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G.BHASKARAN versus THE COMMERCIAL TAX OFFICER

High Court of Madras

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G.Bhaskaran v. The Commercial Tax Officer - Writ Petition No.19912 of 2000 [2002] RD-TN 558 (6 August 2002)



IN THE HIGH COURT OF JUDICATURE AT MADRAS



DATED: 06/08/2002

C O R A M

THE HONOURABLE Mr.JUSTICE V.KANAGARAJ

Writ Petition No.19912 of 2000

G.Bhaskaran

rep. by partner

No.2, Kamaraj Park Street

Chennai 600 013. ... Petitioner -Vs-

1.The Commercial Tax Officer

Royapuram Assessment Circle

Kuralagam Annexe, 5th Floor

Chennai 600 108.

2.The Appellate Assistant Commissioner

of Commercial Taxes II

Kuralagam Annexe, VIth Floor

Chennai 108.

3.The Tamil Nadu Sales Tax

Appellate Tribunal

(Additional Bench)

Chennai 104. ... Respondents Petition under Article 226 of the Constitution of India praying for issue of a writ of Certiorari as stated therein. For petitioner ... Mr.N.Murali

For respondents... Mr.B.Parthasarathi, G.A.(T) :O R D E R



This Writ petition has been filed praying to issue a Writ of Certiorari calling for the impugned proceedings of the third respondent passed in T.A.No. 164/99, dated 11-05-2000 and quash the same.

2. In the affidavit filed in support of the Writ Petition, the petitioner would submit that, he is a dealer in pulses and grams on the file of the first respondent under the Tamil Nadu General Sales Tax Act, 1959 and also under Central 956; that for the assessment year CST 1996-97, they returned a total and taxable turnover of Rs. 16,01,210/- and Rs. Nil respectively, through their monthly returns; that the petitioner claimed exemption on the above turnover under Entry 81 of the Part B of the Third Schedule to the TNGST Act 1959 read with Section 8 (2-A) of the CST Act, 1956; that the first respondent disallowed the claim of exemption on ground that the exemption is a conditional exemption and not general exemption and thereby, for no t fulfilling conditions of Section 8(2-A) of the CST Act, 1956, and thereby, passed the assessment proceedings for the said year 1996-97 as per its proceeding dated 29-05-1998.

3. The petitioner would further submit that an Appeal filed under Section 9(2) of the CST Act 1956 read with Section 31 of the TNGST Act 1959 before the second respondent in A.P.No. CST 97/98, dated 23-10-1998, the order of the first r o be confirmed, further holding that the Entry 81 of the Part B of the Third Schedule to the TNGST Act, 1959, is only a conditional exemption and that the petitioner is not satisfying the conditions of Section 8 (2-A) of the CST Act, 1956; that a furthe r Appeal against the order of the second respondent, dated 23-10-1998 before the third respondent in T.A.No. 164/99 also got dismissed confirming the views of the first and second respondents as per its order dated 11-05-2000, which is impugned herein. H ence, the petitioner has come forward to challenge the said order passed by the third respondent on certain grounds such as that the order impugned passed in T.A.No. 164/99, dated 11-05-2000, failed to substantiate how the Entry 81 of the Part B of the T hird Schedule to the TNGST Act, 1959 is a conditional exemption; that the third respondent failed to follow the principles of law laid down by this Court and The Honourable Supreme Court of India in interpreting Section 8(2-A) of the CST Act 1956; that t he word "otherwise than" occurring in explanation to Section 8(2-A) of the CST Act 1956 must be interpreted as an exemption to what is stated earlier in the explanation and if it is so construed the turnover limit occurring in the Entry 81 of Part B of t he Third Schedule to the TNGST Act 1959 will mean a general exemption, on such grounds the petitioner would pray to grant the relief extracted supra.

