1994 (10) TMI 274 - HC - VAT and Sales Tax

Summary

Issues Involved:
- Interpretation of exemption clauses in taxation statutes.
- Applicability of the notification dated June 19, 1991, regarding tax exemptions.
- Relevance of the decision in Anitha Cashew Industries [1993] 90 STC 163 (Kar).

Issue-wise Detailed Analysis:

1. Interpretation of Exemption Clauses in Taxation Statutes:

Principles of Interpretation:
- The court examined the principles relating to the interpretation of exemption clauses in taxation statutes. It cited several precedents, including Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64, which emphasized that in a taxing Act, "one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax."
- Crawford's treatise on "The Construction of Statutes" was referenced, stating that "Provisions providing for an exemption may be properly construed strictly against the person who makes the claim of an exemption."
- The court also cited Union of India v. Wood Papers Ltd. [1991] 83 STC 251; AIR 1991 SC 2049, which stated that "an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly."
- The court highlighted that the burden of establishing exemption lies upon the assessee, as reiterated in Tata Oil Mills Co. Ltd. v. Collector of Central Excise [1991] 82 STC 225; AIR 1990 SC 27.

Application to Notification:
- The notification dated June 19, 1991, exempted "tax payable in respect of goods manufactured and sold by new industrial units." The court found these words to be "clear, specific and unambiguous."
- The court held that the plain and straightforward meaning should be given to the words, and there is no need for interpretative tools if the words clearly convey the meaning. Consequently, the exemption did not extend to purchase tax on raw materials.

2. Applicability of Notification Dated June 19, 1991:

Notification's Scope:
- The notification was issued under section 8-A of the Karnataka Sales Tax Act, 1957, which allows the State Government to exempt or reduce the rate of tax on specified goods or by specified classes of persons.
- The court noted that the exemption was specifically in regard to "goods manufactured and sold" by new industrial units and did not mention raw materials.

Petitioner's Argument:
- The petitioner argued that the 100% exemption granted under the notification should extend to all taxes payable under the Act, including purchase tax on raw materials. The petitioner relied on the decision in Anitha Cashew Industries [1993] 90 STC 163, arguing that the exemption should be construed liberally.

Court's Conclusion:
- The court rejected the petitioner's argument, stating that the notification's clear language did not support an extension to purchase tax on raw materials. The court emphasized that any extension of the exemption beyond what is expressly stated is not permissible.

3. Relevance of Anitha Cashew Industries [1993] 90 STC 163 (Kar):

Distinguishing Facts:
- The court distinguished the facts of Anitha Cashew Industries from the present case. In Anitha Cashew, the "goods manufactured and sold" (cashew kernel) were not subject to tax due to an existing statutory provision, making the exemption under the notification illusory.
- The court noted that in Anitha Cashew, the only way to provide a meaningful benefit was to exempt the raw materials from purchase tax, which was not the case here.

Court's Conclusion:
- The court concluded that the principles laid down in Anitha Cashew were applicable only to cases where the "goods manufactured and sold" were not subject to tax at all. Since the petitioner's manufactured goods (groundnut oil) were subject to tax, the exemption did not extend to raw materials.

Judgment:
- The court held that the notification dated June 19, 1991, did not exempt the tax payable on the purchase of raw materials.
- The impugned endorsement dated October 18, 1994, requiring the petitioner to pay purchase tax on groundnuts was upheld.
- The writ petition was dismissed.