VATAP No.48 of 2012 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH VATAP No.48 of 2012 (O&M) Date of decision: July 25, 2014 M/s Sonex Auto Industries P Limited, Bahadurgarh (Haryana) ……Appellant Vs. State of Haryana and others …..Respondents CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Rajiv Agnihotri, Advocate, Mr. S.K.Yadav, Advocate, Mr. Avneesh Jhingan, Advocate, Mr. Rohit Gupta, Advocate and Mr. Sandeep Goyal, Advocate for the appellant(s). Ms. Tanisha Peshawaria, DAG, Haryana. Ajay Kumar Mittal,J.
1. This order shall dispose of VAT Reference Nos.9 and 10 of 2010, VATAP Nos.4, 6, 17 to 19, 27 to 30, 48 to 50, 62 to 64, 66, 67, 69, 70, 72 to 75, 84 to 86, 103, 109, 112, 113, 124, 125, 140, 141, 142, 147, 181, 185 to 188 of 2012, 5 to 9, 11, 19 to 23, 71, 72, 92, 96 to 98, 100 of 2013 and CWP Nos.15346 of 2011, 8548, 9159, 14394, 14437, 19788, 20682, 20684, 24171 and 25993 of 2013, as according to learned counsel for the parties, the issue involved in all these cases is identical. However, the facts are being extracted from VATAP No.48 of 2012.
2. VATAP No.48 of 2012 has been preferred by the appellant- assessee under Section 36 of the Haryana Valued Added tax Act, 2003 (in Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 2 short, the “HVAT Act”.) against the orders dated 21.9.2011, Annexure A.6, 7.10.2009, Annexure A.4 and 29.2.2008, Annexure A.2 passed by the respondent authorities.
3. As per order dated January 30, 2013 passed by this Court, learned counsel for the appellant relied upon questions of law framed in VAT Reference No.9 of 2010 as the questions of law arising in this case, which read thus:- “(i)What is the amount of 'deferred tax' within the meaning of Section 61(2) (d) (iii) of the Haryana Value Added Tax Act, 2003 and how will the amount of one half of the amount of deferred tax payable upfront along with the filing of the tax returns be computed under section 61(2) (d) (iii) of the Act?. (ii) How the tax benefit in case of payment of one half of the amount of deferred tax upfront along with the tax returns will be counted towards exhausting the capping limit on the amount of deferment of payment of tax?. (iii)Whether the clarification issued under Section 56(3) of the Act by the Financial Commissioner and Principal Secretary to Government Haryana in Haldi Ram's case dated 12.7.2004 dealt with the aforesaid questions and if it did, then was the Tribunal right in deciding the above questions raised in appeals?. (iv)Is interest payable under the provisions of Section 14(6) of the Act on short payment of one half of the amount of deferred tax calculated in accordance with the Act and the Rules made thereunder?.
4. A few facts necessary for adjudication of the controversy involved, as available on the record of VATAP No.48 of 2012 may be noticed. The appellant is a dealer registered with the HVAT Act as also under the Central Sales Tax Act, 1956 (in short, “the CST Act”.) and is filing the returns and discharging tax obligations in accordance therewith. It is Singh Gurbax engaged in the manufacturing and trading of plastic moulding parts etc. The 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 3 appellant was allowed exemption/deferment from payment of tax in view of industrial policy as defined in Rules 28A, 28B and 28C of the Haryana General Sales Tax Rules, 1975 (for brevity, “the 1975 Rules”.). After introduction of the HVAT Act w.e.f 1.4.2003, the units enjoying the benefit of exemption were given an option for deferment of tax under Section 61 of the said Act. Assessment for the relevant assessment year in the case of the appellant was framed by the assessing authority vide order dated 15.2.2007, Annexure A.1. The case was taken suo motu by the revisional authority. On receipt of notice, the appellant put in appearance and filed written submissions. According to the appellant, the revisional authority without considering the clarification given by the Secretary in the case of M/s Haldiram Foods (P) Limited inflicted financial liability on it and order dated 29.2.2008, Annexure A.2 was passed against it. Aggrieved by the order, the appellant filed appeal before the Tribunal on 11.5.2008 which was rejected vide order dated 7.10.2009, Annexure A.4. Thereafter, the appellant filed review application before the Tribunal on 18.3.2010 and the same was also dismissed vide order dated 21.9.2011, Annexure A.6. Hence the present appeal.
5. We have heard learned counsel for the parties and perused the record.
6. Learned counsel for the appellant contended that the amount of deferred tax should be calculated without deducting the amount of input tax paid on the goods used in the manufacture and the whole of the amount of input tax paid should be treated as the amount of tax paid in advance to be adjusted against payment of half of the amount of deferred tax required to be paid upfront alongwith the tax returns. Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 4 According to the learned counsel, the dealer collecting 100% sales tax is required to deposit 50% upfront and 50% shall be retained by the assessee. Reliance was placed on judgments in Associated Cememt Companies Limited v. State of Bihar and others, (2004) 7 SCC642(SC), Nathi Devi vs. Radha Devi Gupta, (2005) 2 SCC271 Union of India and another v. Hansoli Devi and others, (2002) 7 SCC273 Commissioner of Trade Tax, UP vs. SS Ayodhya Distillery and others, (2009) 19 VST251and The State of Punjab v. Jullundur Vegetables Syndicate, (1966) 17 STC326SC) in support of the submissions.
