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Judgment
M.S. Sanklecha, J.—This petition under article 226 of the Constitution of India challenges the order dated February 26, 2010 of the Joint Commissioner of Sales Tax (H.Q.) (respondent No. 3) refusing to amend the entitlement certificate dated August 27, 2008 in accordance with the eligibility certificate dated October 4, 2008 as amended by an addenda amendment dated January 20, 2009 issued by the State Government under the Package Scheme of Incentive, 1993 (the 1993 Scheme) for the benefit of deferral of sales tax. The issue which arises for consideration in the present petition is:
Whether the Commissioner of Sales Tax is bound/obliged to amend the entitlement certificate to include within it such processes which have been amended in the eligibility certificate as process of manufacture and therefore eligible to the benefit of deferral of sales tax?
Briefly, the facts leading to this petition are as follows:
(a) On May 7, 1993 the Government of Maharashtra issued a Package Scheme of Incentive 1993 with the objective of achieving dispersal of industries to under developed and developing areas of Maharashtra state
(b) In view of the representation made in 1993 scheme, the petitioner established a factory in 1997 for processing of hot/cold roll coils at Ranjangaon, MIDC, Tal. Shirol, District Pune. Originally, the petitioner was registered as dealer under the Bombay Sales Tax Act, 1959 ("the Sales Tax Act"). The sales tax registration was amended to indicate that with effect from April 16, 1999, the petitioner was manufacturer under the Sales Tax Act: In the meantime, on May 14, 1998, the petitioner was registered as an industry under the Industries (Development and Regulation) Act, 1951.
(c) On August 8,1999, the petitioner entered into an agreement with the State of Maharashtra to avail of the benefits of 1993 Scheme. The agreement provided that SICOM would act as an agent of the State Government for the purposes of implementation of the 1993 Scheme. In terms of agreement the petitioner was putting up a unit to engage in the manufacturing process of slitting, pickling oiling and cutting to length hot rolled/cold rolled coils into sheets at Ranjangaon, Pune. The agreement was to remain in force for a period of 30 years from the date of commercial production and the petitioner was entitled to avail of sales tax incentive by way of deferral of sales tax payment. The State Government/implementing agency would issue an eligibility Certificate which would entitle the petitioner to avail of all the benefits under the 1993 Schemes including the benefit of deferral scheme of payment of sales tax.
(d) On September 23, 1998, the petitioner made an application u/s 52 of the Sales Tax Act to the Commissioner of Sales Tax seeking determination of the question whether the process of slitting pickling, oiling, cutting to length of HR/CR coils into sheets would amount to manufacture or not. By an order dated January 12, 2000, the Commissioner of Sales Tax held that the process of slitting, pickling, oiling of HR/CR coils into sheets would not amount to manufacturing process.
(e) Being aggrieved, by the order of the Commissioner of Sales Tax dated January 12, 2000, the petitioner preferred an appeal being appeal No. 31 of 2000 to the Maharashtra Sales Tax Tribunal (Tribunal). In the meantime, SICOM issued an eligibility certificate on December 22, 1999 to the petitioner under the 1993 Scheme. In spite of SICOM having issued an eligibility certificate, the Deputy Commissioner of Sales Tax by an order dated September 2, 2002 refused to issue an entitlement certificate by stating that as the activity carried out by the appellant has been held by the order dated January 12, 2000 of Commissioner of Sales Tax not a manufacturing activity. Being aggrieved by the failure of sales tax authorities to issue entitlement certificate the petitioner preferred an appeal being Appeal No. 172 of 2000 to the Tribunal.
