2009 (3) TMI 948 - HC - VAT and Sales Tax

Whether the manufacturing of mentha crystals out of mentha oil purchased by the dealer is covered under entry No. 34 of the Notification No. 2454 dated October 5, 1995? Whether the dealer is liable to exemption under the above notification even if he himself has not collected and processed the forest plants? Held that - The entry in question in the said notification is not attracted to the facts of the present case. The dealer having not collected the forest plants itself for medicinal purposes is not entitled for exemption of tax as it simply carried on the processing of the mentha oil to manufacture mentha crystals. The Tribunal was not justified in reading word and in entry No. 34 of the said notification as disjunctively. It has also misdirected itself as it assumed certain non-existent facts. In view of the above, it is held that the Tribunal was not correct in extending the benefit of the aforesaid exemption notification to the dealeropposite party on the sale of mentha crystals. Since the matter having been disposed of finally by the Tribunal and by this court as well, the order of remand passed by the first appellate authority has become inconsequential; nor its restoration was prayed by the learned counsel for the dealer. The reassessment and the assessment order for the relevant assessment years are, therefore, restored.

Summary

Issues Involved:
1. Whether the manufacturing of mentha crystals out of mentha oil purchased by the dealer is covered under entry No. 34 of the Notification No. 2454 dated October 5, 1995?
2. Whether the dealer is liable to exemption under the above notification even if he himself has not collected and processed the forest plants?

Issue-wise Detailed Analysis:

1. Manufacturing of Mentha Crystals and Entry No. 34:
The dealer claimed exemption on the sale of mentha crystals under Notification No. 2454 dated October 5, 1995, issued under section 4(c) of the U.P. Trade Tax Act, 1948. The dealer argued that mentha crystals, manufactured from purchased mentha oil, fall under entry No. 34 of the notification, which pertains to "collection and processing of forest plants for medicinal purposes." The assessing authority disagreed, stating that the dealer did not collect mentha herbs but purchased mentha oil, thus not qualifying for the exemption. The Tribunal, however, interpreted the word "and" in the entry as disjunctive, meaning "or," thereby allowing the dealer's claim. The High Court, referencing various legal precedents, concluded that the word "and" should be read conjunctively, not disjunctively, as there was no ambiguity in the notification's language. The court emphasized that exemption notifications should be interpreted strictly based on their plain language and not on external aids unless the language is ambiguous or leads to absurd results. Consequently, the Tribunal's interpretation was deemed incorrect.

2. Eligibility for Exemption Without Collecting Forest Plants:
The dealer's eligibility for exemption was also questioned on the grounds that it had not collected the mentha herbs itself but purchased mentha oil. The High Court noted that the exemption under entry No. 34 is granted for the "collection and processing of forest plants for medicinal purposes." Since the dealer did not collect the forest plants, it did not meet the criteria for exemption. The court highlighted that the burden of proof lies on the dealer to fulfill all the conditions laid down in the exemption notification. The Tribunal's decision to grant exemption without verifying whether the mentha crystals were sold for medicinal purposes was found to be flawed. The High Court reiterated that the Trade Tax Department is not bound by the certificates issued by the U.P. Khadi and Gramodyog Board and has the authority to assess the dealer's eligibility for exemption based on the statutory provisions of the U.P. Trade Tax Act.

Conclusion:
The High Court concluded that the dealer did not qualify for the exemption under entry No. 34 of the notification as it did not collect the forest plants itself and merely processed purchased mentha oil. The Tribunal's interpretation of the word "and" as disjunctive was incorrect, and its reliance on external aids for interpretation was unwarranted. The High Court restored the reassessment and assessment orders for the relevant assessment years and allowed both revisions filed by the Commissioner of Trade Tax, U.P., Lucknow, with no order as to costs.