2023 (10) TMI 953 - HC - VAT and Sales Tax

Petitioners win Central Sales Tax exemption until 30.11.2016; literal interpretation of notifications upheld. Assessing Authority's procedure faulted.

The Court allowed the Revision Petitions, ruling in favor of the petitioners, and determined that all petitioners were entitled to Central Sales Tax ... Exemption on commencement of commercial production - Grant of incentives of exemption from State Sales Tax to existing and new Information Technology Industrial Units - Notification dt. 05.08.2002 - HELD THAT:- Since the petitioners’ units commenced commercial production on 31.03.2010 (between the dates 01.08.2006 upto 31.03.2013), they would be entitled to the incentives contained in the Notification dt. 05.08.2002. The Supreme Court in Jugalkshore Saraf vs. Raw Cotton Company Limited [1955 (3) TMI 38 - SUPREME COURT] declared that the cardinal rule of construction of statutes is to read the statute literally, that is by giving to the words used by the legislature their ordinary, natural and grammatical meaning; if, however, such a reading leads to absurdity and the words are susceptible of another meaning, the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation. Had the State intended to confine the benefit granted to New Information Technology Industrial Units only upto 31.03.2013 as is contended by the respondents the language in para-4 would have been different, and it would have stated that for such units the period of incentive is only up to 31.03.2013, but that is not the case. Para-4 specifically says that total period of incentive in case of New Information Technology Industrial Units also would not exceed 6 years and 8 months - the specific language used in para-4 cannot be ignored on the basis of minutes of a meeting said to have been held between the Secretary (Information Technology) to the State Government of Himachal Pradesh and the Excise & Taxation Commissioner on 31.05.2006 or the proposal placed before the Council of Ministers, as has been done by the Tribunal. Therefore, since the petitioners fall within the plain terms of the exemption granted in para-3 having commenced production on 31.03.2010, which is between 01.08.2006 and 31.03.2013 (as mentioned in para-3), they are entitled as per Para 4 for the incentive mentioned in the Notification dt. 05.08.2002 for a period not exceeding 6 years and 8 months, i.e. up to 30.11.2016 - this apart, Section 60 authorizes the Assessing Authority to undertake scrutiny of returns filed for any return/tax period under Section 16 (3 & 4) and to interalia check correctness of application and calculation of rates of tax etc. The statutory procedure of scrutiny of returns filed to check correctness of application an calculation of rates of tax, penalty and interest, and issuance of notice enacted under Section 60(2) if a mistake is detected, read with Rule 44 (1) & (2), and the recommendation for audit under Rule 44(2) are mandatory requisites of procedure of scrutiny of returns under the Act and this fact had not been appreciated by the Tribunal. The substantial questions of law are answered in favour of the assessee - the Revision Petitions are allowed. Issues Involved:1. Statutory force and validity of the Notification dated 05.08.2002 as amended by Notification dated 29.07.2006.2. Applicability of statutory procedures under the HP VAT Act, 2005, and related rules.3. Alleged arbitrariness and discrimination in the denial of exemption from Central Sales Tax.Summary:Issue 1: Statutory Force and Validity of NotificationsThe Court examined whether the Notification No.EXN-F(9)2/99-III (i) dated 05.08.2002, as amended by Notification No.EXN-F(5)-5/2006 dated 29th July, 2006, had statutory force and validity. The Court noted that the amended notification under Section 8(5) of the Central Sales Tax Act, 1956, granted incentives for exemption from Central Sales Tax to new Information Technology Industrial Units. The petitioners contended they were entitled to this exemption for a period of 6 years and 8 months up to 30.11.2017. However, the respondents argued that the exemption was only valid up to 31.03.2013. The Court concluded that the language of the notification, particularly Para-4, which stated that the total period of incentive shall not exceed 6 years and 8 months, should be interpreted literally. Therefore, the petitioners were entitled to the exemption up to 30.11.2016.Issue 2: Applicability of Statutory ProceduresThe petitioners argued that the statutory procedure for scrutiny of returns under Section 60(2) of the HP VAT Act, 2005, read with Rule 44(1) and (2), was mandatory. The Assessing Authority had issued a notice for scrutiny of returns but had not followed the correct procedure. The Court agreed, noting that the Assessing Authority could only issue a notice to rectify mistakes and not pass an order denying the exemption. The Tribunal had failed to appreciate this statutory requirement.Issue 3: Alleged Arbitrariness and DiscriminationThe petitioners claimed that denying them the exemption while granting it to other existing Information Technology units under the same notification was arbitrary and discriminatory, violating Article 14 of the Constitution. The Court found that since the petitioners' units commenced production within the specified period (01.08.2006 to 31.03.2013), they were entitled to the exemption for the full period of 6 years and 8 months as per Para-4 of the notification. The Court emphasized that the plain terms of the exemption could not be denied based on any supposed intention of the exempting authority.Conclusion:The Court allowed the Revision Petitions, answered the substantial questions of law in favor of the petitioners, and declared that all petitioners were entitled to Central Sales Tax exemption up to 30.11.2016. No costs were awarded, and any pending miscellaneous applications were disposed of.