2016 (9) TMI 465 - HC - VAT and Sales Tax

Issuance of eligibility certificate - manufacture of cattle feed - tax incentives - Section 13-B of the Haryana General Sales Tax Act, 1973 - eligibility certificate - Rule 28-A of the Haryana General Sales Tax Act, 1973 - eligible industrial unit - Rule 28-A(2)(f) of the Rules - notional sales tax liability - Rule 28A (2)(n) of the rules - negative list not entitled to the benefits - benefit of purchasing raw material without payment of tax - tax free goods - Rule 28A(4)(a) of the rules - Held that - neither the product being manufactured by the petitioner, namely, cattle feed, nor the unit engaged in manufacturing of tax free products, is mentioned in the nagative list under sub-rule 5 of Rule 28A of the rules. Meaning thereby there is no bar as such to issue eligibility certificate to a unit engaged in manufacture of cattle feed or for that matter any product which may be tax free on the date. The eligibility certificate is issued, in case specifically not mentioned in the negative list. The quantum of benefit or type of benefit which the industrial unit may avail after issuance of eligibility certificate is a stage subsequent to the issuance thereof. As has already been referred to by the petitioner that in terms of notification issued by the Government, an eligible industrial unit availing exemption from payment of tax may be entitled to purchase goods without payment of tax. In the overall scheme, the object may be to promote industrialisation. This Court is not opining on the issue as to whether the petitioner will be entitled to any benefit and how the benefit, if any available, under the Rules will be calculated, as this is not the stage for that as only issue under consideration before this Court is as to whether the petitioner can be denied issuance of eligibility certificate. The rejection of the case of the petitioner for issuance of eligibility certificate merely on the ground that the petitioner is manufacturer of tax free goods cannot be legally sustained. Petition allowed - issuance of eligibility certificate granted - decided in favor of petitioner.

Issues Involved:

1. Challenge to the orders passed by the Lower Level Screening Committee and the Higher Level Screening Committee.
2. Eligibility for tax incentives under the Haryana General Sales Tax Act, 1973 and Rules, 1975.
3. Definition and interpretation of "eligible industrial unit" and "notional sales tax liability".
4. Relevance of the product being tax-free in determining eligibility for tax incentives.
5. Procedural aspects and communication related to eligibility certificates.

Issue-wise Detailed Analysis:

1. Challenge to the Orders Passed by the Committees:

The petitions challenge the orders passed by the Lower Level Screening Committee and the Higher Level Screening Committee, which rejected the petitioner's application for an eligibility certificate under the Haryana General Sales Tax Rules, 1975.

2. Eligibility for Tax Incentives:

The petitioner, a partnership firm engaged in the manufacture of cattle feed, contends that it is eligible for tax incentives under Section 13-B of the Haryana General Sales Tax Act, 1973. The unit commenced commercial production on 23.5.1996 and applied for an eligibility certificate on 19.8.1996. The Lower Level Screening Committee rejected the application on 28.10.1997, and the Higher Level Screening Committee upheld this decision on 18/19.6.2001, communicated to the petitioner on 3.10.2001.

3. Definition and Interpretation of "Eligible Industrial Unit" and "Notional Sales Tax Liability":

The petitioner argues that the rejection is contrary to Rule 28-A(2)(f) and Rule 2(n) of the Rules. The product manufactured by the petitioner is not on the negative list, and even if the product is tax-free, the petitioner should be entitled to purchase raw materials without tax. The petitioner refers to a communication dated 1.3.1993 from the Excise and Taxation Commissioner, which was later superseded by a communication dated 31.7.1997.

4. Relevance of the Product Being Tax-Free:

The State argues that the purpose of the Rules is to exempt payment of sales tax on goods manufactured by an industrial unit. Since the petitioner's product is tax-free, issuing an eligibility certificate is futile. The benefit of exemption from purchase tax is only for units whose products are taxable.

5. Procedural Aspects and Communication Related to Eligibility Certificates:

In CWP No. 11835 of 2000, the State argues that the petitioner did not challenge the clarification provided on 31.7.1997, making the petition non-maintainable. The petitioner counters that the clarification was not in response to their request and was not communicated to them.

Judgment:

The Court finds merit in the petitions and quashes the orders of the Lower Level Screening Committee and the Higher Level Screening Committee. The Court holds that the rejection of the eligibility certificate based on the petitioner manufacturing tax-free goods is not legally sustainable. The authorities are directed to issue the eligibility certificate to the petitioner.

Conclusion:

The Court concludes that the petitioner is entitled to an eligibility certificate despite manufacturing tax-free goods, as the product is not on the negative list and the scheme does not bar issuance of the certificate to such units. The authorities are directed to comply with this judgment.

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