Maurya Timbers Vs. Deputy Excise and Taxation Commissioner-cum-assessing Authority and anr. - Court Judgment

SooperKanoon Citationsooperkanoon.com/627276
SubjectSales Tax
CourtPunjab and Haryana High Court
Decided OnOct-07-1996
Case NumberCivil Writ Petition No. 4422 of 1995
Judge N.K. Agrawal, J.
Reported in(1997)115PLR293
ActsHaryana General Sales Tax Rules, 1975 - Rule 28A
AppellantMaurya Timbers
RespondentDeputy Excise and Taxation Commissioner-cum-assessing Authority and anr.
Appellant Advocate R.C. Dogra, Sr. Adv. and; Deepak Kapur, Adv.
Respondent Advocate Vimal Kumar, Adv.
Excerpt:
- - the only ground, which impelled the deputy commissioner as well as the commissioner, to reject the application for renewal, is that the petitioner firm had not obtained 'c' forms for the inter state sales made by it.n.k. agrawal, j.1. this is a petition of a business firm under articles 226 and 227 of the constitution for the quashing of the order dated 29.12.1993 passed by the deputy commissioner excise and taxation, and order dated 31.1.1995 passed by the commissioner, excise and taxation, haryana.2. the petitioners is a partnership firm carrying on business in timbers at yamuna nagar in the state of haryana. the petitioner, after obtaining the eligibility certificate, obtained exemption certificate dated 26.5.1990 whereby the firm was not required to pay sales tax for a period of 7 years from 20.6.1989 to 19.6.1996 the total amount of benefit under the said exemption certificate was fixed at rs. 3,08,102/-. the petitioner firm had to seek renewal of the exemption from year to year under the relevant rules. rule 28-a was incorporated in the haryana general sales tax rules, 1975 (for short, the rules), in the year 1989. the said rule contained detailed provisions as to how a new industrial unit could avail of the benefit of deferment or the exemption for a fixed period under the haryana general sales tax act, 1973. procedure had been laid down for first obtaining an eligibility certificate and then an exemption certificate.3. assessments, in order to determine the notional tax liability, had been framed from 1989-90 to 1991-92 on the basis of the returns filed by the petitioner-firm as under:- no. year tax liability (rs.) (i) 1989-90 40,613 (ii) 1990-91 4,247(iii) 1991-92 79,650 total:- 1,24,510/- 4. a notional tax liability has been determined in each of the aforesaid three years after applying the rate of tax at 4 per cent on the sales made by the petitioner-firm in the course of inter-state trade. assessment for the year 1992-93 was pending. on the renewal application filed by the petitioner-firm, seeking renewal for the period commencing from 1.7.1993 the deputy commissioner, excise and taxation, re-examined the notional tax liability of the earlier four years and reached a conclusion that the petitioner-firm had already exceeded the exemption limit. the deputy commissioner, took the view that the rate of tax on inter-state sales should be applied at 10 per cent and not at 4 per cent as was done in the three assessments in earlier three years. it was noticed by him that the petitioner-firm had not made sales against 'c' forms to registered dealers. the concessional rate of tax at 4 per cent was available to such inter-state sales which were made to registered dealers against 'c' forms. though the assessment for the year 1992-93 had not been framed, the deputy commissioner determined the tax liability for that year at rs. 1,66,194/ adopting the rate of tax at 10 per cent. thus, the total notional tax liability was worked out at rs. 4,48,890/- as against total benefit allowed under the exemption certificate to the tune of rs. 3,08,102/- only. it was for this reason that the exemption certificate was not renewed for the year.5. the petitioner-firm went in appeal against the refusal of the renewal of the exemption certificate but the appeal was rejected by the commissioner, vide order dated 31.1.1995 upholding the view taken by the deputy commissioner.6. the petitioner has raised two-fold pleas in the present petition. first, the tax liability was rightly determined in the earlier years adopting the rate of tax at 4 per cent inasmuch as the petitioner-firm, being an exempted industrial unit, was not required to collect 'c' forms from the buyers. therefore, the presumption raised by the deputy commissioner that the sales had been made without issuing 'c' forms to unregistered dealers is said to be totally unfounded. secondly, the deputy commissioner did not give any opportunity of hearing to the petitioner-firm while redetermining the notional tax liability of the earlier years and refusing the renewal of exemption for the next year.7. clause (n) of sub-rule (2) of rule 28-a of the rules defines 'notional sales tax liability' as under:-(n). 'notional sales tax liability' means-(i) amount of tax payable on the sales of finished products of the eligible industrial unit under the local sales tax law but for an exemption computed at the maximum rates specified under the local sales tax law as applicable from time to time; andexplanation:- (i) the sales made on consignment basis within the state of haryana or branch transfer within the state of haryana shall also be deemed to be sales made within the state and liable to tax:(ii) amount of tax payable under the central sales tax act, 1956, on the sales of finished products of the eligible industrial unit made in the course of inter-state trade or commerce computed at the rate of tax applicable to such sales as if these were made against certificate in form 'c' on the basis that the sales are eligible to tax under the said act.'8. in the aforesaid definition, tax liability has been defined so as to mean that the amount of tax on the sales of finished products under the local sales tax law shall be computed at the maximum rates. the amount of tax under the central sales