TaxTMI 
TaxTMI 
2019 (5) TMI 4
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....-A) of Section 14 of 2002 Act whereby the liability is fastened on the purchasing dealer against the Input Tax Rebate (ITR). (iv) challenge the constitutional validity of Section 20(5) of VAT Act, 2002. (v) challenge the constitutional validity of the procedure prescribed under Section 46 and 53 of VAT Act, 2002 read with Rule 60 of the Madhya Pradesh VAT Rules, 2006, as regulating the procedure of filing of appeal and its summary rejection. [2] Petitioners are manufacturer and sellers of spirit and alcoholic beverages in the State of Madhya Pradesh. They purchase/ import Grains Neutral Spirits/ Extra Neutral Alcohol, concentrate of Alcoholic Beverages and imported Foreign Liquor as bottled in original in the State of Madhya Pradesh. The spirit is used for manufacture of potable liquor. The spirit manufactured by the petitioner is sold within and outside State of Madhya Pradesh. The manufacture and sale is on the strength of licence issued under provisions of Madhya Pradesh Excise Act, 1915 and the Rules framed there under. The petitioners are also registered under the Madhya Pradesh Value Added Tax, 2002. [3] At the outset, it is submitted on behalf of the petitioners that a....
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....e of M.P. (judgment dated 26/08/2016 in W.P. No. 6655/2015). It is contended that, the legislature has intentionally placed liquor under entry no.6 of Part III-A of Schedule II so as to ensure that there is no input tax rebate available for sale of liquor which includes spirit. The very fact that liquor has been included under Part III-A of Schedule 2 displays the clear intention of the legislature to ensure that there is no input tax rebate available against sale of spirit. It is contended that, the argument of the respondents stating that 'liquor' only means to include the final product of bottled liquor meant for human consumption is entirely misplaced as there can be no set off against sale of a final product. Thus, the respondents clearly envisaged scenario where sales of spirit made to manufacture IMFL/ country liquor should not be provided the benefit of set off. Thus, spirit falls within the meaning of the word 'liquor' as envisaged under the VAT Act read with the M.P. Excise Act. It is further contended that the respondents have tried to incorporate Entry 51 of List II in Schedule VII of the Constitution of India while interpreting the meaning of 'liqu....
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....ntry 1 in Part IV of Schedule II. It is urged that it is within the competence of the State to charge tax on ENA/ Rectified Spirit at higher rate vide residuary clause. [9] Considered the rival submissions. [10] The VAT Act was enacted to levy tax on sale and purchase of goods, tax on buildings and tax on goods carried by road in the State of Madhya Pradesh previous to VAT Act, the Act which governed the field were the Madhya Pradesh General Sales Tax Act, 1958 which was then replaced by the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994. And now the VAT Act, 2002. [11] The excisable articles under the Excise Act, 1915 was kept out of the purview of the Sales Tax. In other words, they were tax free goods, brought under Schedule I Entry No. 23 of 1958 Act. Entry No.18 of 1994 Act and Entry No. 47 of 2002 Act, as we are presently concerned with, of the VAT Act, Entry 47 of Schedule prior to 01/04/2013 stood thus:- "47. Goods on which duty is or may be levied under the Madhya Pradesh Excise Act, 1915 (No.2 of 1915) other than medicinal and toilet preparations specified for the time being in the schedule to the medicinal and toilet preparations (Excise Duties Act, 1955 (No.16 of 1955....
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....#39; and a 'fee' and the characteristic of these two as also of 'excise duty' are well- known. "A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered". A fee is a charge for special services rendered to individuals by some governmental agency and such a charge has an element in it of a quid pro quo. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. ....." [18] A taxing statute is to be strictly construed is the well established principle of law. [19] In Commissioner of Income Tax, Madras Vs. Kasturi & Sons Ltd. [(1999) 3 SCC 346], it is observed:- "9. The principle that a taxing statute should be strictly construed is well settled. In Principles of Statutory Interpretation by Justice G.P. Singh, 6th edition 1996, the law is stated thus:- "The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means: 'The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural ....
