2004 (12) TMI 362 - SC - VAT and Sales Tax

Benefit of notification issued by the Punjab Government on November 23, 1979 - Held that - Appeal allowed. As can be seen from the return filed by the respondents, which is set out in the assessment order, there was admittedly inter- State sales in a fairly large amount. This has been noticed by the division Bench. The learned single Judge of the High Court erred in considering these to be mere branch transfers when the respondents themselves showed them as inter-State sales in their returns. Thus the reasoning of the learned single Judge of the High Court that these are mere transfers out of State is erroneous. The reasoning given by the division Bench is also not acceptable. The wording of clause (ii) are very clear. All that is required is despatch out of the State. Once there is despatch outside the State the benefit of the notification cannot be claimed. In view of the clear wording of sub-clause (ii), the High Court erred in granting the benefit of the notification when the respondents were clearly not entitled to the benefit thereof

Summary

Issues:
Interpretation of a notification for concessional tax rate on cotton purchases by textile mills established after a certain date.
Applicability of the notification conditions regarding production start date and restrictions on inter-State transactions.
Entitlement to the benefit of the notification based on compliance with its conditions.
Validity of the High Court's decision granting the benefit of the notification to the respondents.

Issue 1: Interpretation of the notification
The judgment revolves around the interpretation of a notification issued by the Punjab Government regarding a concessional tax rate on cotton purchases by textile mills established after December 1, 1979. The notification specified conditions, including the requirement for mills to start production by a certain date and restrictions on inter-State transactions through commission agents.

Issue 2: Compliance with notification conditions
The assessing authority initially granted the concessional tax rate to the respondents based on the notification. However, it later found that the mill was not established before the specified date and that yarn had been transferred outside the State. This led to the authority demanding the payment of the differential rate of duty and penalty from the respondents.

Issue 3: Entitlement to notification benefits
The Sales Tax Tribunal dismissed the revision petition filed by the respondents, stating that they had not fulfilled the conditions of the notification and were not entitled to its benefits. The High Court, however, entertained a writ petition from the respondents, ruling in their favor by holding that they had met all the conditions of the notification and were entitled to its benefits.

Issue 4: High Court's decision validity
The division Bench of the High Court upheld the decision in favor of the respondents, concluding that the mill had started after the specified date and that the benefit of the notification applied even though the respondent was a spinning mill treated as a textile mill. However, the Supreme Court disagreed, emphasizing the need for strict compliance with the notification conditions and the clear wording of the notification regarding inter-State transactions.

In conclusion, the Supreme Court set aside the High Court's decision, ruling that the respondents were not entitled to the benefit of the notification due to non-compliance with its conditions. The judgment highlighted the importance of interpreting notifications based on their clear and unambiguous wording and the necessity for strict adherence to conditions for availing benefits.