Eligibility certificate renewal may be refused for failure to maintain separate accounts, but security demand needs independent good reasons.

Renewal of an eligibility certificate was properly refused where the applicant failed to maintain separate accounts for the manufacturing unit, an essential condition for verifying entitlement to exemption. A short delay in filing the renewal application was treated as condonable, and alleged tax collection in an earlier year could not by itself justify refusal for a later year because each renewal stands separately. However, a demand for security could not rest solely on refusal of renewal and the resulting tax liability; in the absence of recorded good or sufficient reasons showing risk to tax payment, the security demand was invalid and was quashed.

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Issues: (i) whether renewal of the eligibility certificate for the period from 1 April 1982 to 31 March 1983 was rightly refused under rule 3(66) of the Bengal Sales Tax Rules, 1941; (ii) whether security could validly be demanded under section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941 merely because renewal of the eligibility certificate had been refused.

Issue (i): whether renewal of the eligibility certificate for the period from 1 April 1982 to 31 March 1983 was rightly refused under rule 3(66) of the Bengal Sales Tax Rules, 1941.

Analysis: The delay of six days in filing the renewal application was treated as condonable in the facts of the case. The earlier year's alleged collection of sales tax could not by itself justify refusal for a subsequent year because each year's renewal is a separate proceeding. However, the authorities' finding that the applicant had not maintained separate accounts for the manufacturing unit, including manufacturing and wage accounts, was accepted. The requirement of separate accounts was viewed as integral to verifying that the exempt sales were of goods manufactured in the newly set up industry. In the absence of compliance with that important condition, remand was found unnecessary.

Conclusion: Renewal of the eligibility certificate was rightly refused and the rejection was upheld.

Issue (ii): whether security could validly be demanded under section 7(4a)(i) of the Bengal Finance (Sales Tax) Act, 1941 merely because renewal of the eligibility certificate had been refused.

Analysis: The statutory power to demand security requires good or sufficient reasons to be recorded in writing. Refusal of renewal and the resulting tax liability, without evidence of past default or other material showing risk to proper payment of tax, was held insufficient by itself to justify a security demand.

Conclusion: The demand for security was invalid and was quashed.

Final Conclusion: The applicant succeeded only on the challenge to the security demand, while the refusal of renewal of the eligibility certificate remained undisturbed.

Ratio Decidendi: A renewal of eligibility certificate may be refused where an essential statutory condition, such as maintenance of separate accounts for the eligible manufacturing unit, is not satisfied; but security for payment of tax cannot be demanded merely because exemption is refused, absent good or sufficient reasons showing a need for such security.

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