Strict construction of VAT exemptions keeps chokad sales exempt absent any notification treating it as an industrial input.

Sale of wheat bran (chokad) remained exempt under Entry 3 of Schedule A of the Odisha Value Added Tax Act, 2004, because the entry expressly included chokad and imposed no condition on the exemption. The HC applied strict construction of the charging and exemption provisions and held that exemption could not be denied merely because the buyer was an industrial unit or because the Department treated the goods as an input. Entry 74 of Part-II of Schedule B applied only to industrial inputs notified by the State Government, and no notification identifying chokad was shown. In the absence of such notification, taxation at 4% was unsustainable.

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Issues: Whether sale of wheat bran (Chokad) was exempt under Entry 3 of Schedule A of the Odisha Value Added Tax Act, 2004, or whether it could be taxed at 4% as an industrial input under Entry 74 of Part-II of Schedule B in the absence of a State Government notification.

Analysis: Entry 3 of Schedule A expressly included chokad among exempt goods and did not attach any condition to the exemption. By contrast, other exemption entries in the Schedule showed that where the Legislature intended a conditional exemption, it said so expressly. On a strict construction of the charging and exemption provisions, the sale of chokad could not be denied exemption merely because the purchaser was an industrial unit or because the Department assumed that the goods were used as input. Entry 74 of Part-II of Schedule B applied only to industrial inputs as notified by the State Government, and no notification identifying chokad as an industrial input was shown. In the absence of such notification, the authorities could not infer that the sale fell within Entry 74.

Conclusion: The sale of chokad remained exempt under Entry 3 of Schedule A and was not taxable at 4% under Entry 74 of Part-II of Schedule B. The levy was unsustainable.

Ratio Decidendi: An exemption entry in a taxing statute must be strictly construed according to its express terms, and where tax is made contingent on notification, the statutory condition cannot be satisfied by inference in the absence of the required notification.

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