State Taxation Tribunal - West Bengal
Health Guard Laboratories vs Assistant Commissioner, Commercial ... on 5 November, 1998
JUDGMENT
J. Gupta, Judicial Member
1. The applicant, a registered partnership firm, entered into an agreement with Dabur India (hereinafter referred to as "the company") for manufacture of "red tooth powder" on the latter's behalf and exclusive sale of the same to them. For this purpose, the applicant established a small-scale industrial unit at Village-Nandabhanga (within the district of 24-Parganas) which is outside the area of the Calcutta Metropolitan Development Authority (in short, "CMDA"). The first sale of the product to the company took place on January 18, 1996. As a dealer registered under the West Bengal Sales Tax Act, 1994 (in short, "the 1994 Act"), the applicant applied on February 14, 1996 for grant of eligibility certificate (in short, "EC") under Section 39 of the Act read with Rule 99 of the West Bengal Sales Tax Rules, 1995 (in short, "the 1995 Rules") to avail of the tax holiday on the sales of the goods (red tooth powder) manufactured at its aforesaid newly set up small-scale industrial unit. The applicant-firm claims that during the hearing of the said application, the competent authority's notice was drawn to the fact that by notification dated July 12, 1996, amending Rule 99 of the 1995 Rules, the eligible period for tax holiday for small-scale industrial unit, situated outside the CMDA area had been extended from five years to seven years. It alleges that in spite of such legal position, the Assistant Commissioner of Commercial Taxes (respondent No. 1) by his order dated September 2, 1996 granted EC for three years effective from January 18, 1996, ignoring the effect of the amendment. The applicant-firm again approached the respondent No. 1 to apprise him of the fact that the unit in question is situated outside the CMDA area. The applicant claims to have produced necessary documents in support of his contention. The respondent No. I being satisfied amended the EC making it valid for five years with effect from January 18, 1996. The applicant now contends that the EC ought to have been made valid for seven years on the strength of the amended provision of Rule 99 since the amended provision came into force during the pendency of the application for grant of EC. Against this order of the respondent No. 1, the applicant preferred a revision before respondent No. 2. The firm claims that during the hearing of the revision application it made specific assertion that in view of the amendment of Rule 99, the facility of tax holiday should be for seven years instead of five years. But respondent No. 2 by his order dated July 28, 1997 affirmed the order of the respondent No. I on the ground that the date of starting of commercial production would determine the eligible period under Section 39 of the 1994 Act. In the meantime, the applicant also started production of hair oil in terms of a contract with the said company and necessary entry in the EC was made on May 12, 1997 to extend the tax holiday also on the sales of such hair oil. According to the applicant both the respondent Nos. 1 and 2 misconstrued the legal provision in granting the EC only for five years and failed to appreciate that during the pendency of the application for EC Rule 99 was amended, extending the eligible period from five years to seven years. The applicant has, therefore, filed the instant application before this Tribunal for quashing the impugned orders of the respondent Nos. 1 and 2 and for direction on the respondent No. 1 to issue EC valid for seven years from the date of the first sale of the products.
2. The respondents' contention as canvassed in their affidavit-in-opposition is that the rules as existed on the date of first sale of the product of the small-scale industrial unit of a dealer will determine the period of tax holiday available to him under Section 39. According to them, the amended provision of Rule 99 of the 1995 Rules, effective from July 15, 1996, not being retrospective in operation, cannot have any application to the applicant who had the first sale of his product on January 18, 1996.
3. The issue before us is whether the applicant-firm is entitled to the benefit under amended provision of Rule 99 which was effective from July 15, 1996.
4. Mr. S.K. Chakraborty, learned Advocate for the applicant, in defending the plea of the applicant submits that when the order on the prayer of the applicant-firm was passed by the respondent No. 1, Rule 99 in its old form was no more there and the amended rule had already come into force and accordingly the respondent No. 1 had no option but to grant the eligibility certificate for seven years according to the amended rule. According to him, the approach made by the respondent No. 1 in disposing of the application will create discrimination. In elaborating his point he submits that if another dealer dealing in the same type of goods as the applicant has his first sale on July 15, 1996, he will enjoy the privilege of seven years' tax holiday even if his prayer under Section 39 is disposed of on the same date on which the applicant's application under Section 39 was disposed of, i.e., on September 2, 1996. According to Mr. Chakraborty, two dealers dealing in identical goods would thus be clearly discriminated. He further adds that as a result of such discrimination the applicant will not be able to sell its goods in the market because the other dealer enjoying tax holiday for additional period of two years will be in a position to sell its product at a rate much lower than that of the applicant. In the opinion of Mr. Chakraborty, such discrimination will cause ouster of the applicant from the market.
5. Having considered the factual and the legal aspects of the matter, we arc unable to cater to the view of Mr. Chakraborty. There is no dispute to the position that it is due to the delay made by the respondent No. 1, in disposing of the applicant's application, that has given the applicant the occasion to set up such a plea. In our view it is the applicant's plea, if accepted, will really create discrimination. Let us take up a hypothetical case where two manufacturer-dealers in identical goods applied while the old Rule 99 was in force, and the application of one was disposed of before July 15, 1996 and the application of the other was disposed of by the competent authority deliberately or due to reasons beyond his control after July 15, 1996. If the applicant's view is accepted there can be no escape from the position that the former dealer can enjoy the tax holiday only for five years under the old rules and the second dealer will be entitled to enjoy the benefit for seven years. Thus two dealers having absolutely no distinguishing features are placed differently in the matter of enjoyment of legal privileges, simply due to the action of the respondent No. 1 and for no other cause. On the, other hand, a dealer having his first sale of product after July 15, 1996 is distinguishable from the one who has first sale of his product on a date when the amended Rule 99 was yet to come into force. Those two types of dealer belong to two distinct groups based on intelligible differentia.
