1962 (8) TMI 35 - SC - VAT and Sales Tax

EXEMPTION INTERPRETATION OF NOTIFICATION EXEMPTING SALE OF HAND-MAD FOOTWEARS BY MANUFACTURER OR MEMBER OF HIS FAMILY

Summary

Issues Involved:
1. Validity of the sales tax assessment against the respondent.
2. Interpretation of the exemption notification dated January 28, 1956.
3. Alleged discrimination under Article 304(a) of the Constitution.

Issue-Wise Detailed Analysis:

1. Validity of the Sales Tax Assessment Against the Respondent:
The respondent, engaged in importing and selling footwear, was assessed to sales tax for the year 1956-57. The High Court of Madhya Pradesh quashed this assessment, but the appellants (State of Madhya Pradesh and its officials) challenged this decision. The Supreme Court had to determine whether the assessment was valid under the Madhya Bharat Sales Tax Act, 1950.

2. Interpretation of the Exemption Notification Dated January 28, 1956:
The respondent argued that he was exempt from paying sales tax on hand-made shoes, chappals, and other footwear sold for less than Rs. 12-8-0 per pair, based on the notification dated January 28, 1956. The Sales Tax Officer rejected this claim, stating that the exemption applied only to sales by the manufacturer or a member of his family, and the respondent was neither.

The High Court interpreted the notification to include sales by importers like the respondent, but the Supreme Court disagreed. The Supreme Court clarified that the notification specified three conditions: the footwear must be hand-made, not manufactured with power machines, and sold by the manufacturer or a member of his family. The Court emphasized that the taxable event was the sale by the importer or manufacturer within the state, and the notification could not be interpreted to include sales outside the state.

3. Alleged Discrimination Under Article 304(a) of the Constitution:
The respondent contended that if the exemption was limited to manufacturers or their family members, it would be discriminatory under Article 304(a) of the Constitution. The Supreme Court addressed this by stating that the exemption conditions applied equally to all footwear, whether manufactured within the state or imported. The exemption aimed to protect small manufacturers who produce hand-made shoes and might struggle to compete with larger manufacturers.

The Court rejected the argument that the notification created discrimination by requiring out-of-state manufacturers to travel to the state to sell their goods. It noted that the exemption related to sales within the state, and both in-state and out-of-state manufacturers had to meet the same conditions to claim the exemption.

The Supreme Court also dismissed the respondent's argument that the omission of the word "himself" from the later notification could extend the exemption to servants or agents of the manufacturer. This issue was irrelevant to the respondent, who was an importer, not a manufacturer or his agent.

The Court further held that if the exemption notification were invalid due to Article 304(a), it would not affect the validity of the main notification dated October 24, 1953, which imposed the tax. The respondent would still be liable for the tax on his total turnover, as assessed by the Sales Tax Officer.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's judgment, and dismissed the writ petition. The Court upheld the original sales tax assessment, concluding that the respondent was not entitled to the claimed exemption. The appellants were awarded costs throughout the proceedings.