tax act, 1956, is to be calculated on the inter-state sales at such rate which is applicable to the sales made against the certificates in form 'c' sub-clause (ii) of clause (n) makes it clear that the inter-state sales made by the industrial unit shall be treated to be such sales as if those sales were made against 'c ' forms. this sub-clause incorporates a presumption to the effect that the sales of finished products of the eligible industrial unit shall be assumed to be sales made against 'c' forms. such a presumption has been engrafted in sub-clause (ii) for the reasons that an exempted industrial unit has not to pay sales tax for a specified period and is, therefore, not required to collect 'c' forms from the buyers. ordinarily, a buyer has to pay tax at the rate of 10 per cent of sales which are made in the course of inter-state trade to him as an unregistered buyer, and a reduced rate of 4 per rent is applicable to those inter-state sales which are made to registered buyers against 'c' forms. sub-clause (ii) of clause (n) does not lead to any ambiguity for the application of the reduced rate of tax in case of inter-state sales made by an industrial exempted unit.' the words 'the rate of tax applicable to such sales as if these were made against certificate in form 'c' explicitly give rise to a presumption that such rate of tax shall be applied to inter-state sales as if those sales had been made by the industrial unit against 'c' forms. the use of the words 'as if creates a deeming provision to treat all inter-state sales as sales made against 'c' forms. since 'c' forms can be made available to a seller by a registered buyer only, the next natural presumption would arise that the sales were made to the registered dealers only.9. the redetermination of notional tax liability by the deputy commissioner, vide his order dated 29-12-1993, is found to be unwarranted, uncalled for and unjustified. the notional tax liability had already been determined in the earlier three years and there was no occasion to reopen the matters of assessment for the earlier years simply on an assumption that the inter-state sales had been made by the petitioner firm to unregistered dealers without obtaining 'c' forms. as has been seen in the relevant rule, that rate of tax is to be adopted which is applicable to the sales made against 'c' forms. therefore, there was no justification to treat the sales as having been made to unregistered buyers/dealers. if the petitioner firm was not required to pay tax, it was then indeed not required to collect 'c' forms from the purchasing dealers also. if that was so the presumption raised by the deputy commissioner is found to be totally unjustified. if the petitioner-firm was not required to collect 'c' forms, no presumption can be raised that the sales were made to unregistered dealers. clause (n)(ii) of rule 28-a(2) leaves no room f or any doubt that the reduced rate of tax has to be applied to the inter-state sales made by an exempted industrial unit, treating such sales as having been made against 'c' forms.10. the second ground of challenge raised by the petitioner is the denial of opportunity of hearing. the order of the deputy commissioner does not show that the petitioner or his representative had attended the proceedings or had been given any, notice of hearing before the refusal order was passed. therefore, the order cannot be sustained on the ground of denial of opportunity to the petitioner firm also11. shri r.c. dora senior counsel for the petitioner-firm, has also argued that a renewal of exemption certificate could be refused only on any of the grounds . specified in the relevant rule. clause (b) of sub-rule (7) of rule 28-a of the rules enumerates the grounds on which an application for renewal of exemption/entitlement certificate could be rejected. clause (b) reads as under:-'(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 in the application are not correct and complete or the applicant is not a bona-fide industrial unit or has misused exemption entitlement certificate, or has not complied with any of the directions, given to it by him within the specified time, he may reject the application after giving the applicant an opportunity of being heard.' 12. the aforesaid rule empowers the deputy commissioner to reject an application for renewal of exemption on any of the four grounds. first, an application could be rejected if it was not in order or if the particulars were not correct and complete. secondly, it could be rejected if the applicant was not a bona fide industrial unit. thirdly, renewal can be refused it exemption has been misused. fourthly, exemption can be refused if-the industrial unit had not complied with any of the directions given to it by the deputy commissioner within the specified time.13. the petitioner-firm has not been charged with any of the violations as have been specified in clause (b) of sub-rule (7) of rule 28-a of the act. the only ground, which impelled the deputy commissioner as well as the commissioner, to reject the application for renewal, is that the petitioner firm had not obtained 'c' forms for the inter state sales made by it. there was no condition in the exemption certificate requiring the industrial unit to furnish 'c' forms. therefore, non-collection and non-furnishing of 'c' forms can not be treated to a breach of any condition of the exemption certificate.14. in the result, the order of the deputy commissioner, dated. 29.12.1993, and the order of the commissioner, dated 31.1.1995, are found to be unsustainable in law and invalid. the rejection of the renewal application is held to be unjustified. the aforesaid orders are, therefore, cancelled and the deputy commissioner of excise and taxation is directed to decide the renewal application of the petitioner-firm afresh in accordance with law.
Judgment:

N.K. Agrawal, J.

