9911796707
TMI Blog1999 (12) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... State of U.P. both under the Sales Tax Act and under the Central Sales Tax Act for manufacture of notified goods. The company uses molasses purchased locally from within the State of U.P. as basic raw material besides various other chemicals. With effect from May 14, 1980 the revisionist was granted recognition certificate under sub-section (2) of section 4-B of the then U.P. Sales Tax Act, 1948 for purchase of molasses, one of the raw materials on the concessional rate of tax at the rate of 4 per cent. 3.. The present dispute relates to the assessment years 1982-83 and 1983-84. For its entire purchases of molasses from within the State of U.P. in the above assessment years the revisionist furnished declaration in form III-B. Other chemicals purchased for production of the notified goods were purchased on payment of normal sales tax. Out of the entire products for the assessment years under consideration the revisionist transferred the goods out of the State on consignment basis as mentioned below: For the assessment year 1982-83 ... Rs. 1,08,88,399.98 For the assessment year 1983-84 ... Rs. 1,29,80,803.75 4. Assessment for the year 1982-83 was completed vide order dated Febr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the revisionist referring to the provisions contained in sub-section (6) of section 4-B as contained prior to November 1, 1978 and as were amended with effect from November 1, 1978 has submitted that earlier the liability for penalty arose when the dealer sold the notified goods otherwise than in the State of U.P. or in the course of inter-State trade and commerce or in course of export out of India or has dispatched such goods to a place outside the State except as a direct result of the sale or purchase in the course of interState trade or commerce or in the course of export out of India, whereas after amendment effective from November 1, 1978 the liability for penalty arose when a dealer sold or "otherwise disposed of" the notified goods, the raw material of which he has been granted such eligibility certificate as provided under section 4-B. His submission is that expression "otherwise disposed of " substituted in the amended provision with effect from November 1, 1978 did not cover the cases of stock transfer which was earlier included in the expression, "has dispatched such goods to a place outside the State" except as a direct result of sale or purchase in the course of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards the assessment year 1983-84 it is submitted that the expression otherwise disposed of is wide enough to cover the cases of stock transfer since the stock transfer does not amount to sale within the State or sale in the course of interState trade or commerce or in the course of export out of India. It is further submitted that exemption from purchase tax or purchase on payment of purchase tax on concessional rate is permissible only in the cases where the goods are intended to be sold within the State or in the course of inter-State trade or commerce or in the course of export out of India and if the goods are not sold in the manner provided under sub-section (2) of section 4-B of the Act, it would amount to "dispose of otherwise" which would be contravention of the conditions to the recognition certificate. As to the argument that amount of penalty is relatable to the amount of tax that would have been payable under the provisions of the Act on the sale of such notified goods in the State, the submission of Sri Gupta is that this is generally with regard to tax on sale which a dealer is liable to pay on the sales of notified goods and it has nothing to do with the elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sale of such notified goods in the State and not more than three times the amount of such tax." Prior to amendment with effect from November 1, 1978, sub-section (6) of section 4-B stood as follows: "Where a dealer in whose favour a recognition certificate has been granted under sub-section (2) has sold the notified goods otherwise than in the State of Uttar Pradesh or in the course of inter-State trade or commerce or in the course of export out of India or had despatched such goods to a place outside State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India, such dealer shall be liable to pay an amount, which shall be equal to the difference between the amount of tax on the sale or purchase of such goods payable under section 3, section 3-A, section 3-AA or section 3-D, as the case may be, and the amount of the tax payable at concessional rate under this section, where the goods are purchased at the concessional rate, or which shall be equal to the tax payable under section 3, section 3-A, section 3-AA or section 3-D, as the case may be, where the goods are purchased without payment of the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of export out of India, the dealer transferred the goods out of the State on stock transfer or on consignment basis and thus contravened the terms and conditions laid down in sub-section (2) for the grant of recognition certificate. However, the submission of Sri Agrawal, learned counsel for the revisionist, is that the penalty provisions as contained in sub-section (6) of section 4-B of the Act shall be attracted only when the second condition in sub-section (6) is also fulfilled. His submission is that the goods were not sold by the assessee and transfer of the goods out of the State would not amount to "otherwise disposal of" the notified goods. His submission is that since the goods have not been sold in contravention of the terms and conditions laid down in sub-section (2) and the goods have also not been "otherwise disposed of" no penalty could be imposed upon the dealer. It may be seen that prior to amendment of sub-section (6) with effect from November 1, 1978 the provisions of sub-section (6) provided for penalty in case the dealer holding recognition certificate sold the notified goods otherwise than in the State of U.P. or in the course of inter-State trade or comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something different from 'sale'. 