Prakash Krishna, J.
1. This is second round of litigation in the High Court. The petitioner is a new unit under Section 4-A of the U.P. Trade Tax Act, 1948 (hereinafter referred to as 'the Act'). Aggrieved by the order dated January 19, 1988 passed by the Divisional Level Committee, by which eligibility certificate to the petitioner has been denied, the petitioner has preferred the above writ petition.
2. The petitioner established a new unit for the manufacture of paper. The date of production is December 6, 1982. The unit was registered under the Factories Act on February 18, 1983. The first purchase of the raw material is dated November 4, 1982 and the date of first sale is February 22, 1983. The petitioner has also obtained licence under the Central Excise Act, which is dated December 3, 1982. The State Government by Government Order No. 8244 dated September 30, 1982 floated a scheme for sales tax exemption to new units set up in the State of Uttar Pradesh. The petitioner filed an application under Section 4-A of the Act for exemption. The General Manager, District Industries Centre, Ghaziabad recommended to the Sales Tax Officer, Sector I, Ghaziabad that the petitioner is entitled for all the benefits as provided in the Government Order dated September 30, 1982. A copy of the said recommendation has been filed as annexure 8 to the writ petition. Surprisingly, the petitioner immediately thereafter received a letter dated June 4, 1984 from the General Manager that the petitioner is not eligible for grant of tax exemption. A copy of the said letter has been filed as annexure 9 to the writ petition. The said order is a non-speaking one and contains no reasons. It appears that the petitioner approached the State Government and Udyog Bandhu for the supply of the reasons, which were later on communicated to the petitioner. The reason was communicated through the letter dated January 8, 1985. It was stated that the electric connection was taken by the petitioner on March 26, 1982 and the first purchase of raw material is dated May 4, 1982 and as such the unit was already established prior to October 1, 1982 and thus the petitioner was not entitled for grant of eligibility certificate. The petitioner filed Writ Petition No. 511 of 1985 challenging the rejection of its application under Section 4-A of the Act for grant of eligibility certificate. The said writ petition was allowed by the judgment dated November 24, 1987 by a division Bench of this Court with the direction to the Division Level Committee to consider the prayer made on behalf of the petitioner's unit for grant of benefits to it under Section 4-A of the Act. It was further provided that before taking a decision, the committee shall give opportunity to a representative of the petitioner to place its version before it.
3. The petitioner, in pursuance of the aforesaid judgment approached the Divisional Level Committee and explained the discrepancies regarding electric connection and regarding purchase of the raw material by means of a representation. It has further been stated in paragraph 35 of the writ petition that the Divisional Level Committee after the above representation neither required any documents to be produced before it nor ever asked the petitioner to file any documents, etc.
4. Subsequently the petitioner was served with an order dated January 19, 1988 passed by the Additional Director of Industries, Convener of Divisional Level Committee, rejecting the exemption/ review application of the petitioner. The petitioner is aggrieved against the aforesaid order and has approached this Court by means of the present writ petition.
5. The main grievance of the petitioner is that the Divisional Level Committee in the impugned order dated January 19, 1988 has taken into consideration new and additional grounds for rejection of the exemption application which were not taken earlier. Further, the Divisional Level Committee did not afford to the petitioner any opportunity to explain the discrepancies, if any, and the rejection of the exemption application on totally new grounds is violative of principles of natural justice. In the writ petition an attempt has been made by the petitioner to demonstrate on merits that the grounds on which the impugned order has been passed are not tenable in the eyes of law.
6. We have heard Sri Bharat Ji Agrawal, Senior Advocate for the petitioner and Sri S.P. Kesarwani, learned Standing Counsel.
7. The averment made in paragraph 37 of the writ petition that the impugned order dated January 19, 1988 mentions the additional grounds for rejection of the exemption application which were not taken earlier and so there was no occasion for the petitioner to explain the discrepancy before the Divisional Level Committee, has not been specifically denied in the counter-affidavits of Dharam Pal Singh and Javed Mudassir. In the counter-affidavit of Sri Javed Mudassir reply of paragraphs 32 to 62 of the writ petition has been given in paragraph 4. In the said paragraph it has been mentioned that the contents of paragraphs 32 to 62 of the writ petition are not admitted. It deals with other paragraphs of the writ petition but there is no specific denial of the fact that the review application was rejected by the Divisional Level Committee on new and additional grounds. Further there is no denial of the allegation that before passing the impugned order the petitioner was never called upon by way of show cause notice or otherwise to explain about its stand to the proposed new grounds. The petitioner was taken aback when it received the impugned order. The Divisional Level Committee, at no point of time, confronted the petitioner with the alleged grounds on which the petitioner's application was likely to be rejected. In our view, the principles of fair play were violated in the present case.
