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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 ..... urther, the Tribunal rightly noted that there are conditions specified in Schedule A39 and which, upon fulfillment, would make the sale and purchase of these products free from tax. The Tribunal also rightly referred to the object, namely, to promote the products of village industries as are defined by KVIC Act. - There are specific conditions when such products, as referred above, are sold by a dealer who is certified by the Commissioner. Such dealer should not be holding a trade mark or a patent. Now, a trade mark is referable to the goods sold and patent is referable to the method or process of manufacturing of the goods sold. Thus understood, we have no hesitation in concluding that the products, if sold by such dealers, would be tax free. 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, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... havan, A.G.P. for the Applicant State in all STRs. Ms. N. R. Badheka a/w Mr. Parth Badheka and Ms. Lata Nagal for the Respondent in STR/37/2010. ORAL JUDGMENT (PER S. C. DHARMADHIKARI, J.) : Sales Tax Reference No. 37 OF 2010 1. The Commissioner of Sales Tax filed applications styled as Reference Application Nos. 4 of 1998 and 99 to 105 of 2001 before the First Bench of the Maharashtra Sales Tax Tribunal at Mumbai. 2. These Reference Applications arose out of the judgment and order dated 10th October, 1997, in Second Appeal No. 188 of 1997 and the judgment and order dated 5th May, 2001 in Second Appeal Nos. 950 to 956 of 1999. 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 admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 21,47,115/ , whereas, dues as per the first appellate order were determined at ₹ 16,68,082/ . Thus, the claim on account of resale was disallowed. Being aggrieved by the order passed by the assessment officer, so also the first appellate authority, the subject Second Appeal was filed before the Maharashtra Sales Tax Tribunal. The Second Appeal No. 188 of 1997 was decided on 10th October, 1997. The Tribunal framed the points for its consideration, to which, we will make a reference later on. For completion of the factual narration, suffice it to state that the Tribunal allowed this appeal. The order of the first appellate authority was set aside. The resale to the tune of ₹ 60,38,491/ against the purchases of ₹ 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 Rectificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sonpal would submit that the original appellant is admittedly not certified by the Commissioner of Sales Tax as above. It is not entitled to exemption. If it is not entitled to exemption in terms of A 39(2), then, it cannot, by any alternative process, avoid the obligation to pay tax. The original appellant is avoiding it on the ground that what the Revenue is attempting to do is to tax a resale. 13. Then, Mr. Sonpal invites our attention to Section 8 of the Bombay Act. He would submit that the Scheme of Section 8, Rule 42H and Rule 46B, both of the Bombay Sales Tax Rules, would demonstrate that if resales are to be allowed, it is necessary 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 A 39 (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 C II 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically provided in the Schedule entry itself that exemption is to the purchaser on the condition of compliance with the requirements. Since there is a single point of tax and that can be gathered from Section 17A of the Bombay Act, then, all the more, the resale claim cannot be allowed. Mr. Sonpal is relying upon the wording of Section 17A to submit that where any entry (or part thereof) is transposed by its deletion from one of the Schedules and for its insertion 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 and in clause (b) or clause (c) of Subsection (1) of Section 9 shall not apply to the re sale 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusions in the second appellate order. The Tribunal has completely misconstrued and misinterpreted the issue. On a Reference Application, a question even of law, which never arose from the order passed in appeal, could not have been referred for this Court's opinion. There was no occasion for the Tribunal to have forwarded such question and as is reproduced by us above. She would submit that this Court, therefore, should not answer any hypothetical or academic question or issue. The matter must be approached squarely in the light of the factual position and emerging from the record. She would submit that even the factual position, 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) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present record. Even the grounds of appeal before the first appellate authority and the second appellate authority are not attached. The assessment order, as attached, is incomplete. Ms. Badheka would, therefore, submit that this Court is really handicapped and should not answer the questions in the absence of these material documents. The Tribunal has also not forwarded the relevant trade circulars and which have an important bearing on the issue. She would therefore submit that once the Tribunal has not followed the practice of drawing up a statement of admitted facts and forwarding of the relevant records, then, this Court 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 Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in Second Appeal of the original appellant, held that it had claimed deduction under Section 8(ii) and not exemption under Section (5) of the BST Act. 21. In any case, according to Ms. Badheka, the entry A 39, as it existed, must be read together with the change effected after 11 th August, 1988. The amendment to the definition of the term resale as appearing in Section 2(26) denotes that it is to disallow a claim of resale to trade mark holders. Such dealers cannot be allowed resale under Schedule entry A 39. The purpose in making such amendment ought to be noticed and only then it would be evident that dealers, 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 Ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are taxable. This would defeat the very purpose of grant of exemption to promote KVIC units. In any case, the KVIC Board would never recommend traders and direct the Commissioner to issue certificate to traders as it is concerned only with it's own units. That is how Ms. Badheka invites our attention to the Khadi and Village Industries Commission Act, 1956 (for short, the KVIC Act ) itself. She would submit that the KVIC Act and Rules, as compiled by her, would indicate that the said Act enacted by the Parliament is to provide for the establishment of a Commission for the development of khadi and village industries and for matters 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue and in favour of the dealer. 