TMI Blog2010 (3) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... atch of four writ petitions are directed against the orders of reassessment for the years 2000-01, 2001-02, 2002-03, and 2003-04, passed by the Sales Tax Officer, Dhenkanal Circle, Angul, disallowing the benefit of deferred payment of sales tax extended by the State Government under the Industrial Policy Resolution, 1992, which had been allowed in the original orders of assessment and confirmed in appeals and demanding tax for the entire period. The facts of the case as detailed in the writ petition are that the Government of Orissa in the Industries Department formulated the Industrial Policy Resolution, 1992 (for short, the IPR 1992 ), which was published in the Orissa Gazette on August 1, 1992. The policies outlined in IPR 1992 was intended to encourage the flow of investment and development of entrepreneurship in the State of Orissa. While financial assistance to the potential entrepreneurs in the form of subsidies and post-production benefits was envisaged, the main thrust of the policy was on creating an environment conducive to the smooth setting up and successful functioning of industries. The said policies detailed in IPR 1992 offered several incentives to the new indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under: SCHEDULE Sl. No. (1) Class of industrial units (dealers) (2) Conditions and restrictions of deferment (3) 1. Medium/large scale industrial units where fixed capital investment, i.e., investment in land, buildings, plant and machinery and other equipment of permanent nature has been made in Orissa on or after August 1, 1992, as certified by the Director of Industries, Orissa in form E(92). 1. Deferment of sales tax shall be allowed for a period of five years from the date of commercial production each year, i.e., a period of 365 consecutive days. The period shall be extended by two years for pioneer units. 2. The amount of deferment of sales tax which shall include sales tax payable to Government under the Orissa Sales Tax Act, 1947 and the Central Sales Tax Act, 1956 taken together shall not exceed the sum calculated at 100 per cent in Zone A, 75 per cent in Zone B and 60 per cent in Zone C of the investment of the unit in plant and machinery, land, building and other equipment of a permanent nature. . . . Similar notification vide S.R.O. No. 1094 of 1992, dated September 23, 1992, was issued by the State Government in the Finance Department providing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Director of Industries, Orissa, that the petitioner-unit has started its own production and selling of its product with effect from January 20, 2000. Accordingly, the Director of Industries, Orissa, vide its letter dated September 18, 2000 clarified that the petitioner-company started manufacturing and selling of their own products, with effect from January 20, 2000. The clarification letter of the Director of Industries, Orissa, dated September 18, 2000, reads as under: In continuation to this office order No. 4967/dated April 13, 1999, this is to clarify that M/s. Nava Bharat Ferro Alloys Limited, Kharagprasad, Near Meramundali, Rly. Station sub-division Dhenkanal, District: Dhenkanal, Orissa, is an industrial unit under medium/large scale sector. The unit started production from October 1, 1997 as a conversion agent of TISCO Ltd. for processing of (1) Carbon ferro chrome (of more than four per cent carbon) (2) Ferro silico manganese/ferro silicon. Subsequently from January 20, 2000, the unit started manufacturing and selling the above products on their own account. Pursuant to the aforesaid clarification, the Director of Industries, Orissa, issued necessary cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner-company filed a copy of the agreement entered into with IPICOL before the Sales Tax Officer, Dhenkanal Circle, requesting him to issue certificate in form C(92) as required under aforesaid notification vide S.R.O. No. 1093 of 1992, dated September 23, 1992, for availing of deferment of sales tax with effect from January 20, 2000. The Sales Tax Officer, Dhenkanal Circle, completed the assessment for the years 2000-01, 2001-02, 2002-03 and 2003-04 under rule 12(4) of the Central Sales Tax (Orissa) Rules (for short, the CST (O) Rules ) and while allowing deferment of payment of sales tax, demanded CST and surcharge in respect of certain sale transactions, due to non-submission of requisite form C against sale of ferro chrome. Being aggrieved by the orders of the assessment for the years 2000-01 to 2003-04, passed by the Sales Tax Officer, Dhenkanal Circle, the petitionercompany filed first appeals before the Assistant Commissioner of Sales Tax, Cuttack II Range, Cuttack. The said appellate authority while allowing the appeals and reducing the tax demand on production of requisite form C, confirmed the deferment of tax allowed to the petitioner-company. While the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under OST Act and CST Act, as the Director of Industries is the competent authority to certify the eligibility and entitlement of a industrial unit to avail of the incentives of deferment of payment of sales tax for five years from the date of actual commencement of commercial production, the assessing officer had no authority to hold otherwise and disallow such incentives. Moreover, as the petitioner's unit started its actual commercial production and sale of finished products only from January 20, 2000, as certified by the Director of Industries, Orissa, there was no scope for the assessing officer to interpret the same and hold otherwise, while disallowing the incentive of deferment of sales tax. Coming to the question of power of the assessing authority to reopen the assessment, learned counsel for the petitioners, with reference to rule 12(8) of the CST (O) Rules submit that such reassessment merely on the change of opinion of the assessing officer is not permissible in law. In this regard, it is submitted that as the said assessing officer had passed the original order of assessment, allowing deferment of sales tax, the impugned orders of reassessment disallowing su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the