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2003 (12) TMI 664

ior Counsel with G.S. Kulkarni JUDGMENT R.M.S. Khandeparkar, J. 1. The petitioners challenge the Notification Nos. DMN/CST/2001-02/01 and DMN/CST/2001-02/02, both dated 17-10-2001, hereinafter called as "the impugned Notifications", on the ground that the same takes away the rights of the petitioners which were otherwise assured under the statutory provisions of law contained in the Daman and Diu Sales Tax Act, 1964, hereinafter called as "the said Act" read with the Notification No. DMN/ST/4-1/99/2, dated 31-12-1999, hereinafter called as "the second Notification of December". 2. Few facts relevant for the decision are that one M/s Sharda Packaging Industries, hereinafter called as "Sharda Industries", was having its establishment at Bhimpore, Daman and registered as a dealer under the said Act as well as under the Central Sales Tax Act. It was a partnership firm and the registration No. 60/01/2791 of 17-9-1999 was granted to them for their business of manufacturing articles by the Director of Industries. The registration under the said Act was bearing No. DA/5806, dated 1-12-1999 and was effective from 13-10-1999 and it was for the purpose .....

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sferee had succeeded to the business of the transferor under section 24(6) of the said Act and, therefore, were directed to file the necessary returns and to pay the tax. 3. Assailing the said notice dated 17-5-2002 along with the impugned Notifications, the learned Advocate for the petitioners submitted that the petitioners, being the successors of Sharda Industries and considering the provision of section 24(6) of the said Act read with the second Notification of December are entitled to continue to avail the benefit of exemption which Shards Industries was availing in terms of the entry No. 68 of the Second Schedule of the said Act, hereinafter called as "the entry No. 68", read with section 10 of the said Act. He further submitted that in no case the respondents were entitled to deny the benefit under the exemption notification retrospectively. The impugned Notifications seeking to deny the exemption retrospectively with effect from 1-5-2000 are therefore bad in law in as much as that the respondents have no power to withdraw the exemption notifications retrospectively. He also submitted that the exemption goes with the business and the business of Sharda Industries h .....

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egistration was obtained during the time the entry No. 68 was on the statute book and the product which is manufactured by the petitioners since 2001, had no registration prior to 31-12-1999 and therefore consequent to deletion of entry No. 63, the petitioners, who are the successors of Sharda Industries, cannot claim exemption under entry No. 68 as the same ceased to exist in the statute book from 31-12-1999. The impugned Notifications are merely declaratory and clarificatory in nature and considering the same, it cannot be held that they give retrospective effect to the second Notification of December. The Notification was already in force since 1-1-2000. In the absence of any discrimination, the provisions of Articles 301 to 304 of the Constitution of India are not at all attracted. It is also submitted that the exemption which was available in terms of the entry No. 68 was under section 10 and therefore it was in relation to the products manufactured in terms of registration and by the industries to which the said Notification was applicable. Reliance is placed in the decisions in the matters of Commissioner of Income-Tax vs. Podar Cement Pvt. Ltd. and others, reported in 1997 .....

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7. It is to be noted that section 10(2) of the said Act empowers the Government to add to, omit from or otherwise amend, the entries in the Second Schedule. The provision relating to incidence of tax under the said Act is to be found in section 4(1) which makes every dealer, whose gross turnover during the year immediately preceding the commencement of the said Act exceeded the taxable quantum, liable to pay the tax under the said Act on all sales effected after the date notified by the Government except by the dealers who may deal exclusively in one or more classes of goods specified in the Second Schedule. In other words, excepting the goods enumerated under the Second Schedule of the said Act, in case of all other goods, the dealer is liable to pay tax, of course, subject to conditions specified in section 4. 8. In terms of the entry No. 68 of the Second Schedule, the goods manufactured, processed or assembled in the Union Territory of Daman and Diu by any Small Scale Industry which was set up on or after the date of coming into force of the said provision and which had not gone into production and had not effected any sale of goods manufactured, processed or assembled by it on .....

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the said Act. The manner and the period within which the application for registration is to be filed has been specified in sub-section (2) thereof. In terms of sub-section (3) of section 11, if the authority to whom the application for registration of a dealer under the said Act is filed, is satisfied that the application is in order, then he shall, in accordance with the rules made in the said Act, register the application and grant the applicant a certificate of registration in the prescribed form and such a certificate should specify the places of business as well as the class or classed of goods for the purpose of Clause (II) of sub-section (3) of section 7 which relate to taxable turnover. The sub-section (4) of section 11 empowers the prescribed authority to amend the certificate of registration in accordance with the information either furnished to him under section 23 or received by him in any other form. This will include power to amend the certificate pursuant to the application filed by the dealer for amendment in relation to the class or classes of goods. The sub-section (7) of section 11 provides that when any business in respect of which a certificate has been grante .....

