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2004 DIGILAW 2131 (ALL)

Kamal Fuels v. Commissioner, Trade Tax

2004-10-28

RAJES KUMAR

body2004
RAJES KUMAR, J. ( 1 ) 1. Present revision under Section 11 of U. P. Trade Tax Act (hereinafter referred to as act) is directed against the order of Tribunal dated 24. 06. 2004 arises from the proceeding under Section 4-A (3) of the Act relating to the assessment year 1984-85 under the U. P. Trade Tax Act. ( 2 ) BRIEF facts of the case are that the applicant established a new unit for the manufacturing of coal briquettes in the year 1991. First sale was made on 06. 04. 1988. Applicant applied for exemption under Section 4-A of the Act. Divisional Level Committee after examination, issued the eligibility certificate and granted exemption on the turn over of the manufactured products namely coal briquettes for the period of five years from 06. 04. 1988 to 05. 04. 1993. Applicant was also issued recognition certificate under Section 4-B of the Act for making the purchases of the raw material at concessional rate, According to the applicant main raw material in the manufacturing of coal briquettes was coal dust and cement. As per certificate of Assistant director of Small Scale Industries Development Organisation. Government of India dated 30. 07. 1987 written to General Manager. District Industries Center, Devas, Madhya Pradesh, which is at page No. 59 of the revision, percentage of the coal was between 80% to 84% and cement 20% to 16%. Survey was made by the STO (SIB) Trade Tax, Muzaffarnagar on 30. 07. 1992 at the manufacturing unit of the applicant. At the time of survey machines were found installed and the manufacturing process was going on and the stock of finished goods and the raw material were found. At the time of survey one diary was seized from one Sri Satyendra kumar, alleged to be a supervisor. In the diary, entry of cement and the manufactured quantity of coal briquettes, were found. On the basis of the entries, found in the diary, it was inferred that the applicant had not utilized the cement purchased at the concessional rate in the manufacturing of coal briquettes and had sold it. With the view that the applicant had misused the eligibility certificate, a notice under Section 4-A (3) of the Act was issued on 14/16. 09. 1994. It appears that in pursuance of the notice, ex-parte order under Section 4-A (3) was passed on 26. 12. With the view that the applicant had misused the eligibility certificate, a notice under Section 4-A (3) of the Act was issued on 14/16. 09. 1994. It appears that in pursuance of the notice, ex-parte order under Section 4-A (3) was passed on 26. 12. 1996 cancelling the eligibility certificate issued to the applicant w. e. f. 24. 12. 1991. Against the said order, applicant filed appeal before the Tribunal. Tribunal vide its order dated 03. 06. 1999 allowed the appeal set aside the order dated 26. 12. 1996 and remanded back the matter to the commissioner, Trade tax to decide the matter afresh after giving opportunity to the applicant. Thereafter, applicant had filed reply to the show cause notice. Commissioner of Trade Tax however, had not accepted the plea of the applicant and passed the order under Section 4-A (3)of the Act on 07. 02. 2000. Commissioner of Trade Tax cancelled the eligibility certificate w. e. f. 24. 12. 1991 for the future period. Commissioner of Trade Tax was of the view that the perusal of the entries made in the diary shows that the cement purchased at the concessional rate were not utilized in the manufacturing of the final product and had been sold as such and accordingly misused the eligibility certificate. Applicant filed appeal before the Tribunal. Written Statement dated 04. 06. 2004 was filed before the Tribunal which is No. 8 to the revision. Tribunal vide order dated 24. 06. 2004 rejected the appeal. ( 3 ) HEARD Spanned counsel for the parties. ( 4 ) LEARNED counsel for the applicant submitted that the order of the Commissioner of Trade Tax under Section 4-A (3) of the Act canceling the eligibility certificate w. e. f. 24 12. 1991 on the ground that the applicant had not used the cement purchased at concessional rate in the manufacturing of coal briquettes and had been sold as such is erroneous. He submitted that firstly inference drawn by the Commissioner of Trade Tax and the Tribunal from the entries of the seized diary is not correct secondly this can not be a ground for cancellation of the eligibility certificate, he further submitted that the survey was made on. 10. 07. l992. period of exemption was expired on 05. 04. 1993 and the notice under Section 4-A (3) of the Act was issued much thereafter on 16. 09. 10. 07. l992. period of exemption was expired on 05. 04. 1993 and the notice under Section 4-A (3) of the Act was issued much thereafter on 16. 09. 1994 and in pursuance thereof the order under Section 4-A (3) of the Act was passed on 07. 02. 2000, therefore, order under Section 4-A (3) of the Act was non-judicious. In support of his contention, he relied upon the decision of this Court in the case of Protek Coating pvt. Ltd. , Ghaziabad v. Commissioner of Trade Tax, reported in 1999 UPTC, 138. Mala roller Flour Mills, Meerut v. Commissioner of Trade Tax, reported in 1999, UPTC 953, in the case of Saberina Oil Industries Pvt. Ltd. , Shikohabad v. State of U. P. and Ors. , reported in 1996, UPTC, 341. Learned Standing Counsel supported the order of the Tribunal. ( 5 ) IN my opinion, on the facts and circumstances of, the case, order of the Tribunal, and the order of the Commissioner of Trade Tax passed under Section 4-A (3) of the Act are not sustainable. , reported in 1996, UPTC, 341. Learned Standing Counsel supported the order of the Tribunal. ( 5 ) IN my opinion, on the facts and circumstances of, the case, order of the Tribunal, and the order of the Commissioner of Trade Tax passed under Section 4-A (3) of the Act are not sustainable. ( 6 ) SECTION 4-A (3) of the Act reads as follows: "section 4-A (3): Where the Commissioner is of the opinion that the facility of exemption from or reduction in the rate of tax, obtained on the basis of an eligibility certificate referred to in Clause (d) of Sub-section (1) or on the basis of any eligibility certificate issued under any executive orders of the Government issued before or after September 13, 1985 has been misused in any manner whatsoever or that the new unit has committed breach of any of the