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TMI Blog2024 (7) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... s petition under Article 227 of the Constitution of India, the petitioner has prayed for quashing and setting aside the order dated 18.01.2016 passed by the Gujarat Value Added Tax Tribunal (for short 'the Tribunal') in Revision Application No. 39 of 2004. The petitioner has further prayed for holding that the respondents are not entitled to collect any turnover tax (for short TOT) from the petitioners as per Assessment Orders dated 12.02.2001 and to give remission in the amount of TOT payable by the Oil Marketing Companies on the sale effected by the petitioner. The petitioner has also prayed for quashing and setting aside the revisional order dated 26.12.2003 passed by the Special Commissioner of Sales Tax, Gujarat State-respondent No. 2 and order dated 12.02.2001 passed by the Assistant Commissioner of Sales Tax assessing the liability of TOT amounting to Rs. 3,65,65,350/- by declaring that the petitioner is liable to pay TOT by virtue of statutory exemption as per entry No. 173 under Section 49 (2) of the Gujarat Sales Tax Act, 1969 (for short 'the Act'). It is also prayed to hold and declare that the Oil Marketing Companies (OMCs) are not liable to pay TOT in the turn over of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods which are wholly exempted from tax as per Section 49 (2) of the Act were not included in the total turnover of sales for assessing TOT. Therefore, exemptions granted under the Section 49 (2) of the Act were also considered for the purpose of TOT. 5.8. The Government thereafter, issued notification dated 01.04.1993 withdrawing the exemption by way of omission of Section 10A (2) (f) of the Act stating that turnover of sales which were exempted under Section 49 (2) of the Act were now to be calculated and included in total turn over of sales for the purpose of assessment of TOT. Therefore, the sale between ONGC and OMCs which was exempted vide entry No. 173 under Section 49 (2) of the Act was to be considered by including the same in total turnover of sales for the purpose of assessing the TOT and said notification was made effective from 01.04.1993. 5.9. The Assistant Commissioner of Sales Tax (Petroleum-I)(Division-I), Ahmedabad (hereinafter referred to as "assessing authority") by assessing order dated 12.02.2001 passed under Section 41 (3) of the Act assessed the liability of TOT amounting to Rs. 3,65,65,350/- upon the petitioner ONGC for the financial year 1993-1994. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing total turnover. 5.11. The petitioner-ONGC was made liable to pay TOT for financial year 1993-94 and recovery proceedings were also ordered to be initiated. 5.12. Feeling aggrieved and dis-satisfied by the order dated 24.12.2003 passed by the respondent No. 2, the petitioner preferred revision application No. 39 of 2004 before the Tribunal on the following grounds: "(a) Firstly, TOT was levied / introduced primarily as a single point tax which is to be payable at the last point re-sale between OMCs to end user. (b) Secondly, by virtue of section 7 of GST Act, for the goods as specified in Schedule - II Part A, there cannot be double taxation on the same quantum of turnover of sale of goods. Thus in case of resale of goods, the dealer is liable to get deduction of purchase price from total turnover of sales. (c) Thirdly, as per section 11 of GST Act, the assessing authority has also assessed TOT on re-sale of goods by OMCs which has resulted into a double taxation. The authority have interpreted the provisions of section 10A in isolation only by not reading with Sec.2 (32), 3, 7, 11 & 49 (2) which clearly suggest that the first point sale of petroleum products by ONGC to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry No. 173 under Section 49 (2) of the Act on sale of the petroleum products, the TOT cannot be levied on such sales. 6.3. It was therefore submitted that the ONGC sales petroleum products to OMCs who resale these products to the retailer/end user and therefore, the first point sale is between ONGC and OMCs and last point sale is between OMC and retailer or end user and the respondent-authority has already collected sales tax and TOT on the total turnover on last point sale from OMCs which also includes the first point sale. It was therefore submitted that for purpose of eradicating double tax, the first point sale has been exempted from any tax under the Gujarat Sales Tax by entry No. 173 under Section 49 (2) of the Act. Learned Senior Advocate Mr. S.N. Soparkar submitted that the first point sale between ONGC and OMCs therefore has been exempted from all taxes under the Act and the said sales are also deemed to be exempted from TOT. It was therefore submitted that denying such exemption for the purpose of assessing TOT would result in double taxation which is against the basic moral and conscious levy of TOT. 6.4. It was submitted that it is not in dispute that the OMCs has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to pay tax under Section 3 and Section 3A of the Act and turnover is required to exceed Rs. 50,00,000/-. It was therefore submitted that as per Section 3(5)(a) of the Act, if sale of petroleum products from ONGC to OMCs are exempted from tax