1997 (7) TMI 609 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 4-A(3) of the Act for cancellation of eligibility certificate based on fulfillment of conditions at the time of production.
Validity of eligibility certificate cancellation due to subsequent conditions not being satisfied.
Arbitrary action by Commissioner in cancelling eligibility certificate without considering alternative measures.
Jurisdictional error in cancelling eligibility certificate.

Analysis:
The case involved the cancellation of an eligibility certificate for tax exemption granted to an applicant's unit. The applicant contended that the certificate was cancelled by the Commissioner of Trade Tax on the grounds that the unit did not fulfill the conditions for the certificate at the time of starting production. The Tribunal, however, found that production had indeed commenced on the specified date of August 28, 1984. The applicant argued that different conditions were imposed by different authorities, leading to confusion regarding the start date of production and registration under the small-scale industries. The applicant was granted the eligibility certificate on August 28, 1984, based on the notional date of production, while actual production began on September 10, 1984. The Small Scale Industries (S.S.I.) registration was issued only from the date of actual production, causing a discrepancy in dates. The amended provisions of section 4-A(3) allowed for cancellation of eligibility certificates if conditions were not met, even after the expiration of the certificate.

The applicant's representative argued that the eligibility certificate was validly granted based on the existing facts at the time, and any subsequent conditions should not invalidate the certificate. Referring to a previous court decision, it was emphasized that fulfillment of conditions at the time of production was crucial. The representative contended that a slight delay in obtaining the S.S.I. registration should not render the eligibility certificate invalid. Section 4-A(3) was interpreted as not intended to cancel certificates based on later-imposed conditions. The Commissioner was criticized for not utilizing the provision allowing for withdrawal of the facility for a lesser period or from a different date, instead of outright cancellation.

The judgment highlighted that the Commissioner's action in cancelling the eligibility certificate was deemed arbitrary and without jurisdiction. It was emphasized that the applicant should not be penalized for the department's errors in granting the certificate. The court quashed the orders passed by the Trade Tax Tribunal and the Commissioner, ruling in favor of the applicant. The revision was allowed, setting aside the previous orders, and no costs were awarded. The court directed the order to be sent to the concerned Tribunal under section 11(8) of the Act, ultimately allowing the petition.