1999 (2) TMI 520 - SC - VAT and Sales Tax

Supreme Court affirms sales tax exemption, clarifies 3-yr period

Divisional Level Committee and Another Versus Harswarup Drug Udyog

The Supreme Court upheld the High Court's decision in Civil Misc. Writ Petition No. 485 of 1992, granting exemption from sales tax under section 4-A of ... Whether High Court correct in quashing the order of the committee rejecting an application filed by the respondent for exemption from payment of sales tax under section 4-A of the Act? Held that:- Appeal dismissed. The judgment of the High Court is confirmed with the clarification that the exemption will be for a period of 3 years 1 month and 4 days from March 27, 1990. The respondent no doubt applied for exemption for the entire period but the conditions were fulfilled only on March 27, 1990 and the exemption can be granted only for the remaining period after that date. In other words, the respondent will be entitled to exemption for a period of 3 years 1 month and 4 days from March 27, 1990. In the present case, there is no dispute with regard to the other conditions set out in the section having been fulfilled by the respondent. Issues:1. Interpretation of section 4-A of the U.P. Sales Tax Act, 1948 regarding exemption from payment of sales tax.2. Entitlement to exemption under section 4-A based on the date of registration of lease deed.3. Application of sub-section (5) of section 4-A for partial exemption period.4. Discretion of the court to grant a smaller relief than requested by the applicant.Analysis:1. The Divisional Level Committee and the State of U.P. challenged the High Court's decision in Civil Misc. Writ Petition No. 485 of 1992, which quashed the rejection of an application for exemption from sales tax under section 4-A of the U.P. Sales Tax Act, 1948. The rejection was based on the registration date of the lease deed compared to the date of the first sale, questioning the respondent's entitlement to the exemption.2. The rejection of the application by the Joint Director of Industries was overturned by the High Court, stating that the respondent was entitled to exemption from the date of lease deed registration. However, the High Court did not specify the duration of the exemption period, leaving it ambiguous.3. The appellants argued that since the respondent did not fulfill all conditions for exemption at the time of the first sale, they should not be entitled to any exemption. However, the court disagreed, emphasizing that section 4-A allows for partial exemption and fulfillment of conditions at a later date. The critical condition in this case was the ownership or lease of land/building for a minimum of seven years, which was met upon lease registration.4. Sub-section (5) of section 4-A was invoked to determine the entitlement to exemption for a partial period. Despite the respondent's initial application for the entire period, the fulfillment of conditions on a later date restricted the exemption to the remaining period. The court clarified that the respondent would be entitled to exemption for 3 years, 1 month, and 4 days from the date of lease deed registration.5. The appellants sought a remittance of the matter to the High Court due to the discrepancy in the exemption period applied for and granted. However, the court held that it had the authority to adjust the relief granted and confirmed the High Court's judgment, specifying the exemption period. The appeal was dismissed with costs, maintaining the clarified exemption period.In conclusion, the Supreme Court's judgment clarified the interpretation of section 4-A of the U.P. Sales Tax Act, 1948, regarding exemption from sales tax, emphasizing the flexibility for partial exemptions and the court's discretion in granting relief.