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2016 (9) TMI 354 - PUNJAB AND HARYANA HIGH COURT

2016 (9) TMI 354 - PUNJAB AND HARYANA HIGH COURT - 2016 (342) E.L.T. 524 (P & H) - Recovery of benefit availed - cancellation of exemption certificate eligibility certificate benefit of exemption from payment of tax - valid from 20.3.1993 to 19.3.2002 - exemption certificate was issued on 28.10.1993. Benefit of ₹ 27,95,959/- was availed of by the appellant out of the total benefit admissible ₹ 72,11,700 upto June, 2000. The unit stopped production thereafter. The benefits, which .....

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when notional sales tax liability first exceeds the permissible limit, whichever is earlier. - Sub-rule (9) of Rule 28A of the Rules provides for cancellation of exemption/ entitlement certificate under certain specified conditions and one of them being discontinuance of its business by the unit for a period exceeding six months or closing down its business during the period of exemption/ deferment. - The facts of the case are that the period of eligibility of the appellant was from 20.3 .....

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that: - a perusal of the order shows that in fact, it is not an assessment order, rather an order passed for demand of tax and interest on account of violation of conditions laid down in Rule 28A(11)(a)(i) of the Rules, which specifically provides that in case after availing the benefits, the unit does not remain in production for next five years, the entire amount of tax benefits availed of, shall be payable along with interest order of demand maintainable demand of benefit availed with int .....

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have been extracted from VATAP No. 188 of 2014. 3. The appellant has filed the present appeal raising the following substantial questions of law arising out of the order dated 27.11.2013 passed by the Haryana Tax Tribunal at Chandigarh in STA Nos. 160-176 of 2013- 14:- (i) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was justified in upholding the order of the lower authorities raising the demand prior to the date of cancellation of exemption certificate even thoug .....

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e order of Assessing Authority raising demand is violative of principles of judicial discipline? (iv) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was justified in making recovery of the tax in terms of Rule 28-A(10)(v) even though the Exemption Certificate has not been cancelled during its validity? (v) Whether the Ld. DETC could have cancelled the Exemption Certificate vide his order dated 25.10.2006 even though the Exemption Certificate had already lost its vali .....

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ppellant with validity from 20.3.1993 to 19.3.2002. After receipt of eligibility certificate, the appellant applied for issuance of exemption certificate, which was issued on 28.10.1993 entitling the appellant to claim benefit of exemption from payment of tax to the extent of Rs. 72,11,700/-. The appellant continued availing the benefit till the validity of the eligibility certificate as well as the exemption certificate expired. Vide order dated 7.11.2002, passed under Rule 28A(11)(b) of the Ha .....

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Joint Excise & Taxation Commissioner (Appeals), who vide order dated 28.1.2005 set aside the order and remitted the case back to the Deputy Excise & Taxation Commissioner for passing a fresh order in terms of the observations made in that order. Thereafter, process was initiated to withdraw the eligibility certificate granted to the appellant. The matter was put up in the meeting of Lower Level Screening Committee held on 11.8.2006. The matter was dropped, however, it was observed that .....

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the aforesaid order to the Joint Excise & Taxation Commissioner (Appeals). The Appellate Authority vide order dated 21.12.2006, upheld the order while noticing the contention raised by learned counsel for the appellant that even though the exemption certificate was cancelled with effect from 1.7.2000, still the assessing authority was demanding the entire amount of tax, even for the period prior thereto. The Appellate Authority upheld the order while noticing that in case the impugned order .....

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he appellant preferred appeal before the Joint Excise & Taxation Commissioner (Appeal), who vide order dated 31.5.2013 dismissed the same. The appeal of the appellant before the Tribunal also met the same fate as the same was dismissed vide order dated 27.11.2013. It is the aforesaid order, which is impugned before this Court raising the aforesaid substantial questions of law. 6. Learned counsel for the appellant submitted that Section 13B of the Act gives power to Government to grant exempt .....

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Sub-rule (7) of Rule 28A of the Rules provides that exemption certificate is to be renewed from year to year, for which application is required to be made on statutory form. Sub-rule (8) of Rule 28A of the Rules provides for the conditions under which eligibility certificate granted to an industrial unit can be withdrawn. If it is so, the exemption certificate is automatically withdrawn and entire amount of tax benefit availed of by the industrial unit is recoverable along with interest or pena .....

