1993 (6) TMI 245 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Rejection of eligibility certificate under the West Bengal Sales Tax Act, 1954.
2. Maintenance of sales records and proof of manufacturing.
3. Economic viability of the industrial unit.
4. Consideration of subsequent period anomalies for eligibility certificate.

Detailed Analysis:

1. Rejection of Eligibility Certificate:
The applicant's request for an eligibility certificate under the West Bengal Sales Tax Act, 1954, was rejected by the Assistant Commissioner and subsequently by the Additional Commissioner. The Assistant Commissioner cited various grounds for rejection, while the Additional Commissioner upheld the rejection on two primary grounds: improper maintenance of sales records and the economic non-viability of the unit.

2. Maintenance of Sales Records and Proof of Manufacturing:
The Additional Commissioner rejected the eligibility certificate application on the basis that the petitioner did not maintain proper sales records, failing to prove that the sales claimed as exempt were of the notified commodity manufactured in her unit. However, it was argued that the alleged irregularities noted pertained to a period after the relevant period for which the eligibility certificate was sought. The Tribunal referred to precedents, including a decision of the Calcutta High Court and a Full Bench decision of the Tribunal, which established that eligibility certificate for a prior period cannot be denied based on subsequent period anomalies. The Tribunal concluded that the first ground for rejection by the Additional Commissioner was erroneous in law as it was based on transactions relating to a subsequent period.

3. Economic Viability of the Industrial Unit:
The second ground for rejection was the economic non-viability of the unit, as the unit had stopped manufacturing activities and had not resumed production. The Tribunal noted that the mere closure of the unit does not necessarily imply economic non-viability. The Tribunal referred to the proviso in Notification No. 1177-F.T. dated March 31, 1983, which states that the eligibility certificate should not be refused unless there is a definite finding that the dealer acted in a manner affecting the economic viability of the unit. The Tribunal cited a Full Bench decision which held that the mere closure of the unit cannot be the sole criterion for determining the refusal of eligibility certificate. The Tribunal found no evidence that the applicant's actions adversely affected the economic viability of the unit and thus rejected the second ground for rejection by the Additional Commissioner.

4. Consideration of Subsequent Period Anomalies:
The respondents argued that anomalies and discrepancies in subsequent years could be considered if they were grievous and indicative of the non-genuineness of the industry. However, the Tribunal found no indication of lacunae in the maintenance of books of account for the period in question. The Tribunal emphasized that the eligibility certificate for a prior period cannot be canceled based on events in a subsequent period unless those events directly affect the conditions for grant of the certificate.

Conclusion:
The Tribunal allowed the application, setting aside the orders of the Assistant Commissioner and the Additional Commissioner. The Tribunal directed the respondents to grant the eligibility certificate to the applicant for the period in question within three months, stating that the grounds for rejection were either extraneous or related to subsequent years and thus bad in law. The Tribunal concluded that the rejection of the eligibility certificate was contrary to the provisions of the notification read with section 4AA of the 54 Act. The application was allowed with no order as to costs.