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TMI Blog2015 (12) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... there can be no additional tax thereon. While it could be said that having regard to the first part of section 4A of the Act, additional tax is leviable, considering the second part of the section, such additional tax would be nil as the tax payable by the dealer on sale or purchase of goods which are wholly exempt from payment of sales tax, general sales tax or, as the case may be, purchase tax would be nil. If the dealer is called upon to pay the additional tax in cash, an anomalous situation arises, inasmuch as, on the one hand, he has to bear the burden of tax and on the other hand, he cannot pass on the same to the purchaser. The additional tax being a tax on the sale or purchase of goods liable to tax under the Act, the legislative intent would normally be that such tax should be recovered from the buyer of the goods. However, in view of the bar contained in section 56 of the Act, in case where the sale or purchase is exempt from tax, the dealer would not be in a position to recover the additional tax from the purchaser, thereby frustrating the very object of the provision namely, to tax the sale or purchase and would result in taxing the dealer instead of the sale or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, the same were heard together and are decided by this common judgment. 2. The appellants in these appeals and the respondents in the writ petitions are dealers who at the relevant time were enjoying the benefit of exemption from payment of general sales tax, sales tax or, as the case may be, purchase tax under the relevant notification issued by the State Government in exercise of powers under sub-section (2) of section 49 of the Act. Under the incentive schemes framed under section 49(2) of the Act, exemption was granted to a particular limit calculated in terms of the Scheme. The Scheme also lays down the method for computing the entitlement limit of tax exemption. For the purposes of such computation, the amount of tax leviable under the relevant provisions of the Act is required to be calculated and the same is adjusted against the exemption limit. 3. In the appeals, the appellants have questioned the act of the assessing authority in adjusting the additional tax against the exemption limit by contending that additional tax under section 4A of the Act was not leviable in relation to sales or purchases which are wholly exempt from payment of sales tax, general sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of sections 3, 3A and 4 of the Act, however, insofar as the adjustment of such amount against the exemption limit is concerned, the Tribunal deviated from the previous view taken by it in the case of M/s. D.K. Trivedi and Sons and allied matters wherein it was held that though the assessees were entitled to exemption under section 49(2) of the Act, they were still liable to pay the additional tax in cash, and held that the assessees were entitled to adjust the amount of additional tax against the ceiling limit of tax exemption granted under section 49(2) of the Act. Against the orders passed by the Tribunal holding the dealers liable to pay additional tax under section 4A of the Act, the dealers are in appeal and against the order of the Tribunal holding that the dealers are entitled to adjust the additional tax against the ceiling limit of exemption even prior to the notification dated 3rd March, 2001, the State of Gujarat has filed writ petitions. 4. Mr. Tanvish Bhatt, learned advocate for the appellants, referred to the provisions of section 4A of the Act to point out that a dealer who was liable to pay tax under sections 3 or 3A or section 4 of the Act was liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified 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 under Section 41 thereof. But in the Act which repealed and replaced the Bombay Act the meaning of the expression taxable goods has been narrowed down as Section 2(33) of the Act reads - taxable goods means goods other than those on the sale or purchase of which no tax is payable under Section 5 (which corresponds to Section 5 of the Bombay Act) and Section 49 of the Act (which corresponds to Section 41 of the Bombay Act) or a notification issued thereunder. By this definition, the dichotomy that is stated to exist between taxable goods and taxable events has been given a go-by. It may be that Section 5 and Schedule I refer to goods only but Section 49 deals with only taxable events which result in the exemption from payment of tax on the conditions mentioned therein or in the notification issued thereunder being satisfied even though the goods in question do not come under Schedule I. Secondly one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance was placed upon the decision of the Madras High Court in the case of M/s. MRF Limited, Madras v. Union of India, 1988 (14) ECR 507 (Madras), wherein, the court has observed that there must be an excise duty for the time being in force and which is leviable on the goods; then only there could be the levy of additional duty under section 3(1) of the Central Excise Act. If no excise duty is in force and could be levied on the goods, then there was no question of levy of additional duty under section 3(1) of the said Act. When there is no excise duty in force and levied on the goods, by virtue of the exemption notifications, it is not possible to bring in a fiction that the goods are amenable and liable for levy of excise duty and exemption notifications have only suspended such levy and on that basis, there could be levy of additional duty under section 3(1) of the Act. The court held that when the very measure for additional duty is not available, it would be doing violence to the express language and implications of section 3(1) and the explanation thereto to work out the additional levy on the fictional basis. The court, accordingly, refused to accept the submission