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. Learned counsel for the appellant further submitted that the rates of tax on sale of goods in the course of Inter-State was exempted for the units availing exemption vide notification dated 4.9.1995 issued in exercise of powers conferred under Section 8(5) of the Central Sales Tax Act, 1956 (for short, 'the Central Act'). 8. Learned counsel for the appellant while referring to a Division Bench of this Court in A. S. Fuels Pvt. Ltd. And another vs State of Haryana and others (2002) 126 .....

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mount of benefit availed of by the industrial unit can be recovered. Facts in that case were distinguishable as it had come on record that in that case even the eligibility certificate of the party before Hon'ble the Supreme Court had been cancelled. In the case in hand, though the proceedings were initiated for cancellation of eligibility certificate, however, the matter was dropped by the Lower Level Screening Committee. 9. Learned counsel for the appellant further referred to a Division B .....

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this Court in M/s Sai Beverages (P) Limited, New Delhi vs State of Haryana (2001) 17 PHT 197, in which earlier judgment of this Court in A. S. Fuels (P) Limited's case (supra) was followed. Special Leave to Appeal (Civil) No. 19347 of 2001 State of Haryana vs M/s Sai Beverages (P) Limited filed against the aforesaid judgment was also dismissed on 26.11.2001. 10. Further it was submitted that the Deputy Excise & Taxation Commissioner while cancelling the exemption certificate granted to .....

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013) 5 Supreme Court Cases 252. 11. Another contention raised by learned counsel for the appellant was that the assessment years in question in all the appeals are from 1992- 93 till 2000-2001. Section 28 of the Act provides that the assessment of a dealer can be framed within 5 years of a particular assessment year. Even Rule 28A(10)(ii) of the Rules provides that the assessment of a dealer availing exemption of tax has to be completed by 31st December of the succeeding year. He further submitt .....

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hence, barred by limitation. In support of the arguments, reliance was placed upon Division Bench judgments of this Court in Ballarpur Industries Limited vs State of Punjab and others (2010) 35 PHT 5, VATAP No. 110 of 2013 The State of Punjab and others vs M/s The Patiala Cooperative Sugar Mills Limited, Rakhra, District Patiala, decided on 26.2.2014 and GSTR No. 9 of 2011 M/s Mahavir Techno Ltd., Kurukshetra vs State of Haryana, decided on 30.3.2016. 12. As regards the demand raised under the .....

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n/ entitlement certificate under certain specific circumstances. It does not provide for any date from which it could be cancelled. Cancellation means from day one. It was not a case of non-renewal. The consequence of cancellation of exemption / entitlement certificate has been provided for under Rule 28A(10)(v) of the Rules. In the case of the appellant, it had stopped production in the year 2000, during even currency of its eligibility period, whereas in terms of Sub-rule 11 of Rule 28A of the .....

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rely consequential to the order passed by the Deputy Excise & Taxation Commissioner withdrawing the exemption certificate. Those have been upheld in appeal. She further submitted that the facts of the case in hand and before Hon'ble the Supreme Court in A. S. Fuels Pvt. Ltd.'s case (supra) were identical and, in fact, support the case of the department. She further submitted that even on the ground of limitation, the orders of assessment cannot be set aside as the language used in Se .....

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es and perused the paper book. 16. The undisputed facts on record are that the appellant industrial unit came into commercial production on 20.3.1993. It was issued eligibility certificate valid from 20.3.1993 to 19.3.2002 for a total sum of Rs. 72,11,700/-. Subsequently exemption certificate was issued on 28.10.1993. Benefit of Rs. 27,95,959/- was availed of by the appellant out of the total benefit admissible upto June, 2000. The unit stopped production thereafter. The benefits, which were ava .....

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ing authority shall, within five years after the expiry of such period, proceed to assess, to the best of his judgment the amount of the tax due from the dealer. (5) If a dealer does not furnish returns in respect of any period by the prescribed date, the assessing authority shall, within five years after the expiry of such period, after giving the dealer a reasonable opportunity of being heard, proceed to assess, to the best of his judgment, the amount of tax, if any, due from the dealer. Rules .....

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avail of exemption from the payment of sales or purchase tax or both, as the case may be; xx xx xx (6) (a) An eligible industrial unit which has been issued with an eligibility certificate (hereinafter referred to as the applicant unit), shall, within sixty days of its receipt make an application for the grant of exemption or entitlement certificate, as the case may be, in Form ST-71 to the Deputy Excise and Taxation Commissioner of the District in which his unit is located. The application sha .....

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hall ask the applicant unit seeking benefit of,- (i) tax deferment to either execute a mortgage deed in Form ST-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 ST-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. .....

