2012 (8) TMI 877 - HC - VAT and Sales Tax

Eligibility to sales tax exemption for seven years - whether eligibility certificate once granted on formation of a bona fide opinion on a debatable issue can be cancelled by changing the opinion? Held that - Eligibility certificate once granted can be cancelled only if there is violation of any condition or information furnished was found to be false or if certificate was obtained by fraud or misstatement or suppression. The impugned order does not show either the allegation of fraud, misrepresentation or suppression on the part of the petitioner nor violation of any of the condition of the eligibility. Only ground on which eligibility certificate has been terminated is the change of opinion as to the eligibility of the petitioner to get the benefit. This course is clearly ultra vires the power conferred under clause 12 of the 2005 Order. The issue is debatable and as per opinion earlier formed by the Department, the petitioner was eligible. No subsequent development or suppression or misrepresentation by the petitioner has been pointed out. In these circumstances, the impugned orders cannot be sustained. W.P. allowed.

Summary

Issues:
Quashing of order withdrawing sales tax exemption based on change of opinion regarding manufacturing activity eligibility.

Analysis:
The petitioner, engaged in manufacturing lubricating and fuel oil from used oil, sought quashing of orders withdrawing sales tax exemption. The petitioner received an eligibility certificate in 2007, granting benefits until 2013. However, the Director of Industries withdrew the exemption in 2008, citing non-manufacturing activity. The petitioner challenged this decision, emphasizing that the process involved manufacturing. The court noted the specific refining steps involved in the process and the distinction between raw materials and finished products. The Commissioner of Taxes relied on a previous judgment stating that certain conversions did not constitute manufacturing.

The key question was whether an eligibility certificate, granted based on a bona fide opinion, could be revoked due to a change in opinion. The court examined Clause 12 of the Assam Industries Order, which allowed cancellation only for specific reasons like fraud or violation of conditions. As no fraud or violation was proven, the court held that revocation based solely on a change in opinion was beyond the Order's scope. The court did not delve into the manufacturing debate, as the petitioner had acted based on the initial favorable opinion. Consequently, the court quashed the impugned orders, allowing authorities to proceed lawfully.

In conclusion, the judgment focused on the legality of revoking an eligibility certificate based solely on a change in opinion, emphasizing the need for specific grounds like fraud or violation for cancellation. The court's decision highlighted the importance of upholding legal principles and ensuring fair treatment in administrative decisions.