2025 (11) TMI 1690 - HC - VAT / Sales Tax

No Retrospective 8% Tax on Ice-Cream; Relief Upheld Under Sections 52(1), 52(2) and 55(6) provisions

The Commissioner of Sales Tax, Mumbai Versus M/s. Shrirampur Doodh Zilla Madhyavarti Sahakari Doodh Vyavsaik Sangh Ltd.

HC held that, although the assessee had not applied for determination under Section 52(1), the Revenue could not retrospectively levy 8% tax on ice-cream ... Interpretation of the provisions in sub-section (2) of Section 52 and sub-section (6) of Section 55 of the Bombay Sales Tax Act, 1959 - sales of ice-cream as liable to tax @ 4% or not, by invoking the provisions of Section 52(2) of the Bombay Sales Tax Act, 1959, when in fact the appellant had not made any application for determination u/s 52(1) - interpretation of Section 55(6) of the Bombay Act - taxable @ 8% as per the Schedule entry CII- 35(1) or not - admissibility of benefit of the Notification entry 374 u/s. 41. HELD THAT:- This Court has considered that, for a long time, ‘ice-creams’ were covered within the entry ‘sweets and sweetmeats’. This Court has also considered the impact that an Assessee would have to face if retrospective levy were to be permitted. This is because the assessee, relying on the earlier-years classification, had sold ice cream on the premise that the duty was only 4% and not 8%. Recovery of any additional amount from the customers was entirely unfeasible. Accordingly, even the Revenue’s application for seeking directions to the Tribunal to make a reference in the case of Kwality Frozen Foods Ltd [2008 (6) TMI 556 - BOMBAY HIGH COURT]] was rejected. Therefore, the Tribunal’s view, which is the subject matter of the referred questions, stands substantially approved by the Division Bench of this Court in the case of Kwality Frozen Foods Ltd. At least, prima facie, it may be possible to reconcile the views in Halward Engineers [1977 (11) TMI 129 - BOMBAY HIGH COURT] and Kulko Engineering Works Limited [1979 (11) TMI 230 - BOMBAY HIGH COURT]. Incidentally, both these decisions were authored by the Bench presided over by D.P. Madon J. (as his Lordship then was). None of the decisions, at least, prima facie, purports to lay down any broad position in law about the determination obtained by one party being applicable to some other party or dealer as a matter of course. The two decisions, at least prima facie, proceed on the premise that there is nothing wrong with promoting parity, provided the products are the same and the circumstances are identical. The two decisions do not provide for any straitjacket formulae in such matters - The circumstance that both decisions were authored by D.P. Madon J. (as his Lordship then was), and the time gap between the two was by no means substantial, can also not be completely ignored. In the particular facts of the present case, answering the referred questions either way would not be sufficient justification to interfere with the discretionary relief granted by the Tribunal to the Assessee. The Tribunal, independent of the precedent, could have reached the same decision, given the parity of circumstances. Thus, in the facts of the present case, even if the Respondent–Assessee might not had made an application for determination under Section 52 of the said Act, still, in respect of the very same product, the Revenue could not have refused to apply the principle of parity and non-arbitrariness by insisting upon a retrospective levy, despite the decision of the Tribunal which was subsequently confirmed by this Court, i.e. the case of Kwality Frozen Foods Ltd. This reference is returned unanswered, keeping the larger issues raised therein open for consideration and determination in an appropriate case. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether, in the context of the assessee's liability to tax on sales of ice-cream at 8% instead of 4%, the levy could be enforced retrospectively or only prospectively, having regard to earlier treatment of ice-cream and the decision concerning another dealer. (2) Whether the principles of parity, equality and non-arbitrariness required the Revenue to extend the same prospective-only levy treatment accorded in an earlier case concerning the same product, notwithstanding the absence of a separate determination application by the assessee under Section 52. (3) Whether the earlier decisions interpreting Section 52, holding that determinations bind only the applicant dealer, are irreconcilable with the later decision applying parity to similarly situated dealers, and whether the later decision is per incuriam. (4) Whether, in the facts of the case, the Court should answer the questions referred under the Bombay Sales Tax Act, 1959, or leave the larger legal questions under Section 52 open. