1996 (7) TMI 533 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the revisional authority's power to withdraw tax exemption benefits.
2. Compliance with procedural requirements for obtaining eligibility and exemption certificates.
3. Legality of the levy of interest on the amount of tax deemed due.

Issue-wise Detailed Analysis:

1. Validity of the revisional authority's power to withdraw tax exemption benefits:

The petitioner, a small-scale industrial unit, was granted an eligibility certificate by the relevant screening committee on January 25, 1990, effective from June 20, 1989, for tax exemption under section 13B of the Haryana General Sales Tax Act, 1973. An exemption certificate was subsequently issued on May 26, 1990. The petitioner filed quarterly returns for the financial year 1989-90, and the Assessing Authority granted the benefit of exemption from tax for the new diversified unit. However, the revisional authority, exercising powers under section 40 of the Act, suo motu withdrew the exemption benefit, arguing that the petitioner did not hold a registration certificate from the date of production commencement.

The court held that the revisional authority had no power to withdraw the exemption benefits granted by the screening committee and the Deputy Excise and Taxation Commissioner, as section 40 of the Act did not confer such authority. The eligibility and exemption certificates could only be modified or canceled by the competent authorities that issued them. The revisional authority, while revising the assessment order, indirectly canceled the certificates, which was beyond its jurisdiction. The court referenced similar cases, including Kamal Plastics and Rubber Industries v. State of U.P., to support its decision that only the authority that granted the certificate could recall or cancel it.

2. Compliance with procedural requirements for obtaining eligibility and exemption certificates:

The petitioner argued that both the eligibility and exemption certificates were issued by competent authorities and made effective from the date of production commencement. Rule 28A of the Haryana General Sales Tax Rules, 1975, outlines the procedure for obtaining these certificates, including the roles of the lower level screening committee and the Deputy Excise and Taxation Commissioner. The court noted that the eligibility certificate was issued by the lower level screening committee and was valid from the date of commercial production, as per the rules.

The court emphasized that the revisional authority could not interfere with the certificates issued by the competent authorities. The lower level screening committee had the discretion to grant the eligibility certificate from the date of production commencement, and any errors could only be rectified by the committee itself. The court also referenced Sahu Stone Crushing Industries v. Divisional Level Committee, where the requirement for registration under the Factories Act was deemed directory, not mandatory, supporting the petitioner's claim that the registration date under the Act was not crucial for the exemption benefit.

3. Legality of the levy of interest on the amount of tax deemed due:

The petitioner challenged the levy of interest on the amount of tax deemed due, arguing that no tax was payable under the scheme. The court agreed, citing the Supreme Court's decisions in J.K. Synthetics Ltd. v. Commercial Taxes Officer and Frick India Limited v. State of Haryana, which held that interest could not be levied when no tax was payable under an exemption scheme. Since the withdrawal of the exemption benefits was deemed invalid, the levy of interest was also unjustified.

Conclusion:

The court quashed the orders passed by the revisional authority and the Sales Tax Tribunal, holding that the revisional authority had no jurisdiction to withdraw the exemption benefits granted by the competent authorities. The levy of interest on the amount of tax deemed due was also invalid. The writ petition was allowed, and no order as to costs was made.