1989 (8) TMI 308 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to tax exemption under sub-section (2) of section 3 of the Tripura Sales Tax Act, 1976.
2. Entitlement to tax exemption under sub-rule (2) of rule 5 of the Tripura Sales Tax Rules, 1976.
3. Arbitrary estimation of turnover by the Superintendent of Taxes.

Issue-Wise Detailed Analysis:

1. Entitlement to tax exemption under sub-section (2) of section 3 of the Tripura Sales Tax Act, 1976:

The petitioner, a manufacturer of steel furniture, claimed tax exemption under sub-section (2) of section 3 of the Act. This provision allows the State Government to exempt taxable goods from tax if it deems it necessary to increase production or encourage industry, but such exemption requires a notification in the Official Gazette. The court found that no such notification had been issued by the State Government. The petitioner's reliance on recommendations and schemes was deemed insufficient as they did not constitute a legal basis for exemption. The court concluded that sub-section (2) of section 3 is merely an enabling provision and does not itself grant any exemption. Therefore, the petitioner's claim under this provision was not tenable.

2. Entitlement to tax exemption under sub-rule (2) of rule 5 of the Tripura Sales Tax Rules, 1976:

The petitioner also claimed exemption under sub-rule (2) of rule 5, which allows newly set up small-scale industries to be exempt from tax on sales of goods manufactured by them for three years. The court found that the petitioner met the criteria of a newly set up small-scale industry and thus fell under sub-rule (2) of rule 5. However, the exemption is conditional on maintaining proper accounts, issuing serially numbered cash or credit memos, and keeping vouchers and other documents. The Superintendent of Taxes had rejected the exemption claim on the erroneous ground that newly set up industries were not entitled to exemption under sub-rule (2) of rule 5. The court held that the petitioner was indeed entitled to the exemption, provided the requirements of the rule were met. The case was remanded to the Superintendent of Taxes to re-examine the claim in light of this decision.

3. Arbitrary estimation of turnover by the Superintendent of Taxes:

The petitioner argued that the estimation of turnover by the Superintendent of Taxes was arbitrary and lacked basis. Given that the court found the rejection of the exemption claim to be based on an incorrect interpretation of the law, it did not find it necessary to delve into the issue of turnover estimation. The court's focus was on ensuring the correct application of sub-rule (2) of rule 5, and it directed the re-examination of the petitioner's exemption claim, which would inherently address any issues related to turnover estimation.

Conclusion:

The court allowed the writ petitions to the extent of setting aside the impugned orders of assessment and directed the Superintendent of Taxes to re-examine the petitioner's claim for exemption under sub-rule (2) of rule 5 of the Rules. The other contentions regarding arbitrary turnover estimation were not addressed as the primary issue of exemption was deemed central to the resolution of the case. The petitions were partly allowed with no order as to costs.