Allowed

M/S Hpl Socomee Pvt. Ltd, Gurgaon v. State of Haryana & Ors.

Punjab & Haryana HC14 Aug 2015VATAP/10/2013

Case brief

AI extract

What is this about?

The High Court held that the Higher Level Screening Committee (HLSC) lacked jurisdiction to reopen a case after its decision was quashed by the Secretary Industries, who had directed issuance of an eligibility certificate. The court quashed the Tribunal's order and directed compliance with the final appellate decision.

What did the court decide?

Impugned orders of the Tribunal and HLSC set aside; respondents directed to comply with the final order of the Secretary dated 09.05.2003.

M/S Hpl Socomee Pvt. Ltd, Gurgaon Vs State… — Writ and Judicial Review | Punjab & Haryana HC (2015)

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

¶2

 VATAP No.10of2013(O&M)
RESERVED ON: 05.08.2015
 DATE OF DECISION: 14.08.2015

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M/s HPL Socomec P. Ltd. …..Appellant

¶4

versus

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State of Haryana and others .....Respondents

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CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE G.S. SANDHAWALIA

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Present: Mr. Rajiv Agnihotri, Advocate for the appellant
Ms. Mamta Singla Talawar, AAG, Haryana

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S.J. VAZIFDAR, ACTING CHIEF JUSTICE :

¶9

This is an appeal under Section 36 of the Haryana Value
Added Tax Act, 2003 against the order of the Haryana Tax Tribunal
dated 05.09.2011 dismissing the appellant’s appeal against the
order of the Higher Level Screening Committee (HLSC) dated
10.08.2005 by which the HLSC held the appellant’s industrial unit
to be eligible for sales tax exemption only on the fixed capital
investment of Rs.3,26,210/- and for the issuance of an eligibility
certificate entitling the appellant to avail exemption to that
extent alone, as against the appellant’s claim for sales tax
exemption of Rs.54.08 lacs. The appellant has also challenged the
order of the Tribunal dated 22.06.2012 rejecting its application
for review of the order dated 05.09.2011.

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PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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2. In paragraph-27 of the appeal, several questions of law
have been raised. We, however, admit the appeal on the following
substantial questions of law as framed by us:-

¶14

i) Whether the Higher Level Screening
Committee is entitled to reopen a case
on its own where its earlier decision
had been overruled by the appellate
authority-Secretary in exercise of
powers under Rule 28A(5)(g) of the
Haryana General Sales Tax Rules, 1975?

¶15

ii) Whether the Higher Level Screening
Committee is entitled to ignore the
order of the appellate authority i.e.
Secretary passed under Rule 28A(5)(h)
and to refuse to comply with the order
on the basis that it was doing so on a
ground that had not been considered by
the appellate authority?

¶16

We have answered the questions in the negative, in
favour of the appellant/assessee.

¶17

3. The appellant is engaged in the manufacture of onload
changeover switches, switch boards and parts and accessories in
relation thereto. The appellant’s unit commenced commercial
production on 24.06.1993. On 26.06.1993, the appellant applied for
an eligibility certificate. The application was pending till the
year 1998.

¶18

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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4. On 28.11.1996, the Deputy Excise and Taxation

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Commissioner reported to the HLSC that the appellant was not
eligible for exemption as out of the total fixed capital investment
of Rs.58.75 lacs claimed in the application, Rs.54.08 lacs was in
respect of purchase of old moulds and dies. On a finding that the
investment in old moulds and dies was more than 25% of the fixed
capital investment, it was held that the company did not qualify to
be a new industrial unit in view of rule 28A of the Haryana General
Sales Tax Rules, 1975. Accordingly, it was observed that the
appellant was not qualified for the grant of an eligibility
certificate. By an order dated 29.01.1998, the HLSC held that the
appellant was not entitled to be issued the eligibility certificate
and rejected the appellant’s application which was made in Form
S.T.70. What is recorded in the order is important and as follows.

