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TMI Blog2015 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the tax is leviable on the sale of paddy as per second schedule, tax could not be collected on account of exemption to the agriculturists in sale of their paddy. The assessing officer although initially did not assess the assessee for any purchase tax on paddy, but subsequently, assessment was reopened and assessee was held liable to pay purchase tax under Section 5A on the purchase of paddy. - first sale was by agriculturists in favour of the assessees, who were not liable to pay tax. The mere fact that payment of tax was exempted cannot furnish any basis for the respondents to shift the liability of tax on purchase, whereas, under second Schedule, liability is only on first sale. As per Section 15(a), there is restriction in levying tax by a State Legislature on more than one stage. When the second schedule has levied the tax on the first sale, there is no jurisdiction in the respondents to shift the levy on purchase. Tribunal which rightly deleted the levy of purchase tax on the assessee and committed no error in following the Apex Court judgment in Peekay Re-Rolling Mills's case (2007 (3) TMI 356 - SUPREME COURT OF INDIA). - Decided against Revenue. - S. T. Rev. Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, has filed revision. In Sales Tax Revision No. 4/2012 the following two questions of law have been framed:- A. Has not the Tribunal gone wrong in applying the decision of the Supreme Court reported in (2007) 15 KTR 273 (SC) to the facts of the above case and is not the finding of the Tribunal based on the said decision of the Supreme Court, perverse in the facts and circumstances of the case? B. Ought not the Tribunal have held that the assessee's purchase of paddy from unregistered dealers is liable to tax under section 5A and there is no question of any shifting of levy violating the restriction under section 15 of the CST Act? 4. The facts in S.T. Rev. No. 5 of 2012 are more or less similar and the same questions as noted above have also been framed in S.T. Rev. No. 5/2012. 5. When the Sales Tax Revisions came up for hearing before the Division Bench, the learned Government Pleader placed reliance on P.D. Thomas's case (supra) and Empees Modern Rice Mills's case (supra) contending that assessee was liable to pay tax on purchase of paddy. The learned Government Pleader further contended that the judgment of the Apex Court in Peekay Re-Rolling Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under sub-sections (1), (3), (4) or (5) of section 5 and either:- (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) uses or disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce; shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in Section 5. 9. It is relevant to note that in the present case assessee having purchased paddy from agriculturists, no tax was leviable or realised on the first sale of paddy, since the sale was from agriculturists, who were exempted to pay any sales tax. 10. Paddy being a declared goods under the Central Sales Tax Act, 1956 as well as the second schedule of the Act, 1963, the provisions of Section 15 of the Central Sales Tax Act, 1956 are also attracted. Section 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered office at Kozikode. It is a registered dealer under the Kerala General Sales Tax Act, 1963 (for short the State Act ). It carried on the business of steel re-rolling mills at Nallalam, Kozikode. The raw material used by the appellant in the production of bars and rods, is steel ingots, which the appellant either manufactures or purchases from other manufacturers from within or outside the State. Purchase of steel ingots effected by the appellant within the State are from manufacturing units, which are exempt from the payment of sales tax on the sale of such ingots by virtue of an exemption notification issued under Section 10 of the State Act. The assessee was issued notice under Section 5A, which was challenged in a Writ Petition before the High Court. The Writ Petition was dismissed, against which two Writ Appeals were filed, which were also dismissed by the Division Bench. The findings of the High Court dismissing the Writ Appeals have been noted in paragraph 8 of the judgment, which is quoted below:- 8. Aggrieved by the above order of the learned Single Judge, the appellant preferred two separate writ appeals. The Division Bench dismissed the writ appeals by a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial importance in inter-State trade or commerce. In case turnover of such goods is subjected to tax under the sales tax laws, Section 15 prescribes the maximum rate at which such tax shall be levied and the same could not be levied at more than one stage. The two conditions have been imposed in order to ensure that inter-State trade or commerce in such goods is not subjected to heavy taxation within the State occasioned by excessive rate of tax or by multipoint taxation. If either of the two conditions is not satisfied, the imposition of sales tax will not be valid. xx xx xx 22. The controversy in the instant case arises when a tax is sought to be levied under Section 5A of the State Act on the same goods that are taxable under Section 5, but exempted. The essential question that we are required to adjudicate upon is whether the tax sought to be levied under Section 5A on these goods, would amount to tax at a second stage and therefore violate Section 15 of the Central Act. The Apex Court, after considering several judgments on the issue, held that taxability