TMI Blog2015 (6) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... e by a registered dealer of goods covered by entry 10 in Part I of Schedule C. Part I of Schedule C specifies the rate of tax at two per cent. By applying the principles of harmonious construction, the notification will have to be construed to apply to the rate of tax as specified in entry 10 of Part I of Schedule C of the said Act. The rate is specifically prescribed at the rate of two per cent. It is found that, what has been provided by the notification is exemption of tax, in excess of what is provided under the said notification, from the tax payable as specified by entry 10 of Part I of Schedule C of the said Act. The Legislature has specifically provided for a purchase tax, at the rate of two per cent in addition to the tax payable under the other provisions of the Act, when the requirements as provided under the said section are fulfilled. The tax as provided in section 13AA, is an additional tax payable in certain circumstances as carved out in the said section, so as to compensate the loss of revenue. Therefore, there is no conflict between any of the provisions of the said Act if the principles of harmonious construction is applied thereto. Whether the Tribunal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Sales Tax JUDGMENT The learned Maharashtra Sales Tax Tribunal, Mumbai, vide order dated November 23, 2007, has referred the following questions of law for our determination: (I) Whether the Tribunal was correct in holding that, instead of the entry A47 waiving tax on purchase in excess of given percentage, the dealer was liable to purchase tax at two per cent. and not at reduced amount of 0.5 per cent. or 1.55 per cent. as applicable at relevant time under the entry A47 while section 41 read with section 13AA of the Bombay Sales Tax Act ? (II) Even though the entry A47 cover exemption from tax on purchase, whether the Tribunal was justified in holding that the said exemption on purchase will not cover, purchase tax levied under section 13AA, unless specific exemption entry is inserted by Government ? 2. The facts, in brief, giving rise to the present references, are as under: The assessee, who is registered under the provisions of the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956 (hereinafter referred to as the said Act and the Central Act ), is an importer/exporter of diamonds and manufacturer of gold jewellery. The place of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar, learned counsel for the assessee and Shri Sonpal, learned special counsel for the Revenue. 4. Shri Thakar learned counsel for the assessee, submits that the learned Tribunal grossly erred in holding that the case of the applicant is not covered by the notification issued under section 41 of the said Act. The learned counsel submits that, what is being levied is a purchase tax and what is being exempted by the notification is also a purchase tax. He submits that merely because the case of the applicant is covered by section 13AA, cannot itself be a ground to deny the benefit of exemption under the said notification, inasmuch as what is being levied under section 13AA is also a purchase tax. The learned counsel submits that when the language of the notification is plain and simple, there is no question of taking recourse to other principles of interpretation. The learned counsel submits that from plain interpretation of the notification issued under section 41, it will be abundantly clear that the purpose of the notification is to give benefit of reduced rate of tax whenever purchase tax is liable to be paid and the distinction sought to be carved out by the authority and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured in the State, are sent outside the State to the branch of the assessee or his agent. 7. For considering the rival submissions, it will be necessary to refer to certain provisions of the said Act. Sections 13, 13A, 13AA, 13B and section 41 read thus: 13. Purchase tax payable on certain purchases of goods.-(1) Where a dealer, who is liable to pay tax under the provisions of this Act, purchases any goods specified in Schedule B or C from a person or a Government, who or which is not a dealer or a dealer who is not registered dealer and treats them as capital assets any time after such purchase, then there shall be levied, subject to the provisions of subsection (2) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the Schedules aforesaid. (2) Subject to the provisions contained in sub-section (1), where a dealer, who is liable to pay tax under the provisions of this Act, purchases any goods specified in Schedule B or C from a person or a Government, who or which is not a dealer or a dealer who is not a registered dealer then unless the goods so purchased are resold by the dealer, there shall be levied, subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer: (2) Where the specified goods are declared goods, the purchase tax leviable under sub-section (1) shall be subject to the provisions of sub-section (2) of section 7. (3) On issue of the notification under sub-section (1), nothing in sections 7, 8 or 13 shall apply to the sale or purchase, as the case may be, of the specified goods. 