2010 (5) TMI 820 - SC - VAT and Sales Tax

Whether Monocrotophos (Technical) and Dichlorvos (Technical) , being manufactured by the respondent (hereinafter referred to as the Dealer ) are chemicals and not pesticides within the meaning of Entry 43 of the negative list as contained in Schedule III to the Haryana General Sales Tax Rules, 1975 (for short the Rules )?

Summary

Issues:
Interpretation of Entry 43 of the negative list in the Haryana General Sales Tax Rules, 1975 concerning "pesticides" and "chemicals"; Validity of notification dated 16th December 1996; Retrospective effect of amendments in the sales tax exemption rules; Entitlement of sales tax exemption to industrial units under certain conditions.

Interpretation of Entry 43 - "Pesticides" vs. "Chemicals":
The case involved a dispute regarding whether the items manufactured by the Dealer fell under the category of "pesticides" or "chemicals" as per Entry 43 of the negative list in the Haryana General Sales Tax Rules, 1975. The High Court affirmed that the items were "chemicals" and not "pesticides," leading to the denial of sales tax exemption to the Dealer.

Validity of Notification dated 16th December 1996:
The notification dated 16th December 1996 included "Pesticides manufacturing and Formulations" in the negative list under Schedule III of the Rules. This notification had Notes specifying conditions for sales tax exemption, including an investment threshold and entitlement to benefits for certain industrial units.

Retrospective Effect of Amendments:
The issue of retrospective effect arose concerning the deletion of Note 2 to Schedule III, affecting the entitlement of Dealers to sales tax exemption. The Supreme Court, in a previous case, held that such deletions could not have retrospective effect, safeguarding the rights conferred by the earlier provisions.

Entitlement to Sales Tax Exemption:
The Dealer appealed the decision denying sales tax exemption, leading to a review by the Commissioner and Secretary to the Government of Haryana, Industries Department. The Commissioner allowed the appeal, stating that the items manufactured did not fall under the category of "Pesticides and formulations" in Entry 43, thereby granting sales tax exemption to the Dealer.

Resolution and Decision:
The Supreme Court partially allowed the appeal, modifying the impugned order to require a fresh consideration of the Dealer's case by the authorities concerned. The Court directed the expedited determination of the relief entitled to the Dealer, preferably within three months, without imposing any costs. The decision aimed to address the concerns raised by both parties and ensure a fair review of the Dealer's entitlement to sales tax exemption based on the Court's previous ruling.