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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 security and that his application is in order will issue him the exemption/entitlement certificate as the case may be, within thirty days of the receipt of the application. One copy of the certificate shall be sent to the Director of Industries or The General Manager, District Industries Cen .....

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an important document and shall be entered in a register to be maintained in Form ST-75 by the Deputy Excise and Taxation Commissioner concerned in his personal custody. At the time of transfer of the charge of his office, the Deputy Excise and Taxation Commissioner shall hand over the register as well as the documents to his successor personally against proper receipt and shall send a certified copy of the same to the Excise and Taxation Commissioner by name who will acknowledge its receipt to .....

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eclared national sales tax liability of the current year and the difference between the actual and the declared notional sales tax liability of the previous year in the case of sales tax exemption and equivalent, to the extent of estimated tax liability of the current year and difference between actual and estimated tax liability of previous year in case of tax deferment, as also other documents mentioned in the application. The Deputy Excise and Taxation Commissioner after making such enquiries .....

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e year in which the application is made if it is in time or otherwise from the date of application to 30th June, 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 incharge of the district finds that the application for renewal of exemption/entitlement certificate is not in order or the particulars contained .....

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, Haryana, if preferred within thirty days of the communication of the order appealed against. (8)(a) The eligibility certificate granted to an industrial unit shall be liable to be withdrawn at any time during its currency by the appropriate screening committee, in the following circumstances - (i) if it is discovered that it has been obtained by fraud, deceit, misrepresentation, mis-statement or concealment of material facts; (ii) discontinuance of its business by the unit or closing down of i .....

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e affected unit. (b) When the eligibility certificate is withdrawn, the exemption/entitlement certificate shall be deemed to have been withdrawn from the 1st 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 ever been granted to it. (9) The exemption/entitlement certificate granted to an eligible industrial unit shall be liable to be cancelled by the Deputy Excise and Taxation Commissioner concerned in the f .....

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the deferred amount on the date of payment, (v) contravention of any of the provisions of the Act and/or the rules or conditions of the eligibility certificate or 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 .....

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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 deferment shall make payment of the deferred amount after the expiry of a period of five years to the extent of the amount deferred, every quarter .....

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eneficiary/industrial unit after having availed of the benefit, - (i) shall continue its production at least for the next five years not below the level of average production for the preceding five years, and (ii) shall not make sales outside the State for next five years by way of transfer or consignment of goods manufactured by it. (b) In case the unit violates any of the conditions laid down in clause (a), it shall be liable to make, in addition to the full amount of tax-benefit availed of by .....

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een given reasonable opportunity of being heard. 18. A perusal of the scheme of Rule 28A(5) of the Rules provides for procedure for issuance of eligibility certificate, whereas Sub-Rule (6) thereof provides for issuance of exemption certificate. It further provides that the exemption certificate issued shall be valid unless cancelled or withdrawn from the date of commercial production or from the date of issue of exemption certificate as the case may be to the 30th June next year or when notiona .....

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e period is still remaining. 20. Sub-rule (8) of Rule 28A of the Rules provides that the eligibility certificate granted to an industrial unit shall be liable to be withdrawn at any time during its currency by the appropriate screening committee under certain specified conditions. On withdrawal of eligibility certificate, the exemption/ entitlement certificate shall be deemed to have been withdrawn and the entire amount of tax, interest or penalty shall become payable. 21. Sub-rule (9) of Rule 2 .....

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ent of such unit is to be framed in accordance with the provisions of the Act and the Rules framed thereunder and is to be completed by 31st December in respect of the assessment year immediately proceeding thereto. It further provides that on cancellation of eligibility or exemption/ entitlement certificate before it is due for expiry, the entire amount of tax exempted/ deferred shall become payable in lumpsum. The provisions relating to levy of interest and penalty shall also be applicable. 23 .....

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tion shall be recoverable along with interest. 24. Withdrawal of eligibility certificate or cancellation of exemption/ deferment certificate may be during its currency as envisaged in Rule 28A(8) and 28A(9) of the Rules but Rule 28A(11) of the Rules operates after the expiry of both the certificates. It contains conditions which are applicable after the entire benefit has already been availed of. 25. In the case in hand, the facts as noticed above are that the period of eligibility of the appell .....

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rt opined that the exemption certificate is renewed on year to year basis. It can be cancelled during its currency and as a result the demand of tax only for that year could be raised and not for the earlier period. When the matter went before Hon'ble the Supreme Court, it was opined that this Court had failed to take notice of the provisions of Rule 28A(11)(a) in terms of which a unit even after claiming the benefit will have to remain in production for next five years and on failure, to pa .....

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