1997 (7) TMI 638 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of G.O. Ms. No. 117, dated March 17, 1993.
2. Eligibility for sales tax deferment on raw materials.
3. Scope of the term "products manufactured" in the context of tax deferment.
4. Application of beneficial construction principles to the G.O.

Detailed Analysis:

1. Interpretation of G.O. Ms. No. 117, dated March 17, 1993:

The main issue revolves around the interpretation of G.O. Ms. No. 117, which provides incentives for newly set up industries, including sales tax deferment. The petitioners argued that the deferment should include tax on the purchase of raw materials, while the respondents contended that it only applies to the sales of manufactured products.

2. Eligibility for sales tax deferment on raw materials:

The petitioners, medium-scale industrial units, sought deferment of sales tax on cotton yarn, including the tax on the purchase of raw cotton. The Assistant Commissioner (C.T.) (Intelligence) for the respondents admitted that the petitioner is entitled to the incentive but clarified that it applies only to the sale of goods manufactured by the petitioner, not to the purchase of raw materials.

3. Scope of the term "products manufactured" in the context of tax deferment:

The petitioners argued that the term "products manufactured" should include all steps in the manufacturing process, thereby extending the deferment to raw materials. They contended that limiting the benefit to the end-products would be contrary to the government's intention. The court, however, found that the scheme under G.O. Ms. No. 117 clearly aims to defer sales tax on the final products manufactured in new industrial units, not on the raw materials.

4. Application of beneficial construction principles to the G.O.:

The petitioners relied on the principle of beneficial construction, suggesting that the G.O. should be interpreted to include the benefit of tax deferment on raw materials. They cited various judgments to support their claim. However, the court held that beneficial construction does not permit rewriting the notification to include benefits not explicitly stated. The court emphasized that the plain and clear wording of the G.O. does not extend the deferment to purchase tax on raw materials.

Conclusion:

The court dismissed the writ petitions, concluding that the benefit of tax deferment under G.O. Ms. No. 117 does not cover the purchase tax on raw materials used in manufacturing. The judgment emphasized that the plain language of the G.O. must be adhered to and that the principle of beneficial construction cannot be used to extend benefits beyond what is explicitly stated.