2012 (12) TMI 951 - HC - VAT and Sales Tax

Whether activity of crushing of boulders into smaller sizes of stones amounts to manufacturing and, if not, whether the sales tax exemption already granted could be withdrawn? Whether it is open to the Department to cancel the eligibility certificate already granted even if the same was given on erroneous understanding that conversion of stones into chips amounts to manufacturing ? Held that - In the present case, the question being covered by the judgment of the honourable Supreme Court in State of Maharashtra v. Mahalaxmi Stores 2002 (11) TMI 112 - SUPREME COURT OF INDIA on the same item, it is not open to this court to examine the matter any further and we have to hold that crushing of boulders into different sizes of stone did not involve any manufacturing . Unable to hold that proposed cancellation of eligibility certificate is based on mere change of opinion on a debatable issue. The Revenue authority in the present case is proceeding on the basis of a binding legal precedent and not merely on its own opinion. There can be estoppel against law. Even if eligibility certificate was issued, the Revenue authority can certainly act on established legal position.

Summary

Issues:
- Whether crushing of boulders into smaller sizes of stones amounts to "manufacturing" for sales tax exemption eligibility.
- Whether the sales tax exemption already granted could be withdrawn.
- Whether it is permissible to cancel an eligibility certificate already granted based on a change in interpretation.

Analysis:
- The court considered whether the activity of crushing boulders into stones qualifies as "manufacturing" for sales tax exemption eligibility. The petitioner had received an eligibility certificate for exemption, but it was later revoked on the grounds that the activity did not constitute manufacturing. The court referred to a Supreme Court judgment in a similar case and held that no new commercial commodity emerged from the process, thus not meeting the criteria for manufacturing.

- The court examined the issue of withdrawing the sales tax exemption already granted. The petitioners argued that based on previous legal precedents, the exemption should not be revoked unless there was fraud or misrepresentation. However, the court found that the issue was not debatable at the time of granting the eligibility certificate, as it was after the Supreme Court judgment. Therefore, the Revenue authority was justified in canceling the exemption based on a binding legal precedent.

- The court addressed the question of canceling an eligibility certificate already granted due to a change in interpretation. While acknowledging the general legal position against canceling certificates without fraud or misrepresentation, the court found that in this case, the Revenue authority acted based on a binding legal precedent. The court upheld the decision to cancel the eligibility certificate but directed that benefits already extended should not be withdrawn, considering the Department's initial understanding of the situation.

- The judgment emphasized the importance of legal precedents and binding decisions in interpreting and applying the law. Despite arguments for maintaining the exemption and certificate, the court upheld the Revenue authority's actions based on established legal principles. The court balanced the interests of the parties by allowing benefits already granted to remain in place while upholding the Department's decision for future actions.