2004 (6) TMI 595 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Maintainability of the writ petition under Articles 19(1)(g) and 14 of the Constitution of India.
2. Validity and legality of the cancellation of the eligibility certificate.
3. Interpretation of the term "manufacture" under the Assam General Sales Tax Act, 1993, and its applicability to the Scheme of 1995.
4. Whether the process of producing washed clean coal constitutes manufacturing.
5. Grounds for cancellation of the eligibility certificate and adherence to principles of natural justice.
6. Retrospective cancellation of the eligibility certificate.

Analysis:

1. Maintainability of the Writ Petition:

The court examined whether a writ petition jointly filed by a company and its director alleging violations of Articles 19(1)(g) and 14 of the Constitution is maintainable. The court noted that Article 19 rights are available only to citizens, not companies. However, since Article 14 applies to all persons, the company could invoke Article 14 for arbitrary denial of tax exemption. The director, being a citizen, could also maintain the petition under Article 19(1)(g). The court concluded that the writ petition was maintainable.

2. Validity and Legality of the Cancellation of the Eligibility Certificate:

The court scrutinized the cancellation of the eligibility certificate, which was initially granted based on the Scheme of 1995. The eligibility certificate was canceled on grounds that the process of producing washed coal did not involve manufacturing and that no plant or machinery was installed. The court found that the cancellation was arbitrary and not in accordance with the principles of natural justice, as the grounds for cancellation were not mentioned in the show cause notice and were not grounds available under the Scheme for cancellation.

3. Interpretation of "Manufacture" under the Assam General Sales Tax Act, 1993:

The court examined the definition of "manufacture" under Section 2(22) of the Assam General Sales Tax Act, 1993, which includes producing, making, extracting, altering, blending, finishing, or otherwise processing, treating, or adapting any goods. The court held that this definition is broad and includes the process of producing washed clean coal by reducing ash content from raw coal, which falls within the definition of "manufacture."

4. Whether the Process of Producing Washed Clean Coal Constitutes Manufacturing:

The court determined that the process of producing washed clean coal by reducing ash content from 25% to 5% and removing impurities constitutes manufacturing under the Assam General Sales Tax Act, 1993. The court noted that the process results in a new and distinct commodity known as washed clean coal, which is recognized in trade as different from raw coal.

5. Grounds for Cancellation of the Eligibility Certificate and Adherence to Principles of Natural Justice:

The court found that the grounds mentioned in the show cause notice differed from those on which the eligibility certificate was canceled. The cancellation was based on grounds not provided for in the Scheme, and the petitioners were not given an opportunity to respond to these grounds. The court held that the cancellation violated principles of natural justice and was arbitrary.

6. Retrospective Cancellation of the Eligibility Certificate:

The court did not delve into the issue of retrospective cancellation in detail, as it had already concluded that the cancellation itself was arbitrary and illegal. However, the court noted that retrospective cancellation would also be problematic and not tenable in law.

Conclusion:

The court allowed the writ petition, quashed the impugned orders canceling the eligibility certificate, and directed the release of the bank guarantee furnished by the petitioners. The court emphasized that the cancellation was arbitrary, illegal, and in violation of principles of natural justice.