TMI Blog2010 (2) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... to be confirmed by raising questions of law as enumerated hereinbelow: The facts leading to the filing of these two revision petitions are as follows: (I) The Government of Karnataka issued a notification bearing No. FD 58 CSL 93(VI) dated March 31, 1993 in exercise of its power conferred under section 8A of the Karnataka Sales Tax Act, 1957 (for short, the Act ) exempting the tax payable under section 6 of the Act on the purchase of raw bathis consumed in the manufacture of agarbathi in the State for sale. The said notification reads as follows: In exercise of the powers conferred by section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempt with effect from the first day of April, 1993, (i) the tax payable by a manufacturer of agarbathi under section 6 of the said Act on the purchase of 'raw bathi' consumed in the manufacture of agarbathi in the State for sale; (ii) the tax payable by a dealer under section 5 of the said Act on the sale of 'raw bathi' to a manufacturer of agarbathi in the State subject to production of declaration in form 37 duly filled and signed by the manufacturer to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the State to the tune of Rs. 3,28,87,550.81, sales in the course of export to the tune of Rs. 5,14,260 and direct exports to the tune of Rs. 1,67,65,438. The assessing officer concluded the said assessment by holding the total gross turnover at Rs. 12,92,66,490 and demanded tax thereon. (VIII) Thereafterwards, a notice under section 25A of the Act came to be issued calling upon the assessee to show cause as to why the tax on consignment sales should not be demanded, on the ground a purchase turnover of raw bathis used in the manufacture of agarbathis which are consigned to place outside the State of Karnataka and sold, had escaped assessment under section 6 of the Act and accordingly the assessing authority proposed to levy turnover tax under section 6B of the Act, surcharge under section 6C, cess under section 6D of the Act. On considering the reply filed by the assessee an order came to be passed under section 25A of the Act by order dated September 29, 1999 (annexure G). (IX) The assessee filed an appeal before the Joint Commissioner of Commercial Taxes (Assessment) II, Bangalore 3 which came to be dismissed by order dated April 23, 2001 (annexure J). (X) The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by contending that the purchase turnover of raw agarbathis consumed in the manufacture of agarbathi in the State for sale is exempted and by harmonious reading of the said notification it is to be understood that exemption is for the raw bathis consumed in the manufacture of agarbathis for being sold in the State of Karnataka. He elaborates his submission that nature of sale, i.e., inter-State and intra-State sale in the course of export or consignment sale is immaterial for the purpose of availing of exemption. He would further contend that by another notification dated March 31, 1995 issued with effect from April 1, 1995 in exercise of power conferred under section 8A of the Act exempting the turnover tax under section 6B of the Act with effect from April 1, 1995 by a manufacturer of agarbathis in respect of turnovers relating to purchase of raw bathis consumed in the manufacture of agarbathis in the State for sale also and hence contends that by combined reading of these two notifications the only conclusion required to be arrived at is that the charging section would come into play only in the event of the raw bathis is not consumed in the manufacture of agarbathis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchased should be consumed in the manufacture of agarbathis and the manufacturing activity has to take place in the State and also the sale should take place within the State. She further contends that State has issued exemption from levy of purchase tax on sales including consignment sales, since the State would not stand to gain any revenue in respect of consignment sales in case exemption is also extended to the consignment sales. Elaborating her submissions she would also rely upon the judgment of the honourable Supreme Court in the case of Hotel Balaji [1993] 88 STC 98 wherein, the enactments of various States challenging the levy of purchase tax and its interpretation regarding exemption in cases of sales have been extended to contend that the Act of State Legislature excluding the consignment sales has been approved and as such submits that the questions of law framed hereinabove are required to be answered in favour of the Revenue and against the assessee. Having heard the learned counsel appearing for the parties, perusing the records as also the judgment cited at the Bar, it would be necessary to extract the relevant provisions of the Act as also the exemption n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds Act, 1930 (Central Act 3 of 1930), for the purpose of this Act, the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract shall be deemed to have taken place in the State, if the goods are within the State at the time of such transfer, irrespective of the place where the agreement for works contract is made, whether the assent of the other party is prior or subsequent to such transfer. (d) Notwithstanding anything contained in the Sale of Goods Act, 1930 (Central Act 3 of 1930), for the purposes of this Act, the transfer of the right to use any goods for any purpose (whether or not for a specified period) shall be deemed to have taken place in the State, if such goods are for use within the State, irrespective of the place where the contract of transfer of the right to use the goods is made. Explanation 3A. Every transaction of supply by way of or as a part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration, shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such turnover which relates to, (i) sale or purchase of goods specified in the Fifth Schedule; (ii) sale or purchase of goods in the course of inter-State trade or commerce; (iii) sale or purchase of goods in the course of export out of the territory of India or sale or purchase in the course of import into the territory of India; (iv) all amounts collected by way of tax under the provisions of this Act or the Central Sales Tax Act, 1956 (Central Act 74 of 1956); (v) all amounts falling under the head 'freight', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold; (vi) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less discount; (vii)(a) all amounts allowed to purchasers in respect of goods returned by them to the dealer when the goods are taxable