TMI Blog2004 (6) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Concessions) Scheme, 1995" (hereinafter referred to as "the Scheme of 1995") granting relief of exemption of sales tax, both Central as well as State, for a period of 7 years, to the new industrial units, established on or after April 1, 1991, on fulfilment of the criteria of eligibility prescribed therein. In response to the Scheme of 1995, so announced, the petitioner-company undertook steps to establish a new industrial unit at Beltola, Guwahati, and prepared a project report (annexure II to the writ petition) for manufacture of washed clean coal by processing and washing of raw coal, lump coal and medium coal so as to bring down the ash contents thereof from as much as 25 per cent to 5 per cent there being heavy demand for washed coal in the local market as well as in the other States of the country and also in Bangladesh. The petitioner-company purchased a plot of land at Beltola and established a new industrial unit, which was granted a permanent registration certificate, dated June 18, 1996 by the Director of Industries, Government of Assam, as a tiny unit. The petitioner-company also obtained licence as well as necessary "no objection certificate" from Gauhati Municip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly, within a period of 6 months. Instead of refunding the amount of sales tax already paid at the check gates by the petitioner-company, the petitioner-company was served with a notice, dated December 28, 2000 (annexure IX to the writ petition) by the respondent No. 2, namely, General Manager, District Industries and Commerce Centre, Guwahati, directing the petitioner-company to show cause as to why the eligibility certificate, dated March 31, 1998 aforementioned, issued in favour of the petitioner-company, be not cancelled on the ground that the petitioner's industrial unit is not an industrial unit eligible to receive eligibility certificate for the purpose of exemption of sales tax inasmuch as in producing washed coal, no manufacturing process was allegedly involved and the petitioner-company had not installed any plant and machinery in conformity with its project. It was also pointed out in the said notice, that the ordinary coal, even after washing, remains as ordinary raw coal without being, in any way, distinct from its raw material. To the notice of show cause, so issued, the petitioner-company submitted its reply by their letter, dated April 7, 2000 denying and disputing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the clause of manufacture of processing did not exist therein. On change of status of the business from proprietorship to a limited company, the certificate of registration was amended to incorporate the name of M/s. Megha Assam Coal Mines (India) Pvt. Ltd. The petitioner-company never applied for amendment of registration certificate for inclusion of manufacture of processing at any stage. No change of the object clause was ever made to enable the petitioner-company to carry on the business of coal washing. (ii) The petitioner-company's industrial unit was registered with the Directorate of Industries and Commerce, Assam, as a SSI unit. Under a notification, dated August 26, 1993 issued by the Government of India, Ministry of Industry, a SSI unit shall not be granted registration until the end-product has a distinct name, character or use having change of form. The end-product of the petitionercompany's industrial unit is same as the raw material and there being, thus, no new product produced by the petitioner-company's industrial unit, the petitioner-company does not carry out any manufacturing process and this industrial unit is, therefore, neither a SSI unit nor eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was issued by an authority, who had no jurisdiction to issue the said certificate and, as such, the same is void ab initio. (vii) The petitioner-company has charged 4 per cent tax under the Assam General Sales Tax Act, 1993, during the period 1996-97, 1997-98 and 1998-99 from its customers, but has not deposited the same. (viii) The petitioner-company, in its application for eligibility certificate, recorded that the commercial production of its unit had commenced on February 5, 1996, whereas as per its trading, profit and loss and balance-sheet audited by the chartered accountants and submitted to the Income-tax Department and Registrar of Companies, there was no manufacture or processing of coal at all by the petitionercompany's industrial unit during 1995-96. The petitioner-company took the resolution to take over existing business of M/s. B.R. Gupta and Company on June 1, 1996, and filed a petition with the Superintendent of Taxes, Jalukbari, for necessary amendment of its registration certificate on June 4, 1996. The petitioner-company obtained "certificate of employment of people of Assam" from the Labour Department on August 26, 1996. The petitioner-company's unit obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igibility certificate itself being void ab initio, it conferred no right upon the petitioner-company. 