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2016 (4) TMI 7 - SUPREME COURT

2016 (4) TMI 7 - SUPREME COURT - [2016] 91 VST 231 (SC) - Benefit of exemption Notification - Scope of the proviso to the main condition - issued under Section 8(5) of the CST Act read with Rule 28A(4)(c) of the Rules - Sale of Radio Pagers manufactured by M/s Bharati Telecom Limited that was holding a valid exemption certificate under Rule 28A of the Rules - Appellant claimed central sales tax exemption of such goods in terms of notification dated 04.09.1995 by urging that such exemption was in .....

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itlement certificate for the period specified. Clause (c) to sub-rule (4)(2) postulates that goods manufactured by an eligible industrial unit availing of exemption under this Rule shall be exempt from levy of tax on all successive stage/stages of sale or purchase, subject to the dealer affecting the said purchase or sale furnishing a certificate in the form of ST-14A obtained from the assessing authority. This clause has the effect of granting exemption from levy of tax at all successive stages .....

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e also not charged any tax under the Central Sales Tax Act on the sale of goods manufactured by him but it should be given a greater or more significant role in interpretation of the main part of the notification, except as carving out an exception. It means and implies that the requirement of the proviso should be satisfied i.e. manufacturing dealer should not have charged the tax. The proviso would not scuttle or negate the main provision by holding that the first transaction by the eligible m .....

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ation in question.- Decided in favour of appellant - Civil Appeal No. 1410 of 2007, Civil Appeal No. 1411 of 2007, Civil Appeal No. 5450 of 2013 - Dated:- 29-3-2016 - Dipak Misra And Shiva Kirti Singh, JJ. JUDGMENT Dipak Misra, J. Regard being had to the similitude of the issue in all the appeals, they were heard together and disposed of by a common judgment. As the principal principle that constitutes the bedrock of the decision in the subject matter of assail in Civil Appeal No. 1410 of 2007, .....

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les Tax Rules, 1975 (for short, the Rules ) and the Central Sales Tax Act, 1956 (for brevity, CST Act ) In the year 1995-96, the assessee-company after purchase of Radio Pagers from M/s Bharati Telecom Limited was also engaged in inter-state sale of the said Radio Pagers and in course of the said transaction, did not charge any sales tax from the purchasers on the basis of Notification No. SO 89/CA.74/56/S.8/95 dated 04.09.1995 issued under Section 8(5) of the CST Act read with Rule 28A(4)(c) of .....

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passed in appeal, the appellant knocked at the doors of the Sales Tax Tribunal, Chandigarh (for short the tribunal ) which dismissed the appeal by its order dated September 9, 2002. The dismissal of the appeal by the tribunal compelled the appellant to prefer Writ Petition No. 2346 of 2003, seeking a direction to the tribunal to make a reference to the High Court. The High Court accepting the prayer of the assessee called for a reference from the tribunal, and the tribunal vide its order dated .....

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of the goods manufactured by an exempted unit , even by any other dealer, is exempted from the levy of the Central Sales Act? 5. Before the High Court it was contended by the assessee that the notification dated 04.09.1995 issued by the State Government provides for grant of exemption on the sale of goods manufactured in the State of Haryana by any dealer holding valid exemption certificate under Rule 28 of the Rules and not to the dealer and, therefore, the goods sold by the assessee in the cou .....

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nterprises (1999) 114 STC 365. 6. On behalf of the revenue, it was urged that the notification in question provided for grant of exemption only on the sale of goods manufactured in the State by a dealer holding valid exemption certificate under Rule 28 of the Rules, subject to the condition that such dealer had not charged tax under the CST Act on the sale of goods manufactured by it, and not in respect of the sale of goods by other dealers in the course of inter-state trade. It was the stand of .....

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to Section 8(2A) and 5 of the CST Act and Rule 28A(2)(n) and (4)(c) of the Rules and notification dated 04.09.1995; distinguished the authorities cited by the assessee and came to hold that the expression notional sales tax liability as used in Rule 28A(2)(n) takes within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial unit under the Act but also the amount of tax payable under the CST Act on the sales of finished products of the eligible ind .....

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ate in form ST-14A which is required to be obtained from the assessing authority duly filled in and signed by the registered dealer to whom such goods were sold. Thereafter, the High Court analysed the Rules and in that context stated thus:- A reading of the provisions reproduced above shows that the expression notional sales tax liability takes within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial unit under the State Act, but also the amou .....

