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TMI Blog2010 (7) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, 2009 made by the Gujarat Value Added Tax Tribunal (hereinafter referred to as, the Tribunal ) in Second Appeal Nos. 639, 640, 364, 746 of 2005, 206, 716 of 2007 and Revision Application No. 26 of 2007, respectively. Tax Appeal Nos. 1112 and 1113 of 2009. Both these tax appeals arise out of common judgment and order dated May 12, 2009 made by the Tribunal in Second Appeal Nos. 230 and 231 of 2005. Tax Appeal Nos. 2203 and 2204 of 2009. Both these appeals arise out of common order dated June 18, 2009 made by the Tribunal in Second Appeal Nos. 439 of 2003 and 1205 of 2002, respectively. Tax Appeal No. 2202 of 2009 This appeal arises out of order dated June 22, 2009 made by the Tribunal in Second Appeal No. 439 of 2003. While admitting all the aforesaid appeals, except Tax Appeal Nos. 2121 and 2122 of 2009, the following substantial questions of law had been framed by the court: (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the levy of purchase tax under section 15B of the Gujarat Sales Tax Act on the purchases from a new industry, which is granted sales tax exemption by a notification is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said Act. It is stated that the written submissions made before the Tribunal bear this out. It is therefore, submitted that question Nos. 4 and 5 also arise from the order of the Tribunal. 3.. Since the judgment of the Tribunal does not refer to such an argument, we leave it open to the appellant to make a review application before the Tribunal, without prejudice to the rights and contentions in these tax appeals. In the light of the aforesaid, the questions formulated at the time of admitting the appeals are substituted by the questions of law as formulated in Tax Appeal No. 1110 of 2009 and cognate matters by resorting to the proviso to sub-section (4) of section 78 of the Gujarat Value Added Tax Act, 2003. Since all these appeals involve common questions of law, the same were taken up for hearing together and are disposed of by this common judgment. For the sake of convenience facts obtaining in Tax Appeal No. 1110 of 2009 are recorded, there being no dispute that the principal controversy is common in all the appeals. The appellant is a dealer duly registered under the provisions of the Gujarat Sales Tax Act, 1969 and the Central Sales Tax Act, 1956. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act purchases any taxable goods (not being declared goods) either directly or indirectly or through a commission agent and uses them as raw or processing material or consumable stores, in the manufacture of taxable goods. Thus, for the purpose of attracting the provisions of section 15B, four conditions are required to be satisfied. Firstly the person should be a dealer who is liable to pay tax under the Act; secondly such dealer should purchase any taxable goods (not being declared goods); thirdly he should use such goods as raw or processing material or consumable stores in the manufacture of goods; and fourthly the goods so manufactured should be taxable goods. It is submitted that for the purpose of invoking the provisions of section 15B all these four conditions are required to be satisfied. It is pointed out that in all these appeals, the appellants are dealers as envisaged under the provision, who have purchased raw or processing materials or consumable stores and used them in the manufacture of goods. However, the goods so purchased by them are not taxable goods, inasmuch as the same have been purchased from new industries which are exempt from payment of sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 981] 47 STC 376. It is urged that the decision in the case of Nowroji N. Vakil [1979] 43 STC 238 (Guj) directly applies on the construction of the words taxable goods wherein it has been held that even the goods which are exempt by virtue of notification under section 49(2) conditionally, are excluded from the definition of taxable goods , which view has been upheld by the Supreme Court in the case of Hindustan Brown Boveri Ltd. [1981] 47 STC 376. It is submitted that the Tribunal has misdirected itself in placing reliance upon the decision of this High Court in the case of Madhu Silica Private Limited v. State of Gujarat [1992] 85 STC 258 (Guj) which was not concerned with this issue at all but with regard to the constitutional validity of section 15B on various grounds. It is urged that the decision in the case of Madhu Silica [1992] 85 STC 258 (Guj) is not a precedent insofar as the interpretation of the term taxable goods as defined under section 2(33) of the Act is concerned. It is further submitted that the Tribunal could not have placed reliance on the decision in the case of Cheminova India Ltd. v. Sales Tax Officer [2002] 126 STC 334 (Guj) inasmuch as the matter was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision and still they would remain taxable goods. It is submitted that the said decision introduces a qualification that goods which are generally taxable would remain within the domain of taxability, even if they are otherwise exempted by virtue of a notification under section 49(2), etc. It is submitted that in the light of the said decision, if the goods purchased by the dealer are used as raw or processing material or consumable stores in the manufacture of goods which are generally taxable goods, the provisions of section 15B would be attracted. That in the