7. On the other hand, learned counsel for the State besides supporting the impugned order submitted that the amount of tax deferred should be calculated after deducting the amount of input tax paid on the goods purchased from within the State for use in the manufacture of the goods for sale. According to the learned counsel, exemption provisions should be strictly construed. Learned counsel raised the following three points:- i) What is the amount of deferred tax within the meaning of section 61(2) (d) (iii) of HVAT Act read with Rule 69 of Haryana Value Added tax Rules, 2003 (in short, “the HVAT Rules, 2003”.). ii) Clarification issued by the Financial Commissioner in case of M/s Haldi Ram Foods Pvt. Limited, Gurgaon under section 56(3) of HVAT Act is binding or not?. iii) Whether in the facts and circumstances of the case, interest is automatically leviable?. Reliance was placed on judgments in Creative Handicrafts v. Chairman, Noida and another, (1999) 116 STC475All), State of Haryana and others Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 5 v. M/s Mahabir Vegetable Oils Pvt. Limited, (2011) 38 PHT333and Tata Iron and Steel Co. Limited vs. State of Jharkhand and others, (2005) 140 STC284 8. The question that arises for consideration is whether the tax deferred would be calculated as the amount of tax payable on the taxable turnover of the goods manufactured by the unit without deducting the input tax paid by the unit on the goods used in the manufacture of the goods or after deducting the input tax.
9. It would be apposite to refer to the relevant statutory provisions. Section 61(2) (d) of HVAT Act reads thus:-
“61. (1) The Haryana General Sales Tax Act, 1973 (20 of 1973), is hereby repealed: (2) Notwithstanding anything contained in sub-section (1), - xx xx xx xx xx xx xx (a) to (c) ............ (d) The provisions of section 13B and section 25A of the said Act and the rules (hereinafter referred to as the ‘existing rules’), framed thereunder relating to tax concessions to industrial units shall remain in force subject to the following exceptions, restrictions and conditions, namely: - (i) An industrial unit availing the benefit of exemption from payment of tax may, in the prescribed manner, change over to deferment of payment of tax for the remaining period and the remaining extent of benefit or for such period and such extent of benefit as may be prescribed but where an industrial unit does not choose to do so, exemption to it from payment of tax shall cease to take effect on and from the appointed day and further,- (I) It shall be liable to maintain production at a level so that its annual turnover does not fall short of the average annual turnover during the period of exemption; and Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 6 (II) It shall not export out of State any goods produced by it, for a period of next five years or such shorter period for which it has availed of exemption from payment of tax and if it fails to do so, it shall be liable to pay to the State Government, in the prescribed manner the amount of tax in respect of which it has availed of exemption from payment after reducing therefrom the tax paid by it before such failure; (ii) An industrial unit availing the benefit of capital subsidy may, in the prescribed manner, change over to deferment of payment of tax for the remaining period and the remaining extent of benefit but where an industrial unit does not choose to do so, the benefit of capital subsidy to it shall cease to take effect on and from the appointed day; (iii) An industrial unit availing the benefit of deferment of payment of tax, whether by change over under the foregoing provisions or otherwise, may, in lieu of making payment of the deferred tax after five years, pay half of the amount of the deferred tax upfront along with the returns and on making payment in this manner, the tax due according to the returns shall be deemed to have been paid in full; and (iv) The tax deferred in every other case shall be converted into interest free loan in the manner prescribed. Explanation, - For the purpose of this clause, “tax”. includes the tax under the Act of 1973 and the Central Act.”. 10. A composite reading of the above provision leads to the following conclusions regarding intent and scope of benefits available under Section 61(2) (d) of the HVAT Act:- (a) After coming of HVAT Act, the only benefit available to the dealers, who had been given tax benefits under section 13B and 25A of the repealed Haryana General Sales Tax Act, 1973 (in short, the “HGST Act”.) is that of tax deferment. The benefits of tax exemption and capital subsidy available under the repealed Act were not extended to HVAT Act. (b) Such of the dealers as were enjoying the benefit in the shape of tax Singh Gurbax exemption or capital subsidy were required vide section 61(2) (d) (i) 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 7 and section 61(2) (d) (ii), respectively, to change over to deferment in the prescribed manner. Those who failed to do so, ceased to be eligible for any benefit from the appointed day i.e. Ist April 2003. (c) Under section 61(2) (d) (iii), the dealer has two options for payment of deferred tax. (i) Ist option relates to where the dealer can pay deferred tax after five years; (ii) In second option, the dealer is required to pay half of the amount of the deferred tax upfront alongwith the returns and on making such payment, the tax due according to the returns shall be deemed to have been paid in full. As an illustration, in lieu of deferred amount of Rs.100.00, eligible dealer can either pay Rs.100.00 after five years or pay Rs.50.00 upfront alongwith the returns.
