2013 (11) TMI 1012 - HC - VAT and Sales Tax

Reopening of assessment - Exemption of trade tax on the sale of rice - Notification No. 709 - Held that - units of Khadi Gram Udyog Board were entitled for exemption of trade tax on the sale of rice under the Government Order dated 31.01.1985 and Government Order dated 27.02.1997. Accordingly, the exemption from trade tax liability on the sale of rice claimed on the basis of Government Order dated 27.02.1997, was rightly given - the words processing, packaging and marketing of cereals, pulses, masalas and chhonks have been used. Thus it was processing of the cereals and not processing of paddy. The word cereal means paddy, rice and all other food grains. Thus the exemption granted to the petitioner on the sale of rice was fully covered in the word cereals . The exclusion of specific goods clearly proves that the excluded goods were included in this clause prior to that date of exclusion. The notification dated 30.09.2004, which carries exclusion of some goods will apply prospectively and not with retrospective effect. The reassessment under Section 21 (2) on the basis of notification dated 30.09.2004, which was not applicable for the Assessment Years 2002-03 and 2003-04, was illegal - Decided in favour of assessee.

Summary

Issues:
Challenge to permission for reopening assessment and notices issued under Section 21 of Trade Tax Act for tax on sale of rice.

Analysis:
The petitioner, an institution certified by Uttar Pradesh Khadi and Gramodyog Board, challenged permission to reopen assessment and notices for tax on sale of rice. The Addl. Commissioner granted permission to reassess for 2002-03, 2003-04, and 2004-05 due to alleged tax evasion on rice sales. Initially challenged in Writ Petition No.2045 of 2008, the matter was remanded for fresh orders under Section 21(2) of the Act. The petitioner cited precedents like M/s Him Gramodyog Sansthan and M/s Shriram Gramodyog Vikas Samiti to support their case. The Court noted the exemption for Khadi Gram Udyog Board units on rice sale under Government Orders dated 31.01.1985 and 27.02.1997.

The State argued that rice manufacture from paddy is not processing but manufacturing, citing legal precedents. However, the Court held that the exemption under Government Orders covered rice sales as part of cereal processing. The subsequent Government Order dated 30.09.2004 excluded rice and its by-products from the exemption retrospectively. The petitioner paid tax on rice sales post-1.10.2004 following the withdrawal of exemption. Consequently, the Court allowed the writ petition, setting aside the impugned orders and notices for reassessment.

In conclusion, the judgment addressed the challenge to permission for reassessment and notices under the Trade Tax Act regarding tax on rice sales. It analyzed legal precedents and government orders to determine the applicability of exemptions and tax liabilities on rice processing. The Court's decision favored the petitioner, considering the retrospective effect of the exclusion of rice from the exemption clause.