2008 (7) TMI 866 - HC - VAT and Sales Tax

Exemption from tax granted - Held that - Having considered the provisions of the VAT Act with the provisions of Notification dated December 26, 2000 it is crystal clear that the respondents could not have denied the exemption simply on the strength of sub-section (13) of section 80 of the said Act, particularly ignoring the provisions of sub-section (15) and section 76(6)(b)(i) and (ii) thereof. The petitioners are fully entitled to the exemption from tax granted to them under the eligibility certificate by the erstwhile Government of State of Uttar Pradesh and vide notification dated December 26, 2000 issued by the Uttaranchal Government for the period remaining on the date of commencement of VAT Act, i.e. October 1, 2005. From a perusal of record, it does not come out that petitioners had exercised option under clause (ii) of section 76(6)(b) of the VAT Act, within the stipulated period. Therefore, it shall be presumed that the petitioners desire to continue as per provision of (i). Therefore, in view of the transitional provisions of sub-section (3) of section 80 of the VAT Act, the rebate granted to the petitioners vide Government notification dated December 26, 2000 under section 5 of the Act shall be deemed to be continuing even after enforcement of the VAT Act till the date of publication of notification dated October 12, 2006.For the reasons and discussion aforesaid, all the three writ petitions deserve to be partly allowed. Respondent No. 3 is restrained by a writ of mandamus from imposing any tax upon the petitioners in pursuance of the circular dated January 13, 2006 issued by respondent No. 2 acting upon the circular dated January 4, 2006 issued by respondent No. 1.

Issues Involved:
1. Validity of circulars dated January 4, 2006, and January 13, 2006.
2. Validity of notices issued by Deputy Commissioners.
3. Continuation of tax exemption under section 4A of the U.P. Trade Tax Act after the enforcement of the VAT Act.
4. Applicability of transitional provisions under the VAT Act, 2005.

Issue-wise Detailed Analysis:

1. Validity of Circulars Dated January 4, 2006, and January 13, 2006:
The petitioners challenged the circulars issued by the Principal Secretary Finance, Uttaranchal, and the Commissioner of Taxes, Dehradun, which discontinued the tax exemption under section 4A of the U.P. Trade Tax Act after the enforcement of the VAT Act on October 1, 2005. The court found that the circulars were inconsistent with the transitional provisions of the VAT Act, particularly section 80(3), which allows existing notifications to continue if not inconsistent with the new Act. Hence, the circulars were deemed invalid.

2. Validity of Notices Issued by Deputy Commissioners:
The notices issued by the Deputy Commissioners (Assessment) of Commercial Taxes, directing the petitioners to deposit tax at specified rates for the months following the enforcement of the VAT Act, were also challenged. The court restrained the respondents from imposing any tax based on these notices, as they were issued in pursuance of the invalidated circulars.

3. Continuation of Tax Exemption Under Section 4A of the U.P. Trade Tax Act:
The petitioners argued that they were entitled to continue the tax exemption granted under section 4A of the U.P. Trade Tax Act, as per their eligibility certificates, even after the enforcement of the VAT Act. The court agreed, stating that the exemption should continue for the remaining period specified in the eligibility certificates, in line with section 76(6)(b)(i) of the VAT Act, which allows for such continuation if the dealer does not opt for deferment of tax.

4. Applicability of Transitional Provisions Under the VAT Act, 2005:
The court examined the transitional provisions under section 80 of the VAT Act, particularly subsections (3), (13), (14), and (15). It was concluded that the exemptions granted under the repealed Act should continue unless inconsistent with the VAT Act. Since the provisions of section 4(6) of the VAT Act and section 5 of the repealed Act were analogous and not inconsistent, the exemptions were deemed to continue until the issuance of the new notification on October 12, 2006.

Conclusion:
The court partly allowed the writ petitions, restraining the respondents from imposing any tax based on the invalidated circulars and notices. It upheld the continuation of the tax exemption for the petitioners as per their eligibility certificates and the transitional provisions of the VAT Act. The exemptions were deemed to continue until the date of the new notification on October 12, 2006.

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