Orissa HC: Sale Of Wheat Bran Is Exempt From VAT Regardless Of ‘Purpose For Purchase’

The Orissa high court has recently ruled that the sale of ‘chokad’ (wheat bran), regardless of the purpose for which it is purchased by a buyer, is exempt from Value Added Tax (VAT).

The decision was made recently in the case of a dealer in which tax was imposed at 4% for chokad supplied to Nalco by treating it as an industrial input under the Odisha Value Added Tax (VAT) Act, 2004.

The two-judge bench of Chief Justice S Muralidhar and Justice M S Raman stated that if the law intended for some conditionality to be attached to granting VAT exemption on the sale of chokad, it should have been expressly stated in the Act.

“Because no such conditionality is laid out in the statute, the only conclusion that can be drawn is that sales of ‘chokad’ would be exempt from VAT, regardless of the purpose for which such ‘chokad’ was purchased by the buyer,” the bench ruled.

The bench stated that in order for the sale of chokad to Nalco to be taxed at 4%, the department must show that a notification issued by the state government identifying it as an ‘industrial input’ was issued.

“In the absence of such notification, no inference could have been drawn that ‘chokad’ sold to Nalco was in fact an ‘industrial input’. The court is thus satisfied that the sales tax officer, the joint commissioner of sales tax, and the Sales Tax Tribunal erred in classifying the petitioner’s sale of ‘chokad’ to Nalco as an ‘industrial input’ attracting VAT at 4%,” the bench observed.