9911796707
TMI Blog1988 (2) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... n entitled him to such deduction. The petitioner No. 1 carried on the said new business during the period from 1st April, 1981 to 31st March, 1982 and incurred loss of Rs. 1,02,639.82. Thereafter during the financial year 1982-83, the said small-scale industrial unit had to be closed and also the capital assets had to be sold. The petitioner No. 1 claims that it was entitled to the renewal of the eligibility certificate for the period from 1st April, 1981 to 31st March, 1982. It applied for such renewal and the application was rejected by an order dated 28th December, 1984 by the Assistant Commissioner of Commercial Taxes (South Circle). The petitioner thereafter applied for revision. By an order dated 18th November, 1986, the Additional Commissioner of Commercial Taxes upheld the said order dated 28th December, 1984 and rejected the revision petition on the ground that the said new unit had been closed down during the subsequent year and as such the incentive had lost its purpose. The petitioners have come up before this Court claiming that the said decisions are both liable to be quashed as they were made on extraneous grounds which did not subsist during the relevant period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be granted on application and shall be valid for a period not exceeding twelve months from such date as may be specified therein, but may, at the discretion of the authority granting the certificate, be renewed from time to time for a period not exceeding twelve months at a time: Provided that the certificate of eligibility shall not be granted or renewed if the dealer sells any capital assets otherwise than in the ordinary course of business, violates any conditions referred to in subclause (i), or does anything which adversely affects the economic viability of the newly set up industry. (iii) The authority granting the certificate of eligibility referred to in sub-clause (ii) may, for good and sufficient reasons to be recorded in writing and after giving the holder of such certificate a reasonable opportunity of being heard, declare such certificate invalid from such date as he may specify. (iv) A dealer shall apply for a certificate of eligibility on or before the 14th April, 1983, or for renewal thereof ordinarily within a month from the date from which such certificate is required to be (......) renewed for the purpose of this rule. Provided that only a registered deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner does not seem to have violated any condition specified in law; instead, the, petitioner's business admittedly had to be closed down for incurring loss of a large amount during the period for which renewal of eligibility certificate was sought. ......The petitioner could not deny that they incurred a loss from their business during the period for which renewal of eligibility certificate was sought and incurring of that loss ultimately forced them to close down their business in the year immediately after 3 1st March, 1982. So the closure of business was not an abrupt incident, the event taking place even prior to the period for which renewal was sought or during the period even when there was indication that the unit had been losing its economic viability and taking a definite turn for ultimate closure of the business. ......There is no denying the fact that if the petitioner had incurred any loss it was due to own contribution in managing the force of the business which led to not only closure of the business but to sell out of entire plant and machinery ultimately.............At the time of the hearing of the petitioner's application for renewal when the Assistant Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the earlier year charged sales tax. On a writ petition: Held accordingly, that the mere fact that the petitioner was refused a certificate in the first year on the ground that it had realised sales tax in respect of sales of the newly set up small-scale industrial unit did not make the petitioner ineligible for a certificate for all time to come." Rule 3(66a) is substantially identical in terms with rule 3(66), so far as the provisions relevant for this application are concerned. The above case therefore is an authority for the proposition that eligibility certificate may be granted under rule 3(66a) (of course on satisfying the requirement thereof for the relevant period) even if the petitioner was disqualified during the earlier period due to collection of sales tax. In my opinion, relying on the said judgment and also for the same reasons it can equally be said that if the petitioner was qualified for grant of eligibility certificate during a particular period during which he had complied with all the requirements for the grant of such certificate, then he cannot be refused the grant of eligibility certificate merely on the ground that he became disqualified on a late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the sales made by him during the period for which he claims exemption. This benefit operates as a benefit to the dealer inasmuch as he can offer his products at a lower or competitive rate. But at the same time if a dealer in view of the tax holiday granted by the said rule does not collect sales tax and also complies with other requirements of the rules, then and in that event if he is ultimately required to pay sales tax, simply because the undertaking faced a closure, later on due to reasons beyond his control, then it will operate very harshly upon the dealer and the whole intention of giving incentive to newly set up industrial units will be frustrated. Moreover, the rule itself provides that the application for renewal of E.C. has to be made within a month from the date from which such certificate is required to be renewed. The said rule also provides that the authority granting the certificate of eligibility has the power to declare the certificate invalid from such date as the authority may specify. A certificate already granted for a period of twelve months may be declared as invalid from a particular date apparently on the ground of non-compliance with requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refused in the event of violation of the condition laid down in the notification itself read with the provisions of section 4-AA of the Act. Cancellation of eligibility certificate for good and sufficient reasons did not envisage cancellation on any other consideration but on the basis of conditions laid down in the notification." In that case as the departmental authorities in refusing to grant the eligibility certificate considered extraneous matter, they were directed to consider the matter afresh and the order as passed by the authority and the earlier order were quashed and set aside. The learned counsel appearing on behalf of the sales tax authorities submitted that the benefits under rule 3(66) of the Bengal Sales Tax Rules, 1941 were granted with the object that the Government will give this benefit to newly set up small-scale industry during the first few years so that ultimately that will grow up and will pay greater taxes to the sales tax authorities. No doubt the rule gives incentive in the shape of tax few years as specified but that is with the object to enable them to grow up in the face of competition. If such benefit is given to, let us say, 100 such industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that renewal has to be granted to an industry which can continue as economically viable. That, I am afraid, is not the provision of the statute. His Lordship further held that the subsequent closure of the business was held by the Assistant Commissioner of Commercial Taxes to be a good ground for declining renewal. It is regrettable that the two earlier judgments in the case of Dwarkesh Engineering Works [1987] 65 STC 37 (Cal) and Shri Shiv Kumar Bajaj [1986] 63 STC 354 (Cal) do not appear to have been cited before His Lordship. In my opinion when the statute itself provides the circumstances under which the renewal of a certificate may be refused, then the existence of such circumstances is necessary in order to bring up this disqualification. Furthermore, since the statute itself provides for certificate for split periods not exceeding 12 months and since the statute also provides for declaration of the certificate as invalid on and from a particular date, the whole scheme of the rule is to give the tax benefit during the period until which, such act of disqualification is not committed and to withdraw the said benefit on and from the date such act of disqualification is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing and an interpretation of this nature will lead to serious prejudice to the small-scale units who relying on the provisions of rule 3(66), do not charge or collect any sales tax from their purchasers. A refusal to renew the E.C. on the ground of subsequent closure will visit the dealer with liability to pay sales tax even for the period he did not collect any such sales tax from his customers and even though he was fully qualified for the grant thereof during the earlier period. Such a situation is not conceived by the said rule. The impugned orders were on the basis of subsequent closure, though the application related to the earlier period. In my opinion the said impugned orders were made on the basis of totally extraneous matters, which were not relevant for consideration. In that view of the matter the impugned order dated 18th November, 1986 passed by the Additional Commissioner, Commercial Taxes, West Bengal, as also the order dated 28th December, 1984 passed by the Assistant Commissioner, Commercial Taxes, are quashed and the Assistant Commissioner is directed to pass a fresh order in accordance with law. If the petitioner fulfilled all the conditions contained in rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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