TMI Blog2007 (1) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... e of commencement of commercial production in terms of the scheme evolved by the Government vide Government Order dated September 27, 1990 and sales tax exemption notification dated June 19, 1991. The Assistant Commissioner of Commercial Tax (Int.), Kolar visited the premises of the respondent on December 20, 1996. According to the revision petition, he noticed the contravention of the conditions laid down under Explanation III(a)(e) to the notification dated June 19, 1991. He therefore issued a provisional notice dated April 12, 1997 under section 28(6) of the Karnataka Sales Tax Act, 1957 for the assessment year 1995-96 on the footing that the respondent which produces several branded blended packed teas at Dharwad unit also produces the very same branded blended packed teas at other units of the respondent within the State and elsewhere and markets these products along with teas produced at Dharwad Unit (hereinafter referred to as Dharwad Tea , for brevity) and teas produced at other units (hereinafter referred to as Non-Dharwad Teas ), which do not enjoy the benefit of sales tax exemption, at the same price. The authority on the basis of a detailed study held that the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial unit under the provision of the KST Act, 1957. (underlining(1) is by us). Learned Advocate-General says that in the case on hand, Dharwad tea is entitled for exemption provided in terms of notification. No sales tax can be collected by the respondent in terms of the notification for the purpose of exemption. Learned Advocate-General argues that the material on record would show that the respondent did consider the sales tax for the purpose of sale price in terms of the material available on record. He refers to us the various materials on record in the case on hand to contend that a collection was factually made contrary to the notification and that therefore the authorities are justified in denying exemption in the case on hand. He finds fault with the order of the Tribunal by contending that the Tribunal is wrong in holding in favour of the assessee despite sale consideration in the sale price fixed by the assessee. He relies on various case laws in support of his submissions. Per contra, learned counsel for the assessee invites our attention to the notification in the case on hand to say that the Government did provide for concession in respect of turnovers of tea m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered and the special concessions that are to be extended. Sanction of incentives and concession as per this Government Order shall be subject to certain terms and conditions specified in detail in clause XIVs. The said notification was issued with the concurrence of Finance Department in terms of the notification. Thereafter, the Government issued another notification on June 19, 1991 in exercise of the powers conferred by sub-section (1) of section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957). The Government exempted the tax payable in the said Act in respect of the goods manufactured and sold by new industrial units mentioned in column (2) located in the zones specified in column (3) to the extent indicated in column (4) and during the period mentioned in column (5). A new industrial unit has been defined in terms of the Explanation found at page 152. Explanation would provide for exemption being available to an existing tiny/SSI/medium/large scale industrial unit registered as such with the Director of Industries and Commerce, subject to certain conditions mentioned therein. Explanation III would provide for non-applicability of the notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factor has been taken into consideration by the company in fixing the price. It was also stated that the price circulars issued periodically for the teas produced at Dharwad would contain the End Consumer Prices (ECP) and it includes local taxes. Ultimately, the Assistant Commissioner of Commercial Taxes (Int.), Kolar, issued a notice under section 28(6) that the respondent had conceded the sales tax while fixing the price of teas produced at Dharwad factory which is included in the sale price and concluded by the company and is disentitled to the benefit of sales tax exemption under notification dated June 19, 1991. Government gave an opportunity in terms of section 28(6) of the Act and ask the respondent to show cause against the notice within seven days from the date of receipt of a notice. On receipt of notice, a detailed reply was submitted by the respondent. The respondent mentioned about the background of the case and also referred to various material facts in the body of the reply. The essential contention of the respondent was that they had not violated the condition in terms of the exemption notification. They would explain their stand with reference to case laws in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a judgment and to build upon it . Quinn v. Leathem [1901] AC 495 was referred to by the apex court. In Quinn v. Leathem [1901] AC 495, the House of Lords have ruled that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It further ruled that a case is only an authority for what it actually decides. Learned Advocate-General also places before us another judgment of the apex court in Ambica Quarry Works v. State of Gujarat AIR 1987 SC 1073. The apex court in para 18 of its judgment has ruled that the ratio of any decision must be understood in the background of the facts of that case; and that it had been said long time ago that a case is only an authority for what it actually decides and not what logically follows from it. In the light of the law laid down by the apex court with regard to the understanding of case laws, we have to see as to whether the Tribunal was justified in granting relief to the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the department. Noticing certain documents with regard to price structure to arrive at ECP, the authority issued a notice under section 28(6) of the Karnataka Sales Tax Act, 1957 (for short, the Act ). The authorities noticed the price structure in terms of the documents seized and noticed sales tax benefit was also taken into consideration for the purpose of the price structure. In fact, they have also noticed certain invoices for the purpose of collection of sales tax contrary to the notification. It was on that basis, proceedings were initiated. As mentioned earlier, proposition notice was confirmed and that confirmation was upheld by the appellate authority. It is only the Tribunal that has set aside the confirmatory order passed under section 28(6) of the Act. The Tribunal in its detailed order has ruled that sales invoice of Dharwad tea carries a specific legend reading as under: 29. It is an admitted fact that the sale invoices of Dharwad tea carries a specific legend. 