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TMI Blog2019 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ule II of the VAT Act 2002, the liquor which is sold by the holder of licence FL2, FL3, FL3A, FL4 and FL4A is only subjected to 5 % tax and not other species of the liquor which as rightly construed by the State functionaries will be covered by residuary entry - there is no ultra vires or an arbitrary act on the part of the State in charging tax at the rate 13% on ENA/Rectified Spirit. Input Tax Rebate (ITR) - Constitutional validity of sub-section (6-A) of Section 14 of 2002 Act - HELD THAT:- There is no force in the submissions made on behalf of the petitioner that they are not afforded opportunity to prove the bonafide of their claim - the challenge to the validity of Section 14 (6A) fails. Constitutional validity of Section 20(5) of VAT Act, 2002 - HELD THAT:- The contention that the provisions contained under sub-section (5) lacks jurisdictional foundation and therefore it is ultra vires, are taken note of and are rejected outright. If the petitioners have any grievance as regard to the procedural irregularity they are always at liberty to take recourse to forum of appeal for redressal of the grievance. Merely on assumption that the procedural irregularity may occur, a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y rejection. [2] Petitioners are manufacturer and sellers of spirit and alcoholic beverages in the State of Madhya Pradesh. They purchase/ import Grains Neutral Spirits/ Extra Neutral Alcohol, concentrate of Alcoholic Beverages and imported Foreign Liquor as bottled in original in the State of Madhya Pradesh. The spirit is used for manufacture of potable liquor. The spirit manufactured by the petitioner is sold within and outside State of Madhya Pradesh. The manufacture and sale is on the strength of licence issued under provisions of Madhya Pradesh Excise Act, 1915 and the Rules framed there under. The petitioners are also registered under the Madhya Pradesh Value Added Tax, 2002. [3] At the outset, it is submitted on behalf of the petitioners that as to the issue of levy of VAT on lease rental, the same is sub-judice before Hon'ble Supreme Court in petition for Special Leave to Appeal (c) No. 21700/2018 [Tripti Alcobrew Pvt. Ltd (formerly Tripti Acobrew Ltd.) Vs. State of Madhya Pradesh and others]. In view whereof, the said issue is subjected to final outcome of SLP (c) No. 21700/2018. [4] Respective issues are taken up in seriatum. As to direction No.(i):- [5] As to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x rebate available against sale of spirit. It is contended that, the argument of the respondents stating that 'liquor' only means to include the final product of bottled liquor meant for human consumption is entirely misplaced as there can be no set off against sale of a final product. Thus, the respondents clearly envisaged scenario where sales of spirit made to manufacture IMFL/ country liquor should not be provided the benefit of set off. Thus, spirit falls within the meaning of the word 'liquor' as envisaged under the VAT Act read with the M.P. Excise Act. It is further contended that the respondents have tried to incorporate Entry 51 of List II in Schedule VII of the Constitution of India while interpreting the meaning of 'liquor'. Entry 51 specifically uses the words 'alcoholic liquors for human consumption' while Entries 47, 56, 6 used in the VAT Act, only refer to the word 'liquor' which is well defined under Section 2(13) of the MP Excise Act, 1915. Thus this process of interpretation adopted by the respondent State, it is contended, has no valid basis, as it is settled principle of classification that words used in a particular sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh General Sales Tax Act, 1958 which was then replaced by the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994. And now the VAT Act, 2002. [11] The excisable articles under the Excise Act, 1915 was kept out of the purview of the Sales Tax. In other words, they were tax free goods, brought under Schedule I Entry No. 23 of 1958 Act. Entry No.18 of 1994 Act and Entry No. 47 of 2002 Act, as we are presently concerned with, of the VAT Act, Entry 47 of Schedule prior to 01/04/2013 stood thus:- "47. Goods on which duty is or may be levied under the Madhya Pradesh Excise Act, 1915 (No.2 of 1915) other than medicinal and toilet preparations specified for the time being in the schedule to the medicinal and toilet preparations (Excise Duties Act, 1955 (No.16 of 1955))." [12] That vide M.P. Act 2 and 16 of 2013 following amendment in Entry No. 47 of Schedule I, Entry 56 in Part II of Schedule II and Entry No.6 in Part IIIA of Schedule II w.e.f. 01/04/2013 in the following terms:- Entry No. 47 in Schedule I of the VAT Act (w.e.f. 01/04/2013) "47. Goods on which duty is or may be levied under the Madhya Pradesh Excise Act, 1915 (No. 2 of 1915) other than,- (i) medicinal and toilet preparati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the production or manufacture of goods produced or manufactured within the country. ....." [18] A taxing statute is to be strictly construed is the well established principle of law. [19] In Commissioner of Income Tax, Madras Vs. Kasturi & Sons Ltd. [(1999) 3 SCC 346], it is observed:- "9. The principle that a taxing statute should be strictly construed is well settled. In Principles of Statutory Interpretation by Justice G.P. Singh, 