1989 (9) TMI 367 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Effective date for tax holiday exemption.
2. Imposition and demand of turnover tax during the tax holiday period.
3. Refusal or withholding of declaration forms due to non-payment of turnover tax.
4. Refund of turnover tax collected during the tax holiday period.

Issue-wise Detailed Analysis:

1. Effective Date for Tax Holiday Exemption:
The petitioner-company sought a direction for the tax holiday exemption to be effective from 16th November 1985, the date of the first sale, instead of 4th February 1986. The court noted that the eligibility certificate was issued effective from 4th February 1986, but the first sale occurred on 16th November 1985. The respondent conceded that the exemption should be from the date of the first sale. The court directed the respondent-authorities to amend the eligibility certificate to reflect the benefit from 16th November 1985.

2. Imposition and Demand of Turnover Tax During the Tax Holiday Period:
The petitioner contested the imposition of turnover tax during the tax holiday period, arguing that the exemption under Notification No. 1177-F.T. dated 31st March 1983, should include turnover tax. The respondent argued that turnover tax under section 4AAA of the Act is distinct from sales tax under section 4AA. The court found merit in the petitioner's argument that the notification's phrase "no tax shall be payable" should include turnover tax. The court held that the petitioner is not liable to pay turnover tax during the tax holiday.

3. Refusal or Withholding of Declaration Forms Due to Non-payment of Turnover Tax:
The petitioner argued that the commercial tax authorities wrongfully withheld declaration forms due to non-payment of turnover tax. The court observed that if the petitioner is exempt from paying any tax, including turnover tax, during the tax holiday, there should be no tax due. Therefore, the refusal to issue declaration forms was unjustified. The court directed the respondent-authorities to issue the declaration forms to the petitioner.

4. Refund of Turnover Tax Collected During the Tax Holiday Period:
The petitioner paid Rs. 13,624 as turnover tax under protest. The court directed the respondent-authorities to refund the amount or adjust it against future taxes due from the petitioner. The court reiterated that the petitioner is not liable to pay any turnover tax as long as the eligibility certificate is in operation.

Conclusion:
The court allowed the writ application, directing the respondent-authorities to amend the eligibility certificate to reflect the tax holiday from 16th November 1985, issue the declaration forms, and refund or adjust the turnover tax paid by the petitioner. The petitioner is not liable to pay turnover tax during the tax holiday period.