2014 (8) TMI 1197 - HC - VAT and Sales Tax

Eligibility of sales tax exemption - sale of BOPP tapes and PVC adhesive tapes - applicability and scope of G.O.Ms. No.1772 (Revenue) dated 25-09-1958 - contention of the revenue, before the Tribunal, was that, in view of the addition of Entry 191 to the First Schedule, with effect from 15-02-1989, the earlier order of exemption in G.O.Ms. No.1772 (Revenue) dated 25-09-1958 ceased to remain in force; and the intention of the legislature was to bring adhesive tapes to tax. HELD THAT - The power to grant exemption from tax is referable to Section 9 of the Act. Section 9 empowers the State Government to notify exemptions from tax or interest and, under sub-Section (1) thereof, the State Government may, by notification in the Andhra Pradesh Gazette, make an exemption, in respect of any tax payable under the Act, on the sale or purchase of any specified class of goods. G.O.Ms. No.1772 (Revenue) dated 25-09-1958 was issued, in the exercise of the powers conferred under Section 9 (1) (i) of the Act, exempting all kinds of tapes, nawars and laces from tax - As an exemption notification was issued under Section 9 (1) of the Act, and was published in the A.P. Gazette, the order of exemption can only be rescinded or revoked by way of another notification published in the Andhra Pradesh Gazette. It is not in dispute that no notification was issued rescinding or revoking G.O.Ms. No.1772 (Revenue) dated 25-09-1958 after Entry 191 was added, to the First Schedule of the Act, by Act 4 of 1989 with effect from 15-02-1989. Exercise of power under Section 40, to amend the schedules to the Act, is distinct from the exercise of power to grant exemption under Section 9 of the Act. The mere fact that power was exercised under Section 40 to add an Entry to the First Schedule did not, by itself and without anything more, result in the exemption order, issued under Section 9 of the Act, ceasing to remain in force. It is only on a notification being issued in the A.P. Gazette, canceling or rescinding the earlier notification granting exemption, would the said order of exemption stand revoked. The mere fact that Entry 191 was added to the First Schedule, with effect from 15-02-1989, would not automatically result in the respondent being denied the benefit of exemption under G.O.Ms. No.1772 (Revenue) dated 25-09-1958, in as much as the said order of exemption, passed by the Government under Section 9 (1) of the Act, was not rescinded or revoked by way of a notification in the A.P. Gazette even after Entry 191 was added to the First Schedule. As long as the order of exemption in G.O.Ms. No.1772 (Revenue) dated 25-09-1958 remained in force, the assessing authority could not have denied them the benefit of exemption - there are no error in the order of the Tribunal necessitating its Revision. Tax revision dismissed.

Summary

Issues:
1. Interpretation of exemption orders in relation to amendments made to the First Schedule of the Act.
2. Scope of power under Section 9 of the Act to grant exemptions from tax.
3. Effect of adding new entries to the First Schedule on existing exemption orders.
4. Distinction between power to amend schedules under Section 40 and power to grant exemptions under Section 9 of the Act.

Issue 1: Interpretation of exemption orders in relation to amendments made to the First Schedule of the Act:
The case involved a registered dealer claiming exemption on the sale of BOPP tapes and PVC adhesive tapes based on a government order. The Tribunal held that the introduction of new entries in the First Schedule did not automatically rescind the existing exemption order. The judgment emphasized that legislative amendments do not nullify executive orders unless specifically rescinded. The Tribunal relied on legal precedents to support the view that the exemption order remained valid until officially canceled.

Issue 2: Scope of power under Section 9 of the Act to grant exemptions from tax:
Section 9 of the Act empowers the State Government to grant exemptions from tax on specified goods. The judgment highlighted that exemptions are granted when goods are liable to tax; hence, there is no need for exemptions if goods are not taxable. The power to issue exemptions is tied to the taxability of goods, and any changes to exemption orders must follow the statutory procedures outlined in the Act.

Issue 3: Effect of adding new entries to the First Schedule on existing exemption orders:
The judgment discussed the addition of Entry 191 to the First Schedule, which included adhesive tapes. Despite this addition, the existing exemption order for tapes issued in 1958 remained in force as it was not officially revoked. The court emphasized that the mere addition of new entries did not automatically invalidate existing exemption orders, and proper notification in the Gazette was required to revoke exemptions.

Issue 4: Distinction between power to amend schedules under Section 40 and power to grant exemptions under Section 9 of the Act:
The judgment clarified the distinction between the power to amend schedules under Section 40 and the power to grant exemptions under Section 9. It highlighted that the addition of new entries to the schedule did not automatically revoke existing exemption orders. The court emphasized that unless a formal notification rescinding the exemption order was issued, the benefits of the exemption would continue to apply.

In conclusion, the court dismissed the Tax Revision Case, upholding the dealer's right to exemption based on the existing order despite the addition of new entries to the First Schedule. The judgment emphasized the importance of following statutory procedures for amending or revoking exemption orders to ensure clarity and legal validity in tax matters.