Rajes Kumar, J.
1. The present revision under Section 11 of U. P. Trade Tax Act (hereinafter referred to as 'Act') is directed against the order of Full Bench of Tribunal dated 19.09.1998 relating to assessment year 1999-2000.
2. The brief facts of the case are that the applicant is a Private Limited Company incorporated under the Indian Companies Act. Applicant established a Unit for manufacturing of Laundry Soap and Detergent Powder. The Unit was established in its own land. The total investment towards machines was to the extent of Rs. 3,19,960/- consisting of one machine named as Pouch Sealing Machine valuing Rs. 24,400/-. Such machine was required for packing purposes. Admittedly, Pouch Sealing Machine was initially imported by the Finn M/S Gorakhpur Grah Udyog Kendra, Gorakhpur and thereafter, it was transferred to the applicant. Applicant claimed exemption under the Government Order dated 30.9.1982 under Section 4-A of the Act on the turnover of manufactured goods. The exemption application was processed and thereafter, an Eligibility Certificate was issued on 14.2.1994 granting exemption for the period of five years from 1.9.1983 to 31.8.1988. The Commissioner of Trade Tax issued a notice under Section 4-A (3) of the Act purporting to cancel the Eligibility Certificate granted on 14.2.1994 on the ground that (a) One Pouch Sealing Machine was acquired by M/S Gorakhpur Grah Udyog Kendra. Gorakhpur and thereafter, transferred to the applicant (b) A capital investment in the Unit is less than Rs. 3 Lacs (c) Land and building were not in the name of Unit (d) Unit has taken electricity connection on 17.11.1983 (e) Unit was not registered under the Indian Factories Act.
3. Applicant filed reply to the notice. After consideration of the reply to the notice. Commissioner of Trade Tax vide order dated 27.3.1993 cancelled the Eligibility Certificate from very beginning on the ground that the Unit was not entitled for exemption under Section 4-A of the Act. The Eligibility Certificate was cancelled mainly on the ground that the Unit had installed one Pouch Sealing Machine, which had been acquired by M/S Gorakhpur Grah Udyog Kendra, Gorakhpur, and the Unit was not registered under the Indian Factories Act, thus, had not fulfilled the conditions of being new Unit under Section 4-A of the Act. Being aggrieved by the said order, applicant filed appeal before the Tribunal. The Tribunal by the impugned order, dismissed the appeal. Tribunal held that the production was made during the period 1.9.1983 to 31.8.1988 with the help of Generator acquired by another Unit. The Tribunal has accepted the submissions of the applicant with regard to the use of Generator in the manufacturing and not obtaining the registration under the Indian Factories Act. The Tribunal, however, held that the Unit was not eligible for exemption because it had used Pouch Sealing Machine, which was earlier acquired by M/S Gorakhpur Grah Udyog Kendra, Gorakhpur and the applicant had purchased such machine from the said Company, relying upon the decision of Apex Court in the case of State Level Committee v. Morgardshammar India Ltd. reported in 1996 UPTC page 213. The Tribunal in its order referred a document dated 7.8.1983 available in the file of DLC which is in the form of Certificate issued by Sri R.C. Gupta, Proprietor of M/S Gorakhpur Grah Udyog Kendra, Gorakhpur certifying that the Pouch Sealing Machine was purchased by his Unit from Spark Electronics, Bombay for Rs. 24,440/- and since it was not much useful for their purposes, hence, lying idle and M/S Chetna Chemicals Pvt. Ltd. was willing to buy the machine, hence, the machine had been transferred in the name of M/S Chetna Chemicals Pvt. Ltd.
