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United Paper Products v/s State of U.P.

    Civil Misc.Writ 828 Of 1985

    Decided On, 24 February 1986

    At, High Court of Judicature at Allahabad

    By, THE HONOURABLE MR. JUSTICE A. BANERJI & THE HONOURABLE MR. JUSTICE OM PRAKASH

    For the Appearing Parties: Bharatji Agarwal, V.B. Upadhyay, Advocates.



Judgment Text

OM PRAKASH, J.

(1.) This is a writ petition under Article 226 of the Constitution of India for quashing the notice dated 12th August, 1986 (annexure 3 to the writ petition), issued by the respondent No. 2 and for restraining the respondents from taking any action to cancel the recognition certificate issued under Section 4-B of the U.P. Sales Tax Act, 1948 (briefly "the Act") and for declaring by means of a suitable writ/order that the petitioner is entitled to exemption from payment of tax on the purchases of raw materials required for the manufacture of waterproof rolls and sheets.

(2.) The petitioner is engaged in the business of manufacture of waterproof packing rolls and sheets. The manufacturing process of the petitioner is that a kraft paper is bituminised on one side and then it is bounded with hessian or polythene sheets. In short the bitumen layer is sandwiched by kraft paper and by hessian or polythene. The petitioner was granted a recognition certificate (annexure 2 to the petition) in May, 1976, and, therefore, purchases of the manufacturing materials, namely, the kraft paper, bitumen, hessian and polythene sheets, were fully exempted from tax. The petitioner received a show cause notice dated 12th Augustj 1985, sent by the respondent No. 2 calling upon the former to show cause as to why the recognition certificate be not cancelled with immediate effect as the manufacturing of paper was not exempt from tax under Clause 3 of the notification dated 31st December, 1976 (annexure 1 to the writ petition) (hereinafter referred to as "the notification"). The aforesaid notice dated 12th August, 1985, is said to be based upon the circulars (annexures 4 and 5 to the writ petition) issued by the Sales Tax Commissioner dated 12th July 1985 and 3rd December, 1983, directing the officers that the wrapping paper cannot be exempted under Section 4-B of the Act. The case of the petitioner is that its claim for exemption is fully covered by Clause 2 of the notification, which provides that no tax shall be payable on the sales or purchases by any unit in respect of raw materials required by it for the use in the manufacture of the goods mentioned in annexure III as referred to in Clause 2 of the notification. The petitioner particularly relied upon item 4 in annexure III to the notification which is as under : 4. All kinds of packing materials including cases and containers.

(3.) So, the case is that the manufacturing unit of the petitioner being engaged in the manufacture of packing material is entitled to full exemption of tax on the purchase of raw materials within the meaning of Clause 2 of the notification, read with item 4 of annexure III to the notification. It is contended that the petitioner was granted a recognition certificates as such, under Section 4-B of the Act in May, 1976 and that it continued to avail exemption until the date of service of the show cause notice. It is averred that the show cause notice issued by the respondent No. 2 is absolutely without jurisdiction, as exemption of tax on purchases of raw materials is available to the petitioner under Clause 2 of the notification read with item 4 of annexure III to the notification. On these averments, the petitioner claims that a writ of prohibition be issued against the respondents and they be stopped from taking any action pursuant to the said show cause notice and that it be declared that the petitioner is entitled to exemption of tax under the recognition certificate already granted.

(4.) The respondent No. 2 filed a counter-affidavit stating that the petitioner is engaged in the manufacture of paper within the meaning of Clause 3 of the notification and, therefore, this case is not covered by Clause 2 of the notification read with item 4 of annexure III to the notification. It is, therefore, denied that the show cause notice was issued without jurisdiction.

(5.) The short question for consideration in this writ petition, therefore, is: whether the manufacturing activity of the petitioner falls under Clause 3 of the notification or under Clause 2 of the notification, read with item 4 of annexure III to the notification ? If it is held that the petitioner is engaged in the manufacture of paper within the meaning of Clause 3 of the notification; then no exemption can be claimed under Clause 2, read with item 4 of annexure III to the notification and the recognition certificate issued to the petitioner under Section 4-B earlier will become bad in law.

(6.) There is no dispute on facts that the petitioner is engaged in the manufacture of waterproof packing sheets and rolls, the manufacturing process of which has been stated above, which is also not under dispute.

(7.) An identical question arose in the case of Mahabir Industries v. State of U.P. [1987] 65 STC 251 (All.), being Civil Misc. Writ No. 834 of 1985. Both the writ petitioner of M/s. Mahabir Industries and the instant writ petition, had been heard together and common submissions had been made in both the petitions by Sri Bharatji Agarwal, learned counsel for the petitioner and by Sri V. B. Upadhyaya, learned standing counsel. By our order dated 6th February, 1986, the writ petition of Mahabir Industries [1987] 65 STC 251 (All.) was allowed. It was held therein that the manufacturing activity of that petitioner was covered by Clause 2, read with item 4 of annexure III to the notification and not by Clause 3 of the notification. In short, it was held that the petitioner M/s. Mahabir Industries was not engaged in the manufacture of paper within the meaning of Clause 3 of the notification, but its product, namely, waterproof packing rolls and sheets are different from paper and, therefore, Clause 3 of the notification was not attracted.

(8.) So, our earlier decision dated 6th February, 1986 (Mahabir Industries v. State of U.P. [1987] 65 STC 251)

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is squarely applicable to the instant case. For the sake of brevity and to avoid unproductive exercise, we follow the same reasons to decide this petition. (9.) In the result, the writ petition is allowed, the show cause notice dated 12th August, 1985 (annexure 3 to the writ petition), is quashed and the respondent No. 2 is directed not to cancel the recognition certificate (2 to the writ petition) and to allow the benefit of tax exemption to the petitioner on purchases of raw materials required for the manufacture of waterproof packing rolls or sheets, a sample of which is included in the file. The parties will, however, bear their own costs.
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