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TMI Blog2014 (2) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12 of 1974 by which amendment under Section 3 of the 1939 Act alcohol become taxable w.e.f. 2.5.1974. Similarly by U.P. Act No. 8 of 1975 payment of tax under the 1948 Act on alcohol was exempted under section 4 of the 1948 Act. By virtue of amendments made in Section 4 by U.P. Act No. 8 of 1975, the tax on alcohol was exempted under section 4 w.e.f. 2.5.1974. The exemption from the Central Sales Tax Act under the repealed provision was in respect of 'sales or purchases ........ of any goods by a dealer'. The section granted exemption to any goods of a dealer when such goods were 'exempt from tax generally .......'. In order to take advantage of this Section 8(2A), a dealer will have to establish that sale or purchase of the goods in question was exempt from tax generally. If it was a special exemption granted to him because his undertaking was a new industrial undertaking or for any other reason for a limited period, then the exemption will not be of general nature and he will not be entitled to get the benefit of this sub-section. There was an Explanation to the old sub-section (2A) of Section 8, which made it clear that if the exemption was only in specified circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Central Sales Tax Act and deposited a sum of ₹ 59024/-. The Assessing Authority accepted the book version and created a tax liability of ₹ 65,210/-. The assessee filed an appeal before the Assistant Commissioner (Judicial) Sales Tax. The assessee before the appellate authority claimed that denatured spirit and rectified spirit are alcohol which is exempted under section 4 of the U.P. Sales Tax Act, 1948 (hereinafter referred to as '1948 Act') hence, no tax can be imposed. It was submitted before the appellate authority that since tax is exempted under the 1948 Act, there is no liability to pay any central sales tax. The appeal was dismissed on 18.7.1980 against which the assessee filed a second appeal before the Tribunal. Before the Tribunal, the assessee submitted that by virtue of U.P. Act No. 8 of 1975 Section 4 of the 1948 Act has been amended and w.e.f. 2.5.1974 rectified spirit and denatured spirit were unconditionally exempted from tax hence, there was no liability to pay central sales tax also. The Tribunal relying on its earlier judgment in M/s Swaroop Vegetable Products Industries Ltd. accepted the submission of the assessee and deleted the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1935 enacted an Act namely; the United Provinces Sales of (Motor Spirit, Diesel Oil and Alcohol) Taxation Act, 1939 to provide for the levy of a tax on the retail sales of motor spirit. The provincial Legislature again enacted the U.P. Sales Tax Act, 1948 (U.P. Trade Tax Act, 1948) to provide for levy of a tax on the sales or purchase of goods in Uttar Pradesh. Both the aforesaid enactments were enacted by the provincial Legislature exercising the legislative powers given in Section 100 of the Government of India Act, 1935 read with Entry 48-A of List II of the Seventh Schedule to the Government of India Act, 1935. List II i.e. Provincial Legislative List contained Entry 48 which is to the following effect: 48. Taxes on the sale of goods and on advertisements. Section 2 of the 1948 Act contains definition of various terms. Section 3 provides for Liability to tax under the Act. Section 3-A provides for Rate of tax. Section 4 provides for exemption from tax. Section 3 was a charging Section of 1939 Act. By U.P. Act No. 12 of 1974, amendments were made in 1939 Act. The definition of 'alcohol' was inserted by Section 2(aaaa) which was to the following effect: (aaaa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol as defined under the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939, at such point and at such rate not exceeding twenty-six per cent, as the State Government may, by notification, declare: Provided that no tax shall be levied on any goods under this clause if tax is payable on purchase or sale of such goods, under any other Uttar Pradesh Act for the time being in force; By Section 10 of the same U.P. Amendment Act 31 of 1995 in Section 4 in clause (a) following amendment was made: 10 Amendment of Section 4.- In Section 4 of the principal Act, - (a) in clause (a), the words and figures motor spirit, diesel oil or alcohol as defined in the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 shall be omitted and be deemed to have always been omitted; By U.P. Act No. 11 of 1997 further amendments were made in 1948 Act. By section 3 of the Amendment Act, amendments were made in Section 3A of the 1948 Act which are to the following effect: 3. Amendment of Section 3-A.