Rajesh Balia, J.
1. Heard learned counsel for the parties.
2. The petitioner challenges the order passed by the District Level Screening Committee (for short 'D.L.S.C.') dt. 30th October, 1991 as communicated vide letter dt. 31st October, 1991 (Annexure-3) by which the eligibility certificate issued to the petitioner under the Rajasthan Sales Tax Incentive Scheme, 1987 (for short 'Scheme of 1987') on the recommendation of Dy. Commissioner, Commercial Taxes, Jaipur (Annexure-6) and the order passed by the Rajasthan Taxation Tribunal dt. 29th April, 1987 (Annexure-7) affirming the said order on appeal.
3. The only ground on which the order cancelling the eligibility certificate is challenged is that the same has been made in breach of principles of natural justice without affording opportunity of hearing to the petitioner.
4. The facts of the case are that the petitioner was issued a eligibility certificate on 24th June, 1989 under the Scheme of 1987 as a new industrial unit manufacturing the cement for availing the benefit under the Scheme of exemption from payment of tax during the period of eligibility certificate to the extent benefit quantified. The petitioner commenced commercial production of cement on 21st July, 1987 and applied for issuance of eligibility certificate on 8th January, 1988.
5. As noticed above the eligibility certificate for availing the benefit of scheme was issued only on 24th June, 1989. However, the petitioner has collected tax since the commencement of the commercial production on its sales but has not paid such tax to the public treasury, therefore, the assessment for the period from 23rd October, 1987 to 31st March, 1989 was made against the assessee raising demand for that period.
6. The assessee has contested his liability to pay tax as a new industrial unit claiming exemption from payment of tax. That issue ultimately came in subject matter of S.B. Civil Sales Tax Revision Petition No. 630/1991 before this Court.
7. The contention of the assessee was not accepted and it was found from the fact that the assessee has claimed total price which he was charging from buyers which included sales tax also and on which Excise Duty was also paid. As a policy of the assessee to work out total consolidated price which he is charging from customers, the operation cost which has taken place for the purpose of value of the goods manufactured by it from the customers as sales tax. Since the assessee has charged sales tax on the sales made by him, the assessee was held bound to make it over to the public revenue by subjecting himself to the assessment. In respect of very same claim, the assessee has also filed S.B. Civil Writ Petition No. 801/1991 which was dismissed as having become infructuous in view of decision rendered in aforesaid Sales Tax Revision.
8. It may not be out of place to mention here that exemption from payment of tax under the Scheme does not exempt the dealer from assessment of tax for each period. That in fact is essential feature of incentive Scheme that regular returns are required to be filed and tax payable in respect thereof has to be assessed. This is so because the exemption from payment of tax on turnover of sales of goods manufactured by new industrial unit is for a period is not absolute and unlimited. The exemption is subject to two limitations one of time and another of quantity. Maximum exemption quantified with reference to eligible capital investment can be availed during the period prescribed. If the maximum amount of such quantum of tax becomes payable before the expiry of period, of eligibility certificate the further exemption ceases. So also even if period of eligibility certificate expires without availing the maximum quantum of tax exemption from payment which could be availed, then also further exemption stops. It becomes essential therefore, regular assessment of tax payable on taxable turnover during such period is also made and amount of tax chargeable thereon is adjusted against limit of quantum benefit.
