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TMI Blog2016 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... gible industrial unit availing of exemption under this Rule shall be exempt from levy of tax on all successive stage/stages of sale or purchase, subject to the dealer affecting the said purchase or sale furnishing a certificate in the form of ST-14A obtained from the assessing authority. This clause has the effect of granting exemption from levy of tax at all successive stages of sale and purchase in intra-state trade or commerce i.e. within the State of Haryana. To put it differently, it extends the benefit granted under clause (n)(ii) which relates to inter-state trade or commerce to intra-state sale or purchase. Such sales may be one or successive and tax at all stages is exempt. The exemption, therefore, is good specific, subject of course to other conditions being satisfied. Though the proviso to the said notification stipulates that the dealers should have also not charged any tax under the Central Sales Tax Act on the sale of goods manufactured by him but it should be given a greater or more significant role in interpretation of the main part of the notification, except as carving out an exception. It means and implies that the requirement of the proviso should be satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer vide assessment order dated October 05, 2001. Being aggrieved by the order of assessment, the appellant preferred an appeal before the Joint Excise and Taxation Commissioner (Appeal), Rohtak Circle, Rohtak who dismissed the appeal vide order dated May 2, 2002. 3. Being dissatisfied with the order passed in appeal, the appellant knocked at the doors of the Sales Tax Tribunal, Chandigarh (for short the tribunal ) which dismissed the appeal by its order dated September 9, 2002. The dismissal of the appeal by the tribunal compelled the appellant to prefer Writ Petition No. 2346 of 2003, seeking a direction to the tribunal to make a reference to the High Court. The High Court accepting the prayer of the assessee called for a reference from the tribunal, and the tribunal vide its order dated 14.10.2003 in S.T.M. No. 82 of 2002-03 made a reference to the High Court for its opinion. 4. After stating the case, the tribunal referred the following questions for the opinion of the High Court:- (i) Whether the notification dated 04.09.1995 issued under Section 8(5) of the CST Act is relatable to the exemption of goods or the person selling it? (ii) Whether in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial unit under the Act but also the amount of tax payable under the CST Act on the sales of finished products of the eligible industrial units made in the course of inter-state trade or commerce and branch transfers or consignment sales outside the State of Haryana. Reference was made to clause (c) of sub-rule (4) of Rule 28A of the Rules to opine that the scope of exemption was extended to the goods manufactured by an eligible industrial unit availing exemption under Rule 28A at all successive stage(s) of sale or purchase subject to the condition that the dealer effecting successive purchase or sale furnishing a certificate in form ST-14A which is required to be obtained from the assessing authority duly filled in and signed by the registered dealer to whom such goods were sold. Thereafter, the High Court analysed the Rules and in that context stated thus:- A reading of the provisions reproduced above shows that the expression notional sales tax liability takes within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certificate under Rule 28A of the Rules, provided that such dealer has not charged tax under the Central Act on the sale of goods manufactured by him. 8. After so stating, the High Court referred to the notification dated 04.09.1995 and observed that it was not happily worded and thereafter, it proceeded to hold that the tribunal was correct in following its earlier order for arriving at the conclusion that the notification did not exempt the goods sold in the course of inter-state trade by dealer other than those who held valid exemption certificate granted under Rule 28A of the Rules. It further ruled that if the State Government wanted to extend the benefit of exemption from payment of tax under the CST Act to the sale of goods effected by a dealer in the course of inter-state trade irrespective of the fact that such dealer did not hold valid exemption certificate under Rule 28A of the Rules, then it would have incorporated the language of Rule 28A(4)(c) of the Rules in the notification and would not have put a rider that such dealer should not have charged tax under the CST Act on the sale of goods manufactured by it. 9. Thus, the ultimate conclusion recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.09.1995; and (ii) Rule 28A(4)(c) of the Rules provides a mechanism to confirm that goods are manufactured by a person holding exemption certificate in terms of Rule 28A by providing the requirement to furnish a certificate in the form of certificate ST-14A. Section 8(5) of the CST Act mandates the requirement of issuance of Form C by the buying dealer which is to be issued by the sales tax authorities of purchasing State and, therefore, there is no requirement for such mechanism to be provided in the notification. It is highlighted by him that if the interpretation placed by the High Court is accepted, it would tantamount to making exempted goods chargeable to tax and further, the goods manufactured by eligible manufacturer would not remain competitive in spite of exemption being given to such manufacturer unless all subsequent stages including inter-state sales are exempt from payment of tax. The emphasis is on exemption at subsequent stages including inter-state