TMI Blog1994 (11) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... t Director of Industries, Allahabad, on September 15, 1990, entitling it to exemption from payment of sales tax on sales of goods manufactured by it for a period of three years with effect from August 25, 1987, the date of first sale. One of the conditions for the grant of eligibility certificate was that the unit should be registered under the Factories Act or should have made an application therefor. The registration under the Factories Act was granted to the revisionist with effect from September 1, 1987, and, therefore, the actual period of exemption was restricted to the period from September 1, 1987 to August 24, 1990. Accordingly, the revisionist availed exemption from sales tax for the said period. Sub-section (2) of section 4-A of the Act, as it stood at the relevant time, stood as under: "(2) It shall be lawful for the State Government to specify in the notification under sub-section (1) that the exemption from, or reduction in the rate of tax, shall be admissible- (a) generally in respect of all such goods manufactured subsequent to the date of such notification; or (b) in respect of such of those goods only as are manufactured in a new unit, the date of starti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate 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 or 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 order so however, that in cases 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 passed without giving the dealers a reasonable opportunity of being heard. "Then, the Explanation to the newly added sub-section (6) defined a "new unit" and sub-clause (c) thereof provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means of an Ordinance No. 10 of 1990 promulgated on April 25, 1990, this condition was brought in Explanation to section 4-A of the Act and the period of lease was reduced from 15 years to seven years and by the amending Act, the Explanation was given retrospective effect from October 12, 1983. The Tribunal held that the condition in relation to the nature of the rights in the land/building was mandatory and since this condition was not fulfilled by the dealer, the eligibility certificate was rightly cancelled. At the hearing before me, the learned counsel for the revisionist contended that at the time when the unit was established, there was no condition that the land/building should be owned by the dealer or should hold on a lease for more than seven years. He referred to the notification dated December 26, 1985, a copy of which has been annexed to the revision petition. The learned Standing Counsel, on the other hand, referred to the Government order dated March 6, 1986. A perusal of the said Government order would show that it was not a notification issued under section 4-A of the Act. It was a mere inter-departmental communication and any instructions contained therein wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make it a new unit. Reliance was placed by either side on a judgment of a Division Bench of this Court in P.P.S. Electronics Industries, Kanpur v. State of U.P. 1993 UPTC 853. That was a case in which initially an unregistered lease deed for eight years beginning from May 1, 1989, was executed, but before the expiry of one year, a registered lease deed for the same period of eight years was executed and it was held that this duly satisfied the requirements of law. There is nothing in this case to show whether the condition of owning the land/building or having the same for a period of at least seven years was mandatory or merely directory. Reliance was placed by the learned counsel for the revisionist on another Division Bench judgment of this Court in Sahu Stone Crushing Industries v. Divisional Level Committee, Jhansi [1995] 98 STC 66 (All.); 1994 UPTC 1. That was a case in which the condition regarding registration under the Factories Act was held to be directory. This judgment, therefore, is not strictly to the point. Whether the conditions are directory or mandatory for the purpose of grant of an eligibility certificate is one thing and whether on the particular facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such facility...... ". This power has to be exercised taking the grant of eligibility certificate to be valid and does not entitle the Commissioner to question the certificate itself. The third circumstance, i.e., "is not entitled to such facility" is ejusdem generis to the preceding two, i.e., misuser and violation of conditions. Therefore, the disentitlement (not entitled to) must arise out of an act of omission or commission by the unit holder. A legal or factual error made by the authority granting the eligibility certificate would not be a cause to bring the unit holder within the words "not entitled to". It is not difficult to conceive cases which may not come within the scope of misuse or breach of conditions of grant and yet need withdrawal or modification of the eligibility certificate. An eligibility certificate might have been procured by misrepresentation or concealment of material facts. Such misrepresentation or concealment, if discovered later, can authorise the Commissioner to act under section 4-A(3) of the Act. A change in the law is not a circumstance which would entitle the Commissioner to invoke his authority under section 4-A(3) of the Act. The U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on August 24, 1990. The law was amended on August 21, 1991, with retrospective effect from September 13, 1985. The dealer conducted himself according to the legislative assurance. The amended provisions do not indicate that the purpose of amendment was to remedy any mischief and do not make any provisions declaring eligibility certificates granted in terms of erstwhile law as invalid or obliging the Commissioner to take corrective action in all such matters. Cancellation of eligibility certificate at such belated stage would cause undue hardship to the revisionist and compel him to meet a financial liability which was not anticipated and about the absence of which it had a legal and administrative assurance. Such an assurance should not be broken by the exercise of a power which the Legislature had not made obligatory and has left it to the discretion and good conscience of the Commissioner. Dealing with the levy of penalty under the Orissa Sales Tax Act, the honourable Supreme Court observed that, "penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious ..... X X X X Extracts X X X X X X X X Extracts X X X X
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