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TMI Blog2006 (11) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act on any sale of goods which, in accordance with the provisions of subsection (3) of section 5, is a sale in the course of export of those goods out of the territory of India. (1-A) A dealer shall be liable to pay tax under this Act, on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State. II. SECTION 8(2-A) OF THE CENTRAL ACT: (as it stood from April 1, 1973 to May 10, 2002): (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 insofar 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 any other name), shall be nil or, as the case may be, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such tax shall not be levied at more than one stage.' Section 15 of the Central Act as it stands today: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof. VI. SECOND SCHEDULE Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as 'the State Act'): S. No. Description of goods Point of levy Effective from 1 2 3 4 3-B Desiccated coconut At the point of first sale in the State 27.3.2002 6(viii) Oil seeds, that is to say, (as it stood prior to 1.4.1994) At the point of first purchase in the State .... Coconut (i.e., copra excluding tender coconuts) (cocos nucifera) 6(viii) as amended by Act 32 of 1994 Coconut including copra (cocos nucifera) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by any dealer under the said Act at the point of last purchase of coconut including copra in the State for crushing oil, in Notification No. II/(1)/CTRE/41(c-3)/98 dated March 27, 1998. In view of this notification the inter-State sale of coconut with 'C' form is taxable at one per cent and without 'C' form at two per cent with effect from March 27, 1998. The Government by Notification No. II(1)/CTRE/ 43(d-6)/98 dated April 7, 1998 have reduced the rate to one per cent in respect of the sale of coconut including copra effected by any dealer in the course of inter-State trade/commerce. Hence, the inter-State sale of coconut is taxable at one per cent with or without 'C' form. In the above circumstances, the rates of tax under the CST Act 1956 on the inter-State sale of coconuts are clarified as follows: It is also clarified that the reduced rate of tax modified by the Government is related to the goods falling under entry 6(viii) of the Second Schedule to the TNGST Act, 1959. The inter-State sale of goods falling under entry 10 of Part B of the Third Schedule to the TNGST Act, 1959 continues to be exempted from tax. All the Deputy Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the exemption from tax under the State law is in specified circumstance or specified condition; (ix) Section 8 of the State Act is captioned exemption from tax and states not liable to pay any tax in respect of the goods specified in the Third Schedule. Such goods specified in the Third Schedule are exempt; (x) Section 8 is subject to such restrictions and conditions as may be prescribed. The restriction or condition should be found in the Third chedule. Serial No. 10 of the Third Schedule (up to March 31, 1994) and later serial No. 17 and serial No. 28 of the Third Schedule (from April 1, 1994) specified coconut, copra and tender coconut , other than those falling under the Second Schedule . Falling refers to goods excluded and not transaction; (xi) It is of no account that the word coconut, i.e., copra considered in the context of section 14(vi)(viii) of the Central Act may be wide to include watery coconut , dried coconut , desiccated coconut or copra . The tax treatment in the State law alone is relevant to consider section 8(2-A)/section 8(2-C) because it is open for the State to tax one class and exempt another class of goods falling under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial No. 17 of the Third Schedule are unnecessary to exempt rest of the transactions. This interpretation renders serial No. 10/serial No. 17 of the Third Schedule otiose and purposeless. Revenue is wrong in stating that serial No. 6(viii) of the Second Schedule and serial No. 10/serial No. 17 of the Third Schedule deals with the same class of goods. This fails in respect of watery coconuts ; and (xix) The mention of desiccated coconut in serial No. 3-B of the Second Schedule with effect from March 27, 2002 is of no effect. The consequence is to exclude desiccated coconut (described as a shredded copra by the Supreme Court) as a class from the rest of the exempted goods in serial No. 10/serial No. 17 of the Third Schedule, just as coconut i.e copra of the Second Schedule is found fit for crushing oil. In fine, the plea on behalf of the assessees is that having regard to the circular issued by the Commissioner of Commercial Taxes in Acts Cell-III/ 65129/98 dated March 12, 1999 clarifying the position that the transactions in question are not taxable at any rate in view of the exemption accorded in the Third Schedule to the State Act and having regard to section 8(2A) of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being misunderstood. It, therefore, becomes necessary to clarify para 9 of Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC). One of us (Variava, J) was a party to the judgment of the Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC) and knows what was the intention in incorporating para 9. It must be remembered that law laid down by this court is law of the land. The law so laid down is binding on all courts/Tribunals and bodies. It is clear that the circulars of the Board cannot prevail over the law laid down by this court. However, it was pointed out that during hearing of Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC) because of the circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on the interpretation now given by this court in Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC), the Revenue was likely to reopen cases. Thus para 9 was incorporated to ensure that cases where benefit of exemption notifications had already