2020 (10) TMI 1059 - HC - VAT and Sales Tax

Benefit of exemption - use of firewood as fuel or as Raw Material - demand of additional tax against the petitioner in the assessment under Section 12(4) of the Orissa Sales Tax Act - whether exemption from taxation granted to sale of firewood can be extended to sale of firewood to be used as raw material for manufacturing of paper? HELD THAT - Entry of Firewood at serial no. 13B of the Schedule to the exemption notification No. 20206-CTA-14/76F dated the 23rd April 1976 intended the such firewood to be used as fuel and not as a raw material for manufacturing of paper. Once the firewood is put to any other use than as fuel it would not be entitled to exemption of tax. It is trite that an exemption notification has to be construed strictly. A person claiming exemption provision to relieve him of tax liability must explain clearly that he is covered by the relevant provision. Unlike ordinary taxing statute in the event of ambiguity an exemption clause or provision has to be construed in favour of revenue. There are no merits in this revision petition so as to warrant any interference - revision petition dismissed.

Summary

Issues:
Challenge to ex parte order by Sales Tax Revision. Interpretation of exemption from taxation for sale of firewood to be used as raw material for manufacturing of paper.

Analysis:
The High Court addressed the challenge to an ex parte order by the Sales Tax Revision, which set aside the order allowing additional tax demand against the petitioner for the year 1996-97. The key issue was the interpretation of whether the exemption from taxation for the sale of firewood could be extended to firewood used as raw material for manufacturing paper. The petitioner argued that the Tribunal wrongly applied a Supreme Court judgment, contending that the firewood supplied did not specify the purpose for which it was to be used, unlike the case in the judgment cited. The Tribunal, however, analyzed the purchase orders and specifications of the firewood, concluding that it was meant for use as raw material in paper manufacturing.

The Court referred to a Supreme Court judgment in a similar case from Tamil Nadu, emphasizing that the exemption for firewood is intended for its use as fuel and not as a raw material for manufacturing paper. The Court highlighted the need for strict construction of exemption notifications, placing the burden on the assessee to clearly establish eligibility for exemption. The judgment cited principles that in case of ambiguity, the benefit must go to the State. The Court dismissed the revision petition, stating that the judgment relied upon by the petitioner did not address the specific issue in the present case.

In conclusion, the Court upheld the Tribunal's decision, emphasizing the strict interpretation of exemption notifications and the need for clarity in establishing eligibility for tax exemption. The judgment serves as a reminder that exemption provisions should be construed strictly, with any ambiguity interpreted in favor of the revenue authorities. The dismissal of the revision petition highlights the importance of clear documentation and compliance with exemption criteria in tax matters.