2011 (3) TMI 1501 - HC - VAT and Sales Tax

Whether the Tribunal is right in concluding that sale of water plant machinery i.e. reverse osmosis plant by the petitioner do not fall under section 3(5) of the Tamil Nadu General Sales Tax Act when the petitioner satisfied both the conditions as prescribed under the section? Whether the Tribunal is correct in rejecting the claim of concessional levy when the petitioner has filed declaration forms as per the provisions of section 3(5) of the Act? Held that - Section 3(5) of the Act is a beneficial provision. It provides for concession for tax purposes to encourage industrial activity. It should be liberally construed. It is well-settled principle that a provision which is a taxing statute granting concessional and incentives for promoting growth and development should be construed liberally. Therefore we are of the view that plant and machinery is used for the purpose of treating water for the bleaching and dyeing in the textile factory. Therefore it cannot be said it is not used for the purpose of manufacture. The assessee has satisfied all the conditions enumerated and section 3(5) of the Act and hence they are entitled to the concessional rate of tax under section 3(5) of the Act. In these circumstances the order passed by the Tribunal is not in accordance with law and we set aside the order of the authorities below and answer the questions in favour of the petitioner/assessee and against the Revenue. Consequently the revision is allowed.

Summary

Issues:
1. Interpretation of section 3(5) of the Tamil Nadu General Sales Tax Act regarding the sale of water plant machinery.
2. Eligibility for concessional levy under section 3(5) of the Act.
3. Determination of whether the water treatment plant is used in the manufacturing of goods.

Analysis:
1. The case involved a revision petition against the order of the Tamil Nadu Sales Tax Appellate Tribunal regarding the classification of the sale of water plant machinery under section 3(5) of the Tamil Nadu General Sales Tax Act. The petitioner, a dealer in water treatment plants, claimed exemption on a turnover but was denied the concessional rate of tax by the assessing officer. The Tribunal upheld the decision, leading to the revision. The key issue was whether the water treatment plant fell under the Eighth Schedule of the Act and was used for manufacturing goods.

2. The petitioner contended that the water treatment plant satisfied the conditions under section 3(5) and should be eligible for the concessional rate of tax. The Tribunal, however, held that the plant did not fall under the Eighth Schedule and was not used for manufacturing goods, leading to the denial of the concession. The petitioner argued that the plant was essential for the manufacturing process of bleaching and dyeing textiles, thus meeting the criteria for concessional levy.

3. The Court analyzed the provisions of section 3(5) and the Eighth Schedule to determine the eligibility of the water treatment plant for the concessional rate of tax. It was established that the plant met the criteria specified in the Eighth Schedule and was used within the State for manufacturing textiles. The Court emphasized the liberal interpretation of beneficial provisions like section 3(5) to encourage industrial activity. Ultimately, the Court concluded that the plant was indeed used in the manufacturing process and, therefore, entitled to the concessional rate of tax. The order of the Tribunal was set aside, and the questions were answered in favor of the petitioner, allowing the revision.