Eligibility certificate cancellation barred where Commissioner reopens a debatable exemption decision and later machine installation does not defeat accrued benefit.

Section 4-A(3) of the U.P. Sales Tax Act did not authorise the Commissioner to cancel an eligibility certificate by reappraising a debatable determination already made by the Divisional Level Committee; the correction power was confined to patent, clerical or arithmetical errors apparent from the record. The later installation of an old bottling machine also did not, by itself, defeat an exemption that had already crystallised when the original entitlement conditions were satisfied. The cancellation order was therefore unsustainable, and restoration of the eligibility certificate followed.

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Issues: (i) Whether the Commissioner could cancel the eligibility certificate under section 4-A(3) of the U.P. Sales Tax Act, 1948 on the ground that the new products were of the same nature as the earlier products manufactured by the dealer. (ii) Whether subsequent installation of an old bottling machine disentitled the dealer to the benefit of exemption already granted.

Issue (i): Whether the Commissioner could cancel the eligibility certificate under section 4-A(3) of the U.P. Sales Tax Act, 1948 on the ground that the new products were of the same nature as the earlier products manufactured by the dealer.

Analysis: The power under section 4-A(3) was construed harmoniously with the appeal provision under section 10(2). The Commissioner was held not to possess appellate or review jurisdiction over a conscious decision of the Divisional Level Committee on a debatable question such as whether the new products were of the same nature or amounted to diversification. The expression enabling correction of legal or factual error was confined to patent, clerical, or arithmetical mistakes apparent from the record and not to matters on which a rational debate was possible.

Conclusion: The Commissioner had no jurisdiction to cancel the eligibility certificate on this ground.

Issue (ii): Whether subsequent installation of an old bottling machine disentitled the dealer to the benefit of exemption already granted.

Analysis: The relevant conditions were satisfied on the date when the unit became entitled to exemption and when the eligibility certificate was granted. The later addition of an old machine did not alter the original investment basis, did not reduce the new investment, and did not show any adverse effect on revenue. A subsequent change of this kind, absent misuse or breach affecting the exemption conditions as originally satisfied, could not retrospectively destroy the benefit already earned.

Conclusion: The dealer was not disentitled to exemption merely because an old bottling machine was installed later.

Final Conclusion: The cancellation order was legally unsustainable, and the revisionist was entitled to restoration of the eligibility certificate and allowance of the appeal.

Ratio Decidendi: A power to cancel or amend an eligibility certificate for legal or factual error does not authorise the Commissioner to exercise appellate review over a debatable decision of the certifying authority, and a subsequent change that does not affect the original satisfaction of exemption conditions cannot by itself defeat the exemption.

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