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Judgment
S.C. Parija, J.—The main dispute raised in these two Writ Petitions revolves around the question as to whether the Petitioner is entitled to pay concessianal rate of central sales tax under the Central Sales Tax (Orissa) Rules, 1957 (CST (O) Rules for short) @ 1 %, by enjoying the status of a small scale industrial unit, in view of the order issued by the Government of India, in the Department of Industrial Policy & Promotion dated 10.12.1997, under which the existing medium scale industries were given the option to be registered as a small scale industrial unit, by making application in that regard, within 180 days from the date of publication of the said order.
The brief facts of the case common to both the Writ Petitions are that the Petitioner''s industrial unit was initially registered as a medium scale industry under Government of India in the Ministry of Industry, vide Licence No. 3297/SIA/IM/14/95 dated 03.07.1995, for establishing a Steel Plant in Orissa with an installed capacity of producing 1300 M.T. of structural steel. Subsequently, with the establishment of the Steel Plant at Bainchua, in the district of Cuttack in Orissa, having a fixed capital investment in land, building, plant & machinery of Rs. 2,35,60,000, Petitioner''s industrial unit was registered with the Director of Industries, Orissa, as a medium scale industry, with the date of commencement of commercial production as 17.3.1997. The said industry was granted with eligibility certificate dated 24/26.12.1997, issued by the Director of Industries, Orissa, certifying that the Petitioner''s industry is a new medium scale industry & is eligible for sales-tax concession on raw material, machinery, spare parts, packing materials & finished products, for a period of five years from the date of commercial production, as provided under Industrial Policy. Resolution, 1996 of the Government of Orissa.
While the Petitioner''s industry was enjoying the benefits as a medium scale unit, extended by the State of Orissa under Industrial Policy Resolution, 1996, the Government of India, in the Department of Industrial Policy & Promotion under the Ministry of Industries, issued Order Dated 10.12.1997 (Annexure-1), reclassifying the categories of industries & providing that an industry in which investment in fixed assets in plant & machinery does not exceed Rs. 3 crores, is to be treated as a small scale industry. The said re-classification was subject to the owners of the industrial units applying for such change of status & getting themselves registered as a small scale industrial unit within 180 days of publication of the said Order Dated 10.12.1997.
As the Petitioner had made fixed capital investment of Rs. 2,35,60,000.00 & intending to be re-classified as a small scale industry, as per the order of the Government of India dated 10.12.1997, submitted an application dated 24.03.1998, seeking re-classification of its industrial unit from medium scale to small scale. The General Manager, District Industries Centre, Jagatpur, granted a fresh Registration Certificate dated 13.01.2000 (Annexure-2), certifying the Petitioner''s existing industry to be a small scale unit.
The Government of India subsequently issued Order Dated 24.12.1999, reducing the investment limit for small scale industrial units from Rs. 3.00 crores to Rs. 1.00 crore. Pursuant to the said order of the Government of India dated 24.12.1999, the registration certificate granted to the Petitioner''s industry, as a small scale industrial unit, was cancelled on 26.02.2000, since the maximum investment limit of a small scale industry was re-fixed at Rs. 1.00 crore & the Petitioner''s industry did come within the said limit. Accordingly, the Petitioner was advised to obtain registration as a medium scale industrial unit.
The Government of India issued a clarificatory letter dated 14.3.2000 (Annexure-3), in which it was stated that industrial units which had switched over to small scale units, based on the Order Dated 10.12.1997 would continue to remain as small scale units, in spite of the subsequent Order Dated 24.12.1999, provided the owner of such industrial unit had applied for re-classification within the prescribed period of 180 days from the date of the Order Dated 10.12.1997. Interpreting the said clarification, the General Manager, DIC, Jagatpur, granted re-registration to the Petitioner''s industry as a small scale unit vide Order Dated 8.5.2000 (Annexure-4).
As the Petitioner''s industrial unit was certified to be a small scale industry, the Petitioner availed the benefit of tax concession provided by the State Government under the CST (O) Rules & paid tax @ 1 %, on all inter-state sales of its finished product. Subsequently, the A.G. (Audit), in course of audit, reported that the Petitioner''s industry has been wrongly re-registered as a small scale unit, though it had not exercised the option within the prescribed period of 180 days, as provided in the order of the Government of India dated 10.12.1997. Accordingly, the audit report pointed out that the Petitioner''s industry has been wrongly availing the benefit of tax concession granted by the State of Orissa under the CST (O) Rules, applicable to the small scale industrial units.
