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TMI Blog1992 (1) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... n derivatives and carrying on business at Bari Brahmana, Jammu Tawi. The appellants had prayed in the writ petition for quashing the order of assessment dated 20th January, 1981, made by the Assessing Authority, Incharge Sales Tax Circle, Jammu, under the Central Sales Tax Act, 1956, for the year ending 30th June, 1980 and the penalty order made on 2nd February 1981, under section 10 of the Central Sales Tax Act in respect of the same period. They had also prayed for a declaration that they are entitled to exemption from payment of tax under the Central Sales Tax Act and the Jammu and Kashmir General Sales Tax Act, 1962, on the finished goods produced by them for a period of five years commencing from 8th November, 1979, when the company went into commercial production. This main relief had been prayed for on the grounds that the appellants were exempt from payment of sales tax in terms of the Government Order No. 159-Ind. dated 26th March, 1971, as amended by Government Order No. 414-Ind. dated 25th August, 1971, read with section 8(2-A) of the Central Sales Tax Act. Their further case was that the Government represented and announced a package of incentives for large and medium s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2nd September, 1981, when their industry started commercial production. This relief was prayed again on the ground that Government Order No. 159-Ind. dated 26th March, 1971, as amended by Government Order No. 414-Ind. dated 25th August, 1971, exempted the sales of their finished product of vanaspati ghee from sales tax and also on the ground that in any case the Government is estopped from collecting tax on the principle of promissory estoppel. When this writ petition was pending an assessment order was made on 14th November, 1984, for the assessment year ending 30th September, 1982, including the period 2nd September to 30th September, 1981, which was the subject-matter of the earlier assessment order and which was questioned in Writ Petition No. 52 of 1982. The validity of this assessment order was the subject-matter of Writ Petition No. 822 of 1984 filed by the appellants. The relief prayed for and the grounds on which the relief prayed for were almost identical as that in Writ Petition No. 52 of 1982 except that on the question of promissory estoppel, more detailed facts were mentioned in this writ petition. The respondents filed their counter- affidavits contending that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om payment of tax at all stages up to January, 1992, i.e., for a period of 10 years from the date from which they have started their commercial production. In this writ petition also the appellants had relied on Government Order No. 159-Ind. dated 26th March, 1971 and Government Order No. 414-Ind. dated 25th August, 1971, as orders exempting their goods from sales tax under section 5 of the General Sales Tax Act. They have also relied on certain statements of Government as commitments to continue the incentives and exemptions from sales tax for a period of 10 years on the principle of promissory estoppel. The respondents had filed their counter-affidavit. This writ petition was also dismissed on 17th March, 1989, almost on the same grounds as in the earlier two cases. The first common question that arises for consideration in all these appeals therefore is whether Government Order No. 159-Ind. dated 26th March, 1971 and the amending Government Order No. 414-Ind. dated 25th August, 1971, are orders of exemption referable to section 5 of the General Sales Tax Act, 1962. The said Government Orders are extracted below: "GOVERNMENT OF JAMMU AND KASHMIR INDUSTRIES AND COMMERCE DEPARTME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 years of the production would be refunded to such industries. Similarly such industries will be granted exemption from the payment of any State sales tax on their finished products for a period of five years from the date the unit goes into production. By order of the Government of Jammu and Kashmir. Sd/- Secretary to Government" It may be noted at this stage itself that the amending order G.O. No. 414-Ind. dated 25th August, 1971, was also published in the Government Gazette. Section 5 of the General Sales Tax Act, 1962, empowers the State Government to grant exemption from taxation and that section reads as follows: "Exemption from taxation.-The Government may, subject to such restrictions and conditions as may be prescribed, including conditions as to licence and licence fees, by order exempt in whole or in part from payment of tax any class of dealers or any goods or class or description of goods." The Government orders were made implementing the Cabinet decision No. 101 of the same date. There is no ambiguity about the class of persons or dealers to whom the Government orders apply, no ambiguity about the class or description of goods and the transactions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 1975, under the heading "Incentives to development of industries in Jammu and Kashmir" contained incentives available for small-scale industries as also large and medium scale industries. The abovesaid two Government orders were