TaxTMI 
TaxTMI 
2016 (9) TMI 1161
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.... or extraction of cotton oil is not possible without generation of "Oil Cake" as a byproduct. "Oil Cake" is a commodity declared tax free under Section 16 by specifying in Entry No.3 of Schedule I of the Act (as it stood prior to 01.04.2015). 2. For the purpose of manufacture of oil, the petitioners are required to purchase cotton seeds from registered dealers within the State of Madhya Pradesh as also from the dealers outside the State of Madhya Pradesh, after payment of tax at the rate applicable. Such purchases of raw material from the registered dealer within the State of Madhya Pradesh, after payment of tax i.e. Input Tax for consumption or use of manufacture of oil, entitle the petitioners to Rebate of Input Tax (ITR) from the tax payable on sale of oil by such manufactures. Such Input Tax Rebate (ITR) is available to the petitioners, in accordance with Section 14 (1) (a) (2) of the Act, without any rider regarding proportionate disallowance of ITR in proportion to the generation of the tax commodity viz. "Oil Cake" declared tax free under Section 16 of the Act. 3. All the petitioners herein have filed their respective returns with effect from 01.04.2006 and have claime....
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....tion inserted in the Act by Ordinance has been given a retrospective effect from 01.04.2006. The effect of the above amendment is that the petitioners are deprived of the benefit of ITR in respect of Input Tax paid by them for purchase of raw material used or consumed by them for / in the manufacture of Schedule II goods, viz. 'oil' from oil seeds, which was available to the petitioners in terms of Section 14 (1) (a) (2) of the Act, as interpreted this Court in the above judgments. The said retrospective amendment introduced with retrospective effect is being challenged in the present petition on the ground that the amendment with retrospective effect has an effect of taking away benefit of full ITR from the date of its insertion and reduced it on proportionate basis in proportion to the value of the generation of Schedule I goods, which indirectly amounts to rebate of tax with retrospective effect or withdrawal of the benefit with retrospective effect, which is not permissible in law. 6. Learned counsel for the petitioners has submitted that the petitioners are only aggrieved by the insertion of the explanation by Section 14 of the MP VAT (Second Amendment) Act, 2014 wi....
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....(2005) 7 STJ 312 (SC) : (1992) 2 SCC 579 while interpreting Section 41 (a) framed under provisions of Bombay Sales Tax Act, 1959 whereas in the State of Madhya Pradesh there was no explanation regarding Input Tax Rebate on the entire raw material, even if a by-produce is tax free, as mentioned in Schedule I. 10. It is also stated in the return that since there was a need of explaining in the main act regarding the Input Tax Rebate on entire raw material, whereas byproduct are both taxable and non-taxable, therefore, using power conferred under the Act, the amending notification has been issued providing explanation for ITR, which shall be computed after apportioning the input tax in proportion to the value of Schedule I and Schedule II goods so manufactured. 11. Learned Deputy Advocate General for the respondent / State submits that the law relating to the retrospective operation of the Amending Act, if the same has been made for the purpose of explanation, has already been clarified by the Apex Court in the case of Binani Industries Limited, Kerala v. Assistant Commissioner of Commercial Taxes Bangalore reported in (2007) 15 SCC 435; Commissioner of Income Tax, Bombay v. Pod....
