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TMI Blog2011 (6) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... ional authority cannot be sustained. The impugned order of the Tribunal to the extent it upholds the demand for sales tax and interest thereon is confirmed. However, to the extent the impugned order confirms the penalty levied on the petitioner, the same is quashed and set aside. Appeal partly allowed. - Special Civil Application No. 4886 of 2006 - - - Dated:- 24-6-2011 - HARSHA DEVANI (MS) AND CHHAYA R.M., JJ. For the Appellant : K.H. Kaji For the Respondents : Ms. Maithili Mehta, Assistant Government Pleader JUDGMENT :- The judgment of the court was delivered by MS. HARSHA DEVANI J.- By this petition, under articles 226 and 227 of the Constitution, the petitioner has challenged the order dated 10th January, 2006, passed by the Gujarat Sales Tax Tribunal (hereinafter referred to as, the Tribunal ) in Revision Application Nos. 115 and 116 of 2002 (annexure G to the petition). 2. The facts, as appearing in the petition, are that the petitioner is a firm duly incorporated under the provisions of the Indian Partnership Act, 1932 and is engaged in the business of cotton and cotton seeds. The petitioner is a registered dealer as per the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner preferred Revision Application Nos. 115 and 116 of 2002 before the Tribunal. By the impugned order dated January 10, 2006 the revision applications came to be rejected holding that although there was no exemption on cotton in the exemption certificate, the sales tax authorities should not have granted such certificate which was not as per eligibility certificate and, therefore, it defeats the purpose of the scheme. Being aggrieved, the petitioner has filed the present petition. 6. In response to the petition, the respondents have filed an affidavit-inreply controverting the contentions raised in the petition. 7. Mr. K.H. Kaji, learned advocate appearing on behalf of the petitioner, submitted that though the eligibility certificate issued by the respondentauthorities was in respect of both cotton and cotton seeds, the petitioner had filed exemption application only qua cotton seeds and the sales tax authorities had accordingly granted a certificate of exemption only in respect of the cotton seeds. It was submitted that the petitioner had two options before it, either to avail of benefit under the scheme or to avail of benefit under the regular provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail of the benefit of the provisions of section 13 of the Act and sell cotton against form 17B. Thus, the petitioner cannot be saddled with liability for acting in accordance with law by holding it liable for an error on the part of the Government authority. According to the learned advocate the Tribunal had overlooked that there is no monetary loss to the Revenue either on the exemption claimed by the petitioner relying upon their own certificate or on the sale of cotton against requisite forms since the revenue does get tax thereon. In fact, the subsequent purchaser pays more tax on sale in Gujarat since there is price/ value addition to the product. 7.1. It was further submitted that the petitioner is a specified manufacturer only qua the certificate granted by the respondent-authorities. No authority has cancelled the certificate or said that it is wrong. Both, the revisional authority as well as the Tribunal say that the certificate was proper as the application was only for cotton seeds. It was contended that if the certificate is valid and proper, it only covers cotton seeds, in which case the petitioner falls under sub-entry (3) of entry 175 only in relation to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication dated September 26, 1989 sought for exemption only in respect of the one product, viz., cotton seeds. That pursuant to the application, the respondents issued necessary certificate of sales tax exemption under entry 175 of section 49(2) of the Act only in respect of the cotton seeds. It was submitted that the District Industries Centre had issued eligibility certificate to the petitioner for getting benefit of sales tax exemption for two different products, viz., cotton and cottonseeds. However, the petitioner had made the application before the sales tax authority for getting benefit of sales tax exemption only in respect of the cotton seeds. That it was in these circumstances that an exemption certificate had been issued to the petitioner only in respect of the cotton seeds. It was submitted that the petitioner had violated the provisions of condition 9 of entry No. 175 inasmuch as under condition 9 sales of the specified manufacturer are wholly exempted as per sub-entry (3) of the notification and deduction against any of the certificate under sections 12 and 13 or other entries of the notification issued under sub-section (2) of section 49 of the Act cannot be granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or of specified sales or of purchase, from payment of the whole or any part of the tax payable under the provisions of the Act. 11. In exercise of powers under sub-section (2) of section 49 of the Act, the State Government inserted entry 175 granting exemption under section 49(2) of the Act as specified in the said entry. 12. Under sub-clause (3) of entry 175 sales by a specified manufacturer of goods manufactured by him are exempted from the whole of tax payable thereon. The aforesaid exemption is subject to certain conditions. Under condition No. 2 thereof the specified manufacturer should fulfil the conditions specified in annexure 1 thereto. The conditions enumerated under annexure 1 to entry 175, inter alia, provide that the specified manufacturer should establish the new industry in the designated areas. The specified manufacturer should have obtained an eligibility certificate from the Industries Commissioner, or as the case may be, the General Manager of District Industries Centre concerned, stating, inter alia, that the new industry has been commissioned on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsification. 14. Thus, an overall reading of the scheme indicates that the benefit under the scheme is granted to a new industrial unit which has been established during the operative period of the Scheme and commences commercial production during the operative period. In the present case the benefit granted to the new industry is in relation to the sales by the specified manufacturer of the goods manufactured by him. 15. Insofar as the facts of the present case are concerned, the petitioner established a new unit at Manavadar and obtained eligibility certificate in respect thereof under the provisions of the scheme for the benefit to the tune of ₹ 2,41,000/-. The products mentioned in the said certificate were cotton and cottonseeds. Under the terms of the scheme, the petitioner was a specified manufacturer who had established a new industry in terms of the scheme and was certified by the Commissioner of Sales Tax for the said purpose by issuing necessary certificate in this regard. Thus, since the new industry established by the petitioner was granted the benefit to the tune of ₹ 2,41,000/under the eligibility certificate issued by the District Industries Centre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r entry 175 apply to the sales by a specified manufacturer of goods manufactured by him in the new industry, irrespective of whether the manufacturer claims exemption in respect of only one or all the goods manufactured therein. Ultimately, whether the specified manufacturer avails of the benefit of exemption in respect of one product only or in respect of all products manufactured by him, the limit of exemption would remain the same, being based upon the total capital investment made by him in establishing the new industry. 18. It may be noted that the limit of exemption to which a new industry is entitled is of a percentage of fixed capital investment made by it. Whether the petitioner availed of the exemption limit both, in relation to the cotton and cotton seed or only in relation to the cotton seed alone, the limit remains the same. When the manufacturer opts for exemption only qua one product, he avails of exemption to the total extent admissible under the Scheme in relation to one product only. In other words, in the present case the petitioner has availed of the benefit of exemption in relation to cotton seeds alone, nonetheless the limit of exemption is ₹ 2,41,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein both cotton and cotton seeds are manufactured. In the circumstances, the conditions under entry 175 would be applicable to both the products manufactured in the said industry. Thus, by making sale of cotton by availing of benefit of section 13 of the Act, it is apparent that the petitioner has committed breach of condition 9 of entry 175. 20. In the premises aforesaid, the contention that till the exemption certificate has been cancelled by either of the authorities or that till the exemption certificate stands only qua cotton seed, it cannot be said that there is breach of conditions of the notification does not merit acceptance. As noted hereinabove, it is the goods manufactured by the specified manufacturer which are covered under the scheme. It may be that the petitioner, who is a specified manufacturer under the scheme, may have opted to avail of the benefit of sales tax exemption only qua one product, viz., cotton seeds, but that does not mean that qua the other product, i.e., cotton which is also manufactured in the new industry, the petitioner is absolved of the conditions imposed under the scheme. The Tribunal was, therefore, justified in holding that the sale ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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