4. During arguments the learned counsel appearing on behalf of the petitioner would submit that the petitioner is a registered dealer before the first respondent for the assessment year 1996-97 and is claiming exemption for the sale of s covered by Central Sales Tax Act, 1956, as such no separate schedule is adopted by the State Act. Citing the assessment order passed by the first respondent, the learned counsel would point out the relevant entries extracted therein; that on Appeal bef ore the second respondent having come to be dismissed, a further Appeal had been filed before the third respondent claiming exemption under Entry 81 of the Part B of the Third Schedule of TNGST Act, 1959, which is general in nature, not conditional. Read ing out the relevant provisions of law such as Section 8 of the Central Sales Tax Act 1956, Section 8 (2-A) which adopts the Local Act for the purpose of determining the rate of tax under the Central Sales Tax Act, the learned counsel would point out tha t is why it is clear even under Section 8(2-A) exemption from tax is given and therefore, the petitioner is exempted from the State Act.

5. The learned counsel would put in a nut shell that if the provision of law is general in nature, the petitioner is entitled to the exemption of the Sales Tax and he is not entitled to the exemption of the Sales Tax if it is condition.

6. The learned counsel would also cite two judgment in consummation of his arguments in favour of the case of the petitioner, the first one reported in PRESTON INDUSTRIES VS. COMMERCIAL TAX OFFICER, DISTRICT CIRCLE III, BANGALORE AND AN 17) and the second one reported in COMMISSIONER OF SALES TAX, JAMMU AND KASHMIR AND OTHERS VS. PINE CHEMICALS LIMITED AND OTHERS ([1995] 96 STC 355), so far as the first judgment cited above is concerned, wherein, it is held by a Division Bench as follow s: " 3. The question that falls for our consideration is that whether the goods sold by the appellant in this case are exempted from tax generally under the Karnataka Sales Tax Act. The test applicable to verify whether the exemption granted is general i ature or arose in specific circumstance or subject to conditions, could be illustrated with reference to the decision of Commissioner of Sales Tax v. Pine Chemicals Limited [1995] 96 STC 355, wherein the Supreme Court has stated that in ascertaining the true meaning of Section 8(2-A) of the Act, providing for exemption of Central Sales Tax on sale or purchase of goods where the sale or purchase of such goods is exempt generally under the State sales tax law, the expression "generally" which occurs in th e said provision, will have to be ascertained with reference to the class of goods dealt with by the dealer. As long as the reference is to a class or category of goods, the exemption must be treated as general and if it is with reference to either manu facture or the circumstances under which the manufacturer sold the goods to the dealer or customer, then it would not be general and if it is with reference to the goods then such exemption, it is treated as general. In that case, the exemption provided by the Government was not with reference to the goods or class or category of goods, but with reference to the industrial unit producing them and their manufacture and sale within a particular period. At more than one place in the said decision, the lear ned Judges referred to this aspect of the matter and stated that the exemption was with reference to the unit manufacturing goods and not with reference to the goods. It was emphasised that general exemption means the goods should be totally exempted fro m tax before similar exemption from the levy of Central sales tax can become available. Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exemption from tax generally. The specific circumstances and spec ific conditions referred to therein should be with reference to the transactions and not with reference to the goods. If it is subject of exemption, qua the dealer or qua the manufactured goods then exemption would not be available, but if it is with ref erence to the goods, such benefit would be available.

4. The intention of the Government in exempting goods by bringing the same under the Fifth Schedule to the Karnataka Sales Tax Act is to exempt cheap variety of footwear and the same may be identified with reference to its cost and in this case ess than Rs.30. The Legislature classified the goods in two categories-one costing more than Rs. 30 and the other less than Rs. 30. Thus if the Legislature makes classification into two categories of goods, one category attracts tax and the other does no t attract the tax, this is with reference to description of goods and not with reference to any specific conditions or circumstances. This is the essence of the matter. The learned Judge no doubt, adverted to the decision of the Supreme Court and copious ly extracted different portions to which we have made reference. After quoting the decision in Pine Chemicals case [1995] 96 STC 355 (SC), he missed to appreciate the point raised by the appellant. No doubt, it is true that the learned Judge did refer to another decision of this Court in W.P.No. 32104 of 1994, disposed of on 15th November, 1994 (reported as Shashtha Industries V. Additional Deputy Commissioner of Commercial Taxes [1995] 98 STC 219), to which one of us (Raveendran,J.), is a party. But in that decision, it is held that the exemption is not with reference to footwear in general, but the goods are exempted under specific condition or circumstances. The Supreme Court has clearly and categorically stated in Pine Chemicals' Case (1996 STC 355 , that as long as such exemption is with reference to goods, the exemption could be treated as general in nature. Hence, whatever views might have been expressed earlier by this Court will be of no benefit or use. Therefore, that view expressed, being c ontrary to the decision of the Supreme Court in Pine Chemicals' [1995] 96 STC 355 we think requires reconsideration and in our view, therefore, for the reasons putforth earlier, when the goods are classified into two categories, and the description is only with reference to the goods, we do not think that we can say Section 8(2-A) of the Act is not attracted".