9. The assessee was thereafter given a notice dt. 29th January, 1991 by the Commercial Taxes Officer in terms of Clauses 4 and 9 of the Incentive Scheme alleging that the assessee has collected sales tax from the customers on the sales made by him itself, he is not entitled to it as he is availing the benefit of exemption from payment of tax under the Incentive Scheme and that amounts to breach of conditions to which the assessee replied by his communication dt. 13th February, 1991 taking alternate pleas. Firstly that he is not liable to make payment of tax and Section 5G of the Rajasthan Sales Tax Act does not apply to unit governed under the Incentive Scheme which are exempted from payment of tax and therefore, he is entitled to charge the sales tax separately and is also exempted from payment of such tax. Alternatively it was submitted that he is not charging tax but is charging a composite price but it is shown separately for the purpose of quantifying the benefit of exemption availed by him. Lastly in alternative it was pleaded by the assessee that he may be allowed to opt for deferment Scheme and may not be forced to make payment of tax collected by him. After holding an enquiry the Commercial Taxes Officer by a detailed order found 15.2.1991 found that assessee is collecting taxes on the sales made by him contrary to and in breach of provisions of the Incentive Scheme and therefore, he is not entitled to avail the benefit under the Scheme. The copy of such findings was served on the petitioner-dealer. On receipt of this order Writ Petition No. 892/1991 was filed before this Court on 25.2.1991 challenging the said order.
10. Thereafter it appears that those findings were than forwarded to Commissioner, Commercial Taxes for according approval in terms of Clause 9(b) so that he can proceed to make assessment orders as such vide his communication dt. 18.2.1991. He also forwarded on that very date 18.2.1991 his finding to the D.L.S.C. pointing out that a request has already been made for according sanction in Clause 9(b) and recommending to take appropriate action on the said report by the D.L.S.C. It is on the basis of such report that D.L.S.C. has cancelled the certificate issued in favour of the petitioner vide communication dt. 31.10 1991 addressed to Dy. Commissioner (Adm.) informing that DLSC in its meeting held on 30.10.1991 has cancelled the eligibility certificate.
11. The order of DLSC was challenged through Writ Petition No. 6142/1991 before this Court which stood transferred to Rajasthan Taxation Tribunal on its constitution in 1995 as RTT No. 141/95, inter alia on the ground that order dt. 30.10.1991/31.10.1991 was made without notice to the petitioner in breach of principles of natural justice.
12. This writ petition was dismissed by the Tribunal on 29.4.1997 which is subject matter of present petition.
13. Here it may be noticed that when the Writ Petition No. 892/1991 came up for hearing before this Court on 23.3.1993 it was represented after having argued at length that subsequent notice issued by C.T.O. for not giving benefit of aforesaid scheme is already subject matter of subsequent writ petition, therefore, he may be permitted to argue all those points in that writ petition instead of in the said writ petition. In view of the aforesaid statement the Writ Petition No. 892/1991 was also dismissed as having become infructuous on 29th March, 1993. The order passed in Writ Petition No. 892/1991 reads as under:
Heard learned counsel for the parties. I have perused the writ petition.
The petitioner by this writ petition has prayed that the order Anx. 3 dated 15.2.1991 may be quashed and the petitioner firm is not liable to pay Sales-Tax and interest on the turnover of Cement for the assessment year in question. He has also prayed that Clause 7(d) inserted by the notification dated 5.2.1989 may be declared as hull and void.
The petitioner firm is doing the business of Sugar. This unit at village Roopa Khera, Tehsil Rajsamand, district Udaipur is lying closed for last five years. The petitioner established a separate unit registered in the name and style of M/s Saraswati Cement established a new industrial undertaking for manufacturing of Cement in the same village Roopa Khera and the said new industrial commence its production of Cement on 21.7.1987. The State Government announced two separate schemes i.e. Sales-Tax Incentive Scheme of 1987 and which was given for encouraging the establishment of the industries in the backward area. After having argued the matter at length Mr. Kothari, learned counsel for the petitioner submits that the order dated 15.2.1991 (Anx.3) and the subsequent notice issued by the CTO for not giving him the benefit of the aforesaid scheme is already subject matter of subsequent writ petitions, therefore, he may be permitted to argue all those points in those writ petitions instead of iff this writ petition.
Since the petitioner is challenged the subsequent events by filing another writ petitions, therefore, the present writ petition has become infructuous. Hence, the writ petition is dismissed as having become infructuous.
