1996 (1) TMI 409 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Renewal of eligibility certificate under rule 3(66a) of the Bengal Sales Tax Rules, 1941.
2. Sale of plant and machinery and its impact on the eligibility certificate.
3. Alleged arbitrary and illegal rejection of the renewal application.

Issue-wise Detailed Analysis:

1. Renewal of Eligibility Certificate:
The applicant, a dealer registered under the Bengal Finance (Sales Tax) Act, 1941, and the Central Sales Tax Act, 1956, sought the renewal of an eligibility certificate under rule 3(66a) of the Bengal Sales Tax Rules, 1941, for the period from March 31, 1991, to March 30, 1992. The eligibility certificate for the previous period (March 31, 1990, to March 30, 1991) had been granted after a successful appeal to the Tribunal. However, the renewal application was rejected by the Assistant Commissioner of Commercial Taxes and the Deputy Commissioner of Commercial Taxes on the grounds that the applicant had sold plant and machinery on March 16, 1992, and had closed the unit in July 1993.

2. Sale of Plant and Machinery:
The applicant argued that the machines sold were not used for manufacturing plywood but were purchased for research work on manufacturing particle boards from plywood waste. These machines were sold because the research project was unsuccessful. The applicant provided a certificate from a chartered engineer and a project report to support this claim. However, the respondents contended that the sale of these machines constituted a sale of capital assets otherwise than in the ordinary course of business, violating the conditions for the eligibility certificate.

3. Alleged Arbitrary and Illegal Rejection:
The applicant claimed that the rejection of the renewal application was arbitrary and without proper consideration. The applicant argued that the machines sold were not part of the manufacturing process for plywood and that the rejection was based on a misinterpretation of the facts. The respondents maintained that the sale of the machines affected the viability of the industrial unit and justified the rejection of the renewal application.

Tribunal's Findings:
The Tribunal examined the evidence, including the balance sheets, the project report, and the chartered engineer's certificate. It found that the machines sold were included in the balance sheet and the list of plant and machinery, indicating that they were considered part of the manufacturing process for plywood. The Tribunal concluded that the sale of these machines was not in the ordinary course of business and upheld the rejection of the renewal application.

Conclusion:
The Tribunal dismissed the application, finding that the rejection of the renewal of the eligibility certificate was not illegal, arbitrary, or without application of mind. The Tribunal also noted that the applicant had been given a full opportunity to present their case before the Deputy Commissioner of Commercial Taxes. The operation of the judgment and order was stayed for four weeks upon the applicant's verbal request.