2016 (9) TMI 355 - HC - VAT and Sales Tax

Taxability - Indian Made Foreign Liquor spirit sold outside the state - benefit by virtue of entry No.18 to Schedule I of the Commercial Tax Act exemption from payment of Commercial Tax and Central Sales Tax on the IMFL Held that - it is clear that to avoid double taxation in the matter of payment of excise duty on IMFL manufactured in Madhya Pradesh, Rule 12 has been framed, so that the manufacture is required to pay excise duty only once, i.e. either in the State of M.P. or in the State where it is exported. The intention of the rule maker is that the tax is paid only once. It is held that it becomes a tax free good and as the words used in the entries are goods on which duty may be levied under the Excise Act , this would and could only mean that duty could be levied on the goods in question but the State Government thought it appropriate not to levy duty and once it is a good on which duty could be levied the exemption has to be granted exemption available on IMFL. Statutory remedy of appeal maintainability Held that - it is well settled principle of law that if any action is found to be contrary to law or unsustainable, then relegating a party to take recourse to the alternate remedy is not necessary. The case relied upon here is Paradip Port Trust Vs. Sales Tax Officer and other 1998 (3) TMI 585 - SUPREME COURT OF INDIA there is no reason to relegate the petitioners to take recourse to the alternate remedy available of filing appeal, once it is found that imposition of tax under the Commercial Tax Act/ VAT Act is unsustainable. Power to reopen reassessment - Re-assessment proceedings in accordance with law? Held that - once it is found that the imposition of duty is itself unsustainable it is not necessary to go into various other questions canvassed at the time of hearing including the power to reopen the assessment, the limitation for reopening assessment, non fulfillment of conditions statutory in nature etc petition allowed decided in favor of petitioner.

Summary

Issues Involved:
1. Exemption applicability under Entry 18, Schedule I of the M.P. Commercial Tax Act and Entry 47, Schedule I of the VAT Act for Indian Made Foreign Liquor (IMFL) exported from Madhya Pradesh.
2. Maintainability of the petition in view of the availability of an alternate remedy.
3. Legality of the re-assessment proceedings.

Detailed Analysis:

Exemption Applicability:
The primary issue was whether IMFL exported from Madhya Pradesh is exempt from payment of Commercial Tax/VAT under Entry 18, Schedule I of the M.P. Commercial Tax Act and Entry 47, Schedule I of the VAT Act. The petitioner argued that IMFL is exempted from tax as it is an excisable article under the M.P. Excise Act, even if excise duty is not actually levied on it. The court examined various statutory provisions and precedents, concluding that IMFL is indeed an excisable article on which duty may be levied under the M.P. Excise Act. The court noted that the mere fact that the State Government does not levy excise duty or grants exemptions does not alter the nature of the goods as excisable articles. Therefore, IMFL exported from Madhya Pradesh falls under the category of tax-free goods as per the relevant entries in the Commercial Tax Act and VAT Act.

Maintainability of the Petition:
The court addressed whether the petition is maintainable despite the availability of an alternate remedy of appeal. The petitioner argued that the levy itself is illegal, and thus, the writ petition is maintainable. The court referred to precedents, including Paradip Port Trust vs. Sales Tax Officer, which established that when a question involves the interpretation of statutory provisions, the High Court can exercise its jurisdiction. The court found that the imposition of tax under the Commercial Tax Act/VAT Act was unsustainable, thereby justifying the maintainability of the writ petition without relegating the petitioner to the alternate remedy.

Legality of the Re-assessment Proceedings:
The petitioner challenged the re-assessment proceedings on the grounds of limitation and procedural irregularities. However, the court decided that since the imposition of tax itself was found to be unsustainable, it was unnecessary to delve into the legality of the re-assessment proceedings. The court left these questions open for future consideration if required.

Conclusion:
The court allowed the petition, quashing the impugned orders, including the re-assessment order dated 30th December 2013, the re-assessment notice dated 21st December 2012, and the revisional authority's order dated 19th August 2014. The court concluded that IMFL exported from Madhya Pradesh is exempt from Commercial Tax/VAT, and the imposition of such tax was unsustainable. The petition was disposed of accordingly.