3.. I have heard Dr. A.K. Saraf, learned senior counsel for the petitioners, and Mr. H.N. Sharma, learned senior counsel, appearing on behalf of the respondents. Whether a writ petition jointly filed by a company, registered under the Companies Act, its director and shareholder alleging violation of the provisions of article 19(1)(g) and/or article 14 of the Constitution of India is maintainable and if so, when? 4.. Resisting, at the very threshold, the maintainability of the present writ petition, Mr. H.N. Sarma, learned counsel for the respondents, has submitted that the petitioner No. 1 is a limited company and a limited company, not being a citizen, is not guaranteed the fundamental rights to carry on business in terms of article 19(1)(g) of the Constitution of India and, hence, the writ petition is not maintainable, for, the alleged denial to the petitioner-company of its right to receive exemption from payment of sales tax is, even if true, nothing but violation of article 19(1)(g). In support of his submission, Mr. Sarma has placed reliance on State Trading Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to allow the petitioner-company to enjoy exemption from payment of sales tax is found to be arbitrary, then, such action will fall within the ambit of article 14 and/or article 21 and in such a situation, the petitioner-company will, being a person within the meaning of articles 14 and 21, be entitled to the protections guaranteed therein [see AIR 1951 SC 41 (Charanjit Lal Chowdhury v. Union of India) and AIR 1964 SC 1140 (Indo-china Steam Navigation Co. Ltd. v. Jasjit Singh, Additional Collector of Customs)]. 6.. While considering the question as to whether the petitioner No. 2 can maintain a writ petition for violation of article 19(1)(g), it needs to be noted that the question whether a person is or is not a citizen of India is really a mixed question of fact and law. In the present writ petition, the petitioner No. 2 has described himself as a resident of Guwahati (Assam) and this fact has not been disputed by the respondent No. 3 in his affidavit. It has also been contended by the respondent No. 3, in his affidavit, that the petitioner No. 2 is not a citizen of India and/or that the petitioner No. 2 is not entitled to the freedom enshrined in article 19(1)(g). It was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if put in a narrow compass, is that the writ petitioners have been guaranteed exemption in respect of their industrial unit; but by the impugned orders, the exemption so guaranteed has been arbitrarily, illegally and mala fide denied to them. If this Court forms the view that the petitioners are entitled to the exemptions claimed by them and that the impugned orders are arbitrary and contrary to law, then, it will logically follow that the exemption guaranteed to the writ petitioners by the State have been arbitrarily denied to them. In such a situation, the action of the State respondents will tantamount to denial of the fundamental rights guaranteed to the petitioners as "persons" under articles 14 and 21. Hence, if the conclusion of this Court be that the petitioners have been arbitrarily denied the exemption from sales tax by the impugned orders, the writ petition will be maintainable. Is cancellation of the eligibility certificate in the present case is sustainable? 10.. Bearing in mind the position of law with regard to the maintainability of this writ application as indicated hereinabove, let me, now, turn to the question as to whether the cancellation of the eligibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued in favour of the petitioners. 13.. For strengthening their above submission, the respondents, referring to the Scheme, in question, have contended, inter alia, that the Scheme of 1995 grants exemption not only in respect of sales, which take place within the State of Assam, but also the sales, which take place in the course of inter-State trade or commerce. Though in the case of sale made, within the State of Assam, the provisions of the A.G.S.T. Act, 1993, may be applicable and the meaning of the word "manufacture", as defined in section 2(22) of the Assam General Sales Tax Act, 1993 (hereinafter referred to as "the A.G.S.T. Act, 1993"), may be resorted to, yet when the sale takes place, in the course of inter-State trade or commerce, such a sale is covered by the Central Sales Tax Act, 1956, and since the word "manufacture" has not been defined either in the Scheme of 1995 or in the Central Sales Tax, 1956, the definition of manufacture, for the purpose of exemption of Central sales tax, shall be determined on the basis of the judicial pronouncements, which show that the end-product, for the purpose of being treated as a manufactured product, must be a commercial commodity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In this context, the apex Court observed, " 'Manufacture', in its ordinary connotation, signifies emergence of new and different goods as understood in the relevant commercial circles. The incentives provided in the Industrial Policy Resolution of the Orissa Government, dated May 13, 1986, are meant only for those industrial units, which are engaged in the manufacture or production of goods. The use of the expression 'purchase of raw materials' in the Resolution itself shows that what are ultimately produced are goods different from the raw materials used. Similarly, the repeated use of the expression 'finished products' and the grant of exemption in the case of small-scale industries both in respect of raw materials as well as finished products indicates that the concessions at substantial cost to the public exchequer were being provided with a view to encouraging units engaged in the manufacture or production of goods and not to help those units which merely engaged themselves in some sort of processing whereunder the goods remain essentially the same goods even after the processing." It was also observed therein, further points out Mr. Sharma, that even if a process is adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act: (i) The dealer must have an eligible industrial unit falling under any of the three categories, namely, categories A, B or C described in Part I of the Scheme of 1995. (ii) The dealer must be registered under the Central Sales Tax Act; (iii) Certificate of authorisation under the Scheme of 1995 must have been issued to the industrial unit; and (iv) The exemption shall be available in respect of the goods manufactured in the eligible unit in the State of Assam and sold in course of inter-State trade and commerce during the period of validity of the certificate of authorisation. 