2009 (3) TMI 934 - HC - VAT and Sales Tax

Whether the respondents herein who are manufacturers of ethyl alcohol from molasses falls within entry 10 of the notification dated February 11, 1994, so as to disentitle them from claiming exemption from sales tax under rule 28A of the Rules? Held that - In the present case, the words of the entry are clear and unambiguous and cannot be given a different meaning than what is evident from its literal and plain reading merely on the basis of the intention of the State Government. The learned single judge has rightly held that a proviso cannot be referred to as being independent of the subject-matter of main clause and is always subordinate to the main enactment. Thus judgment of the learned single judge is sound in law. Appeal dismissed.

Issues Involved:
1. Eligibility for sales tax exemption under rule 28A of the Haryana General Sales Tax Rules, 1975.
2. Interpretation of entry 10 of the negative list in the Haryana Government notification dated February 11, 1994.
3. Applicability of subsequent notifications for interpreting earlier provisions.
4. Consideration of the object and purpose of exemption notifications.
5. Interpretation of taxing statutes and exemption provisions.

Detailed Analysis:

1. Eligibility for Sales Tax Exemption:
The respondents, manufacturers of ethyl alcohol from molasses, applied for an eligibility certificate for sales tax exemption under rule 28A of the Haryana General Sales Tax Rules, 1975. Their claims were rejected by the authorities on the grounds that their units fell within entry 10 of the negative list as per the Haryana Government notification dated February 11, 1994. The respondents filed writ petitions, which were allowed by a learned single judge, leading to the present appeals by the State of Haryana.

2. Interpretation of Entry 10 of the Negative List:
The core issue was whether the respondents' manufacturing units fell within entry 10 of the notification dated February 11, 1994, which reads: "10. Ethanol (ethyl alcohol) based industries except non-molasses alcohol industries." The learned single judge interpreted this entry as a single sentence where the main clause is "ethanol (ethyl alcohol) based industries," and the exception is "except non-molasses alcohol industries." The judge held that the entry refers to industries that consume ethyl alcohol as an input rather than those that manufacture it. This interpretation was based on the principle that the word "based" should not be rendered redundant.

3. Applicability of Subsequent Notifications:
The State of Haryana argued that a subsequent notification dated December 17, 1997, clarified the intention to include manufacturers of ethyl alcohol in the negative list. However, the court found that this subsequent notification was not a clarification but an entirely new entry and could not be used to interpret the earlier unambiguous notification. The court cited the Supreme Court's ruling in Manickam and Co. v. State of Tamil Nadu, which allows subsequent legislation to clarify earlier ambiguous provisions, but this was not applicable here as the earlier provision was clear.

4. Consideration of Object and Purpose:
The State contended that the object behind the entry was to discourage the consumption of molasses due to its short supply. The court, however, held that the plain language of the notification should prevail over the State's intention. The learned single judge emphasized that citizens are guided by the notifications' clear language, not by the underlying intentions of the government. The court relied on the Supreme Court's decision in Tata Oil Mills Co. Ltd. v. Collector of Central Excise, which states that the language of an exemption notification should be interpreted in light of its object and purpose, but without distorting its clear meaning.

5. Interpretation of Taxing Statutes and Exemption Provisions:
The court held that words in a taxing statute must be interpreted strictly and literally. The learned single judge rejected the State's argument that the word "based" should include industries manufacturing ethyl alcohol from molasses. The court cited various Supreme Court judgments, emphasizing that taxing statutes should be interpreted based on their clear language without importing any presumed intentions. The court also noted that the proviso in entry 10 serves to qualify the main clause and cannot be used to nullify the clear meaning of the main enactment.

Conclusion:
The judgment of the learned single judge was upheld, affirming that the respondents' manufacturing units do not fall within entry 10 of the negative list. The appeals filed by the State of Haryana were dismissed, and the matter was directed back to the Higher Level Screening Committee for fresh determination of the respondents' claims for sales tax exemption. The court emphasized the importance of interpreting taxing statutes and exemption provisions based on their clear and literal language, without resorting to presumed intentions or subsequent clarifications.

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