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TMI Blog2014 (9) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... titionercompany falls in category (ii) of section 14(iv) of the Central Sales Tax Act, 1956 and the finished products manufactured by the petitioner fall in category (v) of the said section. On establishing the new industrial undertaking, the petitioner was granted exemption from payment of sales tax initially for a period of five years from July 1, 1991 to June 30, 1996 under the exemption notification dated October 23, 1981 and June 29, 1982. The exemption period under the sales tax was extended for two years, i.e., up to June 30, 1998 and the eligibility certificate was accordingly amended. Similar exemption was granted to the petitioner under the Entry Tax Act (Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam) for a period of five years from June 21, 1991 to June 20, 1996. Thereafter the petitioner became liable to pay entry tax for the period under consideration. The assessing authority had granted the benefit of exemption under the Sales Tax Act vide order dated December 30, 1999 but by another order passed on the same day, the assessing authority had levied the entry tax since the exemption period for the entry tax had expired on June 20, 1996. In revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions. The relevant extract of the notification is reproduced as under: "(1) Notification No. A3-41-81(35)-ST-V, dated October 23, 1981 notification exemption new units. In exercise of the powers conferred by section 12 of the Madhya Pradesh General Sales Tax Act, 1958 (No. 2 of 1959), the State Government hereby exempts the class of dealers specified in column (1) of the Schedule below who establish new industrial units for the manufacture of automobiles or agricultural machinery in any of the districts in Madhya Pradesh specified in annexure I and commence commercial production before May 6, 1994, or such dealers having taken any two of the following effective steps before the said date but have commenced commercial production on or after the said date, but before April 1, 1995: (i) Possession of land has been taken; (ii) at least fifty per cent of the expenditure on building as per project report has been incurred; (iii) firm orders of atleast fifty per cent of the plant and machinery as per project report has been placed. from payment of tax under the said Act for the period specified in column." The Schedule to the notification provides for the restrictions and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry tax. The relevant extract of Notification No. 57, dated July 5, 1995 is as under: "(43) Exemption on different categories of iron and steel Notification No. A3-9-95-ST-V(57), dated July 5, 1995 In exercise of the powers conferred by section 10 of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (No. 52 of 1976), the State Government hereby exempts in whole from payment of entry tax under the said Adhiniyam, the class of goods specified in column (1) of the Schedule below, for the period specified in column (2) subject to the restrictions and conditions specified in column (3) of the said Schedule: SCHEDULE Class of goods Period Restrictions and conditions subject to which exemption is granted. (1) (2) (3) Iron and steel as specified in categories (ii) and (xvi) of clause (iv) of section 14 of the Central Sales Tax Act, 1956 (No. 74 of 1956). From 1st April, as to 1995 to 31st March, 1996 (both days inclusive) When entered into a local area by a dealer liable to pay tax under the Commercial Tax Act for consumption or use as raw material in the manufacture of goods covered by categories (iv) and (v) and hoops and strips falling in categ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their nonliability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed." Present is a case where the petitioner is liable to pay sales tax and entry tax under the relevant statute but he has been granted exemption from payment of sales tax and dispute is about exemption from payment of entry tax. In the matter of Associated Cement Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption does not arise. Liability arises in term of section 3 and tax becomes payable at the rate as provided in section 12. Section 11 deals with the point of levy and rate and concessional rate. 20. The word 'liable' in the Concise Oxford Dictionary means, 'legally bound, subject to a tax or penalty, under an obligation'. In Black's Law Dictionary (Sixth Edition) the word 'liable' means, 'bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution . . . Obligated; accountable for or chargeable with'. The above position was noted in Zunjarrao Bhikaji Nagarkar v. Union of India [1999] 7 SCC 409. 