1992 (2) TMI 353 - AT - VAT and Sales Tax

Issues Involved:
1. Eligibility Certificate under Section 4AA of the West Bengal Sales Tax Act, 1954.
2. Potentisation of Homeopathic Medicine as Manufacturing Activity.
3. Review of Tribunal's Judgment.
4. Hierarchical Authority of Tax Officers.
5. Mistake Apparent from the Record.

Detailed Analysis:

1. Eligibility Certificate under Section 4AA of the West Bengal Sales Tax Act, 1954:
The firm applied for a tax holiday starting from September 4, 1981, for manufacturing Jaborandi hair-oil and Livasol-patent homeopathic medicines. The sales tax authorities initially rejected this application, arguing that the firm's unit at Uttarpara was a second unit and an extension of an earlier unit set up in 1979 at Howrah, which was engaged in the potentisation of homeopathic medicines. The Tribunal, however, accepted the firm's claim that it was merely reselling potentised homeopathic medicines before September 4, 1981, and directed the issuance of the eligibility certificate for the unit manufacturing Jaborandi hair-oil and Livasol, effective from September 4, 1981.

2. Potentisation of Homeopathic Medicine as Manufacturing Activity:
The sales tax authorities contended that potentisation of homeopathic medicine, which the firm had been engaged in since April 29, 1979, constituted manufacturing. The Tribunal initially did not find it necessary to determine whether potentisation was a manufacturing activity, as it relied on the assessment order indicating the firm was only reselling medicines until December 31, 1981. However, upon review, it was argued that potentisation indeed amounted to manufacturing, as it involved significant alteration of the medicine's properties, thus creating a new commercial commodity.

3. Review of Tribunal's Judgment:
The sales tax authorities filed for a review of the Tribunal's judgment, claiming there were mistakes apparent from the record. They argued that the Tribunal failed to consider that potentisation was a manufacturing activity and that the firm's second unit was an extension of the first. The Tribunal initially dismissed these claims, stating that the assessment order for the period in question indicated the firm was only reselling medicines. Upon review, however, it was found that significant facts had been overlooked, and the Tribunal's failure to decide whether potentisation amounted to manufacturing was a mistake apparent from the record.

4. Hierarchical Authority of Tax Officers:
The sales tax authorities argued that the finding of the Assistant Commissioner, a higher authority, that the firm was engaged in the manufacturing activity of potentisation should prevail over the Commercial Tax Officer's assessment order. The Tribunal initially overruled this, stating that each quasi-judicial officer has a distinct role and jurisdiction. Upon review, it was emphasized that the order of the Assistant Commissioner should have been given due consideration, as the Commercial Tax Officer's assessment was for a limited period and did not cover the entire scope of the firm's activities.

5. Mistake Apparent from the Record:
The Tribunal's initial judgment was found to have overlooked critical facts and issues, such as the firm's admission of engaging in potentisation since April 1979 and the implications of this activity as manufacturing. The review highlighted that potentisation significantly altered the homeopathic medicines, thus constituting manufacturing. The Tribunal's failure to address this fundamental issue was deemed a mistake apparent from the record, warranting a review and reversal of the initial judgment.

Conclusion:
The application for review was allowed, and the initial judgment was set aside. The firm's second unit at Uttarpara was deemed an extension of the first unit at Howrah, thereby disqualifying it from the eligibility certificate under the tax holiday scheme. The Tribunal's revised decision emphasized the importance of considering all relevant facts and the hierarchical authority of tax officers in determining the nature of business activities.

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