2009 (5) TMI 891 - HC - VAT and Sales Tax

Applicability of the Notification No. KA.NI.-2-1166/XI-9 (231)/94 U.P. Act 15/48-Order-2000 dated April 10, 2000 - Held that - When the words used by the Legislature are to extend the benefit of this exemption in such a manner and this is clear from the plain words used in the notification, then to make unnecessarily limitations and restrictions by way of misconceived notion, would not doubt impinge on the very intention of the Legislature and, thereby unnecessarily create restrictions where there are none. As such the view as taken by the Tribunal is narrow and restrictive and seeks to make qualifications on words, which are otherwise plain and commonly used. The Tribunal has erred in adding an intendment to the words used by the Legislature to confine it to students. This court is, thus, of the opinion that the assessee was entitled to the benefit of Notification No. 1166 dated April 10, 2000 in the category of biological instrument and scientific instrument.

Summary

Issues Involved:
1. Exemption under Notification No. 1166 dated April 10, 2000.
2. Classification of goods as biological/scientific instruments.
3. Consideration of certificates issued by institutions.
4. Distinction between "biological instruments" and "biology instruments."
5. Exemption on sales to international organizations.
6. Rejection of concessional tax rate on sales to government departments.
7. Penalization for buyers' errors.
8. Legality of interest demand on confirmed tax liability.

Issue-wise Detailed Analysis:

1. Exemption under Notification No. 1166 dated April 10, 2000:
The core issue revolves around whether the goods manufactured by the assessee qualify for exemption under Notification No. 1166. The notification exempts "Maps, educational charts, instrument boxes, educational globes and scientific, mathematical, survey, mechanical drawing and biology instruments and apparatus." The Tribunal initially rejected the exemption, classifying the goods as unclassified and taxable at 10%. However, the High Court held that the intention of the Legislature was to extend the exemption to all scientific and biological instruments, not just those used by students, thus granting the exemption to the assessee.

2. Classification of goods as biological/scientific instruments:
The Tribunal differentiated between "biological instruments" and "biology instruments," concluding that the assessee's goods were not covered under the exemption. The High Court disagreed, stating that "biology" and "biological" are interchangeable terms relating to the study of life sciences. The court emphasized that the plain language of the notification should be interpreted to include all scientific and biological instruments.

3. Consideration of certificates issued by institutions:
The Tribunal dismissed certificates from reputable institutions like the National Institute of Immunology and W.H.O., which classified the goods as scientific instruments. The High Court found this unjustified, noting that these institutions are best positioned to classify the goods based on trade understanding and commercial practice.

4. Distinction between "biological instruments" and "biology instruments":
The Tribunal's distinction between "biological instruments" and "biology instruments" was deemed artificial by the High Court. The court clarified that both terms relate to instruments used in the study of life sciences, thus qualifying for exemption under the notification.

5. Exemption on sales to international organizations:
The Tribunal rejected the exemption on sales to the International Centre for Genetic Engineering and Biotechnology, an international organization of the United Nations. The High Court did not specifically address this issue separately but implied that the same principles of exemption apply.

6. Rejection of concessional tax rate on sales to government departments:
The Tribunal disallowed the concessional tax rate on sales made to government departments against forms IIID and D. The High Court found that the assessee's goods qualify for the exemption, thus also entitling them to the concessional tax rate.

7. Penalization for buyers' errors:
The Tribunal's stance that the assessee could be penalized for errors made by buyers in providing forms IIID/D was not upheld by the High Court. The court emphasized that there should be no estoppel against the law, and bona fide belief in the validity of the forms should not result in penalties for the assessee.

8. Legality of interest demand on confirmed tax liability:
The Tribunal's confirmation of interest demand on the assessed tax liability was implicitly overturned by the High Court's decision to grant exemption under the notification, thereby nullifying the basis for the interest demand.

Conclusion:
The High Court allowed the revisions, setting aside the Tribunal's order, and confirmed that the assessee is entitled to the benefit of Notification No. 1166 dated April 10, 2000. The court held that the goods manufactured by the assessee qualify as scientific and biological instruments and are thus exempt from tax. The court also clarified that the exemption applies broadly and is not restricted to instruments used by students alone.