2017 (5) TMI 927 - HC - VAT and Sales Tax

Interpretation of statute - applicability of principle of estoppel - whether the Sales of leather goods are admissible for deduction as resales u/s 8(2) of the Bombay Sales Tax Act, 1959, even though corresponding purchases of these goods were covered by Entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant s vendors? - Held that - Held that - the Tribunal found that the Notification which was issued, referred to entry 39 of Schedule A appended to the Bombay Act w.e.f. 11th August, 1988. The Government of Maharashtra notified the products of the village industries to be the notified products for the purpose of entry 39. This Notification itself is reproduced at page 119 of the paper book. There are as many as 23 kinds of products of the industries which are found in the Notification. The Tribunal concluded from the same that these products are taxable in nature. To our mind, the Tribunal rightly understood the controversy before it. To our mind, and further, the Tribunal rightly noted that there are conditions specified in Schedule A 39 and which, upon fulfillment, would make the sale and purchase of these products free from tax. The Tribunal also rightly referred to the object, namely, to promote the products of village industries as are defined by KVIC Act. - There are specific conditions when such products, as referred above, are sold by a dealer who is certified by the Commissioner. Such dealer should not be holding a trade mark or a patent. Now, a trade mark is referable to the goods sold and patent is referable to the method or process of manufacturing of the goods sold. Thus understood, we have no hesitation in concluding that the products, if sold by such dealers, would be tax free. The appellant before it is entitled to resales in respect of its purchases effected from the KVIC dealers for the goods which are leather goods falling in entries C II 42 and C II 81, both at the time of purchase and sale. They are Schedule C goods when purchased and sold, and therefore, entitled to resale. We do not see how such conclusion can raise a question of law. When the Tribunal decided this matter and as elaborately as it did, how does any question of an interpretation of the provisions of law has not been clarified to us. The question as framed for our consideration and opinion is that, whether the sales of leather goods are admissible for deduction as resales under Section 8(ii) of the Bombay Sales Tax Act, 1959 even though corresponding purchases of these goods were covered by entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant s vendors - Once we have referred to the Schedule entry ourselves, and independent of the Tribunal s conclusions analyzed it, we do not think that it was incorrectly interpreted or misconstrued or misinterpreted at all. Therefore, there was no occasion for the Tribunal to refer these questions. Making distinction between leviability and nonleviability, the Tribunal had come to the conclusion that even after addition of explanation to Section 8, that has not made any difference. We think that the insertion of the Explanation has led to the reference to this court. On facts, we find that all conditions of deduction for resale have been fulfilled. However, the Explanation added later is the focal point. The Explanation that was introduced to Section 8 came to be inserted by Maharashtra Act No. XVII of 1999 and the argument before the Tribunal on the Reference Application was that it shall be deemed to have always been inserted. Reference Application was decided unmindful of the fact that mere insertion of the Explanation does not render the conclusions recorded earlier perverse or vitiated in law. The second round on the same material was, therefore, unnecessary. Principle of estoppel - Held that - There is no question of any estoppel in the sense we are construing and interpreting a statutory provision and Schedule entry as forming part of the statute itself. In such circumstances, we do not see how a question about applicability of the principle of estoppel, as invoked by the Revenue in the peculiar facts and circumstances, would arise at all. Appeal dismissed - decided in favor of dealer.

Summary

Issues Involved:
1. Interpretation of Section 8(2) of the Bombay Sales Tax Act, 1959 regarding the admissibility of sales of leather goods for deduction as resales.
2. Applicability of the principle of estoppel to conditions introduced in Entry A-39 w.e.f. 11.6.1988 for the allowance of exemption from tax.

Issue-wise Detailed Analysis:

1. Interpretation of Section 8(2) of the Bombay Sales Tax Act, 1959:

The court examined whether sales of leather goods could be deducted as resales under Section 8(2) of the Bombay Sales Tax Act, 1959, despite the goods being covered by Entry 39(a) of Schedule A and necessary certification being availed by the appellant's vendors. The Tribunal had allowed the appeal of the original appellant, a reseller in footwear, by setting aside the first appellate authority's order and permitting the resale of goods purchased from certified cobblers' societies. The Tribunal's decision was based on the fact that the goods were purchased from registered dealers holding exemption certificates under Entry 39(a) and were resold in the same form, thus qualifying for resale deduction under Section 8(2). The Tribunal also noted that the goods were exempt from tax at the time of purchase and sale, fulfilling the requirements for resale deduction.

The Revenue argued that the original appellant was not certified by the Commissioner of Sales Tax and thus not entitled to exemption under Entry 39(a). They contended that the goods must fall under the same entry at the time of purchase and sale for resale deduction to be allowed, which was not the case here. The Revenue also emphasized that if no tax was paid on the first sale, subsequent sales could not be claimed as resale merely based on a certificate under Section 12A.

The court upheld the Tribunal's interpretation, stating that the products of village industries, when sold by certified dealers, were exempt from tax. The court found that the Tribunal correctly understood that the exemption was dealer-specific and not goods-specific. The court also noted that the retrospective amendment to Section 8 did not affect the Tribunal's decision, as the goods were exempt from tax at the time of purchase and sale.

2. Applicability of the Principle of Estoppel:

The court examined whether the principle of estoppel applied to the conditions introduced in Entry A-39 w.e.f. 11.6.1988 for the allowance of exemption from tax. The Revenue argued that the Tribunal erred in using old circulars, which were redundant after the amendment, and that the Tribunal failed to consider that the original appellant's claim was based on resale deduction under Section 8(2) and not exemption under Entry 39(a).

The court found that the Tribunal correctly concluded that the original appellant's claim for deduction was based on Section 8(2) and not exemption under Entry 39(a). The court noted that the amendment to Entry 39(a) restricted the exemption to certified dealers, but this did not affect the resale deduction under Section 8(2). The court also observed that the principle of estoppel did not apply, as the statutory provisions and schedule entries were clear and unambiguous.

Conclusion:

The court concluded that the Tribunal's interpretation of Section 8(2) and Entry 39(a) was correct and that the original appellant was entitled to resale deduction for the goods purchased from certified cobblers' societies. The court also held that the principle of estoppel did not apply to the conditions introduced in Entry 39(a) w.e.f. 11.6.1988. Thus, the questions of law were answered in favor of the dealer and against the Revenue.