1995 (2) TMI 378 - HC - VAT and Sales Tax

Summary

Issues:
1. Rejection of application for exemption from sales tax under section 4-A of the U.P. Sales Tax Act.
2. Rejection of review application for the same exemption.
3. Lack of cogent reasons for rejection by the Divisional Level Committee.
4. Discrepancies in the grounds for rejection provided by the Committee.
5. Failure to provide an opportunity of being heard before passing the impugned orders.
6. Need for a reevaluation of the case by the Divisional Level Committee.

Analysis:
The petitioners sought a writ to quash the order rejecting their application for exemption from sales tax under section 4-A of the U.P. Sales Tax Act. The deceased, who intended to establish an industry for manufacturing polythene sheets and bags, had his application rejected by the Divisional Level Committee on the grounds of non-compliance with requirements, doubts regarding the machinery's newness, and absence of a Small Scale Industry Registration Certificate. The review application met the same fate, prompting the petitioners to challenge the decisions through the writ petition. The Court found the grounds for rejection lacked substance and remanded the case to the Committee for a fresh investigation and a reasoned decision within three months.

The rejection of the petitioners' application and review application was based on vague and unsubstantiated grounds. The Committee failed to provide specific reasons for non-compliance with requirements, doubts about machinery being new, and absence of the SSI Registration Certificate. The Court noted that the petitioners had produced evidence to support their claims, which was disregarded. Additionally, discrepancies in the grounds for rejection between the two orders raised concerns about the Committee's decision-making process.

The petitioners' contention that they fulfilled the requirements for exemption under section 4-A of the Act was supported by documentary evidence. The Court observed that the Committee did not adequately consider this evidence before rejecting the applications. Moreover, the Committee's conclusion regarding the factory's closure post the proprietor's death was deemed irrelevant to the exemption sought, as compliance until the proprietor's demise should have sufficed for the exemption.

The Court criticized the Committee for not conducting a thorough investigation into the claims made by the petitioners, especially regarding the machinery's purchase and the existence of the selling firm. The lack of due diligence on the Committee's part led to the Court setting aside both impugned orders and remanding the case for a fresh review, emphasizing the importance of providing a fair opportunity for the petitioners to present their case.

In conclusion, the Court found the Committee's decision-making process flawed and lacking in substantive reasoning. The case was remanded for a reevaluation, highlighting the necessity for a fair and thorough examination of the petitioners' claims before reaching a decision on the exemption application.