of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 4.4 Alternatively, it was submitted that in case the court holds that the dealers are liable to pay tax under section 4A of the Act, the finding recorded by the Tribunal that such tax prior to the amendment of the aggregation clause with effect from 3rd March, 2001 is payable in cash, requires to be interfered with. 5. Mr. Uchit Sheth, learned advocate appearing on behalf of the respondents in the writ petitions reiterated the submissions advanced by Mr. Tanvish Bhatt, learned advocate for the appellants. The attention of the court was invited to the scheme of the Sales Tax Act and more particularly, the provision for exemption, to submit that an anomalous situation would arise if the dealers are held liable to pay additional tax under section 4A of the Act. In support of such contention, the attention of the court was invited to section 50 of the Act, which provides for liability to pay tax in the event of breach of condition of exemption and lays down that if any specified class of sales or of specified sales or of purchases is exempted under section 49 from the whole or any part of any tax payable under the Act subject to any condition, then, in the event of a bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult of the fact that no tax is payable on the transaction. It was submitted that the fact that the State Government has provided for curtailment of the incentive limit by the amount of additional tax under section 4A of the Sales Tax Act by amendment dated 3rd March, 2001, shows that the State Government understood that there was loss of revenue to the State even in respect of additional tax as a result of the exemption notification and, therefore, had provided for curtailment of the incentive limit. 5.2 It was pointed out that the Department is relying upon the amendment dated 3rd March, 2001 to the exemption notification to contend that prior to that date, additional tax was payable in cash. It was submitted that the clause for incentive limit does not confer any exemption to the dealers, but is a provision meant for capping the maximum exemption that would be available to the dealer, thus curtailment of incentive limit does not confer any exemption to the dealer. According to the learned counsel, the amendment in the aggregation clause is in fact indicative of the fact that the tax included therein was not payable and, therefore, it was included in the aggregation clause so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wenty seven days. More so, because when the additional tax was levied earlier, the aggregation clause of the exemption notifications specifically provided for curtailment by amount of additional tax. The reference to additional tax in the aggregation clause was deleted since the provision for additional tax itself was deleted from 1st April, 1992. Thereafter, when additional tax was levied again from 1st April, 2000, reference to additional tax in the aggregation clause has been reinstated. Thus, the amendment is clarificatory and retrospective and hence, the amount of additional tax has rightly been adjusted by the respondent dealer against the incentive limit. 5.5 Next, it was submitted that the additional tax has been demanded from the respondent dealer in cash for the period from 1st April, 2000 to 3rd March, 2001. There is no demand of additional tax after 3rd March, 2001, that is, after curtailment of incentive limit by the amount of additional tax was specifically provided in the notification. Thus, the Department has considered the curtailment of incentive limit as a mode of payment of tax. In other words, the stand of the Department is that additional tax was payable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature envisages that if sales of a dealer are exempted by a notification issued under section 49 of the Act, then the purchasing dealer is not entitled to claim resale deduction, which effectively means that the tax becomes payable by the purchasing dealer on its subsequent sales. It was submitted that merely because the respondent dealer curtailed the exemption limit, he cannot be held liable to pay tax in cash. It was urged that if the court holds that the additional tax is not payable, the respondent cannot be in a worse position. 6. Mr. K.H. Kaji, learned advocate appearing on behalf of the respondents in Special Civil Applications No.11904/2014 to 11906/2014 submitted that the notification imposing levy under section 4A of the Act came to be issued with effect from 1st April, 2000 and the aggregation clause in the notification issued under section 49(2) of the Act came to be amended on 3rd March, 2001, permitting the dealers to adjust the additional tax against the exemption limit provided under the Scheme. Reliance was placed upon the decision of the Supreme Court in the case of Mathra Prasad Sons v. State of Punjab, (1962) 13 STC 180, wherein the court had observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of such order, whereas in the present case, the notice admittedly being beyond a period of three years, the exercise of revisional jurisdiction was bad in law. 7. Mr. Akshay Vakil, learned advocate appearing for the petitioner in Special Civil Application No.83/2014 and for the respondent in Special Civil Application No.9055/2015 submitted that having regard to the amendment in the notification issued under section 49(2) of the Act with effect from 3rd March, 2001, adjustment of additional tax against the exemption limit could be considered from 3rd March, 2001; however, prior thereto, additional tax was neither required to be adjusted nor paid in cash. It was submitted that for the entire year, the petitioner was under the bonafide belief that there was no liability either to adjust additional tax under section 4A of the Act against the exemption limit or to pay the same in cash. It was only after the amendment on 3rd March, 2001 that the liability to adjust the additional tax against the exemption limit arose. It