2023 (10) TMI 519 - HC - VAT and Sales Tax

Court grants dealer rebate on cotton seed tax, refunds excess paid.

M/s. Aggarwal Oil Mills Versus State of Haryana

The High Court ruled in favor of the dealer, holding that they are entitled to a rebate on the entire amount of tax paid on the purchase of cotton seed ... Entitlement of rebate on the entire amount of tax paid on purchase of cotton seed at first stage and used in manufacturing of oil, oil-cake and residue - Section 15A of the Haryana General Sales Tax Act, 1973 read with rule 24A of the Haryana General Sales Tax Rules, 1975 - refund of tax paid in excess at first stage, over and above tax payable on finished goods at the stage of sale at his hands. HELD THAT:- As per the judgment in Sharda Cotton Ginning & Pressing Factory vs. State of Haryana and others [2001 (3) TMI 991 - PUNJAB AND HARYANA HIGH COURT], once the entire cotton seeds after purchase had been used in the manufacturing and if one of the items is tax free, rebate cannot be reduced proportionately and it has to be allowed in full. Since both the questions i.e. (1) whether on the facts and in the circumstances of the case, the dealer is entitled to rebate on the entire amount of tax paid on purchase of cotton seed at first stage and used in manufacturing of oil, oil-cake and residue in terms of the provisions of Section 15A of the Haryana General Sales Tax Act, 1973 read with rule 24A of the Haryana General Sales Tax Rules, 1975 and (2) if answer to the above question is in affirmative, whether the dealer is entitled to refund of tax paid in excess at first stage, over and above tax payable on finished goods at the stage of sale at his hands, have been answered in favour of the assessee. General Sales Tax Reference is allowed. Issues Involved:1. Entitlement to rebate on the entire amount of tax paid on the purchase of cotton seed at the first stage.2. Entitlement to a refund of tax paid in excess at the first stage over and above the tax payable on finished goods.Summary:Issue 1: Entitlement to Rebate on Entire Tax PaidThe High Court addressed whether the dealer is entitled to a rebate on the entire amount of tax paid on the purchase of cotton seed used in manufacturing oil, oil-cake, and residue under Section 15A of the Haryana General Sales Tax Act, 1973, read with Rule 24A of the Haryana General Sales Tax Rules, 1975. The court referred to the Division Bench judgment in Sharda Cotton Ginning & Pressing Factory vs. State of Haryana, where it was held that for claiming exemption, it is not necessary for the assessee to prove that the entire raw material had been used only for the manufacture of taxable goods. The court concluded that once the entire cotton seeds are used in manufacturing, and if one of the items is tax-free, the rebate cannot be reduced proportionately and must be allowed in full.Issue 2: Entitlement to Refund of Excess Tax PaidThe court examined whether the dealer is entitled to a refund of tax paid in excess at the first stage, over and above the tax payable on finished goods at the stage of sale. Given the affirmative answer to the first issue, the court held that the dealer is indeed entitled to such a refund. This interpretation was reinforced by the fact that the Supreme Court had dismissed the SLP against the Division Bench judgment in Sharda Cotton's case, making the interpretation directly applicable to the present case.ConclusionBoth questions were answered in favor of the assessee, allowing the General Sales Tax Reference. The pending application, if any, was disposed of.