1. This is a petition of a business firm under Articles 226 and 227 of the Constitution for the quashing of the order dated 29.12.1993 passed by the Deputy Commissioner Excise and Taxation, and order dated 31.1.1995 passed by the Commissioner, Excise and Taxation, Haryana.

2. The petitioners is a partnership firm carrying on business in timbers at Yamuna Nagar in the State of Haryana. The petitioner, after obtaining the eligibility certificate, obtained exemption certificate dated 26.5.1990 whereby the firm was not required to pay sales tax for a period of 7 years from 20.6.1989 to 19.6.1996 The total amount of benefit under the said exemption certificate was fixed at Rs. 3,08,102/-. The petitioner firm had to seek renewal of the exemption from year to year under the relevant Rules. Rule 28-A was incorporated in the Haryana General Sales Tax Rules, 1975 (for short, the Rules), in the year 1989. The said rule contained detailed provisions as to how a new industrial unit could avail of the benefit of deferment or the exemption for a fixed period under the Haryana General Sales Tax Act, 1973. Procedure had been laid down for first obtaining an eligibility certificate and then an exemption certificate.

3. Assessments, in order to determine the notional tax liability, had been framed from 1989-90 to 1991-92 on the basis of the returns filed by the petitioner-firm as under:-

No. Year Tax liability (Rs.)

(i) 1989-90 40,613

(ii) 1990-91 4,247

(iii) 1991-92 79,650

Total:- 1,24,510/-

4. A notional tax liability has been determined in each of the aforesaid three years after applying the rate of tax at 4 per cent on the sales made by the petitioner-firm in the course of inter-State trade. Assessment for the year 1992-93 was pending. On the renewal application filed by the petitioner-firm, seeking renewal for the period commencing from 1.7.1993 the Deputy Commissioner, Excise and Taxation, re-examined the notional tax liability of the earlier four years and reached a conclusion that the petitioner-firm had already exceeded the exemption limit. The Deputy Commissioner, took the view that the rate of tax on inter-State sales should be applied at 10 per cent and not at 4 per cent as was done in the three assessments in earlier three years. It was noticed by him that the petitioner-firm had not made sales against 'C' Forms to registered dealers. The concessional rate of tax at 4 per cent was available to such inter-State sales which were made to registered dealers against 'C' Forms. Though the assessment for the year 1992-93 had not been framed, the Deputy Commissioner determined the tax liability for that year at Rs. 1,66,194/ adopting the rate of tax at 10 per cent. Thus, the total notional tax liability was worked out at Rs. 4,48,890/- as against total benefit allowed under the exemption certificate to the tune of Rs. 3,08,102/- only. It was for this reason that the exemption certificate was not renewed for the year.

5. The petitioner-firm went in appeal against the refusal of the renewal of the exemption certificate but the appeal was rejected by the Commissioner, vide order dated 31.1.1995 upholding the view taken by the Deputy Commissioner.

6. The petitioner has raised two-fold pleas in the present petition. First, the tax liability was rightly determined in the earlier years adopting the rate of tax at 4 per cent inasmuch as the petitioner-firm, being an exempted industrial unit, was not required to collect 'C' Forms from the buyers. Therefore, the presumption raised by the Deputy Commissioner that the sales had been made without issuing 'C' Forms to unregistered dealers is said to be totally unfounded. Secondly, the Deputy Commissioner did not give any opportunity of hearing to the petitioner-firm while redetermining the notional tax liability of the earlier years and refusing the renewal of exemption for the next year.

7. Clause (n) of sub-rule (2) of Rule 28-A of the Rules defines 'notional sales tax liability' as under:-

(n). 'notional sales tax liability' means-

(i) amount of tax payable on the sales of finished products of the eligible industrial unit under the local sales tax law but for an exemption computed at the maximum rates specified under the local sales tax law as applicable from time to time; and

Explanation:- (i) The sales made on consignment basis within the State of Haryana or branch transfer within the State of Haryana shall also be deemed to be sales made within the state and liable to tax:

(ii) amount of tax payable under the Central Sales Tax Act, 1956, on the sales of finished products of the eligible industrial unit made in the course of inter-State trade or commerce computed at the rate of tax applicable to such sales as if these were made against certificate in form 'C' on the basis that the sales are eligible to tax under the said Act.'