conditions, subject to which the facility of exemption from or reduction in the rate of tax was granted or that the new unit to which the eligibility certificate has been granted in accordance with the provisions of this Act is not entitled to facility under this section is entitled to such facility for a lesser period or from a different date he may, by order in writing passed before or after the expiration of the period of exemption or reduction, cancel or amend the eligibility certificate from a date specified in the order and such date may be prior to the date of the however, that in castte of misuse or breach the cancellation of eligibility certificate shall have effect not before the date of such misuse or breach: provided that no order under this sub-section shall be missed without giving the dealer a reasonable opportunity is being heard. " ( 7 ) IN my opinion, the inference drawn by the Commissioner of Trade Tax which has been confirmed by the Tribunal that the applicant had misussed the eligibility certificate on the ground that the applicant was found not using the cement purchased at the concessional rate as a raw material in the manufacturing of the finished goods but had sold as such, is not justified. Though the applicant tried to explain from the entries in the copies that it could not be inferred that the purchased cement were not utilized in the manufacturing of the finished goods but Have been sold, but I am not going to adjudicate this issue. I am of the view that this aspect of the matter has to be examined by the assessing authority during the course of the assessment proceeding. In case, if assessing authority on the basis of the entries come to the conclusion that the applicant had not used the cement in the manufacturing of the finished goods but had sold as such, it is open to the assessing authority to levy the tax on the cement. It is also open to the assessing authority to levy the penalty under Section 4-B (5) of the Act for not using the cement in the manufacturing of final product for which recognition certificate was issued, for the violation of the condition of Section 4-B (2) of the Act but the alleged reasons can not be a basis to infer the misuse of the eligibility certificate and can not be a ground for cancellation of the eligibility certificate. It is not the case of Commissioner of Trade Tax that the applicant was not involved in the manufacturing of coal briquettes. ( 8 ) IN the case of Protek Coating Pvt. Ltd. , Ghaziabad v. CTT, reported in 1999 UPTC, 138. This Court held as follows. "a finding of misuse of an eligibility certificate should normally first come from the assessing officer before whom a dealer claims exemption from tax and in the assessment proceedings, the assessing officer is entitled to take into account the materials obtain during the surreys or otherwise, as well as, the books of accounts, returns and if he found that the turnover either wholly or in part is not of goods covered by the eligibility certificate and manufactured by the dealer, he has jurisdiction to deny the dealer the exemption claimed by it For examples dealer says that he has manufactured and sold the goods manufactured by it in terms of the eligibility certificate to the extent of Rs. 20 lacs, it is possible for him on the basis of the cogent material to hold that the whole or a part of the turnover is not of goods entitled to exemption. 20 lacs, it is possible for him on the basis of the cogent material to hold that the whole or a part of the turnover is not of goods entitled to exemption. As already staled, the exemption in respect , of goods mentioned in the eligibility certificate and such goods must have been manufactured by the dealer holding the certificate. An eligibility certificate does not debar a dealer from manufacturing other goods or from trading in other goods. Therefore, it is in the assessment proceeding that the assessing officer has to be satisfied that the dealer is entitled to exemption of certain turnover by virtue of the eligibility certificate and he can tax the turnover that according to his finding is not coveted by the eligibility certificate for any reasons whatsoever. " ( 9 ) IN the case of Saberina Oil Industries Pvt. Ltd. , Shikohabad v. State, of UP and Ors. , reported in 1996 UPTC, 341 , dealer was found importing the goods from outside the State in an attempt to evade the tax. On this ground exemption was refused under Section 4-A of the Act. Division Bench of this Court held as follows: "the second ground for rejecting the review application is that the petitioner made an attempt to evade tax at the check-post. This, in any case, cannot be a ground to reject the review application. If the petitioner made an attempt to evade tax or evaded tax, then a different consequence will flow and for that reason the review application cannot be rejected. " ( 10 ) IN the case of Mala Roller Flour Mills. Meerut v. CIT reported in 1999 UPTC, 933. This court held that provision to cancel the eligibility certificate under Section 4-A (3) of the Act is discretionary, which should be exercised judiciously and not arbitrarily. This Court further held that action for the cancellation of the eligibility certificate under Section 4-A (3) of the Act should be taken promptly. Though no limitation is provided under Section 4-A (3) of the Act but in the absence of fraud on the part of the dealer action under Section 4-A (3) of the Act should be taken in a reasonable time. ( 11 ) IN the present case, survey was made on 30. 07. 1992, in which alleged copy were found. The period of exemption was expired on 05. 04. 1993. ( 11 ) IN the present case, survey was made on 30. 07. 1992, in which alleged copy were found. The period of exemption was expired on 05. 04. 1993. Therefore, the initiation of proceeding under section 4-A (3) of the Act on 16. 9. 1994 can not be said to have been initiated within a reasonable time. It could be initiated more promptly in as much as the cancellation of the eligibility certificate creates a heavy burden of the tax on the dealer, which could not be recovered. ( 12 ) FOR the reasons stated above order of Tribunal and the order of the Commissioner of Trade tax under Section 4-A (3) of the Act are erroneous and are liable to set aside. ( 13 ) IN the result, revision is allowed. Order of Tribunal dated 24. 06. 2004 and the order of commissioner of Trade Tax passed under Section 4-A (3) of the Act are here by set aside. . .