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TMI Blog2017 (5) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. 3. In the present Sales Tax Reference, we are concerned with the dealer M/s. Shoe Bazaar Queen, who shall be referred to, hereafter, as the original appellant. 4. After hearing both sides at great length, on 17th March, 2006, the Tribunal forwarded the following two questions for the opinion and answer by this Court: (i) Whether on the facts and circumstances of the case, and on the true and correct interpretation of the provisions of law, the Tribunal was justified in law in holding that the Sales of leather goods are admissible for deduction as resales under Section 8(2) of the Bombay Sales Tax Act, 1959, even though corresponding purchases of these goods were covered by Entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors? (ii) Whether on the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in law in holding that no principle of estoppel is applicable to the conditions introduced in Entry A39 w.e.f. 11.6.1988 for the purpose of allowance of claim of exemption from tax by the claimant dealer? 5. We have to notice certain f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side. The resale to the tune of Rs. 60,38,491/ against the purchases of Rs. 53,54,630/ of the very goods has been allowed. Even consequential relief in interest under Section 36(3)(b) has been given. The penalty imposed under Section 36(2)(c) of the Bombay Act was deleted. 9. An attempt was made to rectify this judgment by making an application under Section 62 of the Bombay Act. That attempt was made by the Revenue in the light of the statutory amendment brought in subsequently, but with retrospective effect. The Rectification Application No. 20 of 1999 moved in that behalf was disposed of by the Tribunal holding that in the light of the retrospective amendment to Section 8, a case for rectification is made out. The Tribunal, accordingly, allowed the Rectification Application and restored the Second Appeal to its file by an order dated 11th October, 2002. The original appellant, being not satisfied with such restoration, filed a Writ Petition bearing No. 41 of 2003 in this Court. By consent, an order was passed on 9th June, 2003 in that Writ Petition. The result of the consent order was that the order dated 11th October, 2002 in Rectification Application No. 20 of 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry that the goods sold and claimed as resale must be in the same Schedule at the time of purchase and at the time of sales. In the present case, the goods at the time of purchases were covered by entry A39 (pages 37 and 38 of the paper book) as exempt from tax and at the time of sales, the goods were covered by Schedule entry CII 42 (pages 31 and 32 of the paper book). Thus, the requirement of law that the goods must fall in the same entry at the time of sales and purchases is not satisfied. The claim of resales cannot be allowed. 14. Then, relying upon this Section further, Mr. Sonpal would submit that deduction of sales of goods purchased from registered dealer, and in terms of Section 8, can be claimed, provided a certificate under Section 12A is furnished or incorporated in seller's invoice. No doubt, the certificate as provided under Section 12A is incorporated in the seller's invoice. It is inherent in the Scheme of the Act that the tax is levied at single point and all subsequent sales are exempt since tax is to be collected in the first instance of sales. In other words, if on the first sale, there was no tax or it has not been suffered, then, subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (ii) or clause (iii) of Section 8 and in clause (b) or clause (c) of Subsection (1) of Section 9 shall not apply to the resale of those goods. It is in these circumstances that Mr. Sonpal would submit that the reasoning of the Sales Tax Tribunal is not in tune with the requirements stipulated by the Bombay Act, particularly for resale. Mr. Sonpal heavily criticizes these findings of the Tribunal in the appellate order, and particularly, paragraphs 45 to 50 thereof. Mr. Sonpal would submit that the Tribunal's reasoning is so faulty that it did not realize that there was a distinct Scheme prevailing prior to amendment and post amendment. 16. Mr. Sonpal then criticizes the approach of the Tribunal in not rendering any definite reasons but only setting out illustrations after illustrations. Mr. Sonpal would submit that multiplying the illustrations would not assist in resolving the controversy which had to be done by an Appellate Court by referring to the facts and circumstances of the case before it and the entire record. By giving hypothetical examples, such complex issues cannot be resolved. Mr. Sonpal also submits that the Tribunal was not concerned in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, as assumed by the Tribunal while making the reference, is contrary to the record. In that behalf, she hands over a complete compilation of the documents. She would submit that this Court must restrict itself to