1990 (2) TMI 299 - AT - VAT and Sales Tax

Summary

Issues:
Application for eligibility certificate under article 226 of the Constitution of India transferred to the West Bengal Taxation Tribunal for disposal. Rejection of eligibility certificate by Assistant Commissioner and Additional Commissioner of Commercial Taxes. Grounds for rejection: factory location discrepancy, missing machine, timing of machine purchase, economic viability of the unit.

Analysis:
The application for an eligibility certificate was transferred to the West Bengal Taxation Tribunal for disposal under section 15 of the West Bengal Taxation Tribunal Act, 1987. The case involved a partnership firm engaged in manufacturing activities seeking relief against the rejection of the eligibility certificate by tax authorities. The firm, M/s. Kulodaya Udyog, faced issues related to the location of its factory, missing machinery, and questions about the economic viability of the unit.

The rejection of the eligibility certificate was primarily based on two grounds. Firstly, the tax authorities argued that the firm did not possess a valid registration certificate indicating the factory location before January 30, 1987. The provisional certificate mentioned a different location from where the factory actually operated. Secondly, concerns were raised about the economic viability of the unit, as the business was deemed intermittent and dependent on specific orders, leading to doubts about the continuity and regularity of operations.

The Additional Commissioner accepted explanations regarding missing machinery and the timing of machine purchase but upheld the rejection based on factory location and economic viability. The Tribunal agreed that the firm could not be considered a newly set up industrial unit before January 30, 1987, due to the lack of a valid registration certificate for the actual factory location. Therefore, the eligibility for tax benefits could only be considered from that date onwards.

Regarding economic viability, the Tribunal noted the arguments presented by both parties. While the authorities highlighted concerns about the irregular nature of business operations, the firm contended that it had been consistently selling goods and maintaining business activities. The Tribunal emphasized the need for a specific finding that the firm's actions adversely affected its economic viability to justify the rejection of the eligibility certificate on these grounds.

Ultimately, the Tribunal quashed the previous orders and directed the Assistant Commissioner of Commercial Taxes to reevaluate the application for the eligibility certificate from the date of the first sale of goods after January 30, 1987. This decision was based on the firm meeting the criteria of a "newly set up small scale industry" from that date onwards, as per the relevant rule. The application was disposed of without costs, with all members concurring on the decision.