Additional excise duty clarification kept textile fabrics outside VAT liability under the Orissa sales tax framework.

Textile fabrics were held not liable to value added tax under the Orissa Value Added Tax Act, 2004 for the relevant period because the clarification dated 3 May 2006 treated additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 as continuing to be leviable, albeit at a nil rate, with the Central Government retaining power to levy it in future. On that basis, the fabrics could not be regarded as exempted from additional excise duty so as to attract the Explanation to Schedule-B (Part-II). The assessment order was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether textile fabrics were liable to value added tax under the Orissa Value Added Tax Act, 2004 for the relevant period, in light of the clarification issued by the Central Government regarding continuance of additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

Analysis: The assessment was founded on the premise that amendment to the schedule under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 had exempted additional excise duty on textiles, thereby attracting the Explanation to Schedule-B (Part-II) of the Orissa Value Added Tax Act, 2004. The clarification dated 3 May 2006 stated that additional excise duty would continue to be leviable on the goods, albeit at a nil rate, and that the Central Government retained the power to levy such duty in future. On that basis, textile fabrics could not be treated as exempted from additional excise duty during the relevant period.

Conclusion: Textile fabrics were not amenable to value added tax for the period in question, and the assessment order was unsustainable and liable to be set aside in favour of the assessee.

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