1993 (4) TMI 296 - AT - VAT and Sales Tax

Issues Involved:
1. Rejection of application for renewal of eligibility certificate (E.C.) for the period from April 1, 1982, to March 31, 1983, under rule 3(66) of the Bengal Sales Tax Rules, 1941.
2. Demand of security under section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941.

Issue-Wise Detailed Analysis:

1. Rejection of Application for Renewal of Eligibility Certificate:

The applicant-company's case revolves around the rejection of its application for the renewal of an eligibility certificate (E.C.) for the period from April 1, 1982, to March 31, 1983. The Assistant Commissioner rejected the renewal application on March 5, 1984, based on four grounds: failure to maintain separate accounts for the new industrial unit, failure to keep serially numbered cash/credit memos, collection of sales tax during 1980-81, and the application being out of time.

The Tribunal noted that the applicant maintained separate accounts for three types of sales but entered them in a common ledger, which the applicant argued was permissible under rule 3(66). The Tribunal agreed with the applicant's argument that the six-day delay in filing the renewal application should be condoned, as the rule states that the application should "ordinarily" be made within a month.

The Tribunal found that the authorities were mistaken in considering the collection of sales tax during 1980-81 as a ground for rejecting the renewal for 1982-83, as each year's renewal is a separate proceeding.

Regarding the issue of serially numbered cash memos, the Tribunal referred to a previous case, J.K. Bansal & Co., where it was observed that the intention of the provision is to distinguish the manufacturing business from any other business. However, due to the lack of definitive findings on this point, the Tribunal did not express an opinion on whether the applicant violated this condition.

The Tribunal upheld the authorities' finding that the applicant violated the condition of keeping separate accounts for the manufacturing unit. The Tribunal emphasized the importance of maintaining separate accounts to satisfy the authorities that the goods sold were actually manufactured in the new unit. Consequently, the Tribunal affirmed the orders rejecting the renewal application.

2. Demand of Security Under Section 7(4a)(i):

The applicant challenged the demand for security of Rs. 25,00,000, later reduced to Rs. 5,00,000, arguing that the rejection of the renewal of the eligibility certificate was not a valid ground for demanding security. The Tribunal examined section 7(4a)(i) of the 1941 Act, which allows the Commissioner to demand reasonable security for the proper payment of tax for good or sufficient reasons recorded in writing.

The Tribunal disagreed with the State Representative's argument that the rejection of the renewal of the E.C. and the resulting tax liability constituted good or sufficient reasons to demand security. The Tribunal noted that there was no evidence of past conduct of default in proper payment of tax by the applicant. Therefore, the Tribunal quashed the orders demanding security.

Conclusion:

The writ petition was allowed in part. The Tribunal quashed the orders demanding security from the applicant for proper payment of tax under section 7(4a)(i) of the 1941 Act. However, the Tribunal dismissed the writ petition concerning the rejection of the renewal of the eligibility certificate for the period from April 1, 1982, to March 31, 1983, and affirmed the impugned orders of the authorities below. The respondents were directed to dispose of applications for declaration forms filed by the applicant in accordance with the law. The judgment and order were stayed for eight weeks as orally prayed for by the applicant.

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