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fecting successive purchase or sale furnishes to the Assessing a certificate in form ST-14A which is required to be obtained from the Assessing Authority duly filled in and signed by the Registered dealer to whom such goods were sold. Sub-rule (6) of Rule 28A lays down the mechanism for grant of exemption/entitlement certificate. Sub-rule (7) envisages renewal of exemption certificate and lays down the procedure for grant of renewal. Section 8(2A) of the Central Act contains a non-obstante claus .....

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h a non-obstante clause. It empowers the State Government to grant exemption from payment of tax or levy of tax at a lower rate on the dealer having his place of business in respect of the sales made by him in the course of inter-State trade or commerce. It also empowers the State Government to direct that no tax shall be payable under the Central Act or tax shall be calculated at lower rates in respect of all sales of goods or classes of goods as may be specified in the notification which are m .....

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ed by him. 8. After so stating, the High Court referred to the notification dated 04.09.1995 and observed that it was not happily worded and thereafter, it proceeded to hold that the tribunal was correct in following its earlier order for arriving at the conclusion that the notification did not exempt the goods sold in the course of inter-state trade by dealer other than those who held valid exemption certificate granted under Rule 28A of the Rules. It further ruled that if the State Government .....

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9. Thus, the ultimate conclusion recorded by the High Court is that successive sales of goods manufactured by dealer holding valid exemption certificate were exempt from payment of sales tax so long as they were inter-state sales but in respect of sale of goods by a dealer not holding exemption certificate under Rule 28A in the course of inter-state trade, the benefit of exemption envisaged under notification dated 04.09.1995 was not available to such dealer. The Division Bench proceeded to clar .....

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acture. Learned senior counsel would submit that on a plain reading of the notification, it is demonstrable that the exemption is on the sale of goods and there is no reference to unit or category of dealers for the purpose of extending the exemption. Once the language is clear, submits Mr. Singh, there is no scope of searching for intendment and, in fact, a bare perusal of the notification is sufficient to determine its applicability or non-applicability. To sustain the submission, he has drawn .....

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as used in Rule 28A(4) of the Rules. According to him, the reasoning given by the High Court is fallacious on two scores, namely, (i) Rule 28A(4)(c) of the Rules exempts all subsequent sales made in the State of Haryana, as one product can be sold any number of times within the State, whereas there can be only one inter-state sale from the State of Haryana, and consequently there is no requirement of any reference to subsequent sale in notification dated 04.09.1995; and (ii) Rule 28A(4)(c) of th .....

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by him that if the interpretation placed by the High Court is accepted, it would tantamount to making exempted goods chargeable to tax and further, the goods manufactured by eligible manufacturer would not remain competitive in spite of exemption being given to such manufacturer unless all subsequent stages including inter-state sales are exempt from payment of tax. The emphasis is on exemption at subsequent stages including inter-state sale. Mr. Singh has drawn immense inspiration from the prov .....

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des unit holding a valid exemption certificate which sells goods purchased by it in the State without charging any tax and the said Rule also exempts all subsequent intra-state sales as such. Elaborating further, it is urged that notification dated 04.09.1995 issued under sub-section (5) of Section 8 of the CST Act can extend the benefit of tax exemption to only such inter-state sales of goods which are purchased inside the State by a unit holding valid exemption certificate and hence, the exemp .....

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ad (1994) Suppl. 3 SCC 606. 12. To understand the controversy in proper perspective, it is necessary to refer to Section 8(2A) and 5 of the CST Act. They read as follows:- (2A) Notwithstanding anything contained in sub-section (1-A) of Section 6 or sub-section (1) or clause (b) of sub-section (2) of this Section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase .....

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subject to such conditions as may be specified therein, direct (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-state trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section(2) as may be ment .....

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d at such lower rates than those specified in sub-section(1) or sub-section (2) as may be mentioned in the notification. The aforesaid provision clearly enables the State Government to exempt the tax payable under the CST Act in public interest by issuing appropriate notification. For the said purpose, the State Government has to be satisfied and is also entitled to impose conditions which have to be specified in the notification. 13. Keeping in view the aforesaid provision and the notification .....

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e of Haryana who held a valid exemption certificate. The core controversy pertains to the interpretation of notification dated 04.09.1995 which has been issued by the competent authority in exercise of power under Section 8(5) of the CST Act. It reads as follows:- Notification dated 4.9.1995 No.S.O.89/CA. 74/56/S.8/95 dated 4.9.1995 - In exercise of the powers conferred by sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 the Governor of Haryana being satisfied that it is necessary .....