18.. From the above, it is also very clear, contends Dr. Saraf, that the notification in Part II as regards the exemption from payment of the Central Sales Tax Act is relatable to the notification in Part I of the Scheme of 1995. For the purpose of grant of exemption under the Central Sales Tax Act also, the eligible industrial unit shall remain the same as in Part I of the notification; so contends Dr. Saraf. All the conditions of the eligibility of the industrial units and all other provisions relating to issuance of eligibility certificate, authorisation certificate, which have been provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no jurisdiction to grant such a certificate, it matters little as to what the powers of cancellation of the respondents are. The arguments on this aspect have been advanced, principally, on the basis of the interpretation of the word "manufacture" and this Court is required to determine if any manufacturing activity, within the meaning of the Scheme of 1995, is being carried on by the petitioner-company, while processing raw coal into washed clean coal. 21.. For the purpose of ascertaining the correctness of the rival submissions made before me, on behalf of the parties, on the above aspects, let me quote hereinbelow the relevant portions of Part I and Part II of the Scheme of 1995, which read as follows: "Part-I No. FTX.78/91/235: In exercise of the powers conferred by subsection (4) of section 9, read with clause (f) of sub-section (3) of section 74 of the Assam General Sales Tax Act, 1993 (Assam Act XII of 1993) hereinafter called the Act, the Governor of Assam is pleased to frame a Scheme as detailed below granting relief by way of full exemption of sales tax, on the purchase of raw materials within the State of Assam by the eligible industrial units, situated within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of finished products within the State of Assam, Part II of the said Scheme extends benefit of the Scheme to "the goods manufactured in such eligible units" and sold in the course of inter-State trade or commerce. The words used, "the goods manufactured in such eligible units", are of immense significance, for, these words mean and convey, concedes grudgingly even Mr. H.N. Sharma, that the goods manufactured in eligible units, covered by categories, A, B or C, will be entitled to exemption from payment of not only the State, but the Central sales tax too if the same are sold in the course of inter-State trade or commerce. 23.. The Scheme of 1995, thus, has three parts. Part I of the Scheme contains, inter alia, the criteria for eligibility certificate in respect of three categories of industrial units as described under A, B and C of paragraph 2 of the said Scheme and also contains provisions for exemption from payment of the Assam general sales tax on the purchase of raw materials within the State of Assam by such eligible units and also on the sale, within the State of Assam, of finished products manufactured in such eligible units. Part II contains the exemption from payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central sales tax in respect of the sales made in the course of inter-State trade or commerce. It will, therefore, be illogical to construe that an industrial unit, which satisfies the criteria for eligibility certificate under any of the said three categories, namely, A, B or C for the purpose of exemption from payment of the Assam general sales tax shall not be qualified to receive exemption from payment of the Central sales tax if it sells its same very product in the course of inter-State trade or commerce. Moreover, such an interpretation, if attributed to the Scheme, will make the use of the word "such eligible units", occurring in Part I of the Scheme, otiose defeating thereby the very intent and purpose of the Scheme, for, the idea behind the Scheme cannot be to sell manufactured products of the eligible units within the State and not outside the State. The giving of the incentive under the Scheme is, admittedly, aimed at augmenting the sales of the manufactured product within and outside the State to help the State in widening its industrial base, improve its economy and reduce the problem of unemployment and such aims cannot be fulfilled if the sale of the manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.G.S.T. Act, 1993, which contains the definition of the term "manufacture". Because of the fact that Part I of the Scheme of 1995 grants exemption from payment of Assam general sales tax in respect of products "manufactured" in an eligible industrial unit, as conceived by the said Scheme, it could not be, on a pointed query made by this Court, be disputed by Mr. H.N. Sharma that for the purpose of availing exemption from the State sales tax, the industrial unit concerned must produce a product, which can be held to have been manufactured within the meaning of section 2(22) of the A.G.S.T. Act, 1993. What, however, Mr. Sharma insists is that so far as the exemption from payment of the Central sales tax is concerned, the end-product manufactured by an eligible industrial unit