2015 (4) TMI 491 - HC - VAT and Sales Tax

Disallowance of for tax exempted sales of agricultural implements - Tractor trailers for use in agricultural purpose - Whether under the facts and in circumstances of the case, the Appellate Board is right in law and had valid material to hold that Tractor trailers, sold by the appellant were not for use in agricultural purpose and not entitled for exemption from payment of tax under Entry No. 1 of Schedule I of the Act, read with Entry No. 55 of notification No. A-3-6-2000/ST-V(52), dated 17-07-2000, being Tractor trailers for use in agricultural purpose - Held that - Tractor trailers were ultimately intended to be used for agricultural purpose. It was immaterial whether these were sold directly to the agriculturists or to the agriculturists through dealers/distributors. It was not necessary for the assessee to establish that the trailers sold were actually used for the agricultural purpose. - appellate board erred in holding that tax exemption could be granted only in respect of the trailers sold directly to the agriculturists and where the trailers were sold through distributor/dealer, the exemption from tax was available to such dealer/distributor when he would have sold such trailers to the agriculturists. As such, the impugned order is not sustainable in the eyes of law. - Decided in favour of assessee.

Summary

Issues:
Challenge to VAT Tax Appeal decision regarding tax exemption for tractor trailers sold indirectly to agriculturists through dealers/distributors.

Analysis:
The case involved a VAT Tax Appeal against an order passed by the Madhya Pradesh Commercial Tax Appellate Board, which dismissed the appeal challenging the tax assessment on the sale of tractor trailers. The appellant, engaged in manufacturing agricultural implements, had claimed tax exemption on the sale of tractor trailers used for agricultural purposes. The assessing authority disallowed the claim, stating that sales made to dealers were not qualified for tax-free sales. This decision was upheld by the Appellate Deputy Commissioner and the Commercial Tax Appellate Board, leading to the appeal.

The substantial question of law in this case was whether the tractor trailers sold by the appellant were for use in agricultural purposes and entitled to tax exemption. The appellant relied on specific entries in the Madhya Pradesh Commercial Tax Act and a notification to support their claim. They argued that the trailers were intended for agricultural use, irrespective of direct sale to agriculturists or sale through dealers.

The court had to consider whether the sale of trailers indirectly to agriculturists through dealers/distributors qualified for tax exemption under the relevant provisions of the Commercial Tax Act. The interpretation of the expression "for use" in the notification dated 17.07.2000 was crucial for determining the eligibility for tax exemption.

Referring to a Supreme Court judgment, the court emphasized that the expression "for use" must mean "intended for use." It was clarified that the actual use of the trailers for agricultural purposes was immaterial, as long as they were intended for such use. Therefore, the court held that tax exemption could not be limited to trailers sold directly to agriculturists and overturned the decision of the appellate board.

In conclusion, the court set aside the impugned order of the Commercial Tax Appellate Board, ruling in favor of the appellant and granting tax exemption on the sale of tractor trailers intended for agricultural purposes, irrespective of the sales channel.