'Disposal' means bestowing the goods to an other person for the purpose of sale or otherwise and interpretation should be based in consonance to the spirit of the statute. The mere 'dispatch' to agent for sale by way of stock transfer may not attract tax liability but it may make the consignor liable for penalty because stock transfer is nothing but deferred sale and therefore, it is covered by the word disposal used in sub-section (6) of section 4-B of the Act. Here the goods are dispatched out of the State for ever and finally while making deduction in the stock in hand. There is nothing on record to show that goods in question sent out of the State were ever coveted to be returned back to the assessee. Rather they were sent out of the State for sale and they were actually sold there. The dispute is related to the years 1982-83 and 1983-1984. If the goods were not sent for disposal finally then certainly they would have been returned back. Since they were disposed of out of the State and the assessee might have received the sale note thereof, by now, then there is no room to argue that the goods were not sent for final disposal. Thus the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealing with the provisions of sub-section (6) of section 4-B of the Act as it stood after the amendment from November 1, 1978 held that "in the instant case, the recognition certificates were obtained by the petitioners for purchasing paddy which, already said, was a notified goods. The conditions imposed for granting recognition certificate have already been narrated by us in the beginning of this judgment. The petitioners committed a breach of the conditions by sending goods on consignment basis, as a result of which the proceedings under sub-section (6) of section 4-B were liable to be taken against the petitioners. The petitioners admitted that they dispatched the goods for sale outside the State on consignment basis through commission agents. This amounted to breach of the condition, of the recognition certificate. In that view of the matter, sub-section (5) of section 4-B was attracted and the proceedings under sub-section (6) of section 4-B in that event are justified". 16.. In both the decisions referred by the High Court, viz., in the case of Commissioner of Sales Tax v. Uma Shankar Oil Mills 1983 UPTC 1097 and J.S. Rice Mill v. State of Uttar Pradesh 1987 UPTC 265 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods. These have been used only as an aid in the manufacture of the goods by the assessee. Consumption must be in the manufacture as raw material or of other components which go into the making of the end-product to come within the mischief of the section. Cashew shells do not tend to the making of the end-product. Goods used for ancillary purposes like fuel in the process of the manufacture, do not fall within section 5A(1)(a) of the Act." 18.. In para 12 of the judgment (page 324 of STC) the honourable Supreme Court has held that ".................the question, therefore, is whether there is any disposal of these goods in any manner otherwise than by way of sale within the State. Disposal means transfer of title in the goods to any other person. The expression 'dispose' means to transfer or alienate. It was formerly an essential word in any conveyance of land. See Jowitt 'The Dictionary of English Law' and also Webster Comprehensive Dictionary (International Edition)-Vol. 1, page 368. Clause (b) of the section requires that the goods in question should be transferred to some person otherwise than by way of sale. In this case, there was no evidence of any transfer at all, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pret the following provisions of section 5A of the Kerala General Sales Tax Act, 1963: "5A. Levy of purchase tax.-(1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under section 5, and either- (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State; or (c) .......................................................................... shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in section 5." Haryana High Court in the case of Goodyear India Limited v. State of Haryana reported in [1983] 53 STC 163. The facts of that case were that the appellant Goodyear India Ltd., was engaged at the relevant time in the manufacture and sale of automobile tyres and tubes. It manufactured the said tyres and tubes at its factory at Ballabhgarh in the district of Faridabad in the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere despatch of goods by a dealer to himself would connote disposal of such goods by him". The High Court referred to the dictionary meaning of "disposes of" in Webster's Third New International Dictionary. Reference was also made to 27 Corpus Juris Secundum p. 345, and ultimately it came to the conclusion that the phrase "disposes of" or "disposal" cannot be possibly equated with the mere despatch of goods by a dealer to himself. Similarly the expression "disposes of otherwise than by way of sale" came up for interpretation before the Punjab and Haryana High Court in the case of Bata India Limited v. State of Haryana reported in [1983] 54 STC 226. The High Court held that "mere despatch of 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' is synonymous with or is in any case included within the 'ambit of the consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce' ". The High Court further held that mere manufacture and consignment of goods outside the State to himself by a manufacturer is not a sale or disposal thereof and an attempt to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on the occurring of the event of sale of goods or their disposal otherwise which is synonymous to transfer of title in the goods in any manner whatsoever. So long as the dealer retains the title of the goods, the event of "otherwise disposal" of the notified goods manufactured by the dealer otherwise than by way of sale in the State of U.P. or in the course of inter-State trade or commerce or in the course of export out of India would not arise. It may be seen that in sub-section (6) as it stood prior to the 1978 amendment the expression used was "had despatched such goods to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India" and such expression was wide enough to cover the mere dispatch of the notified goods to the depot of the dealer situated outside of U.P. After amendment in sub-section (6) with effect from November 1, 1978 the above expression was deleted and in its place the expression substituted was "sales or otherwise disposes of goods". It may be noted here that in the decisions referred to by this Court in Commissioner of Sales Tax v. Uma Shankar Oil Mills 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold after transfer of the stock. Therefore, the Tribunal ought to have recorded as a finding of fact on the material before it as to when the goods were actually sold after their transfer by way of stock transfer. In view of the aforesaid discussions the finding of the Tribunal as reproduced above cannot be sustained. 