2003 (2) TMI 445 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to rejection of eligibility certificate under section 4-A of U.P. Sales Tax Act, 1948 by Divisional Level Committee.

Analysis:
The petitioner, a partnership firm, established a new industry to manufacture oil in 1983 while also being engaged in the business of oil-seeds. The rejection of the eligibility certificate application was based on the dual nature of the petitioner's business, involving both production and trading of oil. The rejection orders were challenged through a writ petition, supported by a review application citing a circular from the Commissioner of Trade Tax regarding new units established during a specific period.

The respondents, through counter-affidavits, contended that the petitioner's unit was involved in trading oil seeds apart from oil production, potentially leading to double benefits and tax evasion. The Divisional Level Committee's decision was based on this aspect, as highlighted in the report by the Deputy Commissioner (A), Sales Tax, Allahabad.

During the legal proceedings, the petitioner argued that the rejection based on trading oil seeds was unjustified, citing a circular emphasizing eligibility for units engaged in both production and trading activities. The Court noted that the circular did not impose restrictions on trading raw materials, distinguishing between the product and raw material. It was clarified that the petitioner was not engaged in trading oil or oil cake, and the rejection was deemed to be based on irrelevant considerations.

Consequently, the Court ruled in favor of the petitioner, quashing the orders rejecting the eligibility certificate application. The respondents were directed to issue the necessary certificate promptly under section 4-A of the U.P. Trade Tax Act. The judgment emphasized that engaging in trading activities alongside a manufacturing unit does not disqualify a petitioner from eligibility, especially when no specific conditions prohibit such dual operations.

In conclusion, the Court's decision upheld the petitioner's right to exemption under section 4-A, emphasizing that the rejection was unfounded and based on irrelevant considerations regarding the nature of the petitioner's business activities.