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TMI Blog2006 (4) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ngots taxable under section 5A has escaped assessment for the year 1994-95 and proposing to assess to the best of judgment and exhibit P2 notice calling upon it to furnish details of purchase turnover under section 5A for the years mentioned therein and to remit the tax with interest. An amendment of the writ petition was allowed during the pendency of the appeal by which a prayer was added as follows: Declare that the State cannot enact a provision under its power under entry 54 of State List of the Constitution providing for more than one definite taxable point in so far as goods declared by section 14 of the CST Act, 1956 as of special importance to inter-State trade and commerce and consequently section 5A of the KGST Act is inapplicable/inoperative in so far as iron and steel, which is charged for levy under section 5(1) read with Second Schedule to the said Act and hence not taxable at any alternative point and operation, if any, of section 5A of the KGST Act on the purchase point besides the sale point in respect of the same goods is ultra vires article 286 of the Constitution read with section 15 of the CST Act, 1956. Section 5A reads as follows: 5A. Levy of purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. Section 15 of the Central Act enacts the restrictions contemplated in article 286. It read as follows at the relevant time: 15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (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, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that law in respect of the sale or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n proceedings under the State Act and hence we proceed to consider the contention of the appellant on merits. The contention of the appellant is sought to be buttressed by referring to the following decisions: (1) Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1 (SC); [1998] 5 SCC 349. (2) Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Company Limited [1996] 3 SCC 434. (3) Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. AIR 1972 SC 2563. (4) State of Tamil Nadu v. M. K. Kandaswami [1975] 36 STC 191 (SC). In fact, the appellant would submit that the issue must be treated as concluded in his favour on the strength of the decision of the apex court in Shanmuga Traders v. State of Tamil Nadu [1999] 114 STC 1; [1998] 5 SCC 349. In the said decision, the question that was posed was the validity of the circular issued by the State of Tamil Nadu, by which tax was purported to be levied at more than one point by the State on declared goods. It is essential to refer to the circular which is reproduced in the judgment. It reads as follows: In the reference first cited, it was clarified that since the first sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1959 on this further sale depending on what that purchaser is doing with scraps. At any rate, it can no longer be considered second seller is not liable to tax. The Deputy Commissioners are requested to instruct the assessing officers that from the date of issue of this clarification, they will have to do all fresh assessments under this clarification and they need not open old assessments already completed under the earlier clarification. The clarifications issued in this office reference cited, except the fourth reference, are hereby cancelled. It was this circular which was in challenge. The goods in question, namely iron and steel which were sold by the Tamil Nadu Electricity Board, were covered by the notification exempting the same under the Madras Act and, therefore, exempt from the tax payable under the Madras Act. The court refers to sections 14 and 15 of the Central Act. The Second Schedule to the State Act required payment of tax on iron and steel at the point of first sale in the State. Paragraphs 12 and 14 are also referred to which read as follows: 12. We do not think that the conclusion reached by the Madras High Court in the order under appeal can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held as follows: We are unable to accept this interpretation which would render section 7-A(1) wholly nugatory. With due respect, it seems to us that in arriving at this erroneous interpretation, the learned Judges mixed up the concept of goods liable to tax with the transactions liable to tax under the Act. The scheme of the Act involves three inter-related but distinct concepts which may conveniently be described as 'taxable person', 'taxable goods' and 'taxable event'. All the three must be satisfied before a person can be saddled with liability under the Act. Nevertheless, the distinction between them, if overlooked, may lead to serious error in the construction and application of the Act. . . . . . 'Taxable person' is a 'dealer' as defined in section 2(g). 'Taxable event' is the 'sale or purchase of goods ' effected during the accounting period although the tax liability is enforced only after quantification is effected by assessment proceedings. 'Sale' is defined in section 2(n) as: 'Every transfer of the property in goods by one person to another in the course of business for cash or for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner [1986] 63 STC 314 relied on by Mr. Saha were not only referred to by this Tribunal but they really formed the basis of the decision of this Tribunal in that case. Referring to the decision of the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 this Tribunal observed that it was held in that case 'that where goods have already been made liable to purchase tax under section 8 of the Orissa Act, no sales tax can be levied in respect of the same transaction'. The Orissa Act which was under examination of the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 laid down the following proviso in section 8 of the said Act 'provided that the same goods shall not be taxed at more than one point in the same series of sales or purchases by successive dealers'. The Tribunal also observed that 'the learned State representative attempted to distinguish between a stage and a point but neither State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 nor Rajasthan Commercial Corporation v. Sales Tax Commissioner [1986] 63 STC 314 (SC) did so'. In those judgments these two words were us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act. . . Learned counsel for the appellant made emphasis on the following passage: By a combined reading of sections 14 and 15 of the CST Act the restrictions that imposed are: (i) In respect of declared goods a tax either on sale or purchase alone can be levied; and it cannot be on both sale and purchase. (ii) The rate of tax should not exceed 4 per cent. (iii) The tax can be levied only at one definite stage. The essence of a single point fixation or one stage