In the second judgment cited above it is held:

" The idea behind sub-section (2-A) of section 8 of the Central Sales Tax Act, which we have analysed hereinbefore, is to exempt the sale/purchase of goods from the Central sales tax where the sale or purchase of such goods is exempt generally under t State sales tax law. We must give due regard and attach due meaning to the expression "generally" which occurs in the sub-section and which expression has been defined in the Explanation. If the said expression had not been there, it could probably have been possible to argue that inasmuch as the goods sold by a particular manufacturer-dealer are exempt from the State tax in his hands, they must equally be exempt under the Central Act. But sub-section (2-A) requires specifically that such exemption m ust be a general exemption and not an exemption operative in specified circumstances or under specified conditions. Can it be said that the goods sold by the dealers in this case are exempt from tax generally under the State sales tax enactment? The answ er can only be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium scale industrial unit within five years of its commencement of production and sold within the said period, i.e., in certain specified circ umstances alone. The exemption is not a general one but a conditional one. The exemption under the Government Order No. 159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale within a particular period. For the purposes of the Government order, the nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within whic h they are manufactured and sold. Can it be said in such a case that it is an instance where the sale is of goods, the sale or purchase of which is under sales tax law of the appropriate State, exempt from tax generally? Certainly not. Exemption provided by Government Order No.159, to repeat, is not with reference to goods but with reference to the industrial unit. So long as it is (i) a large or medium scale industry and (ii) it manufactures and sells goods within the five years of its going into produ ction, the sale of such goods is exempt irrespective of the nature or classification of goods. Similar goods may be manufactured by another unit but if it does not satisfy the above two requirements, the goods manufactured and sold by it would not be en titled to exemption from tax. Indeed, the goods manufactured by that very unit would not be eligible for exemption if they are manufactured after the expiry of five years from the date it goes into production and/or sells them beyond the said period. The period of exemption may also vary from unit to unit depending on the date of commencement of production in each unit. For the above reasons, we are of the opinion that the exemption granted under the aforesaid Government order does not satisfy the requi rements of Section 8(2-A)". On such arguments the learned counsel for the petitioner would pray to grant the relief prayed for.

7. In reply, the learned Government Advocate (Taxes) appearing on behalf of the respondents besides vehemently attacking the line of arguments adopted by the petitioner, would specifically argue that Section 8 is the charging Section un Sales Tax Act; that originally, it contained the rate of tax, how it is to be levied, under what circumstances, to whom etc.,; that Section 8(2-A) is referred as not conditional, but general; that it is non abstaining Section, non defining in nature and it contains the non defining clause; that it is not general in nature; that the scope of the Act cannot be extended or widened by explanation; that under specific circumstances the exemption could be granted; that Section 17, analysis provisions under Ce ntral Sales Tax Act; that third schedule is conditional.

8. Commenting on the judgments cited by the petitioner (mentioned supra) adversely in the context of the facts and circumstances of the case in hand the learned counsel would point out that there are two reliefs prayed for in the Writ P st relief being to decide that, whether it is 'general or conditional' ? and the alternate relief 'Otherwise than' the explanation.

9. The learned Government Advocate (Taxes) would exhort that the explanation cannot be widened or deemed to be a substitution nor could it over-write the legal principles.

On such arguments, the learned Government Advocate (Taxes) would ultimately pray to dismiss the Writ Petition, with costs.