25. For properly appreciating the above controversy, we would first make a reference to the Bombay Sales Tax Act, 1959. We would have to make a reference to the provisions as they stood at the relevant time, namely, 1992 93. At the same time, we would notice some amendments and which have a material bearing on the controversy. 26. At the relevant time, the Bombay Sales Tax Act, 1959 had 79 Sections divided into nine (9) Chapters. It had the Schedules A, B and C. 27. We have before us, a copy of this Act as amended up to 1st May, 1998. It is an Act to consolidate and amend the law relating 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 Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the sales or purchases of any goods specified in that Schedule. (2) The State Government may by notification in the Official Gazette, add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein; and thereupon, the said Schedule shall be deemed to be amended accordingly; and the amendment so made shall take effect from the date of the publication of the notification in the Official Gazette or from such other date as may be mentioned therein. A perusal of this Section would reveal as to how 'sales and purchases of certain goods free from all tax' is the heading of this Section. In Sub section (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. Sub section (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 11 or 12, if the requirements of section 12A are satisfied. 31. Then there are further sections which follow and confer power to specify points of sale at which goods may be taxed, provisions of Section 8A not to apply to declared goods, deduction of resales during pendency of application by dealer for grant of patent or registration of trade mark (Sections 8A to 8C) and exclusion of certain purchases for purposes of deductions under Section 7 and 8, which is set out in Section 10A. By Section 11, tax is payable at reduced rate on certain sales, and by Section 12, no deduction from turnover except on declarations. 32. Section 12 and 12A read as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of such resales. (2) There shall not be deducted from the turnover of sales, the resales of goods purchased by a dealer from a dealer registered under the Central Sales Tax Act, 1956 and who is liable to pay tax under section 4, as provided in section 7, and 8 unless the dealer claiming deduction produces, a bill or cash memorandum containing a certificate that the selling dealer is liable to pay tax under section 4 on the sale of goods to him and that the said sale is in the course of business of the selling dealer. Such certificate shall be signed either by the selling dealer himself or by a person duly authorised by him in this behalf. (3) Notwithstanding anything contained in section 8, on or after the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by resolution of that Assembly; and upon such approval, the notification may be issued and shall take effect in the form in which it is so approved. Any notification issued under this section shall take effect from the date of the publication thereof in the Official Gazette or from such other date as may be mentioned therein. 17A. No deductions under Section 8 in certain cases. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Act, 1960; (1) When sold by a producer or a dealer 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 and Village Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960, or 1-7-1981 to 10-8-1988 (b) Khadi and readymade garments and other articles, prepared from Khadi. Explanation : For the purposes of this entry Khadi means any cloth woven on handloom in India from cotton, silk or woollen yarn handspun in India or from the mixture of any two or more of such yarns. (2) When sold by another dealer who has purchased the goods 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other articles, prepared from Khadi. Explanation : For the purposes of this entry Khadi means any cloth woven on handloom in India, from cotton, silk or woollen yarn handspun in India or from the mixture of any two or more of such yarns. (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 30-9-1995 (2) When sold by another dealer who has purchased the goods from a producer or dealer certified under condition (1) We are concerned with the Schedule A 39(a) as prevailing from 11th August, 1988 to 30th April, 1994. 