was submitted that the notification dated 3rd March, 2001 cannot be made retrospectively applicable so as to make the petitioner liable to pay additional tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposition that exigibility to tax is not the same as liability to pay tax. The former depends upon the charge created by the statute and the latter on computation in accordance with the provisions of the statute and the rules framed thereunder, if any. The liability to pay tax chargeable under section 3 of the Bihar Finance Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. The court observed that but for the exemption, the dealer would be liable to pay tax in terms of section 3. In other words, exemption presupposes a liability. Unless there is a liability, question of exemption does not arise. Liability arises in terms of section 3 and tax becomes payable at the rate as provided in section 12. The court held that it could not be said that as tax was not payable on portion of the turnover of the scheduled goods i.e. cement, the assessees - appellants had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. Ms. Mehta submitted that the contention of the appellants in the appeal and the respondents in the writ petitions that no additional t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include additional tax under Condition 19(i) of Entry 69. Accordingly, prior to such introduction by notification dated 3rd March, 2001, additional tax was not included under Condition 19(i). The notification is not retrospective in effect and so the attempt on the part of the respondents to apply such notification retrospectively is bad in law. It was submitted that for the purpose of interpreting any exemption of incentive provision, the benefit of doubt should be given to the State. In support of such submission, reliance was placed upon the decision of the Supreme Court in the case of Novopan India Limited, Hyderabad v. Collector of Central Excise and Customs, Hyderabad, 1994 Suppl. (3) SCC 606, for the proposition that the principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or exemption provision to relieve him of tax liability must establish clearly that he is covered by such provision. In case of doubt or ambiguity, benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it in the appeal of the appellant? 11. Tax Appeals No.413/2015 and 414/2015 have been admitted on the following two substantial questions of law:- (1) Whether the appellant is liable to pay additional tax under Sec.4A of the Gujarat Sales Tax Act, 1969 on the sales which are exempted by Entry 69 inserted pursuant to notifications issued under Sec.49(2) of the said Act? (2) Whether the Tribunal erred in deciding the appeals though the appeal of the appellant for earlier year which had direct bearing to the present case was yet pending before this Hon ble Court and though the appeals before the Tribunal were only consequential? 12. Tax Appeals No.432 of 2007 and 433 of 2007 have been admitted on the following common questions: (i) Whether the Appellant is liable to Additional Tax U/s 4A of the Gujarat Sales Tax Act, 1969 on the sales which are exempted by Entry inserted pursuant to notification u/s 49(2) of the said Act? (ii) Whether on the facts and in the circumstances of the case, the Gujarat Value Added Tax Tribunal was right in law in holding that the Appellant was liable to pay additional tax u/s 4A of the Gujarat Sales Tax Act, 1969 on the sales ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt from the whole of the sales tax or general sales or both as the case may be by virtue of Entry 69 and 255 of the Concessions and Incentives under section 49(2) of the Act. 15. Section 4A of the Act with which we are primarily concerned in the present case reads thus:- 4A (1) There shall be levied and collected for a period of one year from the date commencement of the Gujarat Sales Tax (Second Amendment) Act, 2000, from every dealer liable to pay tax under section 3 or section 3A or under section 4; an additional tax on the sale or purchase of goods liable to tax under this Act, at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax, payable by such dealer : Provided that the additional tax shall not be levied on the sale or purchase of any of the declared goods. (2) Except as provided in sub-section (1) the provisions of this Act and the rules made thereunder shall, so far as may be, apply in relation to the additional tax payable under sub-section (1), as they apply in relation to the tax payable by a dealer under this Act. (1) For the removal of any doubt, it is hereby declared that (a) additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, in the light of the above decisions, the liability to pay tax under sections 3, 3A and 4 of the Act would continue despite the fact that the sale or purchase of goods are wholly exempt from payment of sales tax, general sales tax or, as the case may be purchase tax. Accordingly, additional tax would be leviable on a dealer who is liable to pay tax under sections 3, 3A and 4 of the Act, irrespective of the fact that the sale or purchase of goods is wholly exempt from payment of tax under those provisions. However, as noticed earlier, section 4A of the Act is in two parts. The second part of section 4A says that such additional tax shall be levied at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax payable by such dealer. Therefore, the sales tax, general sales tax or purchase tax payable by such dealer form the basis for computing the additional tax to be levied and collected from a dealer as the additional tax is at the rate of 10% thereof. It follows as a necessary corollary that if no sales tax, general sales tax or purchase tax is payable, there can be no additional tax thereon. The question that therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal tax to be computed at the rate of 10% of the sales tax, general sales tax or, as the case may be, purchase tax payable by a dealer, so as to ensure that such tax is payable only when the sale/purchase of goods is otherwise exigible to tax. In other words, in case where no tax is payable on the sale or purchase of goods, the legislature did not intend that additional tax should be collected thereon. Otherwise, there was no need to add the words on the sales tax, general sales tax or, as the case may be, purchase tax, payable by such dealer . When the additional tax is to be computed on the tax payable, in the absence of any tax being payable, the question of computing additional tax at the rate of 10% thereof would not arise. 