23.. The next argument of Sri Bharatji Agrawal is that in the instant cases the revisionist was holding eligibility certificate with effect from December 2, 1982 and, therefore, there was no liability for payment of tax on sales. His submission is that under sub-section (6) the amount of penalty is relatable to amount of tax that would have been payable under the provisions of the Act on sale of such notified goods. His submission is that even though there was no liability for payment of tax on the sale of goods, no amount of penalty could have been imposed. Sri Gupta on the other hand has submitted that so far as the assessment year 1982-83 is concerned the benefit of the eligibility certificate was deferred till April 1, 1983. The dealer had realised the tax from the customers and had also deposited it. Therefore, so far as assessment year 1982-83 is concerned, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of Rs. 4 per cent against the normal tax rate of Rs. 12 per cent and therefore, he was bound to follow the conditions imposed under section 4-B. The Tribunal took the view that the difference of purchase tax so saved by the assessee while sending the goods out of State on stock transfer or on consignment is to be paid in the form of penalty under section 4-B(6) of the Act. In support of this ground the Tribunal placed reliance upon a decision of this Court in Saraswati Rice Mill v. Commissioner of Sales Tax, U.P. [1991] 82 STC 402; 1989 UPTC 1295. The above grounds taken by the Tribunal while repelling the contention on behalf of the dealer shall have to be considered in the light of the arguments advanced by the learned counsel for the parties. 25.. At the outset it may be pointed out that the Tribunal has wrongly placed reliance rendered in Saraswati Rice Mill v. Commissioner of Sales Tax [1991] 82 STC 402 (All.); 1989 UPTC 1295. The controversy in that case was not identical to the controversy in hand. That was a case where the amount of penalty imposed by the Tribunal was equivalent to the tax payable on the purchase. Later on the assessing authority corrected the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x' used in section 28-A(1) of the Act. Use of the expression appears to be unhappy inasmuch as there is no provision in the Act which makes any particular goods as such liable to tax under the Act. A perusal of sections 3-A to 3-D of the Act shows that it is a dealer who has been made liable to pay tax on the turnover of his sales or purchases of goods. Section 4 of the Act makes a provision for exempting, in certain circumstances, the turnover of sale and purchase of goods from payment of tax. It, inter alia, provides that sale or purchase of any goods by All India Spinners' Association or Gandhi Ashram, Meerut, and their branches, or by such other persons or class of persons as the State Government may, by notification in the Gazette, shall be exempt. It thus appears that the Act contemplates that even though the turnover of sale or purchase of goods may be taxable in the hands of a particular dealer, the same goods may not be so taxable in the hands of another dealer. In the circumstances, 'any goods liable to tax under the Act' cannot be identified as any particular goods in respect whereof tax can be levied under the U.P. Sales Tax Act. In the circumstances the said provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 54 (All.); 1983 UPTC 198 also the division Bench has held that"It thus appears that one of the necessary conditions for applicability of section 28-A(1) and for obliging the persons importing goods to obtain requisite declaration is that such person should be importing into or otherwise receiving in the State goods which are intended to be sold inside the State in such circumstances that the turnover thereof can be taxed in accordance with the provisions of the Act. This conclusion is strengthened by the provision made in the section to the effect that for its applicability the concerned goods should not only be liable to tax under the Act but they should also have been imported by such person in connection with his business." Liability for payment of trade tax on the goods sold in the State arises only in the contingency envisaged under the Act. If under certain contingencies on the sale of the goods no tax is payable by the dealer and the amount of penalty is relatable to the amount of tax which would otherwise have been payable by the dealer but for enjoying the benefit of eligibility certificate no amount of penalty can be imposed. 28.. The question can be gone into from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granting eligibility certificate was issued at a much later date. Reliance is placed on the case of Subhash Chandra Ghosh v. State of Orissa [1970] 26 STC 211 (Orissa) rendered by a division Bench of the Orissa High Court. There cannot be a dispute that if a recognition certificate or eligibility certificate is granted on a date much after the date of the application, the benefit of such certificate or exemption granted shall be effective with effect from the date from which the certificate was granted and not with effect from the date of its notification in the official gazette. The argument of Sri Agrawal is however, partially correct so far as the assessment year 1982-83 is concerned. It is not disputed that even though the eligibility certificate was effective with effect from December 2, 1982 its benefit was deferred till April 1, 1983. Therefore, if any sale of the notified goods is made in contravention of the terms and conditions of the recognition certificate as provided in sub-section (2) of section 4-B, the dealer shall make himself liable to penal provision. In the instant cases since the benefit of the eligibility certificate though granted with effect from December 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
