2011 (9) TMI 768 - HC - VAT and Sales Tax

Certificate of entitlement - Following a notice to show cause dated November 20, 2008, the Joint Commissioner of Sales Tax by his order dated February 16, 2009 deleted ab initio the aforesaid two products from the certificate of entitlement on the ground that the activity of producing standardized milk and cow s milk from raw milk did not constitute a manufacturing activity - Tribunal was justified in holding that the cancellation of the certificate of entitlement shall take effect prospectively from the date of the order that was passed by the Commissioner of Sales Tax on February 16, 2009 cancelling the certificate of entitlement - Application is dismissed

Summary

Issues:

1. Validity of cancellation of certificate of entitlement for standardized milk and cow's milk.
2. Retroactive vs. prospective effect of cancellation.
3. Interpretation of section 41C of the Bombay Sales Tax Act, 1959.

Issue 1: Validity of cancellation of certificate of entitlement for standardized milk and cow's milk:

The Commissioner of Sales Tax granted a certificate of entitlement to the assessee for various products, including standardized milk and cow's milk. However, the Joint Commissioner of Sales Tax later deleted these two products from the certificate on the basis that producing them did not constitute a manufacturing activity. The Tribunal, in an appeal by the assessee, agreed that the cancellation was justified but ruled that it should only be prospective from the date of the Commissioner's order. The High Court upheld this decision, emphasizing that the cancellation was in line with the relevant provisions and that no question of law necessitated a reference under section 61 of the Act.

Issue 2: Retroactive vs. prospective effect of cancellation:

The Tribunal's decision to make the cancellation of the certificate of entitlement for standardized milk and cow's milk prospective from the date of the Commissioner's order was deemed appropriate by the High Court. This ruling was based on the provisions of section 41C of the Act, which state that upon cancellation, the unit ceases to be eligible for tax exemptions from the date of cancellation. Therefore, the retrospective effect was not warranted, and the Tribunal's decision was upheld.

Issue 3: Interpretation of section 41C of the Bombay Sales Tax Act, 1959:

Section 41C of the Act provides for the cancellation of a certificate of entitlement if it is found to be inconsistent with the provisions of the Act or relevant schemes. The High Court reiterated that the cancellation should take effect prospectively from the date of the Commissioner's order, as stipulated in the Act. This interpretation guided the decision to dismiss the application and confirmed the Tribunal's ruling on the matter.

This detailed analysis of the judgment highlights the key issues addressed by the High Court regarding the cancellation of the certificate of entitlement for standardized milk and cow's milk, the effect of the cancellation, and the interpretation of the relevant statutory provisions under the Bombay Sales Tax Act, 1959.