2016 (7) TMI 38 - HC - VAT and Sales Tax

Revision of assessment order to deny the exemption - Commissioner passed his revisional order on 21/22102010 and held that the petitioner was in breach of the condition of the sales tax exemption, since the petitioner discontinued the unit before the prescribed period - The Tribunal turned down the petitioner s contention that the discontinuation of the unit being on account of adverse financial conditions, cannot be seen as a breach of condition - Held that - despite the breach of condition, AO granted benefit of exemption. The action was thus clearly erroneous. Under section 67 of the Gujarat Sales Tax Act, Commissioner had power to take any order passed by the said authority in revision and pass such order as he thinks just and proper. Had the department demanded the past dues from the petitioner, for which, the exemption was already granted, perhaps the question of applicability of section 49 and 50 of the Act may arise. However, in the present case, all that the Commissioner did was to withdraw the benefit of adjusting the ascertained sales tax liability against the surviving exemption limit. - Demand confirmed - Decided against the petitioner.

Summary

Issues:
Challenge to judgment of Value Added Tax Tribunal regarding exemption under Sales Tax Act.

Analysis:
The petitioner, a registered company under the Companies Act, established a yarn texturizing unit with an exemption benefit under entry 255 of a notification by the State Government. The exemption was subject to conditions, including maintaining pollution control measures and continuous production. The petitioner breached the condition by discontinuing the unit before the prescribed period. The Commissioner held that the petitioner couldn't adjust the sales tax liability against the remaining exemption limit, leading to a revision order for tax payment with interest and penalty.

The petitioner contended that the Commissioner lacked power to impose tax through revisional powers without proper assessment under sections 49 and 50 of the Sales Tax Act. The petitioner cited legal precedents to support their argument. However, the AGP argued that the petitioner breached the exemption condition, justifying the Commissioner's corrective action through revisional powers. The Court noted that the petitioner failed to fulfill the condition of continuous production, leading to the exemption ceasing to operate as per clause 17 of the exemption notification. The Assessing Officer's decision to grant exemption despite the breach was deemed erroneous.

The Court upheld the Commissioner's authority under section 67 of the Gujarat Sales Tax Act to rectify the erroneous exemption benefit. The judgment clarified that the Commissioner's action was to withdraw the benefit of adjusting sales tax liability against the remaining exemption limit, not demanding past dues. The Tribunal had already removed the penalty portion, leading to the dismissal of the petition without interference.

In conclusion, the Court dismissed the petition challenging the Tribunal's decision, emphasizing the breach of exemption conditions and the Commissioner's corrective action within his revisional powers. The judgment highlighted the importance of fulfilling exemption conditions and the Commissioner's authority to rectify erroneous benefits under the Sales Tax Act.