TMI Blog1998 (11) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ed company and is engaged in the business of manufacture and sale of auto diesel engine spare parts. The assessee had set up a new industrial unit in a backward area which was a designated area under the scheme then prevailing governing exemption of sales tax to new industrial units and was issued eligibility certificate certifying that the assessee is entitled to exemption from payment of sales tax with effect from November 21, 1985. The eligible amount up to which the assessee could claim exemption from payment of sales tax was quantified at Rs. 2,04,832. During the period in question the assessee, who is a registered dealer, has effected some of his sales to other registered dealers under the Gujarat Sales Tax Act against form Nos. 17-A and 19. In terms of section 7(iii) of the Gujarat Sales Tax Act, 1969, sales against such forms to another registered dealer is to be deducted from taxable turnover of the selling dealer. 3.. By a notification issued under section 49(2) of the Gujarat Sales Tax Act, entry 118 was inserted in Schedule appended to notification under section 49(2). Subject to conditions mentioned therein, sales by a specified manufacturer of goods manufactured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processing materials, consumable stores and packaging materials from another dealer by exempting such sales from tax in the hands of seller burden of which otherwise would have been borne by such manufacturer. 6.. The entry also envisaged a general condition that as soon as the aggregate of amounts of tax which would have become leviable from the specified manufacturer but for the exemption under this entry or under Government Notification No. (GN-12) CST-1081-S-8(5) (32)-TH dated February 5, 1981 issued under sub-section (5) of section 8 of the Central Sales Tax Act, 1956 or under any drawback, set-off or refund during the period commencing on and from June 1, 1980 or as the case may be the date of commissioning the new industry become equal to the amount specified in the certificate as the eligible quantum of tax exemption. 7.. The assessee claimed that sales effected to registered dealers who had furnished form Nos. 17-A and 19 are liable to be deducted from taxable turnover of the assessee for determining tax leviable from him. In other words, on the sales effected by the assessee to registered dealers under form Nos. 17-A and 19 were sales in respect of which no sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by they themselves on their own voluntary action to the Industries Department) and it is on the basis of the same that the Industries Department has, after due scrutiny thereof, fixed up the amount of such limit as per the fixed percentages as aforesaid, they would not be entitled to get out of that limit for any portion of their business during the operation of the said limit, for one reason or the other. 9.. We have heard the learned counsel for the parties. It has been urged by learned counsel for the assessee that once eligibility certificate has been granted after examining the claim of assessee to exemption under the relevant provisions of the scheme framed by the State and notifications issued in that regard, the question that the assessee is entitled to exemption is well-established and is not in dispute. The question relates to the realm of determining how in implementing the exemption granted to the assessee the actual exemption availed by the assessee has to be worked out in accordance with the provisions of the Act and the scheme read together. There is no room to travel beyond the provisions of the Act and the scheme to find the intention of the framers of the sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal firstly that if the assessee has chosen to get exemption under the incentive scheme, he is not entitled to claim any other exemption and secondly that if the construction suggested by the learned counsel for the assessee is accepted, it would render sub-entry (2) of entry No. 118 redundant. 11.. At the outset, we may state that we are neither called upon to decide the question whether any provision of the Act brings into the incidence of tax on the assessee or that assessee is entitled to claim exemption. We are to consider on the premise that assessee is entitled to claim exemption, what is the mode and scope of the provisions under which the limit of exemption availed is to be worked out with reference to different provisions of the Act. 12.. The principle governing the taxing statutes in all these three aspects are well-established. While construing a fiscal legislation imposing a tax liability, the principle is that the statute must be strictly construed. Unless the liability to pay tax can be brought strictly within the four corners of law, no liability can be fastened by travelling beyond the scope. In case of any ambiguity rendering the statute capable of more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schaffenburg [1975] 1 All ER 810. We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used. We are seeking not what Parliament meant but the true meaning of what they said. 23-11-1998: 15.. Thus, before bringing in the consideration of intendment, the first principle is to look at the words used by the law making authority. If the words are clear and are unambiguous, there is no room to search for intendment by assuming foundations for it. However, if the words are not so clear, the meaning of the words used giving expression to Legislature s intention has to be interpreted in the light of object to the provision and context of the statute. The intention of Legislature is to be searched in the context of words used and not by exploring outside the expression. While interpreting the statutory provisions substantively levying tax on a subject as distinguished from machinery provisions, the principle is firmly rooted. If the interpretation of a fiscal enactment is open to doubt, the construction most beneficial to the subject is to be adopted . That was the principle enuncia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. 18.. The question again fell for consideration before their Lordships in Novopan India Ltd. v. Collector of Central Excise and Customs (1994) 6 JT SC 80. The court after considering Mangalore Chemicals Fertilizers case [1991] 83 STC 234 (SC); (1992) Supp 1 SCC 21 as well as Wood Papers s case [1991] 83 STC 251 (SC) observed: The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee-assuming that the said principle is good and sounddoes not apply to the construction of an exception or an exempting provision; they have to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises is to determine the tax liability which the petitioner has incurred during the period in question which but for exemption he will be liable to pay and to see whether such amount does not exceed the maximum limit of tax exemption permissible under the scheme. The scheme a fortiori assumes that the deferment of tax or exemption from payment of tax is in respect of those transactions which constitute taxable event and but for exemption tax is payable by the assessee on it, it does not impose any liability to pay tax in addition to what there is otherwise under the charging provisions of the statute itself. Nor do we find any other mode specified for computation of exemption availed. On these precincts if one is to read general condition No. 1 reproduced earlier it carries in clear terms answer to the question. 