2023 (3) TMI 572 - HC - VAT and Sales Tax

Exemption from payment of sales tax on the sales turnover of finished products namely molasses, bagasse and filter mud - G.O. No. CI 30 SPC 96 dated 15-03-1996 read with notification No. FD 32 CSL 96 (I) dated 15-11-1996 - Revenue s specific case is, the exemption notification specifically mentions the word manufacture , hence, the by-products cannot be considered as products manufactured. Whether the petitioner is entitled for exemption from payment of tax on molasses, bagasse and filter mud under 1996-2001 Industrial Policy? HELD THAT - It is not disputed that the activities of both petitioner and Chamundeshwari are identical. There is no pleading on behalf of the State Government that the benefit is denied to the petitioner based on the interpretation of the words manufacture and production . It is only at the time of final hearing of this writ petition the learned Additional Advocate General sought to justify the action of the State Government by placing reliance of Arihant Tiles. The indubitable fact remains that, according to both petitioner and the State Government, the activities of petitioner and Chamundeshwari are one and the same. The State Government s action amounts to conscious discrimination between two similarly situated industrial units. It is relevant to note that Chamundeshwari Industry was granted sales tax exemption on sale of by-products of sugar under Industrial Policy 1993-98 and it also enjoyed the benefit of deferral of purchase tax as interest free loan from 2000 to 2010. The petitioner being similarly situated as that of Chamundeshwari shall be entitled for exemption from payment of sales tax on by-products namely molasses, bagasse and filter mud - petition allowed.

Summary

Issues Involved:
1. Quashing the order dated 22.02.2018 by the 5th Respondent.
2. Declaration of entitlement for exemption from sales tax on molasses, bagasse, and filter mud.
3. Direction to issue FAVC for claiming sales tax exemption.
4. Consideration of discrimination and violation of Article 14.

Detailed Analysis:

Issue 1: Quashing the Order Dated 22.02.2018
The petitioner sought a writ of certiorari to quash the order dated 22.02.2018 by the 5th Respondent, which rejected the petitioner's claim for sales tax exemption on by-products of sugar. The court found that the State Government had discriminated against the petitioner by not referring the matter to the SLCC for reconsideration, despite a similar case being granted exemption. This amounted to a violation of Article 14 of the Constitution of India.

Issue 2: Declaration of Entitlement for Sales Tax Exemption
The petitioner argued that they were entitled to sales tax exemption on the sale of by-products such as molasses, bagasse, and filter mud under the Industrial Policy 1996-2001. The court examined the Industrial Policy and noted that the petitioner was already enjoying the benefit of purchase tax deferment for ten years as an interest-free loan. The court concluded that the petitioner should be entitled to the same benefits as another company, Chamundeshwari, which was granted similar exemptions under a different policy (Industrial Policy 1993-1998). The court found that the activities of both companies were identical and the State Government's action amounted to conscious discrimination.

Issue 3: Direction to Issue FAVC
The petitioner requested the issuance of a Fixed Assets Valuation Certificate (FAVC) to claim the sales tax exemption. The court noted that the petitioner's FAVC had been unjustly denied, resulting in the denial of the benefit of sales tax exemption. The court directed the second respondent to issue the necessary certificate to facilitate the petitioner in claiming the sales tax exemption.

Issue 4: Consideration of Discrimination and Violation of Article 14
The petitioner contended that the denial of sales tax exemption constituted gross discrimination and a violation of Article 14 of the Constitution of India. The court agreed, stating that the State Government's action of granting exemption to Chamundeshwari while denying the same to the petitioner was discriminatory. The court emphasized that fiscal statutes must be construed strictly, and any ambiguity should be interpreted in favor of the taxpayer.

Conclusion:
The court allowed the writ petition, quashed the order dated 22.02.2018, and held that the petitioner was entitled to exemption from payment of tax on by-products of sugar. The court directed the second respondent to issue the necessary certificate to enable the petitioner to claim the sales tax exemption. The court emphasized that the petitioner was similarly situated as Chamundeshwari and should be treated equally, thereby upholding the principles of non-discrimination and fairness.