facts of the present case, the raw or processing material or consumable stores purchased by the appellants and used in the manufacture of goods, though have been purchased from dealers who are exempted from payment of tax, are otherwise taxable goods, that is they are generally taxable and as such, the provisions of section 15B would be clearly attracted on the purchase of such goods. It is submitted that section 2(33) of the Act has to be read in the light of the decision of the Division Bench in the case of Madhu Silica Private Limited [1992] 85 STC 258 (Guj). Hence, the Tribunal has rightly held that the petitioners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re a dealer who being liable to pay tax under this Act purchases either directly or through a commission agent any taxable goods (not being declared goods) and uses them as raw or processing materials or consumable stores, in the manufacture of taxable goods, then there shall be levied in addition to any tax levied under the other provisions of this Act, a purchase tax at the rate of (a) two paise in a rupee on the turnover of such purchases made during the period commencing on the April 1, 1986 and ending on the August 5, 1988; and (b) four paise in the rupee on the turnover of such purchases made at any time after the August 5, 1988: Provided that where the raw materials purchased and used in the manufacture of goods or bullion or specie, the rate of purchase tax on the turnover of purchase of such raw materials shall not exceed the aggregate of the rates of sales tax and general sales tax leviable on bullion or specie under entry 15 in Part A of Schedule II. 2(33) 'taxable goods means goods other than those on the sale or purchase of which no tax is payable under section 5 or section 49 or a notification issued thereunder. 5.. Sales and purchases of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing ingredients: (1) The person who purchases the goods should be a dealer liable to pay tax under the Act; (2) He should purchase any taxable goods (not being declared goods), either directly or through a commission agent; (3) He should use such goods as raw or processing materials or consumable stores, in the manufacture of goods; (4) The goods so manufactured should be taxable goods. Thus, on a plain reading of section 15B, it is apparent that the same can be invoked only if all the above ingredients are cumulatively satisfied. If the above four requirements are satisfied, the dealer becomes exigible to tax under section 15B. This tax is in the nature of a purchase tax which is in addition to any tax levied under the other provisions of the Act. The next question that arises for consideration is the construction of the term taxable goods as defined under section 2(33) of the Act. From the language employed in clause (33) of section 2 which defines taxable goods to mean goods other than those on the sale or purchase of which no tax is payable under section 5 or section 49 or a notification issued thereunder, it is apparent that the same is clear and unam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive intent being to exclude the goods that are subject-matter of transactions of sale or purchase as the case may be, which are wholly exempt from payment of any tax under section 49 or a notification issued thereunder from the purview of the term taxable goods the construction put forth on behalf of the respondents would nullify the legislative intent. Moreover as noted hereinabove, the construction suggested on behalf of the respondents would render the latter part of section 2(33) otiose. It is settled legal position that even apparently conflicting statutory provisions should be harmoniously construed for upholding and giving effect to all the provisions as far as possible, and for avoiding interpretation which may render any of them ineffective or otiose. (State of Rajasthan v. Gopi Kishan Sen [1993] Supp 1 SCC 522). Whereas in the facts of the present case there is no conflict between the provisions of section 15B and section 2(33). Hence, while construing the term taxable goods in section 15B of the Act, any interpretation which renders any part of section 2(33) ineffective or otiose should be avoided. Moreover, the fact that section 15B was not on the statute book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It might be noted at this stage that entry 13 of Schedule III is a residuary entry and that thereunder all goods other than those specified from time to time in section 18 (sugarcane) and in Schedules I and II and in the preceding entries of Schedule III are covered. This brings into focus Schedule I, which enumerates goods, the sale or purchase of which is free from all taxes. This Schedule is enacted under section 5. Sub-section (1) of the said section provides that subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule I, no tax shall be payable on the sales or purchases of any goods specified in that Schedule. Sub-section (2) provides that the State Government may, by notification in the official gazette, add to or enlarge, any entry in Schedule I or relax or omit any condition or exception specified therein; and thereupon the said Schedule shall be deemed to be amended accordingly. The foregoing discussion would show that all goods other than those specified in Schedule I are taxable goods. Ordinarily, therefore, the term 'taxable goods should have been defined in the Act as meaning goods other than those on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ambit