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TMI Blog2015 (5) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural produce) from the farmer. The contention that a farmer or an agriculturist is being subjected to tax is not tenable, as tax is levied not on him but on the VAT dealer who purchases goods from him. It is not every purchase of taxable goods from an agriculturist/farmer, but only such goods which fall within the ambit of clauses (i) to (iii) of Section 4(4), and its proviso, which attracts levy of tax at the stage of its purchase. The contention that a farmer/agriculturist is indirectly being subjected to tax does not, therefore, merit acceptance. When taxable goods are sold by a person, who is not a dealer under the Act, then VAT is not payable on the sale of such goods. Where a farmer grows raw cotton, paddy, raw dhal and soyabean seed in his land, and sells these agricultural produce to others, he is not liable to pay tax, on the sale of such goods, as he is not a dealer under Section 2(10) of the Act. Purchase of such agricultural produce by a VAT dealer is in circumstances in which no tax is payable by the seller. In such circumstances tax, at 4%/5% of the purchase price of such goods, is liable to be paid by the VAT dealer who purchases the aforesaid goods i.e., agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3664, 25661, 25664, 26593, 26600, 26707, 26811, 26904, 27032, 27055, 27278, 27280, 27757, 27885, 27933, 27956, 27967, 28002, 28168, 28175, 28353, 28368, 28514, 28676, 29351, 29429, 29701, 29740, 29742, 29750, 29762, 29806, 29911, 30260, 30371, 30377, 30857, 30860, 30887, 30895, 30902, 30941, 31743, 31871, 31894, 31939, 32032, 33027, 34323, 34452, 34474, 34476 and 34890 of 2014 SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. For the Appellant :S.R.R. Viswanath, Sri V. Bhaskar Reddy, Sri Shaikh Jilani Basha and Sri M.V.J.K. Kumar For the Respondent: Sri D. Srinivas, Sri M. Govind Reddy and Sri J. Anil Kumar, Learned Special Standing Counsel for Commercial Taxes COMMON ORDER: (Per Honble Sri Justice Ramesh Ranganathan) In this batch of writ petitions, the validity of the assessment orders are put in issue on the ground that the assessing authority has levied purchase tax contrary to Section 4(4) of the A.P. VAT Act, 2005 (for short the Act) and Sections 14 and 15 of the Central Sales Tax Act, 1956 (CST Act for short). The petitioner- assessees are either (1) rice millers, or (2) dhal millers, or (3) soyabean oil millers, or (4) cotton millers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions have also been filed by Dr. S.R.R. Viswanath and Sri M.V.J.K. Kumar, Learned Counsel for the petitioners and Sri D. Srinivas, Sri M. Govind Reddy and Sri J. Anil Kumar, Learned Special Standing Counsel for Commercial Taxes. I. THE RULE OF PRESUMPTION, IN FAVOUR OF CONSTITUTIONALITY, AS A PRINCIPLE OF STATUTORY CONSTRUCTION: 3. Before considering the rival submissions of Learned Counsel on either side, it is useful to examine the scope of Section 4(4) of the Act and its proviso. In order to arrest tax avoidance, a provision for levy of contingent purchase tax was introduced in almost all State enactments. This tax was called contingent purchase tax as the levy of tax on purchases is contingent upon the happening of certain events subsequent to the purchase viz., (1) consumption in the manufacture/production of other goods for sale; (2) consumption otherwise; (3) disposal of those goods within the State otherwise than by way of sale; and (4) dispatch of goods outside the State. Purchase tax, levied under Section 4(4) of the Act, is similar to Section 6-A of the A.P. General Sales Tax Act, 1957 (for short the APGST Act). Section 6-A was inserted in the APGST Act by Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. (1994) 5 SCC 672, ; State of M.P. v. Chhotabhai Jethabhai Patel Co.(1972) 1 SCC 209 ; Kedar Nath v. State of Bihar AIR 1962 SC 955 (Five Judge Bench). If the language is not clear and precise as it ought to be, the attempt of the court should to ascertain the intention of the legislature and put that construction which would lean in favour of the constitutionality unless such construction is wholly untenable. (State of Karnataka v. Hansa Corpn. (1980) 4 SCC 697 ; Seaford Court Estates Ltd. v. Asher (1949) 2 ALLER 155 (SC)). II. SECTION 4(4) OF THE ACT ITS SCOPE: 6. Section 4(4) of the Act provides that every VAT dealer, who in the course of his business purchases any taxable goods from a person or a dealer not registered as a VAT dealer or from a VAT dealer in circumstances in which no tax is payable by the selling VAT dealer, shall be liable to pay tax at the rate of four/five percent on the purchase price of such goods if, after such purchase, the goods are (i) used as inputs for goods which are exempt from tax under the Act; or (ii) used as inputs for goods, which are disposed of otherwise than by way of sale in the State or dispatched outside the State oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) from a VAT dealer in circumstances in which no tax is paid by the selling dealer; (2) the VAT dealer, who has purchased the taxable goods from persons mentioned at (a), (b) and (c) above, is liable to pay tax at 4%/5% on the purchase price of such goods which, under Section 2(25) of the Act, is defined to mean the amount of valuable consideration paid or payable by a person for any purchase made by him. The liability to pay such tax, however, arises only when, after such purchase, the goods are (i) used as inputs for goods which are exempt from tax under the Act; or (ii) used as inputs for goods which are (a) disposed of otherwise than by way of sale in the State, or (b) dispatched outside the State otherwise than by way of (1) sale in the course of inter-state trade or commerce or (2) export out of the territory of India; or (iii) disposed of, otherwise than by way of consumption or by way of sale, either (a) within the State or (b) in the course of inter-state trade or commerce or (c) export out of the territory of India. If a common input is used to produce more goods than one and, if any one of the goods so produced attracts clauses (i) to (iii) of Section 4(4), the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnataka (1993) 90 STC 537 (Karnataka HC)), or where a VAT dealer purchases goods and disposes it otherwise than by way of consumption or by way of sale. The idea is that the State should have the benefit of one tax atleast from a transaction in such goods involving sale or purchase. (Madhur Trading Co.). 10. Section 4(4) of the Act brings to tax goods the sale of which would, normally, have been taxed at some point in the State. Subsequent to their purchase by the dealer if those goods are not available for taxation, owing to the act of the dealer in (1) using them as inputs for goods which are exempt from tax under the Act; (2) using them as inputs for goods which are disposed of otherwise than by way of sale in the State; (3) using them as inputs for goods which are dispatched outside the State otherwise than by way of sale in the course of inter-state trade and commerce or export out of the territory of India; or (4) disposing of such goods otherwise than by consumption or by way of sale either within the State or in the course of inter-state trade or export, tax is levied on the purchase price of such goods. (Kandaswami12). True it is that the levy materialises only when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consumption in the manufacture of other goods, and yet the manufactured goods are dealt with in a manner as to deprive the State of revenue. In such cases, there is no reason why the State should forego its tax revenue on the purchase of raw material/inputs. (Hotel Balaji1). 