¶23

 The appellant’s claim was enquired into by the field
authorities and was also scrutinized by the Deputy Excise and
Taxation Commissioner and G.M., DIC, Gurgaon. A joint inspection
report was put up before the HLSC. The HLSC ordered another joint
inspection of the appellant’s unit. The appellant was directed to
call back the entire machinery which had been sent to Chennai. The
appellant, however, informed the district authorities that the
machinery could not be called back from Chennai and requested for
the inspection of the machinery at Chennai. An officer of the
department visited Chennai and made necessary enquiries regarding
the machinery which was available with a concern by the name of M/s

¶24

Devi Polymers Limited at Chennai. The appellant’s application for
an adjournment thereafter before the HLSC was rejected with the
observation that the appellant was deliberately trying to delay the
matter after having availed the maximum exemption. It was held

¶25

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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that the investment of Rs.54.08 lacs had been made in old machinery
i.e. dies and tools. They have been shown as having been purchased
from Havell’s Circuit Breakers Private Limited, Noida. It was held
that the machinery had earlier been used by M/s Havell’s Circuit
Breakers Private Limited, Noida and had been purchased from them.
The order contains reasons in respect of the finding that the
machinery in respect of which the exemption was claimed was old. It
is not necessary to refer to these reasons for ultimately it has
been held that the machinery was new and that finding has attained
finality. It has not been challenged before us by the
respondents/department.

¶29

5. The appellant’s first appeal before the Commissioner
Industries was dismissed on 26.07.1999. The appellant filed Civil
Writ Petition No.11173 of 1999 in this Court challenging this
order. This Court by an order dated 26.5.2000 directed the HLSC to
hold a fresh enquiry into the question as to whether the moulds and
dies were old or new and directed the company to be associated with
the enquiry.

¶30

6. The HLSC, by an order dated 17.05.2002, once again
concluded that the same were old.

¶31

7. This brings us to the most crucial aspect of the matter.
The appellant filed an appeal before the Financial Commissioner &
Secretary Industries, Department of Industries. The appeal was
allowed by an order dated 09.05.2003. It is important to note that
the Secretary by the said order observed that it was not disputed
that the appellant purchased a part of the machinery in question
from HPL India Limited in the year 1993 of the value of Rs.54.08
lacs and commenced commercial production on 26.06.1993 and that the

¶32

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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appellant at some point of time shifted this machinery to M/s Devi
Polymers Limited at Chennai who was doing job work for the
appellant. It was further noted that the final product was
assembled in the premises rented by the appellant. These
observations are important in view of the contention now raised
that the machinery had never been installed in Haryana. It is
significant that the order notes that a visit was made to the
appellant’s premises by the DETC, Gurgaon on 22.06.1995 where he
was told that the machinery had been sent to Chennai. At that time,
it was not even contended that the machinery had not earlier been
installed in Gurgaon as is now sought to be contended. The order
has commented adversely upon the fact that though the notices were
issued in October, 1993, the first visit was made by the DETC to
the appellant’s premises only in June, 1995. It was conclusively
held that the tools and dies were new at the time of purchase and
that the HLSC had wrongly concluded otherwise. This finding has
attained finality. The Secretary passed the following order which
is vital for the purposes of this appeal:-

¶36

“I, therefore, quash the impugned order,
accept the appeal & direct the HLSC to issue
eligibility certificate to the appellant.”

¶37

This order too has attained finality.

¶38

By the impugned order, the HLSC has sought to reopen the

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entire matter and to reject the application to a substantial extent
now on the ground that the machinery had never been installed in
Haryana. It is necessary to examine the consideration of the
impugned order by referring to the relevant provisions of the Act
and the rules.

¶40

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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 We have come to the conclusion that under the scheme
under Rule 28A the order of the Secretary had attained finality and
that it was not open to the HLSC to ignore the order and to hear
the matter afresh on the ground that the HLSC had failed to
consider a particular aspect of the matter.

¶44

8. Rules 28A(2)(c), (f)(i), (g)(iii), 5(a) to (h) of the
Haryana General Sales Tax Rules, 1975, read as under:-

¶45

“Rule-28A

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CLASS OF INDUSTRIES, PERIOD AND OTHER CONDITIONS FOR
EXEMPTION/DEFERMENT FROM PAYMENT OF TAX.

¶47

(2) For the purpose of this Chapter, unless the
context otherwise requires.
(a) & (b) ……… ………. …………. ……..

