TMI Blog2016 (11) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of goods in question within the State on the local sales. There is therefore, no warrant to interprete the expression “rate applicable to the sale or purchase of such goods” used in subsection( 1) of section 8 as to mean the prescribed rate and not the rate which may be applicable taking into account the exemption totally or partially that may have been granted by the State Government. The expression “within the State of Gujarat” does not aim to collect tax on interState sale. In fact, learned Advocate General also stated that this could not be and is not even the intention of the State legislation - we do not find that the amended entry 69 is in any way unconstitutional or outside the legislative competence of the State delegated legislation. Our interpretation and the order of dismissing the appeal would take care of other prayers of the petitioner in the Special Civil Application. Same is disposed of accordingly - appeal dismissed - decided against Revenue. - Tax Appeal No. 649, 660, 661 of 2014 , Special Civil Application No. 13691 of 2014 - - - Dated:- 19-10-2016 - Akil Kureshi And A. J. Shastri, JJ. Mr Kamal Trivedi, Advocate General With Ms Sk Vishen AGP for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. This was amended with effect from 3.10.2008 and reads as under : Sales of Liquified Petroleum Gas (LPG) for domestic use by the consumers of the State. 4. The State VAT authorities were of the opinion that with the addition of words by the consumers of the State in the said entry, the intrastate sales of LPG would continue to be exempt but not its interState sales. On such basis, the assessing authority and the appellate authority demanded CST from the assessee on its interState sales of LPG which were effected after 3.10.2008. The issue was carried before the Tribunal by the assessee. On behalf of the assessee, it was argued that under entry 69, the sale of LPG within the State was exempt from tax. By virtue of section 8(1) of the CST Act, interState sales also would invite no tax. On behalf of the Government, however, much emphasis was placed on the introduction of the words by the consumers of the State in the said entry 69 with effect from 3.10.2008. It was argued that there would be no exemption on sale of LPG outside the State which was available under entry 69 before 3.10.2008. The Tribunal by the impugned judgement held that the State Government has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing for the State Government drew our attention to the various statutory provisions and the decision of this Court in case of State of Gujarat v. Oil and Natural Gas Corporation Limited dated 17.10.2015 in Tax Appeal No.384/2014 and connected appeals in which similar issue came up for consideration. He submitted that by virtue of amendment in entry 69 with effect from 3.10.2008, the words by the consumers of the State were added. This would have significant bearing on the taxability of interState sales of LPG. He submitted that the exemption was confined only to the local sales and by virtue of section 6(1A) and true interpretation of section 8(1) of the CST Act, such exemption from payment of Central Sales tax would no longer be available on interState sales. He raised the following contentions : 1) Since there is no specific entry in the scheduleII to the VAT Act, sale of LPG would fall under residuary entry 87 and ordinarily, invite tax at the rate of 12.5% with additional tax as applicable. By virtue of sections 14 and 15 of the CST Act and entry 55 to the exemption notification under VAT Act, this rate would be reduced to 5%. He contended that the central sales tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way with. In that view of the matter, post 1.4.2007 in any case, no tax could be levied on sale of LPG in its interState sales as long as the local sales are exempt. 7.1) It was contended that entry 55 is in consonance with the provisions of sections 14 and 15 of the CST Act when it limits the tax on specified product to 5%. Entry 69 is specific to LPG. The said product may otherwise be covered under entry 55 but by virtue of specific entry, the rate of tax on sale of such product would be nil. It was contended that the specific entry would prevail over the general entry. It was contended that entry 55 did not in any manner intend to provide for a minimum rate of tax. 7.2) It was contended that section 6(1A) of the CST Act would have no application in the present circumstances. Section 8(1) of the Act would ensure that as long as local sale of LPG is exempt from tax, no tax on its interState sale could be levied. It was argued that section 6(1A) and section 8(1) of the CST Act have to be harmonised. Section 6(1A) was inserted by the legislature to nullify the effect of judgement of Supreme Court in case of State of Mysore v. Yaddalam Lakshminarasimhiah Setty and sons reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al sales. As the Finance Minister's speech would show the intention of the State legislature to grant exemption on the local sales of the LPG while continuing to tax the interState sales of the product, had failed. In order to achieve this purpose, the exemption was done away altogether. However, to protect the local consumers from additional burden on account of the withdrawal of the exemption it was promised that a separate mechanism will be put in place. Counsel submitted that under the new regime, local sales tax is also levied on sale of Liquified Petroleum Gas but an equivalent amount is reimbursed by the State Government to the purchaser dealers who are oil marketing companies through the department of Civil Supplies. According to the counsel, this understanding of the legal position by the Finance Minister, would assume significance. 7.6) Counsel relied on various judgments, reference to which would be made at an appropriate stage. 