2017 (6) TMI 1214 - HC - VAT and Sales Tax

Benefit of N/N. 1729/93, as amended - conversion of bones into crushed bones and bone meal - whether the process would amount to manufacture or not? - Jurisdiction of assessing authority - Held that - the authority had power, under the Notification, to grant exemption only in respect of turnover of sale of goods manufactured and sold by a small scale industrial unit in question. The declaration of law by this Court had the effect of rendering the decision of the appropriate authority, illegal, as beyond the jurisdiction conferred on him in terms of the Notification - the action of the Assessing authority, as also the Appellate authorities, under the KGST Act, denying the benefit of exemption to the petitioner, was legal and valid, and the said orders do not require any intervention by this Court in these proceedings under Article 226 of the Constitution of India. The appropriate authority under the Notification, having committed a jurisdictional error in granting a certificate of eligibility, in a case which did not involve a process of manufacture, the said certificate could not have been relied upon to grant an exemption to the petitioner in the instant case. Petition dismissed.

Summary

Issues:
1. Denial of tax exemption to a small scale industrial unit engaged in crushing bones into crushed bones.
2. Interpretation of Notification SRO. No. 1729/93, as amended, for tax exemption eligibility.
3. Validity of Assessing authority's decision to deny exemption despite eligibility certificate.
4. Applicability of Supreme Court decisions on exemption eligibility and assessment process.
5. Jurisdictional error in granting exemption certificate and its impact on assessment.

Analysis:
1. The petitioner, a small scale industrial unit, sought tax exemption under Notification SRO. No. 1729/93 for crushing bones into crushed bones. The General Manager granted an exemption of ?18,18,581 from 2000 to 2007. However, Assessing Officer denied the exemption based on a court decision stating the process did not qualify as manufacturing.

2. The Assessing authority justified denial of exemption, citing the court decision that the process did not meet the manufacturing criteria under the Notification. The petitioner argued that once eligibility was granted, Assessing authorities could not reverse it without canceling the eligibility order. The petitioner faced financial hardship due to potential retrospective tax liability.

3. The High Court noted conflicting views between the exemption order and the court decision on manufacturing. The court held that the Assessing authority's denial of exemption was valid as the eligibility certificate exceeded the authority's jurisdiction. The court found no grounds to intervene under Article 226 of the Constitution.

4. The petitioner relied on Supreme Court cases where eligibility certificates were upheld, and reopening assessments based on manufacturing criteria was deemed impermissible without new evidence. However, the High Court distinguished these cases, emphasizing the Assessing authority's duty to follow court decisions on manufacturing, even if it meant disregarding eligibility certificates.

5. Citing a Division Bench decision, the High Court emphasized that certificates issued beyond jurisdiction were nullities, justifying the Assessing authority's denial of exemption. The court dismissed the writ petition, upholding the Assessing authority's decision and emphasizing the importance of following court interpretations on manufacturing processes for tax exemption eligibility.