41. Exemptions.-(1) Subject to such conditions as it may impose, the State Government, may, if it is necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or purchases from payment of the whole or any part of any tax payable under the provisions of this Act any notification issued under this section may be issued so as to be retrospective to any date not earlier than the January 1, 1960. (2) Where any dealer or person has purchased any goods under a declaration given by him under any of the notifications issued under this section and - (a) any of the conditions subject to which such exemption was granted, or (b) any of the recitals or the conditions of the declaration, are not complied with, for any reason whatsoever, or, in any other case, where such dealer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of tax as is provided in sub-section (1) of section 13. 9. Section 13A, deals with dealer holding a certificate of entitlement, who purchases any goods on a declaration referred to in clause (g) of section 12 and provides for a levy of purchase tax on the turnover of such purchases, at such rate not exceeding four per cent as may be prescribed and further provides that different rates may be prescribed for different classes of dealers. 10. Section 13AA which is most material for the decision of the present reference, deals with a dealer who is liable to pay tax under the Act and who purchases any goods specified in Part I of the Schedule C, directly or through commission agent, from any person and uses such goods in the manufacture of taxable goods and dispatches the goods, so manufactured, to his own place of business or to his agents place of business situated outside the State within India. It provides that such a dealer shall be liable to pay, in addition to the sales tax paid or payable, if any, or, as the case may be, the purchase tax levied or leviable, if any, under the other provisions of the said Act in respect of purchase of such goods, a purchase tax at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Period of operation (1) (2) (3) (4) (5) 10. Bullion and specie. Explanation.-The expression 'bullion' in this entry means gold and silver of fineness of not less than fifty per cent. 2% 2% 1-10-1995 to date. As per the said notification, from August 1, 1995, till May 31, 2000, the duty in excess of 0.5 per cent. in respect of the goods covered by entry No. 10 was exempted from payment of tax and with effect from June 1, 2000 till May 31, 2002 the duty in excess of 1.55 per cent. and whole of surcharge was exempted. 15. It could thus be seen that insofar as the goods, i.e., the bullion is concerned, it is undisputedly entitled to benefit of the notification under section 41 of the said Act. However, the only question that is required to be considered, is as to whether by virtue of the said notification issued under section 41, the liability of the assessee to pay the purchase tax as is provided in section 13A of the said Act would be affected or not. In other words, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14(1) provides for an additional tax at one per cent., on inputs that go into branch transfers but it is restricted to the goods specified in Part II of Schedule C. Since certain manufacturers who transfer most of the goods by branch transfers, use all the facilities of infrastructure provided by this State, it is felt that it is no more necessary to give them concession in respect of inputs, falling in Part I of Schedule C, for manufacture. Accordingly, it is proposed to levy two per cent. purchase tax even on purchase of inputs covered by Part I of Schedule C, in addition to the sales/purchase tax paid or payable, as the case may be. 17. It will be relevant to note that the validity of section 13AA came to be challenged before this court. This court upheld the validity of the said section. However, in the appeals before the apex court, the apex court in the judgment, in the case of Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC); [1991] 188 ITR 402 (SC) allowed the appeals and held section 13AA to be ultra vires. After the aforesaid judgment was delivered by the apex court on October 9, 1989, by an Ordinance dated December 6, 1989, section 13AA was again brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the Supreme Court against the decision of the High Court. The Supreme Court, by its judgment, dated October 19, 1989, declared section 13AA ultra vires holding that the tax leviable under that section was in the nature of tax on consignment. 