13. The principle behind the levy of purchase tax is that, if the goods purchased are not available for taxation inside the State and, by reason of one of the contingencies, the State is likely to lose its revenue, the interest of the State needs to be secured. The policy underlying Section 4(4) is to tax every transaction either at the point of sale or purchase. Where the seller is not taxed or cannot be taxed, the purchaser is taxed. By the same reasoning, when the seller is taxed, the purchases is not taxed. (Ruchi Soya Industries Limited v. Commercial Tax Officer Harbour III Assessment Circle, Chennai (2008) 12 VST 546, ; Malabar Fruit Products Co. (1972) 30 STC 537 (Ker) approved in M.K. Kandaswami; and Hotel Balaji). The fact that, in a given case, the purchased goods are consigned by the purchaser to his own depots or agents outside the State makes no difference to the nature and character of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise than by way of sale; purchase tax is levied only when the goods, produced from the inputs, are not subjected to tax; and the petitioners cannot escape the liability to pay purchase tax on raw cotton (proportionately), as no tax is levied on the oil cake, extracted by them from cotton seed, which is dispatched outside the State. 17. In these Writ Petitions, the goods which have been subjected to tax under Section 4(4) of the Act, are raw cotton (kapas), paddy, raw dhal and soyabean seed. Tax, under Section 4(4), has been levied on the proportionate purchase value of raw cotton (kapas) on the ground that cotton seed/cotton deoiled cake/cotton delint husk (hull) have not been subjected to tax under the Act. Likewise tax has been levied on the proportionate purchase value of paddy and raw dhal on the ground that husk has not been subjected to tax under the Act. Tax has also been levied on the proportionate purchase value of soyabean seed on the ground that soyabean deoiled cake has not been subjected to tax under the Act. 18. Raw cotton, paddy, raw dhal and soyabean seed are all taxable goods. The expression taxable goods, as used in Section 4(4), can be defined as goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 4(4) wholly nugatory. (M.K. Kandaswami). 20. The table below details the process to which the agricultural produce (on which tax under Section 4(4) has been levied in this batch of Writ Petitions), are subjected to, resulting in production of other goods. IV. SALE OF AGRICULTURAL PRODUCE TO VAT DEALERS FARMERS ARE NOT SUBJECTED TO TAX UNDER THE ACT: 21. It is contended, on behalf of the petitioners, that the goods, i.e., paddy, cotton kapas, soyabean seed, and dhal, are purchased from farmers in all these cases, except in the case of cotton mills where kapas are also purchased from registered dealers; the farmer is outside the purview of the Act; Section 2(6), which deals with the definition of business, excludes farmer in the relevant Explanation-III appended to the definition; so also the definition of dealer in section 2(10) r/w ExplanationII; as the farmer, is outside the purview of the Act, treating him as a person, or a dealer not registered as a VAT dealer, is without jurisdiction; the intention of the legislature is to exempt the farmer from the clutches of the Act; the definition of Sale, in Section 2(28), refers to business and trade; trade and busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. (Madhur Trading Co.). Section 4(4) visualises imposition of tax on purchases made by a VAT dealer from a person other than a registered dealer, who could be a non- registered dealer or a person who is not a dealer. (Hindustan Milkfood Manufacturers Ltd.). 24. Section 2(6) of the Act defines business to include (a) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on or undertaken with a motive to make gain or profit and whether or not any gain or profit accrues therefrom; (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; and (c) any transaction in connection with commencement or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. Under Explanation (iii) thereto, for the purpose of Section 2(6), a sale by a person, whether by himself or through an agent of agricultural or horticultural produce grown by himself or grown on any land whether as owner or tenant in a form not different from the one in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise provide, under Section 4(4) of the Act also. 27. The tax levied under Section 4(4) is not on the sale of goods by a farmer/agriculturist, but on the VAT dealer who purchases goods (agricultural produce) from the farmer. The contention that a farmer or an agriculturist is being subjected to tax is not tenable, as tax is levied not on him but on the VAT dealer who purchases goods from him. It is not every purchase of taxable goods from an agriculturist/farmer, but only such goods which fall within the ambit of clauses (i) to (iii) of Section 4(4), and its proviso, which attracts levy of tax at the stage of its purchase. The contention that a farmer/agriculturist is indirectly being subjected to tax does not, therefore, merit acceptance. 28. Broadly speaking, the effect of Section 4(4) is: tax payable at sale point becomes the tax payable on the purchase point in certain circumstances. Because the seller is not, or cannot be, taxed for certain reasons, the purchasing dealer is being taxed. When taxable goods are sold by a farmer/agriculturist he cannot be taxed because he is not a dealer. The purchaser is taxed in such cases provided one of the conditions specified in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arises only when there is a liability. But for the exemption, the dealer would be required to pay tax. In other words, exemption pre-supposes a liability. (Associated Cement Companies Ltd. v. State of Bihar (2004) 7 SCC 642) ; Peekay Re-Rolling Mills (P) Ltd. v. Asstt. Commr. (2007) 4 SCC 30 , ). Exemption does not negate levy of tax altogether. Despite an exemption, the liability to tax remains unaffected, only the subsequent requirement of payment of tax to fulfil the liability is done away with. (Peekay Re-Rolling Mills (P) Ltd. (2007) 4 SCC 30). Section 4(4)(i) of the Act is attracted where the purchased goods are used as inputs for goods which are exempt from tax under the Act. Section 7 of the Act stipulates that the goods, listed in Schedule I to the Act, shall be exempt from tax under the Act. The VAT dealer, who purchases paddy from a farmer and mills it, obtains rice and husk. A process of manufacture is involved in the production of rice by milling paddy, and the rice so produced is distinct in nature and character from paddy. When paddy is dehusked and rice