the controversy arising from the order of the second appellate court, namely, the Tribunal. In the Second Appeal, the Tribunal was considering a question somewhat distant from the one referred to this Court's opinion. Therefore, going by the Schedule entry, the claim for resales and particularly, bearing in mind Section 8 clause (ii) of the Bombay Act, the question must be answered. If looking at these provisions, the question as proposed and forwarded does not arise at all, and particularly, in the factual background, then, this Court is not obliged to answer the same. This Court, then, can return the Reference unanswered by keeping the question open for decision in an appropriate case. Ms. Badheka has elaborated her oral arguments by tendering the written submissions. She devoted most part of it to the material documents and which, she claims, were not forwarded together with the statement of facts. It was the duty of the Tribunal, according to her, to not only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t should return the Reference. Then, she would submit that the present Reference is peculiar. The Reference Application before the Tribunal is disposed of not only by passing an order on the same, but on seven other Applications. The seven other Applications were for different assessment years. The subject matter and the issue is the same. The findings on the issue of bias are identical. The Tribunal has rejected the Applications to forward the questions of law and at the instance of the Revenue in these seven cases. The rejection is on the ground that the Tribunal has quashed the orders of assessment on a finding of bias. The Tribunal held that the orders are vitiated by bias. This being a finding of fact, the State has not challenged the order of the Tribunal rejecting these Reference Applications. However, even when the assessment order in the present matter is vitiated by a bias, then, the same decision and conclusion, as reached in the seven other cases, should have been reached by the Tribunal in the present matter. 20. Without prejudice to the above contentions, Ms. Badheka would submit that the respondent's claim for deduction is based on Section 8(ii) of the Bombay Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are not trade mark holders and not importers, but only producers, remain untouched. The recommendation to be made by KVIC is restricted to those and spelt out by the language of the entry itself. There is no question of any recommendation for the original appellant and to be made by KVIC. The Tribunal was convinced that even if the first sale is exempted, the statute is framed for a single time tax, the sales subsequent to the first sale which is exempted, will also be exempted. In that regard, the Tribunal rightly relied upon the judgment in the case of Anand Distillery vs. The Assistant Commissioner of Sales Tax, Panaji reported in Volume 52 STC 262 (Bom.) and Shanmuga Traders, Etc. vs. State of Tamil Nadu and Others reported in Volume 114 SCT 1 (SC). It is in tune with this law that the circular has been issued by the Commissioner. Once the very certificate issued to the respective vendor societies, in terms, states that the resale of goods purchased from the respective vendors shall be free, then all the more, there was no occasion for the Tribunal to make any Reference. The question of law proposed and forwarded for this Court's opinion and answer is, therefore, not ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers connected therewith. She invites our attention to the definition of the term "village industry" as appearing in Section 2(h). She would submit that all the provisions of the KVIC Act, read together and harmoniously, would indicate that, it is to promote such articles of artisans and village industries, that the Commission is established and set up. Therefore, it would like the products of such artisans and village industries to reach all corners of the country. It would never put any fetter or restriction on their free marketing and trading. In the circumstances, she would submit that though before the Tribunal it was argued that under the KVIC Act, no dealer buying from such society and reselling the goods is eligible to be given such a certificate so as to enable him to claim exemption under the Bombay Act. Still, the Tribunal was aware that in law, there is nothing which would restrain or restrict the successive dealers. There is no requirement that they should hold certificate from the Commissioner. The certificate to be issued by the seller is as stipulated in terms of Section 12A. That certificate is to be issued in the prescribed form. That form nowhere prescribes that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the levy of tax on the sale or purchase of certain goods in the State of Bombay. Chapter I contains Section 2 titled as "Definitions". We are concerned with this Section, and particularly with certain definitions. The term "Commissioner" as defined under Section 2 Clause (7) means the person appointed to be the Commissioner of Sales Tax for the purposes of