fixation consists of fixation of single point or stage. In other words, in respect of the declared goods, what is left to the State's domain is to determine whether the tax is to be imposed at the point of first sale or purchase or at any one of the successive points of sale or purchase. He would contend, that either sale or purchase could be rendered exigible to tax, but not both. This principle would stand violated, if tax is held permissible under section 5A of the State Act on the strength of the declared goods being exempt from tax under section 5 of the State Act. The fact that tax was not payable under section 5 by reason of the exemption granted, could not detract from the levy of tax m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l collection'. Leaned counsel also relied on the decision of the apex court in Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Company Limited, Hyderabad [1996] 3 SCC 434. Section 37 of the Finance Act, 1978 provided for levy of special duty of excise in addition to the existing excise duties. The Tribunal upheld the contention of the assessee that the goods purchased or manufactured before March 1, 1978 from which day the provision was to remain in force, though removed after the said date, were not subject to special duty. The court held as follows: In view of the provision of entry 84 of List I of the Seventh Schedule to the Constitution of India, the special excise duty is relatable to entry 84 and, therefore, must be on the manufacture or production of goods. Once the levy is not there at the time when the goods are manufactured or produced in India, it cannot be levied at the stage of removal of the said goods. The idea of collection at the stage of removal is devised for the sake of convenience. It is not as if the levy is at the stage of removal; it is only the collection that is done at the stage or removal. Admittedly, the special excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxes, on the other hand, submitted that there is absolutely no merit in the contention of the appellant. He highlighted the words in section 15 of the Central Act which provide that the tax shall be payable at the rate not more than four per cent. He would further submit that there is only one levy, treating the word levy as meaning imposition of tax . He would contend that in fact sections 5 and 5A of the State Act have to be read together and section 5A cannot have a separate existence. He would point out that the decision of the apex court in Shanmuga Traders' case [1999] 114 STC 1; [1998] 5 SCC 349 turned on the challenge to a circular whereunder tax was sought to be levied at more than one point. In regard to Kandaswami's case [1975] 36 STC 191 (SC), it is his contention that, in fact, the provisions of sections 5 and 5A are to be read together and section 5A does not have an independent existence. He would, in other words, submit that there is no violation either of article 286 or section 15 of the Central Act. The decision of the apex court in Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd. AIR 1972 SC 2563 is an authority fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is traceable to entry 54 of the State List. Therefore, on the one hand, we have to safeguard the power of the State, meaning the State Legislatures, to raise revenue by resort to garnering revenue as is sanctioned in law. But, on the other hand, we have to give full effect to the restrictions which the founding-fathers of the Constitution enabled the Central Legislature to impose on declared goods and which are enshrined in section 15 of the Central Act. We feel that there cannot be any doubt in the light of the decision of the apex court in Kandaswami's case [1975] 36 STC 191 that the appellant is correct in contending that section 5A of the State Act enacts an independent charging section. As far as the decision of the division Bench of this court is concerned, the question that fell for decision was the validity of imposition of tax at more than one point on declared goods. No doubt, in the course of the same, the court did observe that tax can be levied in respect of declared goods, either on sale or purchase. We feel that the dictum laid down in the said decision may not advance the case of the appellant in the facts of these cases. True, it is that the West Bengal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 290 (SC). This has been followed in Rajasthan Commercial Corporation v. Sales Tax Commissioner [1986] 63 STC 314. In Rattan Lal and Co. v. Assessing Authority [1970] 25 STC 136 (SC), the apex court after referring to section 15 of the Central Act held as follows: The section provides that in respect of declared goods the tax (sale or purchase) shall not exceed the prescribed limit and shall not be levied at more than one stage and shall be refunded to persons from whom it is collected if the goods are sold in the course of inter-State trade or commerce. In Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290, the apex court dealt with the provision in a State Act where there was possibility of tax being imposed on purchase at more than one stage on declared goods. The court considered the question whether there was a contravention of section 15(a) of the Central Act. In the course of the judgment, the court held as follows: If the Central Act makes it mandatory that the tax can be collected only at one stage, in our opinion, it is not enough for the State to say that a person, who is not liable to pay tax, must, nevertheless, pay it in the first instance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the word levy is used, there is no violation of the prohibition in section 15(a) of the Central Act that the levy cannot be at more than one stage. It cannot be said that the stage or the point at which tax is levied under section 5A is unascertainable or unspecified. There is no contention in that direction. The only contention is that tax is imposed, notwithstanding that there is an exemption under section 10 of the State Act, at the point of first sale in the State and, therefore, when tax is imposed under section 5A at another point other than the point of first sale, section 15(a) stands violated. We do not think that in the scheme of section 5A of the State Act, we would be justified in accepting this contention. Section 5A provides for a levy on purchase only in the circumstances on which no tax is payable and further conditioned by the existence of circumstances provided in clauses (a) to (c) of section 5A. We find that the observations made by the Supreme Court in Shanmuga Traders' case [1999] 114 STC 1; [1998] 5 SCC 349 in paragraph 12, came to be made in the facts of the case. The single point of levy was at the point of first sale and not at the poi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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