is produced there is a change in the identity of the goods, and paddy does not continue to be paddy thereafter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se tax levied on other goods which are used as input for such exempted goods. Both Section 4(4) and Section 7 form part of the Act and the submission that the executive is seeking to levy tax on goods, which are exempt from tax under the Act, does not merit acceptance. Having granted exemption in respect of certain goods, under Section 7 read with the entries in the first schedule, the legislature has also chosen to levy purchase tax, under Section 4(4) (i) of the Act, on goods which are used as inputs for goods exempt from tax under the Act. VI. THE FIRST PROVISO TO SECTION 4(4) ITS SCOPE: 34. It is contended, on behalf of the petitioners, that the pro-rata principle, incorporated in the 1st proviso to Section 4(4), applies only to the value of goods, used or disposed of in the manner as prescribed; no purchase tax is leviable as the use of expression disposed of in the proviso makes it clear that branch transfers or stock transfers to ones own consignee/agents, which do not involve transfer of ownership, will not attract the charge; the pro- rata principle is not applicable to stock transfers; Section 4(4), as interpreted by the Revenue, tries to reach out to the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., Kapas), and then the cotton seed is processed into oil and cake, raw cotton becomes the input for all these products; the petitioners herein claim exemption on the turnover relating to dispatches outside the state, otherwise than by way of sale (i.e. consignment) of cotton seed oil, cotton seed cake and, in some instances, cotton seed; since it is an exempt transaction, purchase tax is levied on the proportionate purchase value of the goods i.e., input i.e., raw cotton under clause (ii) of Section 4(4) of the Act; a common input is one which gives rise to an output or outputs; inputs, which are not related to the outputs, are specific inputs; a common input is one which gives rise to both common and specific outputs; raw cotton is a common input for cotton seed, oil and cake; in case the dealer purchases cotton lint and sells it as it is, it would be a specific output as it is not connected with oil and cake; the word used in Section 4(4) permits the assessing authority to go back and levy purchase tax on the purchase price of the input which is purchased from farmers/ un-registered dealers, if any of the output /outputs, arising from such input, are disposed in the manner pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed by him outside the State. 37. A proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. (S. Sundaram v. V.R. Pattabhiraman AIR 1985 SC 582 ). The proviso to Section 4(4) prescribes the manner in which the turnover, taxable under Section 4(4) of the Act, should be determined. It stipulates that, where a common input is used to produce goods, the taxable turnover under Section 4(4) shall be the value of the inputs proportionate to the value of the goods used or disposed of in the manner prescribed in clauses (i) to (iii) thereunder. 38. The goods used in the manufacture of any output or end- product might comprise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 479 ; CCE v. Jay Engineering Works Ltd. 1989 Supp (1) SCC 128 , ). The word common, as used in the proviso to Section 4(4), is significant. The Concise Oxford Dictionary of Current English (Eighth Edition) defines common, among others, to mean belonging to two or more quantities (common factor). The input must be common to one or more outputs. Paddy, as an input, is common both to rice and husk and soyabean seed, as an input, is common both to soyabean oil and soyabean deoiled cake. 40. The proviso to Section 4(4) is attracted where a common input is used to produce goods more than one, and where the output or one of the outputs cannot be subjected to tax as it attracts the ingredients of clauses (i) to (iii) of Section 4(4) of the Act. In such cases tax is levied on the value of the input proportionate to the value of such output/outputs. Application of the principle, words in the singular include the plural and vice versa, depends on whether the contrary intention appears from the context of the provision. (Sin Poh Amalgamated (H.K.) v. Attorney General (1965) 1 All E.R. 225 ). As the word inputs, referred to in the second limb of the proviso, refers only to the common input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... founded on a broad purposive interpretation, giving effect to the intention of the legislature. This principle is based on an orthodox form of statutory interpretation. And in asserting the power to examine the substance of a composite transaction, formalism in fiscal matters is rejected and a more realistic legal analysis has been chosen. (Inland Revenue Commissioners v. Mc Guckian (1997) 3 All ER 817 ; Ramsay (WT) Ltd. v. IRC (1981) 1 ALLER 865 = (1982) AC 300). The main object of Section 4(4) is to plug leakage of revenue and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile. (Hotel Balaji; M.K. Kandaswami). 42. The proviso to Section 4(4) of the Act is attracted where a common input is used to produce one or more outputs. By the use of the word common, the legislative intent is to tax the proportionate value of the common input to the extent one or more of the outputs attract the ingredient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subjected to tax under Section 4(4) of the Act. That would, however, not justify raw-cotton, which is a commodity distinct from cotton seed, being subjected to tax in terms of the proviso to Section 4(4), as raw-cotton is not the common input for cotton seed hull, cotton seed oil and cotton seed de-oiled cake. The use of the words used or disposed of in the manner as prescribed under this section in the proviso, makes it clear that the common input, of the outputs which are used or disposed of in the manner prescribed in clauses (i) to (iii) of Section 4(4) of the Act, can alone be subjected to tax in terms of the proviso. Cotton seed is derived from raw-cotton. Even if cotton seed de-oiled cake were to attract the ingredients of Section 4(4)(ii), the proportionate value of raw-cotton cannot be subjected to tax as it is not raw-cotton, but cotton seed which is the common input for cotton seed oil or cotton seed hull or cotton seed de-oiled cake. The proviso to Section 4(4) cannot be so extended as to bring within its ambit goods whose derivatives are common inputs for other goods (outputs) which attract the ingredients of clauses (i) to (iii) of Section 4(4) of the Act. 45. