2016 (4) TMI 7 - SC - VAT and Sales Tax

Benefit of exemption Notification - Scope of the proviso to the main condition - issued under Section 8(5) of the CST Act read with Rule 28A(4)(c) of the Rules - Sale of Radio Pagers manufactured by M/s Bharati Telecom Limited that was holding a valid exemption certificate under Rule 28A of the Rules - Appellant claimed central sales tax exemption of such goods in terms of notification dated 04.09.1995 by urging that such exemption was in respect of sale of goods which were manufactured by any dealer in the State of Haryana who held a valid exemption certificate - Held that - the purport and impact of Rule 28-A is with reference to eligible industrial unit, is not only clear from the definition clauses which define eligibility certificate, exemption certificate, etc. but also from sub-rule (4)(a) which stipulates that the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate for the period specified. Clause (c) to sub-rule (4)(2) postulates that goods manufactured by an eligible industrial unit availing of exemption under this Rule shall be exempt from levy of tax on all successive stage/stages of sale or purchase, subject to the dealer affecting the said purchase or sale furnishing a certificate in the form of ST-14A obtained from the assessing authority. This clause has the effect of granting exemption from levy of tax at all successive stages of sale and purchase in intra-state trade or commerce i.e. within the State of Haryana. To put it differently, it extends the benefit granted under clause (n)(ii) which relates to inter-state trade or commerce to intra-state sale or purchase. Such sales may be one or successive and tax at all stages is exempt. The exemption, therefore, is good specific, subject of course to other conditions being satisfied. Though the proviso to the said notification stipulates that the dealers should have also not charged any tax under the Central Sales Tax Act on the sale of goods manufactured by him but it should be given a greater or more significant role in interpretation of the main part of the notification, except as carving out an exception. It means and implies that the requirement of the proviso should be satisfied i.e. manufacturing dealer should not have charged the tax. The proviso would not scuttle or negate the main provision by holding that the first transaction by the eligible manufacturing dealer in the course by way of inter-state sale would be exempt but if the inter-state sale is made by trader/purchaser, the same would not be exempt. That will not be the correct understanding of the proviso. Giving over due and extended implied interpretation to the proviso in the notification will nullify and unreasonably restrict the general and plain words of the main notification. Such construction is not warranted. Therefore, the assessee shall reap the benefit of the notification in question.- Decided in favour of appellant

Issues Involved:
1. Interpretation of the notification dated 04.09.1995 under Section 8(5) of the CST Act.
2. Whether the exemption applies to goods or to the person selling it.
3. Applicability of the exemption to inter-state sales by dealers not holding an exemption certificate.
4. The role of Rule 28A(4)(c) in the context of the exemption.

Detailed Analysis:

1. Interpretation of the Notification Dated 04.09.1995:
The core issue revolves around the interpretation of the notification issued under Section 8(5) of the CST Act, which exempts certain sales from tax. The notification states: "no tax under the said Act shall be payable with effect from 1.4.1988, on the sale of goods, manufactured in the State of Haryana by any dealer holding a valid exemption certificate under Rule 28-A of the Haryana General Sales Tax Rules, 1975 during the period of exemption: provided that no tax under the said Act has been charged by such dealer on the sale of goods manufactured by him." The court examined whether this exemption applies solely to the goods or the person selling them.

2. Exemption Applicability to Goods or Person Selling:
The appellant argued that the exemption should apply to goods manufactured by any dealer holding a valid exemption certificate, regardless of subsequent sales by other dealers. The revenue contended that the exemption is limited to sales made by the manufacturer holding the exemption certificate. The High Court supported the revenue's view, stating that the notification did not exempt goods sold in inter-state trade by dealers other than those holding valid exemption certificates.

3. Applicability to Inter-State Sales by Non-Certificate Holders:
The High Court held that the exemption did not extend to inter-state sales by dealers who did not hold an exemption certificate. The appellant argued that this interpretation would negate the competitive advantage intended by the exemption. The Supreme Court analyzed Rule 28A and noted that the exemption should apply to the goods manufactured by eligible units, even if sold by other dealers in inter-state trade, provided the manufacturer did not charge tax.

4. Role of Rule 28A(4)(c):
Rule 28A(4)(c) extends the exemption to all successive stages of sale or purchase within the state, subject to certain conditions. The Supreme Court emphasized that the intention behind Rule 28A and the notification is to exempt goods manufactured by eligible units from tax at all stages, including inter-state sales. The proviso in the notification should not be interpreted to restrict the exemption solely to the manufacturer’s sales.

Conclusion:
The Supreme Court allowed the appeals, holding that the exemption applies to the goods manufactured by eligible units, even if sold by other dealers in inter-state trade. The interpretation of the notification should not unduly restrict the exemption, and the proviso should be seen as ensuring that the manufacturer does not charge tax, rather than limiting the exemption to the manufacturer’s sales. The court set aside the impugned orders and ruled in favor of the appellant, granting the benefit of the notification as interpreted.

← Previous Next →