Trade-tax exemption for rice mills depended on whether later exclusion of paddy rice applied retrospectively.

Rice manufactured from paddy by units certified and financed by the Uttar Pradesh Khadi and Gramodyog Board was treated as falling within the trade-tax exemption under the Government Order of 31.01.1985, as amended on 27.02.1997, which covered products of such units engaged in hulling, processing, packaging and marketing of cereals. The later exclusion of "rice and its by-product manufactured from paddy" introduced on 30.09.2004 was described as a substantive change, not a mere clarification, so it could not be applied retrospectively. On that basis, reassessment proceedings and notices for earlier assessment years were unsustainable.

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Issues: Whether rice manufactured from paddy by units certified and financed by the Uttar Pradesh Khadi and Gramodyog Board was covered by the trade tax exemption under the relevant Government Orders, and whether reassessment proceedings and notices for the assessment years 2002-03, 2003-04 and 2004-05 could be sustained on the basis of the later exclusion introduced by the Government Order dated 30.09.2004.

Analysis: The exemption under the Government Order dated 31.01.1985, as amended by Notification No. 709 dated 27.02.1997, extended to the products of Khadi Gram Udyog Board units and used the expression relating to hulling, cutting, trimming, processing, packaging and marketing of cereals. The later exclusion of "rice and its by-product manufactured from paddy" by the Government Order dated 30.09.2004 was treated as a substantive exclusion and not as a mere clarification. Accordingly, the exclusion could not be applied retrospectively to earlier assessment years, and reassessment under Section 21(2) on that basis was not permissible for the period in question.

Conclusion: The challenge succeeded. The reassessment permission and consequential notices for the assessment years 2002-03, 2003-04 and 2004-05 were unsustainable and were quashed, in favour of the assessee.

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