21.. The key words are as soon as the aggregate of amounts of tax which would have become leviable from the specified manufacturer but for the exemption under this entry 118. Entry 118 envisages three taxing events on which exemption is granted. Firstly, sub-entry (1) exempts purchase of raw materials, processing materials, consumable stores or packing materials from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the exemption period. Lastly, sales by a specified manufacturer of goods manufactured by him have been exempted under sub-entry (iii). It is aggregate of tax which would otherwise be liable but for exemption from the specified manufacturer whether as a purchaser or as a seller is to be ascertained. It is only on ascertainment of such tax liability leviable on the respective transactions envisaged under entry 118 that the aggregation of the amount of tax to be adjusted against the exemption limit can take place. The language in itself is clear indication to ascertain the tax liability as if the benefit of exemption under entry 118 does not exist. In arriving at such liability exemption granted under notification dated February 5, 1981 under section 8(5) of the Central Sales Tax Act is also not to be considered. That relates to the exemption from payment of sales tax under Central Sales Tax Act to a specified manufacturer under the same scheme. For that purpose any drawback, set-off or refund to which an assessee is entitled in respect of such liability is not to be taken into account for the purpose of finding the aggregate sum of tax to be adjusted against exempted limit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gular assessment as per the provisions of the Act as if entry 118 does not exist and whatever the tax is assessed on such assessment under each of the sub-entries has to be aggregated and adjusted against the assessee s exemption limit. As per plain meaning of terms tax leviable from specified manufacturer , actual liability of dealer to tax has to be worked out under the provisions of the Act or Rules or notification other than entry 118 as per the existing state of events. Say for example, the goods manufactured by specified manufacturer is cooked food. The tax leviable on cooked food enjoys exemption under entry 3 of Schedule under section 49(2) relating to transaction below a particular limit. Therefore, while finding out the tax leviable from a specified manufacturer but for exemption under entry 118 from the total turnover of cooked food, the taxable events which are exempt under said entry 3 has to be excluded. If we read the condition 1 in its plain expression, it cannot be said that if assessment has to be made without reference to entry 118 from the total turnover of the assessee, such exempted sales will not be excluded to find out the tax liability of the assessee on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d meaning to the exemption scheme. One fails to appreciate the argument that this would result in enhancing the exemption limit. We have not been able to comprehend how the process of finding tax liability of assessee in a regular manner and set-off the same against existing limit up to which a dealer can avail exemption to which has been found entitled to can result in enhancing of exemption limit. As a matter of fact accepting contention of Revenue would result in assuming income-tax leviable from the assessee than it would have been leviable from him but for exemption under entry 118 for which there is no warrant anywhere in the scheme or exemption as was in force at the relevant time. Unless any specific mode is prescribed for calculating the exemption availed for the purpose of computing the exemption availed liability of tax arising under the Act will have to be determined in accordance with the provisions of the Act according to existing facts and not by assuming facts to the contrary. It cannot be said that anything in excess thereof has been availed as exemption by the specified manufacturer. The question of availing exemption in excess thereof under the scheme simply wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 7, correspondingly, the purchaser registered dealer is subject to liability of purchase tax under section 15A. However, it is to be seen that while sales are subject to tax at rate specified in Schedule II, purchase tax to which the recognised dealer becomes liable under section 15A is subject to tax at a much lower rate. But for sub-entry (2) read with its conditions in the absence of the tax leviable from a specified manufacturer would have been purchase tax leviable under section 15A if specified manufacturer was free to hold recognition certificate and if the transaction was otherwise taxable. By inserting sub-entry (2) with a condition denuding a specified manufacturer of his status as a recognised dealer by prohibiting him from holding a recognition certificate under section 32 and taking away his option to furnish form under rule 24, he is precluded from making his purchases, free of vendor s sales tax liability thereon. Since this tax liability at a higher rate has been envisaged to be aggregate for the purpose of adjustment against exemption limit, sub-entry (2) has been made under entry 118 by denuding the specified manufacturer of his status as recognised dealer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 49 of the Act, shall not be granted . This is another piece of specific legislation having no surrounding ambiguity leading to a different conclusion. Where entry 175 governs the benefit of computing exemption, there is no difficulty in accepting the plea of Revenue that for the purpose of computing exemption and tax liability to be set-off in terms of entry 175 during the operation of exemption limit and the period of exemption with effect from the date entry 175 has been inserted the sales of a specified manufacturer though may have been covered by the certificates under section 12 or 13 or other entries of the notification shall not be deducted from taxable turnover for the purpose of computing exemption enjoyed. This is far from saying that notwithstanding this condition being not there under entry 118, the same should be read for the purpose of interpreting general condition No. 1 as suggested by learned counsel for the revenue and as has been considered by the Tribunal. We are of the opinion that, where the language of general condition No. 1 itself is clear, as we think it is, there was no room for referring to a subsequent subordinate legislation to give it a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible industrial unit to exercise option in writing before availing the incentive benefit. The eligibility and the conditions of tax advantage has been equally envisaged on the same basis in the case whether the assessee opts for deferment scheme or for exemption scheme. The extent of advantage offered in both the scheme is the same except that in one case the assessee collects the tax payable by him on the transactions, keeps it with him and hands over the same to public exchequer at a later stage at a point of time envisaged under the scheme without interest charge thereon whereas in the case of exemption scheme the assessee is not subjected to tax leviable on him and he cannot collect the same. In either case dealer enjoys benefit to the extent tax collected by him or tax leviable from him. Assuming other factors to be same, result cannot lend to different extent up to which exemption is availed by the dealer on the basis of option exercised by him. 26.. We may examine the issue from yet another angle. The assessee has either to accept a tax deferment scheme or exemption from tax payment. In case he opts for exemption, the assessee enjoys exemption from payment of tax alt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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