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2022 (8) TMI 309 - HC - VAT and Sales TaxBenefit of set off of tax paid on raw materials - Manufacture of iron and steel goods - ambiguity in the Finance Department Notification bearing No.14687-CTA-37/2001 (Pt.) F. (SRO No.149/2001) dated 31.03.2001 - entitlement to claim set off of tax on purchase of raw materials separately indicated on the body of the bill/invoice - scope and authority of Rule 19 of the Orissa Entry Tax Rule, 1999 - validity of claim of set off of entry tax as made by the opposite party - HELD THAT - The language of Note (i) being unambiguous, there was no scope for the expression selling dealer to include any selling dealer not limited to the immediate selling dealer vis- -vis the Assessee. The purpose of Note (i) was clearly to imply only the person from whom the Assessee purchased the raw materials and not any previous seller. There was no scope for expanding the expression selling dealer to include any selling dealer previous to the involved in a transaction previous to the transaction. Consequently, the Court is not able to agree with the approach of the Tribunal in an interpretation of Note 1. On a collective reading of Clauses (i) and (iii) of Note 2, it is plain that the set off has to be only proportionate to the actual raw material used in production of the finished products of that particular financial year. The approach of the STO as affirmed by the ACST and the interpretation placed on the above clause appears to be correct. Here again, the Court is unable to concur with the view expressed by the Tribunal. Issue answered in favour of the Revenue and against the Assessee.
Issues Involved:
Interpretation of Finance Department Notification for set off of tax on raw materials, Authority of Sales Tax Tribunal under Orissa Entry Tax Rule, 1999, Interference with the view of the first appellate authority regarding set off of entry tax, Calculation of set off on sales tax paid on raw materials against sales tax due on finished goods, Enhancement of gross turnover based on best judgment assessment. Analysis: Issue 1: Interpretation of Finance Department Notification The Court framed questions regarding the ambiguity in the Finance Department Notification and the entitlement of the dealer to claim set off of tax on raw materials. The Assessee claimed set off for tax paid on raw materials used in manufacturing iron and steel goods. The Sales Tax Officer allowed set off only for direct purchases reflecting tax on the bill. The Tribunal, however, expanded the meaning of 'selling dealer' to include any previous seller, contrary to the clear language of the notification. The Court disagreed with the Tribunal's interpretation, ruling in favor of the Revenue. Issue 2: Authority of Sales Tax Tribunal under Orissa Entry Tax Rule, 1999 The Tribunal's decision on whether raw materials not used in the production of the financial year qualify for set off was challenged. The Tribunal held that set off should be calculated based on sales tax paid on raw materials against sales tax due on finished goods in a financial year. The Court disagreed with the Tribunal's interpretation, affirming the STO's approach and ruling in favor of the Revenue. Issue 3: Interference with the view of the first appellate authority The Tribunal's interference with the first appellate authority's decision regarding the set off of entry tax was questioned. The Tribunal's acceptance of the Assessee's contentions on set off was found to be incorrect by the Court. The Court ruled in favor of the Revenue, setting aside the Tribunal's order. Issue 4: Calculation of set off on sales tax paid on raw materials The calculation of set off on sales tax paid on raw materials against sales tax due on finished goods was a key issue. The Assessee claimed set off based on a formula, but the STO allowed set off only in proportion to sales tax paid on raw materials used in production. The Court upheld the STO's approach, ruling in favor of the Revenue. Issue 5: Enhancement of gross turnover based on best judgment assessment The STO enhanced the gross turnover based on a fraud case report alleging purchase suppression. The Tribunal did not interfere with this enhancement. The Court found the STO's action justified, rejecting the Assessee's appeal and ruling in favor of the Revenue. In conclusion, the Court allowed the revision petition, setting aside the Tribunal's order in favor of the Revenue based on the detailed analysis and interpretation of the relevant legal provisions and notifications.
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