of the exclusion clause is plain and explicit. On a literal reading of the exclusion clause it is manifest that it takes in all goods, which are exempt either generally or conditionally under section 5 and also those goods which are the subject-matter of transactions of sales or purchases which are exempt either generally or conditionally under section 49. There is no indication, external or internal, which requires that the clause should be construed in a constricted or restricted manner so as to cut down its operation. We do not see any good reason to add to or alter or modify the exclusion clause by reading the word 'generally' in between the words 'is' and 'payable' in the exclusion clause as suggested by the assessee. It is a settled rule of construction that where the statute's meaning is clear and explicit, words cannot be interpolated. In the first place, in such a case, they are not needed. If they should be interpolated, the statute would more than likely fail to express the legislative intent, as the thought intended to be conveyed might be altered by the addition of new words. They should not be interpolated even though the remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree grounds urged on behalf of the appellants for the reason that the present case is governed by the definition of the expression 'taxable goods' in section 2(33) of the Act. It is interesting to note that the Bombay Sales Tax Act, 1959 (Bombay Act 1 of 1959) which was in force in the State of Gujarat before the Act came into force and which was repealed by section 88 of the Act contained the definition of the expression 'taxable goods' in section 2(33) thereof. The expression 'taxable goods' was defined in the Bombay Act as 'goods other than those on the sale or purchase of which no tax is payable under section 5'. In the Bombay Act there was also a provision corresponding to section 49 of the Act in section 41 thereof which empowered the State Government subject to such conditions as it may impose to exempt by a notification published in the Official Gazette any specified class of sales or purchases from payment of the whole or any part of any tax payable thereunder if the State Government was satisfied that it was necessary so to do in the public interest. Still the definition of 'taxable goods' in that Act did not refer to sales exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods which are subject-matter of transactions of sale or purchase, as the case may be, which are wholly exempt from payment of any tax under section 49(2) of the Act are not taxable goods within the meaning of section 2(33) of the Act. The definition of taxable goods indicates that goods other than those on the sale and purchase of which no tax is payable either under section 5 or section 49 or a notification issued under section 49 of the Act are all to be taxed. That means that all goods are to be treated as taxable goods except those on which no tax is payable. Under section 5 of the Act though the marginal note states that sales and purchases of certain goods free from all tax, when one reads the provision it stipulates that goods specified in column No. 3 of Schedule I are goods on which no tax shall be payable subject to the conditions or exceptions set out therein. When one goes to section 49 of the Act, the said provision talks of exemption. Under sub-section (1) of section 49 of the Act, it is stated that the class/classes of sales or purchases shall be exempt from the payment of the whole of the taxes payable under the provisions of the Act. Similarly, under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing material or consumable stores should be used in the manufacture of goods also stands duly satisfied. However, the second requirement, namely, that the goods purchased by the appellants and used as raw or processing materials or consumable stores should be taxable goods is evidently not satisfied, inasmuch as it is an admitted position that the appellants have purchased goods from new industries which are exempted from payment of tax under notifications issued under section 49(2) of the Act. Thus, the basic ingredient, namely, that taxable goods should be used as raw or processing materials or consumable stores for the manufacture of goods is not satisfied. Insofar as the fourth requirement, namely, that the goods manufactured should be taxable goods is concerned, the same is not relevant for the present purpose inasmuch as in the facts of the present case, it is the case of the appellants that since the goods used by them as raw or processing material or consumable stores for the manufacture of goods are not taxable goods, the second ingredient of section 15B is not satisfied and as such they are not liable to pay purchase tax under the said provision. Thus, going by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002] 126 STC 334 (Guj) judgment at all , it is apparent that the Tribunal has placed strong reliance upon the same. The Tribunal has thereafter referred to the decision of this High Court in the case of Madhu Silica [1992] 85 STC 258 and held that the term taxable goods under section 15B of the Act means goods which are generally taxable. The Tribunal has held that once the term taxable goods is interpreted to mean goods which are generally taxable, there was no room for holding that the last requirement of section 15B, viz., that the goods manufactured by the appellants therein were not taxable goods had not been complied with. That in the matters at