this Act. Section 2(11) defines "dealer" to mean any person who whether for commission, remuneration or otherwise carries on business of buying or selling goods in the State, and includes the Central Government, or any State Government which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to its members. There are Exceptions carved out, namely 3 in number, and then there is an Explanation. We need not refer to the same in great details. For our purpose, the other definition, and which is relevant, is of the term "Registered dealer" which appears under Section 2(25) to mean, a dealer registered under Section 22. The term "resale" is defined in Section 2(26) and that provision reads as under : "2(26) "resale", for the purposes of sections 7, 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In Subsection (1), it is stated that notwithstanding anything in the Bombay Act, but subject to the conditions or exceptions, if any, set out against each of the goods specified in column 3 of Schedule A, no tax would be payable on the sales or purchases of any goods specified in that Schedule. Subsection (2) of Section 5 reserves the power in the State Government to add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein. Then, Section 6 provides for taxes payable by a dealer. The tax has to be paid subject to the provisions of the Act and to any rules made thereunder, by a dealer who is liable to pay tax. That tax or taxes are leviable in accordance with the provisions of this Chapter II of the Bombay Act. 30. Section 7 provides for single point levy of sales tax on declared goods specified in Schedule B. Then comes Section 8 and that provides for (levy of value added) sales tax on goods specified in Schedule C. Section 8 reads as under: "8. (Levy of value added) sales tax on goods specified in Schedule C. (1) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule C at the rate se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "12. No deduction from turnover except on declarations. There shall not be deducted from the turnover of sales, sales of goods to a Commission agent holding a Permit purchasing on behalf of his principal or to a Registered dealer, or to a dealer holding a Certificate of Entitlement as provided in sections 7, 8 and 8A unless (a) to (d) deleted. (e) the Commission agent certifies in the prescribed declaration form (i) that he is registered under the Central Sales Tax Act,1956; (ii) that his principal is registered under the Central Sales Tax Act, 1956 for his place of business outside the State; (iii) that the goods are purchased by him for his principal for the purpose of complying with the preexisting agreement or order for sale entered into by such principal for or in relation to an export out of the territory on India by such principal himself or for packing of the goods for such export and that such goods will be so exported by such principal or will be so used in the packing of such goods; and (iv) that he would obtain a declaration in the prescribed form from such principal to the aforesaid effect. (f) the Registered dealer certifies in the prescribed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of commencement of the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 1997. (a) no deduction from turnover of sales as provided in that section shall be allowed to any dealer, if, the turnover of all sales or of all purchases of the said dealer has, in the preceding year, exceeded rupees forty lakhs; (b) Subject to the provisions of clause (a), deduction from turnover of sales, as provided in that section shall be allowed up to the time the turnover of sales or purchases of a dealer, in a year, does not exceed rupees forty lakhs and shall not be allowed thereafter. (3A) Without prejudice to the provision of subsection (3), no deduction from turnover of sale as provided in Section 8 shall be allowed to such class or classes of dealers as the State government may, by notification in the official gazette, specify. (4) Notwithstanding anything contained in subsection (3) of section 42, a selling dealer who has not been allowed the deduction from the turnover of sales, as provided in subsection (3), may be granted a set off of tax, calculated in the prescribed manner with reference to the purchase price of goods purchased by him from a Registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply to the resale of those goods." By Section 17, there is a power conferred in the State Government which shall be exercised by issuance of a Notification in the Official Gazette to reduce rate of tax and to amend Schedules. By Section 17A, there will be no deductions under Section 8 in certain cases. Thus, Section 17A deals with the situation where any entry, or part thereof, is transposed whether under Section 17 or otherwise, by its deletion from one of the Schedules and its insertion in or addition to another Schedule, then, if no tax on any sale or purchase of the goods specified in that entry, or part thereof, is leviable, the deductions provided in clause (ii) or clause (iii) of section 8 shall not apply to