2008 (8) TMI 836 - HC - VAT and Sales Tax

Whether the dealer is entitled to avail of the exemption on the basis of the turnover of sale of goods in an assessment year minus base production or the sale of goods after achieving the base production. Held that - The aforestated point is no more res integra and has been set at rest by the apex court in Commissioner of Trade Tax, U.P., Lucknow v. Modipan Fibres Company 2006 (8) TMI 306 - SUPREME COURT OF INDIA .The apex court took the view that under clause 6(b) of the notification, the facility of exemption can be availed of on the turnover of goods in any assessment year in excess of the quantity, referred to in sub-clause (a) of clause (6). In the result, the revision succeeds, and is allowed.The issue involved herein stands concluded in favour of the dealerapplicant and against the Department

Summary

Issues:
Interpretation of eligibility certificate for exemption under U.P. Trade Tax Act, 1948 for a new unit established in 1985 and expanded subsequently.

Analysis:
The applicant, a new unit established in 1985, was granted an "eligibility certificate" under section 4A of the U.P. Trade Tax Act, 1948, providing exemption from July 7, 1991, to July 6, 1999. The certificate determined "base production" at 3,403.95 metric tons, with exemption available on turnover exceeding this base. In the assessment year 1992-93, the assessing authority contended the applicant must pay tax until the base production was achieved on November 25, 1992. The first appellate authority disagreed, stating tax should only apply to the base production amount. However, the Tribunal, in a second appeal by the Department, upheld the original assessment order.

The memo of revision raised questions concerning the Tribunal's decision to set aside the first appellate authority's order and restore the assessing authority's decision. The key issue was whether the applicant could claim exemption based on turnover exceeding base production or only after achieving base production. The apex court's decision in Commissioner of Trade Tax, U.P., Lucknow v. Modipan Fibres Company clarified that exemption could be claimed on turnover exceeding base production in any assessment year.

The High Court, following the apex court's decision, ruled in favor of the dealer-applicant, stating that exemption should be based on turnover in the assessment year minus the base production. The Tribunal's decision was deemed indefensible, and the first appellate authority's order was upheld. Consequently, the revision was allowed, the Tribunal's order was set aside, and the Department's appeal was dismissed, restoring the first appellate authority's decision.

In conclusion, the High Court's judgment clarified the entitlement to exemption under the U.P. Trade Tax Act, 1948 for new units, emphasizing that exemption should be based on turnover exceeding base production in any assessment year. The decision aligned with the apex court's interpretation and ruled in favor of the dealer-applicant, setting aside the Tribunal's decision and upholding the first appellate authority's order.