2011 (1) TMI 1255 - HC - VAT and Sales Tax

Whether ENA manufactured by the applicant is rectified spirit? Held that - It is necessary to examine whether ENA, which is claimed to be purified rectified spirit containing 98 per cent alcohol and is not fit for human consumption ceases to be rectified spirit. No enquiry or investigation has been made in this regard by the authorities below. Therefore, in my view, the matter requires reconsideration. In the result the revision is allowed. The order of the Tribunal dated November 22, 2006 is set aside and the matter is remanded back to the Tribunal to decide the appeal afresh in the light of the observations made above.

Summary

Issues:
Dispute over levy of tax on turnover of extra neutral alcohol (ENA) under U.P. Trade Tax Act, 1948 and U.P. Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939.

Analysis:
The applicant, a public limited company, claimed ENA as "alcohol" liable for tax under the U.P. Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939, and paid tax under the 2001 Act. The applicant sought rebate under a specific notification, but the assessing authority levied tax at 32.5% on ENA turnover, denying the rebate. The Tribunal upheld the denial, stating ENA is not alcohol but a product of spirit, distinct from alcohol and spirit. The applicant argued ENA is purified rectified spirit, not fit for human consumption, falling under the definition of "alcohol" under the 1939 Act. The District Excise Officer certified ENA as purified rectified spirit. The standing counsel contended that ENA is taxable under the relevant notification as a kind of spirit and spurious liquor, distinct from the definition of "alcohol" under the 1939 Act.

The High Court analyzed the notifications under section 3A and section 5 of the Act, focusing on the definitions and tax rates for spirits and liquors. The Court noted that the rebate under a specific notification is applicable only if the goods fall within the definition of alcohol under the 1939 Act. The Court considered whether ENA manufactured by the applicant qualifies as rectified spirit. It disagreed with the Tribunal's conclusion that ENA is different from alcohol and spirit, emphasizing that rectified spirit encompasses various forms. The Court found no investigation by the authorities into whether ENA, claimed as purified rectified spirit, ceases to be rectified spirit, necessitating reconsideration.

In conclusion, the High Court allowed the revision, setting aside the Tribunal's order and remanding the matter for fresh consideration. The Court directed the Tribunal to decide the appeal in light of the observations made, indicating the possibility of further remand for investigation if deemed necessary.