Pursuant to the audit report, the Assessing Officer issued notice of re-assessment for the assessment years 2003-04 & 2004-05, under Rule 10 of the CST (O) Rules. The Assessing Officer after hearing the representative of the Petitioner Company passed the order of assessment for the year 2003-04 (Annexure-5), holding that the Petitioner''s industrial unit was not eligible to avail the concessional rate of tax @ 1 % as admissible to small scale units & accordingly assessed the Petitioner Company, @ 4%, for all inter-state sales of its finished product.
In W.P. (C) No. 15001 of 2006, Petitioner assails the order of re-assessment dated 12.09.2006 (Annexure-5) for the year 2003-2004 under Rule 12(8) of the CST (O) Rules, passed by the Sales Tax Officer- Opp. Part No. 3, on the basis of audit objection. In W.P. (C) No. 15913 of 2006, the Petitioner challenge the notice of re-assessment dated 01.09.2006 (Annexure-6), issued by the Sales Tax Officer-Opp. Part No. 4, under Rule 10 of the CST (O) Rules, for the assessment year 2004-2005.
In the counter affidavit filed on behalf of the Sales Tax Officer Opp. Part No. 3 in W.P. (C) No. 15001 of 2006 & Opp. Part No. 4 in W.P. (C) No. 15913 of 2006, while reiterating the above facts, it has been stated that the Petitioner''s industrial unit having availed concession under Industrial Policy Resolution, 1996, as a medium scale industry & having not applied for change over to a small scale industry within the prescribed period of 180 days, as provided in the order of the Government of India dated 10.12.1997, it has no right to claim exemption available to a small scale industrial unit. It has been further stated that the low rate of tax @ 1 %, for goods manufactured by the small scale industrial units in case of inter-state sales being a concession granted to the small scale industries in the State, the Petitioner''s unit being a medium scale industry, is not eligible to avail such concessional rate of tax. Accordingly, it is stated that as the Petitioner had been under assessed for the assessment years 2003-2004 & 2004-2005, the assessment for the said years were re opened.
The Industries Department, Government of Orissa, Opp. Part No. 3 in W.P. (C) No. 15913 of 2006, in its counter affidavit, while reiterating the facts, as detailed above, has stated that the order published by the Government of India dated 20.12.1997, clearly provided that existing industrial unit may be registered as a small scale unit, if the owner of such industry makes an application to that effect within a period of 180 days from the date of publication of the said order. The Petitioner having not made any-such application within the prescribed time limit, it cannot be classified as a small scale unit. In this regard, it has been stated that the Petitioner submitted a plain paper application dated 24.3.1998 & no action having been taken on the same, Petitioner filed another application in plain paper dated 08.10.1999. Subsequently, Petitioner made an application in proper form dated 15.12.1999, accompanied by necessary documents, which was much beyond the period of 180 days prescribed by the Government of India in its Order Dated 10.12.1997.
It has been further stated in the said counter affidavit that pursuant to the Government of India Order Dated 10.12.1997, the Director of Industries, Orissa, vide its circular letter dated 07.04.1998 (Annexure- D/4) had clarified that as per the decision taken by the State Government, industries which have been granted incentives as a medium scale unit will continue to receive incentives, as applicable to the original unit, even if they are subsequently registered as small scale industry due to change in the investment limit announced by the Government of India. Hence, there should not be any scope for sanctioning double incentives to the same unit at the district level.
It has also been stated in the said counter affidavit that though the Petitioner''s application for change of classification in proper form, accompanied by necessary documents was filed only on 15.12.1999, which is much beyond the prescribed period of 180 days, the General Manager, DIC, Jagatpur, under a mistake of fact registered the Petitioner''s unit as a small scale industry vide registration certificate dated 13.1.2000 & subsequently granted re-registration vide Order Dated 8.5.2000. It is further stated in the counter affidavit that no certificate of eligibility & exemption certificate had been granted to the Petitioner''s industry as a small scale unit & it had availed sales tax exemption/incentives as a medium scale industry for a period of 5 years from the date of commercial production, i.e. 17.3.1997.