10. In consideration of the facts pleaded, having regard to the materials placed on record and upon hearing the learned counsel for both, what is gathered in the case encircling the above Writ Petition is that the petitioner having failed t he Appellate Assistant Commissioner (CT) II, Chennai, resulting in his order dated 23-10-1998 made in A.P.No. CST 97/98 relating to the assessment year 1996-97 under the Central Sales Tax Act, 1956, had initiated proceedings before the Tamil Nadu Sales T ax Appellate Tribunal in Tribunal Appeal No. 164/99 and the said Tribunal having heard the said Appeal preferred by the petitioner herein along with the Cross-Objection petition filed in 690/99 by the otherside has passed its orders dated 11-05-2000, te stifying the validity of which, the petitioner has come forward to file the above Writ Petition seeking the relief extracted supra.

11. The petitioner is a merchant in dhall and pulses and he has sought for exemption on a turn over of Rs. 16,01,210/- relating to inter-state sales of dhall and assessed to tax at 8 , thereby, claiming exemption under Section 8 of th 9 and the Assessing Officer having rejected the exemption application on ground that there was no specific exemption issued by the Government under Section 8(5) of the Central Sales Tax Act for the period upto 12-09-1996.

12. Challenging the said order the petitioner had preferred an Appeal before the Appellate Assistant Commissioner and the said Authority having confirmed the order of the Assessing Officer had dismissed the Appeal , on which the petit eferred another Appeal before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench, Chennai) and the said Tribunal had also turned down the plea of the petitioner as per its order dated 11-05-2000, which is impugned herein, the petition er has come forward to file the above Writ Petition on certain grounds as brought forth in the grounds of Appeal.

13. The contention of the petitioner is that, he is entitled to the exemption under Entry 81 (e) of Part B of the Third schedule to the TNGST Act 1959 read with Section 8(2-A) of the Central Sales Tax Act, 1956.

14. It is relevant to extract Entry 81 of the third Schedule to the TNGST Act, 1959 and Section 8 (2-A) of the Central Sales Tax Act, 1956.

1.ENTRY 81 OF THE THIRD SCHEDULE TO THE TNGST ACT 1959 "The following, for sale, by any dealer whose total turnover does not exceed Rs.100 Crores in a year.

a)Pulses and grams, the following, including broken, splits husk and dust thereof:

i. Gram or gulab gram

ii.Tur or arhar

iii.Moong or green gram

iv.Masur or lentil

v.Urad or black gram

vi.Moth

vii.Lekh or Khesari.

b)Chillies, tamarind, corainder, turmeric, pepper and shikakai. c)Jaggery and gur including jaggery powder and Nattusakkarai. d)Asafoetida.

e)Jeera including black jeera (cumin seeds).

f)Palmyrah sugar candy".

2.SECTION 8 (2-A) OF THE CENTRAL SALES TAX ACT, 1956 "(2A)Notwithstanding anything contained in sub-section (1A) of section 6 or subsection (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover insofar as the turnover or any part thereof rela to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State exempt from tax generally or subject to tax generally at a rate which is lower than four percent (whether called a tax o r fee or by any other name) shall be nil, or as the case may be, shall be calculated at the lower rate."

15. No doubt, so far as the facts and circumstances of the case projected by the petitioner is concerned, it falls within the parameters of Entry 81 of the Third Schedule to the TNGST Act, 1959, but that by itself is not the criteria to ion as it is sought for by the petitioner and the power to grant such exemption from tax flows only from Section 8(2-A) of the Central Sales Tax Act, 1956, according to which, the tax payable under the Central Sales Tax Act by a dealer in so far as the t urn over relates to the sale or purchase of any goods which is under the Sales Tax Law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than 4 shall be nil or calculated at the lower rate.

16. It further comes to be known that the first respondent had disallowed the claim of exemption on ground that the exemption is conditional one and not general exemption and thereby, for not fulfilling the conditions of Section 8(2-A) o ales Tax Act, 1956, rejected the plea of the petitioner while passing the assessment order to grant exemption for the assessment year 1996-97 as per its order dated 29-05-1998. It is this order which has been confirmed by the Appellate Assistant Commissi oner, but also by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench, Chennai), rejecting the plea of the petitioner for exemption.

