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2000 DIGILAW 804 (PNJ)

Shanti Yarns Pvt. Ltd. v. State Of Haryana

2000-07-27

G.S.SINGHVI, NIRMAL SINGH

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Judgment G.S.Singhvi, J. 1. Whether the eligibility certificate granted to the petitioner under Rule 28A(2) read with Rule 28A(5) of the Haryana General Sales Tax Rules, 1975 (for short, "the Rules") could be withdrawn by the Lower Level Screening Committee without complying with the rule of audi alteram partem is the main issue which arises for determination in this petition filed under Article 226 of the Constitution of India. 2. The petitioner is engaged in the manufacture and sale of shoddy yarn, worsted yarn and acrylic yarn in the industrial unit set up by it at Kabari Road, Panipat. In 1995-96, it applied for grant of eligibility certificate under Rule 28A(5)(a) of the Rules. The General" Manager, District Industries Centre, Panipat, issued eligibility certificate vide letter annexure P-2 dated May 21, 1996 entitling the petitioner to claim tax exemption to the tune of Rs. 41,66,887. Thereafter, the Deputy Excise and Taxation Commissioner, Panipat, issued exemption certificate, annexure P-3. However, just after issuance of eligibility and exemption certificates, the Lower Level Screening Committee took a decision to withdraw eligibility certificate on the ground that the petitioner had set up the industry without obtaining permission for change of land use. 3. The petitioner challenged the decision of the Lower Level Screening Committee by filing an appeal which was dismissed by the Higher Level Screening Committee on the ground that it has failed to submit the change of land use permission/NOC from the Town and Country Planning Department. 4. In the meanwhile, the Excise and Taxation Officer-cum-Assessing Authority, Panipat, issued notice annexure P-5 to the petitioner to deposit tax in accordance with Sub-rule (8)(b) of Rule 28A of the Rules and vide order dated June 10, 1997, he held the petitioner liable to pay tax for the assessment years 1995-96 and 1996-97. 5. In the writ petition, it has been averred that the decision of the Lower Level Screening Committee to withdraw the eligibility certificate is vitiated due to violation of the rule of hearing and also on the ground that it is ultra vires to the provisions of Rule 28A(8) of the Rules, The decision of the Higher Level Screening Committee has been challenged on the ground of arbitrariness, non-application of mind and on the ground that it does not satisfy the test of a speaking order. 6. 6. The respondents have justified the decision of the Lower Level and Higher Level Screening Committees as well as the orders passed by the Assessing Authority on the premise that the petitioner was not eligible to get eligibility and exemption certificates. In paragraph 17 of the written statement, it has been averred that the petitioner had not produced no objection certificate from the concerned authority of the Town and Country Planning Department permitting the change of land use and, therefore, eligibility certificate could not have been issued in its favour. 7. Shri D.D. Verma referred to Section 13B of the Haryana General Sales Tax Act, 1973 (for short, "the Act") and Rule 28A of the Rules and argued that the decision of the Lower Level Screening Committee should be declared as void on the ground of violation of the rules of natural justice. He submitted that before deciding to withdraw the eligibility certificate, the Lower Level Screening Committee did not give any notice or opportunity of hearing to the petitioner. Learned counsel argued that even in the absence of any statutory embodiment of the rules of natural justice, the Lower Level Screening Committee was under an obligation to comply with the basis of natural justice before it could take a decision adversely affecting the petitioner. He then argued that the impugned decision should be quashed because the non-production of CLU/NOC is not one of the grounds mentioned in Rule 28A(8) for withdrawal of the eligibility certificate and, therefore, the impugned decision should be declared ultra vires to the said rule. In support of this argument, Shri Verma relied on the decision of this Court in R.K. Mittal Woollen Mills v. State of Haryana [2001] 123 STC 248. He argued that the form S.T. 70 which contains the pro forma of the application to be submitted for issue of eligibility certificate cannot be treated as a part of the statute and non-compliance of one of the stipulations contained in Clause 3 thereof cannot be made a ground for withdrawal of the eligibility certificate. The learned Deputy Advocate-General