1999 (9) TMI 922 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether special smokeless fuel (SSF) or coal manufactured by the respondents is a prohibited item under annexure II to the notification dated July 27, 1991.
2. The validity of the eligibility certificates granted under section 4-A to the industrial units manufacturing SSF.

Issue-Wise Detailed Analysis:

1. Prohibition of SSF under Annexure II:
The primary issue in these revision petitions is whether SSF or coal manufactured by the respondents falls under the prohibited items listed in annexure II of the notification dated July 27, 1991, which would disqualify them from receiving eligibility certificates under section 4-A of the U.P. Trade Tax Act. The Tribunal, in its detailed order, concluded that SSF is a different commodity and does not fall within the description of the commodities mentioned in item 11 of annexure II, which includes "coal powder, firewood, coal briquettes, and charcoal manufacturing units." The Tribunal's decision was based on expert opinions, including a letter from the Central Mine, Planning and Design Institute Limited (CMPDIL), which clarified that SSF is a distinct product from coal briquettes and other listed items. The CMPDIL's letter detailed the differences in the manufacturing processes and end products of SSF and coal briquettes, emphasizing that SSF is produced through devolatilisation of coal in retorts, while coal briquettes are made by compressing coal dust with binders.

2. Validity of Eligibility Certificates:
The second issue pertains to the validity of the eligibility certificates granted to the respondents. The Tribunal set aside the orders of the Divisional Level Committee and the Commissioner, which had rejected or canceled the eligibility certificates. The Tribunal directed the issuance of the certificates, holding that the respondents' industrial units manufacturing SSF were entitled to the exemption under the notification. The Tribunal's decision was supported by expert opinions and the interpretation of the exclusionary list in annexure II, which did not explicitly prohibit the manufacture of SSF. The Tribunal also referred to the Supreme Court's ruling in Pappu Sweets and Biscuits v. Commissioner of Trade Tax, U.P., Lucknow, which emphasized a strict interpretation of exclusionary provisions. The Tribunal concluded that SSF and coal briquettes are not the same, and SSF does not fall within the prohibited categories listed in annexure II.

Conclusion:
The High Court upheld the Tribunal's decisions, dismissing the revision petitions filed by the Commissioner of Sales Tax. The Court agreed with the Tribunal's interpretation that SSF is a distinct product and does not fall under the prohibited items listed in annexure II of the notification dated July 27, 1991. The Court also noted that the Commissioner had the right to appeal against the Divisional Level Committee's decision to grant eligibility certificates, but could not cancel them under section 4-A(3) on a debatable point. The Court's judgment affirmed the respondents' entitlement to the eligibility certificates and the exemption from trade tax for their SSF manufacturing units.