17. On the part of the petitioner besides citing two judgments, the petitioner's counsel would point out from the assessment order passed by the first respondent and state that only on ground that the exemption allowed under the TNGST Ac nditional one, the sales turn over was assessable to tax at 8, ascertaining the true meaning of Section 8(2-A) of the Act, which provides for exemption of Central Sales Tax on sale or purchase of goods under the first judgment cited by the petitioner re ported in PRESTON INDUSTRIES VS. COMMERCIAL TAX OFFICER, DISTRICT CIRCLE III, BANGALORE AND ANOTHER (103 STC 417), pointing out a Division Bench Judgment of the Karnataka High Court, Bangalore reported in COMMISSIONER OF SALES TAX, JAMMU AND KASHMIR A ND OTHERS VS. PINE CHEMICALS LIMITED AND OTHERS ([1995] 96 STC 355), would extract the relevant portion of the judgement that 'the exemption was with reference to the unit manufacturing goods and not with reference to the goods. It was emphasised that g eneral exemption means the goods should be totally exempted from tax before similar exemption from the levy of Central Sales Tax Act can become available. Where the exemption from taxation is conferred by conditions; that the specific circumstances and c onditions should be with reference to the transactions and not with reference to the goods. It would further be held in another Division Bench judgment cited therein reported in [1995] 98 2 STC 219, wherein, it is held that, 'the exemption is not with re ference to footwear in general, but the goods are exempted under specific condition or circumstances. The Division Bench would end up stating that,'in our view when the goods are classified into two categories and the description is only with reference t o the goods, we think that we can say Section 8(2-A) of the Act is not attracted'.

18. The second judgment which is relevant for consideration to the context of the case, wherein, considering Section 8(2-A) of the Central Sales Tax Act, the learned Judges would hold that sub-section (2-A) requires specifically that suc t be a general exemption and not an exemption operative in specified circumstances or under specified conditions.

19. It is further held therein,'that the exemption under the Government Order No.159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale w lar period. The nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within which they are manufactured and sold. So long as it is (i) a large or medium scale i ndustry and (ii) it manufactures and sells goods within the five years of its going into production, the sale of such goods is exempt irrespective of the nature or classification of goods'.

20. In application of all the parameters as provided for by law and as propounded by the prepositions settled by Courts and in consideration of the orders passed by the Authorities upto the impugned order coming to be passed by the Appellate basically grant of exemption as defined under Section 8(2-A) is discretionary in nature and it is upto the authorities to consider whether in the particular sale or purchase of goods of such kind, for which exemptions could be granted. Taking into consid eration of such factors such as the manufacture of the goods from the particular unit and whether similar exemptions have been granted to goods of such nature. The specific circumstances, and conditions with reference to the transactions, further bearing in mind the various other circumstances which would warrant such exemption to be granted by the Authorities, they must make use of the discretion in such cases, whereas, in the case in hand, the Authorities have uniformly decided not to exercise such di scretion in the sale of the items described and in the manner the transaction has taken place, taking various circumstances into consideration and in such case, if at all, the petitioner claims any right of exemption, it is open to the petitioner to esta blish as to how, he is entitled for the same.

21. The Section providing for such exemption is not mandatory, but only discretionary. Even in the case of discretionary exercise of power by the Authorities, it is upto the petitioner to establish, whether such discretion has not been p d or his case has been arbitrarily rejected, which he has failed to do. The petitioner is not even able to cite similar instances, wherein, the Assessing Officer has exempted from tax, such others, so as to plead discrimination in law. Therefore, the pet itioner in the absence of such proof cannot claim it as of right giving only interpretation to certain terms in the Section and therefore, absolutely, no legal right of the petitioner is denied in the case in hand nor any other serious irregularities or legal infirmities or inconsistencies have either crept into the order impugned or pleaded on the part of the petitioner, so as to cause interference into the same and hence, the Writ Petition only becomes liable to be dismissed and the same is dismissed accordingly. In result,

i.the above Writ Petition is without merit and the same is dismissed as such; ii.there shall be no order as to costs.

Index: Yes

Internet: Yes

paa

To

1.The Commercial Tax Officer

Royapuram Assessment Circle

Kuralagam Annexe, 5th Floor

Chennai 600 108.

2.The Appellate Assistant Commissioner

of Commercial Taxes II

Kuralagam Annexe, VIth Floor

Chennai 108.

3.The Tamil Nadu Sales Tax

Appellate Tribunal

(Additional Bench)

Chennai 104.




Copyright

Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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