parties, it reveals that the petitioner's industrial unit was initially issued with a certificate by the Director of Industries, Orissa, certifying the date of commencement of commercial production to be October 1, 1997, which had been obtained by the petitioner's unit for the purpose of undertaking job-work as a conversion agent of M/s. TISCO Ltd. The petitioner's unit did not manufacture any product of its own, which could be sold in the market. Only when the petitioner's industry was in a position to commence commercial production of its own product, necessary application was made and after inspection of the industrial unit, the General Manager, DIC, Dhenkanal, issued a communication dated July 5, 2000, wherein it had been clearly mentioned that the petitioner's industrial unit started its commercial production with effect from October 1, 1997, as a conversion agent of M/s. TISCO Ltd., as per their agreement dated April 1, 1997 and that they have effected sale of their own product only with effect from January 20, 2000. In the said letter, it was further mentioned that the activities undertaken during the period from October 1, 1997 to January 19, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industrial units only on the basis of certificate to be issued by the Director of Industries in respect of large/medium scale and pioneer industries. Accordingly, the said authority having certified that the petitioners unit had commenced commercial production and sale of its own product with effect from January 20, 2000 and is eligible to get the benefit of deferment of sales tax, the same could not have been interfered with and/or denied by the assessing officer, while exercising power of reassessment, by giving a restricted meaning to the term commencement of commercial production . Moreover, the benefits of exemption/deferment of sales tax extended by the State Government under the IPR 1992, were required to be construed liberally so as to make it real and substantial and a narrow pedantic interpretation was neither warranted nor desirable, as the same would defeat the very intent and purpose for which such incentives were granted. What was intended under the IPR 1992 was to provide sales tax incentives and benefits to industrial units in respect of their finished product and as the petitioner's industrial unit admittedly manufactured and sold its own product only from J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to enjoy the exemption from sales tax on sale or purchase of raw materials for the period of five years from the date of commencement of commercial production that is August 10, 1983, as stated in the certificate (annexure 1). The expression commercial production had come up for consideration before a Division Bench of the Punjab and Haryana High Court at Chandigarh, in the case of Ballarpur Industries Limited v. State of Haryana [2000] 117 STC 39, wherein the honourable court had held as under (at page 41): . . . The expression 'commercial production' has not been defined in the Rules but as understood in common parlance it means when the unit starts sale of its products in the market. The units very often go into trial production which would be different from commercial production but when the product is sought to be sold, it is then only that the unit will be said to have gone into commercial production. In other words, the moment the eligible unit issues the first sale voucher it would go into commercial production for the purpose of this rule and the application for exemption. . . In the case of Vadilal Chemicals Ltd. v. State of Andhra Pradesh [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2005] 142 STC 76 (SC), has held that as the exemption in that case was granted to all small and large scale industries registered with Director of Industries and since the assessee therein was recognized and certified as a small industrial unit, engaged in the activity of re-packing of edible oil and further since the exemption was granted with the open eyes to that particular industry, the State cannot be allowed to turn around and take a stance that the appellant-assessee was not entitled to the exemption on the ground that it did not manufacture any goods. Coming to the question as to whether the assessing officer had the power to reopen the assessment in respect of the petitioner's-company on mere change of the opinion with regard to the period from which the petitioner's industrial unit is entitled to the benefit of deferment of sales tax on its product, it is seen that such power to reopen the assessment has been provided under rule 12(8) of the CST (O) Rules, which prescribes that such power of reassessment can be exercised to reopen a concluded assessment, only if the turnover of a dealer for any period has escaped assessment or the dealer has been under-assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer nor is there anything to show that the assessee concealed some material from the assessing officer so as to enable him to reopen the case. In view of the law which we have discussed above and other decisions it is clear that, merely because the assessing officer has changed his opinion, the assessing officer cannot call upon the assessee for reassessment and cannot issue coercive notice. In the case of Binani Industries Limited v. Assistant Commissioner of Commercial Taxes, VI Circle, Bangalore [2007] 6 VST 783 (SC), while dealing with the question as to whether the assessing officer had the power to reopen an assessment merely on change of opinion, the honourable court held as follows (at page 804): The issues can be looked at from a different angle. Undisputedly, the 1996 circular was binding on the Revenue authorities as is spelt out in the case of April 12, 1996 and October 23, 1999 circulars. The assessments were completed on the basis of the April 12, 1996 circular. Merely because the Commissioner changes his view/opinion and according to him it was review of the earlier decision that cannot have any effect on any assessment which has been completed on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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