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2018 (12) TMI 1572 - HC - VAT and Sales TaxSale to an unregistered dealer - inter-State sale of surgical ECG Electrodes to various institutions - N/N. II (1)/CTE/38/76 dated 20.12.1975 issued under Section 8(5) of the Central Sales Tax Act, 1956 - whether exemption under notification for sale to an unregistered dealer remained unaffected by the amendment to Section 8(5)(a) and Section 8(5)(b) of the CST Act, 1956 or not? Held that - Clause 145 of the Notes on Clauses issued to the Finance Bill 2002 makes it clear that the object of amending Section 8(5) of the CST Act by Finance Act 2002 is inter alia to make furnishing of form C compulsory by the dealer except in respect of exempted goods and to withdraw powers of the State Governments to waive the requirement of C form specified under Section 8(4) of the CST Act. In other words, as per the notes on clauses, Section 8(5) was amended by Finance Act with a view to withdraw the powers of the State Governments to waive the requirement of form C specified under Section 8(4), so that compliance of Section 8(4) becomes mandatory in respect of sales of goods to the registered dealer or the Government covered under Section 8(1) except when exempted. The impugned orders have been passed only on the ground that the Notification is deemed to have been withdrawn. However, there is no document on record to show that the 1975 notification granting exemption had been withdrawn with effect from 13.05.2002 and therefore sale to unregistered dealer was no longer available or not exempted. The impugned orders are set aside and the case is remitted back to the original authority to pass a speaking order after giving the petitioner an opportunity to make additional submission - petition allowed by way of remand.
Issues Involved:
1. Validity of the exemption under Notification No.II(1)/CTE/38/76 dated 20.12.1975 after the amendment to Section 8(5) of the Central Sales Tax Act, 1956. 2. Requirement for a corresponding notification to repeal or amend the existing notification post-amendment. 3. Legality of the impugned orders passed by the respondent based on the deemed withdrawal of the notification. Issue-Wise Detailed Analysis: 1. Validity of the exemption under Notification No.II(1)/CTE/38/76 dated 20.12.1975 after the amendment to Section 8(5) of the Central Sales Tax Act, 1956: The petitioner, a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 and Central Sales Tax Act, 1956, availed the benefit of Notification No.II(1)/CTE/38/76 dated 20.12.1975 for inter-State sales of surgical ECG Electrodes. The notification allowed a reduced tax rate for sales to educational institutions, hospitals, and research institutions not run for profit. However, Section 8(5) of the CST Act was amended on 11.05.2002, requiring sales to be made "to a registered dealer or the government" for exemption eligibility. Despite this amendment, the petitioner argued that the notification remained valid as it was not explicitly repealed or amended. 2. Requirement for a corresponding notification to repeal or amend the existing notification post-amendment: The respondent contended that the exemption for sales to unregistered dealers was no longer valid post-amendment. The petitioner countered that the notification continued to be published and was not withdrawn. The court noted that the legislative policy reflected in the amended Act must be given effect through a corresponding amendment or withdrawal of the notification. The absence of such an amendment or withdrawal meant the notification remained in force. 3. Legality of the impugned orders passed by the respondent based on the deemed withdrawal of the notification: The court referenced the Division Bench of the Mumbai High Court in Prism Cement Limited Vs. State of Maharashtra, which clarified that the 2002 amendment aimed to make furnishing of form 'C' mandatory and withdraw State Governments' power to waive this requirement. However, the amendment did not restrict the State Governments' power to grant exemptions under Section 8(2). The court found no evidence of a notification withdrawing the 1975 exemption. Therefore, the impugned orders, based on the assumption that the notification was deemed withdrawn, were unsustainable. Conclusion: The court set aside the impugned orders and remitted the case back to the original authority to pass a speaking order after allowing the petitioner to make additional submissions. The respondent was directed to issue a corrigendum detailing any notification repealing or withdrawing the 1975 notification. If no such notification existed, the earlier assessment would stand crystallized. The proceedings were to be completed within eight weeks, bringing closure to the issue. Disposition: The writ petitions were disposed of with the above observations, and no costs were awarded. Connected miscellaneous petitions were also closed.
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