2018 (3) TMI 1716 - HC - VAT and Sales Tax

Rate of tax - Tendu Leaves - whether Tendu leaves can be brought within the ambit of notification issued by the State Government in exercise of its powers under Section 15(B) of the Chhattisgarh Value Added Tax Act, 2005 whereby tax on minor forest produce has been reduced to 5%? - Held that - There is no dispute of the fact that under Schedule-II of VAT Act there are various entries/items which are otherwise minor forest produces. Once when a notification has been issued invoking the powers under Section 15B of the VAT Act, there cannot be different conclusion drawn than that of the exemption so granted being in respect of those items which under the schedule are minor forest produces or else the notification would have been specific or at least the notification would have mentioned that the said notification would be applicable except for Tendu Leaves. There can be no dispute of the fact that the exemption certainly would be applicable only to those minor forest produces which are exigible to tax. Once when a generic term has been used by the legislature, it has to be construed as if the legislature meant all those items which fall under the said generic term which in the instant case is minor forest produce and which includes Tendu Leaves - Further there is no exclusion carved out in respect of any item including Tendu leaves from its applicability so far as the notification granting exemption under Section 15 B of CG VAT Act is concerned. This Court is of the opinion that vide notifications issued under Section 15 B of the VAT Act from time to time, the State Government has granted an exemption to a generic term known as minor forest produce which includes Tendu leaves as there is no clarification or exclusion in any of these notifications. Since minor forest produce has not been separately entered in the Schedule, it would be inclusive of all those items which are shown as taxable products under Schedule-II. Unless a product is exigible to tax, there can be no exemption or reduction in rate of tax. The petitioners are liable to pay tax only at the rate as specified in the notification issued under Section 15 B of the CG VAT Act, 2005 reducing the rate of tax to 5% - petition allowed.

Summary

Issues Involved:
1. Whether Tendu leaves fall under the ambit of the notification issued by the State Government under Section 15(B) of the Chhattisgarh Value Added Tax Act, 2005, reducing the tax on minor forest produce to 5%.
2. Whether the State Government can demand VAT on Tendu leaves at 25% despite the notification.

Detailed Analysis:

Issue 1: Applicability of Notification to Tendu Leaves

The primary issue in these writ petitions is whether Tendu leaves can be considered under the notification issued by the State Government under Section 15(B) of the Chhattisgarh Value Added Tax Act, 2005, which reduced the tax on minor forest produce to 5%. The petitioners, engaged in the business of Tendu leaves, argued that once the State Government exercised its power to reduce the tax rate on minor forest produce, the reduced rate should apply to Tendu leaves as well. They contended that Tendu leaves are undisputedly minor forest produce, and thus, the reduced tax rate of 5% should be applicable.

The court noted that the Chhattisgarh State Forest Policy, 2001, and the Forest Rights Act, 2006, define minor forest produce to include Tendu leaves. Furthermore, the court observed that the VAT Act does not specifically define minor forest produce, nor does it include a specific entry for minor forest produce in the schedule fixing the rate of tax. However, Tendu leaves are listed in Part-III of Schedule-II of the VAT Act with a tax rate of 25%.

The court emphasized that the notifications issued under Section 15(B) of the VAT Act, which granted exemptions to minor forest produce, should be interpreted to include all items classified as minor forest produce, including Tendu leaves. The court relied on the principle that when a generic term is used by the legislature, it should be construed to include all items falling under that term unless explicitly excluded.

Issue 2: Demand for VAT at 25%

The State Government argued that Tendu leaves are specifically listed in Part-III of Schedule-II with a tax rate of 25%, and unless a specific notification alters this rate, the petitioners are liable to pay the 25% tax. The State contended that the general notification reducing the tax on minor forest produce does not specifically mention Tendu leaves, implying their exclusion from the reduced rate.

The court rejected this argument, stating that the exemption notifications issued under Section 15(B) of the VAT Act were intended to apply to all minor forest produce items listed in Schedule-II. The court highlighted that there was no specific exclusion of Tendu leaves in the notifications, and thus, the reduced tax rate should apply to them. The court referred to the Supreme Court's judgment in M/s Zunaid Enterprises & Ors. Vs. State of Chhattisgarh & Ors, which established that Tendu leaves are minor forest produce.

The court concluded that the State Government's notifications under Section 15(B) reduced the tax rate for minor forest produce, including Tendu leaves, to 5%. Therefore, the petitioners are liable to pay VAT at the reduced rate of 5%. The court directed the authorities to recalculate the VAT payable by the petitioners accordingly and refund or adjust any excess payment made.

Conclusion:

The court allowed the petitions, holding that the petitioners are liable to pay tax at the rate specified in the notification under Section 15(B) of the CG VAT Act, 2005, reducing the tax rate to 5%. The court quashed the impugned notices and orders, directing the authorities to recalculate the VAT payable by each petitioner at the reduced rate and refund or adjust any excess payment made.