2013 (4) TMI 324 - HC - VAT and Sales Tax

Recognition in terms of Section 4-B of the U.P. Trade Tax Act, 1948 - Held that - The sole argument put forth before this Court on behalf of the Department/revisionist was that all these items, indicated above, were not directly and substantially connected with the generation of the electricity. So, the learned Tribunal did not rightly construe the provisions of law and allowed the special relief on those goods as per Section 4-B(2) of the Act - This contention has been rebutted by learned Counsel for the Corporation by contending that use of these items is indispensable in construction of a new unit or plant, which goes into production after the date Without establishment and making the provisions for its construction and effective running, the generation of the power is not possible. So, the Corporation was right in claiming the tax exemption, in respect of those goods used in the establishment and effective running of the plant, as per Section 4-B(2) of the Act, as the power can only be generated when the entire plant is established and becomes functional thereafter. This Court is convinced with the contention of the learned Counsel for the respondent Corporation and feels that the analogy, whereupon the decision of the Assessment Officer was based, lacks substance and was rightly rejected by the learned Tribunal - As such, impugned judgment and order passed by the Commercial Tax Tribunal requires no interference by this Court - The same is hereby upheld - This revision is dismissed.

Summary

Issues:
Challenge to judgment of Commercial Tax Tribunal regarding tax exemption on goods not directly used in electricity production under Section 4-B(2) of U.P. Trade Tax Act, 1948.

Analysis:
The case involved a challenge to the judgment of the Commercial Tax Tribunal concerning the tax exemption on goods not directly used in the production of electricity under Section 4-B(2) of the U.P. Trade Tax Act, 1948. The respondent, a joint venture engaged in electricity production and hydroelectric plant development, sought exemption for various items used in construction and establishment. The Assessing Officer allowed exemption only for items directly used in electricity production, leading to a tax levy on other items. The respondent argued that these items were essential for plant construction and effective operation, crucial for electricity generation. The Joint Commissioner (Appeal) upheld the Assessing Officer's decision, prompting the respondent to appeal to the Commercial Tax Tribunal, which ruled in their favor.

The key legal provision in question was Section 4-B(2) of the Act, which allows for recognition certificates for goods required in manufacturing or packing notified goods. The relevant notification specified the tax rates for different categories of goods. The Department argued that the items in question were not substantially connected to electricity generation, thus not eligible for tax exemption. In contrast, the respondent contended that these items were vital for plant construction and operation, essential for electricity generation. The Court agreed with the respondent's argument, emphasizing the importance of these items in establishing and running the plant effectively for electricity generation.

Ultimately, the Court upheld the Commercial Tax Tribunal's decision, stating that the Assessing Officer's reasoning lacked substance and that the respondent's claim for tax exemption on essential construction and operational items was valid under Section 4-B(2) of the Act. Consequently, the revision was dismissed, affirming the Tribunal's judgment on the tax exemption issue for the Assessment Year 2000-01.