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powers conferred by sub-section (5) to Section 8 of the CST Act by the Governor of Haryana in public interest. As per the notification, no tax is payable under the aforesaid Act w.e.f. 1st April, 1988 on sale of goods during the period of exemption that are manufactured in the State of Haryana by any dealer, who holds a valid exemption certificate under Rule 28A of the Rules. Proviso to the said notification stipulates that the dealers should have also not charged any tax under the Central Sales .....

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of all sales of goods or classes of goods, etc. In this context, Rule 28A is extremely relevant. The said Rule, as per heading relates to class of industries, period and other conditions for exemption/deferment from payment of tax. Sub-rule 1, 2(f), (j), (k), (l), (n) clauses (i), (ii), (iii), (4)(a) and sub-rule 4(2)(c) of Rule 28A are relevant and reproduced below:- Sub-Rule (1): The industries covered under this rule shall not be entitled to any deferment or exemption from payment of tax und .....

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f exemption deferment; (k) exemption certificate means a certificate granted in Form ST-73 by the Deputy Excise and Taxation Commissioner of the district to the eligible industrial unit holding eligibility certificate which entitles the unit to avail of exemption from the payment of sales or purchase tax or both, as the case may be; (l) entitlement certificate a certificate granted in Form ST-72 by the Deputy Excise and Taxation Commissioner of the district to the eligible industrial unit holdin .....

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be deemed to be sales made within the State and liable to tax; (ii) amount of tax payable under the Central Sales Tax Act, 1956, on the sales of finished products of the eligible industrial unit made in the course of inter-State trade or commerce computed at the rate of tax applicable to such sales as if these were made against certificate in Form C on the basis that the sales are eligible to tax under the said Act. Explanation: The branch transfers or consignment sales outside the State of Har .....

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e remaining period and balanced quantum of benefit. (4)(a) Subject to other provisions of this rule, the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate, as the case may be to the extent, for the period, from year to year in various zones from the date of commercial production or from the date of issue of entitlement exemption certificate as may be opted as under. 4(2)(c) The goods manufactured by an eligible indust .....

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. 16. Sub-rule (1) makes it clear that industries are covered under this rule and the said industries would not be entitled to any deferment or exemption from payment of tax under any other provisions of these rules. The expression eligible industrial unit is defined in clause (f) to sub-rule (2). Similarly, eligibility certificate , exemption certificate , etc. are defined in clauses (j) and (k) to sub-rule (2). Clause (n) to sub-rule (2) defines the expression notional sales tax liability and .....

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roducts made by the said units, which are sold in the course of inter-state trade or commerce. 17. The purport and impact of Rule 28-A is with reference to eligible industrial unit, is not only clear from the definition clauses which define eligibility certificate, exemption certificate, etc. but also from sub-rule (4)(a) which stipulates that the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate for the period specif .....

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or commerce i.e. within the State of Haryana. To put it differently, it extends the benefit granted under clause (n)(ii) which relates to inter-state trade or commerce to intra-state sale or purchase. Such sales may be one or successive and tax at all stages is exempt. The exemption, therefore, is good specific, subject of course to other conditions being satisfied. 18. It is not disputed that on all intra-state sales no tax has been charged as the said transactions were treated as exempt by th .....

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objective behind Rule 28A and the notification in question. The basic objective and purpose is to exempt the goods manufactured in the State when they are further transferred in the course of inter-state or intra-state trade or commerce. Therefore, reference is made to the eligible industries and the goods manufactured by the said industries, which are entitled to exemption. The exemption notification refers to the sale of goods manufactured by a dealer holding a valid exemption certificate. Th .....

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n holding that the exemption is qua the goods manufactured and was not curtailed or restricted to the sales made by the manufacturer dealer and would not apply to the second or subsequent sales made by a trader, who buys the goods from the manufacturer-dealer and sells the same in the course of inter-state trade or commerce. It is pertinent to note that, clause (ii) of sub-rule (n) refers to sale of finished products in the course of inter-state trade or commerce where the finished products are .....

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within the purview of the enactment. It is in the nature of exception. [See : Kedarnath Jute Manufacturing Co. Ltd v. Commercial Tax Officer AIR 1966 SC 12]. Hidayatullah, J. (as his Lordship then was) in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha AIR 1961 SC 1596 had observed that a proviso is generally added to an enactment to qualify or create an exception to what is in the enactment, and the proviso is not interpreted as stating a general rule. Furthe .....

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the proviso should be given a greater or more significant role in interpretation of the main part of the notification, except as carving out an exception. It means and implies that the requirement of the proviso should be satisfied i.e. manufacturing dealer should not have charged the tax. The proviso would not scuttle or negate the main provision by holding that the first transaction by the eligible manufacturing dealer in the course by way of inter-state sale would be exempt but if the inter-s .....

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