2019 (4) TMI 1250 - HC - VAT and Sales Tax

Eligibility certificate - exemption u/s 4-A of the U.P. Trade Tax Act - grant of amended certificate of entitlement pursuant to the provision of Sections 42 of the VAT Act, which enables the continuation of the previous benefit so granted . HELD THAT - Section 42(3)(a) stipulates that those industrial units which was granted benefit of exemption from deduction of tax in view of the earlier Act or under the Central Sales Tax Act may apply to the Commissioner for issue of certificate of entitlement in prescribed form and in prescribed manner. The said provision of the Act nowhere restrict for any grant of certificate of entitlement to those industrial units already availing the benefit under Section 4-A of the Act nor it narrow down the scope for grant of such certificate by the authority so enumerated in the said provision. It only enable the said industrial unit to apply before such authority for the grant of entitlement certificate which is in form of extension of the earlier certificate so granted under the old Act or said to be a recognition of the earlier certificate by the new Act. In the present case, certificate of entitlement was already granted by the Commissioner to the assessee on 10.11.2008, it was the subsequent exemption which was granted by the DLC and additional limit was increased by ₹ 6,48,78,870/- that the assess applied for amended certificate of entitlement. As, DLC has already forwarded the additional grant to the Commissioner, he could have exercised his power under Sub-section 9 of Section 42, which mandates him to amend the certificate of entitlement, and, in case he does not proceed to do so, the assess can file an application. The provisions of Section 42(3)(a) of the Act has to be read in harmony with sub-section (9) of Section 42 of the Act, as word 'may' occurs in sub Section 3(a) of Section 42 of the Act, while the word 'shall' has been incorporated by the Legislature in sub section (9) of Section 42, meaning thereby that the duty is cast upon the Commissioner to amend certificate of entitlement to those industrial units already having been granted the eligibility certificate under Section 4-A by the provisions of the Trade Tax Act, and also the certificate of entitlement - Thus it is clear that provisions of Sub-section 9 of Section 42 are applicable in the present case, and not Sub-section 3(a) of Section 42. Tribunal had rightly directed the Commissioner to grant amended certificate of entitlement to the respondent-dealer, who is entitled for the same and the findings recorded by the Commissioner Commercial Tax in regard to the delay of 8 years, 2 months and 5 days is not sustainable. The question stands answered in affirmative, i.e. in favor of the assessee and against the revenue.

Issues Involved:
1. Justification of the Commercial Tax Tribunal's decision to allow the application for Certificate of Entitlement despite an 8-year delay.
2. Interpretation of Section 42(3)(a) and Section 42(9) of the U.P. Value Added Tax Act.
3. Authority of the Joint Commissioner versus the Commissioner in issuing the Certificate of Entitlement.
4. Condonation of delay in filing the application for Certificate of Entitlement.

Issue-wise Detailed Analysis:

1. Justification of the Commercial Tax Tribunal's Decision:
The Tribunal allowed the application for the Certificate of Entitlement despite an 8-year delay. The Tribunal's decision was based on the interpretation that the delay could be condoned under Rule 70(1) of the U.P. Value Added Tax Rules, which allows the Commissioner to condone delays if sufficient cause is shown. The Tribunal found that the dealer had applied within time to the Joint Commissioner and that the Commissioner should have considered this fact rather than rejecting the application solely on the ground of delay.

2. Interpretation of Section 42(3)(a) and Section 42(9) of the U.P. Value Added Tax Act:
Section 42(3)(a) requires industrial units availing exemption under the erstwhile Act to apply for a Certificate of Entitlement from the Commissioner. Section 42(9) states that if the exemption amount or period changes, the Commissioner shall amend the certificate suo moto or upon application. The Tribunal concluded that Section 42(9) was applicable in this case, meaning the Commissioner had a duty to amend the certificate without waiting for an application. The Tribunal emphasized that the purpose of Section 42 was to ensure continuity of benefits granted under the old Act into the new VAT Act.

3. Authority of the Joint Commissioner versus the Commissioner:
The Tribunal interpreted that under Section 2(g) of the VAT Act, the term "Commissioner" includes the Joint Commissioner. Therefore, the application submitted to the Joint Commissioner was valid. The Tribunal found that the Commissioner should have acted on the application received by the Joint Commissioner instead of rejecting it. The Tribunal also noted that Rule 3(3) allows the Commissioner to delegate powers to the Joint Commissioner, reinforcing the validity of the application submitted to the Joint Commissioner.

4. Condonation of Delay:
The Tribunal ruled that the delay in filing the application should be condoned. It was noted that the dealer had initially applied to the Joint Commissioner within the stipulated time frame. The Tribunal held that the Commissioner should have considered this and either acted on the application or forwarded it to the appropriate authority. The Tribunal cited the Supreme Court's decision in G.P. Ceramics Pvt. Ltd. v. Commissioner of Trade Tax, which emphasized that once eligibility criteria are met, exemption notifications should be construed liberally in favor of the applicant.

Conclusion:
The Tribunal's decision to direct the Commissioner to issue the amended Certificate of Entitlement was upheld. The Tribunal found that the dealer's application was validly submitted within time to the Joint Commissioner and that the delay should be condoned. The Tribunal emphasized the importance of ensuring continuity of benefits under the new VAT Act and interpreted the relevant sections of the Act and Rules in favor of the dealer. The revision was dismissed, affirming the Tribunal's decision and rejecting the Commissioner's findings on the delay.

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