Court quashes assessment order on textile sales due to Central Govt clarification

The Court set aside the assessment order challenging the taxable turnover on textile sales under the OVAT Act. The impugned order was found legally unsustainable due to a clarification by the Central Government regarding the exemption of Additional Excise Duty on textile fabrics. As a result, the Court allowed the writ petition without costs and directed the issuance of an urgent certified copy of the order.

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Issues:
Challenge to assessment order under OVAT Act regarding taxable turnover on sale of textiles.

Analysis:
The petition challenges an assessment order dated 19th June 2012 by the Deputy Commissioner of Sales Tax, Balasore Circle, Balasore, concerning the taxable turnover of the Petitioner-Dealer on textile sales under the Orissa Value Added Tax Act, 2004 (OVAT Act). The impugned order was based on an amendment to the schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (ADE Act), exempting Additional Excise Duty (AED) on textiles. This led to the conclusion that textile fabrics were subject to VAT at 4% after 1st March, 2006.

It was noted that a clarification issued by the Department of Revenue, Ministry of Finance, Government of India on 3rd May 2006 stated that although the rate of AED on textile fabrics had become '0%', the duty would still be leviable, and the Central Government reserved the right to levy AED on these items in the future. Consequently, textile fabrics were not exempted from AED under the ADE Act during the relevant period of 1st October 2006 to 30th September 2007. This clarification invalidated the basis of the assessment order, as textile fabrics were not liable to VAT under the Explanation to Schedule-B (Part-II) of the OVAT Act.

Due to the removal of the basis for the assessment order by the Central Government's clarification, the Court deemed the impugned assessment order legally unsustainable and set it aside. The writ petition was allowed without any costs. The Court directed the issuance of an urgent certified copy of the order in accordance with the rules.

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