14. There is no dispute that before issuing cancellation order D.L.S.C. has itself not issued any notice to the dealer and such assessment has been framed in pursuance of said order even before the Commissioner made any order granting sanction on the report of the Commercial Taxes Officer.
15. However, the Tribunal has found that since opportunity of hearing was given by the Commercial Taxes Officer before making his recommendation and there was no option with the D.L.S.C, it was not required to afford any opportunity of hearing to the dealer before cancelling the certificate. From the order it also appears that Tribunal has taken exception to the assessee taking recourse to litigation time and again to the High Court challenging the various orders passed by the Commissioner, Commercial Taxes Officer. He had referred to the three proceedings to which reference has been made hereinabove and has also emphasised of dismissal of two writ petitions.
16. Having carefully considered the order of the Tribunal and facts of the case, we are of the opinion that order of Tribunal is founded more on emotions then on reason. Adherence to principles of natural justice is essential concomitent of any fair procedure required to be adopted by any Tribunal vested with power to make any orders affecting the rights of the citizen adversely, unless the same is excluded by express provision of lower by necessary implications of any provisions of law. The Tribunal singularly ignored this vital aspect of the matter in mechanically using expression 'principles of natural justice are not unruly horses' as a clich.
17. There is inherent intrinsic evidence in the scheme itself that the principles of natural justice are not excluded but are required to be followed scrupulously while taking action under Clause 9 which permits the Screening Committee to amend, suspend, restore or cancel the sanction for eligibility certificate accorded by it. It is to be noticed that Screening Committee only accords sanction and eligibility certificate is issued by the Commercial Taxes Officer under Clause 7(c) of the Scheme. Thus the decision making authority about eligibility rests with D.L.S.C. and not with the C.T.O. C.T.O, is bound to issue eligibility certificate as per sanction of D.L.S.C, except in case where such sanction is set aside by any mechanism known to law. There is no issue joined on requirement to afford opportunity of hearing before any application for such sanction can be rejected. Clause 9(b) enables the Assessing Authority to take action under the Sales Tax Act as if there is no exemption and there was escapement of tax if he is satisfied that breach of any of the conditions mentioned in the Rajasthan Sales Tax Act or Scheme has taken place after obtaining permission by the Commissioner of Commercial Taxes. He is not authorised to take action under clause 9(b) without hearing the dealer and without the sanction of the Commissioner. This makes abundantly clear that finding of C.T.O. in itself is not final to give him any authority to act but it is subject to approval by the Commissioner, We fail to appreciate, in this background, that if the finding recorded by C.T.O. does not authorise C.T.O. himself to take action without approval of Commissioner, how such finding can bind D.L.S.C, when the Commissioner has not taken any action on such recommendation by the C.T.O. Clause (c) enables Screening Committee to amend, suspend, restore or cancel the sanction for eligibility certificate. However, it does not envisage automatic cancellation of sanction or eligibility certificate on finding of breach of conditions reached by the Assessing Authority. That power is independent of power under Sub-Clause (b).
18. This is further clear from Clause 7 that eligibility certificate issued under the notification shall stand valid till the maximum limit of benefit permissible under this Scheme is not appropriated, or till such certificate is not amended, suspended, revoked or cancelled. The Sub-Clause (f) of Clause 7 envisages withdrawal of benefit under the Scheme in case the unit had made two defaults in making repayments of the loans obtained from the financial institutions of the State, even after two years of commencement of commercial production and with effect from the date of second default the benefit under the Scheme shall stand withdrawn. This clause requires that satisfaction in that regard has to be reached after affording opportunity of being heard.
19. It is, therefore, not possible to accept reasoning of the Taxation Tribunal, that adherence to the principles of natural justice in the present case implicitly excluded by providing hearing by C.T.O.