8. We will consider the merits of the objection one by one which led to the rejection of exemption application by the impugned order. As many as five objections have been taken for rejecting the exemption application. By objection No. 1 it has been said that the petitioner has purchased an old sheet-cutter machine. This objection was not raised earlier and hence the petitioner could not furnish any explanation with regard to the same. The sheet-cutter machine was purchased on January 13, 1983 from Ajanta Paper Converter, vide Chalan No. 101 and was imported in Uttar Pradesh from Delhi against form 31 No. 0439825. A specific averment has been made in paragraph 41 of the writ petition with regard to the same. In reply the respondents have not disputed these facts with the result that the objection No. 1 is not sustainable. Reliance was placed on U.P. Trade Tax (Amendment) Act No. 22 of 1984 which came into effect from October 12, 1983. By the said Act for the first time new unit was defined as factory or workshop using the machineries, accessories or components not already used or required for use in any other factory or workshop in India. Consequently, if the petitioner had purchased sheet-cutter machine prior to October 12, 1983 there was no such requirement at the time that the machinery must be new. This Court in the case of Taas Printing Inks Pvt. Ltd. v. State of U.P. 1987 UPTC 410 has held that old machinery purchased from out of Uttar Pradesh prior to October 12, 1983 will not disentitle the unit to the grant of exemption. In view of the fact that the sheet-cutter machine was purchased on January 13, 1983 from Delhi, may be new or old, will not make any difference in the present case.
9. The second objection taken by the Divisional Level Committee for rejecting the application is that the investment being more than Rs. 3,00,000 the unit was required to be registered under the Factories Act. The petitioner has filed only a receipt of payment of fees for registration, but has not produced the registration certificate. In paragraph 45 of the writ petition it has been stated that the petitioner's factory had commenced production from December 6, 1982 while the registration under the Factories Act had been granted with effect from February 18, 1983. Reliance has been placed upon a circular of the Commissioner of Sales Tax dated March 10, 1987. In the said circular it has been provided that if registration under the Factories Act has been granted after the date of production, the exemption may be granted from the said date but the exemption period will be calculated from the date of actual production. The petitioner has annexed a copy of the certificate of registration under the Factories Act as annexure 2 to the writ petition and the necessary averments in this regard have been made in paragraph 9 of the writ petition. The genuineness of the certificate has not been disputed or challenged. Moreover, no such objection was raised by the Divisional Level Committee in its previous order rejecting the exemption application. This was a new objection which was taken by the Divisional Level Committee for the first time in the impugned order. The petitioner had no occasion to meet the said objection before the Divisional Level Committee, nor the Divisional Level Committee demanded the said certificate from the petitioner as stated in paragraph 44 of the writ petition. Therefore, we do not find any merit in the said objection. The aforesaid circular issued by the Commissioner is based upon the Government's decision. It has been held in Raghunatyh Laxminarain Spices Pvt. Ltd. v. State of U.P. 2000 UPTC 554, Commissioner of Sales Tax v. Indra Industries [2001] 122 STC 100 (SC) : 2000 UPTC 472 and Collector of Central Excise v. Dhiren Chemical Industries : [2002]254ITR554(SC) that a circular is binding on the departmental authorities. Reliance has also been placed upon a judgment of this Court reported in 1991 UPTC 195 (Chandra Helican Pumps Pvt. Ltd. v. Joint Director, Industries) that the Divisional Level Committee cannot reject a review application on the new or additional grounds without affording an opportunity of hearing.
10. The third objection for rejecting the exemption application is that the electric connection was obtained on March 26, 1982. The raw material purchased on May 4, 1982 was purchased for testing the machinery. The first purchase of raw material for manufacture of goods for commercial production was made on November 4, 1982. The Divisional Level Committee has taken the date of production as March 26, 1982 while rejecting the application in view of the definition of date of first purchase contained in the Act. Under the said Act the date of starting production shall be the date of the first purchase of the raw material or date of electric connection whichever is later. This definition of 'date of starting production' was introduced with effect from October 12, 1983. In the case of Anil Kumar Ramesh Chandra Glass Works v. Commissioner of Sales Tax 1995 UPTC 369 it has been held that actual date of starting production has to be seen and the artificial definition of the date of starting production shall not be applicable. In view of this, the finding of the Divisional Level Committee on this objection is illegal.
11. The fourth and fifth objections are that the date of first purchase of raw material is May 4, 1982 and the said date would be taken as the date of production while the Government Order is of a subsequent date, i.e., October 1, 1982. The petitioner has submitted that the raw material which was purchased on May 4, 1982 was only for the purposes of testing the machines. The explanation was that the raw material was purchased for the first time on November 4, 1982 for commercial production and that that date should have been taken as the date of first purchase of raw material for the purposes of grant of exemption under Section 4-A of the Act. As stated above, in view of the decision of this Court in the case of Anil Kumar Ramesh Chand Glass Works 1995 UPTC 369 the actual date of starting production has to be seen. In the present case the actual date of starting production was November 1, 1982. The artificial definition of the date of starting production shall not be applicable. In view of this, the fourth and fifth objections raised in the impugned order are also not sustainable in the eyes of law.
12. We have considered each objection raised by the Divisional Level Committee on merits also, keeping in view the fact that the matter is an old one and it has come to this Court in the second round of litigation. Instead of remanding back the case to the Divisional Level Committee on the short ground that it has taken into consideration new and additional grounds while disposing of the review application, to cut the matter short we examined the objections raised by the Divisional Level Committee in detail. The factual averments made in the writ petition have not been disputed in the counter-affidavit specifically.
13. For the reasons given above, the writ petition is allowed and the order dated January 19, 1988 (annexure 14 to the writ petition) passed by the Additional Director of Industries, Meerut, is quashed. We further direct the respondents to issue the necessary eligibility certificate under Section 4-A of the Act to the petitioner . forthwith. Till the issuance of the eligibility certificate by the Divisional Level Committee the assessment proceedings for the assessment years 1982-83 to 1987-88, which were stayed during the pendency of the writ petition, shall remain stayed.