2016 (4) TMI 271 - SC - VAT and Sales Tax

Cancellation of eligibility certificate - Misutilisation - Section 4A(3) of U.P. Trade Tax Act - Held that - it is clear from Section 4A(3) ibid that power can be exercised by the Commissioner to cancel the eligibility certificate only when misuse of the certificate is found in any manner whatsoever. It is found that in the show cause notice there was no allegation of misuse of eligibility certificate which was granted to the respondent. On the contrary, the case was sought to be made out that the eligibility certificate itself was granted wrongly, inasmuch as the Unit has installed a second hand Pouch Sealing Machine purchased from M/s. Gorakhpur Grah Udyog Kendra, Gorakhpur. In these circumstances, it is opined that the High Court has rightly held that this fact was known to the appellant when the eligibility certificate was granted and there was no misrepresentation. In any case, no case was set up by the appellant in the show cause notice that there was misuse of the eligibility certificate. Therefore, it could not have been cancelled in exercise of powers confirmed under Section 4A(3) of the Act. - Apex court dismissed the appeal

Summary

Issues:
1. Interpretation of Section 4A(3) of the U.P. Trade Tax Act regarding cancellation of eligibility certificate for tax exemption.
2. Allegation of misuse of eligibility certificate.
3. Validity of show cause notice for cancellation of eligibility certificate.
4. Consideration of misrepresentation in granting the eligibility certificate.

Analysis:
1. The judgment revolves around the interpretation of Section 4A(3) of the U.P. Trade Tax Act, which empowers the Commissioner to cancel an eligibility certificate if misuse is found. The Court emphasized that the power to cancel the certificate can only be exercised when misuse is established unequivocally.

2. The case involved an allegation of misuse of the eligibility certificate granted to the respondent. However, the Court noted that the show cause notice did not specifically accuse the respondent of misusing the certificate. Instead, it questioned the validity of the certificate itself due to the purchase of a second-hand machine. The Court concluded that without a clear allegation of misuse, the certificate could not be cancelled under Section 4A(3).

3. The validity of the show cause notice was a crucial point of contention in the case. The Court highlighted that the notice did not raise any concerns about the misuse of the eligibility certificate. As a result, the Court held that the notice was deficient in establishing the grounds required for the cancellation of the certificate under Section 4A(3).

4. The judgment also addressed the issue of misrepresentation in the grant of the eligibility certificate. The Court observed that there was no misrepresentation involved in the case, as the circumstances surrounding the purchase of the machine were known at the time of granting the certificate. Therefore, the Court affirmed that the absence of misuse allegations and misrepresentation meant that the cancellation of the certificate was unwarranted.

In conclusion, the Court found the appeal to be without merit and dismissed it based on the lack of evidence supporting the cancellation of the eligibility certificate under Section 4A(3) of the U.P. Trade Tax Act.