2014 (3) TMI 864 - SC - VAT and Sales Tax

Validity of High Court order Tax Exemption Notifications - Explanatory and/or clarificatory Notifications - Whether Notifications of 2001 and 1999 should be treated as independent Notification or Notification explaining the Notification of 1999 and thus operative from the date of the original Notification Held that - The subsequent notification was only to further clarify that the exemption was available only in relation to the products which were manufactured by the industries and for which exemption was availed prior to 1999 - By virtue of the first notification, Entry 68 stood deleted from the second schedule - The second notification issued on the same day restored the exemption already availed under Entry 68 - The said notification under Clause XI also empowered the Government to issue directives from time to time to clarify the scope of the second notification of 1999 - Third notification brought out the terms more explicitly to fall within the terms clarificatory or explanatory notification - An explanation should only explain or clarify - If it excepts, excludes or restricts, it is not an explanation, but a proviso, and should be considered as operative only from the date of its coming into effect - Therefore, had the notification issued by the Government, instead of removing the ambiguity in the earlier notification, introduced fresh conditions bringing substantial changes in the Notification then the notification would not have been explanatory or clarificatory. It is manifest that the intention of the Government was not only to extend the benefit of exemption under Entry 68, Clause XI of the second notification to those dealers who had obtained the certificate of registration and had been enoying exemption on a class of goods prior to 31.12.1999 but also those who have not effected any change in the product manufactured by them after 30.04.2000 - The appellant(s) did not manufacture prior to the issuance of the first notification and further obtained the registration for a different class of goods which included computer stationeries and other related products after 30.04.2000 and therefore such industry would not be entitled to claim the benefit under the Entry 68 by taking shelter of Clause IX of the second notification of December - The second notification, therefore, being clarificatory would apply retrospectively to the appellant(s) - Judgment and order passed by the High Court affirmed and the appeal is dismissed - No order as to cost Decided against assessee.

Summary

Issues Involved:
1. Validity of the High Court's dismissal of the writ petition challenging the notifications.
2. Eligibility of the appellant for sales tax exemption on newly added products.
3. Interpretation of the notifications dated 31.12.1999 and 17.10.2001 and their retrospective application.

Detailed Analysis:

1. Validity of the High Court's Dismissal of the Writ Petition:
The High Court dismissed the writ petition filed by the appellant challenging Notification Nos. DMN/CST/2001-02/01 and DMN/CST/2001-02/02, dated 17.01.2001. The appellant contended that the notifications issued by the State Government in exercise of its powers under Section 10A of the Goa, Daman and Diu Sales Tax Act, 1964, took away vested rights and imposed fresh conditions retrospectively. The High Court, however, found that the notifications were explanatory/clarificatory and upheld their validity.

2. Eligibility of the Appellant for Sales Tax Exemption on Newly Added Products:
The appellant, M/s. Shiv Ganga Paper Convertors Pvt. Ltd., acquired M/s. Sharda Packaging Industries and sought to include additional items like computer stationery and consumables in their registration. The Sales Tax Officer issued a show cause notice stating that the appellant could only claim exemption on corrugated boxes, not on the newly added items. The appellant argued that the notification dated 17.10.2001, which restricted changes in the class of goods, took away their vested rights.

3. Interpretation of the Notifications Dated 31.12.1999 and 17.10.2001 and Their Retrospective Application:
The notifications dated 31.12.1999 omitted Entry Nos. 68 and 85 of the Second Schedule to the Local Act, which provided sales tax exemption to certain goods manufactured by small scale industries. However, a subsequent notification issued on the same day extended the benefit of exemption for the unexpired period to those industries that had obtained registration and were enjoying exemption prior to 31.12.1999.

The notification dated 17.10.2001 further clarified that industries should not change their constitution, ownership, or class of goods manufactured after 30.04.2000 to continue enjoying the exemption. The Supreme Court held that this notification was clarificatory and had retrospective effect. The Court referenced previous judgments, including W.P.I.L. Ltd., Ghaziabad vs. Commissioner of Central Excise, and Collector of Excise, Shillong vs. Wood Craft Products Ltd., to support the principle that clarificatory notifications can operate retrospectively.

Conclusion:
The Supreme Court affirmed the High Court's judgment, concluding that the notification dated 17.10.2001 was merely clarificatory and did not impose fresh conditions with retrospective effect. The appellant's industry, which did not commence production before 31.12.1999 and sought to include new items after 30.04.2000, was not entitled to claim the benefit of sales tax exemption under Entry 68. The appeal was dismissed, and the High Court's order was upheld.