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TMI Blog2016 (7) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act ('the Sales Tax Act' for short). 4. The appellant had got itself registered as a certified manufacturer of oil with the Gujarat Khadi Gramodhyog Board ('the Board' for short). The Board issued a certificate of eligibility to the appellant, covering period between 17.06.2005 to 16.06.2008. Based on such eligibility certificate issued by the Board, the appellant was also granted certificate of exemption by the Assistant Commissioner of Sales Tax in prescribed format as per Entry 74 of Schedule 1 of the Sales Tax Act. The appellant was simultaneously issued certificate in the prescribed form under Entry 95 of the exemption notification issued by the Government under section 49(2) of the Sales Tax Act. This would mean that the appellant was entitled to make purchases of the raw material without payment of sales tax. 5. The VAT Act was activated with effect from 01.04.2006 and with that, the State Government rescinded all exemption notifications issued under the Sales Tax Act. On 18.08.2006, the State Government issued a fresh exemption notification under the VAT Act concerning certain specified industries which did not include the industry in which the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstituted VAT Act would be either a legislative function by issuance of notification in exercise of power conferred under the statute, or it would be a matter of policy to be decided by the respondent Government as to how the benefit of exemption should be extended, for which, while substituting the VAT Act, the entries have been deleted and some of the entries are specified, it may not be proper for this court to issue directions granting the reliefs as prayed for regarding the exemption under the newly substituted VAT Act. However, it will be open for the petitioners to apply to the respondent Government by making a representation highlighting the fact that the industries are established under the KVIC Act and also the new scheme also has the same object of development and therefore the core idea remains the same for which the benefit of exemption granted earlier should also continue and it will be for the respondent Government to decide it afresh in accordance with law." 7. On 27.02.2009, the State Government issued a notification authorizing the Commissioner to grant refund to certified manufacturer of tax charged by a registered dealer from whom he has purchased the goods sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whichever event occurs earlier. (4) The refund of tax shall be granted only for the purchases used in manufacture of specified goods sold within the time limit mentioned in condition 3(3). (5) The tax credit shall not be admissible for the purchases for which refund of tax is granted. (6) The Certified manufacturer shall furnish the detail of tax invoices of the purchases for claiming the refund of tax alongwith the application. (7) The certified manufacturer shall use the goods so purchased for which refund of tax is claimed, in his manufacturing unit situated in the State as raw materials for the manufacture of specified goods or as packing materials in the packing of goods so manufactured. (8) If the certified manufacturer contravenes any of the conditions of this notification or any of provisions of the Act or the rules made in this behalf, the certificate issued to him by the Commissioner shall be liable to be cancelled and on such cancellation, the benefit granted under this notification shall cease to have effect from the date of such contravention. (9) He certified manufacturer shall make an application for refund of tax to the concerned Commercial Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitlement certificate granted to the appellant for the period after 17.06.2008 was therefore required to be canceled. The appellant was called upon to show cause why action should not be taken accordingly. 11. The appellant replied to the show cause notice under letter dated 04.01.2013 and raised two main contentions. First contention of the appellant was that as per the plain terms of the exemption notification, the case of the appellant was covered. According to the appellant, extension of registration by the Board would be sufficient for the appellant to claim benefit of exemption. The second contention of the appellant was that in any case, the VAT department had granted such benefits by issuing entitlement certificates and the same cannot be withdrawn with retrospective effect. 12. The Commissioner of Commercial tax however by the order dated 12.02.2014, withdrew the benefits of exemption in case of the appellant after 17.06.2008. He was of the opinion that the Government scheme for exemption would be available only till the validity of the registration certificate issued by the Board prior to 01.04.2006. Any renewal or extension thereafter would not entitle the dealer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Kishorkumar Prabhudas Tanna (supra), the learned counsel contended that the judgment did limit the power of the Government to grant such exemption. This was so held by the Division Bench in judgment dated 29.04.2011 in Special Civil Application No.1863 of 2011 in case of Janseva Khadi Gramodhyog Sangh v. State of Gujarat & Ors. Counsel submitted that the authorities therefore committed a serious error in withdrawing the exemptions already granted to the assessees. 