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with in the manner specified in clauses (i) to (iii) of Section 4(4) and the other output is not, it is only the output which is dealt with in the manner specified in clauses (i) to (iii) of Section 4(4) which falls within the ambit of Section 4(4) of the Act. For instance, cotton seed is an input both for cotton seed oil and cotton seed cake. If cotton seed oil were to constitute 70% of cotton seed and the remaining 30% cotton seed deoiled cake, and if cotton seed oil is sold and the cotton seed deoiled cake is used or disposed of in the manner specified in clauses (i) to (iii) of Section 4(4), it is only the proportionate value of cotton seed, representing cotton seed deoiled cake, which can be subjected to purchase tax under Section 4(4) of the Act. In the aforesaid illustration as cotton seed deoiled cake is taken as constituting 30% of cotton seed, the proportionate value, liable to tax under Section 4(4) of the Act, would be 30% of the purchase price of cotton seed. In order to attract levy of tax under Section 4(4) of the Act cotton seed, in the aforesaid illustration, should have been purchased by a VAT dealer from persons who are not dealers under the Act and, conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyabean seed which have yielded the aforesaid goods. VII. IS THE METHOD PRESCRIBED IN THE FIRST PROVISO TO SECTION 4(4), FOR COMPUTING THE CORRESPONDING VALUE, IRRATIONAL? 50. It is contended, on behalf of the petitioners, that the assessing authorities, in this batch of writ petitions, have not specifically adopted a rational method for the purpose of computing the corresponding purchase value; neither the legislature in the Act, nor the rule making authority under the relevant rules, have prescribed any method for computing the corresponding purchase turnover of the input alleged to have been used for obtaining the resultant by-product exempt from tax; it is the value of the inputs which is relevant; and the proviso should be understood to be applicable in cases where multiple inputs are used for obtaining an output or different outputs exempt from payment of tax, in which case only the proportionate purchase value of the specific input, used for obtaining the output, has to be calculated as the second limb refers to the value of inputs which is plural in nature. Reliance is placed on Delux Wires v. State of A.P (1990) 77 STC 373 (APHC) in this regard. 51. On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of cotton Kappas and seeds comparing it with the records in respect of oil cake dispatched to other branches; and it is not difficult to arrive at the value applying ordinary principles of accountancy. 53. In Delux Wines (1990) 77 STC 373 (APHC) , a Division Bench of this Court declared that Section 2(1)(s)(ii) and Section 14-B of the APGST Act, as incorporated by the Amendment Act 18 of 1985, must be read down by not giving effect to the said provisions until and unless the legislature prescribes guidelines for exercising the power conferred thereunder; and the expressions prevailing market prices and abnormally low occurring in Section 14-B of the Act, are defined. The Division bench, however, made it clear that, as and when the legislature chooses to define the said two expressions and indicates the method and manner of determination of the turnover with reference to the prevailing market prices, Section 14-B of the Act can be enforced from such date. 54. No uniform formula can be prescribed in applying the proviso to Section 4(4) of the Act, as the proviso would apply to different goods, the proportionate value of which may vary from one to another. For instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rigorous construction. Courts construe the machinery sections in such a manner that a charge to tax is not defeated. (Associated Cement Company Ltd. v. Commercial Tax Officer (48) STC 466 at 476 , Kota ; Commissioner of Wealth Tax, Meerut v. Sharvan Kumar Swarup Sons (1994) 6 SCC 623. Procedural law, generally speaking, is applicable to pending cases. No suitor can be said to have a vested right in procedure. (Sharvan Kumar Swarup Sons (1994) 6 SCC 623 ). 58. The liability is imposed by the charging section ie Section 4(4) of the Act. Its proviso enables the liability to be quantified and, when quantified, to be enforced against the subject, but the liability is definitely and finally created by the charging section i.e., Section 4(4) of the Act. (Sharvan Kumar Swarup Sons (1994) 6 SCC 623; W.H. Cockerline Co. v. The Commissioner of Inland Revenue (16) TC 1 at 19 ). It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and such an unconstitutional outreach is not permissible. 61. A similar contention was considered and negatived in Hotel Balaji, wherein the Supreme Court held:- .The section applies only in those cases where (a) the goods are purchased (for convenience sake, I may refer to them as raw material) by a dealer liable to pay tax under the Act in the State, (b) the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter-State sale or export sale. It is evident that if such manufactured goods are not sold within the State of Haryana, but yet disposed of within the State, no tax is payable on such disposition; similarly, where manufactured goods are despatched out of State as a result of an inter-State sale or export sale, no tax is payable on such sale. Similarly again where such manufactured goods are taken out of State to manufacturers own depots or to the depots of his agents, no tax is payable on such removal. Goodyear1 takes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d promote social and economic planning. Section 9 of Haryana Act and Section 13-AA of Bombay Act are intended to encourage the industry and at the same time derive revenue. It is also not right to concentrate only on one situation viz., consignment of goods to manufacturers own depots (or to the depots of his agents) outside the State. Disposal of goods within the State without effecting a sale also stands on the same footing, an instance of which may be captive consumption of manufactured products in the manufacture of yet other products. Once the scheme and policy of the provision is appreciated, there is no room, in our respectful opinion, for saying that the tax is on the consignment of manufactured goods. (emphasis supplied). The judgment in Hotel Balaji1 was followed in Devi Dass Gopal Krishan (P) Ltd.. The contention urged on behalf of the petitioners, that tax levied under Section 4(4) of the Act is in the nature of consignment tax, does not, therefore, merit acceptance. X. SECTION 15 (a) OF THE CST ACT: ITS SCOPE: 63. It is contended, on behalf of the petitioners, that unginned cotton, and ginned cotton, are treated as one and the same commodity under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two different entries; therefore purchase tax on paddy, and sales tax on rice, can be levied; husk is also a different commercial commodity under the Act; Kapas and cotton seed are two different commercial commodities taxable under two different entries; it is established from the returns, filed by the petitioners, that 100 kgs. of Kapas yields only 32 or 33 kgs of lint, and the rest is either seed or waste; as per this calculation also, the total tax levied on kapas do not exceed 4% as restricted under Section 15(a) of the CST Act; while the petitioners have raised this issue in some of the Writ Petitions, they did not produce any material evidence to prove that the tax levied on declared goods exceeded 4% in any given case; the tax payable under Section 15(a) of the CST Act is output tax input tax; even after levy of purchase tax, if the total tax paid or payable by the dealer does not