4. Heard learned Counsel for the parties.
5. Learned Counsel for the applicant submitted that all the facts relating to the purchases of all the machines including Pouch Sealing Machine were available on record at the time of consideration of exemption application by the Divisional Level Committee which is clear from the order of the Tribunal referring the Certificate issued by Sri R.C. Gupta, Proprietor of M/S Gorakhpur Grah Udyog Kendra, Gorakhpur and on consideration of the fact that Pouch Sealing Machine was initially acquired by M/S Gorakhpur Grah Udyog Kendra. Gorakhpur and thereafter, it was purchased by the applicant from M/S Gorakhpur Grah Udyog Kendra, Gorakhpur. The Divisional Level Committee issued an Eligibility Certificate on 14.2.1994. He submitted that the exemption was expired on 24.3.1985 and thereafter, the present notice was issued on 27.1.1991 after expiry of about six years. He further submitted that prior to the impugned notice, one more notice was issued under Section 4-A (3) of the Act on 8.7.1988 on the ground that the capital investment for the Unit was less than Rs. 3 Lacs and the said notice was vacated after accepting the plea that total capital investment was more than Rs. 3 Lacs. He submitted that in the said notice, no allegation was made with regard to the Pouch Sealing Machine. According to learned Counsel for the applicant, there was no misrepresentation of fact, therefore, initiation of proceeding under Section 4-A (3) of the Act was not justified. In support of his contention, he relied upon the decision of this Court in the case of Jaidurga Detergent & Chemicals Pvt. Ltd. v. Commissioner of Sales Tax reported in 1999 UPTC page 89, 1999 UPTC page 37, Bharat Steel Rolling Mill v. Commissioner of Trade Tax reported in 2002 UPTC page 122 and 2005 (41) STR page 381. Learned Standing Counsel submitted that under the provisions of Section 4-A of the Act, Unit cannot be treated as a new Unit in case if, it has used the machine acquired by any other Factors' or Workshop. He submitted that admittedly, the applicant had used the Pouch Sealing Machine, which had been earlier acquired by M/S Gorakhpur Grah Udyog Kendra, Gorakhpur. He submitted that if the value of the Pouch Sealing Machine is excluded, the total investment come to less than Rs. 3 Lacs and the Unit would not be entitled on this ground also.
6. Having heard learned Counsel for the parties and perused the order of Tribunal and the authorities below.
7. There is no dispute on the fact. Admittedly, the applicant, had used one Pouch Sealing Machine in its Unit, valuing Rs. 24.440 - which was used as a packing machine for packing of Detergent Soap and Powder, therefore, undoubtedly, it was essential machine required in the manufacturing and to bring the final product in the marketable form. The value of the Pouch Sealing Machine had been considered in the earlier proceedings under Section 4-A (3) of the Act and on consideration of the value of the said Machine it has been held that the capital investment was more than Rs. 3 Lacs. Admittedly, the said machine was initially acquired by M/S Gorakhpur Grah Udyog Kendra. Gorakhpur and thereafter, it was transferred to the applicant. It is not disputed by the applicant at any stage that M/S Gorakhpur Grah Udyog Kendra, Gorakhpur did not come Within the purview of any Factory or Workshop. In accordance to Section 4-A of the Act, if a Unit used a machine, which was acquired for use in any Factory or Workshop, such Unit would not come within the purview of a new Unit. The Apex Court in the case of State Level Committee v. Morgardshammar India Ltd. (supra) held that if the installed machine was acquired by any Factory or Workshop, such Unit would not be entitled for exemption. Thus, on the facts and circumstances of the case, it is clear that under the existing provisions, the Unit was not entitled for exemption.
8. Now the question for consideration is that whether the provisions of Section 4-A (3) of the Act can be invoked if there was no misrepresentation or concealment of fact on the part of the applicant.
9. Admittedly, the present is not the case of misrepresentation or concealment of fact on the part of the applicant. The applicant appears to had disclosed all complete details about the purchases of entire machines including Pouch Sealing Machine. A Certificate dated 7.8.1983 which is referred in the order of the Tribunal is available in the file of DLC, also reveals that at the time of consideration of exemption application, it was very well known to the DLC that the said Pouch Sealing Machine was initially acquired by M/S Gorakhpur Grah Udyog Kendra, Gorakhpur and thereafter it was transferred to the applicant. Thus, it is not a case of misrepresentation or concealment of fact on the part of the applicant.
10. Now the question for consideration is that whether the provision of Section 4-A (3) of the Act can be invoked in the absence of any case of misrepresentation or concealment of fact on the part of the applicant.
11. Section 4-A (3) of the Act as is stood prior to the amendment by UP. Act No. 28 of 1991 read as follows:
(3)' Where the Commissioner of Sales Tax is of the opinion that facility of exemption from, or reduction in the rate of tax obtained on the basis of eligibility certificate referred to in Clause (d) of Sub-section (2) has been misused in any manner whatsoever, he may, by order in writing cancel the Eligibility Certificate from such date, whether before or after the date of such order, as may be specified therein.
