985, would apply to all eligibility certificates granted on or after 26th December, 1985, and would not affect those that had been granted earlier."

3. Power of the Sales Tax Officer to cancel the eligibility certificate:
The court emphasized that the power to grant includes the power to cancel, and since the Sales Tax Officer does not have the power to grant the eligibility certificate, he also does not have the power to cancel it. The court noted, "The Commissioner of Sales Tax has a limited power to cancel the eligibility certificate where there is a misuse of facility for exemption or grant of a reduction of tax." However, this power does not extend to questioning the validity of the certificate itself. The court concluded that the show cause notice issued by the Sales Tax Officer was without jurisdiction and quashed it.

Conclusion:
The High Court allowed the writ petition, quashing the show cause notice issued by the Sales Tax Officer and holding that the officer had no jurisdiction to question the eligibility certificate granted u/s 4-A(2)(d) of the U.P. Sales Tax Act, 1948. The court emphasized that the power to question or cancel the eligibility certificate lies exclusively with the State Government or the designated officers.