under Section 5 remains unaffected by an exemption and the State cannot validly shift the burden of tax to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrv 104/2010 3 Rolling Mills (P) Ltd.'s case decided by the Supreme Court is now referred to Larger Bench of the Supreme Court and he produced copy of Reference Order issued by the Supreme Court before us. We notice that the Supreme Court has not considered the factual position in regard to rice mill while deciding the case in Surendra Modern Rice Mills' case. In fact the Supreme Court just applied the decision in Peekay Re-Rolling Mills (P) Ltd.'s case to the Rice Mill's case as such though factual position is different in the case of rice mill. As already stated, Legislature itself has provided safeguard against multiplicity of levy of tax on both paddy and rice falling under declared goods. So much so, the position is such that levy of tax on both paddy and rice has to be considered at the hands of dealer. In Peekay Rerolling Mills (P) Ltd.'s case Supreme Court found that there is levy of tax at the point of purchase of ingots by the SSI unit because it was purchased from another industrial unit which was liable to pay tax, but for the exemption granted to that unit. So much so, the Supreme Court held that there is levy at the hands of the seller of ingots, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase tax was levied under Section 5A. Following was laid down in paragraph 2 of the judgment:- 2. The first contention raised by counsel for the petitioner is that when Section 5A is applied in the hands of any dealer, such commodity becomes taxable at the point of last purchase in the State as it is consumed in the manufacture of the final product. However, Government Pleader submitted that goods taxable at the point of last purchase in the State as contained in the notification are only goods which are specifically made taxable at the point of last purchase in the First Schedule to the KGST Act. If petitioner's contention is accepted, then every commodity when assessed under Section 5A will become taxable at the point of last purchase and so much so, benefit of notification will be available. This is obviously not intended by the Government while issuing the notification because applying this logic, every commodity when purchased and consumed in manufacture by an SSI unit becomes taxable at the point of last purchase in the State and will be entitled to exemption. On the other hand, notification has to be read consistent with the other provisions of the Act. The charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cannot have any grievance because the tax liability set off from the total amount of exemption certified will be only the net liability for sales tax payable on rice as reduced by the tax paid on paddy. We, therefore, dismiss the S.T. Revision case as devoid of any merit. The Division Bench held that since paddy is taxable at sale point, the assessee is liable to pay tax under Section 5A, as no tax is borne on the commodity at sale point. 16. Another Division Bench judgment, which followed Empees Modern Rice Mills's case (supra) is State of Kerala v. C.R. Augustine Sree Muruga Rice Mills (S.T. Rev. No. 107/2012 and connected cases). The Rice Mill was assessed under Section 5A on purchase of paddy. The Tribunal allowed the assessee's claim and held that levy of purchase tax was illegal. The State filed a revision. The Division Bench held that the Tribunal committed error in following Peekay Re-Rolling Mills's case (supra). Following was laid down in paragraphs 2, 3 and 4 of the judgment:- 2. Aggrieved by this, the respondent assessee seeking exemption on entire tax payable without deducting any amount in respect of rice and bran approached the first appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable only if the commodity is same, hence, the said restriction is not applicable in the present case. Sales tax under Section 5 of the Act, 1963 is levied on one commodity, i.e., rice and purchase tax under Section 5A on another commodity, i.e., paddy. The Apex Court in Peekay Re-Rolling Mills's case (supra) has rendered on different set of issues which case has no application. He submitted that three Judge judgment of this Court in State of Karnataka v. B. Raghurama Shetty: 1981 (47) STC 369) had laid down that paddy and rice are not identical goods, hence, the assessee is not exposed to double tax, both on purchase of paddy and sale of rice. The learned Government Pleader submitted that the issue is covered by three Judge Bench judgment in B. Raghurama Shetty's case (supra) in preference to two Judge judgment in Peekay Re-Rolling Mills's case (supra). 18. Learned counsel for the assessee, to the contrary, has submitted that the Tribunal has rightly relied on the judgment of the Apex Court in Peekay Re-Rolling Mills's case (supra) and the Division Bench judgment of this Court relied on by the learned Government Pleader does not lay down the correct law. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials when he produces semi-finished goods which have to undergo further processes of production before they can be transformed into consumers' goods. At every such intermediate stage of production, some utility or value is added to goods which are used as raw materials and at every such stage the raw materials are consumed. Take the case of bread. It passes through the first stage of production when wheat is grown by the farmer, the second stage of production when wheat is converted into flour by the miller and the third stage of production when flour is utilised by the baker to manufacture bread out of it. The miller and the baker have consumed wheat and flour respectively in the course of their business. In the aforesaid case there was no issue based on Section 15(a) of the Central Sales Tax Act as well as the point of leviability of charge. In the said case the assessee's only contention was that since he has not manufactured any new goods, no tax is leviable on paddy, which was rejected. Thus, in the above case the issues and the ratio, which have been considered in Peekay Re-Rolling Mills's case (supra), were neither considered nor were subject matter of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court had occasion to consider the provisions of Section 15 of the Central Sales Tax Act as well as the provisions of Tamil Nadu General Sales Tax Act, 1959 as well as the circular dated 29.1.1993 issued by the Commissioner of Commercial Tax. The facts of the case and the issue were noted by the Apex Court in Shanmuga Traders's case (supra) in paragraphs 3, 4 and 5, which are to the following effect:- 3. The goods in question are iron and steel and were sold by the Tamil Nadu Electricity Board to the appellants and petitioners. Being sold by the said Board, they were covered by a notification dated 1-12-1982 issued by the 1st respondent under the provisions of Section 17(1) of the State Act and, therefore, exempt from tax payable under the State Act. 4. Under Section 14 of the Central Sales Tax Act iron and steel are declared to be goods of special importance in inter-State trade and commerce. They are, by reason of the provisions of Section 15 of the Central Act, liable to tax at a rate that does not exceed 4% of the sale or purchase price thereof and such tax shall not be levied at more than one stage . Section 3 of the State Act requires every dealer, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a specific provision applicable to a class of seller, the particular seller or the goods sold may not be subjected to tax at either that point of first sale or any subsequent sale in the State. 13. The Second Schedule of the State Act specifies the single point; it is the point of first sale in the State . The first sale in the State was the sale by the said Board to the appellants/petitioners. That sale was exempt from tax by reason of the notification dated 1-12-1982 aforementioned. The iron and steel sold by the said Board to the appellants/petitioners was, therefore, not liable to tax either at the point of first sale or any subsequent sale in the State. 24. As noted above, in the present case the State having decided to levy tax at single point, i.e., point of first sale of paddy, no liability can be fixed on the assessees, who were the purchaser, there being statutory restrictions under Section 15(a) for levying tax at more than one point. 25. The learned Government Pleader has also referred to some more judgments for the proposition that paddy and rice are commercially two different commodities. He placed reliance on a Division Bench judgment of this Court rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om any dealer liable to pay tax, then there cannot be any levy of tax on paddy at all. In fact, purchase may be from farmers, petty dealers, etc. who are not liable to tax as dealers under the Act. However, unless there is proof of levy of tax at the hands of selling dealer, Section 5A is applicable because respondent admittedly purchased paddy from unregistered dealers and manufactured rice out of the same. In fact, exemption is obtained by respondent under SRO 1729 of 1993 on the ground that it is engaged in manufacture of rice from paddy. So much so, tax is to be levied on the purchase of paddy under Section 5A as all the conditions of Section 5A are satisfied. We have in a detailed judgment in Empees Modern Rice Mills v. State of Kerala,: (2009) 4 K.L.T. 433 considered this issue and declared that levy of tax on paddy on an industrial unit which enjoys sales tax exemption on sale of products, namely, rice, rice bran, etc., is perfectly in order. We feel the above decision squarely applies here and so much so, the decision of the Tribunal has to be reversed and we do so. The Division Bench said that the Legislature itself has provided safeguard against multiplicity of levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities. 29. The Apex Court in CWT v. Ellis Bridge Gymkhana: (1998) 1 SCC 384) has laid down the following in paragraph 5:- 5. The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. 30. Similar proposition was laid down by the Apex Court in its Constitution Bench in Mathuram Agrawal v. State of Madhya Pradesh: (1999) 8 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Attorney General at p. 122: 'As I understand the principle of all fiscal legislation, it is this; if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be.' 14. In the case of Russell (Inspector of Taxes) v. Scott Lord Simonds in his opinion at p. 5 observed:- My Lords, there is a maxim of income tax law which, though it may sometimes be overstressed, yet ought not to be forgotten. It is that the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him. It is necessary that this maxim should on occasion be reasserted and this is such an occasion. 31. As noted above, the Division Bench in P.D. Thomas's case (supra) has laid down that since the Legislature has itself provided safeguard against multiplicity of levy of tax on both paddy and rice falling under declared goods, tax on purchase of paddy under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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