reproduced in this booklet as the orders relating to incentives available to large and medium scale industries. Another brochure issued in March, 1978, under the heading "The State Marches Towards Industrial Development" after noting the efforts made by the Government to invite industrial enterprises from outside the State to locate the industries in Jammu and Kashmir and the response by the industrialists, listed the package of incentives under the heading "Incentives available to help you establish your beautiful industrial ventures in the Jammu and Kashmir State". Item 5 of this list related to "exemption from certain taxes". This was followed by the Finance Minister's budget speech for the year 1978-79 in which the Finance Minister stated: "We have to continue a consistent policy of support and protection to industry and attract as many new units as we can, both in order to increase the employment opportunity and to achieve better economic growth. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of production............" The second was a Notification dated 21st October, 1980, made under section 10 of the Kerala General Sales Tax Act which read as follows: "In exercise of the powers conferred by section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963) the Government of Kerala, having considered it necessary in the public interest so to do, hereby make an exemption in respect of the tax payable under the said Act on the turnover of the sale of goods produced and sold by the new industrial units under the small-scale industries for a period of five years from the date of commencement of sale of such goods by the said units subject to the conditions that the tax if any collected by such units by way of tax on their sales shall be paid over to Government and that the sales tax, if any, already paid by such units to Government shall not be refunded: Provided that such units shall produce proceedings of the General Manager, District Industries Centre, declaring the eligibility of the units for claiming exemption from sales tax: Provided further that the cumulative sales tax concession granted to a unit at any point of time within this period shall not exceed 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve years from the date they started production and that right could not have been curtailed by the second Notification dated 21st October, 1980, as the Government was bound by the rule of estoppel from taking away that right which had accrued to them under the first Government order. Only new industries set up after the 21st October, 1980, would have the restricted benefit as provided in the second notification. In Shri Bakul Oil Industries v. State of Gujarat [1987] 64 STC 304 (SC); [1987] 1 SCR 185, the effect of two exemption notifications made in exercise of the Government's power under section 49(2) of the Gujarat Sales Tax Act, 1969, was considered. Under the first Notification dated 29th April, 1970, certain exemption from payment of sales tax or purchase tax was given in respect of certain specified classes of sales and purchases described in the Schedule to that notification without any specification of period. The second Notification dated 11th November, 1970, amended the first notification by adding a new entry in the Schedule exempting a manufacturer who established a new industry from the whole of purchase tax and sales tax for a period of five years from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second notification dated 11th November, 1970, was prospective; that is to say if the industry had been commissioned subsequent to 11th November, 1970, the assessee would have been entitled to the exemption for the full period of five years. These observations are apposite only to the Notification dated 29th April, 1970, which was the one which the assessee was entitled to. In correctly understanding the ratio of this judgment we have to keep in mind that the date of commissioning of the industry was the relevant factor to the entitlement of the relief. Therefore this is an authority only for the proposition that if the exemption notification did not stipulate as to how long the exemption would remain in operation it would be open to the Government to withdraw the same at any time by a subsequent notification. But the learned Judges did not stop with that but made a further observation that if the exemption notification gave exemption from payment of tax for a particular period and an industry was commissioned after the date of the exemption order but before the exemption was withdrawn, the said industry would be entitled to the benefit of exemption for the period spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that section 5 of the General Sales Tax Act "does not speak of general order of exemption as the power to grant exemption is related to a class of dealers or goods and that too subject to restrictions and conditions as may be prescribed. So there could be no general order of exemption and hence the need for specific order in favour of the petitioner is quite obvious". On this interpretation the High Court held that the appellant has to first establish that he had set up an industry in the State which conforms to the intent of 1971 order and thereafter ask for an exemption and that on being