21. It is the case of the revenue that the liability to additional tax can be calculated on the basis of the tax which the dealer, but for the exemption, would be liable to pay under sections 3, 3A or 4 of the Act, in the same manner as the liability to tax is computed for the purpose of making adjustment against the ceiling limit of exemption. In this regard, it may be significant to note that the words employed in section 4A of the Act are tax payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase tax would be nil. 23. Examining the issue from another angle, under section 50 of the Act, if any specified class of sales or specified sales or purchases is exempted under section 49 from the whole or any part of any tax payable under the Act, subject to any condition, then, in the event of breach of such condition in respect of any goods so sold or purchased, the seller or purchaser responsible for such breach shall, notwithstanding anything contained in section 3 or section 3A, be liable to pay tax on such sale, specified sale or purchase, as the case may be, to the extent to which it was exempted under section 49 from the payment of tax. Section 56 of the Act provides that no person shall collect any sum by way of tax in respect of sale or specified sale of goods on which by virtue of section 5 or section 49 or a notification issued thereunder no tax is payable. Therefore, as a necessary corollary, such person cannot collect additional tax from the purchaser. Accordingly, when the dealer, in view of the exemption enjoyed by him under section 49(2) of the Act, cannot recover the additional tax on such sale or purchase, except at the risk of incurring liability under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, such additional tax can only be calculated at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax actually payable by the dealer. For the purpose of computation of additional tax, the authorities cannot fall back upon the fictional basis of computation of sales tax, general sales tax or, as the case may be, purchase tax adopted for the purpose of computing the entitlement limit of tax exemption. If the actual tax payable is nil, which would be the case where the sale or purchase of goods is totally exempted, the additional tax at the rate of ten paise in the rupee would also be nil. The authorities under the Act, therefore, cannot recover additional tax under section 4A of the Act in relation to sale or purchase of goods which are wholly exempt from payment of tax under section 49(2) of the Act by resorting to any fictional basis. It follows as a natural corollary that when the additional tax payable is nil, the question of payment of such tax either in cash or by way of adjustment against the exemption limit would not arise. Under the circumstances, till the date of amendment of the exemption notification, viz., 3rd March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the assessing authority. Clearly therefore, the exercise of revisional powers was barred by limitation. Similarly, in Special Civil Application No.83/2014, the assessing authority passed the order on 31st January, 2005, giving benefit of adjustment against the exemption limit to the respondent dealer and the notice under section 67 of the Act came to be issued on 29th May, 2008. Clearly therefore, the notice under section 67 of the Act was beyond a period of three years from the date of the order passed by the assessing authority. Under the circumstances, the exercise of revisional powers by the Commissioner was clearly barred by limitation. 29. It may be noted that in five tax appeals, that is, Tax Appeals No.35/2007, 36/2007, 37/2007, 1337/2006 and 1338/2006, the second question which has been raised is as to whether the Tribunal had exceeded its jurisdiction in holding that the appellant was required to deposit additional tax in cash when the said aspect was not even the controversy before it in the appeal of the appellant. From the facts as emerging from the record, it is apparent that the appellants had challenged the action of the assessing authority in adjusting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of the above discussion Tax Appeals No.35 to 37 of 2007, Tax Appeals No.432 and 433 of 2007 and Tax Appeals No.1337 and 1338 of 2006 succeed and are accordingly allowed. Both the questions are, accordingly, answered in favour of the assessee and against the revenue. It is held that the appellant is not liable to additional tax under section 4A of the Gujarat Sales Tax Act, 1969 on the sales which are exempted by Entry pursuant to notification under section 49(2) of the said Act. It is further held that the Gujarat Value Added Tax Tribunal has exceeded its jurisdiction in holding that the appellant was required to deposit additional tax in cash, when such aspect was not even the controversy before it in the appeal of the appellant. The impugned order dated 12th June, 2006 passed by the Tribunal in Second Appeals No.833/2003, 683/2004, 684/2004, 685/2004 and 695/2004 and Revision Applications No.67 of 2004 and 68 of 2004 is hereby quashed and set aside. There shall be no order as to costs. 32. All the special civil applications filed by the State of Gujarat are hereby dismissed. Rule is discharged in each petition with no order as to costs. 33. Special Civil Application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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