under the Act then such sales are also implicitly exempted from TOT. 6.9. In support of his submissions, learned Senior Advocate Mr. S.N. Soparkar referred to and relied upon the following decisions: (1) Commissioner of Customs (Import Mumbai) versus Dilip Kumar and Company and others reported in 2018 (9) SCC page 1 wherein it is held as under: "24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at which the tax may be levied. Alternatively, it may empower a statutory authority to prescribe such single point for the purpose. Where such point is not prescribed, either by the statute or by the statutory delegate, no compliance is possible with Section 15. The single point at which the tax may be imposed must be a definite ascertainable point so that both the dealer and the sales tax authorities may know clearly the point at which the tax is to be levied. 6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness ill the legislative scheme defining any of those components of the levy will be fatal to its validity." (3) Alembi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as the case may be. Of course, that was a decision under the Central Excise Act and the Rules framed thereunder, but, in our opinion, the principle laid down therein is of general application to exemptions under all taxing enactments." (5) Inmauri Gopalam and Mandala Nagendrudu and Others versus The State of Andhra Pradesh and another reported in 1963 14 SCC 742 SC wherein it is held as under: "No doubt, statutes have to be construed as a whole so as to avoid any inconsistency or repugnancy among its several provisions, but if there is nothing to modify, nothing to alter, or nothing to qualify the language of a statute, the words and sentences have to be construed in their ordinary and natural meaning [vide 36 Hals (3rd Edn.) s. 585]. What we are now concerned with is a fiscal provision and it has often been said that there is no equity in a taxing statute and either the subject is within it or not, on the words of the enactment or the rules validly made thereunder. 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 words of the provision. If the tax-payer is within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in the form of trade notice issued in respect of rule 56-A was as much applicable to that rule as to notification No. 201/79. [272D] (2) It is true that when in a fiscal provision, is benefit of exemption is to be considered, this' should be strictly considered. But the strictness of the construction of exemption notification does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation. After all, exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade. [272E-F] (3) The quantity of ethylene glycol required to produce a certain quantum of polyester fiber is determined by the chemical reaction. It is not possible to use a lesser quantum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fiber. It is not as if the appellants have used excess ethylene glycol wontedly to produce the methanol. It is also clear that the appellants are not engaged in the production of methanol but in the production of polyester fiber. [272H; 273A] (4) The Tribunal, in the instant case, failed to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their identity as goods of a particular type. However, when a distinct commercial commodity emerges, it becomes a separate object of taxation so long as it retains its identity: see State of Tamil Nadu v. Pyare Lal Malhotra. In the process of interpretation of the abovesaid three entries and of Judging their interaction and, if need be, of their harmonisation, this fundamental principle must always be borne in mind." (8) Government of Kerala and Another versus Mother Supreior Adoration Convent reported in (2021) 5 SCC 602 wherein it is held as under : "17. In Union of India Versus Wood Papers Ltd. The rule as to exemption notifications in tax statutes was felicitously laid down as follows: (SCC p. 20. c para 4) "4. Entitlement of exemption depends on construction of the expression "any factory commencing production" used in the Table extracted above. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in eligibility certificate under Section 4-A. The interpretative consequence of the circular was read by the assessing authorities to mean that the adjustment in State Development Tax was to be made on proportional basis, rather than including it in the monetary limit specified in Column 5 of Annexure 1 and the limit in the eligibility certificate. 13. It is a general rule of interpretation of taxing statutes that there is no room for any intendment and they are to be read in the light of what is clearly expressed and enforced literatim of ad verbum. There are no equitable considerations or implications or assumptions or presumptions as to import provisions to supply any assumed deficiency in taxing statutes." 