1994 (2) TMI 261 - SC - VAT and Sales Tax

Whether the publishers of newspapers are entitled to the benefit of section 8(3)(b) read with section 8(1)(b) of the Central Sales Tax Act, 1956? Held that - Appeal allowed. The expression goods occurring in the words for use by him in the manufacture or processing of goods for sale in section 8(3)(b) of the Central Sales Tax Act, 1956, does take in, i.e., does not exclude, newspapers. We agree with the view taken by the Madras and Kerala High Courts. In our view, the view taken by the Karnataka High Court is unsustainable.

Issues Involved:
1. Entitlement of newspaper publishers to the benefit of section 8(3)(b) read with section 8(1)(b) of the Central Sales Tax Act, 1956.
2. Interpretation of the term "goods" in the context of the Central Sales Tax Act, particularly after the 1958 amendment.
3. Impact of the freedom of press on the taxation of newspapers.

Issue-wise Detailed Analysis:

1. Entitlement of Newspaper Publishers to Concessional Tax Rate:
The primary question was whether newspaper publishers could avail the benefit of a concessional tax rate of 4% under section 8(3)(b) read with section 8(1)(b) of the Central Sales Tax Act, 1956. The Madras and Kerala High Courts ruled in favor of the publishers, allowing the concessional rate, while the Karnataka High Court ruled against it. The publishers required various raw materials for printing newspapers and purchased these from registered dealers, often through inter-State transactions. Section 8(1) of the Act allows a concessional tax rate of 4% for inter-State sales to registered dealers, provided the goods are specified in the purchasing dealer's registration certificate and are intended for resale or use in manufacturing goods for sale.

2. Interpretation of the Term "Goods":
The term "goods" was defined in section 2(d) of the Act to exclude newspapers following the 1958 amendment. The amendment aimed to align with the Constitution (Sixth Amendment) Act, which exempted newspapers from sales tax. The Central sales tax authorities argued that since newspapers were excluded from the definition of "goods," publishers could not claim the concessional rate for raw materials used to produce newspapers. This interpretation meant that publishers would have to pay a higher tax rate of 10% on non-declared goods, unlike other manufacturers who continued to benefit from the concessional rate.

3. Impact of Freedom of Press on Taxation:
The judgment emphasized the fundamental significance of the freedom of press, which is implicit in the freedom of speech and expression under Article 19(1)(a) of the Constitution. The special treatment of newspapers, including their exemption from sales tax, is rooted in the historical and philosophical context of ensuring a free press. The judgment cited various precedents, including Express Newspaper (Private) Ltd. v. Union of India and Sakal Papers (P) Ltd. v. Union of India, highlighting the importance of an independent press in a democratic society. The court noted that the amendment to the definition of "goods" was intended to exempt newspapers from tax, not to impose a new burden on them.

Conclusion:
The Supreme Court held that the term "goods" in the context of section 8(3)(b) should not exclude newspapers. The court agreed with the Madras and Kerala High Courts, ruling that the publishers of newspapers are entitled to the benefit of section 8(3)(b) read with section 8(1)(b). The view taken by the Karnataka High Court was deemed unsustainable. Consequently, the appeals from the Karnataka High Court's decisions were allowed, and the appeal from the Kerala High Court's decision was dismissed. The court emphasized that the legislative intent behind the amendment was to exempt newspapers from tax, aligning with the broader constitutional and democratic principles of press freedom.

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