Calcutta High Court
Abn Food And Beverage Pvt. Ltd. vs Assistant Commissioner Of Commercial ... on 18 September, 1989
Equivalent citations: [1990]77STC339(CAL)
JUDGMENT Prabir Kumar Majumdar, J.
1. By this writ application the petitioner-company is asking for a direction upon the respondent No. 1 to allow the benefit of exemption of tax holiday as contemplated in the Notification being No. 1177-F.T. dated 31st March, 1983, issued under Section 4AA of the West Bengal Sales Tax Act, 1954 (hereinafter referred to as "the said Act") from 16th November, 1985, instead of 4th February, 1986. By this application the petitioner has also challenged the imposition or demand of "turnover tax" during the period of tax holiday and also refusal or withholding of declaration forms by the commercial tax authorities for non-payment of "turnover tax" during the relevant period of tax holiday. The petitioner is also asking for refund of the turnover tax collected by the authorities during the period of tax holiday.
2. The petitioner has set up a small-scale industrial unit (hereinafter referred to as "the said unit") at Mangalbari in the district of Maldah, West Bengal, for manufacturing biscuits, a notified commodity under Section 25 of the said Act. The petitioner's said unit was duly registered with the Director of Cottage and Small-scale Industries on 3rd January, 1987, as a small-scale industrial unit for manufacturing biscuits. The petitioner is a dealer within the meaning of Section 28 of the said Act and as also a registered dealer under the Central Sales Tax Act.
3. The petitioner's said unit started manufacturing the said notified commodity, i.e., biscuits for the first time after 1st April, 1980 and first sale of such notified commodity, viz., biscuits by the said unit was made on 16th November, 1985.
4. The respondent No. 5, the State of West Bengal, in exercise of the powers conferred upon it under Section 4AA of the said Act by a Notification No. 1177-F.T. dated 31st March, 1983, made representation to the public that the exemption from tax will be allowed to any dealer, who has sold notified goods manufactured by it in its newly set up small-scale industry. The said notification, inter alia, provided that such exemption would be allowed during a period of five years since the date of first sale of its manufactured notified goods on fulfilling certain conditions set out in the said notification.
5. The petitioner in order to avail itself of the said benefit of tax holiday as provided for in the said notification, made an application for an "eligibility certificate" on 4th February, 1986, to the Assistant Commissioner, Commercial Tax, South Circle, the respondent No. 1. The said application was made, according to the petitioner, in due compliance of or in conformity with the conditions and terms contained in Section 4AA of the said Act read with the said Notification dated 31st March, 1983.
6. It is further contended by the petitioner that on the said application dated 4th February, 1986, the respondent No. 1 issued an eligibility certificate being 4697/38/(54)/BH/73/85-86 dated 4th August, 1986, in respect of the said unit but the same was made effective only from 4th February, 1986 to 3rd February, 1987, instead of 16th November, 1985, which according to the petitioner and not disputed by the respondents, is the date of the first sale of the said manufactured notified commodity.
7. It is also the grievance of the petitioner that the commercial tax authorities withheld the issue of declaration forms on the alleged ground of non-payment of "turnover tax" although there is no liability to pay any tax in view of the benefit of exemption granted to it by the said notification. The petitioner made an application and also made representation from time to time before the respondent No. 2, the Commercial Tax Officer, Bhawanipur Charges, for issuance of the declaration forms and the petitioner produced statements and information and other related documents in this regard to the satisfaction of the respondent No. 2. As stated by the petitioner, the petitioner although not liable to deposit the turnover tax, deposited the turnover tax under protest for a sum of Rs. 13,624 on 10th August, 1988 and obtained receipted challan in this regard. But the grievance of the petitioner is that the respondent No. 2 refused to issue any declaration forms unless the petitioner paid the entire turnover tax.
8. Mr. Bhaskar Gupta, for the petitioner, has submitted that although the petitioner made an application for exemption benefit or eligibility certificate on 4th February, 1986, but the benefit under the said notification should take effect on and from 16th November, 1985, the date of first sale to which there is no dispute. It is, however, the contention of the respondent that the law required that the eligibility certificate as granted to the petitioner should be made effective from the date of the application as has been done in this case.
