1993 (6) TMI 237 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility certificate for small-scale industry.
2. Inclusion of heating element and water treatment plant in plant and machinery.
3. Compliance with principles of natural justice.
4. Determination of investment on plant and machinery.

Detailed Analysis:

1. Eligibility Certificate for Small-Scale Industry:
The applicant-company established a factory for manufacturing galvanized sheets and registered it as a small-scale industrial unit, claiming an investment on plant and machinery below Rs. 35 lakhs as per rule 3(66a) of the Bengal Sales Tax Rules, 1941. The Assistant Commissioner rejected the application for an eligibility certificate, stating that the investment exceeded Rs. 35 lakhs. The Additional Commissioner upheld this decision. The applicant argued that the Small Scale Industries Directorate's registration certificate should suffice as proof of investment, but the Tribunal disagreed, stating that the Assistant Commissioner is obliged to determine the investment independently.

2. Inclusion of Heating Element and Water Treatment Plant in Plant and Machinery:
The applicant contended that the heating element and water treatment plant should not be included in plant and machinery, arguing that the water treatment plant was for making water fit for drinking and the heating element was a consumable store. The respondents maintained that these were integral to the manufacturing process. The Assistant Commissioner and Additional Commissioner both concluded that these items should be included in plant and machinery, as the heating element was essential for heating water used in the manufacturing process and the water treatment plant was necessary to remove hardness from water used in galvanizing.

3. Compliance with Principles of Natural Justice:
The applicant argued that the principles of natural justice were violated as the basis for including the heating element and water treatment plant in plant and machinery was not disclosed. The Tribunal noted that the applicant had countersigned a report prepared in the presence of its officials, which detailed the use of these items. The applicant did not raise this issue in the revision petition before the Additional Commissioner, weakening their contention. The Tribunal found no violation of natural justice, as the applicant had an opportunity to argue its case during the revision.

4. Determination of Investment on Plant and Machinery:
The Tribunal examined the investment figures provided by the applicant and found that the total investment on plant and machinery, including the water treatment plant and entry tax, exceeded Rs. 35 lakhs. The applicant admitted an investment of Rs. 34,14,473, and the cost of the water treatment plant was Rs. 1,07,470, bringing the total to Rs. 35,21,943. Adding the entry tax of Rs. 54,813 further increased the total investment. The Tribunal did not address the inclusion of the heating element, as the investment already exceeded the prescribed limit without it.

Conclusion:
The Tribunal dismissed the application, concluding that the investment on plant and machinery exceeded the Rs. 35 lakhs limit, thus disqualifying the applicant from receiving the eligibility certificate. The Tribunal also made an observation regarding the manner of writing orders for eligibility certificates, emphasizing the need for detailed consideration of all items of plant and machinery. The applicant's request for a stay of the judgment was rejected.