36. A bare perusal of this would indicate that this entry was substituted w.e.f. 11th August, 1988 by Maharashtra Act No. 22 of 1988. It deals with pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8% 1-7-1981 to 30-4-1994 (b) When sold at a price exceeding ₹ 30/per Pair 12% 12% 1-7-1981 to 30-11-1982 (b) When sold at a price exceeding ₹ 30 but not exceeding ₹ 50/per pair. 12% 12% 1-1-21982 to 30-4-1994 (c) When sold at a price exceeding ₹ 50 per pair. 15% 15% 1-12-1982 to 30-4-1994 [Rate of tax is reduced to 8%, if the pair is sold upto ₹ 50/and to 10% if sold above ₹ 50/under entry (97B) by STA-1085/CR97/RES-8 dt. 29-7-85 w.e.f. 25-6-1985]. [Whole of the tax is exempted on the sales or purchases of plastic or rubber footwear sold or purchased at a price not exceeding ₹ 25/per pair under entry(97B(iia)) by STA-1088-62-Tax-2 dt.25-3-1988 w.e.f. 1-4-1988] [Sales or purchases of footwear other than those made by hand without power, and plast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as are defined by KVIC Act. These are products emerging from village industries. These industries are operating at village level are encouraging such artisans and skilled workers in rural areas who manufacture and produce products of day to day use, but do not find a market or do not have an access thereto on account of poverty and varied reasons. It is to promote their products and bring them in the main stream economy that the two Acts have been promulgated. The KVIC Act has a definite object and purpose and that to provide for the establishment of a Commission for the development of khadi and village industries and for matters connected therewith. Both are distinct terms and understood by the preamble itself. Khadi as defined in Section 2(d) means any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns. Then, 'village industry' is defined in Section 2(h) to mean any industry located in rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns based on which the goods can be termed as 'tax free', then the further finding by the Tribunal is logical. It follows from its earlier references. 43. In paragraph 42 of the order of the appeal, the Tribunal concludes that from the nature of the entries found in Schedule A, it will be seen that, subject to certain conditions, both the transactions of sale or purchase are not held to be exigible to tax. The Tribunal was making these observations in the light of the interpretation that it placed eventually on Schedule entry A 39. It rightly proceeds on the footing that this entry grants exemption to specified dealers and not to purchases or sales of the goods unlike the rest of the entries of Schedule A. It also mentioned that as many as 23 products/industries are notified by the Competent Authority. The goods are not tax free, but since they are referable to Khadi and Village Industries Act which is a Central Statute, that the exemption from the ambit of taxation falls. 44. In paragraph 43 and 44 of the Tribunal's order, the findings read thus: 43. A dealer, like Khadi Bhandar, who is dealing in eight or nine figure turnover and is probably covering most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t summarizes the whole issue and the conclusions broadly, it rightly makes a reference to the conditions specified in column 3 of Schedule entry A 39(a). In the first instance, it is the products manufactured and sold by producers or when imported and sold by an importer certified for the purpose by the Commissioner and after taking into account the recommendations of the statutory entities, secondly, when such products of village industries as are defined in the KVIC Act and the Bombay Act, as may be notified from the State Government from time to time for the purpose of this entry, when sold by a dealer who is certified for this purpose by the Commissioner after taking into account the recommendations of the KVIC and the Bombay Board and who does not hold a trade mark or patent in the respective goods sold or who does not hold a patent in respect of the method or process of manufacturing the goods sold. Therefore, there are specific conditions when such products, as referred above, are sold by a dealer who is certified by the Commissioner. Such dealer should not be holding a trade mark or a patent. Now, a trade mark is referable to the goods sold and patent is referable to the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, there was no occasion for the Tribunal to refer these questions. 51. Possibly, it was for the second time engaged by the Revenue in the very controversy and which had already consumed lot of its time. We find that lot of unnecessary discussion is made. Though the Tribunal's order on the appeal was before the Bench when it decided the Reference Applications, and it has extensively revisited the very same provisions, we have not noticed any disagreement, much less recording of any different opinion. Therefore, the Tribunal need not have made elaborate re exercise. If the Revenue was aggrieved and dissatisfied with the order in the appeal, it could have brought a further appeal to this Court. However, the Tribunal, while passing the referring order, was of the view that there is specific exemption to particular class of dealers and the tax was not payable by the particular class of dealers. Thus, making distinction between leviability and nonleviability, the Tribunal had come to the conclusion that even after addition of explanation to Section 8, that has not made any difference. We think that the insertion of the Explanation has led to the reference to this court. On fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn over the value of such goods. This turnover was estimated by the Sales Tax Officer but the Sales Tax Officer held that the goods which were purchased form the registered dealers and which were covered at the time of such purchase by entry 42 of Schedule A to the Act, were liable to be taxed in accordance with the provision of the Bombay Act. The appellate authority, namely, the Assistant Commissioner of Sales Tax, also negatived the contention of the assessee that he was entitled to a deduction under Section 9(i)(ii) of the Act as it then stood. Section 9 of the Act, and as was referred to us, was deleted from 1st October, 1995 by Maharashtra Act XVI of 1995. Sections 9 (i) and (ii) of the Act have been reproduced in the judgment of M/s. Friends Stores Nagpur. Though the order of the first appellate authority was confirmed by the Tribunal, since it took a view that the question whether on a proper construction of Section 9(ii) the assessee was entitled to a deduction from his total turnover in respect of the resales of the goods which were covered by entry 42 of Schedule A to the Act at the time of the purchase but at the time of the sale they were covered by entry 4 of Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X
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