8. Learned counsel Shri S.N. Soparkar while adopting the submissions made by Shri Venkataraman stressed on the aspect of the Supreme Court staying the judgment of this Court in case of Oil and Natural Gas Corporation Limited(supra). He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 8 have undergone multiple changes from time to time. By virtue of Amending Act no.31 of 1958, with effect from 16.9.1958, subsection (2A) was added to section 8 which reads as under : (2A) Notwithstanding anything contained in sub section (1) or sub section (2), if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than one per cent (whether called a tax or fee or by other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation:For the purpose of this sub section a sale or purchase of goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods. 11. By virtue of this provision, thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to the sale of goods in the course of interState trade or commerce not falling within subsection (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State. Explanation: For the purposes of this subsection, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, not withstanding that he, in fact, may not be so liable under that law: (3) The goods referred to in subsection (1): (b) are goods of the class or classes specified in the Certificate of Registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any Rules made by the Central Government in this behalf, for use by him in the manufacture of processing of goods for sale or in the telecommunications network or in mining or in the generation or distribution of electricity or any other form of power; 14. Article 286 of the Constitution pertains to restrictions as to imposition of tax on the sale or purchase of goods. Clause(3) thereof reads as under : (3) Any law of a State shall, in so far as it imposes, or aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of goods into or export of goods out of the territory of India. Section 5 of the VAT Act pertains to exemptions. Subsection( 1) of section 5 provides that the sales and purchases of the goods specified in the ScheduleI shall be exempt from tax subject to the conditions and exceptions set out therein. ScheduleII to the VAT Act provides rate of tax for goods which are not exempt. Entry 87 thereof is the residuary entry covering all goods not specified elsewhere. Subsection( 2) of section 5 provides that subject to such conditions as may be imposed, the State Government may, if it considers necessary to do so in the public interest, by notification published in the official gazette, exempt any specified class of sales or purchases or sales or purchases of goods by any specified dealer or specified class of dealers from payment of the whole or any part of the tax payable under the provisions of the Act. 19. In exercise of powers under section 5(2) of the VAT Act, the State Government issues notifications of exemptions from time to time, which entries are posted in a Schedule. Entry 55 thereof reads as under : 55. 1912007 to 10042011 (GHN1) 191 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. Of many questions which the Court was answering in the said judgement, one of them was whether ONGC's claim of exemption in respect of sales of LPG to various OMCs even within the State was justified. In this context, the Court held that by virtue of amendment in entry 69 with effect from 3.10.2008, the words for domestic use have been added. Till such amendment, ONGC would be entitled to exemption from payment of VAT on its sale to the OMCs within the State. However, post 3.10.2008 on account of introduction of words for domestic use , such sales would not qualify for such exemption. In context of these findings, the Court then proceeded to examine whether the interState sales of ONGC would qualify for exemption. It was held and observed as under : [12.8] In view of the aforesaid discussion and for the reasons stated above, even the ONGC is not entitled to exemption from tax on the interState sales of LPG, effected by the ONGC from the State of Gujarat to other States as the exemption is available on interState sales of LPG for domestic use by the consumers of the State only. Under the circumstances, the ONGC is liable to pay value added tax on the interState sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature inserted entry 55 under notification dated 19.1.2007 specifying that the goods declared under section 14 of special importance would not carry VAT more than 5%. In other words, any tax in excess of 5% would be exempt. 27. This however, would not mean that if by virtue of any other entry in the said Schedule, a particular product invites rate of tax lower than 5%, entry 55 would prevail so as to bring the rate of tax to the said rate of 5%. In plain terms what section 15 of the CST Act provides is for the maximum rate of tax on the declared product beyond which it would not be open for the State legislature to prescribe the tax on sale or purchase of such goods. Entry 55 thus provides for a maximum rate of tax and not minimum. In this context, if one peruses entry 69, it pertains to sales of Liquified Petroleum Gas and exempts the whole of tax in connection with domestic sales. The first contention of the learned Advocate General that entry 55 would prevail over entry 69 cannot be accepted. Quite apart from the principle that specific entry would prevail over a general entry, in plain terms, we do not find that entry 55 had any effect of increasing the rate of tax on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods, the sale or, as the case may be, the purchase of which under the Sales Tax Law of the State is exempt from tax generally, the rate of central sales tax would be nil. By the Amending Act 16 of 2007, section 8 was once again materially altered. Subsections( 1) and (2) which stood till then, were replaced and, as noted, in the present form, under subsection( 1), the provisions have been made to ensure that interState sales of particular goods would invite sales tax liability of 2% or lower, if the same is taxed at a lower rate by the State in the course of intraState sales. Thus the vital distinction of the goods being exempt from payment of tax either generally or otherwise, which existed prior to this amendment, came to be obliterated. Till this amendment, it was possible for the State legislature to provide for a regime under which a particular class of goods would though be exempt from payment of local tax, such exemption may not result in exemption from payment of central sales tax. In other words, by providing exemption not generally but conditionally, in terms of section 8, as it stood prior to 1.4.2007, it was possible to exempt levy of local tax on the goods but cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which this unintentional result had come about. It is not unknown that executive on one hand may continue to agitate a legal contention before the higher judicial forum but for prompt results, with the aid of legislature may amend the statutory provisions to overcome the difficulty arising out of the Court judgment. 