hand also the taxable goods should carry the said meaning, i.e., the goods are generally taxable . That if this interpretation is read in section 15B of the Act, it will have to be held that even the last requirement of section 15B has also been complied with. In the impugned order the Tribunal has followed its earlier decision which has been referred to hereinabove and recorded thus: . . . the term taxable goods would mean the 'goods which are generally taxable'. Here, the goods in question are generally taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. Impost is on the manufacture of goods and the new goods which are manufactured have to bear the charge. In the purchase tax levied on raw materials which are inputs, there is no contemplation of the ultimate output. It is tax on purchased inputs which has been brought as inputs in the manufacturing process and there charge settles and gets exhausted. Consequently, by no stretch of imagination, such a charge can be said to be imposing excise duty on ultimate manufactured goods. The impugned section imposes tax on the dealer as purchaser and not as manufacturer or ultimate manufactured goods. The court, thereafter also held that the phrase uses them as raw material or processing materials or consumable stores in the manufacture of taxable goods as employed by section 15B of the Act would mean user of such raw material in the manufacturing process for manufacturing generally taxable goods under the Act and ultimately, in given circumstances, such manufactured goods may not attract tax under the charging provision and still would remain taxable goods. The court, therefore, did not find it possible to agree with the contention of the petitioners that charging event under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial in the manufacture of goods should also be taxable goods, because in view of the controversy before it, the court was not required to enter into that arena. The decision in the case of Madhu Silica [1992] 85 STC 258 (Guj) came to be confirmed by the Supreme Court in the case of Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98 (SC), wherein while upholding the constitutional validity of section 15B of the Act, the court held that the section, read as a whole, is applicable only to those goods which are used in the manufacture of other goods. The levy is upon the purchase price of raw material and not upon the value of manufactured products. So long as the levy retains the basic character of a tax on sale, the Legislature can levy it in such mode or manner as it thinks appropriate. The said decision does not refer to the concept of generally taxable goods. Insofar as the decision in the case of Cheminova India Ltd. [2002] 126 STC 334 (Guj is concerned, in the light of the disagreement recorded by one of the members of the Division Bench, the reasoning adopted by one of the learned Judges can at best be said to be an opinion of the said learned judge; it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Therefore, the emphasis by the Revenue that what has to be seen are whether the goods are generally taxable or not is misplaced and unwarranted. What has been discussed by this High Court in the case of Madhu Silica [1992] 85 STC 258 has not been understood nor appreciated either by Revenue or the Tribunal. The controversy before the High Court was in the first instance as to whether provisions of section 15B of the Act are ultra vires the Constitution. To press home the said challenge the contention raised before the court was that the said provision in effect is either a consignment tax or a duty in the nature of excise and hence beyond the legislative competence of the State Government. It was in context of the said challenge that the concept of generally taxable goods and fastening of the charge have been discussed by the court in the judgment. However, when it comes to a specific challenge as to leviability, and liability to pay tax, i.e., purchase tax under section 15B of the Act, the court has to read the provision as it stands and interpret the same, if there is any debate, to achieve the object with which the provision has been brought on the statute book. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption vide notification issued under section 49 of the Gujarat Sales Tax Act, 1969 are not taxable goods within the meaning of section 2(33) of the Act and as such are not liable to purchase tax under section 15B of the Act. The Tribunal was, therefore, not justified in confirming the levy of purchase tax under section 15B of the Gujarat Sales Tax Act, 1969 on the purchases from a new industry, which had been granted exemption by notification issued under section 49(2) of the Act. The questions stand answered accordingly. The impugned orders made by the Tribunal are hereby quashed and set aside. The appeals are accordingly allowed with no order as to costs. Special Civil Application No. 8926 of 2009 This petition has been preferred by one of the appellants challenging the judgment and order dated April 6, 2009 made by the Tribunal in Revision Application No. 84 of 2003 as well as the orders made by the appellate authority and the Sales Tax Officer along with show-cause notice. The Tribunal has not assigned any independent reasons but held that the petitioner (revision applicant) is liable to pay purchase tax under section 15B of the Act as the said issue has been deal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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