2023 (3) TMI 229 - HC - VAT and Sales Tax

Classification of goods - rate of tax - sale of Wheat Bran (Chokad) - Taxable @ 4% treating the same as industrial input coming under SI No.74 of Part-II of Schedule-B particularly when Wheat Bran (Chokad) is generally exempted under Entry 3 of Schedule-A? - HELD THAT - The fact remains that an entry in a taxation statute admits only of strict interpretation. If the legislative intent was that there should be some conditionality attached to granting exemption from VAT on the sale of Chokad , then it should have been expressly stated as has been done in Column 3 in regard to Entries 24 and 38. That there being no such conditionality as far as Entry 3 is concerned, the only conclusion that can be drawn is that sales of Chokad irrespective of the purpose for which such Chokad has been purchased by the buyer, would be exempt from VAT. It is not even the Department s case that any notification has been issued by the State Government stating that Chokad is an Industrial input for the purposes of Entry 74 of Schedule B . Without noticing this requirement in Entry 74, both the STO as well as the JCST fell into error in drawing an inference that Chokad sold to NALCO must naturally have been used as an industrial input. This cannot be a matter of surmise or conjecture. If Entry 74 of Schedule B had to be made applicable in order that the sale of Chokad to NALCO is amenable to tax at 4%, then it was necessary for the Department to show that there was a notification issued by the State Government identifying Chokad as an industrial input . In the absence of such notification, no inference could have been drawn that Chokad sold to NALCO was in fact an Industrial input . The Court is, therefore, satisfied that the STO, the JCST and the Tribunal erred in treating the sale of Chokad by the Petitioner to NALCO as an industrial input attracting VAT at 4%. The question framed is answered in the negative, i.e., in favour of the Petitioner-dealer and against the Department.

Summary

Issues:
Interpretation of tax liability on the sale of 'Chokad' under the Odisha Value Added Tax Act, 2004.

Analysis:
1. The petition arises from an order passed by the Odisha Sales Tax Tribunal confirming a tax demand against the dealer for selling 'Chokad' to an industrial unit. The Tribunal agreed with the tax authorities that 'Chokad' falls under Entry 74 of Schedule-B of the Odisha Value Added Tax Act, attracting 4% tax.

2. The primary question framed for consideration was whether the Tribunal was correct in levying tax on the sale of 'Chokad' at 4% under Entry 74 of Schedule-B, despite it being generally exempted under Entry 3 of Schedule-A.

3. The dealer contended that the sale of 'Chokad' to the industrial unit was exempt from VAT under Entry 3 of Schedule-A, which included 'Chokad' without any conditions for exemption. The substitution of Entry 3 from July 1, 2005, explicitly listed 'Chokad' as exempt.

4. Comparatively, other entries like Entry 24 and Entry 38 in Schedule-A had specific conditions for exemption, unlike Entry 3 which exempted 'Chokad' without any conditions.

5. The Department argued that the legislative intent was to exempt goods under Entry 3 only when used 'as such' and not as 'inputs' in manufacturing. However, the Court emphasized that taxation statutes require strict interpretation, and the absence of conditions in Entry 3 implied a blanket exemption for 'Chokad' sales.

6. Examining Entry 74 of Schedule-B, the Court noted that tax at 4% applies only to industrial inputs notified by the State Government. As there was no notification declaring 'Chokad' as an industrial input, the tax authorities erred in assuming its classification as such.

7. Consequently, the Court ruled in favor of the Petitioner-dealer, setting aside the orders of the Tribunal, JCST, and STO. The judgment clarified that 'Chokad' sales to the industrial unit were not subject to 4% VAT as an industrial input.

8. The revision petition was allowed with no costs imposed, concluding the legal proceedings on the tax liability of 'Chokad' under the Odisha Value Added Tax Act, 2004.