High Court · 2012

2. Case of the petitioner is that he is engaged in the business of manufact uring lubricating and fuel oil out of used oil. As per Industrial Policy of 2003 , sales tax exemption for seven years was permissible to eligible units. The pet itioner, claiming to be eligible, applied for the said benefit, which was consid ered in accordance with the Industrial policy and the Assam Industries (Tax Exem ption for Pipeline Units) Order, 2005. Eligibility Certificate dated 19.7.2007 w as issued in his favour granting benefit from 20.3.2006 to 19.03.2013. According ly, certificate of entitlement was also issued to the petitioner. However, on 29 .08.2008, Director of Industries and Commerce, Assam withdrew the sales tax exem ption which was challenged vide W.P.(C) No.4406 of 2008. The writ petition was a llowed on 6.2.2009 on the ground that the petitioner was not given reasonable op portunity in the matter. Thereafter, order dated 2.5.2009 was passed on the grou nd that the activity of the petitioner could not be termed as manufacturing, whi ch was a condition for the grant of concession. The petitioner challenged the or der dated 2.5.2009 and also order dated 14.2.2011 passed by the Commissioner of Taxes, Assam. The petitioner has also challenged consequential assessment order. According to the petitioner, the process carried out by him amounts to m 3. anufacturing and, accordingly, entitlement and eligibility certificate having be en issued, the same could not be withdrawn merely by change of opinion already f ormed in absence of any misstatement or suppression on the part of the petitione r.

4. We have heard learned counsel for the parties.

5. Learned counsel for the petitioner submits that the eligibility certific ate mentions the raw materials and the finished products as declared by the peti tioner as follows:-

6. Name of the Finished products (item)s 1. Lubricating Oil 2. Fuel Oil Name of raw materials 1. Used Oil 2. Waste Oil 3. Chemicals

6. On the basis of above particulars, the activity of the petitioner was tr eated to be manufacturing, treating the finished product to be different from ra w material. Inspite of this, in the impugned order, it has been held that no man ufacturing was involved and exemption granted was liable to be cancelled. The order passed by the Director of Industries refers to the order of th 7. e Commissioner of Taxes, taking a view that since no new commodity emerges, no m anufacturing is involved. The principle has been applied to the case of the peti tioner as follows :- It is found that there are 4 steps in the refining process : Dehydration : where the waste lubricants are being processed at about a (cid:28) 1) temperature of 1500 C to remove the water contented in the used oil. 2) Distillation : (i) the 1st function of this process is to remove from th e used oil, fraction of such as SAE5 and SAE10 grades. This accomplished under a vacuum of 710 mm Hg to 720 mm Hg and a temperature of 1500 C to 3000 C is appli ed. The vapours of the fraction are routed through water cooled condenser, is c ollected in receiver as Fuel Oil. (ii) The next 2nd function of this process is to remove from the used oil, fraction of such as SAE20, SAE30 and SAE40 grades. This accomplished under a vacuum of 756 mm Hg to 759 mm Hg and a temperature of 3600 C is applied. The vapours of the fraction are routed through water cooled c ondenser, is collected in receiver as Raw Base Oil. 3) Clay Treatment : The recovered Raw Base Oil are transferred in Bleeching vessel, mixed with clay in an agitator and processed under a vacuum of 700 mm H g at a temperature of 1500 C to 2500 C. 4) Filteration : The oil-clay mixture filtered out at the Filter Press and blended with lubricant activities for converting them into different grades of l ubrication oils. After hearing from the Unit, namely M/s Progressive Industries and consi dering the views of the Commissioner of Taxes, Assam, it has been concluded tha t the Sales Tax Exemption benefit have been withdrawn from the unit. (cid:29) The Commissioner of Taxes relied upon a Division Bench judgment of this 8. Court in Deepak Kumar Poddar -Vs.- State of Assam and another, (2010) 6 GLR 835 holding that conversion of raw mustard oil into mustard oil did not involve manu facturing.

9. Learned counsel for the petitioner submits that once the Industries Depa rtment as well as the Sales Tax Department took the view that conversion of used oil into lubricating oil or fuel oil entitled the petitioner to tax incentives which the petitioner acted upon, it was not permissible to change the opinion on the basis of judgment of this Court, which was distinguishable.

10. Learned counsel for the State submitted that the eligibility certificate granted could be cancelled at any time, even if the bona fide opinion was forme d in favour of the petitioner that activity undertaken by the petitioner involve d manufacturing.

11. Question for consideration is whether eligibility certificate once grant ed on formation of a bona fide opinion on a debatable issue can be cancelled by changing the opinion.

12. er, 2005, which admittedly governs the issue, is as follows :- Clause 12 of the Assam Industries (Tax Exemption for Pipeline Units) Ord (cid:28)12. Termination of Eligibility Certificate as well as the Certificate of Entitl ement for violation of or non-compliance with any of the conditions laid down in the Order : (1) Under this Order, this Eligibility Certificate is granted to an industrial u nit, which fulfils all eligibility conditions in terms of this Order and this El igibility Certificate for the purpose of Certificate of Entitlement to enable th e industrial unit to enjoy the benefit of tax exemption in terms of this Order. Violation of any condition of the eligibility or information on any of these con ditions being found false at any time after the issue of the Eligibility Certifi cate or obtaining of such certificate by fraud or misrepresentation or suppressi on of facts or failure on the part of the holder of the Certificate of Entitleme nt to comply with any condition, laid down in his Certificate of Entitlement or to furnish any information required by his Prescribed Authority with regard to t he implementation of this Order shall entail the termination of both the eligibi lity Certificate and Certificate of Entitlement. (cid:29)

13. The above clause clearly lays down that eligibility certificate once gra nted can be cancelled only if there is violation of any condition or information furnished was found to be false or if certificate was obtained by fraud or miss tatement or suppression. The impugned order does not show either the allegation of fraud, misrepresentation or suppression on the part of the petitioner nor vio lation of any of the condition of the eligibility. Only ground on which eligibil ity certificate has been terminated is the change of opinion as to the eligibili ty of the petitioner to get the benefit. This course is clearly ultra vires the power conferred under Clause 12 of the 2005 Order, referred to above. This being the clear position, it is not necessary to go into the question whether activit y of the petitioner amounts to manufacturing in view of law laid down in the jud gment of this Court in Deepak Kumar Poddar (supra). The issue is debatable and a s per opinion earlier formed by the Department, the petitioner was eligible. No subsequent development or suppression or misrepresentation by the petitioner has been pointed out. In these circumstances, the impugned orders cannot be sustain ed.

14. Accordingly, we allow these petitions and quash the impugned orders. The respondent authorities will be at liberty to proceed afresh in the matter in ac cordance with law.