Cotton-Filled Khadi Rajai Taxable at 14% Under UP VAT Law: Allahabad High Court Denies Exemption [Read Order]
The Court confirmed that cotton-filled khadi rajai fall outside the exemption in Schedule I
The Allahabad High Court examined whether cotton-filled khadi rajai and khadi gaddey could be treated as exempt goods under Section 28(ii)(2) of the Uttar Pradesh Value Added Tax Act, 2008 (UP VAT Act), and held that the levy of fourteen percent tax imposed by the authorities was justified, as the exemption available to khadi garments and khadi made-ups did not extend to filled rajai.
M/s Sri Gandhi Ashram, the appellant, was assessed for the Assessment Year 2012-13 when the Assessing Officer imposed a fourteen percent tax on the sale of cotton-filled khadi rajai and khadi gaddey, treating them as taxable goods under Schedule II-A, Entry 107 of the UPVAT Act, 2008.
The appellant contended that these products were exempt under Schedule I, Entry 11, which covers khadi garments and khadi made-ups, including rajai and gaddey. The Commercial Tax Tribunal subsequently affirmed the same. Aggrieved by this, the appellant filed the present revision before the High Court challenging the levy.
The High Court bench of Justice Piyush Agrawal held that the appellant had indeed sold filled rajai and that the exemption in Schedule I did not extend to such goods. The Court noted that the appellant’s own submissions before the Tribunal confirmed that the goods sold were cotton-filled rajai.
Since the exemption was limited to unfilled rajai and the appellant had failed to demonstrate otherwise, the High Court ruled that the levy of fourteen percent tax was in accordance with law and no interference was warranted.
The revision petition was accordingly dismissed, and the questions of law were answered in favour of the Revenue.
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