2011 (4) TMI 1465 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment involves the challenge to a communication issued by the Commercial Tax Officer seeking recovery of tax from a Public Trust engaged in the manufacture and supply of furniture to schools in villages. The issues include the validity of exemption under the Sales Tax Act, continuation of exemption under the Value Added Tax Act, and the unilateral withdrawal of tax relief by the authorities.

Exemption under Sales Tax Act:
The petitioner, a registered Public Trust, had obtained exemption from payment of Sales Tax under the Gujarat Sales Tax Act based on a certificate issued by the Gujarat Rajya Khadi & Gramodhyog Board. The Trust's registration was renewed, and the exemption was continued till the validity period of the Sales Tax exemption certificate, even after the introduction of the Gujarat Value Added Tax Act in 2006.

Continuation of Exemption under Value Added Tax Act:
A Division Bench decision allowed the continuation of exemptions granted under the Sales Tax Act until their validity period. However, the Bench did not direct the extension of benefits under the Value Added Tax Act, leaving it to the legislative function or government policy to decide on such extensions. The Trust applied for a fresh exemption under a Circular issued by the Government in 2009, which was initially granted but later questioned by the authorities.

Unilateral Withdrawal of Tax Relief:
The authorities unilaterally decided that the exemption granted to the Trust under the Value Added Tax Act was erroneous and sought recovery of the tax relief amount. The Trust argued that it had fulfilled all requirements for the exemption and that the withdrawal was improper. The Court noted that the Trust was eligible to apply for fresh exemptions under government policies and that the authorities' perception of the Trust's entitlement to exemptions post-2008 was incorrect.

Court's Decision:
The Court held that the Trust was entitled to apply for fresh exemptions under the government's Circular and that the authorities' unilateral withdrawal of the exemption was not justified. The Court directed the Government to reconsider the Trust's application for exemption, and until a decision was made, no recovery of tax already availed of should occur. The Court emphasized that the Trust should not be entitled to any tax exemptions until the Government's final decision, which should be concluded within two months.

Conclusion:
The judgment clarifies the Trust's entitlement to exemptions under the Sales Tax and Value Added Tax Acts, emphasizing the importance of following government policies and procedures in granting and withdrawing tax reliefs. The Court's decision aims to ensure fair treatment of the Trust and proper consideration of its exemption application by the authorities.