exceed 4% on the total purchase or sale of cotton, Section 14 15 of the CST Act will not be violated; in the instant case (cases), since the total tax paid or payable by the dealer does not exceed 4% on the total purchase or sale of cotton, it cannot be said that levy of purchase tax is in violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd commerce, should not be taxed over and over again. In order to achieve this object, it was left open to Parliament to make a law on the subject. In the exercise of this constituent power under Article 286 of the Constitution, the Parliament enacted the CST Act. The amendment of Article 286 by the Constitution (6th Amendment) Act, 1956, and the enactment of the Sales Tax Validation Act 1956, and the CST Act, were all intended to serve a dual purpose: to maintain the source of revenue from sales-tax to the States and, at the same time, to prevent the States from subjecting transactions, in the course of inter-State trade, to tax and thereby obstruct the free flow of trade by making commodities unduly expensive. The CST Act was enacted under the authority of Parliament, but the tax is collected through the agency of the State. It is levied ultimately for the benefit of the States and is, statutorily, assigned to them. It is clear from the amendments made by the Constitution (Sixth Amendment) Act, 1956, in Article 269, and the enactment of the CST Act that CST, though levied for and collected in the name of the Central Government, is a part of the sales-tax levy imposed for the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions as may be provided in any law in force in that State. 69. Section 15, as it originally stood, stipulated that, in respect of declared goods, the tax (on sale or purchase) should not exceed the prescribed rate; it should not be levied at more than one stage; and it should be refunded to persons from whom it is collected if the goods are sold in the course of inter-state trade or commerce. 70. Section 15(a) of the CST Act was amended by Act 20 of 2002 with effect from 13.05.2002 and the words and such tax shall not be levied at more than one stage, in the pre-amended provision, was omitted. Clause 146 of the notes and clauses to the Finance Bill 2002, as introduced in Parliament on 28.02.2002, noted that Section 15(a) of the CST Act was sought to be amended with a view to allowing the State Governments to impose tax on declared goods at more than one stage in respect of the sale of declared goods. After its amendment, by Act 20 of 2002 with effect from 13.05.2002, Section 15 of the CST Act reads as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-State trade. (Mahendrakumari Iswarlal and Co. , Tirupattur v. Commercial Tax Officer, North Arcot AIR 1968 Madras 90 (Madras High Court)). The restriction placed by Section 15 (a) of the CST Act, on the taxing power of a State, is to ensure minimum tax burden on the declared goods because of their special importance in the economy. (Premier Steels v. Assistant Commissioner (Assessment) (1995) 97 STC 395 (Kerala HC). Section 15 of the CST Act is not restricted only to registered dealers. (Rattan Lal Co.). 73. The provisions of a State Act cannot override the provisions of Section 15(a) of the CST Act. The pre-amended Section 15(a) required that, if sales or purchase tax had been levied on declared goods at one point, it could not be levied at any other subsequent stage and consequently, if declared goods had suffered purchase tax, they could not be subjected to tax again at the point of sale to the consumer. (Commissioner, Sales Tax, U.P., Lucknow v. Chokhani Co. (1982) 51 STC 195 (Allahabad HC) ; Commissioner of Sales Tax v. Nirankari Engineering, Kanpur (1982) 51 STC 195 (Allahabad HC); Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 at 296-297 (SC) ). Hit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price thereof. Cotton, whether ginned or unginned, is treated as a single commodity or a single species of declared goods and cannot, therefore, be subjected to tax exceeding the rate prescribed in Section 15(a) of the CST Act on both the sale and purchase price and, prior to its amendment, at not more than one stage. (State of Punjab v. S.G.R. Cotton G. P. Factory ((1989) 74 STC 1) ; State of Punjab v. Chandulal Kishorilal (1970) 25 STC 52 : AIR 1969 SC 1073 ). 76. Section 15(a) of the CST Act, before its amendment by Act 20 of 2002 with effect from 13.05.2002, disabled tax from being levied on declared goods at more than one stage. For instance, if ginned cotton (cotton lint) was hitherto subjected to tax on its sale, no purchase tax could have been levied on raw cotton as Section 15(a), before its amendment, restricted imposition of tax on declared goods only to one stage i.e., either at the stage of its sale or its purchase. However, after the amendment of Section 15(a) by Act 20 of 2002 with effect from 13.05.2002, tax under the Act can be imposed at more than one stage. In effect tax can now be levied both on the sale or purchase of cotton i.e., tax can be imposed both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be ₹ 1,00,000/-, and 4% tax thereon would be ₹ 4,000/-. If, after raw cotton is ginned, 70% thereof constitutes cotton seed, and 30% ginned cotton, then, from the 1000 kgs of raw cotton purchased by him, the VAT dealer would have obtained 300 kgs of ginned cotton (cotton lint). If ginned cotton is sold at say ₹ 400/- per kg, then the sale price of 300 kgs of ginned cotton would be ₹ 1,20,000 and sales tax thereon at 4% would be ₹ 4,800/-. As raw cotton and ginned cotton are to be treated as the very same commodity both under Section 14(ii) of the CST Act and Entry 79 of the IV Schedule to the VAT Act, tax, both on raw cotton and ginned cotton together, cannot exceed 4%. In the illustration above mentioned, as tax on the sale of ginned cotton of ₹ 4,800/- exceeds the tax payable on the entire purchase value of raw cotton of ₹ 4,000/-, no purchase tax can be levied on the purchase of raw cotton by the VAT dealer. 79. Section 14(vi-a) of the CST Act relates to pulses (dhal). Section 15(d) of the CST Act stipulates that each of the pulses referred to in Section 14(vi-a), whether whole or separated and with or without husk, shall be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak Co. (1962) XIII STC 709 (APHC) ; Pithapuram Taluk Tobacco, Cigars and Soda Merchants Union v. The State of Andhra Pradesh (1958) 9 STC 723 (APHC DB). While raw cotton is declared goods under Section 14(ii), cotton seed is treated separately as declared goods under Section 14(vi)(iii) of the CST Act. Likewise, while raw cotton is listed under Entry 79 of the IV Schedule to the Act, cotton seed is listed separately under Entry 77 of the IV Schedule to the Act. Raw cotton and cotton seed are treated as two different commodities both under the CST Act and the VAT Act. The restriction under Section 15(a), of the maximum rate of 4% tax being imposed, would not disable tax at 4% being levied on purchase of raw cotton and tax again being levied at 4% on the sale of cotton seed as both Parliament and the State Legislature have treated them as two different and distinct goods. 