satisfied the Government will have to make an order of exemption under section 5 of the General Sales Tax Act. We are unable to agree with this reasoning of the learned Judges on the interpretation of section 5 of the General Sales Tax Act. We are of the view that the High Court was in error in thinking that the exemption order should be specific in favour of the appellant. The exemption as can be seen from the provisions of section 5 of the General Sales Tax Act could be in respect of any class of dealers or any goods or class or description of goods. There could be an exemption to an indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 1979. The exemption is thus with reference to an industry which is to be established subsequent to the Government order. Therefore in that sense both expressions mean the same. It was then pointed out by the learned Judges of the High Court that this Government order No. 159 dated 26th March, 1971, dealt with sanction to grant four different types of facilities and incentives and three out of them are covered by different legislative enactments and, therefore, it was futile to contend that without any follow up action the said order can be treated as notification of exemption under the different statutes. We are unable to agree with this reasoning of the learned Judges also. As we have already pointed out there is no prescribed form for granting exemption under section 5 of the General Sales Tax Act. There is also no prohibition against reference to any other matter or matters in exemption orders under section 5 of the General Sales Tax Act. If the incentives related also to other benefits or rights merely because they are included in the same Government order does not make it any the less an exemption order so far as the exemption related to payment of sales tax. In fact it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents only extended the benefit of exemption to large and medium scale industries in respect of additional toll leviable "till the construction phase is completed", that is in respect of tax on construction materials and it did not relate to the grant of exemption of additional surcharge on toll tax. But it is significant to note that this notification itself stated that "the raw materials brought into the State for the purpose of manufacturing and finished products marketed outside the State by the said industries shall remain exempt from payment of additional toll for a period of ten years in respect of all the units from the date of commencement of production by them". (Emphasis* supplied). This definitely shows that there is already an exemption from payment of additional toll in respect of raw materials brought and finished product marketed and the Government order related only to an extension of exemption benefit in respect of the construction phase as well. These notifications under the Immovable Property Tax Act and Toll Tax Act rather reinforce the contention of the learned counsel for the appellants that the Government orders themselves are exemption orders under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by specify, in column 3 of the Schedule appended thereto, the point of tax on the turnover in the series of sales of goods specified in column 2 of the said Schedule". This was notified and published as S.R.O. 195 dated 31st March, 1978. The Schedule in column 2 gave the description of the goods and in column 3 point of tax. This Schedule was amended by S.R.O. 448 dated 22nd October, 1982, the relevant portion of which read as follows: "S.R.O. 448.-In exercise of the powers conferred by sub-section (7) of section 4 of the Jammu and Kashmir General Sales Tax Act, 1962 (XX of 1962), the Government hereby direct that in notification S.R.O. 195 dated 31st August, 1978, the following amendments shall be made, namely: (i) sub-item (c) in column 2, under the heading 'Goods manufactured in the State' appearing against serial No. 2 shall be numbered, as sub-item (d) and before sub-item (d) as so numbered the following shall be inserted as sub-item (c). (C) Vanaspati and edible oils. (i) When sale is made by manufacturer 2nd sale in the State, i.e., when sale is to another dealer in made by such dealer who purchases the State for resale. goods from the manufacturer. (ii) When sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment could fix any point in the series of sales for the Government have fixed the sale by the dealer, that if the second sale, as the taxable point no exception can be taken. In that sense no question of vires on the ground of lack of power would arise. Under section 4(1) of the Jammu and Kashmir General Sales Tax Act the goods are taxable only once, that is, it could be taxed only at one point of sale. We have already held that the Government Orders 159 and 414 are exemption orders and exempt the sale by the appellants of their manufactured products. The exemption would not arise unless the goods are taxable at the point of their sale. Thus the effect of exempting their sale is that the said goods manufactured by them could not be taxed at the second or subsequent sales also as that would offend section 4(1) which provides for single point levy. In cases where there are no exemption orders and the State fixed the second or subsequent sale as point