Om Prakash, J. - (1.) This is a writ petition under Article 226 of the Constitution of India for quashing the notice dated 12th August, 1986 (annexure 3 to the writ petition), issued by the respondent No. 2 and for restraining the respondents from taking any action to cancel the recognition certificate issued under Section 4-B of the U.P. Sales Tax Act, 1948 (briefly "the Act") and for declaring by means of a suitable writ/order that the petitioner is entitled to exemption from payment of tax on the purchases of raw materials required for the manufacture of waterproof rolls and sheets.
(2.) The petitioner is engaged in the business of manufacture of waterproof packing rolls and sheets. The manufacturing process of the petitioner is that a kraft paper is bituminised on one side and then it is bounded with hessian or polythene sheets. In short the bitumen layer is sandwiched by kraft paper and by hessian or polythene. The petitioner was granted a recognition certificate (annexure 2 to the petition) in May, 1976, and, therefore, purchases of the manufacturing materials, namely, the kraft paper, bitumen, hessian and polythene sheets, were fully exempted from tax. The petitioner received a show cause notice dated 12th Augustj 1985, sent by the respondent No. 2 calling upon the former to show cause as to why the recognition certificate be not cancelled with immediate effect as the manufacturing of paper was not exempt from tax under Clause 3 of the notification dated 31st December, 1976 (annexure 1 to the writ petition) (hereinafter referred to as "the notification"). The aforesaid notice dated 12th August, 1985, is said to be based upon the circulars (annexures 4 and 5 to the writ petition) issued by the Sales Tax Commissioner dated 12th July 1985 and 3rd December, 1983, directing the officers that the wrapping paper cannot be exempted under Section 4-B of the Act. The case of the petitioner is that its claim for exemption is fully covered by Clause 2 of the notification, which provides that no tax shall be payable on the sales or purchases by any unit in respect of raw materials required by it for the use in the manufacture of the goods mentioned in annexure III as referred to in Clause 2 of the notification. The petitioner particularly relied upon item 4 in annexure III to the notification which is as under : 4. All kinds of packing materials including cases and containers.
(3.) So, the case is that the manufacturing unit of the petitioner being engaged in the manufacture of packing material is entitled to full exemption of tax on the purchase of raw materials within the meaning of Clause 2 of the notification, read with item 4 of annexure III to the notification. It is contended that the petitioner was granted a recognition certificates as such, under Section 4-B of the Act in May, 1976 and that it continued to avail exemption until the date of service of the show cause notice. It is averred that the show cause notice issued by the respondent No. 2 is absolutely without jurisdiction, as exemption of tax on purchases of raw materials is available to the petitioner under Clause 2 of the notification read with item 4 of annexure III to the notification. On these averments, the petitioner claims that a writ of prohibition be issued against the respondents and they be stopped from taking any action pursuant to the said show cause notice and that it be declared that the petitioner is entitled to exemption of tax under the recognition certificate already granted.;