6. However, stronger logic for discounting the applicant's contention rests on the legal position that the nature of right conferable on a person under a statute depends on the relevant provisions of the statute as it exists on the date when the person acquires the right. In the case before us, the applicant became eligible to tax holiday under Section 39 of the 1994 Act on the date on which the first sale of the product of his newly established small-scale industrial unit took place, i.e., on January 18, 1996. The law as it existed on the date provided for 5 years tax holiday from the date of such first sale, because the unit is situated outside the CMDA area. New Rule 99 replaced the old one with effect from July 15, 1996. The new rule permits 7 years tax holiday from the date of the first sale of the product of the unit which is situated outside the CMDA area. So, the new provision would apply only if the date of such sale is on or after July 15, 1996. No doubt, the date (September 2, 1996) when the order was passed by the respondent No. 1 the old Rule 99 had already been substituted by the new one, but that does not empower the respondent No. 1 to apply the new rule to the case of the applicant. If he applies the new rule it will amount to shifting the date of first sale of the product from its actual date, I.e., January 18, 1996 to a point of time posterior to the time when the amended Rule 99 came into force. Obviously, the respondent No. 1 is not empowered to do that. Thus, the nature of statutory right as to the tax holiday being dependent on the rule prevailing on the date the person becomes eligible to the right, it cannot be moulded by the promptitude or the procrastination of the officer in disposing of the application praying for the benefit under Rule 99.
7. To derive support for his contention Mr. Chakraborty has referred to the decision of this Tribunal in the case of the Assistant Commissioner of Commercial Taxes, Chowringhee Circle v. West Bengal Commercial Taxes Appellate and Revisional Board reported in [2000] 117 STC 503 ; [1998] 31 STA 29. That decision relates to the effect of amendment of the period of limitation. The assessee in that case submitted his return for the four quarters ending on March 31, 1987. At the time the return was submitted, a period of four years from the end of the period for which return was submitted was available under Section 1 l(2a) of the Bengal Finance (Sales Tax) Act, 1941 for completion of the assessment. Hence, in that case assessment could be made on or before March 31, 1991. But on June 1, 1987, i.e., before the expiry of four years on March 31, 1991, Section 1 l(2a) was amended making the assessment permissible up to June 30, 1991 and the assessment was actually made on May 10, 1991. In appeal the assessment was affirmed. But the West Bengal Commercial Taxes Appellate and Revisional Board in exercising revisional jurisdiction struck down the assessment on the ground that the assessment having been made beyond the period of limitation of four years was bad and that the old provision of Section 1l (2a) was applicable to the case. The Assistant Commissioner of Commercial Taxes, Chowringhee Circle moved this Tribunal against this finding of the Board. This Tribunal held that the law of limitation being a branch of procedural law any amendment of the same will have application to a pending proceeding and hence the impugned assessment was within time under the amended section.
8. Mr. Chakraborty submits that factually the case before us is identical to that of the said reported case, because here also new Rule 99 came into force when the application for E.C. was yet to be disposed of and hence provisions of the amended section will apply, i.e., 1 years' tax holiday should be made available to the applicant. But the analogy he seeks to introduce is misplaced. In the case before us, the date of first sale of the product (if other conditions under Section 39 of the 1994 Act are fulfilled) gives rise to a right to tax holiday, i.e., a substantive right. On the other hand, the expiry of the last date of the period of limitation does not create any substantive right but extinguishes only a person's procedural right to initiate a legal process to enforce against another person a substantive right which is in existence from beforehand. In other words, expiry of the period of limitation debars the person from access to the legal process to compel the said other person to discharge his (the other person's) legal obligation. However, by the expiry of the last date of period of limitation the obligation of such other person does not become obliterated ; only access to the legal process to enforce the demand for discharge of the obligation ceases. That is why if the other person even after the period of limitation admits his obligation in writing, a fresh time period as available under the law of limitation is made available to initiate the legal process to enforce the right, or if the person having the legal obligation discharges the obligation in full or in part the other party can validly accept the same in settlement of the part or whole of the claim under the right as the case may be. Therefore, if by any amendment the period of limitation is extended before a person's right to initiate a legal proceeding to enforce his substantive right is barred by limitation, such extension of period does not create any new substantive right ; but only gives the additional period for initiating the legal process for enforcing the said existing substantive right. Thus, period of limitation simply determines when an already existing substantive right becomes incompetent to be enforced through recourse to the legal procedure. It deals with only procedural law. In contrast to this, the date of first sale of a product of a small-scale industrial unit gives rise, under Rule 99 of the 1995 Rule read with Section 39 of the 1994 Act, to a substantive right to tax holiday (provided of course all other requisite conditions are fulfilled). The nature of such right gets settled according to the relevant provisions of law prevailing on the date. Subsequent amendment, if any shall not change its nature unless the amending Act/Rules make express provisions otherwise. In the instant case, the amended rule docs not expressly touch the nature of the existing right. Hence, it cannot be said that because of new Rule 99 the applicant is entitled to 7 years tax holiday even though the first sale of the unit's product look place before the amended Rule 99 came into force.
9. It cannot, therefore, be said that the respondents Nos. 1 and 2 erred in refusing to grant the applicant the E.C. valid for 7 years. The mistake committed by the respondent No. 1 in initially granting E.C. for 3 years has already been rectified. We, therefore, find no ground to interfere with the impugned order of the respondents Nos. 1 and 2.
In the result, the application is dismissed. We make no order as to costs.
D. Bhattacharyya, Technical Member
10. I agree.