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TMI Blog1990 (10) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... S.K. Bagga, S.C. Patel and S.K. Gambhir, Advocates, with him), for the appellants. -------------------------------------------------- The judgment of the Court was delivered by S. RANGANATHAN, J.- All these appeals and writ petitions raise a common question regarding the interpretation of section 9(1) of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as "the Act"). Counsel state that the facts in all these appeals are identical and that the only facts necessary (or, atleast, on record before us), on the basis of which the issue before us is to be decided, are these: Each of the appellants/ petitioners (hereinafter referred to compendiously as "the assessees"), is a registered dealer in the State of Haryana. He purchased certain raw materials in the State without paying tax thereon, in view of the provision contained in section 24 of the Act. He then manufactured certain goods in the State with the aid of said raw materials. He then sold the manufactured goods to dealers who, in turn, exported those goods out of India. On these facts, it is claimed, the assessee is not liable to pay the purchase tax on the raw materials imposed under section 9(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gum, scientific goods, utensils and metal handicrafts shall not form part of the turnover of a dealer for the period he is entitled to purchase the goods on the authority of his certificate of registration without payment of sales tax under section 24, provided these are used exclusively for the specified purposes." III. Section 6 (a) Section 6, the charging section, read as under: "6. Incidence of taxation.-(1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales and purchases effected after the coming into force of this Act: Provided that this section shall not apply to a dealer who deals exclusively in goods specified in Schedule B**. (2) Every dealer to whom sub-section (1) does not apply shall, subject to other provisions of this Act, be liable to pay tax under this Act on the expiry of thirty days after the date on which his gross turnover during any year first exceeds the taxable quantum: Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be notified under section 15." (b) Act 44 of 1976 made two amendments to this sub-section. The first amendment was to insert, after the opening words, "where a dealer", the words "liable to pay tax under this Act". The second amendment, which is crucial for the purposes of this case, is the addition at the end of sub- clause (ii) of clause (a) above, the words: "within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956." These amendments were effective from April 1, 1976. (c) Act 11 of 1979 redrafted the above provision, excluded milk from clause (b) and added clause (c). After this amendment, effective from April 9, 1979, the provision read thus: "9(1). Where a dealer liable to pay tax under this Act,- (a) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of goods specified in Schedule B; or (b) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of sub- section (1) of section 5 of the Central Sales Tax Act, 1956; or" The proviso added was in the following terms: " Provided that no tax shall be leviable under this section on scientific goods and guar gum, manufactured in the State and sold by him in the course of export outside the territory of India within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act, 1956." (e) Act 11 of 1984 effected no material change. 'Me exclusion of milk was decided to be dropped and so all that this amendment did was to roll both clauses (b) and (bb) into one clause, reading thus: "4. Amendment of section 9 of Haryana Act 20 of 1973.-For clauses (b) and (bb) of sub-section (1) of section 9 of the principal Act, the following clause shall be substituted, namely: '(b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing those liable to tax at the first stage of sale under section 17 or section 18), specified in his certificate of registration for use by him in the manufacture, in the State, of any goods other than those specified in Schedule B, for the purpose of- (i) sale in the State; or (ii) sale in the course of inter-State trade or commerce; or (iii) sale in the course of export out of the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956. " (b) Act 3 of 1983 renumbered the above as section 24(1) and added, with effect from March 31, 1983, a proviso each, to clauses (a) and (b). These provisoes read thus. The proviso to clause (a) was: " Provided that a dealer registered under this Act, shall also be entitled to purchase barley, without payment of sales tax on the authority of his certificate of registration, on furnishing to the selling registered dealer, a declaration referred to above, for sale by him in the course of export outside the territory of India within the meaning of section 5 of the Central Sales Tax Act, 1956." and that to clause (b) read: " Provided that a dealer registered under this Act, shall also be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from December 31, 1987, omitted the words "sub-section (1) of" in section 24(1)(b)(iii). It also omitted the proviso to the said clause. VI. Section 27 Section 27, which defines "taxable turnover" is not quite relevant for our purposes. We should only like to mention that the provisoes to section 27(a)(iv), section 27(b)(iii) and section 27(c)(ii) inserted by Act 44 of 1976 with effect from April 1, 1976, all make specific reference to sales "in the course of export out of the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956". The provisoes to section 27(a)(iv), in particular, make a clear contrast between sales failing under sub-section (3) and those falling under sub-section (1) of section 5 of the Central Sales Tax Act. VII. Validation provision Act 1 of 1990 effected no amendments to section 24 or 27. But section 14 of this Act (which is a validation section on the same lines as those contained in the earlier amendment Acts) has been referred to in the course of the arguments before us and can be usefully extracted. It reads "14. Notwithstanding any judgment, decree or order of any court or tribunal or other au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as that the appellant sold goods to the State Trading Corporation (S.T.C.) but, to the knowledge of both these parties, the goods were to be exported to fulfil contracts entered into by the S.T.C. with foreign buyers, the terms of such contracts between the foreign buyers and the S.T.C. being referred to in, and part of, the appellant's contracts with the S.T.C. The appellant claimed its sales to be "sales in the course of export" and hence exempt under section 5 of the Central Sales Tax Act. This Court, Khanna, J., dissenting, held that the sales of the appellant were not exempt under section 5(1). The appellant had agreed to sell his goods only to the S.T.C and there was no privity of contract between him and the foreign buyer. The court held that the movement of goods outside India was occasioned by the contract between the S.T.C. and the foreign buyer and not by that between the appellant and the S.T.C. The decision caused several practical difficulties and called for an amendment of the Central Sales Tax Act. The object and reasons of the Central Sales Tax (Amendment) Act (103 of 1976), may be usefully extracted. It said: "According to section 5(1) of the Central Sales Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with, the agreement or order for or in relation to such export." Now, coming to the facts of the present case, the assessees purchased raw materials inside the State of Haryana but paid no tax thereon, as they were registered dealers and furnished the declaration forms prescribed under section 24. Their sales of the manufactured goods are to persons who have exported the goods outside India and so, they claim, they are not liable to pay the tax sought to be imposed on them under section 9(1). The department, however, has denied the relief on the short ground that the sales effected by the appellants are not sales in the course of export outside India within the meaning of section 5(1) of the Central Sales Tax Act. They are only "penultimate" sales; they may be deemed to be "export sales" because of the fiction created under section 5(3) of the Central Sales Tax Act but that is not enough to escape from the clutches of the charge in section 9(1). Shri Rajararn Agarwal, learned counsel for the assessees, contended that the effect of section 5(3) of the Central Sales Tax Act is to expand the scope of section 5(1) and include within the concept of sales in the course of export outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases covered by section 5(3) but not section 5(1) of the Central Sales Tax Act would violate article 286 of the Constitution, was misplaced and overlooks the vital circumstance that what section 9(1)(b) taxes are the purchases of raw materials and not the manufactured goods that were eventually exported. Alternatively, he submits, section 9(1)(b) has been declared unconstitutional by this Court in Goodyear case [1990] 76 STC 71 and, therefore, the assessees can seek no implied exemption from its language. If section 9 is left out, he says, the language of section 6 (as amended) which brings to charge all purchases and sales in the State would be attracted and so the impugned taxation of the purchases would be in order. For these reasons, he submits that the writ petitions were rightly rejected by the High Court and that the appeals as well as writ petitions before us deserve to be dismissed. It will be convenient first to dispose of the contention dealt with by the High Court. For the purposes of this argument we shall assume that the sales made by the assessees were "penultimate sales" which would fall within the purview of section 5(3) of the Central Sales Tax Act. The argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act, 1956". Thus the statute, within the same provision, has made a distinction between a sale in the course of export within the meaning of section 5 and such a sale within the meaning of section 5(3). (3) When we turn to section 27 next, we find two provisoes introduced in section 27(1)(iv)(a) by Act 44 of 1976, the same amending Act that introduced the extra words at the end of section 9(1)(a)(ii). These provisoes make a marked contrast between sales falling under sub-section (1) and those falling under sub-section (3) of section 5 of the Central Sales Tax Act. (4) As will be seen from the extract of the legislative amendments set out earlier the Legislature has subsequently deleted the reference to sub- section (3) of section 5 in section 9(1)(b). However, this amendment, which has been made both in section 9 and in section 24 by Act 1 of 1988 has not been given any retrospective effect. Considering that the legislation is replete with instances of retrospective effect (in some cases even to as early a date as September 7, 1955), the failure or omission to give any retrospective effect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must fall in one of three categories. We are unable to conceive of a fourth category of sale, which could be neither a local sale nor an inter-State sale nor an export sale. Shri Gupta, on behalf of the State, contended that the goods might have been directly moved by the assessee to a port for shipment abroad in pursuance of an export contract entered into by the dealer who purchased from the assessee. Even in such a case if the transport of goods from the assessees' place of business to the port is in pursuance of the terms of the sale, the movement of the goods would be occasioned by the sale made by the assessee and would be an inter-State sale. If, on the other hand, the goods were sent to the port by the assessee subsequent to and independent of the sale made by him, then, for the purpose of that transport, the assessee would only be an agent of the purchaser and the movement of the goods in pursuance of the contract of sale entered into by the purchaser and would be one in the course of export within the meaning of section 5(1) of the Central Sales Tax Act. As pointed out by Shri Agarwal, even in Mod. Serajuddin's case [1975] 36 STC 136 (SC), although the exemption claimed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase of the raw materials if the manufactured goods are disposed of in the State itself otherwise than by way of sale; and (2) that there will be no tax on the purchase of the raw materials if the manufactured goods are despatched from the State consequent on a (i) local sale; (ii) inter-State sale; or (iii) a sale in the course of export. It seems that these two aspects of section 9(1)(b) survive even after the judgment of this Court in Goodyear case [1990] 76 STC 71. Shri Gupta, however, drew our attention to certain sentences in the headnote as well as the body of the above decision where certain wider expressions have been used, such as: "section 9(1)(b) was ultra vires" "sections 9(1) and 24(3) are constitutionally invalid" "section 9(1)(c) is ultra vires" and....... the latter part of section 9(1)(b) is ultra vires and void". As pointed out above, section 9(1) is both a charging and exempting section. Even after the decision the charge under a part of clause (b) still survives and so also the exemption provided in the latter part of clause (b). But let us examine what the position would be if we hold, as contended by Shri Gupta, that the effect of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich tax is leviable under this Act". There can be no dispute that a tax is leviable under the Act on the goods in question when they are sold by a dealer and, indeed, the assessees would have had to pay tax on the sales made to-the purchases effected by-them but for a claim for exemption under section 24. The definition of "turnover" clearly postulates that goods are either to be taxed at the point of purchase or sale and the same transaction cannot be taxed as a sale in the hands of the dealer who sells to the assessees and as a purchase in the hands of the assessees. The only exception was the limited class of goods covered by section 9 but even this exception has been left out with complete retrospective effect. We do not, therefore, think that Shri Gupta is right in arguing that the purchase tax on the raw materials can be upheld under section 6 itself even if the charge under section 9 fails. Explanation (6), inserted in section 2(p) read with the provisoes inserted in section 24(1) with effect from March 31, 1983 and their amendment in 1986 have also a bearing in the cases of raw materials purchased for manufacture of guar gum and utensils where the purchase is exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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