of taxation the first or prior or subsequent sales are not exempted sales but are not taxable sales. Therefore S.R.O. 448 fixing the sale of vanaspati ghee by a dealer would not be applicable to vanaspati ghee manufactured by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the concession referred to related to a question of law and that the State is entitled to press that point in this Court. In these circumstances we have permitted the State to raise the question that even if the said Government orders were exemption orders under section 5 of the General Sales Tax Act the appellants are not eligible for exemption in respect of their inter-State sales under section 8(2-A) of the Central Sales Tax Act. Under section 6(1) of the Central Sales Tax Act, 1956, every dealer who sells goods in the course of inter-State trade or commerce shall be liable to pay tax under that Act. A sale of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale occasions the movement of goods from one State to another or if effected by a transfer of documents of title to the goods during their movement from one State to another. The rate of tax on sales in the course of inter-State trade or commerce is fixed under section 8 of the Central Sales Tax Act. The tax payable by any dealer under the Act shall be collected in the State from which the movement of the goods commenced by the assessment officers of that State on behalf of the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate law shall be reimbursed to the person making such sale in the course of inter-State trade. Section 8(2-A) of the Central Sales Tax Act is in the nature of an exception to these general provisions. That sub-section reads as follows: "8(2-A) Notwithstanding anything contained in sub-section (1-A) of section 6 or sub-section (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation.-For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (2) the tax is leviable on the sale or purchase of such goods at specified stages or (3) otherwise than with reference to the turnover of the goods. These conditions or limitations are therefore with reference to the transaction of sale or purchase. The main clause deals with the turnover of "a dealer" which term would include "any dealer" or "any class of dealers". The existence or otherwise of the three limitations under the explanation above referred to on claiming exemption under section 8(2-A) of the Central Sales Tax Act will, therefore, have to be tested with reference to the transaction of sale or purchase as the case may be of the dealer who claims the exemption in respect of his intrastate sale or purchase of the same goods. Thus the specified circumstances and the specified conditions referred to in the explanation should be with reference to the local turnover of the same dealer who claims exemption under section 8(2-A) of the Central Sales Tax Act. The learned Advocate-General for the State contended that the conditions that the industry should have been set up and commissioned subsequent to the Government Orders 159 and 414 above referred to and the commodity so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been granted under the Indian Electricity Act, 1910 (IX of 1910), of goods for use by it in the generation or distribution of such energy" is to be deducted. That is to say that the transactions covered by this clause are exempt from Punjab General Sales Tax Act. As may be seen from the provision the two conditions relate to the purchaser-company being a licensed undertaking supplying electrical energy to the public and the goods sold are for use by the said undertaking in generation or distribution of such energy. This Court rejected the contention of the dealer that they are descriptive of the goods and not conditions and held that they are conditions under which exemption is granted and that, therefore, section 8(2-A) of the Central Sales Tax Act was not attracted. As may be seen, the two conditions are attached to the sale of the dealer who is liable to pay sales tax. The description of the person who is to be the purchaser is not intended to identify the seller but relate to a condition of the sale being to a person of that description. The condition that the goods sold are for use by the licensed undertaking in the generation or distribution of electrical energy is again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 Ind. dated 26th March, 1971 and G.O. No. 414 Ind. dated 25th August, 1971, in respect of his turnover on inter-State sales and the benefit of exemption is available for a period of five years from the commencement of commercial production. Mr. Verma, learned counsel appearing for the State Government, then contended that the said Government orders were superseded by S.R.O. 80 dated 12th March, 1982 (hereinafter referred to as "S.R.O. 80/82") and vanaspati ghee has been made liable to tax at the rate of 8 per cent. The goods manufactured by M/s. Pine Chemicals are also made taxable as falling under the residuary item at the rate of 8 per cent. S.R.O. 80 dated 12th March, 1982, reads as follows: "In exercise of the powers conferred by sub-section (1) of section 4 of the Jammu and Kashmir General Sales Tax Act, 1962 (XX of 1962) and in supersession of all the previous notifications issued on the