must be, as is understood in common parlance, substantially different from the raw material used for manufacturing such product. It is, therefore, according to Mr. Sharma, not the definition of "manufacture", contained in section 2(22) of the A.G.S.T. Act, 1993, which can be resorted to, while considering the scope of exemption from payment of Central sales tax. In such a case, the term "manufacture" will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which is prescribed by the appropriate authority as not a manufacture or manufacturing process. The manufacture does not also include the works contract. In other words, except the works contract or such manufacture or manufacturing process, which is notified by an appropriate authority as not a manufacture or manufacturing process, "manufacture" will mean producing, making, extracting, altering, ornamenting, blending, finishing or otherwise processing, treating or adapting any goods. 33.. It is category C of paragraph 2 of Part I of the Scheme of 1995, which provides the criteria for the industries, which was not to be eligible for any benefit under the said Scheme. It is of great significance to note that the coal industry was not a category of industry ineligible for benefit under the Scheme. It is, in fact, by a Notification, dated November 5, 1999, that the Finance (Tax department), Government of Assam, amended the said Scheme by introducing a fresh list of ineligible industries under category C of paragraph 2 of the said Scheme. It is of great significance to note that it is by this amended notification that the State Finance department, for the first time, introduced th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... literally meaning, putting together by hand. That is, the process of making products by hand or machinery. A division Bench of this Court in Modern Candle Works v. Commissioner of Taxes, reported in [1988] 71 STC 362, while defining the word "manufacture", held as follows: " 'Manufacture' may, therefore, be defined as the making of goods or wares by manual labour or by machinery. As scale of production has expanded and workmanship and art have advanced, now nearly all artificial products of human industry, nearly all such materials as have acquired changed conditions or new and specific combinations, whether from the direct action of human hand, from chemical and mechanical processes devised by human skill, or by the employment of machinery, are commonly called manufactured products. Any material produced by hand, by machinery or by other agency; anything made from raw materials by the hand, by machinery, or by any other device is manufactured article. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine is manufacture. . .The nature and ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouse were manufacturing processes. 40.. From what have been pointed out above, it is clear that manufacturing process can be manual as well as mechanical. Existence of plant and machinery is, therefore, not a condition precedent for a process to be regarded as a manufacturing process. Bricks are, undoubtedly, produced by bare hands out of clay; but that would not prevent the bricks from being regarded as a manufactured product. The word "manufacture" means the process of making products by hand or machinery. "Manufacture" may, therefore, be defined as the making of goods or wares by manual labour or by machinery. Any material produced by hand or by machinery or by other agency, anything made from raw materials, by the hand, by machinery or by any other device may become a manufactured article. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand, labour or machine, is manufacture. 41.. Having, thus, determined that for a commodity to be regarded as a "manufactured" commodity, it is not necessary that there must be existence and use of plant and machinery and that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions summed up in Commissioner of Sales Tax v. Ruby Surgical and Allied Products Private Limited [1997] 106 STC 26 (Bom) in the following words: "(i) Manufacture implies a change but every change is not manufacture. Something more is necessary. There must be transformation and a new and different article must emerge having a distinctive name, character or use. (ii) The true test for determining whether manufacture can be said to have taken place is whether the commodity, which is subjected to the process of manufacture, can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. (iii) Where the commodity retains a continuing substantial identity through the processing stage, it cannot be said that it has been manufactured." 47.. In a taxing statute, an item has to be interpreted in its popular sense meaning, however, by the words popular sense, that sense, which the people conversant with the subject-matter with which the statute is dealing with, would attribute to it. The commodity should be judged and analysed on the basis of how these expression are used in the trade or industry or in the market or, in other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powder, etc., and sold under the popular name of pan-mashala, did not amount to "manufacture". The court considered the meaning of the term "manufacture", which has been defined in section 2(16) of the Gujarat Sales Tax Act, 1969, as under: "2(16) 'manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, collecting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed." 52.. Referring to the above definition of the term "manufacture", the court observed, "it is no doubt true that the Legislature has defined the term 'manufacture' in