2014 (1) TMI 724 - SC - VAT and Sales Tax

Period of liability - Whether the assessee is entitled for an exemption from payment of tax for a period of six years or for a period of five years in view of the location of the industry - Held that - if an industrial unit has obtained an eligibility certificate for exemption from trade tax under the exemption scheme which was in force upto 31.03.1990 and no act of forgery or cheating has been committed in obtaining the certificate or if no conditions of the certificate is violated, then even if the Commissioner has cancelled the certificate in exercise of his powers under Section 4A (3) of the Act, then also the outstanding amount prior to the date of cancellation or modification would be remitted unless the unit has not realized the tax from its customers. The aforesaid circular is binding on the authorities under the Act as noticed by a Constitution Bench of this Court in the case of Collector of Central Excise, Vadodra vs. Dhiren Chemical Industries 2001 (12) TMI 3 - SUPREME COURT OF INDIA - State Government in exercise of its powers has issued a circular which, in our opinion, is binding on the assessing authority. If that is so even after cancellation of the eligibility certificate in the case of the respondent unit, the said unit can certainly claim remission from payment of tax provided it had not realized the same from its customers - assessing authority in fact, had passed an order granting remission of the tax since the assessee had not collected tax from its customers - Decided against Revenue.

Summary

Issues:
Exemption period entitlement based on industry location.

Analysis:
The appeal concerns the entitlement of an assessee to tax exemption for either six years or five years based on the industry's location. The State of Uttar Pradesh had issued an exemption notification, exempting industries in Dadri Tehsil for six years and those in Ghaziabad Tehsil for five years from trade tax payment. The respondent, an industrial unit in Ghaziabad, sought an extension from five to six years by obtaining a certificate from the Divisional Level Committee. However, the Commissioner of Trade Tax canceled the certificate, leading to a series of legal challenges by the appellant.

The respondent argued that despite the cancellation, they were eligible for tax remission under Section 4A(3) of the Act and a circular issued by the State Government in 1994. The circular allowed remission if no forgery or violation occurred in obtaining the certificate. The Tribunal and High Court upheld the respondent's claim for remission as the unit had not collected tax from customers, in line with the circular and legal provisions.

The Supreme Court affirmed the lower courts' decisions, stating that the circular was binding on the assessing authority. The Court emphasized that even after the certificate cancellation, the unit could claim remission if tax collection from customers had not occurred. The assessing authority had already granted remission due to non-collection of tax, further supporting the respondent's position. Consequently, the Court dismissed the civil appeal, finding no error warranting interference under Article 136 of the Indian Constitution.

The judgment sets a precedent for cases involving tax exemption eligibility based on industry location and the application of circulars issued by State Governments in tax matters. It underscores the importance of adherence to legal provisions and circulars in determining tax liabilities and remissions, ensuring fair treatment for taxpayers.