TMI Blog2008 (8) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to be noted that in terms of clause (b) of sub- rule (11) if the conditions stipulated in clause (a) are not fulfilled, it shall be deemed that exemption/entitlement was not ever availed. Therefore, the High Court was not justified in its view that demand cannot be maintained. - Civil Appeal Nos. 5386 of 2002, 676 of 2005, & 5149 of 2008 - - - Dated:- 20-8-2008 - ARIJIT PASAYAT DR. AND SATHASIVAM P. JJ. Anoop G. Chaudhary, Senior Advocate, (Manjit Singh, Rupansh Purohit, T.V. George, Rajeev Agnihotry and Praveen Kumar, Advocates with him) for the appellants. J.K. Sibal, Senior Advocate, (Sumesh Dhawan, Ms. Shriti Ranjan, P.N. Puri, Nikhil Nayyar, Dayan Krishnan, Gautam Narayan, Ankit Singhal, TVS Raghvendra Sreyas, Samrat Singh and Ashwani Kumar, Advocates with him) for the respondents. -------------------------------------------------- The judgment of the court was delivered by DR. ARIJIT PASAYAT J. Leave granted in S.L.P. (C) No. 26523 of 2004. Challenge in these appeals is to the order of a Division Bench of the Punjab and Haryana High Court holding that the cancellation of exemption certificate after its validity period was over on June 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C noticed that the unit of the respondent was out of production since January, 1997 and as such the exemption certificate was also liable to be cancelled under sub-rule (9)(i) of rule 28A of the Rules. Therefore, a show-cause notice was issued on December 5, 1997 fixing the date for submission of explanation on December 15, 1997. Respondent neither appeared nor furnished any explanation. Therefore, the DETC cancelled the exemption certificate by order dated January 14, 1998. In appeal the matter was remanded to the Prohibition Excise and Transport Commissioner, Haryana. During assessment proceedings, it was again found that the industrial unit was non-functional since January, 1997 and almost the entire plant and machinery had been removed from the factory premises and taken to some other places out of Haryana without any information to the Department. Even the factory shed and other structures were found to be dismantled and business was totally closed. By order dated June 30, 1998 again an application for renewal was rejected and the exemption certificate already granted was cancelled by invoking sub-rule (9)(i) of rule 28A. The respondent was directed to deposit the tax in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly it was held that the cancellation of exemption/entitlement certificate can relate only to the year in respect of which the said certificate is still to expire and it is only the benefit of tax exemption availed by the dealer, for that year alone which becomes payable in lumpsum. It was held that if after the expiry of an exemption/ entitlement certificate it is found that unit had discontinued its business or closed it down for a period of exceeding six months, the department is not without remedy. It can always take action for withdrawal of the eligibility certificate as provided in sub-rule (8) of the rule 28A of the Rules. The High Court held that once the eligibility certificate has been withdrawn, without there being any recourse to the procedure laid down under sub-rule (8) of rule 28A of the Rules, the same is impermissible. It was however held that if the authorities have a case for withdrawal of the eligibility certificate under sub-rule (8) of rule 28A of the Rules they shall be free to proceed in accordance with law and nothing observed in the judgment of the High Court shall prejudice their rights under that provision. The learned counsel for the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unit seeking benefit of (i) tax deferment to either execute a mortgage deed in form S.T. 74 creating a pari passu first charge along with financial institutions/ banks on the assets of the unit, or to furnish a bank guarantee for 15 per cent of the total benefit to be availed of in a year and a surety bond in form S. T. 50 for the balance amount of 85 per cent. The mortgage deed/agreement or bank guarantee shall be valid till the recovery of the entire deferred amount of tax. The bank guarantee, if expiring early or if furnished on annual basis shall be renewed two months before the date of expiry failing which the unsecured deferred tax shall become due for payment immediately; (ii) tax exemption to either execute a surety bond in form S.T. 50 equivalent to 15 per cent of the amount of notional sales tax liability sought to be exempted for a bank guarantee for that amount in a year, which shall be valid for the period extending to five years, after the expiry of total period of tax exemption; (b) The Deputy Excise and Taxation Commissioner shall after satisfying himself that the applicant unit is holding a genuine and valid eligibility certificate, has furnished adequate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit and has not misused the exemption/ entitlement certificate, shall renew the exemption/entitlement certificate within 30 days of the making of the application for renewal failing which the certificate shall remain valid until the renewal is refused or the certificate otherwise expires. The exemption/entitlement certificate on renewal shall unless cancelled or withdrawn be valid from 1st of July of the year in which the application is made if it is in time or otherwise from the date of application to June 30, next or when the eligibility certificate expires or the cumulative notional sales tax liability first exceeds the quantum of tax exemption/deferment fixed for the unit, whichever is earlier. (b) If the Deputy Excise and Taxation Commissioner in-charge of the district finds that the application for renewal of exemption/entitlement certificate is not in order or the particulars contained in the application are not correct and complete or the applicant is not a bona fide industrial unit or has misused exemption/entitlement certificate or has not complied with any of the directions given to it by him within the specified time, he may reject the application after giving the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption/ entitlement certificate by the unit; (vi) when the appropriate committee, which sanctions the eligibility certificate recommends that the exemption/entitlement certificate of the unit be cancelled for reasons to be recorded in writing. (10)(i) The eligible industrial unit shall continue to be liable to file the returns in the manner prescribed under the Act, and the rules and its failure to do so shall expose it to penalty as provided in the Act. (ii) The assessment of an eligible industrial unit holding exemption/entitlement certificate shall be framed in accordance with the provisions of the Act and Rules framed thereunder as early as possible and shall be completed by the 31st December, in respect of the assessment year immediately preceding thereto and the additional demand so determined, if any, shall be paid as per the provisions of the Act and the Rules. (iii) The State Government may appoint special assessing authority for framing assessment of units mentioned in the preceding clause. (iv) Notwithstanding the provisions relating to payment of tax due, according to returns, the eligible industrial unit which has availed of the benefit of sales tax de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict to the eligible industrial unit holding eligibility certificate which entitles the unit to avail of exemption from the payment of sales or purchase tax or both, as the case may be; (l) 'entitlement certificate' means a certificate granted in form S.T. 73 by the Deputy Excise and Taxation Commissioner of the district to the eligible industrial unit holding eligibility certificate which entitles it to get deferment of sales tax;" The eligibility certificate is issued by the appropriate screening committee while the exemption certificate and the entitlement certificate are issued by the DETC in forms 73 and 72, respectively. As the High Court has rightly observed, that there is scope for automatic cancellation in view of the fact that after January, 1997 there was no production. Sub-rule (8) deals with the withdrawal of the eligibility certificate. Under sub-rule (8)(b) when the eligibility certificate is withdrawn, the exemption/entitlement certificate is also deemed to have been withdrawn from the first day of its validity and the unit shall be liable to payment of tax, interest or penalty under the Act as if no entitlement certificate had been ever granted to it. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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