11. Rule 69(2) of the HVAT Rules, 2003 would also be relevant for purposes of resolving the present controversy, which reads:- “Special provisions relating to industrial units availing or entitled to avail tax concessions under Rules 28A, 28B or 28C of the 1975 Rules. Rule 69(1).... (1) xxxxxxxxxx (2) On receipt of application under sub-rule (1), the officer in charge of the district after satisfying himself that the application is within time, correct and complete in all respect and the applicant is a genuine industrial unit, shall, within fifteen days, issue an entitlement certificate in Form VAT-G14 in lieu of exemption certificate where the applicant unit was availing the benefit of exemption from payment of tax and a revised entitlement certificate in Form VAT-G15 where the applicant unit was availing the benefit of capital subsidy which shall take effect from the appointed day and shall entitle the unit to deferment of payment of tax for five years. The Unit may, in lieu of availing deferment of tax, elect, by indicating in the application made under sub-rule (1), to make payment of Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 8 one-half of the tax otherwise due before the time prescribed for filling of quarterly returns and where the tax is so paid the unit shall have no further liability to pay tax for the said period and such payment for the purpose of computation of tax benefit availed by the unit and input tax passed on to the purchaser, if otherwise admissible to him, shall be deemed to be the full payment. This facility shall also be available to a unit who has been availing the benefit of deferment of payment of tax before the appointed day provided such unit sends an intimation to the officer incharge of the district within 15 days of coming into force of these rules in writing in this behalf. The entitlement or the revised entitlement certificate, as the case may be, shall be subject to the conditions and restrictions specified therein or under the existing rules under which the eligibility/entitlement certificate to such applicant was issued.”. 12. According to the aforesaid rule, the authority on receiving an application in Form VAT-A5 under sub rule (1) shall ensure that the application is within limitation, correct and complete in all respects. The industrial unit is to be a genuine unit to avail benefit of deferment for which entitlement certificate in VAT-G14 shall be issued where the unit was availing benefit of exemption from payment of tax whereas revised entitlement certificate in VAT-G15 shall be issued where the applicant unit was availing benefit of capital subsidy. The applicant may indicate in the application form that it wishes to make payment of one half of the tax otherwise due before the prescribed date for filing of quarterly returns. Under this sub rule, where 50% of the tax is paid, the unit shall not be liable to pay any further tax for the said period and such payment for the purpose of computation of tax benefit availed by the unit and the input tax passed on to the purchaser, if otherwise admissible to him, would be deemed to be the full payment of tax. Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 9 13. The provisions of sections 13B (Exemption of Tax) and 25A (Deferment of Tax) of the HGST Act have been saved by virtue of Section 61 of HVAT Act, which reads as under:- “13B. Power to exempt certain class of industries The State Government may, if satisfied that it is necessary or expedient so to do in the interest of industrial development of the State, exempt such class of industries from the payment of tax, for such period either prospectively or retrospectively and subject to such conditions as may be prescribed. 25A. Deferment of tax Notwithstanding anything to the contrary contained in this Act, the State Government is satisfied that it is necessary and expedient so to do in the interest of industrial development of the State, may defer the payment of tax by such class of industries, for such period, either prospectively or retrospectively, and subject to such conditions, as may be prescribed. Provided that the State Government may convert whole or part of the deferred tax to interest from loan or capital subsidy. On plain reading of these provisions, it is clearly spelled out that they empower the State Government to make rules for giving tax concessions in the form of exemption from tax and deferment of tax to the industries for industrial development in the State.
14. The State Government had framed rules for exemption/deferment from payment of tax. Rule 28A of 1975 Rules was introduced on 17.5.1989 which remained effective from 1.4.1988 to 31.3.1997. Sub rule (4) of Rule 28A gives a tax concession to industrial units, relevant portion of which is in following terms:- “(a) Subject to other provisions of this rule, the benefit of tax exemption or deferment shall be given to an eligible industrial unit Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 10 holding exemption or entitlement certificate, as the case may be to the extent, for the period, from year to year in various zones from the date of commercial production or from the date of issue of entitlement/exemption certificate as may be opted, as under:- Quantum and period of tax exemption/tax deferment (I) New Industrial Units Name of the Small scale Medium Time limit Zone and the scale/large area scale comprised therein Zone ‘A’ 150% of fixed 125% of fixed 9 years comprising capital capital Centrally and investment investment State notified backward areas Zone ‘B’ 125% of fixed 100% of fixed 7 years comprising capital capital areas other investment investment than zones ‘A’ and ‘B’ Zone ‘C’ 100% of fixed 90% of fixed 5 years comprising capital capital Faridabad and investment investment Ballabgarh complex administration areas (II) Units undertaking expansion/diversification 100% of 90% of fixed 9 years fixed capital capital investment investment 100% of 90% of fixed 7 years fixed capital capital investment investment 100% of 90% of fixed 5 years fixed capital capital investment investment Provided that in the case of exemption the benefit shall extend to tax on gross turnover and in the case of deferment, it shall extend to tax on the taxable turnover of goods manufactured by the unit.”
. Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 11 15. The State had created three zones on the basis of industrial backwardness. A unit could opt for either exemption or deferment. The time period for which benefit was available varied from 5 to 9 years and monetary limit ranged between 90% and 125% of Fixed Capital Investment in case of Medium Scale/Large Scale Industrial unit and 100% to 150% of Fixed Capital Investment in case of Small scale industrial unit.
16. The Government introduced Rule 28B in 1999 which was operative from 1.8.1997 till the date on which the policy for incentive to industry was terminated/revised by the Government of Haryana in the Industries Department. The Government came up with new industrial policy whereby Rule 28C came into operation in 2000 starting from 15th November 1999 and ending on 30th April 2000. The units in pipeline as on 30th April 2000 were also included. Tax concessions under Rule 28A and Rule 28B were similar in nature. However, under Rule 28C, a new type of tax concession in the form of capital subsidy was introduced. It allowed the industrial unit to pay a part of the tax payable on the sale of the goods manufactured by it on a graded scale spread over a period up to eleven years or at a fixed scale of 50% depending on the location, size and nature of the unit and keep the balance tax on a graded scale or fixed 50% with it as capital subsidy. The rule also provided how the tax paid on goods used in manufacture would be treated. The relevant part of the rule, in this regard, reads, as under — “ 28C(4) For the purpose of providing tax concessions to the eligible industrial units located in the State of Haryana, the State has been divided in the following three Categories, namely- Category A Areas within the municipal limits of Gurgaon Town, Gurgaon block of Gurgaon district (except Industrial Model Town Manesar); the municipal limits of Faridabad Municipal Corporation, Faridabad and Ballabgarh Blocks of Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 12 Faridabad district. Category B Controlled areas of Kundli, Bahadurgarh and Panipat towns, Industrial Model Town Manesar and Urban Estate, Punchkula. Category C Rest of the state. (5)(a) Subject to other provisions of this rule, an eligible industrial unit (except a prestigious unit) holding a valid entitlement certificate shall be entitled to the concession of deferment of payment of sales tax including central sales tax and conversion of the same to capital subsidy, computed on the sale of goods (including bye-products and waste) manufactured by the unit or arising from the process of manufacturer and declared in the sales tax returns filed by the unit, without taking into account the rebate admissible under section 15-A or the rules framed under the Act, at the scale, subject to the time limit and the extent related to the fixed capital investment(FCI), as tabulated below:- Category Extent of Tax Period Scale of concession concession tax Small Medium/ Scale Large scale A125 of 100% of 9 years Ist to 9th fixed fixed year:
50. capital capital investment investment B125 of 100% of 10 Ist fixed fixed year:80% years capital capital 2nd and 3rd investment investment year:
60. xxxxxxxx x C150 of 125% of 11 Ist year : fixed fixed 80% years capital capital xxxxxxx investment investment 11th year 20% TABLE II Singh Gurbax Expansion and diversification 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 13 xxxxxxxxxxxxx TABLE III Sick industrial unit-maximum permissible unit xxxxxxxxxxxxxx and the unit shall be required to pay only the balance of tax after deducting the rebate and the capital subsidy plus any purchase tax payable at its hands but no refunds of any amount of tax paid shall accrue to the unit by operation of these provisions. Illustration — Owner of a unit purchased goods worth Rs. 1000 locally from Haryana and used them in manufacture of goods, which he sold for Rs.