2. The intention in prescribing the low rates of tax on raw materials included in Part I of Schedule C was that the raw materials would be used in manufacture of taxable finished goods which would be sold and the State would be able to levy and recover normal rate of sales tax on the goods so manufactured. If a purchaser availed himself of the concessional low rate of tax at the time of purchase of the raw materials and used them in the manufacture of other taxable goods but did not sell the same, it would result into loss of revenue to the State which was not intended. Therefore, with a view to protecting the revenue, it was expedient to re-enact section 13AA with retrospective effect with validating and saving provisions by removing the disability pointed out by the Supreme Court and to provide levy of purchase tax in general on all the purchases of raw materials at the concessional low rate and which are used in the manufacture of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.' In 'In re, Mayfair Property Company.' [[1898] 2 Ch 28 at page 35 Lindley, M. R., in 1898 found the rule 'as necessary now as it was when Lord Coke reported Heydon's case 3 Co. Rep. 7a; 76 E. R. 637'. In Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks 1898 AC 571 at page 576 Earl of Halsbury reaffirmed the rule as follows: 'My Lords, it appears to me that to construe the statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy. These three being compared I cannot doubt the conclusion.' It appears to us that this rule is equally applicable to the construction of article 286 of our Constitution. In order to properly interpret the provisions of that article it is, therefore, necessary to consider how the matter stood immediately before the Constitution came into force, what the mischief was for which the old law did not provide and the remedy whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature, in order to compensate the loss of revenue, which occasioned on account of a purchaser availing of the concessional rate of tax, at the time of purchase of raw materials specified in Part I of Schedule C has used them in the manufacture of taxable goods, but did not sell the manufactured goods in the State has brought section 13AA on the statute book. The intention of the Legislature, to provide concessional rate of tax on purchase of raw material, was that the said raw material would be used in the manufacture of taxable goods in the State, which will be sold in the State and upon such sale, the State would be in a position to levy sales tax at higher rate. The remedy provided by the statute, was in order to com-pensate the loss of revenue which occasioned on the purchaser purchasing the raw material from the State at concessional rate, but did not sell the goods which were manufactured by using the said raw material in the State. 23. It will be relevant to refer to some of the observations of the apex court in the case of Hotel Balaji [1993] 88 STC 98 (SC) (pages 145 and 146 in 88 STC): This statement accords with our understanding of the scheme of section 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no reason why the State should forego its tax revenue on purchase of raw material. The apex court, has further held that, the taxing power can be utilized to encourage commerce and industry and at the same time, serve the interests of economy and promote social and economic planning. It has been held that, section 9 of the Haryana Act and section 13AA of the Bombay Act are intended to encourage the industry and at the same time derive revenue. 24. The apex court, has further held that, the scheme of the said provision is to levy the purchase tax, on the purchase price of raw material purchased by a manufacturer. However, it is waived in three situations (i) sale of manufactured goods within the State, (ii) inter-State sale and (iii) export sale of manufactured goods. It has been held that in other cases, it is not. 25. Insofar as the provisions with which we are concerned, the apex court has specifically observed thus (pages 149 and 150 in 88 STC): The same is the position under section 13AA of the Bombay Sales Tax Act. The said provision, properly analysed, yields the following ingredients: (i) where a dealer who is liable to pay tax under this Act purchases any go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trade or commerce or sold in the course of export. It has been further held that it is retained and collected, where the goods are taken out of State of Maharashtra. It has been further held that in such an event, there is no reason, as to why the State should not retain and collect the levy on purchase of raw material. 27. It could thus be seen that the apex court in clear terms has held that, the levy under section 13AA is waived only when the goods are either sold in the State or in the course of inter-State trade or commerce or sold in the course of export. It has further been held that, when the goods manufactured are not sold within the State, there is no reason as to why the State should not collect the levy on purchase of raw material. 28. It is further to be noted that, sections 13 and 13B of the said Act specifically refer to the rate of purchase tax leviable in respect of specified goods in Schedule B or Schedule C. Even insofar as section 13A is concerned, wherein a power is vested in the State Government to prescribe the purchase tax for different classes of dealers, on the turnover of purchase of goods on a dealer holding a certificate of entitlement, the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the court construed the expression 'Prize Chit' in Srinivasa's case [1981] 51 Comp Cas 464 (SC); [1981] 1 SCR 801 and we find no reason to depart from the court's construction. The apex court has held that interpretation must depend on the text and context. