2012 (10) TMI 30 - SC - VAT and Sales Tax

Exemption from payment of Sales tax to new industrial units in Madhya Pradesh - Writ Petition benefit of Notification granting exemption from payment of Sales tax to new industrial units in Madhya Pradesh - Clause 5 of the notification Held that - Clause 5 of Chapter-1 of the said Notification which specifically states that products, by-products and the waste products, if they are manufactured by an assessee along with the principal products, then only he will be entitled to take the benefit of the exemption Notification - products, that the assessee is manufacturing after diversification, by no stretch of imagination can be termed as additional principal products, by-products and waste products and therefore, the assessee is not entitled to exemption of benefit under the notification. The exemption Notification requires to be strictly construed and it is only when the assessee falls under that Notification, liberal construction should be placed - appeals are dismissed.

Summary

Issues:
- Interpretation of exemption notification for sales tax benefit under modernization or diversification in industrial units.

Analysis:
The case involves appeals challenging a judgment and order passed by the High Court of Madhya Pradesh regarding the interpretation of a state government notification granting exemption from sales tax to new industrial units in Madhya Pradesh. The appellant, a manufacturer of plastic products used in telephone cables, diversified production to include DVD boxes, television sets, and sanitary napkins. The State Level Committee rejected the exemption request for the diversified products. The State Appellate Forum and the High Court upheld the rejection. The central issue is whether the appellant is entitled to sales tax exemption for diversified products under the notification. The relevant clause states that the benefit is available for additional principal products, by-products, and waste products manufactured alongside the principal products. The court emphasized strict construction of the notification, stating that the diversified products do not qualify as additional principal products or by-products, thus disqualifying the appellant from the exemption.

The court cited established legal principles that exemption notification eligibility criteria must be strictly construed, but once satisfied, the notification should be liberally interpreted. Referring to previous judgments, the court highlighted the importance of meeting eligibility criteria and then applying a liberal interpretation to exemption notifications. The court also emphasized the literal reading of exemption notifications and the need for the assessee to demonstrate eligibility for the exemption. Ultimately, the court found no error in the High Court's judgment and dismissed the appeals, upholding the decision that the appellant was not entitled to sales tax exemption for the diversified products under the notification.