6th edition 1996, the law is stated thus:- "The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means: 'The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words'. In a classic passage LORD CAIRNS stated the principle thus: 'If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "--43 Har. L.R. 863 (868)]. The observations of Lord Russel of Killowen in Attorney General v. Carlton Bank, [1899] 2 Q.B. 158 though an early pronouncement, is refreshing from its broad common-sense: "I see no reason why special canons of construction should be applied to any Act of Parliament, and I know of no authority for saying that a Taxing Act is to be construed differently from any other Act. The duty of the Court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, namely to give effect to the intention of the Legislature, as that intention is to be gathered from the language employed, having regard to the context in connection with which it is employed ..... Courts have to give effect to what the Legislature has said." The rule of construction that if the statutory provision is susceptible or admits of two reasonably possible views then the one which would promote its constitutionality should be preferred on the ground that the legislature is presumed not to have intended an excess of its own jurisdiction, is subject to the further rule that it applies only where two views are reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals." [22] Furthermore, it is held in Keshavji Ravji and Co. and others Vs. Commissioner of Income Tax [(1990) 2 SCC 231]:- "11. The premises of the argument is good in parts; but the inference does not logically follow. Section 40(b), it is true, seeks to prevent the evasion of tax by diversion of the profits of a firm; but the legislative expedience adopted to achieve that objective requires to be given effect on its own language. Section 40 opens with the non-obstante clause and directs that certain outgoings specifically enumerated in it "shall not be deducted" in computing the income chargeable under the head "profits and gains of business or profession". As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature can not then be appealed to to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Assam and others Vs. Naresh Chandra Ghose (D) by LRs [(2001) 1 SCC 265], it is held:- "4. There is no dispute that the legislature has a wide discretion in selecting the persons or objects it wants to tax and that a statute cannot be challenged on the ground that it levies tax on one class of articles and not on others....." 8. This class of spirituous medicinal preparation is to be taxed @ 20 paise in a rupee. The question, therefore, for our consideration is whether this type of classification which differentiates medicinal preparations based on the content of alcohol in such preparations is a valid classification or not. If the accepted principle in law that the Legislature has a wide discretion in selecting the persons or objects it wants to tax is correct then in our opinion such a classification cannot be construed as an arbitrary classification. Definitely, a medicinal preparation containing over 12% of alcohol stands as a separate class of medicinal preparation as compared to other medicinal preparations which either do not contain any alcoholic or contains less than 12%. It is to be noted that this classification based on the alcohol contents of the medicinal prepara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/ Rectified Spirit the State will be within its competence to charge levy at the rate under residual entry. [30] When the liquor is sold by a dealer who holds F.L.2/F.L.3/F.L.3A/F.L.4/F.L.4A licence under M.P. Foreign Liquor Rules 1996, the tax is 5 %. Similarly when it is sold by a dealer other than dealer holding these licences, the tax is 5 %. [31] These licences under Rules 1996 are: "F.L.2 (Restaurant Bar licence)- F.L.2 licence holder may sell foreign liquor to the customer of the restaurant for consumption on the licensed premises with meals or snacks. This licence may be granted to restaurants having facilities of such scale and standard, as may be determined by the State Government. F.L.3 (Hotel Bar Licence). - F.L.3 licence holder may sell foreign liquor for consumption on the licensed premises to residents of such hotels for their own use or that of their guests and other casual visitors, with meals and snacks. This licence may be granted to hotels having both lodging and boarding facilities of such scale and standard as may be determined by the State Government. F.L. 3-A (Resort Bar Licence) : F.L.3-A licence holder may sell foreign liquor for consumption on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax rebate on any purchase of goods shall exceed the amount of tax in respect of such purchase of goods, actually paid under the Act, into the Government Treasury: Provided that if a registered dealer (selling dealer) has furnished return of a period, the tax in respect of the purchases made by a registered dealer from the selling dealer during the period shall ordinarily be deemed to have been paid for the purpose of this sub-section, unless it is found otherwise." [36] It is contended that the respondents have ignored the fact that the petitioner is a bonafide purchaser and therefore, cannot be held accountable for any unpaid/short paid VAT by selling vendor. It is urged that under the provisions the assessee like the petitioner is not