9. Mr. S.N. Bose, the learned counsel for the respondent, has fairly conceded at the time of hearing that the petitioner should be entitled to exemption benefit from the date of first sale, i.e., 16th November, 1985, which is admittedly the date of first sale of the manufactured notified commodity and not from the date on which the said application was made. Mr. Bose has submitted that necessary correction would be made and in this regard necessary direction may be given by this Court.
10. In view of the submissions made by Mr. Gupta and also on the Submission of Mr. Bose on behalf of the respondents, I think that the appropriate order should be to direct the respondent-authorities to amend the eligibility certificate and extend the benefit of the exemption from the date of the first sale, i.e., 16th November, 1985. I, therefore, direct the respondent-authorities to make necessary amendment in the eligibility certificate so as to make the exemption benefit available to the petitioner from the date of the first sale which is 16th November, 1985.
11. With regard to the payment of turnover tax during the period of tax holidays, namely, five years from the date of first sale as per the said notification, Mr. Gupta submitted on behalf of the petitioner that the purport of the said notification read with Section 4AA of the said Act is that in view of such notification there is total exemption for payment of any tax and any tax should also include in its coverage the payment of "turnover tax" under Section 4AAA of the said Act. It has been submitted by the learned counsel for the petitioner that the exemption notification was issued in exercise of the powers conferred by Section 4AA of the said Act and the expression used both in the said section and in the said notification is that no tax shall be payable. He has drawn attention of the court to Clause (d) of Sub-section (2) of Section 4AAA of the said Act which, inter alia, provides that the turnover tax shall be levied on that part of the gross turnover of a dealer during any period which remains after deducting therefrom his turnover during that period on such sales as may be prescribed. Mr. Gupta submits that no turnover tax is leviable or payable by the petitioner in view of the fact that in terms of the said notification whole of the turnover in respect of the sales of the notified commodity by the said unit is liable to be deducted from the gross turnover and if such deduction is made then nothing would remain for the purpose of computation of the turnover tax.
12. Mr. S.N. Bose, the learned Counsel for the respondent, has however, contended that the benefit of exemption granted under the Notification No. 1177-F.T. dated 31st March, 1983, issued under Section 4AA of the said Act does not cover a turnover tax which is different from "sales tax". According to Mr. Bose, the sales tax chargeable under Section 4AA of the said Act is entirely different from the turnover tax chargeable under Section 4AAA of the said Act. It is, therefore, the submission of Mr. Bose that an exemption contemplated under Section 4AA of the said Act does not include exemption of payment of turnover tax under Section 4AAA. Mr. Bose has also contended that taxable event of the turnover tax is the sale and not the turnover. In support of this contention he relied on the decisions (Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax) which is a decision of the Supreme Court and another decision of the Andhra Pradesh High Court reported in the same volume of SALES TAX CASES [1971] 28 STC 399 [FB] (State of Andhra Pradesh v. Murali Cafe).
13. Mr. Bose has also referred to Section 4AAA(2)(d) and submitted that there is no notification exempting the turnover tax. Therefore, according to Mr. Bose, if the petitioner is liable to pay turnover tax, then no declaration forms can be issued to the petitioner until there is a receipted challan for payment of turnover tax. It has been submitted by Mr. Bose that there is no dispute that no declaration forms can be issued unless there is payment of turnover tax, if the dealer concerned is liable to pay turnover tax. Mr. Bose in this context, has relied on the judgment of this Court reported in [1987] 20 STA 132 (Burlap Laminating & Plastic Private Ltd. v. Commercial Tax Officer) where it has been held by this Court that the dealer is not entitled to any declaration forms where the dealer has become defaulter in respect of the payment of the turnover tax. From this, Mr. Bose makes an attempt to conclude that until the payment of turnover tax no declaration forms can be issued and any exemption or tax holiday will not have any bearing on this aspect of the matter, namely, that no declaration forms can be claimed without making payment of turnover tax where the dealer is liable to pay such tax.
