2004 (2) TMI 672 - HC - VAT and Sales Tax

Summary

Issues:
1. Discrimination in exemption granted to manufacturers and dealers.
2. Interpretation of Rubber Act and imposition of rubber cess.
3. Application of Supreme Court decision on inclusion of rubber cess in purchase turnover.
4. Consideration of exemption notification for dealers who are not manufacturers.
5. Allegation of discrimination against manufacturers outside the State.
6. Applicability of exemption based on classification of manufacturers and dealers.

Analysis:
1. The appellant, engaged in manufacturing tires, tubes, and flaps in Tamil Nadu, challenged the exemption notification excluding manufacturers from certain benefits, claiming it to be discriminatory. The contention was that the exemption was only applicable to manufacturers within the State, creating a discriminatory classification.

2. The judgment delved into the imposition of rubber cess under the Rubber Act, equating it to excise duty. The Supreme Court's interpretation highlighted that the duty is linked to the production of rubber, forming part of the purchase turnover. The court emphasized that the incidence of duty is inherent in the production process, regardless of the timing of payment.

3. The application of the Supreme Court decision, which allowed the inclusion of rubber cess in purchase turnover, was crucial. The notification exempted dealers from the tax liability until a specific date, considering the historical demands placed only on manufacturers. This exemption was seen as a measure to address the unforeseen tax liability for dealers based on the apex court's ruling.

4. The judgment addressed the contention of discrimination against manufacturers outside the State, emphasizing that all manufacturers were subject to the duty. The exemption for dealers who were not manufacturers was viewed as a temporary relief until the implications of the Supreme Court decision were clarified.

5. The court rejected the appellant's claim of discrimination based on manufacturing location, stating that the exemption was not applicable to manufacturers, irrespective of their geographical location. The classification was deemed non-discriminatory as it differentiated between manufacturers and dealers, ensuring uniform tax treatment within each class.

6. The decision upheld the classification of manufacturers and dealers as distinct classes, justifying the exemption granted to dealers who were not manufacturers. The court emphasized that the burden of proving entitlement to exemption rested on the appellant, who, being both a manufacturer and a dealer, did not qualify for the exemption provided to dealers. The judgment affirmed the lower court's ruling, dismissing the appeal.