(f) On July 30, 2004, the Tribunal by a common order disposed of Appeal No. 31 of 2000 (from the Commissioner''s order dated January 12, 2000 u/s 52 of the Sales Tax Act holding that subject-process does not amount to manufacture) and Appeal, No. 172 of 2000 (from the Deputy Commissioner''s order dated September 2, 2002 holding that the petitioner is not entitled to entitlement certificate). So far as Appeal No. 31 of 2000 is concerned, the Tribunal set aside the order of the Commissioner of Sales Tax dated January 12, 2000 and remanded the matter to the Commissioner for fresh decision u/s 52 of the Sales Tax Act. So far as Appeal No. 172 of 2000 is concerned the Tribunal took a view that the Sales Tax Department ought to issue an entitlement certificate on the basis of the eligibility certificate issued by SICOM.
(g) Thereafter, the petitioner realized that there was a mistake in eligibility certificate, as it did not provide that its final product was a result of manufacture by slitting, pickling and cutting to length of HR and CR coils into sheets. Thereafter, on, an application by the petitioner, by communication dated. January 28, 2009 SICOM substituted manufactured goods in the eligibility certificate dated October 4, 2008 to read as under:
Slit, pickled and cut to length (CR and HR) sheets.
(h) Consequent to the above modification to eligibility certificate, the petitioner applied to the Sales Tax Department to issue an addenda/ amendment to the entitlement certificate already issued. This application for grant of addenda/amendment to the entitlement certificate was on the basis of the addenda/amendment dated January 20, 2009 issued to the eligibility certificate dated October 4, 2008.
(i) The petitioner states that in view of the delay/failure on the part of the Sales Tax Department in issuing the entitlement certificate a writ petition bearing No. 169 of 2010 was filed in this court. This court by an order dated January 15, 2010 allowed the petitioner to withdraw Petition No. 169 of 2010 on the statement of counsel for the Sales Tax Department that the petitioner''s demand for entitlement certificate would be disposed of within a period of six weeks.
(j) Consequent to the above, by letter dated February 8, 2010, the petitioner was asked to submit the necessary documents/papers to ascertain whether the activity of the petitioner amounts to manufacture. The petitioner in reply submitted that in view of the eligibility certificate granted by the implementing agency no occasion arises for the Sales Tax Department to refuse to issue the entitlement certificate on the ground that the process carried out by the petitioner is not manufacturing process. Inspite of the petitioner submission, by an order dated February 26, 2010 the Joint Commissioner of Sales Tax (H. Q.) rejected the petitioner''s application for entitlement certificate on the ground that according to him the activity of slitting, pickling and cutting to length of (HR/CR) coils into sheets would not amount to a manufacturing process.
In support of the petition, Mrs. N.R. Badheka, counsel appearing for the petitioner, submits as under:
(a) The petitioner runs an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 being registered thereunder. In terms of the 1993 Incentive Scheme the industries listed in the First Schedule to the Industries (Development and Regulation) Act, 1951 are covered by the 1993 Scheme. Therefore, in terms of the 1993 Incentive Scheme and the agreement, once an eligibility certificate has been issued by the implementing agency under the 1993 Scheme, the Sales Tax Department is duty bound/obliged to issue an entitlement certificate for the deferral of sales tax benefit. It is, inter alia, on the basis of the representation made in the 1993 Scheme that the unit was set up in a developing area. Thus it would be unfair to deprive the petitioner of the promised benefit;
(b) The Government of Maharashtra through its, agent SICOM on January 20, 2009, has issued addenda/amendment to the eligibility certificate dated October 4, 2008 by which slit, pickled and cut to length (CR/HR) coils into sheets have been substituted as the final/manufactured product in the certificate dated October 4, 2008. In view of the decision of the Tribunal in the Appeal No. 172 of 2000, the Commissioner of Sales Tax is duty-bound to issue the entitlement certificate and the issue of manufacture or not can be considered at the time of assessment when the returns are filed.