the widest term by taking in besides the activities of producing, making, extracting, collecting, altering, ornamenting or finishing, the activities of processing, treating or adapting any goods so as to make them suitable for a given purpose. But merely because the Legislature has defined the term in such a wide term, it would be too spacious to contend that any processing, treating or adapting of goods would amount to, or result in, a manufacture. Any and every process, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are sold. It is true that under the section it is not necessary that there should be 'manufacture' in the sense that a new commodity has been brought into existence as would have been required if that word is interpreted in its literal sense. But at the same time the section should be so interpreted to mean only such of the various processes referred to in the definition and applied to the goods as are of such a character as to have an impact on the nature of the goods". 55.. From the observations made in Shiv Datt Sons [1992] 84 STC 497 (SC); (1993) Supp 1 SCC 222, it is clear, as contended by the respondents, that the apex Court, while dealing with a very spacious definition of the term "manufacture" used in the statute, held in Shiv Datt Sons [1992] 84 STC 497 (SC); (1993) Supp 1 SCC 222, though it is true that according to the definition of the term "manufacture" given in the statute, it is not necessary that there should be "manufacture" in the sense that a new commodity has to be brought into existence as would have been required if that word is interpreted in its literal sense, yet the definition of the term "manufacture", so spaciously given in the statute, should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd a new and different article, having a distinctive name or character, must emerge. The true test for determining whether manufacture has taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. The difference between 'processing' and 'manufacture' is by now well understood and well recognised. 'Processing' means subjecting a commodity to a process or treatment so as to develop it or make it fit for market. With each process, the original commodity undergoes a change. But it is only when the change takes the commodity to a point, where it can be no longer regarded as the original commodity but is recognised in the trade as a new and distinct commodity that a manufacture can be said to take place. Where the commodity retains a continuing substantial identity through the processing stage, it cannot be said that there has been a 'manufacture' (See Deputy Commissioner of Sales Tax (Law) v. Pio Food Packers [1980] 46 STC 63 (SC); (1980) SCC 174: Chowgule Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 (SC); (1981) 1 SCC 653; State of Oriss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act and had established eligible industrial units in any district in the State and possessed provisional or permanent eligibility certificate issued by an officer authorised for the purpose, from payment of tax to the extent stated therein. The exemption was available only in respect of the sales of the goods, which the dealer was licensed to manufacture and which were manufactured by him. Under the terms of the said notification, the appellant obtained eligibility certificate from the District Level Committees, but subsequently the eligibility certificate were cancelled by the State Level Committees on the ground that the processing of scraps by the appellants did not result in the manufacture of any new item. The High Court upheld the decision of the State Level Committees. Relying on the decisions pertaining to the meaning of the word "manufacture", particularly, under the Excise Act, the respondents opposed the appeal before the Supreme Court on the ground that since no new product emerged from the process employed by the appellants, there was no manufacture. Turning down this contention and allowing the appeal, the Supreme Court held: "Decisions construing the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "manufacture", which is usually attributable to the word "manufacture", was not intended to be applied in the said Act. The clear words of the definition of the term "manufacture" appearing in section 2(j), therefore, according to the apex Court, must be given due weight and must not be overlooked merely because in other contexts, the word "manufacture" has been judicially held to refer to the process of manufacture of new articles. 63.. In the case at hand, the definition of the term "manufacture", as given in the A.G.S.T. Act, 1993, is very wide and includes, besides all types of processings, ornamenting, treating or adapting any goods, even the process of "extraction " as a "manufacture". Thus, the process of extraction of ash contents thereof from the raw coal, lump coal, etc., and bringing down thereby the ash contents from 25 per cent to 5 per cent is, in the light of the law laid down Ashirwad Ispat Udyog [1999] 112 STC 207 (SC); (1998) 8 SCC 85 nothing but a manufacturing process, within the meaning of section 2(22), even if the end-product is, as laid down in Ashirwad Ispat Udyog Ltd. [1999] 112 STC 207 (SC); (1998) 8 SCC 85, not a new product. 