2500. He paid Rs. 20 as tax at the time of purchase of goods which were taxable at the first stage and Rs. 30 became payable by him on other goods taxable at the last stage. The tax payable on sale of manufactured goods is Rs.
120. The scale of concession admissible to him is 50%. He is entitled to defer the payment of Rs. 60(50% of Rs. 120) and retain the same as capital subsidy from the State. He is required to pay Rs. 30 as purchase tax (same as in a normal case) and Rs. 10 as sale tax (Total sale tax: Rs. 120 minus capital subsidy: Rs. 60 minus rebate admissible: Rs. 50 in the Government treasury. Explanation 1 – For the purpose of calculation of benefits availed of under the rule, tax payable including the component of tax to be converted into subsidy shall be taken into account. Explanation II.. Provided that new industrial units falling in category B and category C can opt for the scale of tax concession on fixed slab scale as applicable to units in category A: Provided further….. Provided further….. Provided further that existing units availing or eligible to avail benefits of exemption/deferment under Rules 28-A and 28-B may opt for he benefit of concession of tax on fixed scale of 50% under this rule subject to the following conditions:- Singh Gurbax 2014.07.30 12:14 i) Such unit will be entitled to avail of the balance quantum of I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 14 tax exemption/deferment during the balance period available to it under Rule 28-A or Rule 28-B, as the case may be. ii) The existing unit opting for benefit under this rule will remain under obligation to continue production after availing of the benefit at the same level for a period of five years. iii) The existing unit opting for availing of the benefit under this rule would not be required to give security/bank guarantee against the benefit to be availed of under this rule.”. 17. Rule 28C had some unique features which was not present in Rules 28A and 28B, which are described below:- (1) Tax concession of retention of part of tax as capital subsidy at a graded scale 80% to 20% or fixed 50% was given. (2) As per illustration, amount of tax paid on goods purchased from within the State on payment of sales tax and used in manufacture was not to be reduced from tax payable on sale of goods manufactured for calculation of amount of tax to be retained as capital subsidy but the said amount was to be counted as payment of tax against the tax payable on sale of goods. (3) A unit availing tax concessions under rule 28A or 28B had the option to switch over to rule 28C at the fixed scale of 50% of tax concession within its balance period and monetary limit of tax concession. The tax concessions available under the HGST Act were saved with certain fundamental modifications by virtue of Section 61 of the HVAT Act on repeal and replacement of the HGST Act by HVAT Act with effect from 1.4.2003.
18. From the reading of section 61(2)(d) of HVAT Act, it is deduced that sections 13B and 25A along with the rules 28A, 28B and 28C have been saved for the purpose of extending tax concessions to the industrial units which had been availing of those concessions at the time of repeal of the HGST Act for the balance time period and the extent of monetary capping limit of the concession as was available. Some fundamental Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 15 changes in the nature of the concessions were made. Under the HVAT Act, the only form of tax concession made available was deferment of tax, both tax exemption and capital subsidy were done away with. Clause. (iii) of section 61(2) (d) deals with concession of tax deferment. An optional provision for payment of half of the amount of deferred tax along with returns at the discretion of the industrial unit, is made in it and on payment of that amount, the whole of the amount of tax due according to the returns would be deemed to have been paid.
19. We now proceed to examine certain relevant provisions under the HVAT Act and the rules relating to calculation of tax liability of a dealer thereunder. Section 2(1) (w) of HVAT Act defines “Input tax”. as follows:- “(w) ‘input tax’ means the amount of tax paid to the State in respect of goods sold to a VAT dealer, which such dealer is allowed to take credit of as payment of tax by him, calculated in accordance with the provisions of section 8.”
. ‘Taxable turnover’ under Section 2(1) (zn) means “that part of the gross turnover which is left after making deductions therefrom in accordance with the provisions of section 6; plus purchase value of goods liable to tax under sub-section (3) of section 3”.. According to Section 2(1) (zk) tax means the tax levied under the Act.