(c) The impugned order dated February 26, 2010 of the Joint Commissioner of Sales Tax (H. Q.) examining the issue of manufacture is completely without jurisdiction. This is for the reason that the eligibility certificate dated October 4, 2008 and certificate of entitlement dated August 27, 2008 clearly specifies that the same is issued subject to the provision of the Maharashtra Value Added Tax Act (MVAT). In terms of section 89 of the MVAT Act, the Commissioner of Sales Tax is obliged to issue an entitlement certificate in case an eligibility certificate has been issued by the implementing agency under the package scheme of incentive only subject to satisfaction of such requirements as maybe prescribed. Rule 83 of the MVAT Rules provides that the Commissioner of Sales Tax would be obliged to issue as entitlement certificate when eligibility certificate has been issued under any of the package scheme of incentive subject to the following conditions:
(i) The eligible unit has paid all its taxes, interest and penalty under the MVAT Act; and
(ii) The eligible unit has filed due returns for all periods ending on the date of the grant of certificate of entitlement.
Both the prescribed conditions are completely satisfied and therefore the Commissioner of Sales Tax was not entitled to independently examine the issue of manufacture;
(d) In any event the subject-process of the petitioner has been consistently held by the Department to be a manufacturing process and in support thereof the orders of assessment for the period 2001-02, 2002-03 and 2003-04 were produced wherein the assessing officer has clearly recorded a finding of fact that the petitioner is a manufacturer. This finding of the assessing officer made at the time of assessment has not been challenged. Therefore, it is an admitted position that the process of the petitioner is a manufacturing process; and
(e) Reliance is placed upon the order of the Tribunal dated July 30, 2004, wherein the Tribunal has mandated the Commissioner of Sales Tax to issue an entitlement certificate wherever an eligibility certificate has been issued.
In view of the above Mrs. Badheka submits that the order dated February 26, 2010 of the Joint Commissioner of Sales Tax is arbitrary and bad in law.
As against the above Mr. Sonpal, counsel on behalf of the Revenue, submits, as under:
(a) The petition should not be entertained as there is an alternative remedy of an appeal to the Sales Tax Tribunal provided u/s 55 of the Sales Tax Act from the impugned order dated February 26, 2010;
(b) There has been no determination on whether the activity of the petitioner of slitting, pickling, oiling and cutting to length of CR and HR sheets amounts to manufacture. This can only be done by an investigation into facts and whether the trade regards the resultant end-product differently from the inputs/raw materials used in the process. This investigation of fact cannot be gone into by this court and therefore the matter be remanded to the Joint Commissioner of Sales Tax (H. Q.) for determining the same on the submission of evidence by the petitioner;
(c) The issue of eligibility certificate by the agency, namely, SICOM under the 1993 Scheme would not ipso facto lead to a grant of entitlement certificate. This is particularly so as the 1993 Scheme came into force when Sales Tax Act was in force. Therefore, in terms of section 38(4) of the Sales Tax Act, the Sales Tax Officer has to determine whether or not deferment of tax, is to be granted and for that purpose he has to independently determine whether or not the process carried out by the petitioner is manufacturing process. Further, in terms of rule 31B of the Bombay Sales Tax Rules, 1959, the Sales Tax Department has to independently determine whether or not the process is one of manufacture. The MVAT Act and the Rules made thereunder would have no application and the matter would be strictly governed by the Sales Tax Act in view of saving clause provided under the MVAT Act.
(d) The present petition should not be entertained as the Full Bench of the Tribunal in the matter of Jaison Ammonia and Chemicals Industries Ltd. v. State of Maharashtra by an order dated July 26, 2002 has held that before the issue of entitlement certificate, the Commissioner of Sales Tax has to be satisfied that the activity/process carried out by an assessee amounts to a manufacturing process. In view of the above, he submits that the petition be dismissed.