¶48

(c) “New industrial Unit” means a unit which is or
has been set up in the State of Haryana and comes or
has come into commercial production for the first time
during the operative period and has not been or is not
formed as a result of purchase or transfer of old
machinery except when purchased in the course of
import into the territory of India or when the cost of
old machinery does not exceed 25% of the total cost of
machinery re-establishment, amalgamation, change of
lease, change of ownership, change in constitution,
transfer of business, reconstruction or revival of the
existing unit;

¶49

(d), (e) ……… ………. …………. ……..
(f) ‘eligible industrial unit’ means:-
(i) a new Industrial Unit of expansion or
diversification of the existing unit, which-

¶50

(I) to (V) & (ii) ……… ………. …………. ……..
(g) “fixed capital investment” means investment in-
(i)& (ii) ……… ………. …………. ……..

¶51

(iii) new plant and machinery Including generating
set), tools and equipment.

¶52

5(a) Every eligible Industrial Unit which is desirous
of availing benefit under this rule shall make an
application in form S.T.70 in triplicate alongwith
attested copies of the documents mentioned therein to
the General Manager District Industries Centre within
90 days of the date of its going into commercial
production or the date of coming into force of this
rule whichever is later. No application shall be
entertained if not preferred within time. An
application with incomplete or incorrect particulars
including the documents required to be attached
therewith shall be deemed as having not been made if

¶53

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

¶54

VATAP-10-2013

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the applicant fails to complete it on an opportunity
afforded to him in this behalf.

¶57

b) Applications from small scale units will be
considered by the Lower Level Screening Committee and
those from Medium/Large scale units by the Higher
Level Screening Committee.

¶58

(c) The General Manager, District Industries Centre
shall immediately forward one copy of the application
and documents on receipt to the Deputy Excise and
Taxation Commissioner incharge of the District who
will send his comments within a period of 21 days. In
case of medium/Large scale industry, a copy of the
comments will also be sent by him to the Commissioner.

¶59

(d) The General Manager, District Industries Centre
will, within 30 days of receipt of the application
from the small scale industry, place the proposal
before the Lower Level Screening Committee with his
report and recommendations alongwith comments, if any
of the Deputy Excise and Taxation Commissioner
concerned for its decision.

¶60

(e) The General Manager, District Industries Centre
will within 30 days of receipt of the application from
the medium/large scale industry, forward his report
and recommendations alongwith the comments if any, of
the deputy Excise and Taxation Commissioner to the
Additional Director of Industries who will place his
proposal before the Higher Level Screening Committee
within a further period of 15 days for its decision.

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(f) An appeal from the original decision of the
lower Level Screening Committee shall lie to the
Higher Level Screening Committee, if preferred within
30 days of communication of the decision. The
decision of the Higher Level Screening Committee in
such appeal shall be final.

¶62

(g) An appeal from the original decision of the
Higher Level Screening committee shall lie to the
Secretary Industries, if preferred within 30 days of
communication of the decision. The decision of the
Secretary Industries shall be final.”

¶63

(h) The eligibility certificate will be issued by
the General Manager District Industries Centre in
cases approved by the Lower Level Screening Committee
and by the Director of industries or any officer
nominated by him not below the rank of Additional
Director in cases approved by the Higher Level
Screening Committee normally within a period of 45
days from the date of receipt of the application in
the office of the General Manager, District Industries
Centre. The certificate shall be valid from the date
of commercial production or from the date of issue of
entitlement/exemption certificate as the case may be

¶64

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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for a period as laid down under sub-rule(4) unless
cancelled or withdrawn. A copy of the eligibility
certificate shall also be sent to the Deputy Excise
and Taxation Commissioner concerned.”

¶68

9. The appellant’s application would be considered against
the provisions of rule 28A(2)(c),(f),(i), (g)(iii). In order to be
considered an eligible industrial unit, the enterprise must be a
new industrial unit or an extension or diversification of existing
unit which fulfills the conditions in clauses (I) to (V) of rule
28A(2)(f)(i). In order to be considered a new industrial unit
within the meaning of Section 28A(2)(c), the unit must be one which
has been set up in the State of Haryana and has not been or is not
formed as a result of purchase or transfer of old machinery except
when purchased in the course of import into the territory of India
or when the cost of old machinery does not exceed 25% of the total
cost of machinery, etc. Thus, as far as the second part is
concerned, it was conclusively held by the Secretary that the
machinery was new and not old. That finding has attained finality.

