- (1.) M. C. AGARWAL, J. This revision petition under section 11 of the U. P. Sales Tax Act, 1948 (hereinafter referred to as "the Act") is directed against an order dated May 17, 1999 passed by the Trade Tax Tribunal, Lucknow, whereby it dismissed the dealer's appeal No. 91 of 1998 against an order dated March 27, 1998, passed by the Commissioner of Trade Tax under section 4-A (3) of the Act cancelling an eligibility certificate dated December 15, 1994 granted to the revisionist by the Divisional Level Committee.
(2.) I have heard Sri Bharat Ji Agrawal, Senior Advocate for the dealer-revisionist and Sri S. D. Singh, learned Standing Counsel for the Commissioner-respondent. Section 4-A of the Act makes provisions for exemption from trade tax in certain cases and authorises the Government to issue notifications specifying the persons to whom and the commodities in respect of which exemption will be available and also to lay down the conditions which have to be fulfilled for availing such exemption. The Government, therefore, issued notification to the effect that new industrial units set up during certain specified period will be entitled to exemption on the production of an eligibility certificate granted by the appropriate authority. Subsequently, the Government thought of granting benefits of exemption under section 4-A of the Act to units which undertake expansion, diversification or modemisation. For this purpose, the Government issued Notification No. ST-II-1093/xi-7 (42)-68 UP Act-XV/48-Order-91, dated July 27, 1991. The revisionist had established a unit for the manufacture of soft drinks of the brand names of Thumps-up, Limca, Rim Zim, Maaza, etc. Subsequently, it started production of other soft drinks of the brand names of Coca Cola and Fanta, the date of first sale of which was December 15, 1994 and February 13, 1995 respectively. It claimed to have invested Rs. 3,68,68,628 for the manufacturing facility set up for the production of the aforesaid two new drinks. It applied for the grant of an eligibility certificate in terms of the notification dated July 27, 1991 which extended the benefit of exemption to units which have undertaken expansion, diversification or modemisation. The Divisional Level Committee granted an eligibility certificate dated December 4, 1996 to the revisionist in respect of the diversification as claimed by it by starting production of Coca Cola and Fanta and their sale from the aforesaid dates. The exemption was limited to 100 per cent of Rs. 3,68,68,628 which was found by the Divisional Level Committee to have been invested in the diversification project. Under section 4-A (3) of the Act the Commissioner has been conferred with the power to cancel or amend the eligibility certificate if he is of the opinion that the facility of exemption has been misused in any manner whatsoever or that the new unit has committed breach of any of the conditions, subject to which the facility was granted or that the new unit to which the eligibility certificate has been granted is not entitled to such facility or was entitled to it for a lesser period or from a different date. Under the notification dated July 27, 1991 the goods manufactured by the unit have to be of a different nature from those manufactured earlier by such units in the case of units undertaking diversification and under section 4-A of the Act the new unit is prohibited from using machinery, plant, equipment, apparatus and components already used or acquired for use in any other factory or workshop in India. The Commissioner by notice dated September 1, 1997 proposed to cancel the eligibility certificate dated December 4, 1996 on the ground that the new products of Coca Cola and Fanta are not of a different nature than the goods already manufactured and the goods manufactured earlier and Coca Cola and Fanta were of the same nature being aerated water and that after the grant of the eligibility certificate the dealer had installed on June 19, 1996 an old bottling machine that was purchased from M/s. Jai Hind Bottling Company, Kanpur, and thus revisionist was not entitled to the grant of an eligibility certificate. The dealer's contention was that the two new products were of a different nature because of their different composition and that the old bottling machine was being used only for filling the product in the bottles which by itself was not a manufacturing process and, therefore, did not affect the validity of the eligibility certificate. The Commissioner, however, did not accept these contentions and cancelled the eligibility certificate by an order dated March 27, 1998. The dealer preferred an appeal to the Tribunal. The Tribunal upheld the Commissioner's view that Coca Cola and Fanta were things of the same nature as Thumps-up, Limca, a, Maaza Rim Zim all being soft drinks and aerated water. It also upheld the Commissioner's view that the installation of an old bottling machine disentitled the dealer-revisionist to the eligibility certificate. It placed reliance on a judgment of the honourable Supreme Court in State Level Committee v. Morgardshammar India Limited [1996] 101 STC 1; 1996 UPTC 213 in which a new unit had installed some plant and machinery that was acquired by another unit but was sold to the respondent without actual use. The honourable Supreme Court held that the respondent was not entitled to exemption because the plant and machinery had earlier been acquired for use by another industrial unit. The honourable Supreme Court also held that the statutory provisions laying down the conditions for the claim of exemption should be strictly construed. In the result, the Tribunal has dismissed the dealer's appeal who is now in revision before this Court.
