2019 (9) TMI 573 - HC - VAT and Sales Tax

Court upholds assessee's exemptions, deems Commissioner's amendment invalid.

M/s Samsung India Electronics Ltd. Thru Manager Taxation Versus The Commissioner Of Trade Tax U.P. Lucknow

The court ruled in favor of the assessee, holding that there was no rectifiable mistake in the eligibility certificate regarding the exemptions claimed. ... Amendment of Eligibility Certificate - Section 4-A(3) of U.P. Trade Tax Act, 1948 - whether the exemption granted to the assessee by the Divisional Level Committee under the Eligibility Certificate No.4324 dated 26.11.1998, as amended by Eligibility Certificate No.1596 dated 4.12.2003, could have been denied by the Commissioner in exercise of its power under Section 4-A(3) of the Act, when there was no allegation of any misuse of that Eligibility Certificate? HELD THAT:- In the instant case, it is wholly debatable whether the assessee was entitled to exemption on the investment made on dyes and moulds, merely because such dyes and moulds had been given out to job workers who used the same to manufacture the components that came to be used in the manufacture of the end product by the assessee, namely colour television sets. It appears to be debatable as the revenue could not point out any specific provision, either in the Act or under the exemption notification, as may dis-entitle a new unit from exemption on the value of such dyes and moulds used by job workers to manufacture component parts for the new unit. Section 4-A of the Act continuing to exist and similar nature and purpose of the notified schemes of exemption, it appears to be prima-facie permissible in law for a 'new unit' to be entitled to avail exemption, though some part of the manufacturing activity may have been got done on a job work basis. In absence of any disabling clause, the investment made to obtain manufacture of components on job work basis may remain entitled to exemption. On the date of issuance of the eligibility certificate, the value of the machinery had clearly not been written off. That is not even the allegation of the revenue. The only conclusion that is being drawn in the present proceedings is that there was no rectifiable mistake, either factual or legal, with respect to the exemption granted to the assessee. The Divisional Level Committee having examined the facts and having granted the eligibility certificate, the same could not be overcome and/or defeated by the Commissioner by assuming power and jurisdiction under section 4-A(3) of the Act - Revision allowed - decided in favour of the assessee and against the revenue. Issues Involved:1. Legality of the amendment of the Eligibility Certificate under Section 4-A(3) of the U.P. Trade Tax Act, 1948.2. Denial of exemption on dyes and moulds given to job workers.3. Denial of exemption on machinery whose value was written off after five years from the date of starting production.4. Jurisdiction and power of the Commissioner under Section 4-A(3) of the Act.Detailed Analysis:1. Legality of the Amendment of the Eligibility Certificate under Section 4-A(3) of the U.P. Trade Tax Act, 1948:The Tribunal upheld the Commissioner’s order amending the Eligibility Certificate No. 4324 dated 26.11.1998, which denied the exemption claims on investments in dyes and moulds and machinery. The Commissioner’s amendment was based on the assertion that the assessee did not directly use the dyes and moulds but outsourced them to job workers and that the machinery's value was written off after the stipulated period. The primary legal question was whether there was any legal or factual mistake in the eligibility certificate regarding these investments.2. Denial of Exemption on Dyes and Moulds Given to Job Workers:The Commissioner denied the exemption for dyes and moulds worth Rs. 54,29,827/- and Rs. 77,26,490/- for A.Y. 1997-98 and 1998-99, respectively, as they were given to job workers. The assessee argued that a circular dated 23.12.1985 allowed exemptions even if part of the manufacturing was done through job work. The Tribunal upheld the Commissioner’s decision, stating that the assessee did not provide sufficient evidence regarding the use of dyes and moulds.3. Denial of Exemption on Machinery Whose Value Was Written Off After Five Years from the Date of Starting Production:The Commissioner also denied the exemption on machinery valued at Rs. 34,84,137/- that was written off in November and December 2002. The assessee contended that the write-off occurred after five years from the production start date (17.04.1997), thus qualifying for exemption. The Tribunal upheld the Commissioner’s decision, noting the lack of clarity on the production start date and insufficient evidence from the assessee.4. Jurisdiction and Power of the Commissioner under Section 4-A(3) of the Act:The assessee challenged the Commissioner’s jurisdiction under Section 4-A(3), arguing that it only allowed rectification of clerical or arithmetical errors, not debatable legal or factual issues. The court referenced the case of Mansarovar Bottling Company Ltd. Vs. Commissioner of Trade Tax, which restricted the Commissioner’s power to correct only patent and apparent errors, not those involving rational debate. The court found that the issues regarding dyes and moulds and the machinery write-off were debatable and not apparent errors.Conclusion:The court concluded that there was no rectifiable mistake in the eligibility certificate regarding the exemptions claimed by the assessee. The Divisional Level Committee’s decision to grant the eligibility certificate could not be overridden by the Commissioner under Section 4-A(3). The court thus answered the legal question in favor of the assessee and allowed the revision, setting aside the Tribunal’s and Commissioner’s orders.