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TMI Blog2024 (7) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (2) would override the provisions of Section 10A as once the exemption is granted from the provisions of the levy tax under the Act, the TOT cannot be accepted even on the assumption that the turnover tax is a single point levy, however, single point levy of tax is provided in Section 9 of the Act for the declared goods and there is no provision for single point of levy of sales tax, general sales tax and TOT except for the declared goods. On perusal of Section 10A, it appears that the turn over tax is leviable on the taxable turnover of taxable goods beyond a prescribed threshold and any dealer whose taxable turnover crosses the threshold at whatever stage was liable to pay TOT. As per Section 10A (2) (f) for the purpose of calculating amount of tax payable under Sub-section (1) of Section 10A i.e. TOT, the sales of goods wholly exempted payment of tax under Section 49 was to be deducted and not to be considered as a part of the taxable turnover for levy of the TOT but after the amendment with effect from 01.04.1993, clause (f) of Sub-section (2) of Section 10A was deleted and as a result of such amendment, the TOT would be payable on the sales of goods exempted under Section 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. The petitioner has also prayed for quashing and setting aside the revisional order dated 26.12.2003 passed by the Special Commissioner of Sales Tax, Gujarat State-respondent No. 2 and order dated 12.02.2001 passed by the Assistant Commissioner of Sales Tax assessing the liability of TOT amounting to Rs. 3,65,65,350/- by declaring that the petitioner is liable to pay TOT by virtue of statutory exemption as per entry No. 173 under Section 49 (2) of the Gujarat Sales Tax Act, 1969 (for short the Act ). It is also prayed to hold and declare that the Oil Marketing Companies (OMCs) are not liable to pay TOT in the turn over of sale on which the petitioner has already paid TOT by virtue of statutory provisions and to give further directions to respondents to refund the TOT to OMCs qua TOT on which the petitioner has already paid the TOT. 5. Brief facts of the case are as under : 5.1. The petitioner-Oil and Natural Gas Corporation Limited is engaged in business of exploration, Mining, Processing, Distribution of Hydrocarbon Products and allied activities. 5.2. In the year 1993-94, the petitioner has sold LPG (Liquefied Petroleum Gas) and NGL (Natural Gas Liquids) to various de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment of TOT. Therefore, the sale between ONGC and OMCs which was exempted vide entry No. 173 under Section 49 (2) of the Act was to be considered by including the same in total turnover of sales for the purpose of assessing the TOT and said notification was made effective from 01.04.1993. 5.9. The Assistant Commissioner of Sales Tax (Petroleum-I)(Division-I), Ahmedabad (hereinafter referred to as assessing authority ) by assessing order dated 12.02.2001 passed under Section 41 (3) of the Act assessed the liability of TOT amounting to Rs. 3,65,65,350/- upon the petitioner ONGC for the financial year 1993-1994. The petitioner paid the assessed TOT to the respondents but being aggrieved and dis-satisfied from the assessment order, also preferred an appeal before the Deputy Sales Commissioner, Appeal-2, Ahmedabad for the refund of the amount paid as turnover tax firstly on the ground that the TOT was introduced by the State Government as single point tax and OMCs has already paid the said TOT on the entire subsequent re-sale amount to the end user and secondly that the said sale by ONGC are wholly exempted from the ambit of the tax. It was therefore contended that there has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods as specified in Schedule - II Part A, there cannot be double taxation on the same quantum of turnover of sale of goods. Thus in case of resale of goods, the dealer is liable to get deduction of purchase price from total turnover of sales. (c) Thirdly, as per section 11 of GST Act, the assessing authority has also assessed TOT on re-sale of goods by OMCs which has resulted into a double taxation. The authority have interpreted the provisions of section 10A in isolation only by not reading with Sec.2 (32), 3, 7, 11 49 (2) which clearly suggest that the first point sale of petroleum products by ONGC to OMCs are entirely exempted from the ambit all taxes under GST Act. (e) Lastly, ONGC has paid TOT to respondent on the basis of assessment order due to mistake of law by mis-constructing amended provisions of Sec. 10A as it creates only technical or notional liability to pay TOT. 5.13 The Tribunal by the impugned order dated 18.01.2016 rejected the revision application No. 39 of 2004 by upholding the reasoning of the respondent No. 2 that the TOT was only dependent on the total taxable turn over beyond prescribed threshold and it was a singly point levy of tax prior to amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double tax, the first point sale has been exempted from any tax under the Gujarat Sales Tax by entry No. 173 under Section 49 (2) of the Act. Learned Senior Advocate Mr. S.N. Soparkar submitted that the first point sale between ONGC and OMCs therefore has been exempted from all taxes under the Act and the said sales are also deemed to be exempted from TOT. It was therefore submitted that denying such exemption for the purpose of assessing TOT would result in double taxation which is against the basic moral and conscious levy of TOT. 6.4. It was submitted that it is not in dispute that the OMCs has already paid TOT on total turnover of local sales / resale which are inclusive of the first point sale made by ONGC and therefore when the respondents have already received TOT from OMCs assessed on total turnover of resale, then they are liable to refund the TOT collected from the petitioner-ONGC. Learned Senior Advocate Mr. S.N. Soparkar referred to and relied upon the letter dated March 29, 2004 from Hindustan Petroleum Corporation Limited wherein it is stated that the TOT introduced by the Gujarat Government had been paid on sale of petroleum products in the State of Gujarat locally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature. 35. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness ill the legislative scheme defining any of those components of the levy will be fatal to its validity. (3) Alembic Chemical Works Company Limited Baroda versus Union of India reported in 1979 ELT 258 Gujarat wherein it is held as under : 4. Mr. Patel next argued that it is settled law that the Act and the excise notification in fixing the measure have to be read as one interacted scheme, as laid down in J.K. Steel Limited v. Union of India A.I.R. 1970 S,C. 1173, at page 1187 , by referring to the earlier decision in Kallash Nath v. State of U.P. A.I.R. 1957 S.C. 790. It is true that the levy and exemption are parts of the same scheme of taxation because the two together carry into effect the purpose of the legislation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute, the words and sentences have to be construed in their ordinary and natural meaning [vide 36 Hals (3rd Edn.) s. 585]. What we are now concerned with is a fiscal provision and it has often been said that there is no equity in a taxing statute and either the subject is within it or not, on the words of the enactment or the rules validly made thereunder. In a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the words of the provision. If the tax-payer is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the statute or rule or by necessary implication therefrom, the matter is different, but that is not the position here. In this connection we might refer to the observations of Lord Watson in Salomon v. Salomon Co.(1): Intention of the legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity of ethylene glycol required to produce a certain quantum of polyester fiber is determined by the chemical reaction. It is not possible to use a lesser quantum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fiber. It is not as if the appellants have used excess ethylene glycol wontedly to produce the methanol. It is also clear that the appellants are not engaged in the production of methanol but in the production of polyester fiber. [272H; 273A] (4) The Tribunal, in the instant case, failed to interpret the words of the exemption notification No. 201/79 properly and fully. The said notification exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item No. 68 (i.e. inputs) had been used from so much of the duty of excise already paid on the inputs. The excisable goods, namely, polyester fiber, were not wholly exempt from duty nor chargeable to nil rate of duty. It cannot be read in the notification that the notification would not be available in case non-excisable goods arise during the course of manufacture. In fact, the Tribunal seems to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tax statutes was felicitously laid down as follows: (SCC p. 20. c para 4) 4. Entitlement of exemption depends on construction of the expression any factory commencing production used in the Table extracted above. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision. has to be tested on different touchstone. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject fails in the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to supply any assumed deficiency in taxing statutes. 6.10. Referring to the above decisions, it was submitted that the respondent No. 2 and the Tribunal have failed to consider that once the sale between the ONGC and OMCs is exempted under Section 49 (2) of the Act, for all intents and purpose, such exemptions from the provisions of the Act would continue to apply even if clause (f) of Sub-section (2) of Section 10A of the Act is deleted with effect from 01.04.1993. It was submitted that the basic exemption which was already granted by notification cannot be said to be not applicable for TOT under Section 10A of the Act. It was submitted that beneficial purpose of the exemption contained in Section 49 (2) of the Act must be given full effect to the line and therefore no tax including the TOT can be levied on the turnover of sale between the ONGC and OMCs. 6.11. It was submitted that there is no dispute that TOT is a single point tax in series of sales and therefore, the ordinary meaning to be assigned to a taxable items in the list of specified items is that each item specified is considered is separately taxable item for the purpose of single point taxation in series of sales un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, all the turnover would include all the exemption under Section 49 (2) of the Act. It was therefore submitted that the contention raised on behalf of the petitioner that the exemption granted under Section 49 (2) of the Act would operate even if there is a taxable turnover to be calculated as per Section 10A of the Act which specifically exclude such exemption, is not tanable. 7.2. Learned Assistant Government Pleader Mr. Chintan Dave invited the attention of the Court to the statements at objects and reasons of the amendment bill of 1993, more particularly, clause (2) thereof which stipulates that with a view to mobilising additional resources, it was proposed to introduce new slab of TOT at the rate of two percent on the turn over exceeding Rs. 8 Crore and sales or resales of goods against certificate as provided in Section 13 of the Act would henceforth be liable to TOT and likewise, sales of goods wholly or partially exumpted from payment of tax under Section 49 (2) of the Act would also be liable to TOT. It was therefore submitted that there was a specific legislative intent to levy TOT on the goods which are exempted under Section 49 (2) of the Act. It was therefore sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption continues a specific item has now been notified under section 3A of the Act. (2) Sales Tax Officer, Sector IX, Kanpur versus Dealing Daily Products and Another reported in 1994 (suppl)(2) SCC 639 wherein it is held as under: 3. The State of U.P. has been issuing, from time to time, notifications under Section 4 of the Act, exempting milk and milk products from the levy of sales tax. It has also been issuing from time to time notifications under Section 3-A notifying the rates of tax on sale/purchase of different goods. In this case, we are concerned with one notification under Section 4 namely the one dated 21-5-1974 and two notifications under Section 3-A dated 4-11-1974 and 30-5-1975. The notification under Section 4 dated 21-5-1974 exempted milk and milk products from the levy of tax. Ice-cream was understood to be a milk product and, therefore, exempt. However, by notifications issued under Section 3-A (dated 4-11-1974 and 30-5-1975) a rate of tax was prescribed expressly for ice-cream among other goods. 