HC records dismay over missing documents in CST exemption case

GANGTOK, 20 July: In an interesting turn of events a set of records pertaining to a particular company has gone missing when required to be presented to the High Court in relation to a pending case. Sheela Foam, a company manufacturing mattresses in Sikkim is contesting the state government’s direction to pay Central Sales Tax claiming exemption, and in its support has highlighted that two other companies had been granted exemption by the state government. 
While the High Court will eventually decide on whether the company is eligible for exemption from paying CST, the state government is contending that the company is not eligible as it is not covered by the Industrial Policy of 1996. In fact the company approached court after the Commercial Taxes Division conducted its own assessment of CST payable by the company for the period 2003-05 totaling around Rs. 46 lakh.
What this has also revealed is the confusion over CST seemingly created by state officials when it passed the Sikkim Industrial Promotion and Incentive (Amendment) Act in 2003 and then another amendment to the same Act in 2007. It may be mentioned here that the Industrial Policy itself stood repealed when the state first passed the Sikkim Industrial Promotion and Incentive Act in the year 2000. This Act as such did not specify the exemption but provided that such benefits may be notified by the authority as applicable to industrial units.
With the amendment of the Act in 2003 the state government said that exemption of CST would be governed by the central government but then took it back by the subsequent amendment of the Act in 2007 which simply states that Central Sales Tax shall not be exempted. It may be mentioned here that the CST Act of 1956, a central Act, directs that the tax will be levied by the state where the product originates.
The missing records, as earlier mentioned, pertain to a company called Denzong Laboratories and the court has taken a stern view of this. Sheela Foam has raised the argument that Denzong Labs and Mount Distilleries had been granted exemption from paying CST which necessitated the presentation of the records of these companies to the court.
The state contends that these two companies had commenced production in the year 1999 and so are covered by the Industrial policy of 1996 according to which central and state sales tax were exempted for 7 years from the date of commencement of actual commercial production. In this context, it has been contended by the State Government that Sheela Foam, which has its unit at Bagheykhola, began production in the year 2003.
What has probably added to the confusion is that CST exemption for the two companies, Denzong Labs and Mount Distilleries was notified by the Commercial Tax Division in 2007 and 2005 respectively, a long time after they had commenced production. This, along with other related issues, had led to Sheela Foam questioning as to why these companies were accorded CST exemption and not itself.
The High Court has recorded its dismay over the missing records. Advocate for the petitioning company, BR Pradhan, has filed an amended writ petition after submitting that some entrepreneurs who were not better placed than the petitioning company were granted benefit but not the petitioner.