20. It is true that where action has been taken under Sub-Clause (b) of Clause 9 by the concerned Assessing Authority after affording the opportunity of being heard to the industrial unit, on being satisfied that a breach of any of the conditions mentioned in the notification or the Act has taken place, enabling him to take legal action under the provisions of Rajasthan Sales Tax Act for the purpose of levy of tax on the finished goods not taxed under exemption scheme as if there was no exemption and there was escapement of tax. However, before doing so he has to obtain prior permission of the Commissioner of Commercial Taxes and before according such sanction if he concurs with the findings of the Assessing Authority, the Commissioner is further required to consult with the Screening Committee. But mere finding by CTO cannot result in any action under Clause 9(b). It needs further approval by CTO after consultation with DLSC. Only such sanction by the Commissioner really empowers the Assessing Officer to make assessment and such sanction need not necessarily follow the recommendation as a matter of course. That is to say it does not bind the Commissioner. He is free to deviate. This obviously makes his decision to sanction or not, the proposed action as final. For that he has first to reach his own decision whether to concur or not to concur with these findings. If such a decision on application of mind affects the rights of a party, ordinarily such conclusion cannot be reached de-hors the right of the affected party to be heard and have an opportunity to convince the officer directly affecting his right, as it takes away the umbrella of incentive under the Scheme, about the validity of such findings recorded by C.T.O.
21. The fact remains that the findings of the Assessing Officer, does not bind the Commissioner, to whom he is under obligation to submit his report. If that is so, it is still difficult to accept the reasoning of the Tribunal that such findings about alleged breaches and its affect on consequence to follow binds the DLSC so much so that it has to accept the same and make a consequential order of recalling the Sanction.
22. Moreover in the present case there is no dispute that action under Clause (b) has not resulted in making of any assessment order in accordance with that provision inasmuch as neither any permission of the Commissioner concurring with the findings reached by the C.T.O. has been accorded nor Commissioner has consulted the D.L.S.C.
23. On the other hand the D.L.S.C. on the basis of information received through the Dy. Commissioner Commercial Taxes, Udaipur has made order of cancelling the sanction issued by it as if said letter was a binding direction on the D.L.S.C. to adopt such a course. We can very well visualise where under Sub-Clause (b) of Clause 9 on receiving the findings by the Assessing Officer the Commissioner of Commercial Taxes concurs with those findings and permits the Assessing Officer to take necessary legal action in pursuance of his findings, after consulting with D.L.S.C. could vitally affect the nature of exercise of power under Sub-Clause (c). Once Assessing Authority is empowered in accordance with Sub-Clause (b) to levy tax on the finished goods as if there was no exemption, the cancellation of sanction by the D.L.S.C. remains merely a formality inasmuch as the benefit that flows from the certificate already comes to an end. According of the sanction by the Commissioner, on concurring with the findings by the C.T.O. results in levying of tax as if there was no exemption. In the event of completion of procedure under Sub-Clause (b) exemption otherwise comes to an end and certificate becomes a dead letter. However, in the absence of any such situation having arisen where Assessing Authority could make assessment as if there was no exemption, the eligibility certificate does not become dead letter which could be cancelled by the Screening Committee by mechanically accepting the same, as has been assumed by the Tribunal, without affording any opportunity of hearing on the basis of findings and recommendations received from the Dy. Commissioner. Such recommendation could merely furnish material on the basis of which Screening. Committee could take action under Sub-Clause (c). Its decision may accord or may not accord with those findings. That stage would arise only after the D.L.S.C. had given opportunity of hearing to the dealer and reaches its own conclusion.
24. It cannot be doubted that principles of natural justice are not unruly horse which could be invoked without taking into consideration the facts and circumstances in which those principles are to be applied but at the same time a person cannot be denuded of his right to be heard without taking into consideration those very circumstances which make it necessary that such hearing is afforded. The present case is a telling example.
