Umesh Chandra Banerjee, J.
1. A short but important point centering round the concept of new industrial undertaking has been raised in this application. The Government of West Bengal in its bid to create an interest amongst the small entrepreneures to set up small industries in West Bengal has declared exemption from payment of sales tax upon fulfilment of certain conditions by a notification being No. 1809-F.T. dated 1st April, 1976. Subsequently, however, the concept of eligibility was introduced by the Notification No. 1658-F.T. dated 1st April, 1980.
2. The Notification No. 1658-F.T. dated 1st April, 1980, contains that the dealer claiming the benefit would be so eligible if he possesses a certificate of eligibility in the form prescribed and to be granted by the Assistant Commissioner for such period as mentioned in the certificate. The notification further provides that the certificate of eligibility shall be granted on an application and shall be valid for a period not exceeding 12 months from such date but may be renewed for a further period not exceeding 12 months at the discretion of the authority granting the certificate. The failure of the respondent-authority to issue such an eligibility certificate is under challenge in this writ petition.
3. In order to appreciate the contention raised in this petition, brief reference to the relevant fact may be made.
4. The petitioner has started the business on and from 1st March, 1978, for the purpose of manufacturing electrical fans and regulators. The petitioner duly obtained the required Central excise licence in form L4 from the Central excise authorities. The petitioner's business is also registered with the small-scale industries and admittedly assessment under the Income-tax Act was also effected in the manner which lends support to the petitioner's contention that it is a new industrial undertaking.
5. The petitioner for the purpose of business expediency entered into an agreement with M/s. Khaitan Fans (P.) Ltd. on 22nd March, 1976, the latter being described therein as the Proprietor and the former as User. The agreement referred to above, inter alia, contains the following:
(a) The goods on which the said trade mark shall be applied by the User shall be manufactured in accordance with the physical and technical specifications and standards of quality as laid down by the Proprietor from time to time and shall be also in accordance with the designs, viz., outer shapes and configuration, which the Proprietor shall suggest from time to time.
(b) User shall, as the Proprietor does, give 5 (five) years guarantee for the said products and shall give free service for 5 (five) years on the same basis as the Proprietor does. In the event, the User fails at any time to render such free service to any customer under the guarantee the Proprietor shall undertake to do so at the entire expense and cost of the User and such expenses and cost shall be recoverable by the Proprietor from the User as debt.
(c) The Proprietor shall provide the User with the technical know-how at his disposal for the manufacture of said goods of which a separate agreement has been entered into by the parties hereto.
(d) Proprietor shall, at the request of User place at the disposal of the User such technical personnel as the User may need and ask for proper implementation of manufacturing programme. The entire cost of service and maintenance of such personnel shall be fully borne by the User.
(e) No other trade mark, registered or otherwise, shall be used by the User in conjunction with or apart from the said trade mark and said trade mark shall not be used by the User in relation to any goods other than said goods though the User shall have the free, to manufacture, and/or otherwise deal in goods other than and different from the said goods under any other trade mark.
(f) User shall indicate on, or in relation to, said goods that it is the registered (and therefore not the Proprietor) of said trade mark as under:
Under licence from Khaitan Fans (P.) Ltd.' or a suitable variation thereof. (g) This agreement shall be for a duration of three years in the first instance and renewable at the sole discretion of Proprietor at same or different terms then herein.
(h) The Proprietor shall have the right to appoint other registered users.
(i) User shall have no right' by virtue of the agreement to acquire said trade mark at any time for or without payment of a consideration.
(j) User shall be required to pay the Proprietor a sum of Re. 1 (Rupee one) only per fan manufactured by the User as royalty for the permitted use of said trade mark, during the existence Of this agreement subject to a minimum of Rs. 5,000 (Rupees five thousand) only per annum apart from any fees the User is required to pay for know-how agreement referred to herein or as envisaged herein apart from the royalties.
(k) Royalties as envisaged in para 18 supra shall become payable at the end of every month and shall be paid by the User to the Proprietor within one month of their becoming due.
(l) The royalties envisaged in paragraphs 18 and 19 are apart from any fees payable for technical know-how under this and/or any other agreement.
(m) On determination of the herein agreement the User shall have no right to manufacture or cause to be manufactured said goods bearing the same design or designs and specification except in so far as they are commonly employed in trade and industry. The User shall on determination of this agreement return to the Proprietor all drawings and other specifications belonging to the Proprietor.
(n) Notwithstanding anything herein contained, this agreement shall stand determined under the following circumstances:
(i) When either party gives three months' notice in writing to the last known address of the other party by registered post to determine the agreement.
(ii) On cancellation of the User as registered User for any reason whatsoever.