20. Section 3 of the HVAT Act is the charging section which lays down the accurate method of computation of one's tax liability. The relevant portion of the section reads as under:- "3.Incidence of tax (1) Every dealer who would have continued to be liable to pay tax under the Act of 1973 had this Act not come into force, and every other dealer whose gross turnover during the year immediately preceding the appointed day exceeded the taxable quantum as defined or specified in the Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 16 Act of 1973, shall, subject to the provisions of sub section (4) be liable to pay tax on and from the appointed day on the sale of goods effected by him in the State. (2) Every dealer to whom sub-section (1) does not apply and who is of the class or classes mentioned in column 2 of the Table below and whose gross turnover in any year first exceeds the taxable quantum specified in column 3 there against, shall, subject to the provisions of sub-section (4), be liable to pay tax on and from the day mentioned in column 4 there against on the sale of goods effected by him in the State— TABLE xx xx xx xx xx Provided that this sub section shall not apply to a dealer who deals exclusively in exempted goods. Note: Where a dealer is covered under more than one of the class or classes mentioned in the Table above, the liability to pay tax shall commence from the earliest day he becomes liable to tax. (3) If a dealer liable to pay tax under sub section (1) or sub section (2) purchases any taxable goods in the state from any source in the circumstances that no tax is levied or paid under this Act on_their sale to him and he either exports them out of State or uses or disposes them of in the circumstances in which no tax is payable under this Act or the Central Act by him to the State on them or the goods manufactured therefrom, then, he shall, subject to. the provision of sub-section (4), be liable to pay tax on the purchase thereof: Provided that where such goods (except those specified in Schedule F) or the goods manufactured therefrom are sold in the course of export of the goods out of the territory of India, no tax shall be levied on their purchase. Provided further that where the goods purchased are used or disposed of partly in the circumstances mentioned in the foregoing provisions of this sub- section and partly otherwise, the tax leviable on such goods shall be computed pro rata. (4) The tax levied under sub-sections (1), (2) and (3) shall be calculated on the taxable turnover, determined in accordance with the provisions of section 6, at the rates of tax applicable under section 7, and where the taxable turnover is taxable at different rates of tax, the rate of tax shall be applied Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 17 separately in respect of each part of the taxable turnover liable to a different rate of tax. (5) If the tax calculated under sub section (4) is more than the input tax, determined in accordance with the provisions of section 8, the difference of the two shall be the tax payable; and if the input tax is more than the tax calculated, the excess amount shall be either refundable or adjustable with future tax liability in accordance with the provisions of section 20, but if the input tax is a negative value on account of reversal of input tax under the second proviso to sub section (1) of section 8, the absolute value thereof shall be added to the tax calculated under sub section (4) and the resultant amount shall be the tax payable. Illustration – Serial Tax calculated Input tax Tax payable Refundable/Adjustable No.under sub section (4) 1) Rs.100 Rs.50 Rs.50 Nil 2) Rs.100 Rs.150 Nil Rs.50 3) Rs.100 (-) Rs.50 Rs.150 Nil 21. Under section 3 (1) of the HVAT Act, liability of all those dealers who were liable to pay tax under the HGST Act on the date of its repeal was continued. Sub-section (2) creates liability of new dealers where taxable turnover exceeds the minimum quantum with effect from the day as given in the Table therein. The tax under these sections is levied on the sales of goods effected in the State by a dealer liable to pay tax. However, sub section (2) is not applicable to a dealer where he is exclusively dealing in exempted goods. Certain circumstances have been enumerated under sub-section (3) creating liability to pay purchase tax. Sub-section (4) gives method of calculation of tax levied under sub-sections (1), (2) and (3). Tax is to be calculated on taxable turnover in accordance with the provisions of section 6 at the rates of tax applicable under section 7. For this purpose, where turnover is taxable at different rates, it shall be split according to rates of tax applicable and tax is calculated on each part separately. Sub section (5) provides for reduction of Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 18 input tax from the tax computed under sub-section (4). It deals with three eventualities: firstly, where tax calculated under sub-section (4) is more than the input tax, the difference of the two shall be the tax payable; secondly, where input tax is more, the difference of the two shall be the amount refundable; and lastly, where input tax is in minus due to reversal of input tax credit, the sum of the two will be the tax payable. Under section 3(3), if any purchase tax is leviable, then that shall also be added to the liability to pay tax. On the basis of sub-sections (3) and (4), the tax payable shall be output tax + purchase tax - input tax. This has been provided under Rule 40(4) of HVAT Rules which reads thus:- “(4) The tax due required to be paid by a VAT dealer for a tax period shall be the output tax, calculated under sub rule (1), plus the purchase tax, calculated under sub rule (2), minus the input tax, calculated under sub rule (3). Arithmetically put: Tax due = Output tax + purchase tax – input tax.”
. In Form VAT R-1, the input tax is separately calculated which amounts to payment of tax by the dealer.
22. Section 6 of the HVAT Act prescribes the method for determination of taxable turnover. It provides for certain deductions to be made in calculating the taxable turnover. The deductions given in Section 6 broadly relate to sales made outside the State or in the course of inter-State trade or in the course of the export of the goods out of India. Thus, all sales made within the State which are not exempt are part of the taxable turnover. Filing of returns, assessment and collection of tax and refund has been enumerated in Section 14 of the HVAT Act. In case of large tax payers who had paid one lac rupees or more in the previous year, the tax determined under the HVAT Act is paid on monthly basis under sub section (3) of section 14 and in case of other tax payers, they are obliged to pay tax on quarterly basis under sub section (4). However, tax short paid is required to Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 19 be paid alongwith interest before filing of return under sub section (2) on quarterly basis.
23. On cumulative reading of the above, it spells out that taxable turnover under section 2(1) (zn) means gross turnover left after giving deduction in accordance with the provisions of Section 6 plus purchase value of goods liable to tax under Section 3(3). Tax under section 2(1)(zk) means the tax levied under the HVAT Act. The levy of tax under Section 3 is on the sale of goods effected in the State. Thus, tax payable on the goods manufactured by the unit is the tax levied under Section 3 of HVAT Act. When an industrial unit purchases goods from within the State, it has to pay tax, i.e., input tax on the same and this payment of tax is in essence advance tax which is liable to be adjusted with the tax payable by it on the sale of the goods manufactured by it. In Form VAT-R1, the input tax is separately calculated and is considered as the payment of tax. Under section 61(2) (d) (iii) of the HVAT Act read with Rule 69(2) of the HVAT Rules, the tax benefit under the HGST Act is to be continued in the form of tax deferment under the HVAT Act for the remaining period and the remaining extent of benefit that was admissible under the HGST Act. The expression falling in Clause (iii) of Section 61(2) (d) is “pay half of the amount of the deferred tax upfront alongwith returns and on making payment in this manner, the tax due according to the returns shall be deemed to have been paid in full.”