14. Mr. Gupta in order to meet this contention of Mr. Bose has referred to the provisions of the very same notification being Notification No. 1177-F.T. dated 31st March, 1983, which reads as follows :
"No. 1177-F.T. 31st March, 1983
15. Whereas the Governor is satisfied that it is necessary so to do in the public interest :
16. Now, therefore, in exercise of the powers conferred by Section 4AA of the West Bengal Sales Tax Act, 1854 (West Bengal Act IV of 1954), (hereinafter referred to as 'the said Act'), the Governor is pleased hereby to direct that no tax shall be payable by a dealer under the said Act on sales by a newly set up small-scale industry of notified commodity or class of notified commodities, other than those included in the Schedule appended to this notification, manufactured by it during the period of three years, if the said industry is situated within the area of the Calcutta Metropolitan District as described in the Schedule to the Calcutta Metropolitan Planning Area (Use and Development of Land) Control Act, 1965, (West Bengal Act XIV of 1965), or five years, if it is situated elsewhere in West Bengal since the date of its first sale of such manufactured notified commodity or commodities :
17. Provided that the dealer claiming the benefit of this notification shall be so eligible only if he keeps separate accounts in respect of such newly set up small-scale industry, issues serially numbered cash/credit memos for sale of notified commodity or commodities manufactured in such industry, keeps vouchers and other documents for purchases of plant and machinery for establishment of such industry and maintains other records to prove that sales claimed and exempt under this notification were of notified commodity or commodities manufactured in such an industry set up by him and that no amount by way of tax under the said Act has been realised by him in respect of such sale :
18. Provided further that the dealer claiming the benefit of this notification shall be so eligible if he possessed" a valid certificate of eligibility in the form appended to this notification granted by the appropriate Assistant Commissioner in this behalf for such period as mentioned in the said certificate.
19. Explanation.--For the purpose of this notification 'newly set up small-scale industry' shall mean a new industrial unit,
(i) with an investment up to rupees thirty-five lakhs on plant and machinery, excluding the value of land and building ;
(ii) which is registered with the Cottage and Small-scale Industries Department of the Government of West Bengal ;
(iii) which starts production for the first time on or after the 1st April, 1980 ;
(iv) which is liable to pay tax as a dealer under the said Act, but shall not include any expansion, addition or modification of an existing industrial unit ;
(v) which is not established solely or substantially with the plant or machinery--
(a) of another newly set up small-scale industry which earlier availed of the exemption under this notification or under Notification No. 1802-F.T. dated the 1st April, 1976 and which is not engaged in the business of manufacturing such plant and machinery, or
(b) hired, leased or rented from, or lent by a manufactured dealer registered under the said Act or the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941) ;
(vi) which does not use the trade mark or the brand name of any product of an existing industrial unit ;
(vii) which has not availed of any benefit under Notification No. 1809-F.T. dated the 1st April, 1976 ;
20. The certificate of eligibility referred to on the second proviso to the first paragraph shall be granted on application and shall be valid for a period not exceeding twelve months from such date as may be specified therein, but may, at the discretion of the authority granting the certificate, be renewed from time to time for a period not exceeding twelve months at a time :
21. Provided that the certificate of eligibility shall not be granted or renewed if the dealer sells any capital assets otherwise than in the ordinary course of business, violates any conditions referred to in the first paragraph (sic) may for sufficient or does anything which adversely affects the economic viability of the newly set up industry.
22. The authority granting the certificate of eligibility referred to in the second paragraph may, for sufficient reasons to be recorded in writing and after giving the holder of such certificate a reasonable opportunity of being heard, declare such certificate invalid from such date as he may specify.
23. A dealer shall apply for a certificate of eligibility or renewal thereof ordinarily within a month from the date from which its certificate is required to be granted or renewed for the purpose of this notification."
