2009 (11) TMI 850 - HC - VAT and Sales Tax

Turnover of manufactured goods menthol or as the case may be, rice sold to exporter through form H . Held that - In the assessment proceedings, the exemption on the basis of form H was wrongly granted by the assessing authority to the petitioner as the same was not a transaction in the course of export but was a local sale to an exporter.

Issues Involved:
1. Legality of reopening assessments under Section 21(2) of the U.P. Trade Tax Act.
2. Applicability of the Supreme Court judgment in Monga Rice Mill to the present case.
3. Interpretation of the term "exported out of India" under Section 4B of the U.P. Trade Tax Act.
4. Validity of the exemption claimed under Notification No. 289 dated February 12, 1999.
5. Binding nature of the circular issued by the Commissioner, Trade Tax.

Detailed Analysis:

1. Legality of Reopening Assessments under Section 21(2) of the U.P. Trade Tax Act:
The petitions challenge the orders passed by the authority to reopen assessments for various years (2000-01 to 2005-06) under Section 21(2) of the Act. The reopening was based on the Supreme Court judgment in Monga Rice Mill v. State of Haryana, which clarified the interpretation of sales in the course of export under the Central Sales Tax Act. The court found that the reopening of assessments was justified based on this precedent.

2. Applicability of the Supreme Court Judgment in Monga Rice Mill:
The petitioners argued that the Supreme Court's decision in Monga Rice Mill does not apply to their case. However, the court noted that the apex court had clearly stated that sales to exporters do not qualify as sales in the course of export under Section 5(3) of the Central Sales Tax Act. The court held that this interpretation directly affected the petitioners' claims for tax exemption on sales made to exporters against Form H.

3. Interpretation of the Term "Exported Out of India":
The court examined Section 4B of the U.P. Trade Tax Act, which provides special relief to manufacturers holding recognition certificates. The petitioners claimed that their goods were exported out of India, thus fulfilling the condition of the notification. However, the court clarified that the term "exported out of India" must be interpreted in line with Section 5(1) of the Central Sales Tax Act, which does not include sales to exporters within India. Thus, the petitioners' sales to exporters did not qualify as exports under the Act.

4. Validity of the Exemption Claimed under Notification No. 289:
The petitioners contended that they met all conditions of Notification No. 289 dated February 12, 1999, which provided tax exemptions. The court, however, emphasized that the notification must be read in conjunction with Section 4B of the Act. Since the petitioners' transactions did not qualify as exports under the Central Sales Tax Act, they were not entitled to the claimed exemptions. The court upheld the authority's decision to withdraw the exemptions.

5. Binding Nature of the Circular Issued by the Commissioner, Trade Tax:
The petitioners cited a circular dated April 6, 2004, issued by the Commissioner, Trade Tax, which supported their claim for exemptions. The court ruled that the circular, being anterior to the Supreme Court's judgment in Monga Rice Mill, could not override the apex court's interpretation. The law declared by the Supreme Court takes precedence over any conflicting circulars.

Conclusion:
The court dismissed all the writ petitions, finding no merit in the arguments presented by the petitioners. The court upheld the reopening of assessments and the withdrawal of tax exemptions based on the Supreme Court's judgment in Monga Rice Mill. The petitioners were ordered to pay costs of Rs. 5,000 each to the respondents, to be deposited within one month.

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