2007 (2) TMI 594 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for exemption u/s 4A of the U.P. Trade Tax Act, 1948.
2. Validity of the cancellation of the eligibility certificate by the Commissioner of Trade Tax.
3. Applicability of section 4A(3) of the Act in the absence of misrepresentation or concealment of facts.

Summary:

1. Eligibility for exemption u/s 4A of the U.P. Trade Tax Act, 1948:
The applicant, a private limited company, established a unit for manufacturing laundry soap and detergent powder and claimed exemption u/s 4A of the Act. The eligibility certificate was issued on February 14, 1994, granting exemption for five years from September 1, 1983, to August 31, 1988. The Commissioner of Trade Tax issued a notice to cancel the eligibility certificate on grounds including the use of a pouch sealing machine initially acquired by another unit, M/s. Gorakhpur Grah Udyog Kendra, Gorakhpur, and the unit not being registered under the Indian Factories Act.

2. Validity of the cancellation of the eligibility certificate by the Commissioner of Trade Tax:
The Tribunal dismissed the applicant's appeal, holding that the unit was not eligible for exemption due to the use of the pouch sealing machine acquired from another unit. The Tribunal relied on the apex court's decision in State Level Committee v. Morgardshammar India Ltd., which held that a unit using a machine acquired by any other factory or workshop is not entitled to exemption. The applicant argued that all facts were disclosed at the time of the exemption application and that the notice for cancellation was issued after a significant delay.

3. Applicability of section 4A(3) of the Act in the absence of misrepresentation or concealment of facts:
The court noted that there was no misrepresentation or concealment of facts by the applicant. The details about the pouch sealing machine were available on record at the time of the exemption application. The court referred to the provisions of section 4A(3) of the Act, both before and after the amendment by U.P. Act No. 28 of 1991, and previous judgments, including Jaidurga Detergents and Chemicals Private Limited v. Commissioner of Sales Tax, which held that the power under section 4A(3) is discretionary and should be exercised judiciously. The court concluded that the initiation of proceedings after a long delay was highly belated and improper.

Conclusion:
The revision was allowed, and the orders of the Tribunal and the Commissioner of Trade Tax passed u/s 4A(3) of the Act were set aside. The court held that the Commissioner should not have exercised discretionary power in this case, as there was no misrepresentation or concealment of facts by the applicant.