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted, when we know why it was enacted. It has been held that if a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different, than when the statute is looked at without the glasses provided by the context. It has been further held that with these glasses, we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say, as to fit into the scheme of the entire Act. It has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that construction which renders either of them inoperative should not be adopted, except by last resort. It has been consistently held by the apex court that the provisions of a statute should be construed harmoniously with each other and not in isolation. It has been held that the statute should be construed, so that meaning could be given to each and every provision enacted by the Legislature. Insofar as the contention of Shri Thakar that the provisions of section 41 will have an overriding effect is concerned, we are unable to accept the said contention. We find that there is no conflict in the provisions and all the provisions of the statutes referred to hereinabove, can exist in harmony. Insofar as the judgment in the case of Varun Polymol Organics Ltd. [1995] 97 STC 55 (Bom), which is cited in support of the aforesaid proposition is concerned, we find that the said judgment, would not be applicable to the facts of the present case. The question that fell for consideration before this court in the said case, was as to whether in view of a conflict between a subordinate legislation, i.e., notification and the administrative circular, what would prevail. The court held that an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eventuality of two Acts in a series dealing with the same subject matter, the latter Act will be required to be construed together with the principal Act as a single code. It further held that, while doing so the effect will have to be given to the provisions of the latter Act in preference to the former Act, wherever the latter intended to modify the former. It will be appropriate to refer to the following observations of the apex court in the said case (page 11 in 53 STC): . . .We are of the view that it is necessary to read and to construe the two Acts together as if the two Acts are one, and while doing so to give effect to the provisions of the Act which is a later one in preference to the provisions of the principal Act wherever the Act has manifested an intention to modify the principal Act. The following observations of Lord Simonds in Fendoch Investment Trust Co. v. Inland Revenue Commissioners [1945] 2 ALL ER 140 (HL) made in connection with the construction of certain fiscal statutes are relevant here. He said at page 144: 'My Lords, I do not doubt that in construing the latest of a series of acts dealing with a specific subject-matter, particularly where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. . . It could thus be seen that the apex court has held that in interpreting such a provision, the construction which would defeat its purpose and in effect, obliterate it from the statute book, should be avoided. It has been further held, that if more than one construction is possible, the construction which preserves its workability and efficacy is to be preferred, to the one which would render it otiose or sterile. If the contention of the assesse is to be accepted, then the very purpose for which section 13AA is brought on the statute book would be defeated. By availing of the benefit of notification by paying the meager tax, the assessee would purchase the said goods, use them for manufacture by using State infrastructure and then take away finished goods, from the State to other State and thereby deprive the State its revenue, which it would have earned by way of sales tax, at much higher rates, if the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional rate, manufactures the goods by using the State infrastructure, but does not dispose of by three aforesaid methods, but despatches it to his branch or to his agent, situated outside State, it cannot escape from the liability of tax at the rate of two per cent., as is leviable under section 13AA. 39. In that view of the matter, we answer the questions referred to us as under: (I) The Tribunal was justified in holding that the dealer was liable to purchase tax at the rate of two per cent. and not at reduced amount of 0.5 per cent. or 1.55 per cent. as per entry A-47. (II) The Tribunal was justified in holding that the benefit of the said notification was not available, insofar as the purchase tax, as is levied under section 13AA of the said Act, is concerned. Both the sales tax references stand disposed of in the aforesaid terms. No order as to costs. 40. Before we conclude, we must place on record our appreciation for the valuable assistance rendered by Shri Thakar appearing on behalf of the assessee and Shri Sonpal, learned counsel on behalf of the Revenue. We also appreciate the valuable assistance rendered by Shri Nirmal Darda, Deputy Commissioner of Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X
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