We have considered the submissions. The contention of the Revenue is that the petition should not be entertained as the petitioner had an alternative remedy against the order dated February 26, 2010, as provided for under the section 55 of the Sales Tax Act and/or u/s 26 of the MVAT Act. It is well-settled that the non-exercise of jurisdiction by a writ court on the ground of alternative remedy is a self-imposed limitation and not an absolute bar in exercise of jurisdiction where the order challenged on the face of it is unreasonable and arbitrary besides being without jurisdiction. In the above circumstances the writ court will not shy away from exercising its jurisdiction under article 226 of the Constitution of India. The petitioner alleges that the order dated February 26, 2010 is without jurisdiction as once an eligibility certificate has been issued by the State Government the entitlement certificate has to be issued by the sales tax authorities. This is the mandate of the Tribunal in the petitioner''s own case in Appeal No. 172 of 2000. Moreover, the authorities under the Act have been assessing the petitioner as manufacturer regularly in assessment orders and the same has been accepted by the Sales Tax Department. Therefore, not granting of entitlement certificate by order dated February 26, 2010 at the very threshold is an action completely without jurisdiction as the issue whether or not manufacture has taken place can be examined at the time of assessment as held by the Tribunal in its order dated July 30, 2004 in Appeal No. 172 of 2000. Therefore, on these facts, we do not find any merit in the plea of alternative remedy and would examine the matter on merits for the purpose of exercise of our jurisdiction under article 226 of the Constitution of India.
The Revenue contends that the issue whether the activity/process of slitting, pickling, cutting to length CR/HR coils into sheets carried out by the petitioner amounts to a manufacturing process needs to be determined by the authorities and for that purpose the matter be remanded to the Joint Commissioner of Sales Tax. We are not impressed. We are of the view that in the present facts no occasion arises to remand the matter to the authorities under the Sales Tax Act to determine whether the process carried out by the petitioner amounts to manufacturing activities. This is for more than one reason. Firstly the sales tax authorities while assessing the petitioner have passed assessment orders consistently from the year 2001-02 onwards holding that the petitioner is manufacturer of HR sheets as per customers requirement. It is on the basis of the aforesaid finding that the respondents have collected tax from the petitioner at a higher rate. These assessment orders passed by the assessing officer over a period of four years under the Sales Tax Act has not been challenged in appeal/ revision by the Revenue. Therefore, there has been a determination that the petitioner''s activity/process of slitting, pickling and cutting to length of HR/CR coils into sheets is a manufacturing activity. Further, the Tribunal in the petitioner''s own case in Appeal No. 171 of 2000 decided on July 30, 2004 has held that where an eligibility certificate is issued by the implementing agency, then it would be just and proper for the sales tax authority to issue a entitlement certificate. In fact, the Tribunal held as under:
The proprietary and fairness demand that the entitlement certificate should first be issued and the question as regards whether the individual transactions involve manufacturing activity so as to be eligible for the tax benefits under such entitlement certificate, should be decided as per law at the assessment stage.
Therefore the question whether or not the activity for which the entitlement certificate has been issued would amount to manufacture could be determined at the stage of assessment. Consequently, there is no reason in the present case not to issue the entitlement certificate in line/accordance with the eligibility certificate.
The eligibility certificate dated October 4, 2008 as amended by addenda dated January 20, 2009 and the entitlement certificate dated August 27, 2008 have been issued by the sales tax authorities under the MVAT Act. Therefore, the contention of the Revenue that the in terms of section 38 of the Sales Tax Act read with rule 31B of the Sales Tax Rules would entail that the sales tax authorities have to independently determine whether or not manufacture has taken place cannot be countenanced. In fact we are not even examining whether or not section 38 of the Sales Tax Act or rule 31B of the Sales Tax Rules at all support the respondent''s contention. In terms of section 89 of the MVAT Act, the Commissioner of Sales Tax is obliged to issue an entitlement certificate wherever an eligibility certificate has been issued by the implementing agency in an incentive scheme. The only condition provided u/s 89 of the MVAT Act is that the same can be issued subject to such conditions as may be prescribed. In this case, the only condition prescribed is under rule 83 of the MVAT Rules. The above rule provides that the entitlement certificate would be issued to a unit which has paid its tax interest and penalty if any, payable under the Act and also has filed due returns for the period ending before the grant of entitlement certificate. It is not the case of the Revenue that the requirements of rule 83 of the MVAT Rules have not been satisfied by the petitioner. In the circumstances, the petitioner is entitled to a grant of the entitlement certificate, no sooner it has received the eligibility certificate from the implementing agency under the 1993 Scheme. It would therefore be noticed that the petitioner is entitled to grant of an addenda to the entitlement certificate dated August 27, 2008 in line with/in accordance with the addenda dated January 20, 2009 issued to eligibility certificate dated October 4, 2008.
