2011 (12) TMI 489 - HC - VAT and Sales Tax

State Development Tax - Whether in view of the Notification No.1307 dated 28.4.2005 since full rebate was allowed by the Assessing Authority in the assessment order dated 6.10.2007 of trade tax on account of entry tax having been paid at the full rate of 5%, hence no State Development Tax can be legally levied in view of clause (iii) of Notification No.1307 dated 28.4.2005? Held that - The conclusion drawn by the Tribunal is completely misplaced. Each and every clause of the notification refers to a separate category of commodity and can stand on its own. The Tribunal has wrongly come to the conclusion that one condition is connected to the other, that cannot be the case because every clause refers to specify benefits under specific sections and gives specific relief. The case of the assessee is covered under clause (iii) of the said notification, as his case was a payment of rebate being allowed to the full extent at the rate of 5%. This was allowed to him for having paid entry tax at the rate of 5%. Because the assessee had paid entry tax at the rate of 5% he was given the benefit of not having to pay the State Development Tax. The other clauses are not connected with the rebate factor at all. Thus claim made by the assessee under Section 3-H (4) (d) should have been allowed. The order of the Tribunal is,therefore, set aside. In favour of the assessee.

Summary

Issues involved:
1. Interpretation of Notification No.1307 dated 28.4.2005 regarding State Development Tax.
2. Applicability of State Development Tax on sale of kraft paper.
3. Compliance with conditions specified in the notification for exemption from State Development Tax.
4. Requirement for goods specification in notifications regarding State Development Tax.
5. Independence of clauses specifying goods for exemption from State Development Tax.
6. Liability of the applicant for payment of State Development Tax.

Analysis:
1. The case involved the interpretation of Notification No.1307 dated 28.4.2005 concerning the State Development Tax. The Tribunal rejected the revisionist's claim based on the notification's conditions not being satisfied. However, the High Court found that each clause of the notification referred to a separate category of commodity and could stand alone. The Court concluded that the Tribunal's interpretation was incorrect as the conditions were not interlinked, and the assessee's case fell under clause (iii) of the notification due to the full rebate allowed for paying entry tax at the rate of 5%. The Court held that the Tribunal erred in connecting the conditions and set aside their order in favor of the assessee under Section 3-H (4) (d) of the Act.

2. The issue of the applicability of State Development Tax on the sale of kraft paper was raised. The assessing authority had accepted the turnover disclosed by the assessee for the assessment year 2005-06. The kraft paper was taxable at 5% under the U.P. Trade Tax Act, and the assessee had been depositing tax at this rate based on relevant notifications. Despite depositing entry tax at the full rate, the assessee contested any liability for State Development Tax under Section 3-H of the Act, citing the notification dated 28.4.2005. The High Court ultimately ruled in favor of the assessee, stating that they were not liable for State Development Tax.

3. The dispute also involved the compliance with conditions specified in the notification for exemption from State Development Tax. The Tribunal had concluded that all four conditions in the notification needed to be satisfied. However, the High Court disagreed, emphasizing that each clause of the notification referred to distinct benefits and relief under specific sections. The Court found that the assessee's case met the criteria of clause (iii) of the notification due to the full rebate allowed, thereby rejecting the Tribunal's interpretation and ruling in favor of the assessee.

4. Another issue raised was the requirement for goods specification in notifications concerning State Development Tax. The High Court did not find any specific mention of goods specification in the judgment, but the judgment emphasized the importance of correctly interpreting the clauses of the notification to determine the applicability of State Development Tax.

5. The independence of clauses specifying goods for exemption from State Development Tax was also a subject of discussion. The High Court highlighted that each clause in the notification referred to distinct categories of commodities and benefits, and they could stand independently. This independence was crucial in determining the applicability of State Development Tax in specific cases.

6. Lastly, the liability of the applicant for payment of State Development Tax was contested. The High Court ultimately ruled that the applicant was not liable for the payment of any State Development Tax, overturning the Tribunal's decision and allowing the revisions in favor of the assessee.