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....] "A statute" says Max Radin "is neither a literary text nor a divine revelation. Its effect is, therefore, neither an expression laid on immutable emotional over-tones nor a permanent creation of infallible wisdom. It is a statement of situation or rather a group of possible events within a situation and as such it is essentially ambiguous." [See "Statutory Interpretation"--43 Har. L.R. 863 (868)]. The observations of Lord Russel of Killowen in Attorney General v. Carlton Bank, [1899] 2 Q.B. 158 though an early pronouncement, is refreshing from its broad common-sense: "I see no reason why special canons of construction should be applied to any Act of Parliament, and I know of no authority for saying that a Taxing Act is to be construed differently from any other Act. The duty of the Court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or to any other subject, namely to give effect to the intention of the Legislature, as that intention is to be gathered from the language employed, having regard to the context in connection with which it is employed ..... Courts have to give effect to what the Legislature has said." The rule of ....
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....26 and 1227 of 1975 preferred by the assessee are dismissed, CA No. 1118 of 1975 of the revenue is allowed and in reversal of the order dated 18.9.1974 of the Andhra Pradesh High Court the question referred is answered in the negative and in favour of the revenue. In the circumstances, the parties are left to bear and pay their own costs in these appeals." [22] Furthermore, it is held in Keshavji Ravji and Co. and others Vs. Commissioner of Income Tax [(1990) 2 SCC 231]:- "11. The premises of the argument is good in parts; but the inference does not logically follow. Section 40(b), it is true, seeks to prevent the evasion of tax by diversion of the profits of a firm; but the legislative expedience adopted to achieve that objective requires to be given effect on its own language. Section 40 opens with the non-obstante clause and directs that certain outgoings specifically enumerated in it "shall not be deducted" in computing the income chargeable under the head "profits and gains of business or profession". As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intenti....
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....nd which the legislature never intend- ed to give. Something akin to this has befallen the revenue laws....." (Emphasis Supplied)" [23] In the field of taxation it is well known that the legislature has wide discretion in selecting the person or objects it wants to tax. In State of Assam and others Vs. Naresh Chandra Ghose (D) by LRs [(2001) 1 SCC 265], it is held:- "4. There is no dispute that the legislature has a wide discretion in selecting the persons or objects it wants to tax and that a statute cannot be challenged on the ground that it levies tax on one class of articles and not on others....." 8. This class of spirituous medicinal preparation is to be taxed @ 20 paise in a rupee. The question, therefore, for our consideration is whether this type of classification which differentiates medicinal preparations based on the content of alcohol in such preparations is a valid classification or not. If the accepted principle in law that the Legislature has a wide discretion in selecting the persons or objects it wants to tax is correct then in our opinion such a classification cannot be construed as an arbitrary classification. Definitely, a medicinal preparation containing ....
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.... of Indian Standards for the purpose. That Rule 2(21) of Rules 1995 defines "Rectified Spirit" which means "plain un-denatured spirit of strength of 66 degrees or more over proof and includes Extra Neutral Alcohol and Absolute Alcohol". [29] Thus when the sale or purchase is of ENA/ Rectified Spirit the State will be within its competence to charge levy at the rate under residual entry. [30] When the liquor is sold by a dealer who holds F.L.2/F.L.3/F.L.3A/F.L.4/F.L.4A licence under M.P. Foreign Liquor Rules 1996, the tax is 5 %. Similarly when it is sold by a dealer other than dealer holding these licences, the tax is 5 %. [31] These licences under Rules 1996 are: "F.L.2 (Restaurant Bar licence)- F.L.2 licence holder may sell foreign liquor to the customer of the restaurant for consumption on the licensed premises with meals or snacks. This licence may be granted to restaurants having facilities of such scale and standard, as may be determined by the State Government. F.L.3 (Hotel Bar Licence). - F.L.3 licence holder may sell foreign liquor for consumption on the licensed premises to residents of such hotels for their own use or that of their guests and other casual visitors, ....