. A plain reading of the same shows that what is required to be paid by a unit opting for payment of 50% of deferred tax, is the payment of half of the amount of the deferred tax upfront.The provision nowhere provides that deferred tax would be calculated after computation of tax payable is determined according to the returns. It only provides that if half of the deferred tax is paid, then it would be assumed that the tax due according to returns is deemed to have been paid in full. Thus what is required to be paid, is 50% of the deferred tax which would be computed on the basis of tax on sale of Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 20 the goods manufactured by the industrial unit and the benefit of the payment of tax on the purchase of the goods used in manufacture i.e. input tax shall be allowed as the tax paid in advance. The illustration in rule 28C(5) supports the aforesaid view regarding the calculation of deferred tax and the liability to pay 50% tax upfront.
24. In other words, the amount of tax payable according to the returns is the amount of tax calculated on the sales of the goods manufactured minus the input tax credit. In case the unit opts for payment of half of the deferred tax upfront along with the returns, the deferred tax would be calculated without deducting the amount of input tax paid on the goods used in the manufacture and the amount of input tax paid by it is to be counted towards payment of 50% of the deferred tax upfront.
25. Taking up second issue, it would be expedient to reproduce Section 56(3) of HVAT Act which reads thus:- “(3) The State Government may, if it considers it necessary or expedient so to do, for the purpose of maintaining uniformity in the levy,assessment and collection of tax or for the removal of any doubt, suo motu or on an application made to it in the prescribed form and manner on payment of the prescribed fee by a dealer or a body of dealers, issue an order clarifying any point relating to levy, assessment and collection of tax and all persons employed in the administration of this Act except an appellate authority, and all dealers affected thereby shall observe and follow such order.”. 26. The Financial Commissioner and Principal Secretary to Government, Haryana, Excise and Taxation department in exercise of power under Section 56(3) of the HVAT Act had issued order dated 12.7.2004 giving clarification on the application of M/s Haldi Ram Manufacturing Co. (P) Limited as under:- “Order of clarification under Section 56(3) of HVAT Act, 2003 on the application of M/s Haldi Ram Manufacturing Co. (P) Limited Gurgaon. Singh Gurbax This is an order of clarification under Section 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 21 56(3) of HVAT Act, 2003 (VAT Act) on the application of M/s Haldi Ram Manufacturing Co. (P) Limited Gurgoan seeking clarification on the issue of (a) Input tax benefit (b) restrictions on export out of State and (c) maintenance of production level. The applicant company is an industrial unit availing the benefit of sales tax concession on certain goods i.e. Namkeen, snacks and sweets other than confectionary under rule 28C of the Haryana General sales Tax Rules (Section 61 of Haryana Value Added Tax Act). The facts as narrated by the applicant and the points on which clarification has been sought are as follows:- Under Tax Not under Tax Concession concession Goods Namkeen, Confectionary, Snacks, cooked food, Sweets other processed food than etc. confectionary Taxability Full rate of tax Full rate of ax is to be is to be charged charged at and collected at prevailing the prevailing rates. Half of rates and the tax so depositing the charged or same with the collected shall Govt. on the be paid to due dates. Govt. up-front (if opted for upfront payment) and retain rest half of the tax. Or This 50% of tax can be passed to the consumer by charging 100% tax and collecting 50% only and paying the same to the Govt. to compete the hard market. Singh Gurbax Input Tax Tax though As full tax is 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 22 Benefit paid to Govt. charged or the is 50% yet sale : Input tax input benefit to benefit is the purchaser passed full to is passed the purchaser. 100%. Restriction Rule 28C of No such on Export HGST Act restriction on out of imposes export out of State restriction on State is there on Export out of the goods State upon the which are not goods under under tax Tax concession. concession i.e. Namkeen, snacks and sweets. Production The industrial No such level unit availing restriction is the tax there on the concession goods which under the said are not under rules is to Tax concession. maintain the average production level on the production of goods upon which the benefit of the concession has been availed during the period of concession and even after five years of availing the concession. The issue has been examined in the light of provisions of rule 28C of Haryana General Sales Tax Rules, 1975 and section 61 of Value Added Tax Act, 2003 read with rule 69 of Value Added Tax Rules, 2003. As far as extent of eligibility of the dealer for tax exemption is concerned, the same stands decided vide HLSC order dated 6.1.2004 in 87th meeting. The applicant dealer is in appeal before Haryana Tax Tribunal against this Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 23 order. Section 61(1)(d) of the Value Added Tax Act provides that the provision of section 13B of the Haryana General Sales Tax Act, 1973 and the rules framed theruender relating to tax concession to industrial units shall remain in force subject to the following exceptions, restrictions and conditions, namely:- i) an industrial unit availing the benefit of exemption from payment of tax may, in the prescribed manner, change over to deferment of payment of tax for the remaining period and the remaining extent of benefit or for such period and such extent of benefit as may be prescribed but where an industrial unit does not choose to do so, exemption to it from payment of tax shall cease to take effect on and from the appointed day. Sub rule 2 of Rule 69 of Haryana Value Added Tax Rules provides answer to dealer’s query with regard to input tax benefit. The relevant extract whereby reads as under:- ‘The unit may, in lieu of availing deferment of tax, elect, by indicating, in the application made under sub rule (1), to make payment of one half of the tax otherwise due before the time prescribed for filing of quarterly returns and where the tax is so paid the unit shall have no further liability to pay tax for the said period and such payment for the purpose of computation of tax benefit availed by the unit and input tax passed on to the purchaser, if otherwise admissible to him, shall be deemed to be the full payment.’ The applicant can change tax at full prevailing rate from the customers/purchasing dealers. Half of the tax so charged or collected shall be paid to govt. upfront (if opted for upfront payment). It is upto the dealer to pass 50% of tax to the consumer by charging 100% tax and collecting 50% only and paying the same to the govt. to compete in the market. However, it is made clear that input benefit shall be passed to the purchaser only to the extent of tax charged in the tax Singh Gurbax invoice. 