Non-imported seeds processed and used for sowing purposes are exempt from VAT purchase tax.

Western Agri Seeds Ltd. procured seeds, processed them through research, germination and quality-testing procedures, and supplied the resulting certified seeds for sowing by farmers.

The Assistant Commissioner passed an assessment order dated 29 December 2010 raising a total demand of ₹1,77,89,618, including tax, interest and penalty.

On appeal under Section 73 of the Gujarat Value Added Tax Act, 2003 (“VAT Act”), the Deputy Commissioner substantially modified the demand by order dated 22 December 2011; that order was accepted and attained finality.

Subsequently, exercising revisional powers under Section 75 of the VAT Act, the Deputy Commissioner revisited the original assessment and, by order dated 4 March 2015, restored the substantial tax, interest and penalty demand.

The Gujarat Value Added Tax Tribunal allowed the assessee’s Revision Application No. 16 of 2015 and set aside the revisional order, holding that the revision was impermissible on a mere change of opinion and that the seeds were exempt from tax and purchase tax was not leviable. The State challenged the Tribunal’s order under Article 226 of the Constitution.

1. Whether the revisional authority could reopen and substantially alter the assessment after the assessment order had been considered and modified in appeal, particularly when the appellate order had attained finality?

2. Whether the seeds procured, processed and produced by the respondent for sowing purposes were exempt under the applicable notifications issued under Section 5(2)(a) of the VAT Act?

3. Whether purchase tax under Section 9(1) of the VAT Act could be levied on the respondent’s certified seeds merely by relying on an earlier determination order, contrary to a subsequent determination order concerning substantially similar activities?

The Court applied Sections 5(2)(a), 9(1), 73 and 75 of the Gujarat VAT Act, 2003. Section 5(2)(a), read with the relevant notifications, exempted “seeds of all types other than imported seeds used for sowing purpose”.

Section 9(1) concerning purchase tax could not be invoked where the goods were covered by the applicable exemption and the respondent’s activity did not constitute an ordinary taxable purchase of agricultural produce.

Section 73 governed the statutory appeal against the assessment, while Section 75 conferred revisional power; that power could not be used to reopen a concluded assessment merely on a change of opinion, particularly after the assessment had merged into or been dealt with by the appellate order.

The Court also relied on the Tribunal’s consideration of the determination order in M/s. King and Queen Seeds Corporation, which held that seeds produced under a research and development programme for sowing purposes did not attract purchase tax, while distinguishing the determination order in M/s. Green India Farm Biotech.

The Court found that the State had accepted the appellate order dated 22 December 2011, which had modified the original assessment, and that the revisional authority had failed to properly account for that concluded adjudication before reviving the original demand.

The revision was therefore effectively founded on a change of opinion, especially since the relevant determination order in Green India Farm Biotech was already available when the original assessment and appellate proceedings took place.

On merits, the Department did not dispute that the respondent conducted research and quality testing, arranged for the seeds to be sown on farmers’ land, and processed the output into certified seeds intended exclusively for sowing.

Since the respondent was not importing the seeds and the Department failed to establish that they were used for any purpose other than sowing, the statutory notification exempting non-imported seeds used for sowing applied.

The Tribunal had also appropriately distinguished the Green India Farm Biotech determination and relied on the later, factually similar King and Queen Seeds Corporation determination.

It further held that the respondent’s certified seeds were non-imported seeds used for sowing purposes and were therefore covered by the applicable exemption; consequently, purchase tax under Section 9(1) was not leviable.

The writ petition was dismissed, the Tribunal’s order setting aside the revisional order was upheld, and the accompanying Civil Application for additional evidence was disposed of as having become infructuous.