2023 (11) TMI 462 - HC - VAT and Sales Tax

Exemption of tax at 100% on total eligible production sold under CST Act - Application of pro-rata in the circumstances of increase of capacity and increase in investment - HELD THAT - Respondent is claiming exemption and has been granted exemption earlier as per notification issued under Section 8(5) of the CST Act and as per the 1993 package scheme of incentives. Admittedly, there is no provision for reduction of exemption either under the 1993 package scheme of incentives or under the CST Act. This has not been referred to either by the Assessing Authority or Joint Commissioner of Sales Tax (Appeal) Aurangabad. It is also not in dispute that the notification issued under Section 8(5) of CST Act in the year 1980 is not amended / modified / withdrawn at any point of time. Therefore, the Tribunal was correct in holding that the pro-rata exemption granted was not correct and respondent was entitled to 100% exemption - Section 93 of MVAT Act also will not be applicable to the facts in hand. There are no infirmity in the order passed by the Tribunal - appeal dismissed.

Summary

Issues:
The issue involves determining whether the respondent is entitled to full exemption or pro-rata exemption under the Maharashtra Value Added Tax Act (MVAT Act) and Central Sales Tax Act, 1956 (CST Act).

Comprehensive Details:

1. The respondent, a company engaged in the production of polyester films, was assessed under the provisions of MVAT Act and CST Act by the Deputy Commissioner of Sales Tax, Aurangabad. The respondent claimed exemption of tax at 100% on total eligible production sold under the CST Act. However, the Assessing Authority applied the pro-rata test and granted proportionate exemption based on expansion. The respondent appealed this decision before the Joint Commissioner of Sales Tax (Appeal), Aurangabad, and subsequently to the Tribunal.

2. The Assessing Authority justified the pro-rata calculation by citing Section 93(1)(A) of the MVAT Act, which requires pro-rata application in cases of an increase in capacity and investment. However, the entitlement certificate granted to the respondent was based on investment, not on an increase in production capacity or acquisition of new fixed capital assets. Section 93(1) of the MVAT Act pertains to proportionate incentives for eligible units in specific contingencies.

3. The Tribunal held that the pro-rata exemption granted was incorrect, and the respondent was entitled to 100% exemption under the notification issued under Section 8(5) of the CST Act and the 1993 package scheme of incentives. The notification under Section 8(5) of the CST Act was not amended, modified, or withdrawn, and there was no provision for reducing the exemption. Therefore, the Tribunal's decision was upheld by the High Court, stating that Section 93 of the MVAT Act was not applicable in this case.

4. The High Court concluded that there was no infirmity in the Tribunal's order and dismissed the appeal, affirming the respondent's entitlement to full exemption under the relevant provisions of the MVAT Act and CST Act.