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2009 (8) TMI 1086 - HC - VAT and Sales TaxReassessment tax liability of the petitioner - Held that - The result emanating from accepting the Revenue s contention is to make two exemptions exemption or deferment operate differently depending on their option. We are of the view that there exists no foundation for different treatment under the scheme itself, i.e., exemption or deferment. Therefore, in the absence of clear provision permitting different treatment to persons who opted for exemption or deferment on a fair and harmonious interpretation of statute such dichotomy has to be avoided. Accordingly, we allow this tax revision in favour of the assessee by holding that the tax liability of the petitioner has to be reassessed and determined afresh in accordance with the provisions of the OST Act, requiring computation of taxable turnover, in accordance with law, without reference to the exemption under the IPR, 1996. The re-computation be done in terms of our directions within a period of three months from the date of receipt of certified copy of this judgment.
Issues Involved:
1. Computation of ceiling for exemption of sales tax. 2. Eligibility for concessional rate of tax while enjoying tax holiday under IPR, 1996. Detailed Analysis: Issue 1: Computation of Ceiling for Exemption of Sales Tax The petitioner, a private limited company manufacturing corrugated cardboard boxes, claimed exemption under the IPR, 1996, which exempts new small-scale industrial units from payment of sales tax on raw materials, packing materials, and finished products up to 100% of the fixed capital investment within five years. The petitioner invested Rs. 26.20 lakhs and claimed exemptions accordingly. However, the assessing authorities calculated the sales tax exemption at higher rates (12% for finished goods and 8% and 12% for raw materials) instead of the 4% rate applicable to the petitioner's transactions. The court examined whether the authorities were correct in computing the ceiling for exemption at higher tax rates, which the petitioner did not purchase or sell. The court noted that the petitioner was entitled to a 4% tax rate under Entry 48 of the rate chart made under the OST Act, which specifies a concessional rate for goods used in manufacturing or packing. The Sales Tax Officer's stance that two tax benefits cannot be granted simultaneously was challenged. The court found no legal provision restricting a dealer from availing of a concessional rate while enjoying exemption under IPR, 1996. Issue 2: Eligibility for Concessional Rate of Tax While Enjoying Tax Holiday under IPR, 1996 The Sales Tax Officer argued that an assessee claiming exemption under IPR, 1996, cannot simultaneously claim a concessional rate under Entry 48 of the OST Act. This position was upheld by the appellate court and the Tribunal. However, the Tribunal noted that the OST Act or its rules did not restrict a dealer from availing of a concessional rate while enjoying exemption under IPR, 1996. The Tribunal quashed the findings of the lower authorities, stating that the Revenue should cite legal provisions for such restrictions, which they failed to do. The petitioner relied on the Gujarat High Court judgment in Ardeec Engineering (Saurashtra) Pvt. Ltd. v. State of Gujarat, which dealt with similar issues. The Gujarat High Court concluded that a larger relief granted on plain reading cannot be restricted merely because it results in a double advantage. The court emphasized that the benefit under the IPR, 1996, should be considered over and above what is provided under the OST Act. The Orissa High Court agreed with the Tribunal and the Gujarat High Court's reasoning. It held that the State Government, when issuing a notification for tax concessions, is assumed to be aware of existing concessions under the OST Act. The court found no foundation for different treatment between exemption and deferment under the scheme, and such dichotomy should be avoided. Conclusion: The tax revision was allowed in favor of the assessee. The court directed the tax liability of the petitioner to be reassessed and determined afresh in accordance with the OST Act, without reference to the exemption under the IPR, 1996. The re-computation was to be done within three months from the receipt of the certified copy of the judgment. Separate Judgment: I. Mahanty J. concurred with the judgment.
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