2005 (2) TMI 790 - HC - VAT and Sales Tax

Court allows tractors' tax exemption under Bihar Finance Act, quashes tax commissioner's clarification.

Ganga Tractors and others Versus State of Bihar and others (and other cases)

The court allowed all four writ applications, ruling that tractors are included within the exemption provided by the notifications under sections 5(4) and ... - Issues Involved:1. Authority of the Commissioner of Commercial Taxes to issue directives.2. Classification of tractors under the Bihar Finance Act for tax exemption.3. Interpretation of the term 'light motor vehicle' in the context of tax exemption.4. Validity of the Commissioner's clarification regarding additional tax and surcharge on tractors.Issue-wise Detailed Analysis:1. Authority of the Commissioner of Commercial Taxes to Issue Directives:The petitioners argued that the Commissioner under the provisions of the Bihar Finance Act has no power to issue directives, as evidenced by Memo No. 6771 dated October 27, 2004. The court clarified that the Commissioner did not issue a directive but rather a clarification in response to queries from subordinate officers. Thus, the order was not quashed on this ground, but the clarification was deemed incorrect and quashed as per the court's interpretation of the notifications.2. Classification of Tractors Under the Bihar Finance Act for Tax Exemption:The petitioners contended that tractors, being light motor vehicles with four wheels, are covered by entry No. 1 of the notification and thus entitled to exemption from additional tax and surcharge. They highlighted that section 12 of the Act differentiates between light, medium, and heavy motor vehicles and tractors, but such differentiation was not made under sections 5 and 6. The court agreed with the petitioners, noting that section 6 is a self-contained provision and should be strictly construed without reference to section 12.3. Interpretation of the Term 'Light Motor Vehicle' in the Context of Tax Exemption:The court emphasized that taxing statutes must be strictly construed, as per the Supreme Court's ruling in Federation of Andhra Pradesh Chambers of Commerce and Industry v. State of Andhra Pradesh. The court found that tractors, having four wheels and commonly known as light motor vehicles, fall within the scope of the exemption granted to light, medium, and heavy motor vehicles with four or more wheels. The court rejected the State's argument that tractors should be excluded based on their common usage for agricultural purposes, stating that the term should be understood in its popular sense.4. Validity of the Commissioner's Clarification Regarding Additional Tax and Surcharge on Tractors:The court held that the Commissioner's clarification, which stated that tractors are subject to additional tax and surcharge, was incorrect. The notifications issued under sections 5(4) and 6(2) of the Act exempted light, medium, and heavy motor vehicles with four or more wheels from additional tax and surcharge, and this exemption includes tractors. Consequently, the court quashed the Commissioner's clarification.Conclusion:The court allowed all four writ applications, ruling that tractors are included within the exemption provided by the notifications under sections 5(4) and 6(2) of the Bihar Finance Act. The clarification issued by the Commissioner of Commercial Taxes was quashed as it was found to be incorrect. The court emphasized the need for strict interpretation of taxing statutes and upheld the principle that any ambiguity should be resolved in favor of the taxpayer.