Sale of plant and machinery outside the ordinary course can justify refusal of renewal of a tax eligibility certificate.

Renewal of an eligibility certificate may be refused where a dealer sells machinery that had been treated as part of the business's plant and machinery and the disposal is not shown to be in the ordinary course of business. On the materials examined, the Premur disintegrator was reflected in the books, balance sheet and machinery records as a manufacturing asset, and its sale was not explained as obsolescence or breakdown, so it was treated as a sale of capital assets. The challenge to the refusal as arbitrary or unsupported was not accepted. The separate machine was less clearly documented, but renewal was sustained on the proved sale of the disintegrator.

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Issues: Whether the sale of two machines by the industrial unit during the relevant period amounted to a sale of capital assets otherwise than in the ordinary course of business so as to justify refusal of renewal of the eligibility certificate under rule 3(66a) of the Bengal Sales Tax Rules, 1941.

Analysis: The disputed machines were examined against the applicant's books of account, balance sheet, purchase invoices, machinery list, and the chartered engineer's certificate. One machine, the Premur disintegrator, was shown in the balance sheet and machinery list as part of the plant and machinery used for the plywood business, and its sale was not explained on any ground of obsolescence or malfunction. The materials before the authority supported the view that it had been treated as part of the manufacturing plant and that its disposal was not in the ordinary course of business. The other machine, the double deck vibrating screen, was not shown with the same clarity in the relevant machinery records, but the rejection of renewal was sustained on the basis of the proven sale of the disintegrator as a capital asset. The challenge that the orders were arbitrary or without application of mind was therefore not accepted.

Conclusion: The refusal to renew the eligibility certificate was upheld, as the sale of the relevant machine was rightly treated as a sale of capital assets otherwise than in the ordinary course of business.

Ratio Decidendi: Where a dealer claiming renewal of a tax benefit sells a machine that has been treated as part of the plant and machinery of the business, and the disposal is not shown to be in the ordinary course of business, renewal may be refused on the ground that the condition for the benefit has been breached.

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