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....2007) 15 SCC 435; (5) Zile Singh v. State of Haryana & others reported in AIR 2004 SC 5100; (6) Commissioner of Income Tax v. Gold Coin Health Food P. Limited reported in [2008] 304 ITR 308 (SC); (7) S. Sundaram Pillai v. V.R. Pattabiraman reported in AIR 1985 SC 582; a Division Bench decision of High Court of Gujarat in the case of (8) Niko Resources Limited v. Union of India reported in [2015] 55 Taxmann.com 455 (Gujarat); and a Division Bench decision of Andhra Pradesh High Court in the case of Commissioner of Income Tax v. Vijayawada Bottling Co. Ltd reported as [2013] 356 ITR 625 (AP) and contended that the explanation for commutative of I.T.R on proporti0nate basis by apportionment of the rebate in proportion to the value of tax free and taxable goods, in effect and substance amount to levy of tax on the commodity already declared tax free under Section 16, as such, the said explanation introduced with retrospective effect is bad in law. 15. In the case of D. Caswasji & Co. V/s. State of Mysore & Ors. (Supra), by amendment sought to raise the rate of tax from 6 ½% to 45% with retrospective effect from April 1996, to avoid the liability of excess amount. The Karnatak....
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....d further proceeded to nullify the judgment and order of the High Court. The enhancement of the rate of tax was, therefore, clearly arbitrary and unreasonable. To the extent that the Act imposed the higher levy with retrospective effect and sought to nullify the judgment and order of the High Court, the Act was invalid and unconstitutional." 16. It is well settled that by inserting an Explanation in statute, the main provision of the Act cannot be defeated or enlarged. Ordinarily, the purpose of Explanation is to clarify that it is already enacted and not to introduce something new. 17. Section 14 (1) (a) and Clause II of M.P. VAT Act, which deals with the rebate of input tax is relevant which reads as under :- "Sec.14 : Rebate of input tax (1) Subject to the provisions of sub-section (5) and such restriction and conditions as may be prescribed, a rebate of input tax as provided in this Section shall be claimed by or be allowed to a registered dealer in the circumstances specified below,- (a) Where a registered dealer purchases any goods specified in Schedule II other than those specified in Part III of the said Schedule within the State of Madhya P....
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.... under Section 9-A" 18. In Serial No.3 of Schedule - I "de-oiled cake" including soyameal and cotton seed oil cake" was substituted by VAT (Amendment) Act, 2011 w.e.f. 1.4.2011. Relevant part of Sr. No.3 of VAT Schedule - I, reads as under :- "3. Aquatic feed, poultry feed and cattle feed including feed supplements, concentrates and additives, grass, hay, straw, [de-oiled cake including soyameal, cotton seed oil cake and mustard oil cake]" 19. By VAT (Amendment) Act 2011 the word "excluding cotton seed oil cake and mustard oil cake" is substituted w.e.f 1.4.2011. Serial No.31 of VAT Schedule - II is relevant which reads as under:- "31. Edible oils, oil cake, but [excluding cotton seed oil cake and mustard oil cake]" 20. In the case of M.P. Cement Manufacturer Association V/s. State of M.P. & Ors., reported as 2004 (2) SCC 249, the Apex court has held that the legislature has the power to validate an invalid levy and to do so retrospectively. The proscription provided in the context of judicially invalidated legislation would not apply as the 2001 amendment had not, till the promulgation of the 2003 Act, been held to be invalid by any Court. The legislature can ....
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....rgy produced from the cess in certain cases. The Explanation, if it is read with the main provision, introduces certain contradictions and vagueness. A charging provision should be explicit, certain and clear in order to bind the subject. The outcome of the introduction of the Explanation to an otherwise unchanged Section 3(2) is a singularly ill drawn provision. The 2003 amendment was obviously introduced for the purpose of rectifying the obvious error in Section 3(2), an object which cannot be achieved by introducing an Explanation since an Explanation cannot be read as changing or as interfering with the incidence of the levy. It is not for us, particularly when legislative clarity is required since the statutory provision imposes a tax, to untangle the legislative confusion. 26. The legislature could have avoided the controversy, if it had wished to make the incidence of tax explicitly on sale or consumption, by the simple expedient of so providing. The Legislature in its wisdom did not choose to do so. To use the words voiced by Jessel M.R.6: "I must say that whoever is responsible for drafting .. of this Act . has taken a great deal of trouble to raise a ver....
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....es a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is wellsettled that if a statute is curative or merely dec....