81. The ingredients of Section 15[c] of the CST Act are: (i) tax has been levied under the VAT Act on the sale or purchase of paddy which is declared goods under Section 14(1)[c] of the CST Act; (2) rice is procured from such paddy; and (3) tax is levied on the rice so procured. In such circumstances tax levia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such goods by the last dealer liable to pay the tax and in the case of purchase tax the stage is purchase by the last dealer liable to pay the tax. It is also provided that the turnover of any dealer for any period shall not include his turnover during that period of any sale or purchase of declared goods at any other stage than the stage so mentioned. It will be seen that the matter is now in the hands of the dealer. He has to find out for himself whether he is liable to pay the tax or not. A dealer knows what he has done with his goods or is going to do with them. If he knows that he is not the last dealer having parted with the goods to another dealer or he knows that he is going to use the goods or sell them to consumers, he knows when' he is not liable to tax and when he is. Therefore, he will not include the transaction in his taxable turnover in the first case but include it in the second. Goods in the hands of a dealer are not taxed. They are only taxed on the last purchase or sales. This information is always possessed by a dealer and by providing that he need not include in his turnover any transaction except when he is the last dealer, the position is now cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such goods are sold in the course of inter-state trade or commerce, and tax under the CST Act is paid; where tax has been levied under the state law on declared goods and, subsequently, such goods are sold in the course of inter-state trade and commerce and tax has been paid under the CST Act, Section 15(b) of the CST Act requires the tax levied, under the state law, to be reimbursed to the person making sale in the course of inter-state trade and commerce; where cotton lint, derived out of raw cotton, is completely sold in the course of inter-state trade, and the tax due under the CST Act is completely paid, purchase tax under Section 4(4) cannot be levied on the supposed value of cotton kapas relatable to the value of cotton seed/cotton seed oil/cotton seed oil cake sent on consignment; the petitioners, at times, purchased cotton kapas (raw cotton) or cotton lint from other registered VAT dealers under tax invoices; on such purchases, the other registered VAT dealers charged VAT; the petitioners, after purchasing from other registered VAT dealers, ginned raw cotton and derived cotton lint; the purchased cotton lint was sold locally within the State or in the course of inter-state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of inter-state trade or commerce if the sale or purchase (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Under Section 5(1) a sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Under Section 5(3), notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase, occasioning the export of those goods out of the territory of India, shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export. 88. Section 8 of the CST Act prescribes the rates of tax on sales in the course of inter-state trade or commerce. Under Section 8(1) every dealer who, in the course of inter-state trade or commerce, sells ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3 of the CST Act, are zero rated sales under Section 8 of the Act and, consequently, no tax is levied under the Act on taxable goods sold in the course of inter-state trade or commerce. In addition, such inter-state sales are also eligible for input tax credit. The tax paid by a VAT dealer, on the purchase of goods from another VAT dealer, can be claimed as input tax credit by him when the said taxable goods are sold by him in the course of inter-state trade or commerce. 90. The ingredients of Section 15(b) of the CST Act are (1) tax must have been levied under the VAT Act, in respect of the sale or purchase of declared goods, inside the State; (2) such declared goods must, thereafter, have been sold in the course of inter-state trade or commerce; (3) tax must be paid under the CST Act in respect of the sale of such goods in the course of inter-state trade or commerce; (4) in such an event, the tax levied under the VAT Act is required to be reimbursed to the person making such sale in the course of inter-state trade or commerce; (5) reimbursement, of the tax levied under the VAT Act, shall be in such manner, and shall be subject to such conditions, as may be provided und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If, in such circumstances, purchase tax were to be levied under Section 4(4) on raw cotton, it would then amount to levy of purchase tax on the very same goods which have been sold in the course of inter-state trade and commerce. In such an event, Section 15(b) of the CST Act would require the entire purchase tax, levied under Section 4(4) of the VAT Act, to be reimbursed. 92. Raw dhal (wholesome dhal) and furnished dhal (wholesome dhal after it is dehusked) is treated as the same commodity, both under Section 15(d) of the CST Act and Entry 82 of the IV Schedule to the Act. Likewise if finished dhal is sold in the course of inter- state trade or commerce, then Section 15(b) would require purchase tax levied under Section 4(4) on raw dhal to be reimbursed to the person selling finished dhal in the course of inter-state trade and commerce. Unlike raw cotton, this difficulty does not arise when cotton seed is purchased from persons who are not dealers under the VAT Act. Cotton seed is the common input for both cotton seed oil and cotton seed de-oiled cake. Where cotton seed de-oiled cake is despatched outside the State on consignment, the proportionate purchase value of cotton seed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ruling of the advance ruling authority, under Section 67 of the Act, could or should have been revised by the Commissioner of Commercial Taxes under Section 32(1) of the Act. Even otherwise, as the validity of the said order of revision is stated to be under challenge in the Special Appeals before this Court, it would be wholly inappropriate for us to examine this contention in the present writ proceedings. As the assessment orders are, itself, under challenge in these Writ Petitions it is wholly unnecessary for us to express any opinion on whether or not the assessing authority could or should have deferred assessment proceedings on the ground that a similar issue was pending adjudication before this Court. XIII. LIMITATION FOR PASSING AN ORDER UNDER SECTION 21(3) AND 21(5) OF THE ACT: 95. It is contended, on behalf of the petitioners, that a part of the period, in the relevant assessment orders, is barred by limitation; the Act does not prescribe a separate assessment year, and assessment can be made for any part of a tax period; a part of the assessment period is, therefore, barred by limitation as the assessment order is passed beyond 4 years; nothing has been stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of filing of the return whichever is later. Section 21(4) empowers the prescribed authority, based on any information available or on any other basis, to conduct a detailed scrutiny of the accounts of any VAT dealer and, where any assessment as a result of such scrutiny becomes necessary, to make such assessment within a period of four years from the end of the period for which the assessment is to be made. Section 21(5) stipulates that, where any wilful evasion of tax has been committed by a dealer, an assessment shall be made, to the best of his judgment, by the prescribed authority within a period of six years from date of filing of the return or the first return relating to such offence. 