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2021 (4) TMI 1046 - HC - VAT and Sales TaxEligibility for exemption - M.S. Wires and M.S. Rods - consequential addition of purchase value of M.S.Rod with the gross turnover and taxable turnover in assessment is sustainable in law - HELD THAT - The sales tax authorities cannot ignore the DIC certificate issued in favour of the Petitioner expressly granting it exemption from payment of sales tax on M.S.Wires produced from M.S. Rods as raw material - The instant case is concerned with AY 1997-98. The STO, the ACST and the Tribunal were called upon to answer the question whether for the said AY the Petitioner could avail the sales tax exemption on the strength of the DIC certificate and whether it fulfilled the conditions therein? The fact that in a subsequent year, from 1st April 2000 onwards, when such exemption was no longer available, the Petitioner took a different stand cannot deprive the Petitioner from getting exemption for AY 1997-98 in terms of the certificate of the DIC. The tax liability for each AY had to be decided on the law prevailing in that AY and if for such AY the Petitioner fulfilled the condition for getting tax exemption, then such benefit could not be denied to it - The counter affidavit filed by the respondents-sales tax authorities is telling. It is said that the Sales Tax Department had decided to cancel the eligibility certificates for sales tax incentives. As we have said the eligibility certificates were issued by the Department of Industries and Commerce and could not be cancelled by the Sales Tax Authorities. The consequential addition of the purchase value of M.S. Rods in the gross turnover and tax turnover of the Petitioner in the assessment order in question cannot be justified and is hereby set aside. Revision petition disposed off.
Issues Involved:
1. Whether M.S. Wires and M.S. Rods are different commercial commodities and if the Petitioner is entitled to exemption. 2. Whether the addition of the purchase value of M.S. Rods to the gross turnover and taxable turnover is sustainable in law. Issue-wise Detailed Analysis: Issue 1: Different Commercial Commodities and Entitlement to Exemption The petitioner challenged the decision of the Orissa Sales Tax Tribunal, which upheld the denial of a sales tax exemption on M.S. Wires produced from M.S. Rods. The Tribunal had relied on the Supreme Court's decision in Telengana Steel Industries v. State of Andhra Pradesh, which held that iron wires and wire rods are not separate commercial goods and thus not eligible for separate taxation. However, the petitioner argued that a subsequent Supreme Court decision in K.A. K. Anwar and Co. v. State of Tamilnadu, which distinguished between raw and dressed hides and skins as different commodities, should apply. The court noted that the subsequent decision in K.A. K. Anwar and Co. by a larger bench prevails over the earlier decision in Telengana Steel Industries. The Tribunal's failure to appropriately consider this binding precedent was a significant error. The court emphasized that the sales tax authorities could not ignore the District Industries Center (DIC) certificate, which granted the petitioner exemption from sales tax on M.S. Wires produced from M.S. Rods. The court referred to the Supreme Court's decision in Vadilal Chemicals Ltd., which disapproved of sales tax authorities overriding exemptions granted by the Department of Industries and Commerce. Issue 2: Addition of Purchase Value to Gross and Taxable Turnover The court examined whether the addition of the purchase value of M.S. Rods to the gross turnover and taxable turnover was justified. The petitioner argued that for the assessment year (AY) 1997-98, the DIC certificate entitled them to an exemption, and this should be honored. The court agreed, stating that the tax liability for each AY should be determined based on the prevailing law and the conditions of the DIC certificate. The fact that the petitioner took a different stance in subsequent years did not affect their entitlement to exemption for AY 1997-98. The court also referred to SREI International Finance Ltd., where it was held that liability to pay tax must be imposed by law, not by admission. The decisions cited by the opposite party's counsel, which argued that drawing M.S. Wires from M.S. Rods does not amount to manufacture, were deemed irrelevant since the issue was about the entitlement to exemption based on the DIC certificate. Conclusion: The court set aside the orders of the Sales Tax Officer, Assistant Commissioner of Sales Tax, and the Tribunal. It held that the petitioner was entitled to the exemption for AY 1997-98 and that the addition of the purchase value of M.S. Rods to the gross and taxable turnover was not justified. The court ordered the refund of the amount deposited by the petitioner within eight weeks. Judgment: 1. The Tribunal's decision that the petitioner was not entitled to exemption was incorrect; M.S. Wires and M.S. Rods are different commodities. 2. The addition of the purchase value of M.S. Rods to the gross and taxable turnover was unjustified and is set aside. The reference was decided in favor of the petitioner, and the revision petition was disposed of accordingly. The court allowed the use of a printout of the order from the High Court's website as a certified copy, subject to attestation by the concerned advocate.
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