2016 (10) TMI 258 - SC - VAT and Sales Tax

Denial of exemption from payment of sales tax - Industrial Policy, 1982 - blending and packing of Tea - Eligibilty Certificate - Held that - tea is not to be included in raw material and therefore, no exemption could have been claimed by the Appellant Company in respect of tea as a raw material for purchase as well as sale of tea. Certificate of Authorisation - Held that - no certificate of authorisation, as provided under the Act, had ever been granted to the appellant-Company - the appellant not entitled to any sales tax exemption. Reliance placed upon the decision in the case of COMMISSIONER OF INCOME TAX, KERALA Versus TARA AGENCIES 2007 (7) TMI 4 - SUPREME COURT OF INDIA where it was held that the appellant was not in the business of manufacturing tea but was merely blending and packing tea, which does not amount to manufacturing of tea. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Denial of sales tax exemption to the appellant-Company under the Assam Industries (Sales Tax Concession) Act, 1987.
2. Interpretation of legal provisions regarding eligibility for sales tax exemption and the requirement of a Certificate of Authorisation.
3. Estoppel against legal provisions and the distinction between blending/packing and manufacturing activities.

Analysis:
Issue 1: The appellant-Company contested the denial of sales tax exemption under the Assam Industries (Sales Tax Concession) Act, 1987, claiming eligibility based on the Industrial Policy of the government. The appellant argued that it had fulfilled all conditions under the 1986 Incentive Scheme and was issued an eligibility certificate for exemption. The appellant contended that the denial of exemption was unfair and illegal, citing estoppel principles and case law to support their position.

Issue 2: The State Authorities justified the denial of exemption by emphasizing Rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988, which excluded 'tea' as a raw material eligible for exemption. Additionally, the appellant's lack of a Certificate of Authorisation under Section 4 of the Act was highlighted as a basis for denying the exemption. The absence of this certificate rendered the appellant ineligible for the claimed sales tax benefits.

Issue 3: The courts examined the concept of estoppel against legal provisions, concluding that no estoppel can be claimed against the law. The appellant's argument based on the eligibility certificate issued under the 1986 Incentive Scheme was dismissed due to the exclusion of 'tea' as a raw material under the statutory Act. Furthermore, the distinction between blending/packing and manufacturing activities was crucial, with the appellant being deemed ineligible for exemption due to not engaging in manufacturing tea as per legal definitions.

The Supreme Court upheld the decisions of the lower courts, emphasizing the statutory provisions, lack of Certificate of Authorisation, and the legal interpretation of 'raw material' to exclude tea. The judgment dismissed the appeals, stating that the appellant was not entitled to sales tax exemption and rejecting claims based on estoppel principles. The Court's decision was based on a comprehensive analysis of the legal framework, factual circumstances, and precedents, ultimately affirming the denial of exemption to the appellant-Company.