2024 (1) TMI 1521 - HC - VAT / Sales Tax

Packaged drinking water production and tax remission claim under s 109(4) denied as not 'manufacture' under s 2(30)

Tax remission under s 109(4) of the Assam VAT Act, 2003 read with the 2005 Scheme was denied where the unit's activity was purification of raw water into ... Entitlement to enjoy tax remission for the unexpired period of eligibility and unutilized amount u/s 109 (4) of the Act of 2003 read with the Scheme of 2005 even though the industrial activity of packed drinking water does not amount to manufacture in terms with Section 2 (30) of the Act of 2003 - petitioner’s industrial unit availed tax exemption on packed drinking water on the basis of the Industrial Policy Resolutions, 1997 - HELD THAT:- The records of the instant proceedings reveals that the Eligibility Certificate was issued by the Industries Department of the Government of Assam treating packaged drinking water as a finished product and a Certificate of Authorization was also given by the authorities under the Scheme of 1997 showing amongst others packaged drinking water as a finished product - when Clause 5.4 of the Industrial Policy, 1997 only stipulates granting sales tax exemption on sale of finished products and purchase of raw materials and interestingly, the Scheme of 1997 and the Scheme of 2005 are Schemes framed under Section 9 (4) of the Act of 1993 and Section 109 (4) of the Act of 2003 which specifically mention granting exemption about manufactured finished products within the State of Assam. The definition of ‘manufacture’ is found only in the Act of 1993 or the Act of 2003. The industrial activity of purification of raw water into packaged drinking water would not come within the ambit of manufacture as defined under Section 2 (30) of the Act of 2003. Under such circumstances and in the light of the above declaration by the Division Bench of this Court, the question therefore arises as to whether the petitioner would be entitled to enjoy the benefit of the Scheme of 2005, that too when the activity would not come within the ambit of ‘manufacture’ - It is being well settled now that the activity of purification of raw water into packaged drinking water would not come within the ambit of the term ‘manufacture’ in terms with Section 2 (30) of the Act of 2003, it is the opinion of this Court, the petitioner herein would not be entitled to the benefit of the Scheme of 2005 in respect to the activity of conversion of raw water into packaged drinking water. It is also relevant herein to mention that the Scheme of 2005 or for that matter Clause 3 (1) of the said Scheme has not put to challenge. Therefore, unless there is a challenge to the Clause 3(1) of the Scheme of 2005 which grants tax remission only on goods manufactured by the industrial eligible unit, the question of the petitioner Company being entitled to the benefit of the tax remission for the period w.e.f. 01.05.2005 does not arise. Though the Industrial Policy of 1997 was declared by the State of Assam thereby declaring various incentives including sales tax exemption on purchase of raw materials and sale of finished products but the Industries Department of the Government of Assam did not issue any notification granting the said incentives. The State of Assam exercised powers under Section 9 (4) of the Act of 1993 and formulated the Scheme of 1997. It is pertinent to mention that Section 9 (4) of the Act of 1993, as already observed in the preceding segments of the instant judgment categorically mandates conferring power on the State Government to grant exemption to those industries upon production of such goods to the extent of purchase of raw materials or other inputs within the State or on sale of manufactured goods sold by such industrial unit within the State or in course of inter State trade or commerce. It is also pertinent to mention that Clause 3 (3) of the Scheme of 1997 clearly mandated sales tax exemption on purchase of raw materials and sales of finished goods manufactured by the unit. Further to that, it is also seen from the Scheme of 1997, that merely upon issuance of the Eligibility Certificate, an industrial unit would not be entitled to the benefit of the sales tax exemption. Exemption notifications should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification - When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. This Court is therefore of the opinion that the Additional Commissioner of Taxes was justified in passing the order dated 11.08.2015 for the assessment year 2005-06 by setting aside the Appellate order dated 17.06.2014 passed by the respondent No.5 for which no question of interference arises - this Court therefore having found no merit in both the writ petition, dismisses the same. Issues: Whether an industrial unit holding an Eligibility Certificate for packaged drinking water is entitled to tax remission for the unexpired period of eligibility under Section 109(4) of the Assam Value Added Tax Act, 2003 read with the Assam Industries (Tax Remission) Scheme, 2005 where the activity of converting raw water into packaged drinking water does not amount to 'manufacture' under Section 2(30) of the Act of 2003.Analysis: The Court examined (a) Section 109(4) of the Act of 2003 and the Scheme of 2005 which permit continuation of remission only in conformity with the Act of 2003, (b) the statutory definition of 'manufacture' in Section 2(30) of the Act of 2003 which requires transformation into a new and different article having distinct commercial identity, and (c) prior decisions of the High Court dealing with purification/filtration of water and the scope of 'manufacture'. The Division Bench precedent holds that purification of raw water into packaged drinking water does not produce a new and distinct commercial commodity and thus does not amount to 'manufacture' under Section 2(30). Clause 3(1) of the Scheme of 2005 grants remission only in respect of goods 'manufactured' in Assam as understood in Section 2(30). The Court distinguished authorities where the Industries Department's eligibility certificate precluded the tax authority from re-opening eligibility where no statutory definition restricted the scheme; here the Scheme and statutory definition expressly condition remission on statutory 'manufacture'. The Court also rejected application of promissory estoppel to compel remission that would be contrary to the statutory definition and Scheme.Conclusion: The petitioner is not entitled to tax remission under Section 109(4) of the Act of 2003 read with the Scheme of 2005 in respect of packaged drinking water because conversion of raw water into packaged drinking water does not amount to 'manufacture' under Section 2(30) of the Act of 2003; the revenue authorities' orders denying remission in respect of packaged drinking water are lawful and the writ petitions are dismissed (decision in favour of the Revenue).