2000 (8) TMI 1085 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the cancellation of the exemption certificate.
2. Interpretation of Rule 28A(6)(a)(ii) regarding the provision of bank guarantee or surety bond.
3. Compliance with principles of natural justice.

Detailed Analysis:

1. Legality of the cancellation of the exemption certificate:
The petitioner sought to quash the order dated April 24, 1998, by the Deputy Excise and Taxation Commissioner (East), Gurgaon, which canceled the sales tax exemption granted on August 19, 1994, under Rule 28A of the Haryana General Sales Tax Rules, 1975. The petitioner also contested the orders dated April 22, 1999, and July 26, 1999, by the Excise and Taxation Commissioner (Appeals), Rohtak, and the Sales Tax Tribunal, Haryana, respectively, which dismissed the appeals against the cancellation order.

2. Interpretation of Rule 28A(6)(a)(ii) regarding the provision of bank guarantee or surety bond:
The petitioner initially provided a bank guarantee but later opted to furnish a surety bond due to financial constraints. The Deputy Excise and Taxation Commissioner rejected the bank guarantee, leading to the cancellation of the exemption certificate. The petitioner argued that Rule 28A(6)(a)(ii) does not prohibit changing the option from a bank guarantee to a surety bond. The court observed that the rule's plain language does not support the respondents' interpretation that the option cannot be changed during the exemption period. The court concluded that the applicant could request the acceptance of a surety bond instead of a bank guarantee while seeking renewal, as the rule's objective is to safeguard public revenue.

3. Compliance with principles of natural justice:
The petitioner contended that the cancellation order was passed without providing an effective opportunity to prove its bona fides regarding the submission of the bank guarantee or surety bond. The court noted that the object of Section 13-B of the Act and Rule 28A of the Rules is to incentivize industrial units through tax exemptions to promote rapid industrialization. Therefore, the provisions should be interpreted purposively and constructively to advance the legislative intent rather than frustrate it. The court referred to the Supreme Court's decisions in Bajaj Tempo Ltd. v. Commissioner of Income-tax and Belapur Sugar and Allied Industries Ltd. v. Collector of Central Excise, which emphasized a liberal interpretation of provisions granting incentives for promoting economic growth.

Conclusion:
The court held that the cancellation order dated April 24, 1998, and the subsequent appellate orders were illegal and quashed them. The court directed that the surety bond furnished by the petitioner should be accepted by the competent authority, subject to its satisfaction regarding the bond's genuineness. If the authority finds the security inadequate or not genuine, it may reject it after hearing the petitioner's representative. The writ petition was allowed, and the orders were declared illegal and quashed.