subject, the Government hereby direct that the tax on the taxable turnover shall be payable at the rates specified in Schedules A-I to A-XI annexed hereto: Further the Government, in exercise of the powers conferred by section 5 of the said Act and in supersession of all the previous no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 54-Ind. of 1983 dated 26th February, 1983, again an order made in pursuance of Cabinet decision which reads as follows: "CIVIL SECRETARIAT INDUSTRIES AND COMMERCE DEPARTMENT GOVERNMENT OF JAMMU AND KASHMIR Sub: Incentives for development of large/medium/ small-scale and tiny sector industries in Jammu and Kashmir. Ref: Cabinet decision No. 57 dated 5th February, 1983. Government Order No. 54-Ind. of 1983 dated 26th February, 1983. In supersession of all previous orders it is ordered that the package of incentives as per annexure to this order will now be applicable to the existing and new large/medium/small-scale and tiny industrial units. 2.. Such of the industrial units which have partly availed of the package of incentives, sanctioned under Government Order No. 391-Ind. of 1972 dated 21st June, 1972 and subsequent orders issued in amplification thereof, as well as such units which have become entitled to the availment of the earlier package of incentives, shall have the option to get benefit under the new package of incentives, sanctioned hereunder, for the remaining periods of their entitlement. 3............................ 4............................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to enjoy the exemption benefit for the total period of five years as provided in the said Government orders. The learned counsel for the appellants also contended that they are entitled to enjoy the benefit for the full period of five years both on law as also on the ground of estoppel. We have already noticed that in Bakul Oil case [1987] 64 STC 304; [1987] 1 SCR 185, this Court held that in the case of a grant of exemption without specifying any period for which the exemption is available the Government could withdraw the same at any time. Though in that case on facts no further question can arise since it was held that the dealer was not entitled to the benefit of the subsequent notification giving the exemption for a period of five years on the ground that the notification was prospective in operation and therefore not applicable to the dealer in that case, this Court made certain further observations to the effect that even in the case of exemption for a particular period it could be withdrawn at any time subject of course to the plea of estoppel. In Pournami Oil Mills case [1987] 65 STC 1 (SC); 1986 Supp. SCC 728 also the learned Judges appear to have given the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precluded by any principle of promissory estoppel from assessing their sales turnover. The assessees had challenged these assessment orders mainly on the ground that the Government orders were exemption orders and that in any case the State is precluded from levying any sales tax on the ground of promissory estoppel. The learned Judges of the High Court held, as already stated that, the said Government orders were not exemption orders but were only in the nature of declaration of intention to exempt the said industries from payment of sales tax and that the assessee had also not established any right for non-payment of tax on any ground of promissory estoppel. For holding that the assessees could not be said to have relied on any representation from the Government that they would be exempted from payment of tax the learned Judges relied on the facts that the assessees had collected sales tax or the sales tax element had gone into the fixation of price of vanaspati ghee showing thereby that the appellants had not relied on any representation from the Government that their sales are exempt from payment of tax. Since the assessment orders were regular assessment orders on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the observations of the learned Judges of the High Court that merely because in the balance sheet a reserve fund is made for payment of sales tax or on the basis of the letter of M/s. Kashmir Vanaspati giving a break up of the sale price of Rs. 238 it can be said to be conclusively established that sales tax had been collected. Any way we do not want to say anything because the matter will have to be considered by the authorities concerned in case they want to invoke section 8-B of the local Act on the basis that the said Government orders gave exemption from payment of sales tax in respect of these assessees for a period of five years as we have held. In this view we are also not going into the question as to the validity of section 8-B of the local Act and we leave open that question which was outlined before us. Thus interpretation of section 8-B of the local Act and the question of fact of collection and the liability to refund all have to wait till a demand is made by the competent authority for refund of the amounts in exercise of their power under section 8-B of the local Act. The assessees have made some deposits in pursuance of interim orders made by this Court pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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