2012 (8) TMI 870 - HC - VAT and Sales Tax

Process of production of soapstone powder from soapstone - declining to renew certificate of entitlement - whether process did not amount to manufacturing for the tax benefits under the Assam Industries (Tax Exemption for Pipeline Unit) Order, 2005? - Held that - Mere change of opinion at a belated stage cannot be a ground for declining eligibility certificate and entitlement thereof granted after due consideration in absence of fraud, misrepresentation or suppression on the part of the assessee. Once the Department has taken a view for eligibility for exemption under the scheme which has been held to be possible view not open to be changed on mere change of opinion, it will not be fair to take a different view in different cases. We find merit in this contention. W.P. allowed. Case remanded.

Summary

Issues involved:
1. Challenge to the order of the Commissioner of Taxes regarding manufacturing of soapstone powder for tax benefits under the Assam Industries (Tax Exemption for Pipeline Unit) Order, 2005.
2. Validity of the decision to decline the renewal of the certificate of entitlement for tax benefits based on the manufacturing process.
3. Interpretation of the definition of 'manufacturing' under Section 2(30) of the Act.

Detailed Analysis:
Issue 1:
In W.P.(C) No.1683 of 2012, the petitioner contested the order by the Commissioner of Taxes, Guwahati, which held that the process of producing soapstone powder from soapstone did not qualify as manufacturing for tax benefits under the Assam Industries (Tax Exemption for Pipeline Unit) Order, 2005. The petitioner argued that the process involved a complex treatment process beyond mere grinding, resulting in a new marketable product with distinct properties. The petitioner highlighted the technical and labor-intensive steps involved in the production process, emphasizing the transformation of soapstone into powder with specific chemical specifications. The petitioner relied on previous favorable decisions by the department and cited legal precedents to support the claim that the process constituted manufacturing.

Issue 2:
The key question was whether the Department could refuse to renew the certificate of entitlement based on a changed opinion regarding the manufacturing process. The petitioner contended that once eligibility was granted, it could not be revoked without valid grounds such as fraud or violation of conditions. The Court, citing a previous judgment, emphasized that a mere change of opinion without evidence of fraud or misrepresentation by the petitioner could not justify the denial of benefits. The Court held that the earlier view supporting the petitioner's eligibility was a valid interpretation, and without any new developments or misconduct on the petitioner's part, the refusal to renew the certificate was unjustified.

Issue 3:
The interpretation of the term 'manufacturing' under Section 2(30) of the Act was crucial in determining whether the process of producing soapstone powder constituted manufacturing. The Court analyzed the definition, which includes any activity resulting in a transformation into a new article with distinct characteristics. The petitioner argued that the process met this definition, citing legal precedents and technical details of the production process. The Court's decision to quash the impugned orders in favor of the petitioner indicated acceptance of the argument that the process qualified as manufacturing under the statutory definition.

Overall, the judgment emphasized the importance of consistency in decision-making by the Department, upheld the petitioner's claim of manufacturing soapstone powder, and directed a reconsideration of the matter in accordance with the law.