30. Learned Advocate General however, vehemently contended that interpretation which we have adopted would ignore subsection( 1A) of section 6 of the Act. In his view, such provision would override section 8(1) of the Act when it comes to taxability of certain product in interState sales. 31. Prior to introduction of subsection( 1A) to section 6, in Yaddalam Lakshminarasimhiah Setty and sons (supra), the Supreme Court considered the judgement of Mysore High Court in which it was held that sales which were not first sales within the Mysore State being not exigible to tax under the Mysore Sales Tax Act, no tax was payable thereon under the Central Sales Tax Act also. The three Judge Bench of the Supreme Court by majority of two versus one held as under : 16. Section 6 of the Central Act is the charging section. Subject to the other provisions contained in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of goods under the general sales tax law of the State is assessed, paid and collected, it is reasonable to hold that the expression levied in s.9(1) of the Central Act refers to the expression levied in s.5 (3) (a) of the State Act. There is no reason why the Central Act made a departure in the manner of levy of tax on the specified goods which are taxed only at a single point under the State Act : if any such radical departure was intended, the Central Act would have expressly stated so. The Central Act was passed to levy and collect salestax on interState sales to avoid confusion and conflict of jurisdictions; the tax is also collected only for the benefit of the States. Therefore. the construction we accept avoids the anomaly of the State collecting tax on powerloom textiles only at a single point and the Centre, through the agency of the State authorities, collecting the said tax for and on behalf of the State at multipoints. 32. It is wellknown that to overcome the difficulty arising out of the judgement in case of Yaddalam Lakshminarasimhiah Setty and sons (supra), subsection (1A) of section 6 was inserted by the Amending Act 28 of 1969 but with retrospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may emerge taking into account any exemption granted by the State Government. The term 'rate applicable to the sale' has not been defined under the Act and must therefore, be understood in the context of statutory provision applicable. Under subsection( 1) of section 8, the legislature has essentially provided that interState sales of goods to the Government or to a registered dealer would be 2% or at the rate applicable to such sale or purchase inside the State as per the State Tax laws, whichever is lower. The intention of the legislature therefore, is to ensure that the interState sales of the goods in question does not exceed the rate of tax applicable to the sale or purchase of goods inside the State. Quite apart from this intention, there are two additional reasons why we are persuaded to take a view that the expression rate applicable to the sale or purchase of such goods must take within its sweep the rate at which the goods are taxable within the State and not the rate prescribed ignoring any exemption, if made available by the State Government. Firstly, the proviso to subsection( 1) of section 8 provides that the Central Government may by notification in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding the vires, it was observed that Parliament had fixed the rate of tax on interState sales at the rates fixed by the appropriate State legislature in respect of intraState sales with a purpose namely, to check evasion of tax on interState sales and to prevent discrimination between the residents in one State and those in other. We do not see any direct application of the said judgement in facts on hand. 35. The decision in case of Pravara Pulp Paper Mills v. Collector of Central Excise reported in (1998) 9 Supreme Court Cases 573, was rendered in the background of valuation of goods for the purpose of excisable value for collection of excise duty. It was held that the assessees would be entitled to exclude from the value of the excisable goods, if the effective duty of excise payable by them on the goods after taking into account the exemption notification. Again the said decision has no direct applicability. 36. In case of Shree Digvijay Cement Co. Ltd and others v. State of Rajasthan and others reported in (2000) 1 Supreme Court Cases 688, the Constitution Bench of the Supreme Court upheld the notice issued by the State of Rajasthan under section 8(5) of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly the power of the State Government under the State sales tax law is to levy tax or to grant exemptions only in respect of sales or purchases taking place within the State. The State or the authorities under the State law do not have power to make any order in respect of interState sales. If the sales or purchases are generally exempt from tax under the State law, section 8(2A)automatically comes into operation and no tax can be levied on the interState sales of such goods. No further notification under the Central Sales Tax Act is needed for that purpose. By no stretch of imagination, can it be said that the expression within the State of Maharashtra is a condition to the exemption. So far as the second submission is concerned, on a careful perusal of the scheme of the Bombay Sales Tax Act, in particular section 13 thereof, it is clear that purchase tax is leviable under certain specified circumstances in respect of purchases of those goods only which are liable to sales tax under the Act. Section 13, therefore, does not make the goods which are wholly exempt from sales tax in the State liable to purchase tax. 38. In somewhat different manner, this is precisely what ..... X X X X Extracts X X X X X X X X Extracts X X X X
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