2010 (3) TMI 998 - HC - VAT and Sales Tax

Whether the assessee was entitled to claim set-off of excess tax paid by him on purchase of raw materials like diesel and raw cotton for manufacture of surgical cotton by him as per clause 4(c) of the Rajasthan Sales Tax Incentive Scheme, 1989 notwithstanding clause 4(c) of the said scheme? Held that - The contention of the learned counsel for the Revenue that these two parts of clause 4(c) operate in different fields and, therefore, while the right to avail of concession is protected in clause 4(c) notwithstanding the assessee availing of the benefit of exemption under the Incentive Scheme under eligibility certificate granted to it continues however no set-off can be allowed, renders such entitlement of the assessee itself nugatory. Once the entitlement of the assessee to avail of concessional rate is not in dispute, the only way to allow him to avail of such concession logically and properly is to allow him the set-off of such excess tax suffered by him on the purchase of such raw material. The revision petitions filed by the Revenue are thus found to be devoid of merit

Summary

Issues:
1. Interpretation of clause 4(c) of the Rajasthan Sales Tax Incentive Scheme, 1989 regarding set-off of excess tax paid by the assessee on purchase of raw materials.
2. Applicability of the judgment in the case of CTO v. Nitin Spinners Ltd. to the current scenario.
3. Consideration of remand order benefits and relevant legal precedents.

Analysis:

1. Interpretation of clause 4(c) of the Incentive Scheme:
The Revenue argued that clause 4(c) of the Incentive Scheme prohibits set-off of excess tax paid by an industrial unit claiming exemption. They contended that the right to avail of concessions under different provisions of the Act does not include set-off of excess tax. However, the respondent-assessee relied on the exception part of clause 4(c) and emphasized their entitlement to claim set-off for excess tax suffered on raw material purchases beyond concessional rates under sections 5C and 5CC of the Act. The court, citing a previous judgment, concluded that the assessee's entitlement to avail of concessional rates logically includes the right to set-off excess tax paid on raw materials, as long as the entitlement to concessions is established. Therefore, the court upheld the benefit of set-off for the respondent-assessee.

2. Applicability of Previous Judgment:
The court referenced a previous judgment in the case of Nitin Spinners Ltd. where a similar issue was addressed. The court in the current case found that the matter was conclusively settled in favor of the respondent-assessee in the Nitin Spinners case. The court reiterated that the entitlement to concessional rates inherently includes the right to claim set-off for excess tax paid on raw material purchases. Consequently, the court upheld the decision of the Tax Board to allow the benefit of concessional rates and set-off to the respondent-assessee.

3. Consideration of Remand Order Benefits and Legal Precedents:
The Revenue argued that despite a remand order granting set-off benefits to the assessee, the revision petitions should not be considered infructuous until a final decision is made. They cited legal precedents to support this stance. However, the court, after considering the arguments and relevant provisions, found that the Revenue's contentions were not tenable. The court dismissed the revision petitions filed by the Revenue, deeming them devoid of merit and upheld the benefits of concessional rates and set-off for the respondent-assessee as per the previous judgment and the exception part of clause 4(c) of the Incentive Scheme.

In conclusion, the court's decision favored the respondent-assessee, allowing them to claim set-off for excess tax paid on raw material purchases under the Incentive Scheme. The court's analysis emphasized the importance of recognizing the entitlement to concessional rates as inclusive of the right to set-off, as established in previous judgments and legal provisions.