64.. Since the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of the above meaning given to the word 'processing' by this Court there cannot be any manner of doubt that the nature and extent of the process to which the crude oil is subjected to to make it refined oil brings the latter within the meaning of the expression 'goods manufactured' in section 3(3)(b)(iii) of the Act so as to make the appellant liable to pay tax on its sale. .. In Shiv Datt Sons [1992] 84 STC 497 (SC); (1993) Supp 1 SCC 222, the question was whether the dealer was entitled to the concession provided in section 8 of the Bombay Sales Tax Act, 1959, of such part of their turnover as represented the resale of batteries purchased by them from a registered dealer. Interpreting the meaning of the word 'resale' under section 2(26), and the word 'manufacture' in that Act and the nature of process applied by the dealer before their sale, this Court held that basically speaking the goods purchased by the dealer from the manufacturers as well as the goods sold by the former are one and the same for nothing was done to the goods afresh which had not been done already. The above case also does not come in aid of the appellant: firstly, because it considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Ispat Udyog Ltd. [1999] 112 STC 207 (SC); (1998) 8 SCC 85 and B.P. Oil Mill (1998) 111 STC 188 it can be safely held that the process of conversion of raw coal into washed clean coal by extraction and removal of the ash contents thereof amounts to "manufacture" as defined in section 2(22) of the A.G.S.T. Act, 1993. 68.. In the present case, the respondent No. 2, namely, General Manager, District Industries and Commerce Centre, has himself in his order, dated June 3, 2000, held, as correctly points out Dr. Saraf, that the process of removal of foreign materials from coal may, at best, be a process to improve the quality of the commodity and increase its commercial value. I find considerable force in the submissions of Dr. Saraf that in the present case, the respondent authorities totally overlooked the specific definition of the term "manufacture" as given in the A.G.S.T. Act, 1993, and acted, it appears, arbitrarily in holding that the activities undertaken by the petitioner-company in its new industrial unit do not form a manufacturing process. The respondent authorities have relied on the various judicial pronouncements without considering the fact that in view of the specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Load Factor (PLF). 70.. The petitioners have drawn the attention of this Court to a news item published on July 25, 2003, in the Business Line, wherein it has been reported that the Union Ministry of coal and mines is working out a strategy to ensure that the coal produced in the country is washed so that the use of clean coal becomes the order of the day. Admittedly, in the developed countries, coal washing is an integral part of a mine and no coal is supplied to a user without preparing/washing the raw coal. It has also been reported that the environmental considerations to use clean coal/washed coal and the technological economic advantage in using clean coal, non-cooking coal consumers, such as, power utilisers and cement industries have started preferring washed coal. 71.. Though the respondent No. 3 has contended that washed clean coal is nothing but raw coal, nothing has been submitted, on behalf of the respondents, to controvert what have been pointed out above. Thus, though the respondent No. 3, without producing any materials on record, has contended, in his affidavit, that "washed clean coal" is nothing but coal itself, the fact remains that the washed clean coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of this decision that the Supreme Court, in State of Maharashtra v. Shiv Datt Sons [1992] 84 STC 497; (1993) Supp 1 SCC 222, while reading down the scope of the words used by the Legislature, in section 2(17) of the Bombay Sales Tax Act, 1959 in defining the word "manufacture", held that for the purpose of manufacture, there should be some impact on the nature and character of the goods meaning thereby that if there is some alteration in the nature and character of the goods, it can be said that manufacturing process has taken place. In the present case, when raw coal is converted into washed coal, the ash contents in the coal come down from 25 per cent to 5 per cent and the same is done by screening of raw coal, water washing of the screened coal and elimination of visible stones, pebbles and other foreign materials by manual labour. Thus, a change, indeed, takes place in the nature and character of the goods in the process of conversion of raw coal into washed clean coal. Considered thus, there is no difficulty in concluding that washed clean coal is a manufactured item within the meaning of the Scheme of 1995. 74.. One can have, therefore, no hesitation in concludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision of this Government notification or if it is found at any time after the issue of the eligibility certificate to an industrial unit that the information, furnished by it on any of the conditions, which had led to the issue of the eligibility certificate to the unit is false, the competent authority of the Industries Department of the Government of Assam, which had issued the eligibility certificate shall be competent to terminate the eligibility certificate to the concerned eligible industrial unit after giving an opportunity of hearing to the holder of the eligibility certificate against such termination. In the event of any such termination, the competent authority shall intimate the fact of such termination forthwith to the concerned eligible industrial unit and the assessing officer concerned. On receipt of such intimation, the assessing officer shall cancel forthwith the certificate of authorisation, issued to that industrial unit, and require it to surrender forthwith to the assessing officer the unused declaration forms in Form VII and the holder of the certificate of authorisation shall comply with this instruction from the assessing officer." 