Case: State Of Haryana  Vs. Rubber Reclaim Co.Of India (P) Ltd.&amp;Anr

under the provision of Central Sales Tax Act. Accordingly has set aside the orders passed by the assessing authority. However, the High Court has not gone into the vires of Rule 28-A of the Rules, 1975. 9. Rule 28-A of the Rules, 1975 is framed under Sections 13B and 25-A of the Act. Rule 28-A deals with computation of the quantum of tax incentive available to a dealer in view of eligibility certificate is issued by the department. In order to regulate the exemption scheme the concept of “Notional Sales Tax Liability” is incorporated vide Clause (n) of Rule 28-A (2)(n) of the Rules,1975. The said clause reads: “(i) amount of tax payable on the sales of finished products of the eligible industrial unit under the local sales tax law but for an exemption computed at the maximum rates specified under the local sales tax law as applicable from time to time; andExplanation- The sales made on consignment basis within the State of Haryana or branch transfer within the State of Haryana shall also be deemed to be sales made within the State and liable to tax;(ii) amount of tax payable under the Central Sales Tax Act, 1956, on the sales of finished products of the eligible industrial unit made in the course of inter-State trade or commerce computed at the rate of tax applicable to such sales as if these were made against certificate in form C on the basis that the sales are eligible to tax under the said Act.Explanation- The branch transfers or consignment sales outside the State of Haryana shall be deemed to the sale in the course of inter- State trade or commerce.Note – The expression and terms, if any appearing in this rule not defined above shall unless the context otherwise requires carry the same meaning as assigned to them under the Act and the rules mad thereunder.” 10. Rule 28-A(2)(n) includes within its ambit the sales which were otherwise exigible to sales tax, namely, local sales and inter-State sales and secondly, the Rule also includes branch transfers or consignment sales outside the State and sales made on consignment basis or branch transfers within the State by treating them as deemed sales, which two transactions were otherwise not exigible to sales tax for any other unit not availing exemption. Alternatively, it can be stated that Notional Sales Tax Liability as defined in Rule 28(A)(2)(n), as a condition for grant of exemption. 11. The benefit of tax exemption/ deferment under Rule 28A of the Rules, 1975 shall be subject to condition prescribed under Sub-rule 11(a) of the Rules, 1975. The said rule reads: “(a) The benefit of tax-exemption/deferment under this rule shall be subject to the condition that the beneficiary industrial unit after having availed of the benefit -(i) shall continue its production atleast for the next five years not below the level of average production for the preceding five year; and(ii) shall not make sales outside the State for next five years by way of transfer of consignment of goods manufactured by it.(b) In case the unit violates any of the conditions laid down in clause (a), it shall be liable to make, in addition to the full amount of tax-benefit availed of by it during the period of exemption/deferment, payment of interest chargeable under the Act as if no tax exemption/ deferment was ever available to it;Provided that the provisions of this clause shall not come into play if the loss in production is explained to the satisfaction of the Deputy Excise and Taxation Commissioner concerned as being due to the reasons beyond the control of the units:Provided further that a unit shall not be called upon to pay sum under this clause without having been given reasonable opportunity of being heard.” 12. If there is a violation of anyone of the conditions stipulated in Sub Rule 11(i) and (ii), the sales tax authorities are at liberty to cancel the exemption certificate issued under the scheme and call upon the assessee to make payment of the exemption availed with interest thereon. 13. Having noticed the relevant rules, we will revert back to the facts in the present case. The assessee-company had availed benefit of the sales tax exemption under the Exemption Scheme issued by the State Government. The Eligibility Certificate for sales tax exemption provides for certain conditions which requires to be complied by the assessee-company to take benefit of exemption under the Scheme. The Condition No. 7 of the Eligibility Certificate provides that the certificate can be cancelled if there is contravention of any condition mentioned in the certificate or Rule 28-A, after affording an opportunity to the party of being heard. In the show cause notice it is specifically alleged that the assessee had dispatched good on consignment basis during the assessment period 1995-1996, 1996-1997 and 1997-1998 and therefore the assessee has breached Rule 28-A of the Rules, 1975 and in particular Sub-rule 11(a)(ii) of the Rules, 1975, which prescribes that the benefit of tax exemption shall be subject to the condition that the assessee having availed the benefit of tax exemption shall not make sales outside the State for next five years by way of transfer or consignment of goods manufactured by it. Since the assessee did not dispute the specific contravention pointed out by the assessing authority after cancelling the exemption certificate issued has quantified the tax liability and the interest payable thereon. The order so passed, in our view, is in consonance with the scheme of exemption notified by the State Government and also in accordance with the rules prescribed under Section 13B of the Act.14. The High Court while allowing the petition filed by the assessee has proceeded on a wrong assumption, that, the assessing authority has levied tax on inter-state sales and on consignment transfer and accordingly has quashed the assessment order passed by the assessing authority. In view of our conclusion stated earlier, we cannot sustain the judgment and order passed by the High Court.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. Having noticed the relevant rules, we will revert back to the facts in the present case. Thehad availed benefit of the sales tax exemption under the Exemption Scheme issued by the State Government. The Eligibility Certificate for sales tax exemption provides for certain conditions which requires to be complied by theto take benefit of exemption under the Scheme. The Condition No. 7 of the Eligibility Certificate provides that the certificate can be cancelled if there is contravention of any condition mentioned in the certificate or Ruleafter affording an opportunity to the party of being heard. In the show cause notice it is specifically alleged that the assessee had dispatched good on consignment basis during the assessment period98 and therefore the assessee has breached Rule28A of the Rules,1975 and in particular11(a)(ii) of the Rules, 1975, which prescribes that the benefit of tax exemption shall be subject to the condition that the assessee having availed the benefit of tax exemption shall not make sales outside the State for next five years by way of transfer or consignment of goods manufactured by it. Since the assessee did not dispute the specific contravention pointed out by the assessing authority after cancelling the exemption certificate issued has quantified the tax liability and the interest payable thereon. The order so passed, in our view, is in consonance with the scheme of exemption notified by the State Government and also in accordance with the rules prescribed under Section 13B of the Act.14. The High Court while allowing the petition filed by the assessee has proceeded on a wrong assumption, that, the assessing authority has levied tax onsales and on consignment transfer and accordingly has quashed the assessment order passed by the assessing authority. In view of our conclusion stated earlier, we cannot sustain the judgment and order passed by the High Court.