(3.) IT was contended by the learned counsel for the revisionist that the Divisional Level Committee having accepted that the two new products are of a different nature from the goods already manufactured by the revisionist and thus having granted an eligibility certificate on the basis of diversification, the Commissioner had no jurisdiction to sit in appeal or review and upset the decision of the Divisional Level Committee which was headed by an officer of equal rank, i. e. , Director of Industries and on which there were representatives of the trade tax as well as the Industries Department. He pointed out that against an order granting or refusing an eligibility certificate the aggrieved person can file an appeal under section 10 of the Act to the Tribunal and, therefore, if the Divisional Level Committee wrongly issues an eligibility certificate the Commissioner's remedy is to file an appeal and he cannot himself sit in appeal over the decision of the Divisional Level Committee under section 4-A (3) of the Act. He placed reliance on the observations made by this Court in Jaidurga Detergents and Chemicals Pvt. Ltd. , Kanpur v. Commissioner of Sales Tax 1995 UPTC 89 in which the Commissioner cancelled the eligibility certificate on the ground of a subsequent amendment in the law laying down a new condition for the grant of an eligibility certificate which was not there when the same was granted to that dealer. This Court held that the Commissioner could not cancel the eligibility certificate. IT was observed as under : " 25. The U. P. Sales Tax Act has been amended by U. P. Ordinance No. 21 of 1994 issued by the Governor of Uttar Pradesh on 28th September, 1994, by which section 10 has been amended to the effect that an order granting or refusing to grant an eligibility certificate within the meaning of clause (d) of sub-section (2) of section 4-A of the Act has been made appealable to the Trade Tax Tribunal. The result is that even the Commissioner of Sales Tax, now known as the Commissioner of Trade Tax, can file an appeal to the Tribunal against the grant of an eligibility certificate. The Tribunal is a superior authority - than the Commissioner of Trade Tax. In an appeal by the Commissioner, the, Tribunal may uphold the grant of an eligibility certificate and in an appeal by the dealer, the Tribunal may direct the grant of such certificate. The Ordinance has not made any consequential amendment in sub-section (3) of section 4-A of the Act which would be necessary if this provision is assumed to confer a power of review or revision of the eligibility certificate on the Commissioner. IT is inconceivable that the Commissioner can interfere with an eligibility certificate granted to a dealer under the orders of the Trade Tax Tribunal by saying that the Tribunal was wrong in granting a certificate and that the dealer was not entitled to the exemption or that having lost an appeal before the Trade Tax Tribunal, the Commissioner can still upset the Tribunal's order. " Now, there has been an amendment in the provisions of section 4-A (3) by U. P. Trade Tax (Amendment) Act, 1998 (U. P. Act No. 26 of 1998), with retrospective effect from September 13, 1985 and as a result of the amendment section 4-A (3) of the Act"stands as under : " (3) Where the Commissioner is of the opinion that the facility of exemption from, or reduction in the rate of tax obtained on the basis of an eligibility certificate referred to in clause (d) of sub-section (2) or on the basis of any eligibility certificate issued under any executive orders of the Government issued before or after September 13, 1985 has been misused in any manner whatsoever or there is any legal or factual error in issuing such eligibility certificate or that the new unit has committed breach of any of the conditions, subject to which the facility of exemption from, or reduction in the rate of tax was granted or that the new unit to which the eligibility certificate has been granted in accordance with the provisions of this Act, is not entitled to facility under this section or is entitled to such facility for a lesser period or from a different date he may, by order in writing passed before or after the expiration of the period of exemption or reduction, cancel or amend the eligibility certificate from a date specified in the order and such date may be prior to the date of such order, so however, that in cases of misuse or breach, the cancellation of eligibility certificate shall have effect not before the date of such misuse or breach : Provided that no order under this sub-section shall be passed without giving the dealer a reasonable opportunity of being heard. ";