2017 (5) TMI 735 - HC - VAT and Sales Tax

Levy of VAT - unmanufactured tobacco - Effect of the clarification - retrospective or prospective - neither the manufacturer collected the tax from the petitioners, nor the petitioners have collected the same from its customers - case of petitioners is that as per the provisions of the Act of 2002, the manufacturer shall levy the VAT on sell and collect it from the petitioners and then the petitioners shall in turn recover the same from its customers - Held that - the addition of explanation to Entry No. 45 A under notification dated 31.03.2012 is substantive provision and it is not merely clarificatory, as such would operate prospectively. It will have to be held that, unmanufactured tobacco sold in packets under a brand name would not be taxable from 01.04.2007 to 31.03.2012. The impugned trade circular 9T dated 30.06.2012 stating that explanation is merely clarificatory is held to be erroneous to that extent - The explanation to Entry 45 A of the Maharashtra Value Added Tax would operate prospectively and not retrospectively - matters are remanded to the Tribunal for deciding it afresh - appeal allowed by way of remand.

2005 (11) TMI 25 - SC

Issues Involved:
1. Validity of Trade Circular No. 9T of 2012 dated 30.06.2012.
2. Applicability of VAT on unmanufactured tobacco sold in packets under a brand name.
3. Interpretation of the explanation to Entry 45-A of the Maharashtra Value Added Tax Act, 2002.
4. Retrospective or prospective application of the explanation added by the notification dated 31.03.2012.
5. Authority of the State Government to amend the schedule by way of circular.
6. Compliance with procedural requirements under the Maharashtra Value Added Tax Act, 2002.

Detailed Analysis:

1. Validity of Trade Circular No. 9T of 2012 dated 30.06.2012:
The petitioners challenged the trade circular No. 9T of 2012, arguing that it was contrary to the notification dated 31.03.2012. The court examined whether the circular, which stated that the explanation added to Entry 45-A was merely clarificatory, was valid. The court concluded that the trade circular was erroneous to the extent that it claimed the explanation was clarificatory rather than substantive.

2. Applicability of VAT on unmanufactured tobacco sold in packets under a brand name:
The petitioners contended that they sold unmanufactured tobacco and did not object to the levy of VAT on it as per the notification dated 31.03.2012, effective from 01.04.2012. However, they argued that the circular was contrary to the notification and that VAT should not apply retrospectively. The court held that unmanufactured tobacco sold in packets under a brand name would not be taxable from 01.04.2007 to 31.03.2012.

3. Interpretation of the explanation to Entry 45-A of the Maharashtra Value Added Tax Act, 2002:
The court analyzed whether the explanation to Entry 45-A was clarificatory or substantive. The explanation stated that unmanufactured tobacco sold in packets under a brand name was not included in the category of unmanufactured tobacco. The court concluded that the explanation was substantive, creating a new class of taxable goods and thus could not be applied retrospectively.

4. Retrospective or prospective application of the explanation added by the notification dated 31.03.2012:
The court determined that the explanation added by the notification dated 31.03.2012 was substantive and thus should operate prospectively from 01.04.2012. The court emphasized that taxing statutes must be interpreted strictly, and any substantive change should not have retrospective effect.

5. Authority of the State Government to amend the schedule by way of circular:
The petitioners argued that the State Government could not amend the schedule by way of a circular. The court noted that under Section 9(1-A) of the Act, the State Government had the power to amend the schedule by notification, not by circular. The court found that the trade circular was not a valid instrument for amending the schedule and thus could not override the notification.

6. Compliance with procedural requirements under the Maharashtra Value Added Tax Act, 2002:
The petitioners argued that the respondent authorities did not follow procedural requirements, such as issuing defect notices or conducting business audits. The court noted that the authorities had not issued any notices under Section 23(2) of the Act and had not exercised powers under Section 22(1)(c). The court found that the authorities' actions in issuing show cause notices under Section 29(5) were not justified as the preconditions of Section 8 were not met.

Conclusion:
The court allowed the writ petitions, holding that unmanufactured tobacco sold in packets under a brand name covered under Tariff heading No. 2401 of the Central Excise Tariff Act would not be taxable up to 31.03.2012. The impugned trade circular 9T dated 30.06.2012 was held erroneous to the extent it stated that the explanation was merely clarificatory. The explanation to Entry 45-A of the Maharashtra Value Added Tax Act would operate prospectively and not retrospectively. The court quashed the orders passed by various authorities and remitted the matters to the Tribunal for fresh decisions in line with this judgment.

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