2010 (1) TMI 1128 - HC - VAT and Sales Tax

Summary

Issues involved:
The issues involved in this case are:
1. Interpretation of the definition of 'manufacture' under section 2(ei) of the U.P. Trade Tax Act in relation to the process of dyeing.
2. Validity of the decision of the Divisional Level Committee in granting an eligibility certificate under section 4A of the Act.
3. Jurisdiction of the Commissioner of Trade Tax to appeal against the decision of the Divisional Level Committee.
4. Applicability of rule 25(3)(d) of the U.P. Trade Tax Rules.
5. Legality of the orders passed under section 4A(3) and the Tribunal's order.

Interpretation of 'manufacture' under section 2(ei) of the U.P. Trade Tax Act:
The Tribunal noted that the Divisional Level Committee considered the eligibility certificate for setting up a new unit, which was initially dissented to by one member but later granted with the consent of another member. The Tribunal found no concealment or misleading information by the assessee. Citing precedents, the court held that cancellation of the eligibility certificate was unwarranted, and the Revenue could have appealed under section 10(2) of the U.P. Trade Tax Act. Consequently, the order and notice issued under section 4A(3) were set aside, and the eligibility certificate was restored to the assessee.

Validity of decision of the Divisional Level Committee:
The Tribunal confirmed that the eligibility certificate was granted based on a unanimous decision of the Divisional Level Committee, with all members signing the decision and the Deputy Commissioner concurring. Despite an initial dissent, the certificate was issued. The court held that the cancellation of the certificate was unjustified, and the Revenue had the option to appeal but did not do so. As a result, the order and notice under section 4A(3) were overturned, and the certificate was reinstated.

Jurisdiction of the Commissioner of Trade Tax to appeal:
The court considered whether the Commissioner could appeal against the decision of the Divisional Level Committee regarding the eligibility certificate. It was determined that while the Committee's decision may have been erroneous, the Commissioner could have filed an appeal under section 10(2) of the U.P. Trade Tax Act. However, the Commissioner could not unilaterally cancel the certificate without following due process. The court set aside the orders and restored the eligibility certificate to the assessee.

Applicability of rule 25(3)(d) of the U.P. Trade Tax Rules:
The Tribunal found that the decision of the Committee was properly documented and signed by all members, with no dissenting note. In light of this, the court held that rule 25(3)(d) was not applicable. The cancellation of the eligibility certificate was deemed unjustified, and the orders under section 4A(3) were set aside, restoring the certificate to the assessee.

Legality of the orders passed under section 4A(3) and the Tribunal's order:
The court concluded that the cancellation of the eligibility certificate and subsequent orders were contrary to established law and precedents. The Revenue had the option to appeal but failed to do so, leading to the restoration of the certificate to the assessee. The orders under section 4A(3) were deemed erroneous and illegal, and the Tribunal's decision was set aside in favor of the assessee.