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 24 27. The following query had been posed in the clarification sought by M/s Haldi Ram Manufacturing Co. (P) Limited:- “Full rate of tax is to be charged at prevailing rates. Half of the tax so charged or collected shall be paid to Govt. up-front (if opted for upfront payment) and retain rest half of the tax. Or This 50% of tax can be passed to the consumer by charging 100% tax and collecting 50% only and paying the same to the Govt. to compete the hard market.”. 28. The clarification given answering the said question in favour of the dealer is as follows:- “The unit may, in lieu of availing deferment of tax, elect, by indicating in the application made under sub rule (1) to make payment of one half of the tax otherwise due before the time prescribed for filing of quarterly returns and where the tax is so paid the unit shall have no further liability to pay tax for the said period and such payment for the purpose of computation of tax benefit availed by the unit and input tax passed on to the purchaser, if otherwise admissible to him, shall be deemed to be the full payment. The applicant can charge tax at full prevailing rate from the customers/purchasing dealers. Half of the tax so charged or collected shall be paid to govt. upfront (if opted for upfront payment). It is upto the dealer to pass 50% of tax to the consumer by charging 100% tax and collecting 50% only and paying the same to the govt. to compete in the market. However, it is made clear that input benefit shall be passed to the purchaser only to the extent of tax charged in the tax invoice. In the case of commodities which are not under tax concession, full rate of tax is to be charged and the input tax benefit is passed full to the purchaser.”. 29. The Apex Court in State of Kerala and others v. M/s Kurian Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 25 Abraham Pvt. Limited and another reported in (2008) 13 VST1(SC) had emphasized the authority of the revenue to issue circulars and clarifications for the proper administration of the Act. It was noticed as under:- “One more aspect needs to be mentioned. Provisions of Section 3(1A) are similar to the provisions of Section 119(1) of the Income-tax Act, 1961 ("1961 Act") inasmuch as both the sections have used the expression "for the proper administration of this Act". According to the Law of Income-tax by Kanga and Palkivala, the Board is entrusted with the power to give effect to the provisions of the Act and to provide "fair and just administration" in the matter of imposition and collection of tax. This is where it becomes the incumbent duty of the Board to grant administrative relief in appropriate cases. In such exercise, incidentally the Board has to consider the effect of the items enumerated in the Entry. Therefore, it is not open to the State Government to contend that the Board in this case had entered into an area which is earmarked for the legislature/executive. In our view, the said circular grants administrative relief to the business. It was entitled to do so. Therefore, it cannot be said that the Board had acted beyond its authority in issuing the said circular. One more reason needs to be stated. Whenever such binding circulars are issued by the Board granting administrative relief(s) business arranges its affairs relying on such circulars. Therefore, as long as the circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and not binding on them.
20. In the case of Union of India and anr. V. Azadi Bachao Andolan and anr. Reported in (2004) 10 SCC1a circular was issued by CBDT under Section 119 of the Income-tax Act, 1961. It was challenged inter alia on the ground that it was ultra vires the provisions of Section 19(1). The argument was rejected by this Court in the following words:
"7. It was contended successfully Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 26 before the High Court that the circular is ultra vires the provisions of Section 119. Sub-section (1) of Section 119 is deliberately worded in a general manner so that CBDT is enabled to issue appropriate orders, instructions or directions to the subordinate authorities "as it may deem fit for the proper administration of this Act". As long as the circular emanates from CBDT and contains orders, instructions or directions pertaining to proper administration of the Act, it is relatable to the source of power under Section 119 irrespective of its nomenclature. Apart from sub-section (1), sub-section (2) of Section 119 also enables CBDT 'for the purpose of proper and efficient management of the work of assessment and collection of revenue, to issue appropriate orders, general or special, in respect of any class of income or class of cases, setting forth directions or instructions (not being prejudicial to the assessees) as to the guidelines, principles or procedures to be followed by other Income Tax Authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties'. In our view, the High Court was not justified in reading the circular as not complying with the provisions of Section 119. The circular falls well within the parameters of the powers exercisable by CBDT under Section 119 of the Act."
30. The circular issued in exercise of statutory powers vested in the competent authority under the statute was held to be binding on all the authorities administering the tax department. It was concluded as under:-
“21. Lastly, the binding effect of the said circular No.16/98 needs to be kept in mind. As stated above, the said circular was issued by the Board by exercising statutory powers vested in it under Section 3(1A). As stated above, Section 3(1A) provides for an enabling power of the Board which was recognized as an Authority under the 1963 Act. The said power was to be exercised in special cases. As stated above, granting of administrative reliefs by the Board came within its authority. Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 27 As stated above, the said circular was issued for just and fair administration of the 1963 Act. As stated above, Section 3(1A) is similar to Section 119(1) of the 1961 Act. The circulars of this nature are issued by the Board consisting of highest senior officers in the Revenue Department. These circulars are to be respected by the officers working under the supervision of the Board. These circulars are binding on all the authorities administering the tax department. The power of the Board to issue such circular is traceable to Section 3(1A)(c) of the Act. The said circular is statutory in nature. Therefore, it is binding on the Department though not on the courts and the assessees. In the present case, as stated above, completed assessments were sought to be reopened by the AO on the ground that the said circular No.16/98 was not binding. Such an approach is unsustainable in the eyes of law. If the State Government was of the view that such circulars are illegal or that they are ultra vires Section 3(1A), which it is not, it was open to the State to nullify/withdraw the said circular under Section 60 of the 1963 Act. Till today, the circular continue to remain in force. Till today, it has not been withdrawn. In the circumstances, it is not open to the officers administering the law working under the Board of Revenue to say that the said circular is not binding on them. If such a contention was to be accepted, it would lead to chaos and indiscipline in the administration of tax laws.
