2019 (2) TMI 1013 - HC - VAT and Sales Tax

Rate of tax - Tendu leaves - whether tax on minor forest produce has been reduced to 5% will also be applicable to Tendu leaves by treating the Tendu leaves also as a minor forest produce despite the Tendu leaves having been separately shown as a taxable item in Part III of Schedule II? - Section 15-B of the Chhattisgarh Value Added Tax Act, 2005 - error of interpretation. Held that - An exemption notification is not like a blackhole that it will suck out all entries given in the taxing statutes even though those goods and items are specifically notified and stand as they are without being altered or modified or indicated in the exemption notification. When they are specific taxable goods which are stand alone entries and are identifiable as such of commercial value, then unless the exemption notification specifically touches upon such entries for the benefit of exemption or concession, the Courts will not rush in to bring all such items which can fit into the general notification even though those items may come within a broad definition - thus, while interpreting different entries, attempts shall be made to find out whether the same answers the descriptions of the contents of the basic entry and only if it is not possible to do so, that recourse to residuary entry should be taken as a last resort. Since the notification extending benefit of 5% VAT has been issued by the State only for minor forest produce and the entry 'Tendu leaves' stands untouched as an item of highest incidence of tax and has been clubbed with some such goods like diesel, petrol, aviation fuel, etc., entries in Part III of Schedule II cannot be pulled out and read into a general notification with the object of extending benefit of the said notification. There is serious error of interpretation has been committed by the learned Single Judge by treating the Tendu leaves as a minor forest produce to allow benefit of reduced rate of tax at 5% when the said Schedule in VAT Act still stands and the incidence of tax shown therein is 25% - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Applicability of reduced VAT rate to Tendu leaves.
2. Interpretation of "minor forest produce" under VAT Act.
3. Validity of the notification issued by the State Government under Section 15-B of the VAT Act.

Detailed Analysis:

1. Applicability of reduced VAT rate to Tendu leaves:
The core issue was whether Tendu leaves, classified under Part III of Schedule II of the Chhattisgarh VAT Act, should be taxed at the reduced rate of 5% applicable to minor forest produce. The learned Single Judge had ruled that Tendu leaves should be taxed at the reduced rate, treating them as minor forest produce. However, the appellate court found this interpretation erroneous. The court emphasized that Tendu leaves are specifically listed in Part III of Schedule II, which prescribes a higher tax rate of 25%. The court concluded that the specific provision for Tendu leaves at a higher tax rate prevails over the general notification for minor forest produce.

2. Interpretation of "minor forest produce" under VAT Act:
The court examined whether Tendu leaves fall under the category of minor forest produce as per the VAT Act. The learned Single Judge had relied on the Chhattisgarh State Forest Policy and the Forest Rights Act, 2006, which include Tendu leaves in the definition of minor forest produce. However, the appellate court highlighted the principle that specific entries in tax statutes should be interpreted strictly. The court noted that the VAT Act does not define "minor forest produce" and that Tendu leaves are explicitly listed as a separate taxable item with a higher tax rate. The court referred to the principle that specific provisions override general ones, as established in cases like Mauri Yeast India Pvt. Ltd. v. State of Uttar Pradesh and Commercial Tax Officer, Rajasthan v. Binani Cement Ltd.

3. Validity of the notification issued by the State Government under Section 15-B of the VAT Act:
The notification in question reduced the tax rate on minor forest produce to 5%. The respondents argued that this should include Tendu leaves. However, the court found that the notification did not specifically mention Tendu leaves. The court emphasized that if the State intended to reduce the tax rate on Tendu leaves, it would have explicitly included them in the notification. The court also referred to a notification from 2004 listing minor forest produce, which did not include Tendu leaves. The court concluded that the learned Single Judge erred in expanding the scope of the exemption notification to include Tendu leaves.

Conclusion:
The appellate court allowed the writ appeals, setting aside the learned Single Judge's order. The court held that Tendu leaves are not entitled to the reduced VAT rate of 5% applicable to minor forest produce and should be taxed at the higher rate of 25% as specified in Part III of Schedule II of the VAT Act. The court emphasized the importance of strict interpretation of tax statutes and specific provisions prevailing over general ones.