6.10. Referring to the above decisions, it was submitted that the respondent No. 2 and the Tribunal have failed to consider that once the sale between the ONGC and OMCs is exempted under Section 49 (2) of the Act, for all intents and purpose, such exemptions from the provisions of the Act would continue to apply even if clause (f) of Sub-section (2) of Section 10A of the Act is deleted with effect from 01.04.1993. It was submitted that the basic exemption which was alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore submitted that the TOT or single point tax to be paid by the dealer, if its turnover exceeds Rs. 99,99,999/- on the products specified in Schedule II and III. It was further pointed out that by Gujarat Sales Tax Amendment (amendment) Act, 1993, Section 10A was amended and clause (a) was inserted to the effect that for the words "taxable turnover of sales effected by him of all taxable goods", the word "taxable turnover of tax effected by him of all taxable goods and also the goods wholly and partially exempt from the payment of tax under Sub-section (2) of Section 49 was substituted. It was submitted that for purpose of levy of TOT as per Section 10A of the Act, all the turnover would include all the exemption under Section 49 (2) of the Act. It was therefore submitted that the contention raised on behalf of the petitioner that the exemption granted under Section 49 (2) of the Act would operate even if there is a taxable turnover to be calculated as per Section 10A of the Act which specifically exclude such exemption, is not tanable. 7.2. Learned Assistant Government Pleader Mr. Chintan Dave invited the attention of the Court to the statements at objects and reasons of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification-both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State and the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption continues a specific item has now been notified under section 3A of the Act." (2) Sales Tax Officer, Sector IX, Kanpur versus Dealing Daily Products and Another reported in 1994 (suppl)(2) SCC 639 wherein it is held as under: "3. The State of U.P. has been issuing, from time to time, notifications under Section 4 of the Act, exempting milk and milk products from the levy of sales tax. It has also been issuing from time to time notifications under Section 3-A notifying the rates of tax on sale/purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the priorities in the matter of utilisation of finances and to act in the public interest while issuing or modifying or withdrawing an exemption Notification under Section 25(1) of the Act." 7.4. It was therefore submitted that it is a matter of policy to the Government to levy the TOT even on the goods which are exempted under Section 49 (2) of the Act and such policy is now part of the statutory provisions and in view of the above decisions, the respondent No. 2 and Tribunal have rightly held that the petitioner-ONGC is liable to pay the TOT on the sales made by it to the OMCs as the turnover of the ONGC is to be enhanced with the turnover of sales between ONGC and OMCs in view of the amendment of Section 10A of the Act by the Gujarat Sales Tax Amendment Act, 1993 with effect from 01.04.1993 in view of the deletion of Section 10A (2) (f) in substitution of Section 1 (a). 7.5. It was further submitted that the contention of the petitioner to the effect that further explanation and insertion of Section 10 of the Act with regard to the explanation "taxable turnover" means turnover of all taxable goods as derived after deduction made under Sub-section (2) and the explanation taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely;- (a) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 16; (b) resales of goods purchased by the dealer from a Registered dealers otherwise than on a certificate furnished under section 12 or 13; (c) resales of goods purchased by the dealer from a dealer liable to pay tax under Section 4 if a certificate as provided in the proviso to sub-section (1) of Section 4 is furnished; (d) sales of goods or resales of goods to which clause (b) or clause (e) does not apply, to a licensed dealer, a recognized dealer or a commission agent holding a permit, who purchases on behalf of a principal, upon such dealer or commission agent, as the case may be, furnishing certificate provided in section 13, by virtue of which the sales of goods specified in Schedule II-Part A are exempt from sales tax, Schedule II-Part B are exempt from general sales lax, and Schedule III are exempt from both sales tax and general sales tax. (e) sales of declared goods; (f) sales of goods wholly exempt from payment of tax under section 49. (3) For the purpose of calculating the limit of turnover for arriving at the rate of tax payable by a dealer und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the taxable turnover in excess of rupees eight crores." (2) in sub-section (2), clauses (d) and (f) shall be deleted. "STATEMENT OF OBJECTS AND REASONS This Bill seeks to amend the Gujarat Sales Tax Act, 1969 with a view to giving effect to the proposals contained in the Budget speech of the Finance Minister in the Legislative Assembly on the 17th February, 1993. "Clause 2.