TMI Blog2015 (2) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... ab are not exigible to sales tax. A taxing statute imposes tax by enacting a taxing provision that sets out the taxing event. The exigibility of a transaction to tax must flow from the statute and, therefore, requires legislature to enact a specific provision setting out the contours of the event/transaction that would invite tax. If liability to pay tax is not set out in the parent statute, a rule, a policy, an instruction or a clarification cannot whether by intent or by interpretation, be used to impose a tax. The words "subject to such conditions" used in Section 10-A of the Act while referring to the deferment, cannot be construed to confer power to prescribe a fresh tax by way of a rule. It would also be appropriate to point out that the words "and liable to tax" used in the explanation and the words "on the presumption that these transactions are exigible to tax under the aforesaid Act" used do not lend themselves to an interpretation that raises them to the status of a charging provision thereby imposing a fresh charge or tax rendering an assessee exigible to a tax that is not imposed by the parent statue. It is, therefore, apparent that Rule 2(xxi) of the Rules is a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitioner), entered into a memorandum of understanding, dated 08.03.1994, agreeing to defer sales tax liability for nine years, subject to a fixed capital investment of 150%. Admittedly, the petitioner set up a manufacturing unit at Mohali and commenced production on 22.03.1996. The State of Punjab notified an amendment, dated 11.12.1997, to Clause 7 of the Package of Incentives, 1992 and Rule 8 of the Punjab Industrial Incentive Code, 1992, granting sales tax deferment to the petitioner. Accordingly, an eligibility certificate dated 20.02.1998 was issued to the petitioner granting deferment for nine years or for a maximum amount of ₹ 127,12,57,500/- whichever is earlier, to be calculated from 22.03.1996. The petitioner in the meanwhile had deposited ₹ 5,80,00,000/- towards sales tax from 22.03.1996 upto 31.03.1998 (the date of issuance of the eligibility certificate). The State of Punjab notified the Package of Incentives, 1996 and included incentives granted under the Package of Incentives, 1992, in the new policy. The petitioner was also informed on 18.10.2003 that the empowered committee had in its meeting dated 11.09.2003, decided that the period of sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the petitioner/appellant submits that liability to pay sales tax was deferred by fixing the quantum of deferment and providing for an outer period of deferment whichever is achieved earlier. The latter period was nine years and the former amount was ₹ 137 crores. The period of deferment, including the extended period expired on 21.03.2007. The petitioner has deposited the entire deferred sales tax liability to the satisfaction of authorities but the respondents have demanded sales tax on branch transfers made outside the State of Punjab by asserting that the explanation to Rule 2(xxi) of the Rules and the proviso appended thereto provide that branch transfers outside the State shall be liable to tax. Counsel for the petitioner contends that Rule 2(xxi) of the Rules provides a methodology for calculating notional sales tax liability for the purpose of calculating whether an assessee has achieved the quantum of deferred tax. Rule 2(xxi) of the Rules does not fasten a liability to pay tax on branch transfers which are exempted under the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the '1948 Act'). Rule 2 (xxi) cannot, in the absence of any taxin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r branch transfer within the State of Punjab, shall be deemed to be sales made with the State and liable to tax. (ii) the amount of tax payable under the Central Sales Tax Act, 1956 on the sale of finished products of the eligible units made in the course of inter-State trade of commerce computed at the rate of tax applicable under the aforesaid Act; PROVIDED THAT on branch transfer or consignment sales outside the state of Punjab, notional sales tax liability shall be computed at the rate of four per cent on the production of the certificate in Form F and at the rate of ten per cent in the event of non-production of certificate in Form F specified in the Central Sales Tax Act, 1956 on the presumption that these transactions are eligible to tax under the aforesaid Act. Admittedly, branch transfers outside the State of Punjab are exempted from the payment of sales tax. The State of Punjab has from time to time, notified schemes for deferment and exemption from payment of sales tax and for the said purpose, has enacted Section 10-A of the 1948 Act. A perusal of Section 10-A of the 1948 Act, reveals that the State Government may defer the payment of tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that branch transfers within the State of Punjab shall be deemed to be sales made within the State of Punjab and liable to tax does appear to suggest that branch transfers shall be deemed to be sales under the Act and liable to tax. The proviso to sub rule (ii), which sets out the rate of notional tax liability on branch transfers or consignment sales outside the State of Punjab clarifies that sale tax liability on branch transfers shall be sales under the Act, by raising a presumption that these transactions are eligible to tax under the aforesaid Act . The sub rule and the proviso, in our considered opinion, merely enable the State to include branch transfers while calculating a notional liability to determine whether the assessee has attained the amount of deferment. The sub rule or the proviso to Rule 2 (xxi) of the Rules cannot, in our opinion, by reference to the presumption be read as imposing a tax on branch transfers outside the State of Punjab or setting out a taxing event beyond the terms of the statue. As referred to before branch transfers are exempted from payment of sale. Rule 2(xxi) of the Rules, therefore, only provides for the methodology for calculating no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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