Case Note & Summary
The petitioner, M/s. Ghodawat Energy Pvt. Ltd., a manufacturer of pan masala with and without tobacco, challenged the levy of VAT on pan masala containing tobacco (gutkha/mawa) for the financial year 2005-06. It claimed exemption under Schedule Entry A-45 of the Maharashtra Value Added Tax Act, 2002, on the ground that it had discharged Additional Duties of Excise (Goods of Special Importance) under the ADE Act, 1957. The Sales Tax authorities disallowed the exemption and raised a demand of Rs. 3,21,13,742. The petitioner appealed, and the appellate authorities directed pre-deposits of Rs. 1,60,39,180 (later reduced to Rs. 1,41,93,875) while upholding the taxability. The petitioner also challenged the Explanation to Entry A-45, inserted on 21.01.2006, which declared that tobacco shall not include pan masala containing betel nuts and tobacco with lime, kattha, etc., as discriminatory under Article 14. The petitioner contended that the Explanation was contrary to the scheme of the ADE Act and that the State had been compensated from the divisible pool. The Revenue defended the Explanation as valid. The court reserved judgment on 26.07.2016 and pronounced it on 04.10.2016. The available text does not include the court's analysis or final decision.
Issue of Consideration
Whether the Explanation to Schedule Entry A-45 of the MVAT Act, 2002, introduced by Notification dated 21.01.2006, is discriminatory and ultra vires Article 14 of the Constitution of India; Whether the pre-deposit orders passed by the Sales Tax authorities are valid.
Law Points
- Schedule Entry A-45 of MVAT Act
- 2002 exempts tobacco from VAT if ADE is paid
- Explanation added to exclude pan masala containing tobacco
- challenge of ultra vires under Article 14
- part payment directions
Case Details
2016 LawText (BOM) (10) 46
Writ Petition No. 8572 of 2015 and Writ Petition No. 9265 of 2015
S.C. Dharmadhikari, Dr. Shalini Phansalkar-Joshi
Mr. V. Sridharan, Mr. C.B. Thakar, Mr. Rahul Thakkar, Mr. Girish Kala, Mr. Puneeth Ganapathy (for Petitioner); Mrs. Naira Jeejeebhoy (for Respondents)
M/s. Ghodawat Energy Pvt. Ltd.
The State of Maharashtra, The Commissioner of Sales Tax, The Deputy Commissioner of Sales Tax, The Joint Commissioner of Sales Tax (Appeals), The Maharashtra Sales Tax Tribunal
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Challenge to pre-deposit orders and validity of Explanation to Schedule Entry A-45 of the MVAT Act, 2002.
Remedy Sought
Petitioner sought a writ of mandamus to quash assessment order and pre-deposit order, and to strike down Explanation as ultra vires Article 14.
Filing Reason
The Sales Tax authorities disallowed VAT exemption on pan masala containing tobacco and demanded payment; petitioner also challenged the Explanation as discriminatory.
Previous Decisions
Assessment order dated 22-08-2014 by Deputy Commissioner of Sales Tax; pre-deposit order by Joint Commissioner (Appeals) dated 22-09-2014; and order by Maharashtra Sales Tax Tribunal dated 26-06-2015 reducing pre-deposit but upholding taxability.
Issues
Whether the Explanation to Schedule Entry A-45 of the MVAT Act, 2002, is discriminatory and ultra vires Article 14 of the Constitution of India?
Whether the pre-deposit orders passed by the Sales Tax authorities are valid?
Submissions/Arguments
Petitioner contended that it paid Additional Duties of Excise on pan masala containing tobacco and thus was exempt from VAT under Entry A-45; the Explanation erroneously excludes such goods, violating Article 14.
Respondents contended that the Explanation was valid and pan masala containing tobacco was taxable.
Judgment Excerpts
Explanation- For removal of doubts, it is hereby declared that tobacco shall not include Pan Masala, that is to say, any preparation containing betel nuts and tobacco and any one or more of the following ingredients, namely :- (i) Lime, and (ii) Kattha (Catechu) whether or not containing any other ingredient such as cardamom, copra and menthol.
Entry 45 of the Schedule A to the MVAT Act, 2002, as introduced reads as under : Sugar, fabrics and tobacco as described from time to time in column 3 of the First schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
Procedural History
The petitioner was assessed for FY 2005-06 by assessment order dated 22-08-2014. Petitioner filed appeal before Joint Commissioner (Appeals) who directed part payment on 22-09-2014. Further appeal to Maharashtra Sales Tax Tribunal resulted in order dated 26-06-2015, reducing part payment but upholding tax liability. Petitioner filed writ petitions challenging these orders and the validity of the Explanation.
Acts & Sections
- Maharashtra Value Added Tax Act, 2002: Section 9(1), Schedule Entry A-45, Explanation to Schedule Entry A-45
- Additional Duties of Excise (Goods of Special Importance) Act, 1957: Section 3, First Schedule, Column 3
- Central Excise Tariff Act, 1985: Tariff Heading 21069020, Tariff Heading 24039990, Chapter 24
- Taxation Laws (Amendment) Act, 2007: Section 10
- Constitution of India: Article 226, Article 14
