Eligibility certificate cancellation needs cogent material; mere suspicion of raw material sale was insufficient to justify withdrawal.

An eligibility certificate under section 4A could not be cancelled merely because coal said to be raw material was allegedly sold and some trucks were not entered in the books at survey. The court found that the material relied upon did not conclusively show that the raw material covered by the certificate had been sold as such, and that the inference of misuse rested on suspicion rather than cogent evidence. Cancellation of an eligibility certificate is a discretionary power that must be exercised on relevant material and in a judicious manner; alleged irregularities may affect assessment or tax liability, but they do not by themselves justify cancellation. The cancellation was therefore set aside.

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Issues: Whether the eligibility certificate granted under section 4A could be cancelled under section 4A(3) on the ground that coal, being raw material, was sold and that some trucks had not been entered in the books at the time of survey.

Analysis: The cancellation was founded on an inference that the assessee had misused the exemption by selling coal. The facts showed that the coal sold was stated to be under-sized and unusable in manufacture, and the material relied upon by the authorities did not conclusively establish that the raw material covered by the eligibility certificate had been sold as such. The reasoning adopted below was held to be insufficient, being based on inference rather than cogent material. Cancellation of an eligibility certificate under section 4A(3) is a discretionary power that must be exercised judiciously and on relevant material; alleged irregularities, if any, may bear on assessment or tax liability but do not by themselves justify cancellation of the certificate.

Conclusion: The cancellation of the eligibility certificate was not sustainable and the assessee succeeded.

Final Conclusion: The orders cancelling the eligibility certificate and affirming that cancellation were set aside, and the revision was allowed.

Ratio Decidendi: Mere sale of raw material or suspicion of irregularity at survey, cogent material showing misuse of the exemption, is not a sufficient ground to cancel an eligibility certificate under section 4A(3); such power must be exercised on relevant material and within a reasonable time.

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