2012 (4) TMI 553 - HC - VAT and Sales Tax

Validity of Notification (annexure P/1) dated April 12 2007 exempting crude edible oil from payment of entry tax extended for the period between 1st of October 1997 to 31st of March 2004 challenged Held that - The exemption which was granted vide earlier notifications was available to the petitioner up to 31st of March 2007 but vide notification dated 12th April 2007 it was restricted up to 31st of March 2004 meaning thereby for a period near about three years the petitioner has been held liable for payment of entry tax for which there was no power with the State Government to withdraw such exemption with retrospective effect. Petition is allowed. Notification (annexure P/1) in so far as it relates to the petitioner only restricting the exemption of notification (annexure P/5) till 31st of March 2004 is not sustainable under the law and is hereby quashed. The petitioner who was extended the benefit of exemption from payment of entry tax till 31st of March 2007 vide notification (annexure P/5) shall be entitled to get the aforesaid exemption.

Summary

Issues:
Challenge to the validity of Notification dated April 12, 2007 withdrawing exemption to crude edible oil from payment of entry tax; Interpretation of Notification (annexure P/5) exempting raw material for manufacturing vegetable and edible oil; Authority of law for issuing Notification (annexure P/1) withdrawing exemption retrospectively; Application of section 10 of the Entry Tax Act regarding exemption powers; Impact of subsequent notifications on existing exemptions; Legal consequences of withdrawing exemptions with retrospective effect.

Analysis:

The petitioner challenged the validity of a Notification issued by the Government of M.P. withdrawing the exemption to crude edible oil from entry tax payment. The petitioner contended that under a previous Notification (annexure P/5), they were exempted from entry tax on raw materials, including crude edible oil, used for manufacturing vegetable and edible oil. The petitioner argued that the subsequent Notification (annexure P/1) withdrawing the exemption with retrospective effect was unauthorized and contrary to section 10 of the Entry Tax Act.

The State, represented by the Deputy Government Advocate, supported the withdrawal of exemption, stating that the new Notification did not expressly modify or withdraw the previous exemption granted under annexure P/5. The State argued that the petitioner was liable to pay entry tax from April 1, 2004, as per the terms of the new Notification.

The High Court analyzed the factual background of the case, highlighting the petitioner's role as a manufacturer of vegetable and edible oil, and the specific exemptions granted under annexure P/5 for raw materials used in manufacturing. The Court referenced the relevant provisions of the M.P. Vanijyik Kar Adhiniyam, 1994, defining raw material and the conditions for exemption from entry tax.

The Court examined the power vested in the State Government under section 10 of the Entry Tax Act to grant exemptions prospectively or retrospectively. It noted that the State had initially granted exemptions up to March 31, 2005, and later extended them to March 31, 2007, through subsequent Notifications. The Court cited a Supreme Court judgment emphasizing that exemptions could not be withdrawn retrospectively, especially if they increased the tax liability of the party concerned.

Ultimately, the Court ruled in favor of the petitioner, quashing the Notification (annexure P/1) that restricted the exemption granted under annexure P/5. The Court held that the State Government lacked the authority to withdraw the exemption with retrospective effect, especially after granting continuous exemptions through multiple Notifications. The petitioner was entitled to the exemption from entry tax until March 31, 2007, as per the original Notification. The Court allowed the petition with no costs awarded.

In conclusion, the judgment clarified the legal implications of withdrawing exemptions retrospectively, emphasizing the need for clear authority and adherence to statutory provisions when issuing such notifications.