1988 (6) TMI 329 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of exemption under clause (iii) of the first proviso to section 3(1) of the Entry Tax Act in relation to the payment of tax on entry of coal.
Applicability of clause (c) of section 5-B of the M.P. General Sales Tax Act, 1958, in determining liability for additional tax on declared goods.

Detailed Analysis:
The judgment of the High Court of Madhya Pradesh pertains to a reference made under the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act) and the M.P. General Sales Tax Act, 1958. The primary issue revolved around the liability of an assessee, a cement manufacturing company, to pay entry tax on coal imported as raw material. The assessee claimed exemption under clause (iii) of the first proviso to section 3(1) of the Entry Tax Act, which exempts goods from tax if the entry is caused by the purchase of such goods and the transaction is liable to additional tax. The dispute arose as the assessing authority rejected the exemption claim, arguing that the coal was liable to a tax of 4%, not meeting the criteria for additional tax under clause (iii) of the proviso.

The Court analyzed the relevant provisions, including section 6(2) of the Act, which allows for a concessional rate of tax on raw materials used in manufacturing. The Court noted that the coal had been taxed at 3% basic rate and 0.5% additional tax, falling below the general rate of 4%. The Court further examined clause (c) of section 5-B of the Act, which deems goods subjected to tax below 4% as having been subjected to additional tax. Consequently, the Court held that the assessee was entitled to exemption from entry tax under clause (iii) of the proviso, as the coal had effectively been subjected to additional tax under clause (c) of section 5-B.

The Court criticized the Tribunal's application of clause (b) of section 5-B, emphasizing that the specific language referred to goods taxed at a rate of 4%, not the general rate applicable to declared goods. Ultimately, the Court ruled in favor of the assessee, concluding that the exemption applied due to the payment of 3% tax and 0.5% additional tax on the coal, aligning with clause (c) of section 5-B. As a result, the assessee was not liable to pay entry tax on the coal entry.

In conclusion, the High Court answered the reference in favor of the assessee, highlighting the correct interpretation of the relevant provisions and the application of the exemption criteria under the Entry Tax Act. The Court made no order as to costs in this reference, settling the matter in favor of the assessee.