(iii) In the event of any default or breach by the User of the terms of this agreement unless within 30 days of such breach or default the User when called upon by the Proprietor to do so, remedies such breach or default.
(iv) When the technical know-how agreement referred to herein between the Proprietor and the User is determined.
(v) Forthwith on change in constitution of the User.
6. Subsequently a separate technical know-how agreement was also executed and in terms of the know-how agreement M/s. Khaitan Fans (P.) Ltd. was to provide the petitioner with a list of plant and machinery required for manufacture of fans and regulators with source of availability of specification, designs, drawings and also of paint and paintings. The petitioner according to the terms of know-how agreement is to manufacture under licence from M/s. Khaitan Fans (P.) Ltd. with the technical know-how so provided is to pay to said M/s. Khaitan Fans (P.) Ltd. fees at the rate of Rs. 9 per fan with a minimum of Rs. 45,000 per year for 3 years from the date of agreement, payable monthly at the rate of Rs. 3 per fan manufactured.
7. The technical know-how agreement, admittedly was approved by the income-tax department as also by other authorities. The petitioner's definite case is that his is a small-scale unit and is not an expanded unit of the established business house, viz., M/s. Khaitan Fans (P.) Ltd., the Central excise authority by its order dated 30th May, 1980, upheld the contention of the petitioner and granted exemption from payment of Central excise duty on account of sales effected upto Rs. 5,00,000. The petitioner thereafter applied for registration certificate under the West Bengal Sales Tax Act, 1954, and the certificate No. Pg/640/64A was issued on 18th May, 1978, and the registration under the Central Sales Tax Act was also granted to the petitioner on 1st August, 1978. The sales tax authority while effecting the first assessment relating to the period 24th April, 1978, to 17th May, 1978, being the period prior to registration accepted the petitioner to be a dealer eligible for exemption from payment of tax as newly set up small-scale unit in accordance with the provisions of Notification No. 1809-F.T. dated 1st April, 1976, issued under Section 4-AA of the 1954 Act. The concept of obtaining the eligibility certificate was, for the first time introduced as noted above by the Notification No. 1658-F.T. dated 1st April, 1980. Apart from extending the period of exemption from 3 years to 5 years the aforesaid notification contains the following:
The certificate of eligibility shall be granted on application and shall be valid for a period not exceeding twelve months from such date as may be specified therein, but may, at the discretion of the authority granting the certificate, be renewed from time to time for a period not exceeding twelve months at a time:
Provided that the certificate of eligibility shall not be granted or renewed if the dealer changes the constitution of the business, sells any capital assets otherwise than in the ordinary course of business, violates any condition or does anything without adversely affects the economic viability of the newly set up industry.
The authority granting the certificate of eligibility may, for good and sufficient reasons to be recorded in writing and after giving the holder of such certificate a reasonable opportunity of being heard, declare such certificate invalid from such date as he may specify.
A dealer shall apply for a certificate of eligibility or for renewal thereof ordinarily within a month from the date from which such certificate is required to be granted or renewed for the purpose of this notification.
8. The notification further provides:
(v) The newly set up small-scale industrial unit is not established solely or substantially with the plant or machinery of another newly set up by small-scale industrial unit which earlier availed of the exemption under this notification and which is not engaged in the business of manufacturing such plant or machinery.
9. Subsequently, however, the petitioner's application for the grant of eligibility certificate was rejected by the Assistant Commissioner of Commercial Taxes, Howrah Circle, on the ground that petitioner's firm is nothing but an expansion of other established manufacturing industrial unit of M/s. Khaitan Fans (P.) Ltd. Thereafter diverse proceedings were had in the matter of refusal of the eligibility certificate culminating in an order passed by this Court under Article 226 of the Constitution wherein, this Court directed the petitioner to move before the Commissioner of Commercial Taxes in revision. Such revisional application was however rejected by the Additional Commissioner, Commercial Taxes, West Bengal, by his order dated 24th August, 1981, on the ground that the petitioner's business is not an independent unit but was set up for diversification of sales of 'Khaitan' fans manufactured by the long standing established concern, viz., M/s. Khaitan Fans (P.) Ltd., in order to avoid payment of sales tax.
