2019 (11) TMI 1427 - HC - VAT and Sales Tax

Interpretation of statute - Effect of amending provision - retrospective or prospective effect? - Set-off of Orissa Value Added Tax - input tax credit - Revenue contended that the word substitute in a declaratory legislation is not intended to give effect retrospectively - HELD THAT - In a tax statute, the word substitute is to be interpreted strictly as per the legislative intention. It cannot be given the retrospective effect unless expressly provided or intention to that effect is manifest from a bare reading of the provision - If an ordinary interpretation is made as per the case law relied by the petitioner, then if any tax is increased, it cannot be realized retrospectively, which can never be the intention of such substitution . Therefore, amending provision will have prospective effect. Thus, every word in a tax statute should be interpreted strictly as it stood on the date the taxing event exists or it occurs. Thus, the argument canvassed by the learned counsel for the petitioner is devoid of any merit, is required to be rejected and is rejected - petition dismissed.

Summary

Issues Involved:
1. Validity of the order dated 26.05.2006 and consequential notice dated 03.07.2006.
2. Interpretation of Section 21 of the OVAT Act and its amendments.
3. Retrospective application of legislative amendments.
4. Entitlement to input tax credit and refund.

Detailed Analysis:

Validity of the Order and Notice:
The petitioner challenged the order dated 26.05.2006 and the consequential notice dated 03.07.2006 issued by the Assistant Commissioner of Sales Tax under Rule 16 of the Central Sales Tax (Orissa) Rules, 1957, seeking a refund of ?15,00,000/-. The Assistant Commissioner, relying on the law, passed an order rejecting the claim of the petitioner, holding that it is not entitled to avail the input tax credit.

Interpretation of Section 21 of the OVAT Act:
The petitioner contended that as per the White Paper on State-Level Value Added Tax and Section 21 of the VAT Act, which was effective from 01.04.2005 to 30.06.2005, the State Government assured industries that payment of Orissa Value Added Tax would be given set-off. However, the State Government amended Section 21(1) of the OVAT Act effective from 01.07.2005, changing the provisions for set-off. The amended Section 21(1) stated that excess input tax credit would be set off against the tax payable under the Central Sales Tax Act, 1956, and any remaining balance would be carried forward.

Retrospective Application of Legislative Amendments:
The petitioner relied on several Supreme Court judgments to argue that the term "substituted" should be given retrospective effect. The cases cited include:
- Sunil Kumar Rana v. State of Haryana: Emphasized the legislative intent and the need for purposive construction to avoid anomalies.
- Zile Singh v. State of Haryana: Discussed the presumption against retrospective operation unless the statute is declaratory or explanatory.
- Government of India v. Indian Tobacco Association: Highlighted that amendments to correct obvious mistakes should be construed liberally.
- Gottumukkala Venkata Krishamraju v. Union of India: Argued for the retrospective application of amendments to serve the legislative purpose.

Entitlement to Input Tax Credit and Refund:
The court held that in a tax statute, the word "substitute" should be interpreted strictly according to the legislative intention and cannot be given retrospective effect unless expressly provided. The court emphasized that every word in a tax statute should be interpreted as it stood on the date the taxing event occurred. Consequently, the argument for retrospective application was rejected.

Conclusion:
The court concluded that the amending provision would have prospective effect. It directed that if there was any excess payment made by the petitioner, they could apply for a refund before the Assessing Officer, who would then pass an appropriate order within four months from the date of the application. The writ petition was accordingly disposed of.