12. Section 4-A (3) of the Act as stood after the amendment by U.P. Act No 28 of 1991 read as follows:
Where the Commissioner of Sales Tax is of the opinion that the facility of exemption from, or reduction in the rate of tax obtained on the basis of an eligibility certificate referred to in Clause (d) of Sub-section (2) or on the basis of any eligibility certificate 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 such 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 dealer a reasonable opportunity of being heard.
13. The aforesaid Section 4-A (3) of the Act came up for consideration before this Court in the case of Jaidurga Detergents and Chemicals Pvt. Ltd., Kanpur v. Commissioner of Sales Tax reported in 1995 UPTC, 89 this Court held as follows:
Earlier, Section 4-A (3) of the Act could be invoked by the Commissioner if the facility of exemption has been misused The scope of this power has now been expanded by the amendment to cover cases where the unit has violated the conditions subject to which the facility of exemption was granted or 'that the unit to which the eligibility certificate has been granted is not entitled 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 circumstances, i.e. 'is not entitled to such facility' is ejusdem generis to the preceding two, i.e. misuer 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 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 authorize 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.
14. Learned Single Judge further held the power conferred under Section 4-A (3) of the Act is discretionary. Legislature has used the word 'may' indicating that the power should be exercised only where default is substantial. It would not be permissible to the Commissioner to deny the dealer the benefit of exemption on account of trivial lapses or for circumstances not of the dealer's own making.
15. It may be mentioned here that Section 10 (2) of the Act has been amended in 1994 by Act No. 31 of 1995, w.e.f. 14.05.1994. After the amendment, appeal could be filed against the order of the Divisional Level Committee before the Tribunal. Appeal could be filed by the aggrieved person including the dealer as well as Commissioner of Trade Tax.
16. Section 4-A (3) of the Act has been considered with reference to the provisions to file appeal against the order of the Divisional Level Committee before the Tribunal under Section 10(2) of the Act. In the case of Mansarovar Bottling Company Ltd., Bijnor v. Commissioner of Trade Tax reported in 1999 UPTC, 864. Learned Single Judge of this Court held as follows:
Thus, by the amendment it has been clarified that the Commissioner can correct a legal of factual error made by the authority granting the eligibility certificate. Thus, we have two provisions on the statute book; one is Section 10 (2) which provides for an appeal to the Tribunal by any person aggrieved by an order granting or refusing to grant an eligibility certificate and under which power the Tribunal can correct all error whether of law or of fact made by the authority concerned and we have also Sub-section (3) of Section 4-A which confers jurisdiction on the Commissioner- to correct legal or factual error in issuing the eligibility certificate. Patently, it is not a case of misuse of a facility and by cancelling the eligibility certificate on the ground that Coca Cola and Fanta were of the same nature as the products being manufactured by the dealer from before, the Commissioner purports to rectify a legal or factual error in the issue of the eligibility certificate. The question is whether the Commissioner having a right of appeal before the Tribunal has also the right to bring about the same result by himself exercising the powers under Section 4-A (3) of the Act. Learned Standing Counsel asserted that the two provisions being placed at different places confer powers on different authority to bring about the same result and that the Commissioner instead of filing an appeal to the Tribunal can himself rectify the mistake of the Tribunal irrespective of the nature of the mistake. In my view such an interpretation of the law is not feasible. As pointed out above, the Divisional Level Committee consists of Senior officers and is presided over by an officer of the same rank as the Commissioner and it is inappropriate to assume that under Section 4-A (3) of the Act the Legislature intended to vest in the Commissioner the powers of an appellate authority that could correct all mistakes whether of law or of fact in the matter of the grant of an eligibility certificate. If that be the position, the provisions of Section 10 (2) of the Act in so far as they provide an appeal against an order granting or refusing to grant an eligibility certificate would become redundant and the Commissioner would become a Judge-in his own cause. In my view the two provisions have to be given a harmonious interpreatation and when the provisions of Sub-section (3) confer powers of correcting legal or factual error made by the authority granting an eligibility certificate, this powers has to be restricted to clerical or arithmetical errors which are patent and apparent from record and not errors about which they can be a rational debate. As state above, in the present case, there is a debate between the parties as to whether the new products Coca Cola and Fanta which admittedly have different composition from the earlier products can be described to be goods of the same nature or they are of a nature different from those manufactured earlier and since the notification dated 27th July, 1991 also provides for exemption in the case of a unit undertaking expansion, there has also to be a debate whether even if the two type of goods were of the same nature the eligibility certificate granted to the revisionist should have been for expansion and not for diversification. Such an assumed mistake on which there is a debate, and on which aspect of the matter, the D.L.C. has taken a conscious decision, cannot be said to be an error apparent on the fact of record and free from debate and the Commissioner can have no jurisdiction under Section 4-A (3) of the Act to correct the error himself and must avail the procedure of appeal to the Tribunal. In my view, therefore, the Commissioner had no jurisdiction to correct the alleged error and cancel the eligibility certificate on the ground that the new products were of the same nature as the products being manufactured from before. It may be mentioned that there was debate between the learned Counsel for the parties whether Coca Cola and Fanta were of the same nature as the other products and reference was made to M/s Malviya Chemicals and Pharmaceuticals (P) Ltd., Ghaziabad v. State of U.P. 1991 U.P.T.C. 830 in which an existing unit manufactured paracetamol. It established a new unit for the manufacture of antibiotics and this Court has held that the two things were different. Whether the two products are of the same nature has to be determined on the facts of each individual case and in view of my conclusion that the Commissioner had no jurisdiction to invoke this ground, I do not think it necessary to go into the question whether Coca Cola and Fanta were of a different nature or of the same nature as the goods produced from before.