¶69

The issue as to whether the unit has been set up in the
State of Haryana or not was not considered, as the appellant’s
application for the eligibility certificate was not rejected on
that ground. It was never contended by the department that the unit
had not been set up in the State of Haryana. This is despite the
fact that site visits were made and during those visits, the
authorities were fully aware of the fact that the machinery had
been shifted to Chennai to the premises of M/s Devi Polymers
Limited who were doing job work for the appellant at the premises
rented by the appellant. As noted earlier, the order of the
Secretary expressly records that it was not disputed that the
appellant had purchased a part of the machinery in the year 1993 of

¶70

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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the value of Rs.54.08 lacs and had come into commercial production
on 24.06.1993 and that the appellant had shifted this machinery to
Chennai. Implied therein is a finding that the machinery had been
set up in Haryana. There is an implied if not an express admission
to that effect in the order. In any event, it was not contended in
the earlier proceedings that the machinery had not been set up in
Haryana.

¶74

10. To reiterate, therefore, the Secretary had by the order
dated 09.05.2003 directed the HLSC to issue the eligibility
certificate to the appellant. The scheme of rule 28A(5) establishes
the hierarchy of the authorities and the binding nature of their
orders. The appellant is a medium/large scale industry. It made
the application for the eligibility certificate in Form S.T.70 as
required by sub-rule 5(a) and (c), to the General Manager, District
Industries Centre. The appellant being a medium/large scale unit,
its application was to be considered by the HLSC. Under clause (c),
the General Manager, District Industries Centre was to immediately
forward a copy of the application to the Deputy Excise & Taxation
Commissioner who was to send his comments. Under clause (e), the
General Manager, District Industries Centre was to forward his
report and recommendations along with the comments, if any, of the
DETC to the Additional Director of Industries. The Additional
Director of Industries was to place his proposal before the HLSC.
What is important for the present purposes is to note that an
appeal against the decision of the Lower Level Screening Committee
(LLSC) lies to the HLSC and the decision of the HLSC in such appeal
shall be final and an appeal from the original decision of the HLSC
lies to the Secretary Industries and the decision of the Secretary
Industries shall be final. The appellant had challenged the

¶75

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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decision of the HLSC dated 29.01.1998 refusing to grant the
eligibility certificate before the Secretary and the Secretary had,
by the order dated 09.05.2003, expressly directed the HLSC to issue
the eligibility certificate to the appellant. This order attained
finality in view of rule 28A(5)(g). The HLSC thereafter had nothing
to do with the matter. It had passed its order dated 29.01.1998
upon which it became functus officio. Its order was amenable to an
appeal under rule 28A(5)(g) whereunder the decision of the
Secretary became final which had not been challenged by the
respondents.

¶79

11. In fact, upon the decision of the Secretary Industries,
the HLSC had no jurisdiction to deal with the matter for any
purpose and in any respect. The order of the HLSC dated 29.01.1998
had merged into the order of the Secretary dated 09.05.2003. Under
clause (h), the Director of Industries or any officer nominated by
him not below the rank of Additional Director ought to have issued
the eligibility certificate, as the eligibility certificate ordered
to be granted by the order of the Secretary dated 09.05.2003 must
be deemed to have been an eligibility certificate issued by the
HLSC.

¶80

12. Pursuant to the order of the Secretary, the matter was
put up before the HLSC. The HLSC examined the matter treating the
moulds and tools as new. Indeed, It was bound to do so in view of
the order of the Secretary and the findings therein. The HLSC
ought to have, in compliance with the order of the Secretary in
appeal, granted the eligibility certificate. Instead, in its
meeting held on 30.06.2004, it recorded its prima facie finding
that the machinery had not been erected at Gurgaon and it was being

¶81

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

¶82

VATAP-10-2013

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used in Chennai and that an investment of only Rs.3.26 lacs could
be considered for tax benefits. The HLSC, on the one hand,
recorded that nobody had appeared for the appellant at the final
meeting and, on the other hand, recorded that “it was an undisputed
fact” that the machinery worth Rs.54.08 lacs was not erected at the
appellant’s industrial unit at Gurgaon but was sent to M/s Devi
Polymers Limited at Chennai.