25. The foundation on which D.L.S.C. has acted as if the C.T.O.'s finding which may or may not have been accepted by the Commissioner was a dictate to DLSC to cancel the sanction. It obviously gives rise to anomalous situation. In a given case the CIT may not concur with the findings recorded by CTO and yet DLSC, if held bound by such recommendation contained in C.T.O.'s order cancelled the sanction mechanically. This will result in making the provision of subjecting the provisions of Sub-Clause (b) providing in built safeguard against finding recorded by CTO redundant and meaningless. Such a result is not warranted in law.
26. It is stated by the learned counsel for the petitioner now that subsequent to aforesaid decision his appeal against the finding recorded by the Assessing Officer in his recommendation letter before the Dy. Commissioner Commercial Taxes had been allowed and finding has been set aside.
27. In that event the order of the Screening Committee under challenge as on today becomes an order on the basis of material which no more exist. It cannot be said the findings recorded by the Commercial Taxes are findings of the Screening Committee on its own after application of mind.
28. We, therefore, have no hesitation in coming to the conclusion that impugned order of the D.L.S.C. cancelling the eligibility certificate cannot be sustained, so also the order of the Tribunal which suffers from patent error of law.
29. However, we make it clear that prima facie we are of the opinion that since the Assessing Authority merely submits his finding to the Commissioner for the purposes of obtaining the sanction of the Commissioner and it is within his jurisdiction to agree or not to agree with those findings, no other authority could have intervened in that process. Such a recommendation cannot be termed as an order unless sanction is accorded by the Commissioner on recording of his concurrence, no appeal could lie against such order; otherwise the very Scheme of Sub-Clause (b) will be rendered inoperative. Be that as it may since an appeal in fact was filed by the assessee against report dt. 15.2.1991 and the Dy. Commissioner has in fact intervened and set aside that order, we leave it to the appropriate authorities to take remedial measures desired, if any, in respect of order dt. 8.10.1999 passed by the Dy. Commissioner (Appeals) which was placed before the Court for perusal and take necessary action in respect of findings recorded by the Commercial Taxes Officer independently.
30. We further clarify that there cannot be any doubt about the principle that if the assessee has collected tax on any of sales made by him during the continuance of eligibility certificate, notwithstanding the continuance of the eligibility certificate, he cannot be permitted to retain that benefit, as it would result in double concession not envisaged under the Incentive Scheme namely collecting tax on sales and then retaining by the assessee. Such benefit of retention is specifically conferred only under the Deferment Scheme in which a dealer is entitled to collect tax and retain the same with him for prescribed period to be utilised by him for his own purposes and to be paid only after the period of deferment is over. Even if independent of these proceedings under Clause 9(b), if the Commercial Taxes Officer reaches the findings that the assessee has collected tax, there is no impediment in recovering that tax from the dealer. As recovery of such amount does not depend up assuming 'as if exemption is not there', but is permissible inspite of it. As a matter of fact, since the collection of such tax would be unauthorised the assessee is under statutory obligation to hand over same to public treasury. Benefit under the incentive Scheme is only that in respect of the taxable turnover the dealer is to be assessed and tax liability that is quantified on the basis of such assessment is to be adjusted against the quantum of benefit upto which he is entitled to avail exemption from payment and no demand is to be ceased for that. But the assessee himself cannot collect the tax and retain the same for the purposes of his own use while availing the benefit of Incentive Scheme of 1987. Raising demand of deposit of tax collected by the assessee, is not on the basis of assessment of his tax liability from the payment of which he is exempted. But such demand is return of amount illegally corrected from the buyer and is de-hors the Incentive Scheme.
31. D.L.S.C. will be free to make appropriate order after hearing the assessee if it so chooses, on the basis of material that has come before it.
32. With the aforesaid discussion, this writ petition is allowed. Judgment of the Rajasthan Taxation Tribunal as well as order of the DLSC dt. 30.10.1991 communicated by letter dt. 31.10.1991 (Ex.3) are set aside.
33. There shall be no order as to costs.