2023 (1) TMI 987 - HC - VAT / Sales Tax

HC upholds GST exemption on Canteen Stores Department sales under Notification dated 31.01.1985

The HC upheld the Tribunal's decision dismissing revisions challenging GST exemption on sales by Canteen Stores Department outside U.P. The Court held ... Exemption from GST - sale of goods by the Canteen Stores Department to different Canteen Store Department situate outside the State of U.P. - Conditional nature of exemption or not - Eligibility for exemption Notification No.7037, dated 31.01.1985. HELD THAT:- From the reading of Notification dated 31.01.1985, benefit has been extended not only to the Canteen Stores Department/ Military Canteens, but also to U.P. Govt. Employees’ Welfare Corporation. The State Government found that there were certain contradictions to its earlier notifications which were issued in the years 1977 and 1981 in regard to Khadi Evam Gramodyog and Canteen Stores Department/ Military Canteens. The Circular dated 23rd July, 1987 has to be read in harmony with the Notification dated 31.01.1985, as the Notification of 1985 also provided exemptions of tax subject to certain conditions. Due to contradictions existing between the earlier notifications of the Government, Circular dated 23.07.1987 was issued on the direction of the State Government re-conciling the said fact. Though, the Circular of 23rd July, 1987 does not take note of the Notification dated 31.01.1985, but it mentions of the Notification dated 03.02.1981 which disallowed the exemptions under Section 8(2A) of CST. The Apex Court in Paper Products Ltd. [[1999 (8) TMI 70 - SUPREME COURT]] and M/s Indra Industries [[2000 (1) TMI 44 - SUPREME COURT]] has already clarified that circulars by Taxing Authorities are not binding on the Assessee, but the department could not take plea that they are not binding upon the department. The judgment and order passed by the Tribunal needs no interference of this Court and all the revisions stand dismissed. Issues:1. Granting exemption under Section 8 of the Central Sales Tax Act.2. Interpretation of Notification No.7037 dated 31.01.1985.Analysis:Issue 1: Granting exemption under Section 8 of the Central Sales Tax ActThe case involved multiple revisions arising from judgments allowing second appeals filed by the Assessee regarding the exemption on the sale of goods by the Canteen Stores Department. The Assessing Authority had initially refused to grant exemption under Section 8 (2A) of the Central Sales Tax Act. The Tribunal, however, allowed the appeals and held the sales exempted from Central Sales Tax under Section 8(2A)/8(2C). The State Counsel argued against the exemption, citing conditional nature of Notification dated 31.01.1985. The Assessee contended that the Circular issued by the Commissioner Trade Tax was binding and supported their claim for exemption under Section 8(2A) of CST.Issue 2: Interpretation of Notification No.7037 dated 31.01.1985The Notification provided exemptions subject to specified conditions, including sales to Canteen Stores Department/ Military Canteens. The Circular dated 23.07.1987 reconciled earlier notifications and clarified exemptions for sales made to certain institutions. The Tribunal relied on this Circular to grant exemption under Section 8(2A). The Court analyzed the Notification and Circular, emphasizing that the Circular clarified existing contradictions and extended benefits under Section 8(2A) of CST. The Court held that the Circular was clarificatory in nature and resolved the exemption controversy.In conclusion, the Court dismissed all revisions, upholding the Tribunal's decision to grant exemption under Section 8 of the Central Sales Tax Act. The judgment favored the Assessee, emphasizing the binding nature of the Circular issued by the Commissioner Trade Tax and the resolution of exemption issues through the Circular dated 23.07.1987. The Court clarified the interpretation of the Notification No.7037 dated 31.01.1985 and affirmed the Tribunal's decision in granting the exemption.