2002 (4) TMI 921 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to tax exemption for liquid chlorine manufactured in a leased factory under the Government's notification.
2. Entitlement to tax exemption for "brine" under the entry for "salt" in Schedule III of the PGST Act, 1967.

Issue-wise Detailed Analysis:

1. Entitlement to Tax Exemption for Liquid Chlorine:

The first issue revolves around whether the respondent, who manufactures liquid chlorine in a leased factory, is entitled to the tax exemption as per the Government's notification in G.O. Ms. No. 15/74/Fin. (CT) dated June 25, 1974. The respondent is an industrial undertaking producing caustic soda, chlorine gas, hydro-chloric acid, and calcium hydro-chlorite. For the assessment year 1988-89, the respondent claimed an exemption on the sales turnover of liquid chlorine amounting to Rs. 1,20,029 under the said notification. The assessing officer denied the exemption, arguing that the liquid chlorine was produced in a plant leased from another entity, M/s. Lichlor, and thus did not qualify for the exemption.

The Tribunal, however, allowed the exemption, interpreting that the notification did not require the industry to be owned by the assessee to avail the benefit. The High Court upheld this interpretation, stating that the notification exempts goods manufactured by industries that went into production on or after specified dates, as certified by the Director of Industries, Pondicherry. The Court clarified that the exemption applies to goods manufactured by qualifying industries, regardless of ownership, and thus, the respondent was entitled to the exemption.

2. Entitlement to Tax Exemption for "Brine":

The second issue concerns whether "brine," a product made using "salt" and other chemicals, qualifies for tax exemption under entry No. 10 of Schedule III of the PGST Act, which exempts "salt" from tax. The respondent claimed an exemption on the sales turnover of "brine" amounting to Rs. 3,88,863.89. The assessing officer and the first appellate authority rejected the claim, asserting that "brine" and "salt" are commercially distinct commodities. They noted that "brine" is produced by purifying and diluting salt with water and chemicals, and thus, it cannot be considered "salt."

The Tribunal reversed this finding without detailed reasoning, merely stating that the exemption for "brine" is justified. The High Court criticized the Tribunal for not providing adequate reasons or discussing the arguments and evidence presented by both parties. The Court emphasized that the Tribunal, as the final fact-finding authority, should provide a reasoned conclusion to enable judicial review. Consequently, the High Court remitted the matter back to the Tribunal to reconsider and provide a detailed finding on whether "brine" qualifies as "salt" under entry No. 10 of Schedule III.

Conclusion:

The High Court decided the first question of law in favor of the assessee, affirming the entitlement to tax exemption for liquid chlorine manufactured in a leased factory. Regarding the second question, the Court set aside the Tribunal's conclusion and remitted the matter back for a detailed examination and finding on whether "brine" falls under the tax-exempt category of "salt" in the PGST Act. The revision was disposed of accordingly, with no costs ordered.