10. Mr. Sanjoy Bhattacharya appearing in support of the writ-petitioner strenuously contended that the respondent-authority being a creature of the statute is to act in accordance with the provisions of the statute and not de hors the same. It was contended that the aforesaid two notifications issued by the authority being statutory in nature, refusal to grant eligibility certificate can only be occasional for non-compliance of the conditions laid down therein and not otherwise. Mr. Bhattacharya placed strong reliance on the findings of the Central excise authority as well as income-tax authority in support of his contention that his is a newly set up small industrial undertaking and it was contended that question of scrutiny of the agreement in detail was wholly unnecessary and the petitioner would be entitled to obtain exemption irrespective of the fact as to whether agreement can be termed to be another method of avoiding tax liability. In this context, strong reliance was placed on the decision of the Supreme Court in the case of Commissioner of Income-tax, Gujarat v. A. Raman and Co. reported in : 67ITR11(SC) , wherein the Supreme Court observed:
The plea raised by the Income-tax Officer is that income which could have been earned by the assessees was not earned, and a part of that income was earned by the Hindu undivided families. That according to the Income-tax Officer was brought about by 'a subterfuge or contrivance'. Counsel for the Commissioner contended that if by resorting to a 'device or contrivance', income which would normally have been earned by the assessee is divided between the assessee and another person, the Income-tax Officer would be entitled to bring the entire income to tax as if it had been earned by him. But the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have, but has not earned, is not made taxable as income accrued to him. By adopting a device, if it is made to appear that income which belonged to the assessee had been earned by some other person, that income may be brought to tax in the hands of the assessee, and if the income has escaped tax in a previous assessment a case for commencing a proceeding for reassessment under Section 147(b) may be made out. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income-tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully circumvented.
11. Mr. Dutt appearing for the revenue authorities, however, contended that upon consideration of the terms, of the agreement abovenoted it leaves no manner of doubt that the petitioner's organisation is a party of the well established organisation and as such the reviewing authority was justified in refusing the prayer for eligibility certificate. Mr. Dutt further contended that this Court in the writ jurisdiction ought not to direct the issue of eligibility certificate as otherwise that would open up an avenue of malpractice.
12. While this is true that law courts exist to remedy the wrong but no assistance can be rendered by the law court to a person indulging in malpractice, but if the law permits the method adopted cannot be termed to be a malpractice as is now well-settled.
13. The notification, which has a statutory sanction, provides the grant of eligibility certificate upon fulfilment of certain conditions. There exists a bounden obligation, in my view, on the part of the authority to consider the grant of eligibility certificate only on the basis of the requirement of law and not otherwise. It is a well-settled principle of law that taxing statute should always be construed strictly and in the event of any ambiguity the benefit would always go in favour of the assessee. The legislature in its wisdom have engrafted in the statute book certain conditions for the grant of exemption to the newly set up industries. The notification was issued incorporating certain other conditions. In any view, the taxing authority is to act within the four corners of the statute and not otherwise. If the law permits circumvention, there cannot be said to be any illegality. It is for the law makers to plug the loop-holes rather than the enforcement agency to do the same. There is no scope for any guess-work and it is not open to the taxing authority to travel beyond the limits prescribed by the statute.
14. It is significant to note in this context that exemption as provided under Notification No. 1809-F.T. dated 1st April, 1976, was allowed by the Commercial Tax Officer, 24 Parganas, in respect of first assessment relating to the period from 24th April, to 17th May, 1978, and the Commercial Tax Officer accepted the petitioner to be a dealer eligible for exemption from payment of tax as newly set up small-scale industrial unit according to the Notification No. 1809-F.T. dated 1st April, 1976, issued under the Act of 1954. The factum of such finding by the Commercial Tax Officer has not been denied. In the contrary in the counter-affidavit it has been stated as follows:
18...I state that if in the earlier assessment, the respondent No, 3 failed to scrutinise the real position of the petitioner's business, the concerned are not restrained from finding out the actual position and to assess accordingly. The aforesaid statement in the counter-affidavit filed by the Assistant Commissioner of Commercial Taxes, Howrah Circle, does not in any way lend support to the respondent's contention.
15. As stated above, the duty and obligation of the statutory authority is to adhere to the requirement of statute and no extraneous matter ought to be taken note of. The creatures of the statute in taxing statutes are to follow the rigours of law and no extraneous matter ought to be taken into consideration in interpreting a taxing statute.
16. In that view of the matter I am of the view that there exists a grave error of law on the face of the records. The eligibility certificate can only be refused in the event of violation of the condition laid down in the notification itself read with the provisions of Section 4AA of the West Bengal Sales Tax Act, 1954. Cancellation of eligibility certificate for good and sufficient reasons does not envisage cancellation on any other consideration but on the basis of the conditions laid down in the notification.
17. In that view of the matter, the order passed in Revision Case No. 34/81/82 dated 24th August, 1981, and the order dated 17th February, 1981, are quashed and set aside. I however direct the respondent-authority to consider the matter afresh in accordance with the observations made herein upon affording an opportunity of hearing to the petitioner. Since long time has elapsed, such consideration is to be effected within a period of 8 weeks from the date of communication of this order.
18. In the view aforesaid, the sales tax authority is further directed to consider the application for issuance of declaration forms along with matter as directed. The application for issuance of declaration form is also accordingly disposed of.