UPVAT Rules | Stricter Approach To Be Followed Before Giving Benefit Of Exemptions/ Deductions: Allahabad High Court

The Allahabad High Court has held that though in case of doubt, taxing statues are to be interpreted in favour of the assesee. However, a stricter approach needs to be followed before giving the benefit of exemptions and deductions.

“The general rule of law in taxing statutes is that in case of any doubt the benefit should be given to the assessee. However, in case of exemption and deduction to be given, a stricter approach may be followed, as per catena of judgments of the Supreme Court, to examine whether the assessee is eligible for such benefit,” held Justice Shekhar B. Saraf.

The Department filed the revision challenging the decision of the Commercial Tax Tribunal wherein the turnover of the assesee was reduced as per Rule 9 of the Value Added Tax Rules on grounds that the cement imported from outside the State of U.P.

Counsel for the Department argued that the assessee failed to prove that good were imported and the specific execution of work contract. Therefore, the benefit under Rule 9(1)(e) of the U.P. Value Added Tax Rules, 2008, will not be applicable to the assessee. Further, distinction was drawn from the decision of the Allahabad High Court in M/s Comfort Systems Vs. Commissioner Commercial Tax, U.P. as in that case there was no dispute that the goods have been imported from outside the State of UP for utilization in the works contract.

However, the counsel for assesee submitted that the ratio of M/s Comfort Systems is applicable to the present case. It was held in M/s Comfort Systems that when the Tribunal comes to a specific finding that goods were brought in to the State for purpose of carrying out pre-existing works contract and the goods are actually coming from outside the State, the benefit of deduction contemplated under Rule 9(1)(e) of the Rules would be available to the assessee.

The Court observed that the Tribunal had specifically noted that the goods were being imported from outside the State of UP and were being used in project carried out within the State. The Court held that since there was no “perversity” in the above fact, Rule 9(1)(e) of the VAT Rules will be applicable.

The Court held that even though in case of doubt tax statutes are to be read in favour of the assesee, however for granting benefit of exemptions and deductions, stricter approach needs to be followed.

Since the fact that goods were transported from outside the State was undisputed, the revision filed by the department was dismissed.

Case Title: The Commissioner, Commercial Tax U.P. vs. S/S Sanya Construction And Developers Pvt. Ltd. [SALES/TRADE TAX REVISION No. - 94 of 2023]

Citaion: 2023 LiveLaw (AB) 449

Counsel for Revisionist: Bipin Kumar Pandey

Counsel for Opposite Party: Shubham Agrawal

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