2013 (4) TMI 732 - HC - VAT and Sales Tax

hulling, cutting/trimming, processing, packaging and marketing of cereals have been used and not processing of paddy . The hulling of the cereal is nothing but hulling of the paddy for manufacture of rice. An exclusion clause can not be treated as a clarificatory clause, or clarification of existing clause.

Summary

Issues:
Quashing of order under U.P. Trade Tax Act for Assessment Years 2002-03 and 2003-04 based on exemption claims for sale of rice by a society registered with U.P. Khadi Gram Udyog Board.

Analysis:
The writ petition challenged the order passed by the Additional Commissioner under Section 21(2) of the U.P. Trade Tax Act, 1948, and the subsequent notice issued by the Deputy Commissioner for re-assessment proceedings. The petitioner, a society registered with U.P. Khadi Gram Udyog Board, claimed exemption from sales tax liability on the sale of rice under various Government Orders. The issue revolved around the interpretation of these Government Orders and whether the petitioner was entitled to exemption on the sale of rice.

The Additional Commissioner held that the petitioner was not entitled to exemption on the sale of rice as per the Government Orders, leading to the initiation of re-assessment proceedings. The respondents argued that the word 'processing' in the relevant clause did not cover the manufacture of rice from paddy, thus the exemption was wrongly granted. They contended that the Government Order dated 30.09.2004 clarified the previous notifications and applied retrospectively, justifying the re-assessment proceedings.

However, the Court referred to a previous Division Bench judgment where it was held that units of Khadi Gram Udyog Board were entitled to exemption on the sale of rice under specific Government Orders. The Court emphasized that the word 'cereals' in the Orders covered rice, and the subsequent exclusion of rice and its by-products from the Orders was prospective, not retrospective. Therefore, the reassessment based on the later notification was deemed illegal.

In conclusion, the Court allowed the writ petition, quashing the order under the U.P. Trade Tax Act for the Assessment Years 2002-03 and 2003-04, along with the notice for re-assessment proceedings. The judgment clarified the scope of exemption under the Government Orders and the retrospective application of subsequent notifications, ensuring the petitioner's entitlement to exemption on the sale of rice was upheld.