2000 (3) TMI 1044 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of Central Sales Tax on rice sold in inter-State trade or commerce.
2. Applicability of Notification No. 324 (Annexure 6) for tax exemption.
3. Interpretation of Notification No. 323 (Annexure 5) regarding tax adjustment.
4. Relevance of Section 5C of the Rajasthan Sales Tax Act.
5. Clarification and applicability of multiple notifications issued on the same date.

Detailed Analysis:

1. Levy of Central Sales Tax on Rice Sold in Inter-State Trade or Commerce:
The primary issue was whether the dealer was liable to pay Central Sales Tax (CST) on rice sold in inter-State trade or commerce, given that tax had already been paid on paddy at the rate of 3% under the Rajasthan Sales Tax Act, 1954.

2. Applicability of Notification No. 324 (Annexure 6) for Tax Exemption:
The dealer claimed exemption from CST on rice under Notification No. 324 (Annexure 6), issued under Section 8(5) of the CST Act. This notification stated that no tax would be payable on rice if the tax on paddy was paid under the Rajasthan Sales Tax Act, excluding Section 5C.

3. Interpretation of Notification No. 323 (Annexure 5) Regarding Tax Adjustment:
The revenue argued that Notification No. 323 (Annexure 5) provided that the tax on rice should be reduced by the amount of tax levied on paddy. Therefore, the dealer's liability was adjusted accordingly, and tax was charged at 3% on the turnover of rice sold in inter-State trade.

4. Relevance of Section 5C of the Rajasthan Sales Tax Act:
Section 5C allowed for a concessional tax rate of 2% on raw materials used for manufacturing goods for inter-State trade. The dealer asserted that since they paid the full 3% tax on paddy without availing the concessional rate under Section 5C, they should be exempt from CST on rice under Notification No. 324 (Annexure 6).

5. Clarification and Applicability of Multiple Notifications Issued on the Same Date:
The court examined the three notifications issued on September 8, 1976:
- Notification No. 23 (Annexure 2): Prescribed a general tax rate of 3% on paddy, rice, and other commodities within Rajasthan.
- Notification No. 24 (Annexure 5): Directed a 3% tax rate on inter-State sales of paddy, rice, and wheat, with a provision to reduce the tax on rice by the amount already paid on paddy.
- Notification No. 25 (Annexure 6): Stated that no tax would be payable on inter-State sales of rice if the tax on paddy was paid under the general rate without availing the concessional rate under Section 5C.

Conclusion:
The court held that the dealer was entitled to the benefit of Notification No. 25 (Annexure 6), which exempted them from paying CST on rice sold in inter-State trade because they had paid the full tax on paddy at the general rate of 3%, not the concessional rate under Section 5C. The revenue authorities erred in not recognizing this entitlement, and the orders of the lower authorities were set aside. The revisions were allowed, and no costs were ordered.