17. Counsel further submitted that in any case, the eligibility certificate which was already granted by the department on the basis of its understanding of the said notification could not have been withdrawn with retrospective effect. The departmental authorities did not possess any such powers. Even otherwise such retrospective portion of the order would cause immense prejudice to the assessees since the Value Added Tax being an indirect tax, if the same was payable, would have been passed on to the consumers. 18. Counsel relied on following judgments to contend that the benefits already granted could not have been withdrawn with retrospective effect. * In case of Birla Jute And Industries Ltd. v. State of M.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and even exhausted the exemption limit by 31.10.1986 and thereafter started collecting sales tax from its customers and paid the same over to the State Government. By amending those eligibility/exemption certificates in the year 1990, what the respondents have done is to purport to give retrospective effect to those amendments and take away the benefits which were already vested in the petitioner. The respondents could not have done so without inviting the charge of arbitrariness and unfairness violative of the petitioner's fundamental right under Article 14 of the Constitution. The petitioner is, therefore, entitled to succeed." 19. On the other hand, learned AGP Mr.Tirthraj Pandya opposed the appeal and the petitions contending that this Court in case of Kishorkumar Prabhudas Tanna (supra) had already turned down the challenge of the assessees against the withdrawal of the exemption. The Court in case of Janseva Khadi Gramodhyog Sangh (supra), nowhere held that the notification dated 27.02.2009 granted exemption to all existing industries for all times to come till the eligibility certificates were valid. Plain language of the exemption notification would not permit such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gujarat Value Added Tax Act. This, by no means, was to limit the Government's discretion of granting fresh exemptions on such conditions, as found necessary. In fact, the Government itself came up with a fresh set of Circulars; particularly the Circular dated 9th March 2009. Under such circular, the Government envisaged exemption from payment of Value Added Tax on fulfilling conditions laid down therein." 22. This judgment however, did not involve the question of the interpretation of the said exemption notification and merely recognized the right of the Government to grant exemption even after the judgment of the High Court in case of Kishorkumar Prabhudas Tanna (supra). 23. With this background, we may refer to the relevant portion of the said notification dated 27.03.2009. This notification envisages grant of refund to the certified manufacturer amount of tax separately charged by a registered dealer from whom he has purchased the goods subject to certain conditions. Para 1 refers to the eligibility and provides that a registered dealer who is manufacturer of a specified goods and who has obtained eligibility certificate prior to 01.04.2006 from Khadi Commissioner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid judgment. In other words, instead of leaving the application of the High Court judgment to individual officers of the Commercial Tax department and thereby leaving scope for different understanding and application of the judgment, the Government issued the said notification and provided for uniform exemption in cases of those manufactures who had been already granted eligibility certificate by the Board or the Commission prior to 01.04.2006 and on the basis of which Commissioner of commercial tax had granted exemption certificate. This was in consonance with the judgment of this Court in case of Kishorkumar Prabhudas Tanna (supra). 26. It is true that this notification does not specifically provide that such exemption would not continue after the expiry of the period of initial eligibility of the certificate issued prior to 01.04.2006. However, various terms of the notification when read as a whole and interpreted conjointly, would lead to an inescapable conclusion that the notification never meant to continue the exemption in perpetuity upon mere renewal of eligibility certificate by the Khadi Commissioner or the Khadi Board. For example, the very first paragraph of the notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority on the basis of which, the Commissioners had also granted exemption certificates. Though, we have held that the notification dated 27.02.2009 did not envisage grant of exemptions after expiry of the initial period of eligibility either in original or under renewal as per the eligibility certificate which a dealer would be enjoying as on 01.04.2006, the question of withdrawing such benefits once granted even if under erroneous belief, would stand on a different footing. We have noticed that in these very cases after completion of period of eligibility, the same were extended or renewed by the Khadi Commissioner or Khadi Board, as the case may be, and on the basis of which, the department had also renewed exemption certificates and issued certificates of entitlement. On the basis of such certificates, the assessees would naturally have been granted the benefit of exemption. For various reasons, it would not be open for the department to withdraw the same. First and foremost, we have serious doubt about the very power of the authority to suomotu recall such exemption certificates. The notification itself makes no such reference. Para No.8 of the notification envisages cancella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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