17. In the case of Suraj Vanaspati Ltd., Sikandrabad v. Commissioner of Trade Tax reported in 1999 UPTC, 1154 it was held that the power under Section 4-A (3) of the Act is discretionary and the discretion has to be exercised judiciously only to prevent unscrupulous dealers from claiming exemption to defraud or misuse of the facility. It can not be exercised where there was no default on the part of the dealer and an eligibility certificate was granted after taking conscious decision on the matter involved.
18. It appears that the decision of this Court in the case of Jaidurga Detergent & Chemicals Pvt. Ltd. v. Commissioner of Sales Tax (Supra) has been accepted by the department and circular in this regard has been issued as Circular letter No. Nayee Ekayee Sa,Ka.Mu. 18/87-164/Vyaparkar Karayalaya, Commissioner Vyuapakar, Uttar Pradesh (Nayee Ekayee Anubhag), Lucknow, dated 10th May, 1997.
19. In the case of Shah Wire Industries, Varanasi v. Commissioner of Trade Tax, U.P. reported in (2005) 41 STR, 381, this Court followed the decision of this Court in the case of Jaidurga Detergent & Chemicals Pvt. Ltd. v. Commissioner of Sales Tax (Surpa) and Mansarovar Bottling Company Ltd., Bijnor v. Commissioner of Trade Tax (Supra) has held the cancellation of the eligibility certificate is unjustified in the absence of any case of mis-representation, suppression of fact or mis-use of the eligibility certificate.
20. This Court in the case of Janta Dal Mill, Fatehpur v. Commissioner of Trade Tax reported in 1999 UPTC, 1123 has held the cancellation of eligibility certificate unjustified on the ground that the initiation of proceedings under Section 4-A (3) of the Act after the expiry of four and half years from the date of the expiry of the entire period of exemption. Court held that in the circumstances discretionary power should not be exercised by the Commissioner. The aforesaid decision has been followed by this Court in the case of Bharat Steel Rolling Mill v. Commissioner of Trade Tax, reported in 2002 UPTC, 122 and the cancellation of the eligibility certificate after the expiry of 4-5 years has been held highly belated and improper.
21. In view of the above law laid down by this Court, referred hereinabove the order of the Tribunal is not sustainable. No case of mis-representation or concealment of fact has been made out. It is clear from the record that at the time of the grant of exemption by the Divisional Level Committee the fact was available on record that the Pouch Sealing Machine was purchased by the applicant unit from M/s Gorakhpur Grah Udyog Kendra. Gorakhpur, who had acquired for their factory. Further, this fact was available on record when the first notice under Section 4-A (3) of the Act was issued but no such ground was taken and the present proceeding has been initiated after 5-6 years from the expiry of the period of exemption. Initiation of the proceeding after the expiry of such a long period is highly belated and improper. Thus, on the facts and circumstances of the case, in my opinion, Commissioner of Trade Tax should have not exercised its discretionary power under Section 4-A (3) of the Act.
22. In the result, revision is allowed. Order of the Tribunal and the order of the Commissioner of Trade Tax passed under Section 4-A (3) of the Act are set aside.