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Issues: Whether purchase tax could be levied on capital goods and fuel used by units located in a Special Economic Zone under section 9(5) of the Gujarat Value Added Tax Act, notwithstanding the exemption and overriding provisions of sections 21 and 22 of the Gujarat Special Economic Zone Act, 2004.
Analysis: Section 21 of the Special Economic Zone Act grants exemption from State taxes on transactions within the Zone, and section 22 gives that Act overriding effect over any other law for the time being in force. The later insertion of sections 5A and 9(5) in the Value Added Tax Act created a purchase-tax mechanism for zero rated sales, but no corresponding non obstante clause or express provision was enacted to override the special exemption granted to SEZ units. In a taxing statute, liability must arise from clear words and cannot be created by implication or by relying only on legislative intent. The phrase "for the time being in force" was held to extend to later laws as well, but that did not dilute the unqualified overriding effect of the SEZ Act in the absence of a contrary legislative provision.
Conclusion: The levy of purchase tax under section 9(5) of the Gujarat Value Added Tax Act on SEZ units was invalid and impermissible, and the demand was quashed; the petitioners succeeded.
Final Conclusion: The special fiscal exemption under the SEZ Act prevailed over the VAT levy, and the State could not recover purchase tax from the SEZ units on the disputed transactions.
Ratio Decidendi: Where a special statute grants tax exemption and contains an overriding non obstante clause, a later taxing provision cannot curtail that exemption unless the later law clearly and expressly provides for such override.
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