2014 (9) TMI 505 - HC - VAT and Sales Tax

Denial of exemption from payment of entry tax under the Notification No. A-3-995-ST-V(57) dated July 5, 1995 - Held that - if no tax is charged on goods in the taxing statute then there is no liability to pay tax but if in terms of the taxing statute the goods are liable to tax and the conditional exemption is granted from payment of tax, then the liability to pay the tax continues even if no tax is paid. In the present matter the petitioner was liable to pay the sales tax under the provisions of the M.P. General Sales Tax Act, 1958 but as a dealer conditional exemption was granted by the Notification dated October 23, 1981. Therefore, though no sales tax was paid by the petitioner for the period in question, its liability to pay the sales tax continued and under the Notification No. 55 dated July 5, 1995, his liability to pay the sales tax was reduced to two per cent, therefore, in terms of the Notification No. 57 dated July 5, 1995, the petitioner was entitled to claim exemption from payment of entry tax on the goods in question on satisfaction of the other conditions, which have been specified in the Notification No. 57 dated July 5, 1995. Impugned orders of the assessing authority dated February 13, 2004 as well as the revisional authority dated January 12, 2005, cannot be sustained and are hereby set aside. The assessing authority is directed to pass a fresh order of assessment by treating that the Notification No. 57 dated July 5, 1995 is attracted in the case of the petitioner, since the petitioner is liable to tax at two per cent on the sale under item No. 2 of the Notification No. 55 dated July 5, 1995, and extend him the benefit accruing from the exemption Notification No. 57 dated July 5, 1995, if the petitioner satisfies all other relevant conditions of the said notification. Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of exemption from payment of entry tax.
2. Applicability of Notification No. 57 dated July 5, 1995.
3. Interpretation of liability and exemption under tax statutes.

Detailed Analysis:

1. Denial of Exemption from Payment of Entry Tax:
The petitioner was denied exemption from payment of entry tax for the period April 1, 1996, to March 31, 1997, under Notification No. A-3-9-95-ST-V(57) dated July 5, 1995. The revisional authority rejected the petitioner's claim by an order dated January 12, 2005. The petitioner argued that they were initially granted exemption from sales tax and entry tax for five years from June 21, 1991, to June 20, 1996. However, the assessing authority levied entry tax after the exemption period expired, despite the petitioner's claim that they should be exempt under the new notification.

2. Applicability of Notification No. 57 dated July 5, 1995:
The petitioner contended that under Notification No. 55 dated July 5, 1995, the rate of sales tax on their goods was reduced to two percent, thus making them eligible for exemption from entry tax under Notification No. 57 dated July 5, 1995. The respondent argued that since the petitioner was already exempted from sales tax under an earlier notification, the reduction in sales tax rate under Notification No. 55 was not applicable, and hence, the petitioner was not entitled to the benefits of Notification No. 57.

3. Interpretation of Liability and Exemption under Tax Statutes:
The court examined the distinction between liability to tax and exemption from payment of tax. It referred to several judgments, including the Supreme Court's decision in A.V. Fernandez v. State of Kerala, which clarified that exemption from tax does not negate the liability to tax. The court also cited the Associated Cement Companies Ltd. case, which emphasized that exemption presupposes liability. The court concluded that the petitioner, despite being exempted from sales tax, was still liable to tax under the statute, and therefore, the reduction in tax rate under Notification No. 55 applied, making them eligible for entry tax exemption under Notification No. 57.

Conclusion:
The court held that the petitioner was entitled to the exemption from entry tax under Notification No. 57 dated July 5, 1995, as they were liable to pay sales tax at a reduced rate of two percent under Notification No. 55. The impugned orders of the assessing and revisional authorities were set aside, and the assessing authority was directed to reassess the petitioner's case by treating Notification No. 57 as applicable, provided the petitioner met all other relevant conditions of the notification. The petition was allowed to the extent indicated above.