2010 (1) TMI 1106 - HC - VAT and Sales Tax

Whether the reliance placed on exhibit P11 S.R.O. by the 4th respondent for rejecting the claim for exemption in respect of the unit of the petitioner with regard to the products chilly powder and coriander powder is correct or not. ? Held that - The petitioner s unit, being one exclusively owned and operated by women, it very much satisfies the requirements under exhibit P10 S.R.O.This being the position, denying the benefit of exemption to the unit of the petitioner, placing reliance on exhibit P11 S. R. O (which has superseded only the S.R.O. No. 968/80, i.e., the general notification and not exhibit P10 special notification S.R.O. No. 969/80) is not correct or sustainable. The case of the petitioner requires to be reconsidered and as a natural consequence, the coercive steps being pursued are not liable to be enforced any further. The impugned proceedings, exhibit P9 series, are set aside and the fourth respondent is directed to reconsider the matter in the light of the observations made above, as to the eligibility of the petitioner to have exemption based on exhibit P10 S.R.O.

Summary

Issues:
Whether the rejection of the application for exemption from sales tax for "chilly powder" and "coriander powder" based on exhibit P7 SRO is correct.

Analysis:
The petitioner, a partnership firm constituted by three women, was registered as an SSI unit and classified under the Women Industrial Programme (WIP) by the Government, entitling them to tax discounts and benefits. Initially granted exemption from sales tax, the petitioner's claim for exemption for "chilly powder" and "coriander powder" was rejected by the fourth respondent based on exhibit P7 SRO. The petitioner challenged this decision, arguing that exhibit P10 should have been considered instead of P11. The Full Bench decision in Tatson Food Industries case regarding "turmeric" and "turmeric powder" was cited, leading to a modification in the exemption order to include "turmeric powder" but not "chilly powder" and "coriander powder."

The Government Pleader contended that a Full Bench decision in Namputhiris Pickle Industries case had established that there is no difference between "chilly" and "chilly powder" or "coriander" and "coriander powder," with no manufacturing process involved in the conversion. The petitioner's counsel argued that the decision in Tatson Food Industries case necessitated a fresh consideration of whether "chilly" and "chilly powder" as well as "coriander" and "coriander powder" are distinct entities requiring a manufacturing process.

The court examined the notifications, distinguishing between the general notification SRO No. 968/80 and the special notification SRO No. 969/80, which provided a longer exemption period for specific categories of units, including women's industrial units. Given the petitioner's unit's classification under the special notification, reliance on the general notification for denial of exemption was deemed incorrect. The court set aside the impugned proceedings and directed the fourth respondent to reconsider the matter based on the eligibility under exhibit P10 SRO, granting a hearing to the petitioner within three months.

The judgment left open the question of whether the production of "chilly powder" and "coriander powder" involves a manufacturing process. The writ petition was disposed of accordingly.