2010 (8) TMI 860 - HC - VAT and Sales Tax

Whether the benefit of the exemption notification dated May 5, 1997, is not available for levy of tax under section 9B of the Madhya Pradesh Commercial Tax Act, 1994? Held that - Reading the exemption notification, as it is the reduction of tax is in respect of the levy of tax under section 9 of the Act only and not for the levy of tax under section 9B of the Act. In view of the aforesaid analysis, the contention of the petitioner that the benefit of the exemption notification should also be available to the petitioner for the purpose of levy of tax under section 9B cannot be accepted. No error has been committed by the assessing authority and the revisional authority in this regard. Appeal dismissed.

Issues Involved:
1. Applicability of exemption notification under section 9 to tax levied under section 9B of the Madhya Pradesh Commercial Tax Act, 1994.
2. Classification of dealers based on turnover and its impact on tax rates.
3. Interpretation of exemption notifications and their applicability.
4. Legal principles regarding the strict construction of exemption notifications.

Detailed Analysis:

1. Applicability of Exemption Notification Under Section 9 to Tax Levied Under Section 9B:
The petitioner challenged the order dismissing the revision petition, arguing that the benefit of the exemption notification reducing the tax rate under section 9 should also apply to tax levied under section 9B. The court examined section 9B, which applies to dealers with a turnover exceeding one crore rupees, and noted that it starts with a non obstante clause, indicating it is a separate provision from section 9. The court concluded that section 9B creates a distinct class of dealers liable to pay tax at the rate specified in Schedule II, without the benefit of the reduced rate under section 9.

2. Classification of Dealers Based on Turnover and Its Impact on Tax Rates:
The court held that the state can classify dealers based on turnover and prescribe different tax rates for different classes. This classification is valid and does not violate principles of equality. The court referenced the Division Bench decision in Chhattisgarh Cement Dealers Association and M.P. Chemists and Druggists Association v. State of M.P., which upheld the constitutional validity of section 9B and recognized the legitimacy of such classification.

3. Interpretation of Exemption Notifications and Their Applicability:
The court analyzed the exemption notifications dated May 9, 1997, and May 14, 1997, which reduced the tax rate for "loose tea" and tea under section 9 to four percent and eight percent, respectively. The court emphasized that these notifications explicitly stated the reduction was under section 9 and did not mention section 9B. Therefore, the reduced rates did not apply to tax levied under section 9B.

4. Legal Principles Regarding the Strict Construction of Exemption Notifications:
The court reiterated the principle that exemption notifications must be strictly construed and cannot be extended beyond their explicit terms. The petitioner failed to demonstrate that the exemption under section 9 should apply to section 9B. The court cited several Supreme Court judgments, including Collector of Customs (Preventive), Amritsar v. Malwa Industries Limited and Union of India v. Wood Papers Ltd., which support the strict interpretation of exemption notifications.

Conclusion:
The court dismissed the writ petition, holding that the exemption notifications reducing the tax rate under section 9 did not extend to tax levied under section 9B. The state has the authority to classify dealers based on turnover and prescribe different tax rates. The exemption notifications were explicitly limited to section 9, and the principle of strict construction of such notifications precluded extending the reduced rates to section 9B. The petitioner's contention was rejected, and no costs were awarded.

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