2009 (2) TMI 755 - HC - VAT and Sales Tax

Whether the respondent-Corporation is entitled to charge tax on the sale of damaged foodgrains despite the fact that it is a tax-free item falling under Schedule A of the Punjab Value Added Tax Act 2005? Held that - What is exempted under the Schedule is cattle fodder and the definition of cattle fodder would also include damaged rice. In the present case viewing the matter from every angle it is crystal clear that the petitioner is not liable to incur liability of sale tax and the question posed hereinabove is answered in favour of the petitioner and against the respondents. Writ petition filed by the petitioner succeeds and is allowed. Accordingly the respondent-Corporation is directed to deliver the damaged foodgrains to the petitioner without charging any VAT/sales tax since the goods are cattle feed and are exempt from levy of tax under section 16 of the Act.

Summary

Issues:
Whether the respondent-Corporation can charge tax on the sale of damaged foodgrains despite being tax-free under the Punjab Value Added Tax Act, 2005.

Analysis:
The petitioner, a registered dealer engaged in manufacturing cattle feed, participated in an auction by the respondent-Corporation for damaged foodgrains intended for cattle feed. The petitioner argued that as per Section 16 of the Act, tax cannot be charged on goods specified in Schedule A, which includes cattle feed. The respondent contended that the damaged rice purchased by the petitioner was to be used as raw material for manufacturing cattle feed and hence not exempt from tax. The court referred to Schedule A, which specifically exempts cattle feed from tax, and cited relevant case law to support the interpretation that damaged rice qualifies as cattle feed.

The court emphasized that the intention of both parties, as per the tender notice, was to treat the damaged foodgrains as cattle feed. The court noted that similar instances in the past, where dealers were refunded sales tax on damaged foodgrains, supported the petitioner's claim. The court highlighted an opinion by the Additional Solicitor General of India, which led to a refund order for another dealer in a similar situation. The court concluded that the petitioner was not liable to pay sales tax on the damaged foodgrains, as they fell under the category of tax-free cattle feed as per Schedule A of the Act.

In light of the above analysis, the court allowed the writ petition filed by the petitioner and directed the respondent-Corporation to deliver the damaged foodgrains without charging any VAT/sales tax, as the goods were considered cattle feed and exempt from tax under Section 16 of the Act.