The respondent placed heavy reliance upon the Larger Bench decision of Tribunal in the matter of Jaison Ammonia and Chemical Industries Ltd. v. State of Maharashtra decided on July 26, 2002 in support of its submission that the sales tax authorities has to independently determine whether the activity amounts to manufacturing activity independently of the eligibility certificate issued by the implementing agency. In the aforesaid decision, the Full Bench of the Tribunal has taken a view that an entitlement certificate can only be issued by the Commissioner of Sales Tax if he is satisfied that the unit to whom eligibility certificate is given is carrying on manufacturing activity/process. The aforesaid decision relies upon Procedural rule 2.11 of the 1993 Incentive Scheme which reads as under:
The Commissioner of Sales Tax/such other subordinate officer as may be authorised by the Commissioner on being satisfied that the application for certificate of entitlement is in order and on the basis of the eligibility certificate issued by the implementing agency, shall issue the certificate of entitlement in favour of the unit.
The aforesaid procedural rule has been read by the Tribunal to mean that the Commissioner of Sales Tax has to make necessary inquiry and satisfy itself whether the unit is eligible for grant of entitlement certificate, i.e., whether it carries out manufacturing activity. This interpretation of procedural rule 2.11 of the 1993 scheme is not correct. This is so as in terms of paragraph 2.11 of the procedural rule of 1993 scheme, the entitlement certificate has to be issued on the basis of the eligibility certificate. It does not require any independent application of mind. Further, the petitioner had entered into an agreement with the State Government while opting for the deferral scheme in 1993. This agreement casts various obligation upon the petitioner and also requires the State Government to issue an eligibility certificate. In fact, the apex court in the matter of Vadilal Chemicals Ltd. Vs. The State of Andhra Pradesh and Others, , has held that once an eligibility certificate has been granted by the implementing agency in accordance with the incentive scheme for setting up new industries then the Sales Tax Department cannot ignore the eligibility certificate and deny the benefit available to the assessee. If we accept the Revenue''s contention it would only mean that the eligibility certificate issued by the implementing agency is being cancelled by the sales tax authority. Such a suggestion has in fact been negatived by the apex court in the matter of Vadilal Chemicals Ltd. Vs. The State of Andhra Pradesh and Others, . Similarly, in the matter of Pondicherry State Cooperative Consumer Federation Ltd. Vs. Union Territory of Pondicherry, , the apex court has held that once an exemption is granted by the Department of industry and a certificate issued by it, then it is not open to the sales tax authorities to ignore the certificate on the ground that there was no manufacture involved and deny a benefit otherwise available to an assessee.
In the circumstances, we quash the order dated February 26, 2010 of the Joint Commissioner of Sales Tax. The Joint Commissioner of Sales Tax (H. Q.) is directed to issue addenda to the entitlement certificate dated August 27, 2008 in line with the addenda dated January 20, 2009 issued to the eligibility certificate dated October 4, 2008. We further reschedule the eligible period from September 1, 2008 to February 28, 2015 as noted in the entitlement certificate dated August 27, 2008 and in the eligibility certificate dated October 4, 2008 to a period of 39 months from the date the Sales Tax Commissioner issue a entitlement certificate or till the sales tax incentive of Rs. 18,96,00,000 is exhausted. This rescheduling of the period has became necessary in view of the respondents inaction in not issuing the addenda to entitlement certificate dated August 27, 2008 though the petitioner was clearly entitled to the same.
The petition is allowed in above terms. No order as to costs. At this stage, Mr. Vinay Sonpal for the respondents applied for a stay of present order for the period of six weeks. We find no reason to stay the operation of this order and therefore the application is rejected.