the resale of those goods. Therefore, there has to be a fulfillment of the precondition, namely, transposition, whether under Section 17 or otherwise. Secondly, there ought to be no tax on any sale or purchase of the goods specified in that entry or part thereof. It is only upon such situation that there will be no deduction provided in clause (ii) or clause (iii) of Section 8 and which provision deals with resale of the goods. In other words, the deductions under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a producer or dealer certified under condition (1) (Sales of manmade fibre and polyester and cotton blended silvers are exempted against BX from under Entry (215) by STA1085/CR97RES8 dt. 29785. w.e.f. 25-6-85 to 30-9-1995) 39 (a) Such products of Village Industries as are defined in the Khadi and Village Industries Commission Act, 1956 and Bombay Khadi and Village Industries Act, 1960, as may be notified by the State Government from time to time for the purpose of this entry. (1) When manufactured and sold by a Producer, or when imported and sold by an importer, certified for this purpose by the Commissioner after taking into account the recommendations of the Khadi & Village Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956, or, as the case may be, of the Maharashtra State Khadi & Village Industries Board constituted under the Bombay Khadi and village Industries Act, 1960, or 11-8-1988 to 30-4-1994 (2) When sold by a dealer who is certified for this purpose by the Commissioner after taking into account the recommendations of the Khadi and Village Industries Commission constituted under the Khadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of village industries as are defined in the KVIC Act and the Bombay Khadi and Village Industries Act, 1960. Such products of these industries as may be notified by the State Government from time to time for the purpose of this entry are covered by this Schedule entry. However, in column 3 thereof, in item (1), a situation where these goods are manufactured and sold by producer, or when imported and sold by an importer, certified for this purpose by the Commissioner after taking into account the recommendations of the KVIC or, as the case may be, of the Maharashtra State Khadi & Village Industries Board, or when sold by a dealer, who is certified for this purpose by the Commissioner after taking into account the recommendations as above, and who does not hold a trade mark or a patent in respect of the goods sold or who does not hold a patent in respect of the method or process of manufacturing the goods sold. Thus, two types of persons are dealt with by item (1) and item (2) appearing in column 3. One is a case of manufacturer and producer selling the goods, or when they are imported, the sale by an importer certified for this purpose by the Commissioner and after taking into acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 30-9-1995 [By Entry (377(i)) Sales of plastic and rubber footwear when sold at a price not exceeding Rs. 50/per pair whole of tax is exempted w.e.f. 1594]. [By Entry (377(ii)) Sales of orthopaedic footwear by a dealer recognised by the commissioner; whole of tax exempted w.e.f. 1594]. [By Entry (377(iii)) Sales or purchases other than 377(i) or 377(ii); rate of tax is 4% w.e.f. 1-5-94 by STA-1094/12/T-2 dt. 2-6-94]. [In Entry 97(iv) in col. 2 and resales thereof deleted w.e.f. 1-5-94 by STA-1094/35/T-2 dt. 10-8-94]. 40. From the factual narration and the submissions of parties, which were fairly extensive, the Tribunal found that the Notification which was issued, referred to entry 39 of Schedule A appended to the Bombay Act w.e.f. 11th August, 1988. The Government of Maharashtra notified the products of the village industries to be the notified products for the purpose of entry 39. This Notification itself is reproduced at page 119 of the paper book. There are as many as 23 kinds of products of the industries which are found in the Notification. The Tribunal concluded from the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a recommendation of the KVIC or the Bombay Board that the Commissioner of Sales Tax will issue the necessary documents/certificates. The Tribunal, therefore, in paragraph 36 of its order on the appeal, concludes that if the dealer dealing in such items is an unregistered dealer, then, sales at the hands of such dealer and the purchase thereof would be taxable notwithstanding the entry A39 which is meant for tax free goods. That is because the products which are described in entry A39 are not tax free otherwise, but exigible to tax. It is only when the products are dealt with by the dealer specified, or rather certified, that all the benefits would follow. Therefore, the Tribunal understood this controversy in the first instance in a correct and proper perspective. 