2012 (11) TMI 1059 - HC - VAT and Sales Tax

Exemption from commercial tax on sale of cement in residuary State of Madhya Pradesh manufactured in its cement manufacturing plant at Sonadih, following in bifurcated State of Chhattisgarh. Held that - The benefit of exemption from payment of sales tax on purchase of raw materials in respect of new units or the benefit envisaged for units which have undertaken diversification or expansion are available to those units, if eligible under SO No. 478 dated December 22, 1995 notwithstanding the fact that the erstwhile State has been divided into two States by creation of the new State. See Fairdeal Traders v. Assistant Commissioner Commercial Tax 2013 (5) TMI 231 - MADHYA PRADESH HIGH COURT

Issues:
1. Entitlement to exemption from commercial tax on sale of cement in Madhya Pradesh.
2. Validity of assessment and revision orders.
3. Application of notification dated February 19, 1991.
4. Tax liability for purchases made post-reorganization.
5. Interpretation of benefits post-state reorganization.

Entitlement to exemption from commercial tax on sale of cement in Madhya Pradesh:
The petitioner sought relief claiming entitlement to exemption from commercial tax on the sale of cement in Madhya Pradesh, manufactured at its cement plant in Sonadih, following the reorganization of the State. The petitioner relied on Notification No. A-3-27-ST-V(15) dated February 19, 1991, to support its claim for exemption. The contention was that due to the reorganization, the exemption had not been extended to the petitioner, which it was entitled to for a period of 11 years from the commencement of commercial production. The petitioner referenced a similar judgment where the benefit was granted to another party for a subsequent assessment year.

Validity of assessment and revision orders:
The petitioner sought the quashing of the assessment and revision orders (annexure P/5 and P/6) and requested a writ of mandamus directing the respondents to grant exemption from tax payment during the assessment period under the eligibility certificate. The petitioner challenged the orders on the grounds of non-extension of entitled exemption post-reorganization.

Application of notification dated February 19, 1991:
The case involved a dispute regarding the applicability of the notification dated February 19, 1991, which granted exemption to certain industrial undertakings. The petitioner argued that the exemption should continue even after the reorganization of the state, as per the settled position in similar judgments.

Tax liability for purchases made post-reorganization:
The petitioner, a trader of cement, questioned the tax liability for purchases made post-reorganization from an industry that was previously exempted from tax. The issue revolved around whether the petitioner was entitled to the same exemption that was available before the reorganization of the state.

Interpretation of benefits post-state reorganization:
The judgment referenced Commissioner of Commercial Tax v. Swarn Rekha Cokes and Coals Pvt. Ltd., where the Supreme Court clarified that benefits under industrial policies and notifications continue post-reorganization. The court held that the benefit available to an exempted unit prior to reorganization should persist even after reorganization, granting exemption for the period specified in the original exemption.

In conclusion, the court allowed the petitions, holding that the exemption granted to the petitioner should remain applicable even after the state's reorganization. The authorities were directed to reconsider the matter in line with the law laid down by the apex court within a specified timeframe. The judgment provided clarity on the continuity of benefits post-state reorganization, aligning with previous legal interpretations.

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