77.. On a perusa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew commercial article must come out after processing, manufacturing, etc., of the raw materials. But in your case, raw "ordinary coal" after washing remain as raw ordinary coal without having any distinction from the raw materials. And whereas the matter was reviewed and discussed elaborately in the meeting of the District Level Committee under the New Industrial Policy, 1991 held on February 16, 2000. And whereas after examining all aspects of the matter the said District Level Committee was satisfied that your unit was not eligible for issue of eligibility certificate for the purpose of sales tax exemption and other incentives under the New Industrial Policy, 1995 and that the said eligibility certificate was issued wrongly to your unit. Now, therefore, you are required to show cause as to why the eligibility certificate to your unit under No. DIC/(US EC-91) 225/97-98 (Sl. No. 103) dated March 31, 1998 be not cancelled with effect from the date of its issue, your reply should reach the undersigned within April 7, 2000. Yours faithfully General Manager District Industries and Commerce Centre, Kamrup, Guwahati-21 80. The writ petitioners replied to the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the eligibility certificate was cancelled by the order dated June 5, 2000. 81.. On a comparison of the grounds specified in the show cause notice and the grounds on which the eligibility certificate was cancelled, it is apparent that the same are totally different except for only two grounds, namely: (i) In the process of producing washed coal from ordinary coal, no manufacturing process is involved; and (ii) There are no plant and machinery installed. 82.. I have already held that the process of producing washed clean coal from ordinary coal is a manufacturing process and no plant or machinery is required for constituting a process as a manufacturing process. 83.. Part III of the said Scheme clearly provides that a show cause notice and an opportunity of hearing must be given to the holder of the eligibility certificate prior to its cancellation. Thus, the Scheme itself expressly provides for granting of an opportunity to the holder of the eligibility certificate mentioned in the show cause notice, by the grounds on which, or the reasons for which the eligibility certificate is sought to be cancelled. 84.. As indicated above, the Scheme provided for cancellation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds on which the show cause notice was issued differ from the grounds on which the eligibility certificate was cancelled by the respondent No. 2. 89.. I respectfully agree with the decision in Loharu Steel Industries Ltd. [1995] 96 STC 369 (AP), and I hold that while cancelling the eligibility certificate, the respondent No. 2, having travelled beyond the scope of the show cause notice, did not afford a reasonable opportunity of hearing to the petitioners, contrary to what has been expressly provided for in the said Scheme. 90. The petitioners have also relied on the decision in Baldev Spinners Pvt. Ltd. v. State of Haryana reported in [2003] 132 STC 594 (P H) for the proposition "that the provisions of a taxing statute dealing with cancellation or withdrawal of certificates have to be interpreted strictly and the certificates can be withdrawn only on the grounds mentioned in the statute and on no other grounds". I am in respectful agreement with the observations so made by the division Bench in Baldev Spinners Pvt. Ltd. [2003] 132 STC 594 (P H) and hold that a taxing statute has to be strictly construed both in the matter of grant of exemption as well as in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself." 94.. The above passage, occurring in Gordhandas Bhanji AIR 1952 SC 16 quoted with approval by the apex Court in M.S. Gill v. Chief Election Commissioner (1978) 1 SCC 409, wherein the apex Court further held that the orders are not like old wine becoming better as they grow older. 95.. I have already indicated that the grounds, which were mentioned in the show cause notice and the grounds on which the eligibility certificate was cancelled, are quite at variance and except the two grounds, namely, that in the process of reducing washed coal from ordinary coal, no manufacturing process is involved and that no plant or machinery has been installed at the site of the industrial unit concerned, the remaining grounds, on which the eligibility certificate has been cancelled (as the impugned order reflects) were never offered to the petitioners for their comments and no opportunity of hearing having, thus, been accorded to the petitioners on those grounds, the cancellation of the eligibility certificate is nothing, but an arbitrary act of the respondents inasmuch as the grounds for such cancellation has been furnished subsequent to the notice of show cause and cannot, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of cancellation of the eligibility certificate. Further, the respondent No. 3, as correctly pointed out by the petitioner, has no authority and/or jurisdiction to step into the shoes of the authority empowered to grant the eligibility certificate and put forth irrelevant factors in support of the cancellation of the eligibility certificate, when such factors were not considered to be relevant by the authority empowered to grant and/or cancel the eligibility certificate. 