42. We are not in agreement with Mr. Sonpal that the Tribunal's order on the appeal was vitiated in any manner. Mr. Sonpal's argument centers around the fact criticism the Tribunal has, in the order on appeal, merely gave illustrations and did not assign any reasons for its conclusions. That is incorrect. We must read the order on the appeal in its entirety. So read, it is apparent that the illustration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose, as mentioned above, is to promote the Khadi and Village industries' products. 44. There is another angle of looking at this controversy. Unless the producer of the goods notified by the K.V.I.C. is also certified dealer under class (2), the goods sold by him will be taxable in his hands. What will happen to the goods purchased from such second dealer and resold? The answer is that unless second dealer is a registered dealer, the sale should be taxable notwithstanding the fact that the goods are of the category of Village Industries' produce or otherwise. All the resales, thereafter, will be tax free. Once a registered dealer intervenes, the goods remain free from tax throughout the chain of marketing." Then, the Tribunal refers to the definition of the term "resale". 45. After reproducing, in paragraph 45, the definition of the term "resale" as appearing then in Section 2(26), the Tribunal summarizes the prerequisites or requirements on the fulfillment of which, resale takes place. They are rightly summarized in paragraph 45. 46. The Tribunal has also referred to the provisions as appearing after 11th August, 1988. The Tribunal observes that the structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles to be applied while interpreting a taxing statute. Those alone have been invoked and applied. 50. The Tribunal records a firm opinion that the appellant before it is entitled to resales in respect of its purchases effected from the KVIC dealers for the goods which are leather goods falling in entries CII42 and CII81, both at the time of purchase and sale. They are Schedule C goods when purchased and sold, and therefore, entitled to resale. We do not see how such conclusion can raise a question of law. When the Tribunal decided this matter and as elaborately as it did, how does any question of an interpretation of the provisions of law has not been clarified to us. The question as framed for our consideration and opinion is that, whether the sales of leather goods are admissible for deduction as resales under Section 8(ii) of the Bombay Sales Tax Act, 1959 even though corresponding purchases of these goods were covered by entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors. The issue before the Tribunal's Bench in the Reference Application was whether the above conclusions of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean resale of those goods on the sale of which, tax was leviable under this Section at the time of their purchase. 53. While making a reference of the above question to this Court, the Tribunal lost sight of the fact that in its order on the main appeal, it had already held that the tax was leviable. Once it was leviable, then, insertion of the explanation made no difference to the issue and controversy at hand. From the factual position emerging from the record of the appeal, even if the Tribunal had later on decided this matter, but with reference to the same provision or insertion of the explanation, the conclusion could not have been otherwise. If mere insertion of the explanation has led to a reference of the above question no. 1, then we are very sorry to say that it is mere duplication. A lot of judicial time has been consumed and unnecessarily in this exercise. 54. We are, therefore, of the opinion that the Reference Application was decided unmindful of the fact that mere insertion of the Explanation does not render the conclusions recorded earlier perverse or vitiated in law. The second round on the same material was, therefore, unnecessary. 55. Mr. Sonpal has heavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover of sales of goods specified in Schedule D. After analyzing the Section, the Division Bench concluded that before an assessee claims a deduction from his turnover, one of the conditions which he must satisfy is that the goods which are resold must be the goods which are specified in Schedule D and which he must have purchased from a registered dealer. Admittedly, in that case the goods in respect of which deduction was claimed, were not goods which were specified in Schedule D at the time when the assessee purchased them but they were covered by entry 42 of Schedule A. It is in that context that the principle of transposition was applied and to our mind, such is not the controversy before us at all. In such circumstances, the judgment in the case of M/s. Friends Stores Nagpur is of no assistance and was rightly distinguished by the Tribunal. Section 17A of the BST Act, 1959, as reproduced above has no application to the facts before us. 56. We are of the opinion that once the above view is taken, then, the question of law, though strictly does not arise in the present case, would have to be answered against the Revenue and in favour of the dealer. 57. There is no question o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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