- In Section 3-A of the principal Act, in sub-section (1), for clause (c),the following clause shall be substituted and be deemed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notwithstanding anything contained in sub- section (1A) 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 or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods. Having noted the relevant statutory provisions, now we proceed to note and consider the relevant submissions of learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that during the relevant period tax on alcohol being exempt under the 1948 Act, Section 8(2-A) was clearly attracted and the central sales tax on the sale by the assessee was exempt as has rightly been held by the Tribunal. Sri Agarwal submits that the judgment of learned Single Judge in Oudh Sugar Mills (supra) has correctly interpreted Section 8 (2-A) which judgment and other judgements following the said judgment of this Court need to be approved. He submits that constitutional inhibition or statutory restriction under the legislative entry is an important fact for determining whether a law is a sales tax law or not under the 1956 Act. 1939 Act is not a sales tax law of the State of U.P. insofar as it provides for levy of purchase tax on the purchase of alcohol and sales of rectified spirit and denatured spirit are exempt from tax generally under section 4(a) of the 1948 Act hence intra-State sale of goods is exempted generally and dealer/manufacturer/ respondent is not liable for payment of any tax. The general exemption under section 4(a)of 1948 Act in respect of sales of alcohol remained in operation till 27.9.1994 i.e. during the relevant assessment year. The amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on alcohol generally. As noted above the provisions of 1939 Act were amended by U.P. Act No. 12 of 1974 by which amendment under Section 3 of the 1939 Act alcohol become taxable w.e.f. 2.5.1974. Similarly by U.P. Act No. 8 of 1975 payment of tax under the 1948 Act on alcohol was exempted under section 4 of the 1948 Act. By virtue of amendments made in Section 4 by U.P. Act No. 8 of 1975, the tax on alcohol was exempted under section 4 w.e.f. 2.5.1974. The thrust of the submission of Sri Bharat Ji Agarwal is that 1939 Act is not 'sales tax law' of the appropriate state hence, taxability under the 1939 Act on alcohol shall not detract the benefit of exemption under the 1948 Act and consequently, the central sales tax Act shall also be exempted under section 8 (2-A) of the 1956 Act. Thus, it has to be examined as to whether the 1939 Act is a 'sales tax law' within the meaning of Section 2(i) of 1956 Act or not. Sri Bharat Ji Agarwal submits that 1939 Act has been enacted in reference to Entry 48 of List II of 1935 Act, which only provided tax on the sale of goods and since 1939 Act only provided tax at the point of first purchase hence, 1939 Act cannot be treated to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority Submission of Sri Bharat Ji Agarwal that Entry 48 of Seventh Schedule of the Government of India Act, 1935 only provided for tax on sale of goods hence it was not a sale tax law, is fallacious. It is well settled that language used in the Legislative Entries in the Constitution of India must be interpreted in a broad way so as to give the widest amplitude of power to the legislature to legislate and not in a narrow and pedantic sense. Reference is made to judgment of Supreme Court in 1963 AIR S.C. 414 The Jiyajeerao Cotton Mills Ltd. Vs. State of Madhya Pradesh in which following was laid down: The language used in the legislative entries in the Constitution must be interpreted in a broad way so as to give the widest amplitude of power to the legislature to legislate and not in a narrow and pedantic sense. Sri C.B. Tripathi, learned Counsel for the appellant has rightly relied on the judgment of the apex Court reported in AIR 1954 S.C. 314 V.M. Syed M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rally exempt from tax. This argument proceeds on the basis that the sale and purchase are different transactions. The Legislature might for the sake of convenience or from other considerations of policy make either a sale or a purchase taxable in respect of the sale of any particular goods. That does not mean that the sale and purchase in respect of the same transactions are two different transactions. They are two facets of the same transactions, Therefore when sub-section (2A) of section 8 uses the words the sale or, as the case may be, the purchase it is mere referring to the fact that State Sales Tax Acts make either the Sale or purchase taxable and not that where the sale is taxable the purchase is exempt from tax and where the purchase is taxable the sale is exempt from tax and therefore where one of them is exempt from tax in respect of an intra-state sale the inter-State sale is completely exempt from tax. We agree with the view of the Mysore High Court that the object of sub-section (2A) of section 8 is to exempt transaction of sale of any goods if they are wholly exempt from the tax under the sales tax law of the appropriate State and make the said sale chargeable at lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with entry 35 of Schedule A to that Act, as it stood at the relevant time, such sales were exempted generally from the payment of sales tax under that Act, viz., the Bombay Sales Tax Act, 1953. It was urged by him that the Bombay Sales Tax Act, 1953, at the relevant time, was the sales tax law for the appropriate State, viz., the State of Bombay, as it then was, and as the sales and