2007 (8) TMI 677 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of Notification No. 978 dated March 31, 1994 for exemption eligibility.
2. Validity of exemption on sales made through air force canteen under Notification No. 978 dated March 31, 1994.

Analysis:
1. The dispute in this case revolves around the assessment year 1994-95, with the primary issue being the interpretation of Notification No. 978 dated March 31, 1994. The assessing officer initially allowed exemption from trade tax only for sales made through the U.P. State Employees Welfare Corporation to State Government employees, excluding sales made through the air force canteen. This decision was challenged by the dealer, leading to subsequent appeals and the involvement of the Trade Tax Tribunal.

2. The Deputy Commissioner (Appeal) supported the dealer's claim, citing past practices where exemptions were granted for sales made through the air force canteen. The Tribunal also upheld this decision, emphasizing the historical application of exemptions in similar cases. The Standing Counsel, however, argued that the Notification specifically limits exemptions to sales through the U.P. State Employees Welfare Corporation to State Government employees and retirees, excluding sales through other avenues like the air force canteen.

3. In response, the dealer's counsel referenced Government Notification No. S.T.-2-7037/X-7(23)/83-U.P. Act XV/48-Order-85 dated January 31, 1985, particularly focusing on Entry 18 which exempts sales to the Armed Forces and other defense personnel through canteen stores departments. The counsel highlighted the inclusion of motor scooters in the list of exempted goods, reinforcing the dealer's eligibility for tax exemption on sales to defense employees through the U.P. State Employees Welfare Corporation.

4. Ultimately, the Court agreed with the dealer's interpretation, affirming that motor scooters and accessories sold to defense employees are indeed eligible for trade tax exemption under the relevant notifications. Despite differing reasons provided by the Tribunal, the Court found the decision to grant exemption in this case to be legally sound. Consequently, the revision was dismissed, confirming the dealer's entitlement to exemption on sales to defense personnel, including those made through the air force canteen.