22. In the case of Steel Authority of India v. Collector of Customs, Bombay reported in 2000 (115) ELT42(SC) a similar situation arose. It was submitted on behalf of the revenue in that case that the Trade Notice had been issued only by Bombay Customs and, therefore, it was not binding on other Customs. This argument was repelled by the Division Bench of this Court by stating that the Trade Notice issued by one Customs House must bind all Customs Authorities and, if it is erroneous, it should be first withdrawn or amended. In the present case also, it is not open to the assessing officers to reopen the completed assessments on the ground that said Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 28 circular No.16/98 was erroneous. Till today, the said circular has neither been withdrawn nor amended.”. 31. In K.P.Verghese vs. Income Tax Officer, Ernakulam, (1981) 131 ITR597 the Supreme Court held that circulars and instructions are binding on the authorities administering the tax department but they are also clearly in the nature of contemporanea exposito furnishing legitimate aid to the construction of the Act, in the following terms:-
“12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of subsection (2) and they depart or deviate from such construction. It is now well-settled as a result of two decisions of this Court, one in Navnitlal C. Jhaveri v. RR. Sen(1) and the other in Ellerman Lines Ltd. v. Commissioner of Income-tax, West Bengal(2) that circulars issued by the Central Board of Direct Taxes under section 119 of the Act are binding ( n all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act. The question which arose in Navnitlal C. Jhaveri's case (supra) was in regard to the constitutional validity of sections 2(6A) (e) and 12(1B) which were introduced in the Indian Income Tax Act 1922 by the Finance Act 1955 with effect from 1st April, 1955. These two sections provided that any payment made by a closely held company to its shareholder by a way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in any previous year relevant to any assessment year prior to the assessment year 1955-56, if such loan or advance remained outstanding on the first day of the previous year relevant to the assessment year 1955-56. The Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 29 constitutional validity of these two sections was assailed on the ground that they imposed unreasonable restrictions on the fundamental right of the assessee under Article 19(1) (f) and (g) of the Constitution by taxing outstanding loans or advances of past years as dividend. The Revenue however relied on a circular issued by the Central Board of Revenue under section 5(8) of the Indian lncome-tax Act 1922 which corresponded to section 119 of the Present Act and this circular provided that if any such outstanding loans or advances of past years were repaid on or before 30th June 1922, they would not be taken into account in determining the tax liability of the shareholders to whom such loans or advances were given. This circular was clearly contrary to the plain language of section 2(6A)(e) and section 121(B), but even so this Court held that it was binding on the Revenue and since "past transactions which would normally have attracted the stringent provisions of section 12(1B) as it was introduced in 1955, were substantially granted exemption from the operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies they would not be taken into account under section 12(1B)" sections 2(6A) (e) and 12(1B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines case (supra) where referring to another circular issued by the Central Board of Revenue under section 5(8) of the Indian Income Tax Act 1922 on which reliance was placed on behalf of the assessee, this Court observed: "Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this J Court observed in Navnit Lal C. Jhaveri v. R. K. Shah Appellate Assistant Commissioner, Bombay: "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 30 shareholders as a result of genuine trans actions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision. The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that circular was binding on the Income-tax officers."
The two circulars of the Central Board of Direct Taxes referred to above must therefore be held to be binding on the Revenue in the administration or implementation of sub- section (2) and this sub section must be read as applicable only to cases where there is under-statement of the consideration in respect of the transfer.”
. The Constitution Bench in C.B.Gautam v. Union of India, (1993) 1 SCC78had approved the decision in K.P.Varghese’s case (supra) as under:- “We may point out that although it was submitted by the learned Attorney General that the decision in the case of K.P.Varghese (1981) 131 ITR597(SC) requires reconsideration, he did not seriously challenge the correctness of that decision. No argument has been advanced by him which could lead us to the conclusion that the said case was not correctly decided nor has he pointed out any error in the judgment in that case.”. 32. From the above, it emerges that circulars, instructions and clarifications issued by the competent authority granting administrative relief in exercise of power conferred under statutory provision are binding on subordinate officers. It is not open to the subordinate officers to contend that the circulars, instructions and clarifications are erroneous and not binding on them as long as they remain in force. However, they would not be binding on the courts and the assessees. In other words, it will be open for the assessees to plead that the circular, instructions and clarification issued by an authority which is not of beneficient nature to Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 31 them runs counter to the statutory provision and is ultra vires and bad in law and thus, ineffective qua their rights.
33. On plain interpretation of the provisions of the statute and the rules framed there under and also on the basis of clarification dated 12.7.2004 issued under Section 56(3) of the HVAT Act which is binding on the authorities for the administration of tax, the state cannot deny the benefit of input tax credit to the dealer for determining the tax payable by it. Thus, viewed from any angle, the dealer is entitled to the benefit of input tax credit while calculating the 50% deferred tax upfront to be paid by it.
34. Once the dealer is held entitled to credit for input tax for ascertaining the liability to be discharged by it as noticed above, the question relating to charging of interest in the facts and circumstances is rendered academic.
35. In all fairness, reference is made to the judgments relied upon by learned State counsel. In Tata Iron & Steel Co. Limited’s case (supra), the issue before the Apex Court was whether a dealer falls in exemption clause or not. It was noticed as under:-
“41. The principle that in the event of a provision of a fiscal statute is obscure such construction which favours the assessee may be adopted, but it would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption [see Novopan India Limited v. Collector of Central Excise and Customs, (1994) Supp 3 SCC606.”
. It was further observed that the eligibility criteria is to be construed strictly but a liberal approach may be adopted in construing other conditions. Similar was the position in Creative Handicrafts and M/s Mahabir Vegetable Oils Pvt. Limited’s cases (supra). The conditions of Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh VATAP No.48 of 2012 (O&M) 32 eligibility for claiming deferment not being under challenge in the present cases, no advantage can be derived by the State from these pronouncements.
36. The substantial questions of law as noticed above are answered accordingly and the amount of tax payable by the dealer shall be calculated by the Assessing Officer in accordance therewith. All the cases are disposed of in the aforesaid terms. (Ajay Kumar Mittal) Judge July 25, 2014 (Anita Chaudhry) ‘gs’ Judge Singh Gurbax 2014.07.30 12:14 I attest to the accuracy and integrity of this document High Court Chandigarh