purchases of motor spirit by a dealer were exempted from tax generally under that law, the proviso to section 8(1) of the said Act was applicable and the assessees were entitled to the exemption granted thereunder. It was further urged by him that the expression 'the sales tax law' used in the said proviso to section 8(1) must be interpreted as meaning only the general sales tax law, which levied tax on sale of goods generally, and that the Bombay Sales of Motor Spirit Taxation Act, 1946, could not be said to be covered by that expression. In our view, it is not possible to accept the submission of Mr. Patel that the expression 'the sales tax law' in the proviso to section 8(1) of the said Act is confined in its operation or ambit to the general sales tax law. The definition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales of motor spirits were taxable under another sales tax law, viz., the Bombay Sales of Motor Spirit Taxation Act, 1946. Moreover, it is quite clear that the exemption granted under the aforesaid provisions of the Bombay Sales Tax Act, 1953, was only relating to the levy of sales tax under that Act and did not prevent such a levy being imposed by another law levying sales tax. 4. We feel that it would not be out of place to consider at this stage the reason why the sale and purchase of motor spirits were exempted from the levy of sales tax under the Bombay Sales Tax Act, 1953. It is settled law that it is permissible to refer to the legislative history and to the statement of objects and reasons appended to a Bill which eventually becomes an Act, for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil which he sought to remedy (see Commissioner of Sales Tax, Bombay v. Lala Lajpatrai Hotel [1975] 35 S.T.C. 368 . Under the Bombay Sales Tax Act, 1939, a tax on the sale of motor spirit and certain type of textile mentioned in the schedule thereto was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the levy of sales tax, but the exemption was granted from such levy under the general sales tax law, namely, the Bombay Sales Tax Act, 1953, merely on account of the item being taxed under a separate sales tax law dealing in particular with that item. In the result, in our view, the question referred to us must be answered in the affirmative. The assessees to pay the costs of the reference fixed at ₹ 250. The fee of ₹ 100 paid by the assessees to be appropriated towards the amount of the costs awarded by us to the department. Reference answered in the affirmative. The facts of Maharashtra case were identical. The identical submissions which are being made before us was considered and negativated by the Bombay High Court in the aforesaid judgment. Now we come to the judgment of learned Single Judge in Oudh Sugar Mills Vs. CST (supra) correctness of which judgment has been doubted in the referring order. In the aforesaid case, the argument of the assessee was that since the assessee is a manufacturer of alcohol and motor spirit where tax is attracted on the first purchase only hence, there is no liability on the assessee to pay tax on the inter-state sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is under the sales tax law liable at the appropriate stage or exempt from tax generally. Thus in my opinion from a reading of the aforesaid provision the emphasis is on the goods and not on the sales tax law of the appropriate State and the Tribunal is clearly in error in interpreting the aforesaid provision to the contrary. What remains to be examined is the interpretation of the words exempt from tax generally . Explanation to Section 8(2A) contemplates three circumstances to which fiction extends for interpretation of the aforesaid words. The same are (a) if the sale or purchase of such goods is exempt only in specified circumstances, (b) or is exempt under the aforesaid conditions or (c) tax is levied at specified stages or otherwise than with reference to the turnover of the goods. I find that in the present case liability to tax which is contemplated under the provisions of Section 3(1)(c) Of the Motor Spirit Act, is neither under any of the aforesaid circumstance as there are no circumstances specified except the point at which tax is leviable nor any conditions are attached to the aforesaid levy nor can it be said that tax is levied at some specified stage. As regards t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced by a specified company have been exempted from payment of sales tax for a specified period of time. It is not the case of the assessee that mirrors and toughened glass have been generally exempted from payment of tax. Therefore, in view of the ratio laid down in the aforesaid case of Commissioner of Sales Tax v. Pine Chemicals Ltd. (supra), it must be held that the assessee will not be entitled to get benefit of Section 8(2A) of the Central Sales Tax Act in the facts of this case. 8. Having regard to the language of the section before its amendment, we are unable to uphold the contention of Mr. Agarwal. The exemption from the Central Sales Tax Act under the repealed provision was in respect of 'sales or purchases ........ of any goods by a dealer'. The section granted exemption to any goods of a dealer when such goods were 'exempt from tax generally .......'. In order to take advantage of this Section 8(2A), a dealer will have to establish that sale or purchase of the goods in question was exempt from tax generally. If it was a special exemption granted to him because his undertaking was a new industrial undertaking or for any other reason for a limited p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section (2A) requires specifically that such exemption must be a general exemption and not an exemption operative in specified circumstances or under specified conditions. Can it be said that the goods sold by the dealers in this cases are exempt from tax generally under the State sales tax enactment? The answer can only be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium industrial unit within five years of its commencement of production and sold within the said period, i.e., in certain specified circumstances alone. The exemption is not a general one but a conditional one. The exemption under the Government Order No. 159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale within a particular period. For the purposes of the government order, the nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within which they are manufactured and sold. Can it be said in such a case that it is an instance where the sale is of goods, the sale or pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his submission invited my attention to a decision of this Court in the case of Oudh Sugar Mills Ltd. V. Commissioner of Sales Tax, 1987 U.P. Tax Cases103. The view taken by this Court in the said case is that from a reading of provision of Section 8(2-A) of the Central Sales Tax Act, it is clear, that the emphasis is on the goods and not on the sales tax law of the appropriate State. It has also been held that the Explanation to Section 8(2-A) contemplated three circumstances to which fiction extends for interpretation of the aforesaid words. The same are -(a) if the sale or purchase of such goods is exempt only in specified circumstances, (b) or is exempt under the aforesaid conditions, or (c) tax is levied at specified stages or otherwise than with reference to the turnover of the goods. It is found that in the present case liability to tax which is contemplated under the provisions of Section 3 (1) (c) of the Motor Spirit Act, is neither under any of the aforesaid circumstances as there are no circumstances specified except the point at which tax is leviable nor any conditions are attached to the aforesaid levy nor can it be said that tax is levied at some specified stage. As re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment except of course the stray argument advanced by the learned Attorney General to the following effect. But alcohol not fit for human consumption are not luxury and as such the State Legislatures according to Attorney General will have no power to levy tax on such alcohol. Sales tax or purchase tax under Entry 54 is levied on sale or purchase of goods. It does not contemplate any distinction between luxury and necessity. Luxuries are separately taxable under Entry 62. But that has nothing to do with Entry 54. What prompted this submission is not clear. Neither there was any occasion nor there is any constitutional inhibition or statutory restriction under the legislative Entry nor does the taxing statute make any distinction between luxuries and necessities for levying tax. In any case the Bench did not examine it nor did it base its conclusions on it. In absence Of any discussion or any argument the order was founded on a mistake of fact and, therefore, it could not be held to be law declared. The Bench further was not apprised of earlier Constitution Bench decisions in Hoechest Chemicals v. State of Bihar, AIR 1983 SC 1019 and Ganga Sugar Mill v. State of U.P., [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or confiscatory it could not be struck down as intruding in forbidden field. In Hoechest Pharmaceuticals (supra) this Court while examining the ambit of Entry 54 of List II observed, 'Entry 54 of List II of the Seventh Schedule is only subject to Entry 92A of List I and there can be no further curtailment of the status of power of taxation. Therefore- the entire basis for striking down the levy that even though the State had plenary power to impose tax on sales/purchase of goods can exercise taxing power under Entry 54 of List II so long as it does not militate against the legislative field occupied by the Central Government under the IDR Act or any other enactment made under Entry 52 of List I proceeded on complete misconception of taxing powers of State. In fact as stated earlier the entire theory of occupied field or State legislation being repugnant to Central legislation is available when the two legislatures exercise their powers under Concurrent List. Therefore, the order of the High Court striking down the levy cannot be upheld. The above judgment in no manner helps assessee in the present case. In view of the foregoing discussions our answers to the above issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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