-This clause seeks to amend section 10A. With a view to mobilizing additional resources, it is proposed to introduce a new slab of turnover tax at the rate of 2 per cent. on the turnover exceeding Rs. eight crores. Sales on resales of goods against certificate as provided in section 13 would hence-forth be liable to turnover tax. Likewise, sales of goods wholly or partially exempt from payment of tax under section 49 (2) would also be liable to turnover tax." 10. Section 2 (32) as it existed for the relevant year in the year 1993 reads as under: "2 (32) : sales means sales tax, general tax, TOT or purchase tax payable under this Act." 11. Section 10A is deleted by Gujarat Act No.15 of 1997 with effect from 01.04.1997. Prior to the deletion, Section 10A as is existed read as under : "10A Levy of tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a certificate furnished under section 12 or 13; (c) resales of goods purchased by the dealer from a dealer liable to pay tax under section 4, if a certificate as provided in the proviso to Sub-section (1) of section 4 is furnished; (d) XXX] (e) sales of declared goods; (f) XXX] [(3) **] (4) The turnover tax shall be paid by the dealer before furnishing the declaration or return for the period in which the [turnover of all sales, the turnover of all specified sales or, as the case may be, the aggregate of turnover of all specified sales and the turnover of all sales] as computed from the commencement of the year first exceeds rupees fifty lakhs.] The tax so payable shall be for the period from the commencement of the year to the end of the period covered by such declaration or return and the dealer shall continue to be liable to pay the turnover tax for that year for all the subsequent periods till the end of that year. (5) Notwithstanding anything contained in this Act, no dealer shall collect any amount by way of turnover tax payable by him under this section]" [Explanation: For the purposes of this section, - (1) the expression "taxable turnover" means turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable goods beyond a prescribed threshold and any dealer whose taxable turnover crosses the threshold at whatever stage was liable to pay TOT. As per Section 10A (2) (f) for the purpose of calculating amount of tax payable under Sub-section (1) of Section 10A i.e. TOT, the sales of goods wholly exempted payment of tax under Section 49 was to be deducted and not to be considered as a part of the taxable turnover for levy of the TOT but after the amendment with effect from 01.04.1993, clause (f) of Sub-section (2) of Section 10A was deleted and as a result of such amendment, the TOT would be payable on the sales of goods exempted under Section 49 of the Act so far as calculation of the taxable turnover of taxable goods under Section 10A was concerned. This fact is further explained by insertion of explanation to Section 10A with effect from 01.04.1994. The said notification was issued to amend the Section 10A as a clarification to earlier amendment and therefore, the revisional authority has rightly held that the amendment in Section 10A would be applicable from 01.04.1993 and not from 01.04.1994 as held by the appellate authority. 16. On perusal of the statement on objects to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93. However, by virtue of an amendment in Section 10A of the Act, the intention of the legislature was clear to withdraw the concession and impose turnover tax on sales exempted under Section 49. As such, the amendment in Section 10A was carried out by the legislature itself and clause (f) of sub-section (2) of Section 10A was deleted with effect from 01.04.1993. By virtue of legislative amendment under Section 10A effective from 01.04.1993, the previous notification dated 05.08.1988 was superseded for the exemption in the turnover tax. The applicant has therefore rightly paid the turnover tax initially on the sales exempted under Section 49 of the Act. It was also assessed as per the provisions of the prevailing law. However, the learned First Appellate Authority has removed the said levy of turnover tax on its erroneous presumption that the amendment has come into effect from 01.04.1994. The learned Special Commissioner has therefore rightly taken the said decision into revision and held that the applicant was liable to pay turnover tax and the relief was wrongly granted to the applicant. (17) The above view is also supported by the decision of this Tribunal in the case of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich or which would have been taxable under this Act but for exemption granted under this Act but for exemption granted under Sub-section (2) of Section 49. Therefore, it is very Cleary that the provision of Section 10A would be applicable on the goods which are taxable but for exemption granted under Sub- section (2) of Section 49. Therefore, the turnover of sales made by ONGC to OMCs which are otherwise exempted under Section 49 (2) of the Act would be considered as a taxable goods for the purpose of Section 10A to include in taxable turnover if the total turnover of the dealer exceeds Rs. 50 lakhs. Admittedly, the total turnover of ONGC is exceeding Rs. 50 lakhs and therefore, the taxable turnover would include the taxable goods irrespective of whether such goods are exempted vide entry No. 173 as per the notification issued pursuant to Section 49 (2) of the Act. 18. In view of the foregoing reasons and reliance placed on plain interpretation of the provisions of Section 10A as it has come into effect from 01.04.1993, it appears that the reliance placed by the learned advocates for the petitioners on the various decisions would not be applicable in the facts of the case. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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