2005 (1) TMI 666 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for exemption under Notification No. ST-2-709/XI-9(53)/91-U.P. Act-15-48-Order-97, dated February 27, 1997.
2. Interpretation of the exemption limit of Rs. 50 lakhs in the notification.
3. Whether the exemption applies to each individual product or the total turnover of the institution.

Detailed Analysis:

1. Eligibility for exemption under Notification No. ST-2-709/XI-9(53)/91-U.P. Act-15-48-Order-97, dated February 27, 1997:
The dealer, engaged in the manufacture and sale of detergent cake, detergent powder, toilet soap, and laundry soap, claimed exemption on the turnover of manufactured goods as a unit of Khadi Gramudyog under the specified notification. The dealer was certified by the All India Khadi and Village Industries Commission or U.P. Khadi and Village Industries Board, which is not in dispute.

2. Interpretation of the exemption limit of Rs. 50 lakhs in the notification:
The assessing authority disallowed the exemption claim on the entire turnover, asserting that the exemption was only available to institutions with a total turnover of less than Rs. 50 lakhs in an assessment year. The Deputy Commissioner (Appeals) partially allowed the appeal, granting exemption up to Rs. 50 lakhs and taxing the turnover exceeding this limit. The Tribunal, however, directed that the exemption should apply to each individual product manufactured by the institution, allowing up to Rs. 50 lakhs exemption per product.

3. Whether the exemption applies to each individual product or the total turnover of the institution:
The learned Standing Counsel argued that the notification contemplates exemption on the turnover up to Rs. 50 lakhs for the institution's total manufactured products, not for each individual product. The dealer's counsel cited the history of previous notifications to argue that the intent was to provide more exemption, thus supporting the Tribunal's interpretation.

Upon reviewing the notifications, the court found that the notification dated February 27, 1997, clearly contemplates an exemption limit of Rs. 50 lakhs on the total turnover of the manufactured goods by the institution in an assessment year, not on each individual product. The language of the notification is plain and unambiguous, indicating the Legislature's intent to limit the exemption to a total turnover of Rs. 50 lakhs per assessment year.

Conclusion:
The court concluded that the Tribunal's order was erroneous and could not be sustained. The notification's language clearly limits the exemption to Rs. 50 lakhs on the total turnover of the institution's manufactured products in an assessment year. Thus, the revision was allowed, the Tribunal's order dated December 1, 2003, was set aside, and the order of the first appellate authority was restored.