21. Tax at the appropriate rate would have become payable but for the exemption. Decision in Australian Mutual Provident Society v. I.R.C. [1962] AC 135 (PC) has stated the position as follows: 'The phrase "exempt from taxation" Land and Income-tax Act, 1954 (No. 6701) (New Zeland) section 86(1) does not cover income that is not at all within the reach of the New Zeland tax laws. It refers to income that would, had it not been for the exemption, otherwise have been so taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass 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 instance where the sale is of goods, the sale or purchase of which is under sales tax law of the appropriate State, exempt from tax generally ? Certainly not. Exemption provided by Government Order No. 159, to repeat, is not with reference to goods but with reference to the industrial unit. So long as it is (i) a large or medium scale industry and (ii) it manufactures and sells goods within the five years of its going into production, the sale of such goods is exempt irrespective of the nature or classification of goods. Similar goods may be manufactured by another unit but if it does not satisfy the above two requirements, the goods manufactured and sold by it would not be entitled to exemption from tax. Indeed, the goods manufactured by that very unit would not be eligible for exemption if they are manufactured after the expiry of five years from the date it goes into production and/or sells them beyond the said period. The period of exemption may also vary fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajasthan High Court has held as under (pages 167 and 168 in 67 STC): "On a careful perusal of the various provisions of the Act and the Rules referred to hereinabove the two expressions 'liable to pay tax under the Act' and 'tax shall be payable' deserve our pointed attention. In rule 42 the words used in both sub-rules (1) and (2) are 'liable to pay tax under the Act'. We shall first examine the connotation of the word 'liable'. The word 'liable' is generally/normally interpreted to mean, 'exposed to a certain contingency or casualty, i.e., it means a future possibility, probability, happening which may or may not actually occur'. The word 'liable' ordinarily denotes (1) 'legally subject or amenable to', (2) 'exposed or subject to or likely to suffer from (something prejudicial)', (3) 'subject to the possibility of (doing or undergoing something undesirable)'. According to Webster's New World Dictionary also the word 'liable' denotes 'something external which may befall us'. It is not in dispute that the cloth that was manufactured by the manufacturer during the periods under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able by him, for the cloth, i.e., the cotton fabrics are exempted from payment of tax. Rule 42(2) of the Rules provides that a manufacturer who is liable to pay tax under the Act has to maintain a stock book of the raw materials and of finished goods. The manufacturer in this case admittedly did not maintain the stock book of the raw materials, i.e., of the cloth purchased by him. The manufacturer was not required to pay tax as cloth was exempt from payment of tax. But, on this ground alone it cannot be said that he was not liable to pay tax under the Act as envisaged by rule 42(2) of the Rules, keeping in view of the scheme of the various sections of the Act referred to hereinabove. The basis of the view taken by the Board is that only those dealers or manufactures are required to maintain stock books under rule 42(2) of the Rules from whom tax is payable. The Board has construed 'liable to pay tax under the Act', as tax payable under the Act. In doing so, the Board ignored the distinction and difference between the two expressions 'liable to pay tax' and 'tax shall be payable', for, a manufacturer may be liable for payment of tax but on account of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional exemption was granted by the Notification dated October 23, 1981. Therefore, though no sales tax was paid by the petitioner for the period in question, its liability to pay the sales tax continued and under the Notification No. 55 dated July 5, 1995, his liability to pay the sales tax was reduced to two per cent, therefore, in terms of the Notification No. 57 dated July 5, 1995, the petitioner was entitled to claim exemption from payment of entry tax on the goods in question on satisfaction of the other conditions, which have been specified in the Notification No. 57 dated July 5, 1995. In view of the aforesaid, we are of the considered view that the impugned orders of the assessing authority dated February 13, 2004 as well as the revisional authority dated January 12, 2005, cannot be sustained and are hereby set aside. The assessing authority is directed to pass a fresh order of assessment by treating that the Notification No. 57 dated July 5, 1995 is attracted in the case of the petitioner, since the petitioner is liable to tax at two per cent on the sale under item No. 2 of the Notification No. 55 dated July 5, 1995, and extend him the benefit accruing from the exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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