98. Rule 23 of the Rules relates to tax returns and, under sub- rule (1) thereof, the return to be filed by a VAT dealer, under Section 20, shall be in Form VAT 200, and shall be filed within 20 days after the end of the tax period. Under Rule 23(6)(a) if any VAT dealer, having furnished a return in Form VAT 200, finds any omission or incorrect information therein, other than as a result of an inspection or receipt of any other information or evidence by the authority prescribed, he shall s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be the 20th of April, 2014. Except in cases where a revised return is filed, in terms of Rule 23(6)(a), the limitation period, for making assessment, would expire four years from the due date of the return. 100. The extended period of six years, prescribed under Section 21(5) of the Act, would apply only where the dealer has committed wilful evasion of tax. As the assessment order is required under Rule 25(5), to be preceded by a notice in Form VAT 305-A, it is only if the contents of the show cause notice contain factual allegations of wilful evasion of tax, would the extended period of limitation of six years under Section 21(5) of the Act apply. It would not suffice for the assessing authority to state, for the first time in the assessment order, that the assessee has committed wilful evasion of tax. The show cause notice should contain factual details to show the basis on which the assessing authority has arrived at the tentative conclusion that the VAT dealer has committed wilful evasion of tax, for it is only then would the VAT dealer have the opportunity to submit his reply and satisfy the assessing authority that he has not committed wilful evasion of tax; and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is the sine qua non, or the condition precedent, to the assumption of jurisdiction by the authority. Once such a jurisdictional fact is found to exist, the authority has the power to decide adjudicatory facts or facts in issue. (Carona Ltd. v. Parvathy Swaminathan Sons (2007) 8 SCC 559 ; Halsburys Laws of England (4th Edn.), Vol.1, Para 55, p.61; Reissue, Vol.1(1), Para 68, pp.114-15; Chaube Jagdish Prasad v. Ganga Prasad Chaturvedi AIR 1959 SC 49 ; Arun Kumar v. Union of India (2007) 1 SCC 732). The prescribed authority gets jurisdiction to assess the VAT dealer to tax, within the extended period of limitation of six years under Section 21(5) of the Act, only if the said dealer has committed wilful evasion of tax. As the fact, of commission of wilful evasion, is a jurisdictional fact the dealer is entitled to satisfy the prescribed authority, on being given the opportunity to show cause, that such jurisdictional facts are non-existent; and jurisdiction under Section 21(5) of the Act cannot be exercised. It is necessary, therefore, for the prescribed authority to detail these jurisdictional facts in the show-cause notice proposing to assess the dealer to tax under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance is placed by the respondents on Rule 20(7) of the Rules which prescribes the formula i.e. a x b/c, where a is said to be the total amount of input tax for common inputs for each tax rate excluding the tax paid on goods mentioned in sub-rule (2) of Rule 20 which deals with the ineligible list; soyabean deoiled cake does not find place in the ineligible list; it, being a by-product obtained while manufacturing soyabean oil, cannot be denied the benefit of input-tax credit as the purchased soyabean seed is used for obtaining soyabean oil which is the main manufacturing activity of the petitioner; rejection of input-tax credit on the by-product i.e., soyabean deoiled cake, which is exempt from payment of tax, is without jurisdiction; restriction of input-tax, under Rule 20(6) of the Rules, is illegal; the petitioners claimed input-tax credit ITC as per Rule 20(9)(a) of the Rules, applied the formula as prescribed, and filed VAT 200A return and VAT 200B consolidated return; column 3 of the Form VAT 200A specifically refers to the sum of the boxes 13A, 14A, 16A, 17A and 19A of VAT 200 return; therefore the total of all the turnovers, taxable at different rates, is to be summed up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cotton seed cake, derived in the process, were used for both taxable sales and for exempt transactions; since some of the outputs are non-taxable by virtue of the nature of the transactions, VAT paid on the relevant portion of the inputs is restricted by rightly applying the formula a x b /c as per Rule 20 (8) of the Rules; levy of purchase tax under Section 4(4) of the Act, and the restriction of input-tax credit under Section 13 (6) and Rule 20 (8), are two different and independent acts which do not overlap; levy of purchase tax is limited to un- registered dealers (farmer) purchases, whereas the restriction of input tax credit is on VAT registered dealer purchases; and they are mutually exclusive and independent exercises covering different spheres of purchases by a VAT dealer. 106. Section 2(13) of the Act defines exempt sale to mean a sale of goods on which no tax is chargeable, and consequently no credit for input-tax related to that sale is allowable. Section 2(14) defines exempted turnover to mean the aggregate of sale prices of all goods exempt under the Act and full or part of the actual value or fair market value of all transactions not taxable under the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king a sale liable to tax to another VAT dealer, to issue, at the time of sale, a tax invoice in such form as may be prescribed. 