been granted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apex court has held as follows: 'However, the learned counsel for the appellant relied on the decisions in Navnit Lal C. Javeri v. K. K. Sen, AAC of Income-tax [1965] 56 ITR 198 (SC); AIR 1965 SC 1375, Ellerman Lines Ltd. v. C.I.T. [1971] 82 ITR 913 (SC); AIR 1972 SC 524; 1972 Tax LR 246) and K.P. Varghese v. Income-tax Officer [1981] 131 ITR 597 (SC); (1) Here italicised. (2) Since reported in [2006] 144 STC 161 (SC). (3) Since reported in [2006] 144 STC 146 (SC). court or Tribunal would also give effect to the circulars of the Board in preference to a decision of the Constitution Bench of this court. Where, as a result of dispute the matter is sub judice a court/Tribunal is, after Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC), bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that courts/Tribunals have to ignore a judgment of this court and follow the circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC)'.(Emphasis(1) Supplied) iii. Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f oil. Thus watery coconut while yielding oil merely because it yields some watery substance does not cease to be an oil seed and, therefore, it falls within the entry.' vii. Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd. [1995] 96 STC 355 (SC) wherein it is laid down as follows: 'The simple question before us is whether the Bench which decided Pine Chemicals [1992] 85 STC 432 (SC); [1992] 2 SCC 683, is right in holding that the benefit of the said sub-section is available even where the goods are exempted with reference to industrial unit and for a specified period, viz., period of five years from the date the relevant unit goes into production. In other words, the question is whether an exemption of the nature granted under Government Order No. 159 dated March 26, 1971, is an exemption available only in specified circumstances or under specified conditions within the meaning of the Explanation to section 8(2-A), as contended by the State or is it a case where the goods are exempt from the tax generally within the meaning of section 8(2-A), as contended by the respondents-dealers? We are of the opinion that the respondentsdealers' con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court has placed on that phrase in a particular phraseology, if there were circulars issued by the Central Board of Excise and Customs, which circulars placed a different interpretation upon the said phrase, that interpretation will be binding on the Revenue and cannot be construed in a wide sense as it is now sought to be done by the learned counsel for the petitioners de hors the context, in which, those observations came to be made and the actual purpose and also the object of those observations in that case. The fact that those observations were not meant to lay down any general proposition of law, that the circulars will hold the field de hors the declaration of law by courts, was made clear by the Supreme Court in the case of Kalyani Packaging Industry v. Union of India [2005] 141 STC 116 (SC); [2005] 4 RC 693 (SC); [2004] 6 SCC 719; [2004] 168 ELT 145 (SC) wherein His Lordship Mr. Justice S. N. Variava, who was a party to the earlier Bench, which rendered the decision in Dhiren Chemical's case [2002] 126 STC 122 (SC); [2002] 2 SCC 127; [2002] 139 ELT 3 (SC), clarified the position and intention of the court and declared that the law laid down is binding on all courts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ELT 3 (SC) was construed by the very apex court in other cases, this court is bound to respectfully adhere to and follow the said interpretation and cannot countenance the contra stand taken on behalf of the petitioners/ assessees. Consequently, the matter has to be objectively considered and the liability of the assessees to tax has to be adjudicated on the basis of the law governing the matter in issue. So far as the taxability of the transactions of the petitioners is concerned, the same requires to be adjudged in the light of the provisions of the Central Act and the provisions contained in the Second and Third Schedules to the State Act. In doing so, what is required to be considered at the threshold is as to whether watery coconuts dealt with by the assessees fall within the entry as found described in the Second Schedule to the State Act. The said entry is fashioned upon the entries in section 14 of the Central Act. The apex court, while considering the identical entry in the decision in the case of Commissioner of Sales Tax, Madhya Pradesh v. Popular Trading Co. [2000] 118 STC 379, held that an oil seed botanically means a seed, which is a flowering plant's un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to advert to the decision in the case of Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd. [1995] 96 STC 355 (SC) wherein while following the earlier decisions rendered by the apex court itself in the case of International Cotton Corporation (P) Ltd. v. Commercial Tax Officer [1975] 35 STC 1 (SC) and in the case of Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC 108 (SC), it was observed that general exemption means that goods should be totally exempt from tax before similar exemption from the levy of Central sales tax can become available and when the exemption from taxation is conferred by conditions or in certain circumstances, there is no exemption from tax generally. Viewed in the said context, the exemption in this case cannot be considered to be a general exemption at all. Therefore, the inter-State sale of watery coconuts is taxable under the provisions of the Central Act. When it is held that the transactions are liable to tax and there is no general exemption as claimed on behalf of the petitioners, which would enure to them, the further question as to at what rate and in what circumstances they could be taxed and in what manner are al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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