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....lenge accordingly fails. As to direction No.(iii):- [35] Next challenge is to sub-section (6-A) of Section 14 of 2002 Act which deals with input tax rebate: It stipulates : "6-A. Notwithstanding anything to the contrary contained in this section, in no case the amount of input tax rebate on any purchase of goods shall exceed the amount of tax in respect of such purchase of goods, actually paid under the Act, into the Government Treasury: Provided that if a registered dealer (selling dealer) has furnished return of a period, the tax in respect of the purchases made by a registered dealer from the selling dealer during the period shall ordinarily be deemed to have been paid for the purpose of this sub-section, unless it is found otherwise." [36] It is contended that the respondents have ignored the fact that the petitioner is a bonafide purchaser and therefore, cannot be held accountable for any unpaid/short paid VAT by selling vendor. It is urged that under the provisions the assessee like the petitioner is not accorded any opportunity for proving its bonafides before the authority. Reliance is placed on the decision in Arise India Ltd. Vs. Commissioner of Trade and Tax Delhi....
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.... 2002 Act, read with Rule 60 of the Rules 2006. [40] Section 20 of 2002 Act deals with assessment. Sub-section (1) whereof stipulates that the assessment of every registered dealer shall be made separately for every year. Proviso, however, causes an exception in the following terms : (a) the Commissioner may, subject to such conditions and restrictions as may be prescribed, assess the tax due from any dealer for any part of a year; (b) a registered dealer who claims a refund of input tax rebate under the provisions of sub-section (4) of Section 14,- (i) in his return for any quarter of a year and makes an application for that purpose, along with such return or before the date on which the return for the subsequent quarter becomes due, or (ii) in his returns for a year and makes an application for that purpose before the date on which the return for the first quarter of the subsequent year becomes due, the assessment of such dealer for that quarter or year, as the case may be shall be made in accordance with the provisions of sub-section (4) within a period of three months from the date of receipt of the application." [41] This sub-section i.e. sub-section (1) further stip....
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....b-section (5) lacks jurisdictional foundation and therefore it is ultra vires, are taken note of and are rejected outright. If the petitioners have any grievance as regard to the procedural irregularity they are always at liberty to take recourse to forum of appeal for redressal of the grievance. Merely on assumption that the procedural irregularity may occur, a statutory provision cannot be held to ultra vires constitution. The challenge to validity of sub-section (5) of Section 20 also fails. As to direction No.(v):- [43] As regard to challenge to Section 46 and 53 of Act 2002 read with Rule 60 of the Rules of 2006. These provisions mandates predeposits. A Co-ordinate Bench of this Court in Writ Petition No.6317/2017 (Associated Alcohols and Breweries Ltd. Vs. State of M.P. & others) decided on 18.09.2018 had an occasion to examine the validity of these provisions. It upheld the validity in the following terms : "7. The contention of the learned counsel for the respondent is that Section 46 of the M.P. VAT Act, 2002, provides appeal against the order passed by any officer subordinate to Commissioner, Commercial Tax, appeal will lie before the appellate authority and sub-sec....
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....deposit when such provision exists in other Act. The Division Bench of M.P. High Court in Writ Petition No.5159/2012, (M/s. K.S. Oils Ltd V/s. State of M.P. & Ors. ) wherein alternative prayer of such petitioner was thus :- "(ii) that the common order dated 29.5.2012 Annexure P/1 may kindly be quashed and the matter may kindly be remanded to the appellate Authority for decision of merits without insisting for deposit of percentage amount as required under the provisions of Section 46 (5) of the VAT Act." 10. The Division Bench dismissed the writ petition with the following observations :- "Indeed, there is no provision of any exemption under the vat act and no power are vested in the appellate authority to pass a contrary order de hors to Sec. 45(5) of the VAT Act. According to us, such provision is mandatory and the appeal before the Appellate Authority cannot be admitted until and unless 5% of the tax is deposited since the assessment order was passed in exparte. If the statue does not permit to file any appeal without depositing the aforesaid tax, not only the Appellate Authority but this court too under writ jurisdiction cannot pass an order that the appeal should be hear....