1993 (2) TMI 317 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Additional Commissioner to reject the application for eligibility certificate based on explanation (iv) of rule 3(66a)(i).
2. Definition and interpretation of "newly set up small-scale industry" and "existing industrial unit" under rule 3(66a)(i).
3. Whether the proprietary concern was an "existing industrial unit".
4. Whether the acquisition of the concern by the company amounted to "expansion, addition, or modification" of an existing unit.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Additional Commissioner:
The applicants argued that the Additional Commissioner exceeded his jurisdiction by rejecting the application for eligibility certificate based on explanation (iv) of rule 3(66a)(i), which was not a ground mentioned by the Assistant Commissioner. They contended that the Additional Commissioner should have remanded the matter to the Assistant Commissioner for a decision. However, it was held that the Additional Commissioner, as a revisional authority, had jurisdiction co-terminous with that of the Assistant Commissioner and was competent to enter into any relevant matter concerning the disposal of the application. The Tribunal had directed the Additional Commissioner to consider the applicability of explanation (iv), thus obligating him to do so.

2. Definition and Interpretation of "Newly Set Up Small-Scale Industry" and "Existing Industrial Unit":
Rule 3(66a)(i) of the Bengal Sales Tax Rules, 1941, defines a "newly set up small-scale industry" and excludes any "expansion, addition or modification of an existing industrial unit" from this definition. The applicants argued that the proprietary concern was not an industrial unit as it had not commenced production before being taken over by the company. The Tribunal agreed, stating that an industrial unit must be one that is actually manufacturing goods for sale and liable to pay sales tax to qualify as an "existing industrial unit."

3. Whether the Proprietary Concern was an "Existing Industrial Unit":
The Tribunal found that the proprietary concern had not started production before being acquired by the company. The term "going concern" used in the transfer documents was interpreted not to necessarily mean an "existing industrial unit" as per rule 3(66a). The Tribunal concluded that without production, the proprietary concern could not be considered an existing industrial unit.

4. Whether the Acquisition Amounted to "Expansion, Addition, or Modification":
The Tribunal held that mere change of ownership from a proprietor to a company, without any alteration, addition, or expansion in the unit, does not amount to "expansion, addition, or modification" of an existing industrial unit. The Tribunal noted that there was no material evidence to support the Additional Commissioner's claim of diversification or expansion by the company after acquiring the concern. The Tribunal concluded that the proprietary concern was not an existing industrial unit, and thus, the embargo in explanation (iv) of rule 3(66a) was not applicable.

Conclusion:
The application was allowed, setting aside the impugned order dated November 25, 1991, by the Additional Commissioner. The Assistant Commissioner was directed to issue the eligibility certificate to the applicant No. 1 company within three weeks and to modify any assessments made in respect of the company for the relevant period. The interim order dated March 6, 1992, was vacated, and there was no order for costs.