Decided on November 05,1998

Health Guard Laboratories Appellant
Assistant Commissioner Commercial Taxes Special Cell Respondents


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. 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.
(3.) 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.;

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