24. It is the contention of Mr. Gupta that when there being a total exemption for payment of any tax under the said notification, the question of making any payment of turnover tax under the said Act does not arise. Mr. Gupta submits that the expression "tax" includes the "turnover tax" as well. According to Mr. Gupta, the character of turnover tax is nothing but a sales tax and in his interpretation, it is like an additional sales tax for affluent dealers whose gross turnover reaches certain limits as prescribed in Section 4AAA of the Act. According to Mr. Gupta, whatever the character is, it is nothing but a tax on sales. Mr. Gupta, in this connection, has relied on several decisions ; a decision of this Court reported in [1988] 70 STC 273 (Jadunath Saha v. Commissioner of Commercial Taxes), a decision of the Supreme Court reported in [1974] 34 STC 73 (S. Kodar v. State of Kerala) and [1983] 52 STC 13 (Raj) (Union of India v. State of Rajasthan). It is further submitted by Mr. Gupta that the said notification directs that no tax shall be payable by a newly set up small-scale industry on sale of notified commodity. It is, in the submission of Mr. Gupta, that the said notification exempts all taxes of whatever nature that may be chargeable under this Act. It has further been submitted by Mr. Gupta that the notification granting tax holiday benefit is dated 31st March, 1983, while Section 4AAA came into effect from 1st April, 1979. If it was the intention of the authority concerned that the exemption granted by the said notification would not cover the payment of turnover tax, then suitable provisions would have been made in this regard. Mr. Gupta, therefore, submits that the exemption covers and includes turnover tax as well, particularly when it is specifically provided for in the said Notification dated 31st March, 1983, that "no tax shall be payable".
25. Regarding the decision of this Court as reported in [1987] 20 STA 132 (Burlap Laminating & Plastic Private Ltd. v. Commercial Tax Officer), relied on by Mr. Bose, the submission of Mr. Gupta is that a Division Bench of this Court in a decision reported in [1987] 66 STC 235 ; [1987] 20 STA 205 (Ram Lawat Shaw v. Commercial Tax Officer), has taken a contrary view to what the learned single Judge had taken in [1987] 20 STA 132 (Burlap Laminating & Plastic Private Ltd. v. Commercial Tax Officer). It is also the submission of Mr. Gupta that the petitioner has not defaulted in furnishing any return but the case of the petitioner is that the petitioner has no obligation to pay any turnover tax in view of such exemption granted by the said notification.
26. There is a good deal of substance in the argument of Mr. Gupta that in view of the exemption granted by the said notification to the petitioner, the petitioner is not under any obligation to pay turnover tax during the tax holiday and consequently the petitioner is entitled to obtain declaration forms without being required to pay the turnover tax.
27. Both Mr. Bose and Mr. Gupta have referred to Rule 27AA(2)(c) of the Bengal Sales Tax Rules, 1941, which, inter alia, provides that an applicant for declaration forms has to pay taxes due from him according to return. If due to tax holiday benefit, the petitioner is not required to pay any tax during the tax holiday, then there is no tax due and payable by the petitioner during the said period.
28. In my view, during the subsistence of eligibility certificate giving exemption from payment of any tax under the said Act, there is no question of any tax being due. I am therefore, of the view that the respondent is not entitled to refuse issuing declaration forms on the plea of non-payment of turnover tax.
29. I also find some substance in the submission of Mr. Gupta that under the said notification, it is provided that no tax shall be payable. If the petitioner is required to pay turnover tax, then the tax holiday benefit given to small-scale unit under the said notification would become illusory. In my view, there is some force in the contention that turnover tax is also nothing but a tax due under the said Act.
30. I, therefore, hold that the respondent-authority is not entitled to refuse and withhold issue of declaration forms on the ground that no payment of turnover tax has been made.
31. As I have already indicated above, I hold that the said eligibility certificate issued to the petitioner should be amended so as to make benefit effective from the date of first sale, namely, 16th November, 1985. I direct the respondent-authority to amend the said eligibility certificate as indicated above.
32. I also set aside the decision of the concerned authorities refusing to issue declaration forms. I direct the respondent-authority to issue the declaration forms to the petitioner, if any application for declaration form is made by the petitioner in this regard. It appears, as has been alleged by the petitioner, that the petitioner has paid a sum of Rs. 13,624 as turnover tax under protest. The respondent-authority would also refund the said sum or adjust the sum against any future taxes due and payable by the petitioner. I also hold that the petitioner is not liable to pay any turnover tax so long the said eligibility certificate is in operation.
33. For the reasons aforesaid, this writ application succeeds. There will bo no order as to costs.
34. All parties to act on a signed copy of the operative part of this Judgment on the usual undertaking.