conceded that notice and opportunity of hearing had not been given to the petitioner before the decision to withdraw the eligibility certificate was taken by the Lower Level Screening Committee. The learned Deputy Advocate-General conceded that notice and opportunity of hearing had not been given to the petitioner before the decision to withdraw the eligibility certificate was taken by the Lower Level Screening Committee. He, however, defended the impugned decision by arguing that the very grant of eligibility certificate to the petitioner was non est and no illegality has been committed in withdrawing such certificate. Learned counsel submitted that the General Manager, District Industries Centre could not have issued eligibility certificate without ensuring compliance of the statutory requirement of CLU/NOC. He then referred to Rule 28A(5)(a) and submitted that as the application for issuance of eligibility certificate is required to be submitted in form S.T. 70, the conditions stipulated therein should be treated as statutory and non-compliance thereof could constitute a valid ground to decline the eligibility certificate. 8. We have thoughtfully considered the respective submissions. In our opinion, the impugned decision deserves to be invalidated on the ground of violation of the rule of audi alterant partem. It cannot be denied that the eligibility certificate issued by the competent authority on the basis of the decision taken by the Lower Level Screening Committee created a valuable right in favour of the petitioner to seek and avail exemption to the tune of Rs. 41,66,887 for a period spread over 7 years. The certificate issued by the Deputy Excise and Taxation Commissioner, Panipat, on June 12, 1996 is a testimony of the petitioners entitlement to get exemption from payment of tax. Therefore, before withdrawing the eligibility certificate, which led to the initiation of proceedings for levy of tax, it was incumbent upon the Lower Level Screening Committee to have given an action-oriented notice and opportunity of hearing to the petitioner and as there is no controversy between the parties that notice and hearing was not given to the petitioner, we have no hesitation to invalidate the impugned decision. 9. The order passed by the Higher Level Screening Committee confirming the decision of the Lower Level Screening Committee is also liable to be quashed on the ground of infraction of the rule of hearing. 10. 9. The order passed by the Higher Level Screening Committee confirming the decision of the Lower Level Screening Committee is also liable to be quashed on the ground of infraction of the rule of hearing. 10. In view of the above conclusion, we do not consider it necessary to decide the question as to whether the conditions stipulated in form S.T. 70, which has been referred to in Rule 28A(5) of the Rules, are mandatory or directory and whether the eligibility certificate granted to the petitioner could be withdrawn on a ground other than those specified in Rule 28A(8)(a), though we have serious reservation about the tenability of the argument of Shri Verma that even though form S.T. 70 finds a specific reference in the scheme of the Rules it cannot be treated as a part of the statute and non-compliance of the conditions stipulated therein are inconsequential. Prime facie, we are of the view that the stipulations contained in form S.T. 70 are statutory and non-compliance thereof may justify rejection of an application for issuance of eligibility certificate. However, that is an issue on which we do not want to express final opinion in this case. We also do not consider it proper to deal with the submission of the Deputy Advocate-General that withdrawal of the eligibility certificate was justified because the very grant thereof was contrary to the conditions enumerated in form S.T. 70. In our opinion, both the issues can appropriately be examined and decided by the competent authority after giving notice and opportunity of hearing to the petitioner. 11. For the reasons mentioned above, the writ petition is allowed. Annexure P-1 is declared illegal and quashed. The consequential action taken by the Excise and Taxation Officer-cum-Assessing Authority is also declared illegal and quashed. The Lower Level Screening Committee/any other competent authority shall be free to pass fresh order in the case of the petitioner after giving reasonable opportunity of hearing to it. At such hearing, the petitioner shall be free to raise all permissible objections. Similarly, the department shall be free to show that on account of violation of the conditions stipulated in form S.T. 70, the petitioner was not entitled to get eligibility certificate.