2014 (7) TMI 15 - HC - VAT and Sales Tax

Court affirms tax exemption for items, deems revisional authority notices defective, invalidates tax imposition.

State of Gujarat Versus Virumal Santumal

State of Gujarat Versus Virumal Santumal - [2014] 72 VST 403 (Guj) Issues Involved:1. Validity of the notice issued by the revisional authority.2. Classification of items under Entry 86 of Schedule-I to the GST Act.3. Applicability of Entry 8 of Schedule-IIA to the GST Act.4. Imposition of penalty under Section 45(6) read with Section 45(4) of the GST Act.Issue-wise Detailed Analysis:1. Validity of the Notice Issued by the Revisional Authority:The tribunal held that the revisional authority could not levy tax on items other than patasa, as the final notice issued in Form-49 only referred to patasa. The court agreed, stating that under Rule 67 of the GST Rules, a notice in Form-49 must be issued to give the person likely to be affected adversely a reasonable opportunity of being heard. Since the final order taxed items not mentioned in Form-49, it violated Rule 67 and the requirement of reasonable opportunity of being heard.2. Classification of Items under Entry 86 of Schedule-I to the GST Act:The court examined whether the items (patasa, harada, sakaria, and alchidana) fell under Entry 86, which exempts 'sugar' from tax if additional duties of excise are not exempted. The court referenced the Supreme Court's decision in Sakarwala Brothers, which held that these items are considered 'sugar' for tax purposes if they contain more than 90% sucrose. The court concluded that since the additional duties of excise were not exempted, the items in question fell under Entry 86, making them exempt from sales tax.3. Applicability of Entry 8 of Schedule-IIA to the GST Act:The court considered the alternative argument that if the items did not fall under Entry 86, they would fall under Entry 8 of Schedule-IIA, which also exempts 'sugar' from tax. The court analyzed the legislative history and changes to the entries, noting that both entries historically used the same definition of 'sugar.' The court concluded that even if the items did not meet the conditions of Entry 86, they would still be classified under Entry 8 and thus be exempt from tax.4. Imposition of Penalty under Section 45(6) read with Section 45(4) of the GST Act:The court did not find it necessary to delve into the penalty issue in detail, as the primary contention was resolved in favor of the respondent. The tribunal's decision to not impose a penalty was implicitly upheld by the court's agreement with the tribunal's conclusions on the other issues.Conclusion:The court dismissed the petitions, affirming the tribunal's judgment that the items in question were exempt from sales tax under Entry 86 of Schedule-I or alternatively under Entry 8 of Schedule-IIA. The notices issued by the revisional authority were deemed defective, and the imposition of tax on items not mentioned in the final notice was invalid. The court's interpretation of the legislative entries and historical context supported the respondent's position, leading to the dismissal of the State's petitions.