sale. Mr. Singh has drawn immense inspiration from the proviso to the notification dated 04.09.1995 to bolster the submission that it restrains the eligible manufacturer from charging any tax on its sales as otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be specified therein, direct (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-state trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) or sub-section(2) as may be mentioned in the notification. (b) That in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made in the course of inter-state trade or commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section(1) or sub-section (2) as may be mentioned in the notification. The aforesaid provision clearly enables the State Government to exempt the tax payable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) to Section 8 of the CST Act begins with the non-obstante clause and empowers State Governments to issue a notification in the official gazette subject to the condition(s) as may be specified and under clause (a) direct that no tax shall be payable by any dealer having his place of business in the State in respect of sale in the course of inter-state trade or commerce, etc. and under clause (b) in respect of all sales of goods or classes of goods, etc. In this context, Rule 28A is extremely relevant. The said Rule, as per heading relates to class of industries, period and other conditions for exemption/deferment from payment of tax. Sub-rule 1, 2(f), (j), (k), (l), (n) clauses (i), (ii), (iii), (4)(a) and sub-rule 4(2)(c) of Rule 28A are relevant and reproduced below:- Sub-Rule (1): The industries covered under this rule shall not be entitled to any deferment or exemption from payment of tax under any other provisions of these rules. Rule 2(f): Eligible industrial unit means: (i) a new industrial unit or expansion or diversification of the existing unit, which- (I) has obtained certificate of registration under the Act; (II) is not a public sector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of this rule, the benefit of tax exemption or deferment shall be given to an eligible industrial unit holding exemption or entitlement certificate, as the case may be to the extent, for the period, from year to year in various zones from the date of commercial production or from the date of issue of entitlement exemption certificate as may be opted as under. 4(2)(c) The goods manufactured by an eligible industrial unit availing exemption under this rule shall be exempt from the levy of tax at all the successive stage(s) of sale or purchase subject to the condition that the dealer affecting the successive purchase or sale furnishes to the assessing authority a certificate in Form ST-14A to be obtained from the assessing authority as against payment of such sum as may be fixed by the State Government from time to time, duly filled in and signed by the registered dealer by whom such goods were purchased. 16. Sub-rule (1) makes it clear that industries are covered under this rule and the said industries would not be entitled to any deferment or exemption from payment of tax under any other provisions of these rules. The expression eligible industrial unit is defined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturer i.e. the eligible industrial unit makes sale in inter-state trade or commerce, but if a third party, who had procured the goods from the eligible industrial unit makes inter-state sale, such trade or commerce would not be exempt. The contention of the State suffers from incorrect appreciation and understanding of the purport and objective behind Rule 28A and the notification in question. The basic objective and purpose is to exempt the goods manufactured in the State when they are further transferred in the course of inter-state or intra-state trade or commerce. Therefore, reference is made to the eligible industries and the goods manufactured by the said industries, which are entitled to exemption. The exemption notification refers to the sale of goods manufactured by a dealer holding a valid exemption certificate. The emphasis is on the goods manufactured. However, it is confined by the condition that the said manufacture should be within the exemption period and by a dealer holding an exemption certificate. 19. We have reproduced the exemption notification above and referred to the language employed. At this juncture, it is absolutely necessary to understand the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler should not have charged the tax. The proviso would not scuttle or negate the main provision by holding that the first transaction by the eligible manufacturing dealer in the course by way of inter-state sale would be exempt but if the inter-state sale is made by trader/purchaser, the same would not be exempt. That will not be the correct understanding of the proviso. Giving over due and extended implied interpretation to the proviso in the notification will nullify and unreasonably restrict the general and plain words of the main notification. Such construction is not warranted. 21. Quite apart from the above, Rule 28A(4)(c) supports the interpretation and does not counter it. The said rule exempts all intra-state sales including subsequent sales. The reason for enacting this clause is obvious. The intention is to exempt all subsequent stages in the State of Haryana and the eligible product can be sold a number of times, without payment of tax. Intra-state sales refer to sale between two parties within the State of Haryana. Inter-state transaction results in movement of goods from State of Haryana to another State. Thus, clause (ii) of sub-rule 2(4) refers to inter-state tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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