1987 (4) TMI 82 - SC - VAT and Sales Tax

Whether the High court was justified in holding that in the absence of a notification withdrawing the earlier Notification dated 25-11-1958 made in exercise of power vested under Section 4 of the U.P. Sales Tax Act, 1948, Sales, tax would not be exigible in terms of the Notification dated 1-12-1973 issued under Section 3A of that Act? Held that - Section 3 is the charging provision; Section 3 A authorises variation of the rate of tax and Section 4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under Section 3A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4 granting exemption from liability, a subsequent notification under Section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under Section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification - both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State arid the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption continues, a specific item has now been notified under Section 3A of the Act. The appeal is allowed.

Summary

Issues:
1. Interpretation of conflicting notifications under Sections 3A and 4 of the U.P. Sales Tax Act, 1948.
2. Exemption of goods from sales tax under different notifications.
3. Effect of subsequent notifications on earlier exemptions.
4. Scope of exemption under Section 4 and imposition of tax under Section 3A.
5. Judicial interpretation of statutory provisions and notifications.

Analysis:
The Supreme Court considered the conflicting notifications issued under Sections 3A and 4 of the U.P. Sales Tax Act, 1948. The primary issue was whether the High Court was correct in holding that in the absence of a notification withdrawing the earlier exemption granted under Section 4, sales tax would not be applicable based on the subsequent notification issued under Section 3A. The Court examined the notifications of 1958 and 1973, which exempted cotton fabrics and imposed tax on beltings, respectively. It was noted that patta, treated as cotton fabric, was exempted under the 1958 notification, while beltings were taxed under the 1973 notification.

The Court analyzed the provisions of Sections 3, 3A, and 4 of the Act, emphasizing that the power to grant exemptions and vary tax rates rested with the State Government. It was clarified that when a subsequent notification under Section 3A prescribed a tax rate after an exemption notification under Section 4, it indicated the intention to withdraw the exemption. The Court rejected the argument that a separate notification to recall the exemption was necessary, stating that the intention to levy tax was clear through the subsequent notification.

A dissenting opinion by one of the judges highlighted the interpretation of notifications exempting cotton fabrics and imposing tax on beltings. Referring to previous judgments, the judge emphasized that textiles included fabrics like cotton beltings, falling within the exemption category. The judge concluded that the general exemption under Section 4 prevailed over the subsequent notification under Section 3A, maintaining that the High Court's decision was correct.

The Court referenced various precedents to support the interpretation of conflicting notifications and exemptions under the Sales Tax Act. It was established that as long as a general exemption under Section 4 continued, specific items notified under Section 3A could not be taxed. The Court emphasized strict interpretation of fiscal statutes and the need for express taxing liability. Precedents were cited to illustrate that general exemptions under Section 4 would prevail over specific notifications under Section 3A, ensuring that goods falling within exempt categories were not subjected to sales tax.

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's decision and restoring the assessment. The dissenting judge, however, dismissed the appeal, affirming the High Court's judgment. The judgments provided a comprehensive analysis of statutory provisions, notifications, and judicial interpretations to resolve the conflicting issues regarding sales tax exemptions and impositions under the U.P. Sales Tax Act, 1948.