accorded any opportunity for proving its bonafides before the authority. Reliance is placed on the decision in Arise India Ltd. Vs. Commissioner of Trade and Tax Delhi & others: W.P.No.2106/2015 decided on 26.10.2017. Wherein it is held that a bonafide dealer cannot be denied input tax rebate. The said judgment, it is urged, is affirmed by Hon'ble Supreme Court in SLP (c) No. 36750/2017 decided on 10.01.2018. [37] Learned Additional Advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : (a) the Commissioner may, subject to such conditions and restrictions as may be prescribed, assess the tax due from any dealer for any part of a year; (b) a registered dealer who claims a refund of input tax rebate under the provisions of sub-section (4) of Section 14,- (i) in his return for any quarter of a year and makes an application for that purpose, along with such return or before the date on which the return for the subsequent quarter becomes due, or (ii) in his returns for a year and makes an application for that purpose before the date on which the return for the first quarter of the subsequent year becomes due, the assessment of such dealer for that quarter or year, as the case may be shall be made in accordance with the provisions of sub-section (4) within a period of three months from the date of receipt of the application." [41] This sub-section i.e. sub-section (1) further stipulates that the assessment of such dealer for that quarter or year, as the case may be shall be made in accordance with the provisions of sub-section (4) within a period of three calendar months from the date of receipt of application. That sub-sections (4) and (5) principally deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grievance. Merely on assumption that the procedural irregularity may occur, a statutory provision cannot be held to ultra vires constitution. The challenge to validity of sub-section (5) of Section 20 also fails. As to direction No.(v):- [43] As regard to challenge to Section 46 and 53 of Act 2002 read with Rule 60 of the Rules of 2006. These provisions mandates predeposits. A Co-ordinate Bench of this Court in Writ Petition No.6317/2017 (Associated Alcohols and Breweries Ltd. Vs. State of M.P. & others) decided on 18.09.2018 had an occasion to examine the validity of these provisions. It upheld the validity in the following terms : "7. The contention of the learned counsel for the respondent is that Section 46 of the M.P. VAT Act, 2002, provides appeal against the order passed by any officer subordinate to Commissioner, Commercial Tax, appeal will lie before the appellate authority and sub-section 5 of Section 46(5) mandates that no appeal shall be admitted by appellate authority without depositing admitted tax on 10% or 5% (depending upon whether order is ex parte or by parte) of the balance of extra demand created/assessed by the assessment order Section 46(5) makes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may kindly be quashed and the matter may kindly be remanded to the appellate Authority for decision of merits without insisting for deposit of percentage amount as required under the provisions of Section 46 (5) of the VAT Act." 10. The Division Bench dismissed the writ petition with the following observations :- "Indeed, there is no provision of any exemption under the vat act and no power are vested in the appellate authority to pass a contrary order de hors to Sec. 45(5) of the VAT Act. According to us, such provision is mandatory and the appeal before the Appellate Authority cannot be admitted until and unless 5% of the tax is deposited since the assessment order was passed in exparte. If the statue does not permit to file any appeal without depositing the aforesaid tax, not only the Appellate Authority but this court too under writ jurisdiction cannot pass an order that the appeal should be heard without depositing the required tax. The decision of Supreme Court in the case of Indu Nisan Oxo Chemicals Industries Ltd. (supra) is not at all applicable in the present case because that case pertains to Customs Act, 1962 and proviso to Section 129-E of the said Act power...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 07.8.2012 in Para 23 of the order has held thus :- "23. In view of the above, we are of the considered view that the provisions of Sec.77(4) of OVAT Act requiring deposit of 20% of the tax or interest or both in dispute as a precondition for entertaining an appeal against the order enumerated under Sec.77 (1) of the OVAT Act does not make the right of appeal illusory and such a condition is within the legislative power of the State Legislative and cannot be held to be unreasonable and violative of Article 14 of the Constitution." 13. The Delhi High court in the case of Schneider Electric India Pvt Ltd. V/s. Government of NET of Delhi in C.M. No.11118/2006 wherein petitioner contended that if a sum is disputed then its deposit cannot be made a precondition for entertaining the appeal, in concluding para 15 of order dated 15.02.2017 has held that :- "15. …. Perversity cannot cohabit with dialectic debate. If the merits of a case call for careful consideration, as it does in the matter in hand, a prima facie case cannot exist. Keeping there factors in mind, as also the absence of any requirement for consideration of financial hardship, we find no reason to interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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