2022 (11) TMI 997 - HC - VAT and Sales Tax

Levy of Entry Tax - material consumed during trial production undertaken by petitioner between 05.08.2010 to 01.11.2010 - alleged date of commencement of commercial production - HELD THAT - A bare reading of the expression Business reveals that tax is leviable inter alia on the event of manufacturer whether or not such event is carried on with motive to make gain or profit and whether or not any gain or profit accrues from such manufacturer - Words and expression employed in Sec.2(d) of VAT Act are clear that tax is leviable on the activity of manufacturer notwithstanding such activity entailing profit or not. Thus, it is obvious that in the present case, the authorities have factually found that manufacturer had started business on 05.08.2010. Whether appellant chooses to call this process as a trial manufacturer will not make any difference. Importantly, the authorities have also factually found that not only manufacturing but sale of cement had also started from 05.08.2010 which is luminous by reading of the order of Appellate Board especially para 5(4). The so called trial production of cement and clinker from 05.08.2010 till 01.11.2010 when the appellant claims to have started commercial production has been claimed to be not coming within the definition of Business as defined in Sec.2(d) of VAT Act - this Court has no manner of doubt that factual findings rendered by the Appellate Board are in accordance with law and none of the proposed substantial questions of law are made out herein. Petition dismissed.

Summary

Issues:
1. Interpretation of the term "commencement of business" under the M.P. VAT Act, 2002.
2. Levy of Entry Tax during trial production.
3. Validity of interest imposition under Section 18(4) of the MP VAT Act.

Interpretation of "Commencement of Business":
The appeal challenged the legality of an order regarding the commencement of business under the M.P. VAT Act. The key question was whether a manufacturer's business starts when a profit-making structure for commercial production is established, or when commercial production actually begins. The Court analyzed the definition of "Business" under Section 2(d) of the VAT Act, emphasizing that tax liability arises when manufacturing activities commence, regardless of profit motives. The Court found that the manufacturer had indeed initiated business activities on a specific date, as evidenced by the start of cement production and sales. The Court dismissed the argument that trial production did not constitute business under the Act, citing factual findings supporting the commencement of business.

Levy of Entry Tax during Trial Production:
The dispute revolved around the imposition of Entry Tax on materials consumed during trial production. The Appellate Board upheld the tax levy, stating that cement production had commenced earlier than claimed by the appellant. The Court differentiated this case from a prior judgment involving construction materials, emphasizing that the current situation involved actual manufacturing activities. The Court concluded that the trial production period fell within the definition of "Business" under the VAT Act, warranting the imposition of Entry Tax.

Validity of Interest Imposition under Section 18(4) of the MP VAT Act:
The appellant contested the imposition of interest under Section 18(4) of the MP VAT Act. However, the Court found no merit in this argument due to the factual alignment with the law. Since no substantial legal questions were established, the Court dismissed the appeal without costs. The judgment highlighted the importance of factual findings in determining tax liabilities and upheld the decisions of the lower authorities regarding the commencement of business and tax obligations during trial production.