2013 (4) TMI 733 - 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. exclusion clause can not be treated as a clarificatory clause or clarification of existing clause.

Summary

Issues:
Challenge to order of re-assessment under Section 21(2) of U.P. Trade Tax Act, 1948 for Assessment Year 2001-02 based on Notification No. 2792 dated 30.09.2004.

Analysis:
The writ petition was filed to quash the order of re-assessment passed by the Deputy Commissioner, Assessment, Commercial Tax, Chandauli, related to the Assessment Year 2001-02 under Section 21(2) of the U.P. Trade Tax Act, 1948. 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 dispute arose when an amendment excluded the manufacture of rice and its by-products from paddy from the exemption. The Trade Tax Commissioner clarified that manufacturing rice from paddy did not qualify for exemption. Respondent-2 sanctioned reassessment, leading to a challenge by the petitioner on the grounds of prospective application of the amendment.

The respondents argued that the word 'processing' in the relevant clause did not cover manufacturing rice from paddy. They contended that the amendment applied retrospectively, justifying the reassessment due to escaped assessment. The court referred to a previous Division Bench decision that upheld the exemption for units of Khadi Gram Udyog Board on the sale of rice. The State argued that manufacturing rice from paddy was not processing but manufacture, citing relevant case laws and clarifying the retrospective application of the amendment.

The court analyzed the Government Orders and notifications, emphasizing that the exemption covered the sale of rice as a cereal product. It differentiated between processing of cereals and processing of paddy, asserting that the exclusion of rice and its by-products from paddy in a subsequent amendment indicated a prospective application. The court rejected the State's argument, stating that the exclusion clause could not be considered clarificatory and that reassessment based on a subsequent notification not applicable for the assessment year was illegal. Consequently, the court allowed the writ petition, quashing the re-assessment order for the Assessment Year 2001-02 under Section 21(2) of the Act.