2009 (12) TMI 865 - HC - VAT and Sales Tax

Installed production capacity of the petitioner s unit been fixed at 30,000 M.T. of vanaspati ghee per year Held that - Learned senior counsel for the petitioner submits that the composition amount should have been calculated treating the installed production capacity as 18,750 M.T. per year and not by 30,000 M.T. We find that the said argument was raised in reply to the show-cause notice but has not been addressed by respondent No. 2 while passing the impugned order, therefore, the impugned order is vitiated. The Commissioner has not considered the capacity of other parts of the unit nor there appears to be any indication thereof in the survey report done by the Deputy Commissioner. As against this, the petitioner has filed various documents which cannot be said to be wholly irrelevant or manufactured. The plant was got installed through Alfa Lavel India Limited and Mech Process Engineers P. Ltd. They supplied the plant and machineries on turnkey basis. The agreements dated July 4, 1991 and July 2, 1991, with these suppliers are on the record and they prima facie do support the case of the petitioner. Thus the matter requires reconsideration by respondent No. 2, in the light of the observations made. W.P. allowed by way of remand.

Issues:
1. Determination of installed production capacity for composition of tax under section 7D of the U.P. Trade Tax Act.
2. Dispute regarding the installed production capacity of a manufacturing unit.
3. Validity of the order passed by the Commissioner of Trade Tax.
4. Consideration of documents and expert opinions in determining production capacity.
5. Requirement for expert committee evaluation in technical matters.

Analysis:

1. Installed Production Capacity Determination:
The petitioner sought a writ to quash an order determining the installed production capacity of their manufacturing unit for tax composition under section 7D of the U.P. Trade Tax Act. The petitioner claimed an installed capacity of 18,750 M.T. per annum, while the Commissioner set it at 30,000 M.T. The dispute arose from the interpretation of documents and certifications regarding the actual capacity of the unit.

2. Dispute Resolution:
The State Government's decision allowed units to claim composition tax based on certified capacity, even if they exceeded it. The petitioner argued that the composition amount should be calculated based on their claimed capacity of 18,750 M.T. per year. However, the Commissioner's order did not address this argument, leading to the writ petition challenging the decision-making process.

3. Validity of Commissioner's Order:
The impugned order relied heavily on an inspection report indicating a production capacity of 30,000 M.T. per annum. The court found flaws in this approach, as it did not consider the complexity of the manufacturing process and ignored relevant documents supporting the petitioner's claimed capacity. The order was deemed flawed for not adequately addressing the petitioner's submissions.

4. Consideration of Documents and Expert Opinions:
The court highlighted the importance of considering all relevant documents and expert opinions in determining a unit's production capacity. The Commissioner failed to address crucial documents provided by the petitioner, such as agreements with suppliers, certificates, and reports disclosing the actual capacity of the manufacturing unit. Ignoring these documents rendered the order unsustainable.

5. Expert Committee Evaluation:
Recognizing the technical nature of determining production capacity, the court recommended the involvement of an expert committee comprising industry specialists. The court advised the Commissioner to reconsider the matter with the assistance of an expert committee to accurately assess the installed production capacity of the petitioner's unit. This approach aimed to ensure a thorough and informed decision-making process.

In conclusion, the writ petition was allowed, and the matter was remanded to the Commissioner for a fresh decision. The Commissioner was directed to consider the expert evaluation of the unit's production capacity and review the documents provided by the petitioner before making a revised determination.

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