On a perusal of the order of the Government of India dated 10.12.1997, it is seen that the Central Government considered it necessary with a view to ascertain which ancillary & small scale industrial undertakings need supportive measures, exemption or other favourable treatment under the Industries (Development & Regulation) Act, 1951, in order to enable them to maintain their viability & strength, so as to be effective in (a) promoting in a harmonious manner the industrial economy of the country &'' casing the problem of unemployment & (b) securing that the ownership & control of the material resources of the community are so distributed as best to sub-serve the common good. Clause (1) of the said order of the Government of India provided that an industrial undertaking in which the investment in fixed assets in plant & machinery does not exceed three crores, shall be classified as a small scale industry. However, the said order also provided that every industrial undertaking which has been issued with a certificate of registration or a licence by the Central Government under the provisions of the Industries (Development and Regulation) Act, 1951, & covered by the said order relating to ancillary or small scale industrial undertaking, may be registered at the discretion of the owner, as such, within a period of 180 days from the date of publication of the order.
Admittedly, the Petitioner''s industrial unit had been registered as a medium scale industry with the Government of India, Ministry of Industry, for establishing a Steel Plant in the State of Orissa with an installed capacity of producing 1300 M.T. of structural steel. Subsequently, the Petitioner''s unit was registered as a medium scale industrial unit with the Director of Industries, Orissa & was issued with a certificate indicating the date of commercial production as 17.3.1997. The Petitioner''s industry was also issued with a eligibility certificate by the Director of Industries, Orissa, dated 24/26.12.1997, for sales tax concession/ exemption on machineries, spare parts, raw materials, packing materials & finished products for a period of five years from the date of commencement of commercial products i.e. 17.03.1997 to 15.03.2002, under Industrial Policy Resolution, 1996, of the Government of Orissa. It is not disputed that the Petitioner Company has availed the benefits of sales tax exemption/concession as a medium scale industry.
Regarding re-classification of the category of industry as per the order of the Government of India dated 10.12.1997, the Petitioner''s industrial unit had admittedly not applied in the prescribed form for its re-classification from medium scale to small scale, within the stipulated period of 180 days. However, it had been granted with a registration certificate dated 13.01.2000 by the General Manager, DIC, Jagatpur, certifying the Petitioner''s industrial unit to be a small scale unit. Subsequently, on coming to know about the reduction of investment limit of small scale industries from Rs. 3.00 crores to Rs. 1.00 crore by the'' Government of India notification dated 24.12.1999, the General Manager, DIC, Jagatpur, vide Order Dated 26.2.2000 deregistered the Petitioner''s industry as a small scale unit & advised the Petitioner to obtain registration as a medium scale unit. On 8.5.2000, the said authority granted re-registration to the Petitioner''s industry as a small scale unit.
Apparently, the registration of the Petitioner''s industry as a small scale unit by the General Manager, DIC, Jagatpur, is a mistake of fact, inasmuch as, the Petitioner had not applied for change of status from existing medium scale to small scale within the prescribed period of 180 days, as stipulated in the Government of India Order Dated 10.12.1997 & registered as such. Moreover, after having opted by submitting application in plain paper to be registered as a small scale unit, no eligibility certificate has been granted to the Petitioner for availing sales tax concession. Hence, the Petitioner''s industry having been wrongly treated as a small scale unit under a bona fide mistake of fact, it cannot be permitted to take undue advantage of the same & make a legitimate claim for availing the concessional rate of central sales tax @ 1 %, applicable to small scale industries. Even otherwise, the State cannot be made to suffer due to a bona fide mistake of fact committed by its functionary.
Coming to the question as to whether the Assessing Officer having completed the assessment for the years 2003-04 & 2004-05, had the power to reopen the same on the basis of an audit report, such power of re-assessment is provided under Rule 12(8) of the CST (O) Rules, which prescribes that power of re-assessment can be exercised to reopen a concluded assessment, if the turnover of a dealer for any period has escaped assessment or the dealer has been under-assessed. In the present case, the Petitioner Company having been wrongly assessed as a small scale industry, on the basis of a bonafide mistake of fact, the Assessing Officer had the authority to reopen such concluded assessments & therefore the action of the Assessing Officer in reopening the assessment of the Petitioner Company for the years 2003-04 & 2004-05 cannot be faulted
In view of the foregoing facts & circumstances, we do not find any infirmity in the order of the Assessing Officer directing re-opening of the assessment of the Petitioner Company for the years 2003-04 & 2004-05 & the subsequent order of re-assessment dated 12.09.2006 for the year 2003-04, impugned in W.P. (C) No. 15001 of 2006. In W.P. (C) No. 15913 of 2006, as the notice of re-assessment dated 01.09.2006, for the year 2004-05 is under challenge & this Court by Order Dated 16.1.2007 had restrained the Assessing Officer from passing the final order of assessment, we vacate the said interim Order Dated 16.1.2007.
Both the Writ Petitions are accordingly dismissed. No cost.
V. Gopala Gowda, C.J.
I agree.