108. Rule 20 of the Rules relates to input-tax credit and, under sub-rule (6) thereof, where any VAT dealer is able to establish that specific inputs are meant for specific output, the input-tax credit can be claimed separately for taxable goods; and, for the common inputs, such VAT dealer can claim input-tax credit by applying the formula a x b/c for the common inputs used for taxable goods, exempt goods (goods in Schedule I) and exempt transactions; under the proviso thereto, the VAT dealer is required to furnish an additional return, in Form VAT 200A, for each tax period for adjustment of input-tax credit; and also to make an adjustment for a period of 12 months, ending March every year by filing a return in Form VAT 200B. Rule 20(7) stipulates that, where a VAT dealer makes taxable sales and sales of exempt goods (goods in Schedule I) for a tax period, and inputs are common for both, the amount which can be claimed as input tax credit, for the purchases of the goods at each tax rate shall be calculated by the formula a x b/c. The proviso thereto re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Taxes, that levy of purchase tax under Section 4(4) of the Act, and the restriction of input-tax credit under Section 13 and Rule 20, are two different and independent acts which do not overlap, has considerable force. In any event the question, whether computation of input-tax credit in terms of Rule 20 is in violation of Sections 14 and 15 of the CST Act, must be answered on the facts and circumstances of each case. It is for the assessee to satisfy the assessing authority that computation of the eligible input-tax credit, in terms of Rule 20, is in violation of Sections 14 and 15 of the CST Act. XV: SUMMARY: 111. The conclusions afore-stated are summarised, briefly, as under: (i). Section 4(4) of the VAT Act is the charging section and its main object is to plug leakage of revenue, and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. (ii). The policy underlying Section 4(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances in which no tax is payable by the seller. In such circumstances tax, at 4%/5% of the purchase value of such goods, is liable to be paid by the VAT dealer who purchases the aforesaid goods i.e., agricultural produce. (ix). Where goods, liable to tax under the VAT Act, are purchased by a VAT dealer from other dealers who are not registered under the Act, and the goods have not suffered value added tax, a liability is imposed on the purchasing VAT dealer to the extent the goods purchased by him are used/disposed of as specified in clauses (i) to (iii) of Section 4(4) of the Act. (x). Tax, under Section 4(4), is not levied on goods which are exempt from tax. It is only because the goods listed in the first schedule to the VAT Act are exempt from payment of VAT under the Act is purchase tax levied, under Section 4(4)(i) of the VAT Act, on goods which are used as inputs for those goods which are exempt from tax under the Act. (xi). Section 4(4)(i) (ii) require that the manufactured/produced goods should have been transferred to some person otherwise than by way of sale. If the manufactured goods are not sold within the State, but are yet disposed of within the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a VAT dealer from a person who is not a dealer, then the proportionate purchase value of cotton seed can be subjected to tax under Section 4(4). (xix). The tax is imposed on the raw material purchased by the dealer (ie cotton seed) for, if purchase tax is levied on the value of the end product (ie oil cake), it would then be a tax imposed on the manufacture of goods which would be beyond the competence of the State Legislature. (xx). That would, however, not justify raw-cotton, which is a commodity distinct from cotton seed, being subjected to tax under the proviso to Section 4(4), as raw-cotton is not the common input for cotton seed hull, cotton seed oil and cotton seed de-oiled cake. (xxi). The use of the words used or disposed of in the manner as prescribed under this section, in the proviso to Section 4(4), make it clear that the common input, of the outputs which are used or disposed of in the manner prescribed in clauses (i) to (iii) of Section 4(4), can alone be subjected to tax. (xxii). The proviso to Section 4(4) cannot be so extended as to bring within its ambit goods whose derivatives are common inputs for other goods (outputs) which attract the ingredients ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly known as declared goods. (xxxi). The goods in this batch of Writ Petitions on which purchase tax under Section 4(4) of the Act has been levied, i.e., paddy, dhal, raw cotton and soyabean seed, are all declared goods under Section 14 of the CST Act. (xxxii). Section 15 of the CST Act places restrictions and imposes conditions which are essential to the validity of an impost by the State on such goods. If the conditions prescribed therein are not satisfied, the impost will be invalid. (xxxiii). The intention of Article 286(3) of the Constitution is not to destroy all charging sections in the sales tax acts of the States, which are discrepant with Section 15 of the CST Act, but to modify them in accordance with Section 15. The law of the State is declared to be subject to the restrictions and conditions contained in the law made by Parliament, and the provisions of the State Act would pro-tanto stand modified. (xxxiv). Where the turnover, of declared goods under Section 14 of the CST Act, are subjected to tax under the sales tax law of a State, Section 15(a) of the CST Act prescribes the maximum rate at which such tax may be imposed so as to ensure that inter-state trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry i.e., Entry 82 all kinds of pulses and dhals. (xlii). In view of both Section 15(d) of the CST Act, and Entry 82 of the IV Schedule to the Act, raw dhal (whole dhal) must be held to be the same commodity as finished dhal even after it is dehusked. Section 15(a) of the CST Act is attracted and, consequently, purchase tax on the purchase of raw dhal and tax of the sale of the resultant quantity of finished dhal together cannot exceed 4%/5%. (xliii). The restriction under Section 15(a) of the CST Act would apply only to goods falling under one item or entry under Section 14 of the CST Act, and the IV Schedule to the Act. Commodities, other than those specified, cannot be introduced into the relevant provisions/schedules on the ground that they are derived from the primary commodities. (xliv). Cotton kapas, in its unginned or unmanufactured state, contain cotton-seed. But it is by a manufacturing process that cotton and seed are separated, and the seed so separated is neither cotton nor part of cotton. They are two distinct commercial goods though, before the manufacturing process, the seed might have been a part of cotton itself. (xlv). The restriction under Section 15( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the return is required to be filed on or before the 20th of the succeeding month, the four year period of limitation, stipulated under Section 21(3), would commence from the last date of filing the return for a particular month, and would end four years thereafter. (liii). As Rule 23(6)(a) of the Rules enables a VAT dealer to submit an application in Form VAT 213, within a period of six months from the end of the relevant tax period, the limitation for making assessment under Section 21(3), in such cases, would be four years from the date of filing the said return. (liv). The period of limitation of four years must be computed for each tax period i.e., for each month and, unlike the APGST Act, not for an assessment year. (lv). The prescribed authority gets jurisdiction to assess the VAT dealer to tax, within the extended period of limitation of six years under Section 21(5) of the VAT Act, only if the said dealer has committed wilful evasion of tax. (lvi). As the assessment order is required, under Rule 25(5) of the Rules, to be preceded by a notice in Form VAT 305-A, it would not suffice for the assessing authority to state, for the first time in the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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