1988 (9) TMI 317 - HC - VAT and Sales Tax

Issues Involved:
1. Eligibility for tax holiday under rule 3(66) versus rule 3(66a) of the Bengal Sales Tax Rules, 1941.
2. Retrospective effect of the registration certificate.
3. Delay in granting the registration certificate and its impact on the eligibility for tax holiday.
4. Interpretation of fiscal statutes in favor of the taxpayer.

Issue-wise Detailed Analysis:

1. Eligibility for tax holiday under rule 3(66) versus rule 3(66a):
The petitioner argued that the eligibility certificate should have been granted under rule 3(66), which provided a five-year tax holiday, instead of rule 3(66a), which reduced the tax holiday to three years. The petitioner started production on 18th November 1982 and applied for registration on 10th March 1983, when rule 3(66) was still in force. The certificate of registration was granted on 20th June 1983, with retrospective effect from 10th April 1983. The application for the eligibility certificate was made on 29th June 1983, after rule 3(66a) came into force. The court noted that the petitioner's business activities commenced when rule 3(66) was applicable, and the subsequent amendment should not prevent the petitioner from claiming the benefit under the old rule.

2. Retrospective effect of the registration certificate:
The court acknowledged that the registration certificate was granted with retrospective effect from 10th April 1983. The petitioner contended that the retrospective date should be considered from 10th February 1983, the date of accrual of liability under section 4(2) of the Bengal Finance (Sales Tax) Act, 1941. However, the court focused on the fact that the petitioner's application for registration was made within the stipulated time and the delay in granting the certificate was not the petitioner's fault.

3. Delay in granting the registration certificate and its impact on the eligibility for tax holiday:
The petitioner argued that the delay in granting the registration certificate prevented them from applying for the eligibility certificate within the required timeframe under rule 3(66). The court found merit in this argument, noting that the petitioner applied for registration on 10th March 1983, but the certificate was only granted on 20th June 1983. The court held that the petitioner should not be penalized for the delay caused by the authorities and should be granted the tax holiday under rule 3(66).

4. Interpretation of fiscal statutes in favor of the taxpayer:
The court emphasized the principle that fiscal statutes should be construed in favor of the taxpayer in cases of doubt. Citing the Supreme Court's rulings in Chandulal Harjiwandas v. Commissioner of Income-tax and Commissioner of Income-tax, Punjab v. Kulu Valley Transport Co. P. Ltd., the court underscored that provisions for exemption or relief should be interpreted to effectuate the legislature's intent to grant tax benefits to newly set up small-scale industries. The court concluded that the petitioner's case fell within the purview of rule 3(66) and directed that the eligibility certificate be treated as issued under this rule.

Conclusion:
The court quashed the order of the revisional authority and directed that the eligibility certificate granted to the petitioner be treated under rule 3(66), entitling the petitioner to a five-year tax holiday. The revisional authority was instructed to reconsider the application and grant renewal of the certificate in accordance with the law, considering the petitioner's entitlement to the tax holiday from the date of the first sale of manufactured goods. The writ petition was disposed of with no order as to costs.

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