'Goods sold under this invoice are fully exempted from levy of KST/CST under exemption Certificate No. IDF/E3/50-ST/92-93, dated December 1, 1992 by the Director of Industries and Commerce Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier, would not be applicable to a new industrial unit on the turnover on which any tax is collected by a new industrial unit under the provisions of the Act. Non-applicability of the notification is with reference to turnover on which any tax is collected under the provision of the Act. Turnover has been defined in section 2(v) of the Act, reading as under: 'Turnover' means the aggregate amount for which goods are bought or sold, or supplied or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (t) by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration. Total turnover is defined in section 2(u-2), reading as under: 'Total turnover' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of the inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 392 (Mad) is accepted, section 22 would be rendered nugatory. It would enable dealers to collect by just terming the collection as recoupment, recovery, etc. The recoupment, recovery, collection is nothing else but the amount paid by the assessee to its seller towards the tax liability of the seller. Further recovery, recoupment or collection from their buyers is what is prevented by section 22. In our view, the High Court is absolutely right in the reasoning given in the impugned judgment. The law laid down in the Metal Sales Corporation's case [1983] 52 STC 392 (Mad) is not good law and stands overruled. Accordingly, the special leave petitions stand dismissed. There will be no order as to costs. This court in State of Mysore v. Hanjarimal Saremalji [1975] 36 STC 206, would hold that the: . . . What has got to be ascertained is whether any amount by way of sales tax is intended to be passed on to the buyer as a bargain in the transaction. The process by which the matter could be determined has been explained by this court in Spencer Co. Ltd. v. State of Mysore [1970] 26 STC 283 . It is therefore clear that the matter has to be investigated as to whether the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidated figure inclusive of sales tax, in such a case also, the dealer can be said to have collected the amount by way of sales tax under the Act. But if the dealer offers a price without specifically mentioning that it is exclusive of sales tax, the inference to be drawn is that the dealer does not intend to pass on the tax to the buyer and in that case he cannot claim any deduction. The Madras High Court in Lipton (India) Limited v. State of Tamil Nadu [1973] 32 STC 194, has ruled at page 197 reading as under: The contention on behalf of the assessee before us is that the bills rendered by it should be read along with the price list, already supplied to the purchasers, and that if so read, the inclusive sum mentioned in the bill can easily be taken to represent the price proper as also the sales tax payable thereon. The learned counsel for the assessee contends that the Tribunal as well as the lower authorities have erred in completely overlooking the price list, which formed the basis of the bargain between the assessee and his purchasers. The learned counsel does not dispute the fact that in cases such as the last two items mentioned in the price list, where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such an exercise, even assuming that it was permissible, would have been required to be undertaken only if the Tribunal had found that the assessee had in fact collected any amount by way of tax. The Supreme Court in the case of Delhi Cloth General Mills Co. Ltd. v. Commissioner of Sales Tax, Indore [1971] 28 STC 331 (SC), would hold reading as under (at page 334): In these appeals, it is not necessary to examine the relevance of that provision. But that provision does not give any statutory power to collect sales tax as such from any class of buyers. There is no other provision in the Act which confers such a power on the dealers. Unless the price of an article is controlled, it is always open to the buyer and the seller to agree upon the price to be payable. While doing so it is open to the dealer to include in the price the tax payable by him to the Government. If he does so, he cannot be said to be collecting the tax payable by him from his buyers. The levy and collection of tax is regulated by law and not by contract. So long as there is no law empowering the dealer to collect tax from his buyer or seller, there is no legal basis for saying that the dealer is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is collection in the case on hand. But, if the judgment is read as a whole, it would show that in the said case, dealer was recouping the sales tax as we see from the facts of the case. It was in the context of recoupment by a different nomenclature, the Supreme Court ruled that recoupment by change of nomenclature would certainly amount to collection . That is not the case here. There is no change of nomenclature as in the case of T. Stanes Co. Ltd. [2005] 141 STC 227 (SC). Moreover, in the present case, it is only consideration of tax component in the sales tax. That judgment is distinguishable on facts. In fact, this court in the case of State of Mysore v. Hanjarimal Saremalji [1975] 36 STC 206, has categorically ruled that the matter has to be investigated into and all relevant material gathered before arriving at a decision whether the assessee had not collected the sales tax. In fact, a Division Bench of this court has noticed its earlier judgment in Spencer Co. Ltd. [1970] 26 STC 283. In fact, the said judgment was strongly relied upon by the State to say there is collection by the dealer. It is no doubt true that in the said judgment the court has ruled that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on notification. The buyer has been told in unmistakable terms about the exemption of tax and what the buyer has agreed is a comprehensive price and not tax. Strong reliance is placed with regard to mentioning of the same price on Dharwad tea as well as non-Dharwad tea. It may be true in the given circumstances. That by itself would not mean violation of the condition of the notification as argued before us. So long as there is no price control and so long as there is no agreement between buyer and the company with regard to payment of tax, a mere price would not by itself amount to collection of tax on turnover in terms of the notification. The Tribunal has dealt in detail with regard to this aspect of the matter and we do not want to repeat the same. We agree with the reasonings given by the Tribunal on this aspect. It is also pointed out to us that MRP mentioned is a retail price. In the case on hand, the department is unable to say that the buyer had agreed to pay sales tax and books of account would not disclose such amounts separately. In this view of the matter, the Tribunal is right in answering this issue in favour of the assessee. Learned Advocate-General invites ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The industry is allowed to overcome its teething period by selling its products at comparatively cheaper rate as compared to others. Therefore, both the manufacturer and consumer gain, one by concession of non-levy and other by non-payment. Such provisions in an Act or notification or orders issued by the Government are neither illegal nor against public policy. There can be no quarrel over the proposition with regard to the interest of the consumer. However, while considering the denial of exemption notification, this court has to go only by the clause in the notification and the clause unfortunately did not apply to the present set of circumstances. However, we once again deem it proper to observe that the State would be well-advised in re-drafting the exemption notification at least in future so that the ultimate consumer is benefited on account of grant of exemption to a new industrial unit. We do hope that the Government would bestow its best attention while drafting the exemption notification so that even consideration aspect can result in denial of exemption. It is for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