8. In the aforesaid definition, tax liability has been defined so as to mean that the amount of tax on the sales of finished products under the local sales tax law shall be computed at the maximum rates. The amount of tax under the Central Sales Tax Act, 1956, is to be calculated on the inter-state sales at such rate which is applicable to the sales made against the certificates in Form 'C' Sub-clause (ii) of clause (n) makes it clear that the inter-State sales made by the industrial unit shall be treated to be such sales as if those sales were made against 'C ' Forms. This sub-clause incorporates a presumption to the effect that the sales of finished products of the eligible industrial unit shall be assumed to be sales made against 'C' Forms. Such a presumption has been engrafted in sub-clause (ii) for the reasons that an exempted industrial unit has not to pay sales tax for a specified period and is, therefore, not required to collect 'C' Forms from the buyers. Ordinarily, a buyer has to pay tax at the rate of 10 per cent of sales which are made in the course of inter-State trade to him as an unregistered buyer, and a reduced rate of 4 per rent is applicable to those inter-state sales which are made to registered buyers against 'C' forms. Sub-clause (ii) of clause (n) does not lead to any ambiguity for the application of the reduced rate of tax in case of inter-State sales made by an industrial exempted unit.' The words 'the rate of tax applicable to such sales as if these were made against certificate in form 'C' explicitly give rise to a presumption that such rate of tax shall be applied to inter-State sales as if those sales had been made by the industrial unit against 'C' Forms. The use of the words 'as if creates a deeming provision to treat all inter-State sales as sales made against 'C' Forms. Since 'C' Forms can be made available to a seller by a registered buyer only, the next natural presumption would arise that the sales were made to the registered dealers only.

9. The redetermination of notional tax liability by the Deputy Commissioner, vide his order dated 29-12-1993, is found to be unwarranted, uncalled for and unjustified. The notional tax liability had already been determined in the earlier three years and there was no occasion to reopen the matters of assessment for the earlier years simply on an assumption that the inter-State sales had been made by the petitioner firm to unregistered dealers without obtaining 'C' Forms. As has been seen in the relevant rule, that rate of tax is to be adopted which is applicable to the sales made against 'C' forms. Therefore, there was no justification to treat the sales as having been made to unregistered buyers/dealers. If the petitioner firm was not required to pay tax, it was then indeed not required to collect 'C' Forms from the purchasing dealers also. If that was so the presumption raised by the Deputy Commissioner is found to be totally unjustified. If the petitioner-firm was not required to collect 'C' Forms, no presumption can be raised that the sales were made to unregistered dealers. Clause (n)(ii) of rule 28-A(2) leaves no room f or any doubt that the reduced rate of tax has to be applied to the inter-State sales made by an exempted industrial unit, treating such sales as having been made against 'C' Forms.

10. The second ground of challenge raised by the petitioner is the denial of opportunity of hearing. The order of the Deputy Commissioner does not show that the petitioner or his representative had attended the proceedings or had been given any, notice of hearing before the refusal order was passed. Therefore, the order cannot be sustained on the ground of denial of opportunity to the petitioner firm also

11. Shri R.C. Dora Senior Counsel for the petitioner-firm, has also argued that a renewal of exemption certificate could be refused only on any of the grounds . specified in the relevant rule. Clause (b) of sub-rule (7) of rule 28-A of the Rules enumerates the grounds on which an application for renewal of exemption/entitlement certificate could be rejected. Clause (b) reads as under:-

'(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 in the application are not correct and complete or the applicant is not a bona-fide industrial unit or has misused exemption entitlement certificate, or has not complied with any of the directions, given to it by him within the specified time, he may reject the application after giving the applicant an opportunity of being heard.'

12. The aforesaid rule empowers the Deputy Commissioner to reject an application for renewal of exemption on any of the four grounds. First, an application could be rejected if it was not in order or if the particulars were not correct and complete. Secondly, it could be rejected if the applicant was not a bona fide industrial unit. Thirdly, renewal can be refused it exemption has been misused. Fourthly, Exemption can be refused if-the industrial unit had not complied with any of the directions given to it by the Deputy Commissioner within the specified time.

13. The petitioner-firm has not been charged with any of the violations as have been specified in clause (b) of sub-rule (7) of rule 28-A of the Act. The only ground, which impelled the Deputy Commissioner as well as the Commissioner, to reject the application for renewal, is that the petitioner firm had not obtained 'C' Forms for the inter State sales made by it. There was no condition in the exemption certificate requiring the industrial unit to furnish 'C' Forms. Therefore, non-collection and non-furnishing of 'C' Forms can not be treated to a breach of any condition of the exemption certificate.

14. In the result, the order of the Deputy Commissioner, dated. 29.12.1993, and the order of the Commissioner, dated 31.1.1995, are found to be unsustainable in law and invalid. The rejection of the renewal application is held to be unjustified. The aforesaid orders are, therefore, cancelled and the Deputy Commissioner of Excise and Taxation is directed to decide the renewal application of the petitioner-firm afresh in accordance with law.