2013 (9) TMI 71 - HC - VAT and Sales Tax

Entry Tax - rebate to the extent of the amount of tax on the payment of Trade Tax - Interpretation of Notification - Notification dated 28.4.2005, cannot be interpreted in the manner that where the rate of entry tax and trade tax is at 5 %, and consequently rebate had to be given on the Trade Tax, in view of notification dated 7.3.2005, the exemption will be applicable for State Development Tax. Novopan India Ltd., Hyderabad v. Collector of Central Excise and Customs, Hyderabad, 1994 (9) TMI 67 - SUPREME COURT OF INDIA - The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle was good and sound does not apply to the construction of an exception or an exempting provision; they have to be construed strictly - A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. Under clause (iii) of the notification dated 28.4.2005, exemption from the State Development Tax was granted on the goods on which trade tax rebate was allowed to the full extent - The notification dated March 7, 2005, provided for rebate to the extent of the amount of tax paid by dealer on paper meant for writing, printing or packing purpose, excluding news print, under the Uttar Pradesh Tax on Entry of Goods Act, 2000, from the tax levied under the Uttar Pradesh Trade Tax Act 1948, on the sale of such paper subject to the conditions that - (i) the amount of rebate shall not exceed the amount of trade tax paid; (ii) rebate shall be allowed only in relation to such paper on which Central Excise Duty has been paid. - Decided against the assessee.

Summary

Issues Involved:

1. Quashing of Circular dated 7.9.2006.
2. Restraining Deputy Commissioner from realizing State Development Tax.
3. Quashing Notices dated 6.10.2006 and 11.12.2006.
4. Entitlement to Rebate on Trade Tax and Exemption from State Development Tax.

Issue-wise Detailed Analysis:

1. Quashing of Circular dated 7.9.2006:
The petitioners, manufacturers of paper for packing purposes, sought to quash the circular dated 7.9.2006 issued by the Commissioner of Trade Tax, U.P. Lucknow. The petitioners argued that this circular was inconsistent with the provisions of the U.P. Tax on Entry of Goods Act 2000 and the subsequent notifications that allowed rebates on Trade Tax to the extent of the Entry Tax paid.

2. Restraining Deputy Commissioner from Realizing State Development Tax:
The petitioners requested a writ of mandamus or prohibition to restrain the Deputy Commissioner (Assessment) Trade Tax, Muzaffarnagar, from taking any action for the realization of State Development Tax for the period April 2006 to November 2006. They argued that since they were entitled to a rebate on Trade Tax equivalent to the Entry Tax paid, they should not be liable for the State Development Tax.

3. Quashing Notices dated 6.10.2006 and 11.12.2006:
The petitioners sought to quash the notices dated 6.10.2006 and 11.12.2006 for the assessment year 2006-07, which demanded State Development Tax for the period April 2006 to November 2006. They contended that these notices were issued without considering the rebate provisions under the relevant notifications.

4. Entitlement to Rebate on Trade Tax and Exemption from State Development Tax:
The core issue revolved around the interpretation of the notifications dated 7.3.2005 and 28.04.2005. The petitioners argued that they were entitled to a rebate on Trade Tax to the extent of the Entry Tax paid, which was 5%. They relied on the notification dated 7.3.2005, which allowed such a rebate, and the notification dated 28.04.2005, which exempted goods from State Development Tax if the Trade Tax rebate was allowed to the full extent.

The court examined the relevant notifications and legal principles, including the strict interpretation of exemption notifications. It was noted that the notification dated 7.3.2005 provided a rebate to the extent of the amount of tax paid by the dealer, subject to certain conditions. The notification dated 28.04.2005 exempted goods from State Development Tax if the Trade Tax rebate was allowed to the full extent.

The court emphasized that exemption notifications must be strictly construed. The term "to the full extent" in the notification dated 28.04.2005 was interpreted to mean that the rebate must cover the entire amount of Trade Tax paid, not just an equivalent amount of Entry Tax. The court referred to various judgments, including Bhai Jaspal Singh and another Vs. Assistant Commissioner of Commercial Taxes and Others, which highlighted the need for strict interpretation of exemption provisions.

The court concluded that the petitioners' interpretation of the notifications was incorrect. The rebate allowed under the notification dated 7.3.2005 did not automatically entitle them to an exemption from State Development Tax under the notification dated 28.04.2005. The claim that the same rate of Entry Tax and Trade Tax should result in an exemption from State Development Tax was not supported by a strict interpretation of the notifications.

Conclusion:
The court dismissed the writ petitions, holding that the petitioners were not entitled to an exemption from State Development Tax merely because they had received a rebate on Trade Tax equivalent to the Entry Tax paid. The notifications required a strict interpretation, and the conditions for exemption were not met by the petitioners.