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Retrospective versus prospective levy of 8% tax on ice-cream Interpretation and reasoning The Court noted that for the relevant earlier period, ice-cream had long been classified and taxed under the entry for 'sweets and sweetmeats' at 4%. The assessee conducted its sales on the premise that the applicable rate was 4%, and recovery of any differential duty from customers, in the event of a retrospective reclassification and 8% levy, was unfeasible. The Tribunal had followed its coordinate Bench decision in another case involving the same product and circumstances, where retrospective levying at 8% was considered harsh and the levy was confined to a prospective operation. That Tribunal view was subsequently and expressly upheld by the Court, including rejection of the Revenue's attempt to seek a reference in that matter. The Court held that these circumstances substantially approved the Tribunal's approach in the present case. Conclusions The Tribunal's decision to treat the liability to tax at 8% on ice-cream as operative only prospectively, and not retrospectively, was a proper exercise of discretion in the specific facts and ought not to be interfered with. Issue (2): Application of parity, equality and non-arbitrariness absent a separate Section 52 application Legal framework (as discussed) The reference raised questions on Section 52 (determination of disputed questions) and Section 55(6) of the Bombay Sales Tax Act, 1959. Prior decisions had addressed whether determinations under Section 52 bind only the applicant dealer or can benefit similarly situated dealers as well. Interpretation and reasoning The Court proceeded on the footing that, in the present case, the core dispute before the Tribunal was confined to the timing (retrospective or prospective) of the 8% levy, not to the underlying classification at 8% for subsequent years, which the assessee had accepted. Even assuming that a determination under Section 52 enures only to the benefit of the dealer who obtained it, the Court held that such a view does not eliminate the independent obligation of the Revenue to act consistently with principles of equality, parity and non-arbitrariness. Where the same product is involved, and the circumstances are identical, the Revenue cannot, on those principles, discriminate by insisting on a retrospective levy against one dealer while another dealer dealing in the same product has been accorded only a prospective levy, and that approach has been upheld judicially. Conclusions Even though the assessee had made no application for determination under Section 52, the Revenue could not, consistently with parity and non-arbitrariness, insist on a retrospective 8% levy on ice-cream in the face of an earlier, judicially approved decision confining such levy to a prospective effect for the same product and circumstances. The Tribunal's extension of similar treatment to the assessee was sustainable on those general principles, independently of Section 52. Issue (3): Relationship between earlier and later decisions on Section 52; allegation of per incuriam Interpretation and reasoning The Tribunal had perceived an apparent conflict between an earlier decision which held that the benefit of a determination under Section 52 is confined to the dealer who obtained it or was a party to those proceedings, and a later decision that appeared to extend the benefit to similarly situated dealers on the principle of parity. The Revenue argued that the later decision, not noticing the earlier, should be treated as per incuriam. The Court observed, prima facie, that both decisions were authored by the same judge and were rendered within a short time-span. Neither purported to lay down a rigid, general rule that a determination in favour of one dealer automatically applies to all others as a matter of course. Rather, both decisions could be understood as recognising that parity can be given where the products are the same and the circumstances identical, without prescribing any straitjacket formula. On this reading, there was no irreconcilable conflict between the two decisions. Conclusions Prima facie, the two earlier decisions on Section 52 can be harmonised; they do not necessarily contradict each other or establish a rigid rule either way. In the facts of the present case, it was unnecessary to hold the later decision per incuriam or to conclusively determine the wider point of law regarding the binding effect of a Section 52 determination on non-parties. Issue (4): Whether to answer the reference and decide the larger Section 52 questions Interpretation and reasoning The Court held that, in the particular facts, answering the referred questions on the strict scope and effect of Section 52-whether a determination in one dealer's favour can directly bind or benefit another-would not alter the outcome or furnish sufficient justification to interfere with the Tribunal's discretionary relief. The Tribunal could independently have reached the same conclusion on parity of circumstances, and that conclusion had been substantially approved by the Court in the earlier case concerning the same product. Given that the outcome in the present case could be sustained entirely on parity and non-arbitrariness, the Court deemed it inappropriate to render a final, general pronouncement on the ambit of Section 52 in a reference of this nature. Conclusions The Court declined to answer the questions referred and returned the reference unanswered, expressly leaving the broader legal issues concerning Section 52 open for determination in an appropriate future case. The observations on harmonising the earlier decisions were stated to be prima facie and confined to the context of the present matter.