on sales provided that the goods were returned within a period of six m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the territory of India or sale or purchase in the course of import into the territory of India; (iv) all amounts collected by way of tax under the provisions of this Act or the Central Sales Tax Act, 1956 (Central Act 74 of 1956); (v) all amount falling under the head 'freight', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold; (vi) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less discount; (vii)(a) all amounts allowed to purchaser in respect of goods returned by them to the dealer when the goods are taxable on sales provided that the goods were returned within a period of six months from the date of delivery of the goods and the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made; (b) all amounts received from the sellers in respect of goods returned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of tax in any case: Provided that where the point of levy is altered under this subsection in respect of any goods and if such goods have been subjected to tax under the unaltered entry, then such goods shall not be subjected to tax under the transferred entry. (3) The State Government may, by notification (cancel or vary any notification issued under sub-section (1) (or sub-section (2A)). (3A) . . . (4) If any restriction or condition specified under sub-section (2) is contravened or is not observed by a dealer, the sales or purchases of such dealer may, with effect from the commencement of the year in which such contravention or non-observance took place, be assessed to tax or taxes under the appropriate provisions of this Act as if the provisions of the notification under sub-section (1) did not apply to such sales or purchases. (5)(a) Where any restriction or condition specified under sub-section (2) in respect of goods taxable at the point of sale is contravened or is not observed by the purchaser of such goods, notwithstanding that such a purchaser is not a dealer or that the sale value of such goods is less than the turnover specified in sub-section (5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to whom the said goods are sold. NOTIFICATION No. FD 49 CSL 95(25), Bangalore, dated 31st March, 1995. In exercise of the powers conferred by section 8A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby exempts with effect from the first day of April, 1995, the turnover tax payable under section 6B of the said Act by a manufacturer of agarbathi in respect of turnovers relating to purchase of raw bathis, consumed in the manufacture of agarbathi in the State for sale. It is not in dispute that for both the years, the revision petitioner has sent goods for consignment sale outside the State of Karnataka. For the said purpose raw bathis were purchased from unregistered dealers by the revision petitioners. The exemption notification is meant to encourage the manufacture in the State and for increasing the said industry in the State of Karnataka. The consignment sent outside the State is not a sale effected in the State of Karnataka. In so far as understanding and interpreting an exemption notification guiding principle would be to read the notification as a whole and in this context contends the decision in Innamuri Gopalam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required is the actual words used in the notification. It is held in Hansraj's case AIR 1970 SC 755 as follows: . . . It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the taxpayer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the notification or by necessary implication therefrom, the matter is different but that is not the case here. . . Another factor which requires to be noticed by us is that when an exemption clause has been pressed into service to get the benefit of exemption, the claimant must prove that he is covered by the provision. Keeping the above principles enunciated by their Lordships of the honourable Supreme Court, the words used in the notifications in question are required to be examined. The words used in the notification in question are as follows: Consumed in the manufacture of agarbathi in the State for sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shankarprasad [1999] 6 SCC 275; [1999] AIR SCW 2565; AIR 1999 SC 2423. Applying the principles enunciated in the above decisions it can be seen that in the instant case when there is no sale of goods at the hands of the petitioner, in so far as the consignment sales are concerned the same would not form part of total turnover. In the instant case the revision petitioner cannot be said to have sold by consignment sales unto himself inasmuch as if the consignment sales were to be 'sale' within the definition of section 2(1)(t) of the Act the same would have constituted part of the total turnover as defined under section 2(1)(u2) of the Act. By reading of definition of sale as per section 2(1)(t) it cannot be held to include consignment sales. The sale as mentioned in the exemption notifications should take place within the State. In this regard it would be of benefit to extract the relevant portion of the judgment in Hotel Balaji's case [1993] 88 STC 98 (SC) as found at pages 142-143 which reads as follows: . . . The levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consumed in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Gujarat. It no doubt means the set-off, etc., is not available if the manufactured goods are disposed of otherwise than by way of sale or are consigned to manufacturer's own depots (or to the depots of his agents) outside the State of Gujarat. What in effect the State says is this: 'Raw material when purchased is taxable but I won't tax the raw material if you sell the goods manufactured out of such raw material within the State because I derive larger revenue there; I do not want to tax both the raw material and the manufactured goods, in the interest of trade and public. But if you dispose of the manufactured goods in some other manner, I will tax the purchase of raw material because there is no reason why I should forego the purchase tax due to raw material, when I am not getting any revenue from your method of disposal or dispatch of manufactured products.' There is nothing objectionable in the State saying so. It can indeed rely on the principle of the decision of this court in Godrej Boyce Mfg. Co. Pvt. Ltd. v. Commissioner of Sales Tax reported in [1992] 87 STC 186 (SC). . . The raw materials purchased by the assessee in the instant case are taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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