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ection 15 apply, changes the name or nature of his business or effects any change in the class or classes of goods in which he carries on his business and which is or are specified in his certificate of registration as also sells or otherwise disposes of his business or any part of his business, or effects or comes to know of any other change in the ownership of the business, then he shall within the prescribed time inform the prescribed authority accordingly. In other words, if the person who has obtained provisional certificate of registration disclosing certain goods as the product of manufacture in the industry which is established in Daman or Diu and which is entitled to avail exemption from payment of sale tax in respect of the goods manufactured in such industry and in the course of business, causes or effects any change in the goods manufactured by it, then it is necessary to inform the prescribed authority under section 23(c) and to get the certificate amended under section 13(4) read with section 11(4) of the said Act, failing which the registration can be cancelled by the Commissioner under section 11(7) and (8) of the said Act. 12. The sub-section (4) of section 24 prov .....

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14. The entire case of the petitioners is based on the contention that Sharda Industries was entitled for exemption from payment of sales tax in terms of the entry No. 68 and the petitioners are the successors of Sharda Industries and therefore in terms of Clauses 7 and 9 of the second Notification of December are lawfully entitled to avail the said exemption benefit for the period for which Sharda Industries would have been otherwise entitled to avail the same and such benefit cannot be taken away or denied to the petitioners and therefore the impugned Notifications are bad in law, and in any case the retrospective effect which is sought to be given to the impugned Notifications to deny the said benefit is impermissible in law. 15. There is no doubt that Sharda Industries had obtained registration for the manufacture of corrugated board and some other items much prior to the issuance of the first Notification of December and prior to the deletion of the entry No. 68 from the Second Schedule of the said Act. Therefore it cannot be disputed that Sharda Industries were entitled to claim benefit under the entry No. 68 in relation to the said goods even after issuance of the first Not .....

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the industries which were enjoying the benefit of exemption under the entry No. 68 prior to 31-12-1999. As already observed above, the entry clearly related to the products which were disclosed in the registration certificate. Therefore, even without clarification by the impugned Notifications, the Clause IX quoted above read with the entry No. 68 and the other provisions of the said Act obviously revealed that continuation of the benefit was restricted to those industries which were manufacturing the products as per the registration certificates issued to them and which were in force prior to 31-12-1999. 19. Plain reading of Clause IX of the second Notification of December and the entry No. 68, therefore, would disclose that even after deletion of the entry No. 68 exemption from the payment of sale tax under the entry No. 68, which was available to the industries and those which were enjoying the same prior to 31-12-1999 were allowed to continue to enjoy the same for the balance period of exemption in relation to those goods, the production of which had commenced by such industries prior to April, 2000 provided that the goods so manufactured were in terms of the registration certi .....

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eleted from the Second Schedule, but on deletion of such entry similar exemption is made available by virtue of the Notification issued under section 10A to specified industries and the product manufactured by them pursuant to the registration obtained in terms of the provisions of law and as per the requirement of the said entry No. 68, nothing can prevent the Government from clarifying the exemption to be referable to a particular class of products and, more particularly, when cogent reasons are disclosed for taking the necessary steps in relation to the clarification of the provision regarding the exemption from the payment of sales tax. Being so, the contention of the petitioners that the impugned Notifications are bad in law is devoid of substance. 21. As already seen above, the production had commenced by Sharda Industries on 24-2-2001 and the entire establishment was purchased by the petitioners on 8-3-2001. Though Sharda Industries commenced production with effect from 24-2-2001, the registration regarding class of goods to be manufactured by Sharda Industries was amended with effect from 20-2-2001. In other words, there was no production of goods prior to 31-12-1999 of eve .....

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ion and be not on that account be considered as unsustainable or violating Article 19(l)(g) of the Constitution, especially when the tax is already collected. In Tata Engineering, relied upon by the respondents, the retrospective amendment to Rule 41E of the Bombay Sales Tax Rules, 1959 was held to be valid and lawful. 24. In Aflon Engineering Corporation (supra), it was held by the Apex Court that:- "11. The 1971 notification did not elaborate or specify as to what would be regarded as a rigid plastic sheet. In order that there should be no ambiguity as to what is to be categorised as a flexible or rigid material the explanation was inserted in 1978. It is rightly riot being contended that the Central Government could not have included the explanation at the time when the notification was first promulgated in 1971. The Central Government could at that very first instance restrict the ambit of the exemption notification to a particular variety of goods. After all, no manufacturer has a right to claim exemption. It is a relief which is granted by the Government in case where it thinks appropriate and proper. Exemptions could be granted subject to certain conditions. They may ev .....

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