99.. Similarly, as regards the grievance of the respondent No. 3 that the petitioners have furnished false information about the date of commencement of the commercial production as February 5, 1996, the petitioners have pointed out that there was commencement of the production on trial basis on February 5, 1996 and since the accounting year ends on March 31, 1996, there was no regular commercial production from February 5, 1996 to March 31, 1996. The petitioners have also pointed out that the goods manufactured, during the trial production, had been duly reflected in the trading, profit and loss account as stock in hand and that the petitioners have not claimed any exemption of sales tax during the period fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials from raw coal in order to bring down the ash contents thereof by taking steps, such as, (i) screening of raw ROM coal, (ii) water washing of screened coal, (iii) elimination of visible stones, shells and other foreign materials by manual labour. 101.. Neither the notice to show cause nor the impugned order of cancellation aforementioned give any indication, as already point out hereinabove, that any of the information furnished by the petitioner-company to the respondents through the medium of its project report was false. Far from this, as correctly pointed out, on the behalf of the petitioners, the industrial unit, in question, was engaged in the manufacturing of washed coal by processing the raw coal in such a manner as to remove the ash contents of the coal by converting the same into washed coal. This was the requirement as per the project report and the respondent-authorities were aware of the nature of manufacturing and processing activities of the industrial unit, in question, at the time of grant of the eligibility certificate. In the face of these facts, respondent No. 2 cannot be said to be justified in observing that since no manufacturing activities was bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity certificate. The writ court will, therefore, be justified to step in, whenever there is violation of principles of natural justice and for the act of the State or its instrumentality is arbitrary. 104.. Keeping in view the above position, when I proceed further, what attracts my eyes is that the writ petition has also been resisted by the respondents on the ground that the petitioner-company obtained the eligibility certificate as a SSI unit only under the Assam Industries (Sales Tax Concessions) Scheme, 1995. The petitioner-company's industrial unit, according to the respondents, is not an SSI unit in as much as the notification, dated August 26, 1993 (annexure C to the affidavit-in-opposition) issued by the Government of India, Ministry of Industry, Department of SSI and ARI, indicates that no unit shall be granted registration as an SSI unit until the end-product has a distinct name, character or use, that is, there must be a change of form, the process applied must be mechanised and "value added " should take place. In the case at hand, since, according to the respondents, the industrial unit of the petitioner-company does not carry out a process, which is mechanised and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity certificate. 107.. It is, no doubt, true that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the exempted provision; but no tax can be imposed by inference or by analogy or by trying to probe into the intention of the Legislature or by considering what was the substance of the matter (see A.V. Fernandez v. State of Kerala [1957] 8 STC 561 (SC); AIR 1957 SC 657. Further, in a taxing statute, one has to look merely at what is clearly stated, there is no room for any intendment, there is no equity as to tax, there is no presumption as to tax, nothing is to be read in and nothing is to be implied. (see Smt. Tarulata Shyam v. Commissioner of Income-tax, West Bengal (1977) 3 SCC 305 and Polestar Electronics (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409 (SC); (1978) 1 SCC 636. 108.. The general rule of construction, as correctly contended by the petitioners, is that exemption from tax granted by a statute should be given full scope and should not be whittled down by importing limitations not inserted by the Legislature. When a notification is issued in accordance with the powers conferred by a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic structure of the Constitution. The provisions of the Constitution aim at ensuring the rule of law. Article 14 guarantees equal treatment to all persons, be they citizens or not. The apex Court in Shree Meenakshi Mills Ltd. v. A.V. Viswanatha Shastri [1954] 26 ITR 713, has clarified that article 14 of the Constitution not only guarantees equal protection of a taxpayer as regards substantive law, but procedural laws also come within its ambit. The provisions of the Constitution not only guarantee fundamental rights, but also provides machinery, which will protect such fundamental rights against constitutional invasion. The imposition and collection of taxes by any authority under article 265 of the Constitution of India cannot infringe the protections provided by article 14. 112.. In the present case, there is no escape from the conclusion that the impugned order of cancellation of the eligibility certificate being, as indicated hereinabove, without jurisdiction, illegal, in violation of the principles of natural justice is nothing, but a colourable exercise of the powers. Such acts of the authorities concerned being arbitrary in nature, the same will have the effect of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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