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2021 (8) TMI 433 - HC - VAT and Sales TaxAvailability of sales tax exemption - taxable turnover of the Petitioner - order of the ACST confirmed on the ground that the Petitioner did not produce sufficient documentary evidence to substantiate its contentions - HELD THAT - The impugned orders of the ACST and the Appellate authority are unsustainable in law. In Vadilal Chemicals Ltd. 2005 (8) TMI 121 - SUPREME COURT , the Supreme Court disapproved of the sales tax authority in that case ignoring the certificate issued by the DIC. The Supreme Court took the view that it was not open to the sales tax authorities to cancel the eligibility certificate issued by the DIC and deprive the assessee of sales tax exemption. Indeed it is trite that it is the DIC which is the appropriate authority to determine whether a certain SSI unit needs to be granted eligibility from payment of sales tax in terms of the IPR 1989. The certificate so issued by the DIC cannot be brushed aside by the Sales Tax Department - In the present case, despite a clarification issue by the DIC that the Petitioner was eligible for the grant of exemption from payment of sales tax, notwithstanding the differing quantities of raw material consumption and finished product manufactured, there was no justification for the Sales tax Department to invoke Rule 80 of the OST Rules and issue the impugned SCN and the consequential fresh assessment order, which in turn was confirmed by the appellate authority. Petition disposed off.
Issues:
Challenge to show-cause notice and orders regarding sales tax assessment for the period 1996-97. Analysis: The petitioner, a small scale industrial unit, challenged a show-cause notice and subsequent orders related to the sales tax assessment for the year 1996-97. The petitioner, engaged in manufacturing steel furniture, almirahs, chairs, and tables, had received a certificate from the District Industries Centre (DIC) exempting them from sales tax on raw materials and finished products. The original sales tax assessment for 1996-97 was completed at nil taxable turnover. However, after objections from the Audit General (AG), proceedings were initiated under Section 12(8) of the Orissa Sales Tax Act. The Sales Tax Officer (STO) examined the books of accounts and confirmed the exemption from sales tax on raw materials and finished products. The STO verified that the petitioner's utilization of raw materials was within the prescribed limit set by the DIC. Subsequently, the DIC issued a clarification supporting the petitioner's exemption from sales tax based on the Industrial Policy Resolution (IPR) 1989. Despite this, a show-cause notice was issued by the Assistant Commissioner of Commercial Taxes (ACST) challenging the assessment order. The ACST revised the assessment order, claiming excess utilization of raw materials and finished products. The appellate authority upheld the ACST's order due to insufficient documentary evidence provided by the petitioner. The petitioner argued that the sales tax authorities should abide by the DIC certificate and not question its authenticity. The petitioner contended that the insistence on strict adherence to quantities mentioned in the DIC certificate was unfair. On the other hand, the Department argued that they followed the DIC certificate specifying quantities for sales tax exemption. The Department claimed that the DIC's clarification letter was vague and did not support the petitioner's case. The Court, after considering the arguments, found the orders of the ACST and the appellate authority unsustainable in law. Referring to a Supreme Court decision and a recent High Court order, the Court emphasized that the DIC's certificate granting exemption from sales tax should be respected by the Sales Tax Department. The Court highlighted that the DIC is the appropriate authority to determine eligibility for sales tax exemption under the IPR 1989. Despite the DIC's clarification, the Sales Tax Department had no justification to issue the impugned show-cause notice and subsequent orders. Consequently, the Court set aside the show-cause notice and orders issued by the ACST and the appellate authority. The petitioner was entitled to a refund of the amount deposited as per a previous order. The writ petition was disposed of with no orders as to costs.
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