2010 (7) TMI 910 - HC - VAT and Sales Tax

Whether the petitioner is entitled to pay concessional rate of Central sales tax under the Central Sales Tax (Orissa) Rules 1957 at one per cent by enjoying the status of a small-scale industrial unit in view of the order issued by the Government of India in the Department of Industrial Policy and Promotion dated December 10 1997 under which the existing medium scale industries were given the option to be registered as a small-scale industrial unit by making application in that regard within 180 days from the date of publication of the said order? Held that - The petitioner s industry having been wrongly treated as a smallscale unit under a bona fide mistake of fact it cannot be permitted to take undue advantage of the same and make a legitimate claim for availing of the concessional rate of Central sales tax at one per cent applicable to small-scale industries. Even otherwise the State cannot be made to suffer due to a bona fide mistake of fact committed by its functionary. No infirmity in the order of the assessing officer directing reopening of the assessment of the petitioner-company for the years 2003-04 and 2004-05 and the subsequent order of reassessment dated September 12 2006 for the year 2003-04 impugned in W.P. (C) No. 15001 of 2006. In W.P. (C) No. 15913 of 2006 as the notice of reassessment dated September 1 2006 for the year 2004-05 is under challenge and this court by order dated January 16 2007 had restrained the assessing officer from passing the final order of assessment we vacate the said interim order dated December 16 2007.Appeal dismissed.

Issues Involved:
1. Entitlement to concessional rate of Central Sales Tax (CST) under the CST (Orissa) Rules, 1957 for a small-scale industrial unit.
2. Validity of reclassification of the petitioner's industrial unit from medium scale to small-scale.
3. Authority of the assessing officer to reopen assessments based on audit reports.

Detailed Analysis:

1. Entitlement to Concessional Rate of CST:
The primary issue is whether the petitioner is entitled to pay a concessional rate of Central Sales Tax at one percent by enjoying the status of a small-scale industrial unit. The petitioner's industrial unit was initially registered as a medium scale industry and was granted sales tax concessions under the Industrial Policy Resolution, 1996. However, the Government of India reclassified industries and provided that an industry with investment in fixed assets in plant and machinery not exceeding Rs. 3 crores could be treated as a small-scale industry, provided the owner applied for such reclassification within 180 days of the order dated December 10, 1997.

2. Validity of Reclassification:
The petitioner applied for reclassification as a small-scale industry but did not do so within the stipulated 180 days. Despite this, the General Manager, District Industries Centre (DIC), Jagatpur, issued a fresh registration certificate on January 13, 2000, certifying the petitioner's industry as a small-scale unit. Subsequently, the investment limit for small-scale industries was reduced to Rs. 1 crore, leading to the cancellation of the petitioner's small-scale registration. A clarificatory letter from the Government of India stated that industries switching to small-scale status within the prescribed period would continue to remain as such, despite the subsequent reduction in investment limit. However, the petitioner's application was beyond the 180-day limit, and thus, the reclassification was deemed a mistake of fact.

3. Authority to Reopen Assessments:
The assessing officer issued notices of reassessment for the years 2003-04 and 2004-05 based on an audit report indicating that the petitioner had wrongly availed of tax concessions meant for small-scale units. The reassessment was conducted under rule 12(8) of the CST (Orissa) Rules, which allows reopening of concluded assessments if the turnover has escaped assessment or the dealer has been under-assessed. The court found that the petitioner's unit was wrongly assessed as a small-scale industry due to a bona fide mistake of fact, justifying the reopening of assessments.

Judgment:
The court held that the petitioner's industrial unit was not eligible for the concessional rate of CST at one percent since it did not apply for reclassification within the stipulated 180 days. The registration as a small-scale unit was a mistake of fact, and the petitioner could not take undue advantage of this error. The assessing officer had the authority to reopen the assessments for the years 2003-04 and 2004-05 based on the audit report. Consequently, the court found no infirmity in the reassessment orders and dismissed both writ petitions without costs.

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