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TMI Blog2005 (8) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhra Pradesh, Industries and Commerce Department to effectuate the liberalized State incentive scheme for setting up new industries as introduced by the Government in 1989. The package of incentives already granted by the State Government was reviewed whereafter the State Government decided to introduce certain modifications in order to accelerate industrial development in the State. The incentives were granted on the basis of Districts according to their grouping under areas I, II and III. We are concerned with District Medak, falling within area II. 3. Apart from an investment subsidy, rebate on electricity charges and a deferment/tax holiday on sales tax for specified periods on products manufactured in the new industrial units were granted in Clauses 5(c) and 5(b) respectively of the 1993 G.O. Medium and large scale industries were given sales tax deferment, whereas tiny and small scale industries were given a sales tax (holiday) exemption. The appellant falls within the latter category. In terms of the 1993 G.O. units like the appellant's were given a 5 years sales tax holiday subject to a ceiling of hundred per cent of fixed capital costs or Rs. 35 lakhs whichever was less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 35 lakhs under the Scheme. A temporary eligibility certificate was then issued to the appellant on 22nd August, 1995 by the District Industries Centre. This was made conditional on the SSI unit not collecting Sales Tax from its consumers during the period of exemption. If it did, it would be liable to remit the sales tax collected to Government. 8. Under cover of a letter from the Commissioner of Industries dated 10th August 1996, a final eligibility certificate was granted to the appellant certifying the eligibility of the appellant for sales tax exemption. It may be mentioned here that the final eligibility certificate was issued with the sanction accorded by the State Level Committee/District Level Committee. A copy of the covering letter was forwarded to the Commissioner of Commercial Taxes, the concerned Commercial Tax Officer and the Deputy Commissioner Commercial Taxes, Hyderabad. 9. The Commissioner of Commercial Taxes in his turn wrote to the Deputy Commissioner Commercial Taxes Hyderabad, the respondent No. 4 before us, (referred to in brief as DCCT) requesting him to permit Sales Tax exemption by the appellant in accordance with the 1993 G.O. saying that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the procedure prescribed under that Act. The details of the processes undertaken in producing the products were also given. It was also drawn to the attention of the DCCT that the authority to determine the eligibility under the G.O. Ms. was not the Commercial Taxes Department, but the Department of Industries Commerce. 13. Subsequently, the appellant filed a writ petition in the Andhra Pradesh High Court for a declaration that the appellant was entitled to the benefits notified by the 1993 G.O. and that the pre-revision show cause notices issued by the DCCT for the years 1995-1996 up to the 1999-2000, were illegal, void and unenforceable. 14. During the pendency of the writ proceedings on 21st January, 2003 the DCCT passed an order confirming the demand proposed to be raised in the show cause notices. The DCCT held that process of refilling anhydrous ammonia into cylinders did not amount to a manufacturing activity. He held that the State Government had issued a Memo dated 8-2-2000 declaring that LPG bottling units were not eligible for any Sales Tax incentive as no manufacturing activity was involved. Accordingly the DCCT issued demand notices for recovery of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions under which the eligibility certificates both temporary and final had been issued. 17. Mr. Rakesh Dwivedi, learned Senior Counsel appearing on behalf of the respondents has said that manufacture for the purpose of the sales tax does not include repackaging, rebottling etc. This has been so held in Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes) v. M/s. PIO Food Packers [8](1980) Suppl. SCC 174. Therefore, it was contended, if the commodity remains the same then irrespective of the process, it would not amount to manufacture. This was a patent error which was correctible under Section 20 of the State Sales Tax Act. Countering the appellants' submission for a liberal construction, it is argued that since an exemption was sought to be claimed, the language would have to be strictly construed. The list of ineligible industries in Annexure I to the 1993 G.O. did not, according to the respondents, give rise to any presumption that the process carried on by the industries excluded, indicated what was manufacture for the purpose of the 1993 G.O. The list merely excluded certain industries altogether to avoid controversy. The learned Counsel conceded that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity". In the result it was held : "that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans there is no consumption of the original pineapple fruit for the purpose of manufacture. The case does not fall within Section 5A(1)(a) of the Kerala General Sales Tax Act". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant and had separately notified the appellants eligibility for exemption under the 1993 G.O. In these circumstances the DCCT certainly could not assume that the exemption was wrongly granted nor did he have the jurisdiction under Section 20 of the State Act to go behind the eligibility certificate and embark upon a fresh enquiry with regard to the appellant's eligibility for the grant of the benefits. The counter affidavit filed by the respondents-sales tax authorities is telling. It is said that the Sales Tax Department had decided to cancel the eligibility certificates for sales tax incentives. As we have said the eligibility certificates were issued by the Department of Industries and Commerce and could not be cancelled by the Sales Tax Authorities. [See in this connection : Apollo Tyres v. CIT, Kochi, (2002) 9 SCC 1). 23. There is another reason why the action of the DCCT cannot be upheld. The primary facts relating to the processes undertaken by the appellant at its unit were known to the Department of Industries and Commerce and the DCCT. The only question was what was the proper conclusion to be drawn from these. The Department of Industries and Commerce whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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