¶85

13. In fact, as recorded in the order of the Secretary, the
undisputed fact was to the contrary. As we indicated earlier, the
undisputed fact was, albeit impliedly, that the machinery had been
set up in Haryana and was shifted to Chennai. In view of the fact
that the Secretary’s order had attained finality, this dispute is
entirely irrelevant if the HLSC did not have any jurisdiction to go
into this new point on its own. The HLSC, however, held that the
only point decided by the Secretary was that the dies and moulds
were new and that the Secretary had not taken any decision as to
whether the same had been set up at the appellant’s unit in
Haryana. Having come to the finding entirely without jurisdiction,
that the machinery had not been set up in Haryana, the HLSC held
the appellant to be entitled for tax exemption only to the extent
of Rs.3,26,210/- as against the appellant's claim of Rs.54.08 lacs.

¶86

14. Under the scheme of Rule 28A, there is a clear
hierarchy. The orders of the LLSC are appealable to the HLSC and
the orders of the HLSC are appealable to the Secretary. In the
first case, the order of the HLSC in appeal shall be final and in
the second case the order in appeal of the Secretary shall be
final. The orders appealed against merge into the orders of the
appellate authorities. It is not open then for the HLSC to reopen

¶87

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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¶90

the order of the Secretary which had attained finality on another
ground. This would be permissible only if the order of the
Secretary in appeal had been reviewed, modified or set aside,
assuming, of course, that the order could have been reviewed,
modified or set aside. The HLSC, in any event, had no power or
jurisdiction to review, modify or set aside the order of the
Secretary. A view to the contrary would lead to an absurdity.
Such a view would entitle the HLSC to refuse to comply with the
order of the appellate authority i.e. the Secretary ad infinitum.
There would be no end to the proceedings for in that event
irrespective of the number of times that the order of the HLSC is
overruled and set aside in appeal by the Secretary, it would be
open to the HLSC to reconsider the matter on another ground neither
urged before nor considered by the Secretary, i.e., the appellate
authority. This would in effect permit the HLSC to sit in appeal
over the orders of the appellate authority.

¶91

15. The appellant challenged the order of the HLSC before
the Haryana Tax Tribunal, which passed the impugned order. The
Tribunal held that the order in appeal of the Secretary had not
mentioned the amount for which the eligibility certificate was to
be issued and that the order was passed only on the issue of the
machinery being old or new. Had we come to the conclusion that it
was open to the HLSC to revisit the matter on another ground, we
would have remanded the matter to the Tribunal for there is no
satisfactory consideration even on facts as to whether the
machinery had been installed in Haryana or not. However, as we are
of the view that the HLSC had no jurisdiction to reopen the issue
on another ground, we do not consider it necessary to do so. It
would be an exercise in futility in view of our finding that the

¶92

PARKASH CHAND 2015.08.14 11:53 I attest to the accuracy and authenticity of this document

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VATAP-10-2013

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¶95

HLSC had no jurisdiction to reopen the issue. The Tribunal wrongly
held that merely because an issue had not been considered in the
appeal, it was open to the HLSC to suo motu reopen the case.

¶96

16. Once an order of the Secretary in appeal against the
order of the HLSC attains finality, the HLSC cannot reopen the same
case including on a ground which had not either been urged before
the Secretary or pressed by the department. It is true, as
contended by Ms. Talwar, the learned Deputy Advocate General,
Haryana, that the appellate order passed by the Secretary recorded
that the only question which was to be decided was whether the
tools and dies were new when the appellant purchased the same. That
however would make no difference. It would not entitle the lower
authority, in this case the HLSC, to reopen a matter which has
attained finality before the appellate authority.

¶97

17. The questions are, therefore, answered in favour of the

¶98

appellant and against the respondents. The impugned order of the
Tribunal and of the HLSC are set aside. The respondents are ordered
and directed to comply with the order of the Secretary dated
09.05.2003.

¶99

Note: Whether reportable: YES

¶100

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M/S Hpl Socomee Pvt. Ltd, Gurgaon v. State of Haryana & Ors.

Case brief

What is this about?

What did the court decide?

M/S Hpl Socomee Pvt. Ltd, Gurgaon v. State of Haryana & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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