2002 (10) TMI 746 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of industrial policy regarding exemption from sales tax on finished goods, classification of bran as a finished product for exemption eligibility.

Analysis:
The case involved two writ applications by companies registered under the Companies Act, 1956, operating food processing units in Patliputra industrial area, seeking exemption from sales tax on finished goods as per the Industrial Policy introduced by the State Government. The policy allowed exemption on sale of finished goods for a specified period based on the category of districts and fixed investment made by the unit.

The petitioners' units were registered for manufacturing wheat products, including atta, maida, suji, and bran. They applied for exemption from sales tax on these products as per the notification issued by the Finance Department. However, the tax authorities contended that bran was not a finished product under the industrial policy, leading to a dispute regarding the eligibility of bran for exemption.

The key question for consideration was whether bran qualified as a finished product for exemption. The petitioners argued that bran, being a commercial product and a by-product of wheat, should be considered a finished good. They relied on precedents where subsidiary products were deemed manufactured goods when regularly produced and sold alongside the main products.

Drawing from legal precedents, including Commissioner of Sales Tax, Bombay v. Bharat Petroleum Corporation Ltd., and ITC Bhadrachalam Paper Boards Ltd. v. State of A.P., the court concluded that bran should be treated as a finished good eligible for exemption. The court held that bran, being a product of the unit and a commercial item, fell within the definition of finished goods, overturning the authorities' decision to withdraw the exemption.

In light of the arguments presented and legal precedents cited, the court allowed both writ applications, quashing the orders withdrawing the exemption granted to the petitioners earlier. The judgment emphasized that bran, along with other wheat products, should be considered a finished good entitled to the exemption as per the industrial policy.

In conclusion, the court's decision clarified the classification of bran as a finished product under the industrial policy, highlighting the importance of consistent interpretation and application of exemption provisions for manufacturing units.