2011 (11) TMI 594 - HC - VAT and Sales Tax

Court upholds Tax Board decision denying set-off for entry tax on corrugated paper, clarifying exclusion of packing material.

The court dismissed the revision petition, upholding the Tax Board's decision that the assessee was not entitled to set-off the entry tax paid on ... - Issues Involved:1. Entitlement to set-off of entry tax paid on corrugated paper.2. Interpretation of the term 'paper products including exercise books' under relevant notifications.3. Validity of the State Government's clarification excluding packing material from the term 'paper products including exercise books'.Issue-wise Detailed Analysis:1. Entitlement to Set-off of Entry Tax Paid on Corrugated Paper:The assessee filed a revision petition against the order of the learned Tax Board, which upheld the Revenue's appeal and denied the set-off of entry tax paid on corrugated paper. The Tax Board concluded that the corrugated boxes manufactured from such paper were not covered under the entry 'paper products including exercise books' as per the relevant notification, thus disallowing the set-off.2. Interpretation of the Term 'Paper Products Including Exercise Books':The Tax Board relied on the 'Kar-Niti Paripatra 2002-2003/11' issued by the State Government, which clarified that the entry 'all kinds of papers and paper products including exercise books' does not cover 'packing material'. The notification S.O. No. 72 dated July 21, 2004, imposed a 4% entry tax on 'all kinds of paper and paper products including exercise books'. However, the State Government's notification dated January 3, 2003, allowed set-off of entry tax paid on paper used as raw material or processing material in the manufacture of paper products, including exercise books, provided these products were sold within the State or in inter-State trade.3. Validity of the State Government's Clarification Excluding Packing Material:The Revenue argued that the corrugated boxes, being packing material, were not envisaged as 'paper products' under the notification. The State Government's clarification dated January 10, 2003, explicitly excluded packing material from the ambit of 'all kinds of papers and paper products including exercise books'. The court noted that the clarification could not override the statutory notification but was an interpretative aid. The principle of contemporanea expositio supported the interpretation that packing materials were excluded from the term 'paper products including exercise books'.The court observed that the set-off was intended only for paper products, including exercise books, and not for packing materials like corrugated boxes. The assessee failed to establish that corrugated boxes were not packing material. Consequently, the court held that the Tax Board was justified in denying the set-off.Conclusion:The court dismissed the revision petition filed by the assessee, upholding the Tax Board's decision that the assessee was not entitled to the set-off of entry tax paid on corrugated paper. The court emphasized the significance of the State Government's clarification and the specific conditions stipulated in the relevant notifications, which excluded packing materials from the set-off benefit.