Delayed exemption

The Hon’ble Finance Minister of the State delivered his budget speech for the financial year 2006-07 on 21st March, 2006 and one of the declarations made by him was extension of the exemption period to certain commodities such as cereals, pulses, flour of cereals and pulses, gur, spieces like chillies, turmeric, coriander seeds, fenugreek, solapuri chaddars, towels, wet dates etc. It took them more than a month to issue the notification amending the various schedule entries. The said notification is issued on 27th April, 2006 whereas it is made effective from 1st May, 2006.

The aforesaid commodities were placed in Schedule A in entries 9A and 51 and the original exemption was for the period from 1-5-2005 to 31-3-2006. It is now extended for the period from 1-5-2006 to 30-9-2006. The Finance Minister has stated that Empowered Committee of the State Finance Minister has requested Union Government to continue the said exemptions/concessions for a period of six months more. If the said request is accepted, States will take appropriate action on the same. It seems the request is well taken by the Centre and the notification is issued by State of Maharashtra. However, the process has taken undue time and raised anxiety among the dealers in foodgrains, spices etc.

The said exemption is made effective from 1st May, 2006 which leaves the month of April, 2006 in lurch. For example, rice is exempted prior to 31-3-2006 and after 1-5-2006 but taxable at 12.5% the highest rate, in the month of April, 2006. The concessional rate at 4% as per Schedule entry C-20 is not available since it is made applicable from 1st October, 2006. Immediate steps need to be taken to resolve this paradoxical situation. An administrative relief ought to be granted in such a situation and it must be borne in mind that the relief cannot be denied to the dealers who have paid the tax for the month of April, 2006 in abundant precaution although have not collected the same.

Wet dates

Another anomaly has been created by inserting ‘wet dates’ in Schedule entry C-108(a) which makes it liable to tax at 4% for the period from 1-5-2006 to 30-9-2006 whereas Schedule entry A-51 also covers ‘wet dates’ in clause (viii) and exempted from tax for the same period. It is not clear whether this is an inadvertent error or otherwise. The Commissioner of Sales Tax may clarify this matter urgently.

Returns in new Forms

In continuation with the issues raised in Current Notes for the month of April, 2006, it can be added that new return forms viz. 221, 222, 223, 224 and 225 have enhanced the burden of compliance on the dealers. The forms require very minute and elaborate details. On the top of it, the Explanation 2 inserted under rule 17 requires the dealers to file the returns for any period prior to 31-3-2006 if not so filed before that date, in the new forms.

Under MVAT Act, 2002, the concept of returns is understood in three categories viz., (1) original returns, (2) fresh returns in response to defect notice issued u/ss. 20(b) and (3) revised returns as contemplated u/s. 20(4). The due dates for the original returns are prescribed in rule 17(4), whereas the fresh returns are to be filed within one month from the service of the defect notice. The revised return, on the other hand, can be filed any time before expiry of six months from the end of the year; i.e., on or before 30th September, 2006. The said explanation reads as under:

Explanation II: Where in respect of any period ending on or before 31st March, 2006 or, as the case may be, the due date was before the 1st April, 2006, but the return was not filed before 1st April, 2006, then the dealer shall file the return in the Form mentioned in column (2) of the Table above for the purposes mentioned in column (3) of the said Table.

It is not clear whether the term ‘return’ used in the said explanation covers only original return or all other returns as well. Since the Act uses three different terms to describe original, fresh and revised returns, it can be inferred logically that the said explanation refers to only original returns. The new return forms in instruction No. 3 also distinguishes between these three categories of returns.

Secondly, the revised returns cannot be treated as ‘returns’ prescribed under the law since the dealers are not under an obligation to file a revised return in every case. He may file it in certain eventualities. The Hon’ble Bombay High Court has confirmed in the case of M/s. Bharat Heavy Electricals Ltd. (108 STC 74) that revised return is not a ‘return prescribed, and, therefore, the said explanation does not apply to revised returns for any period prior to 31-3-2006 and filed after 1-4-2006.

In any case, it is difficult to visualise the legislative intent where fresh and revised return needs to be filed in new Form although original return is filed in old form. The Commissioner of Sales Tax may please clarify the effect and exact implications of the said explanation.

Ad hoc payment by notified oil companies

Sub-rule (3) of rule 17 has remained almost intact even after heavy amendments in rule 17 except minor consequential changes. The said sub-rule requires a notified oil company to make an ad hoc payment of 80% of tax as per previous return. In case of oil companies, the tax liability is in respect of motor spirits as well as other petroleum products. The provision of such ad hoc payment @ 80% is picked up from Motor Spirit Taxation Act, 1958 which covered only motor spirits. The pertinent question now arises whether the tax liability mentioned in sub-rule (3) should be construed as the taxes payable on motor spirits alone or on all products. If it is construed as entire liability on all products, it will be too burdensome to comply with and discriminatory as well. This amendment was an opportunity to make clarificatory amendments in the said sub-rule but it is lost sight of as usual although representations were made earlier in this regard.