4. In CST v. Agra Belting Works a Bench of this Court comprising R.S. Pathak, C.J., Ranganath Misra and B.C. Ray, JJ. held, by a majority, that Sections 3, 3-A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Section 10A of the Act by the Gujarat Sales Tax Amendment Act, 1993 with effect from 01.04.1993 in view of the deletion of Section 10A (2) (f) in substitution of Section 1 (a). 7.5. It was further submitted that the contention of the petitioner to the effect that further explanation and insertion of Section 10 of the Act with regard to the explanation taxable turnover means turnover of all taxable goods as derived after deduction made under Sub-section (2) and the explanation taxable goods means the goods which are taxable or which would have been taxable under this Act but for exemption granted under Sub-section (2) of Section 49 would further clarify that the TOT is payable on the taxable goods including the goods which are exempted under Section 49 (2) of the Act forming part of the taxable turnover. It was therefore submitted that the turnover of all sales of the petitioner-assessee has exceeded Rs. 50 lakhs and therefore TOT shall be payable on the total taxable turnover of the sales effected by the petitioner of all taxable goods at the rate specified in the table. It was therefore submitted that no interference may be made in the impugned order passed by the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate provided in section 13, by virtue of which the sales of goods specified in Schedule II-Part A are exempt from sales tax, Schedule II-Part B are exempt from general sales lax, and Schedule III are exempt from both sales tax and general sales tax. (e) sales of declared goods; (f) sales of goods wholly exempt from payment of tax under section 49. (3) For the purpose of calculating the limit of turnover for arriving at the rate of tax payable by a dealer under sub section (1), deductions under clauses (a) to (f) of sub-section (2) shall be ignored as if no such deductions were permissible. (4). The turnover tax shall be paid by the dealer before furnishing the declaration or return for the period in which the turnover either of all sales or of all purchases as computed from the commencement of the year first exceeds Rs. 99,99,999. The tax so payable shall be for the period from the commencement of the year to the end of the period covered by such declaration or return and the dealer shall continue to be liable to pay the turnover tax for that year for all the subsequent periods till the end of that year. (5) Notwithstanding anything contained in this Act, no dealer shall collect a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 49 (2) would also be liable to turnover tax. 10. Section 2 (32) as it existed for the relevant year in the year 1993 reads as under: 2 (32) : sales means sales tax, general tax, TOT or purchase tax payable under this Act. 11. Section 10A is deleted by Gujarat Act No.15 of 1997 with effect from 01.04.1997. Prior to the deletion, Section 10A as is existed read as under : 10A Levy of turnover tax on [all taxable goods] in case of certain dealers. (1) Where the turnover of all sales by any dealer liable to pay tax under section 3, [XX] has first exceeded rupees fifty lakh (In the year commencing on the 1st April, 1990 and every year thereafter] there shall be levied a turnover Tax, on the total [taxable turnover of sales effected by him of all taxable goods] [XX] at the rates specified in the Table below : [(1A) Where the turnover of all specified sales by any dealer liable to pay tax under section 3A has first exceeded rupees fifty lakhs or the aggregate of the turnover of all specified sales and the turnover of all sales by any dealer liable to pay tax under both the sections 3 and 3A has first exceeded rupees fifty lakhs, in any year in which the Gujarat Sales Tax (Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be liable to pay the turnover tax for that year for all the subsequent periods till the end of that year. (5) Notwithstanding anything contained in this Act, no dealer shall collect any amount by way of turnover tax payable by him under this section] [ Explanation : For the purposes of this section, - (1) the expression taxable turnover means turnover of all taxable goods as derived after deductions made under sub-section (2); and (2) the expression taxable goods means the goods which are taxable or which would have been taxable under this Act but for exemption granted under sub-section (2) of section 49.] Section 49. Exemptions (1).... (2) Subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Gazette, [exempt any specified class of sales or of specified sales or of purchases) from payment of the whole or any part of [the tax] payable under the provisions of this Act. 12. Entry No. 173 was inserted by GNFD No. 49(180) dated 27.10.1986 as amended by GNFD No. 49(193) dated 07.03.1988 which reads as under : 173 - Sales or petroleum products including liquified petroleum ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said notification was issued to amend the Section 10A as a clarification to earlier amendment and therefore, the revisional authority has rightly held that the amendment in Section 10A would be applicable from 01.04.1993 and not from 01.04.1994 as held by the appellate authority. 16. On perusal of the statement on objects to the Gujarat Sales Tax Amendment Act, 1993, it is clear that the intention of the legislature was to collect TOT by including the turnover which is exempted under Section 49 of the Act. Therefore for the purpose of considering the TOT payable on the taxable goods would include the turnover of the goods which is exempted under Section 49 with effect from 01.04.1993. The Tribunal while considering the order passed by the revisional authority has held as under: (16) The learned Special Commissioner has specifically referred to the decisions of the Honourable Apex Court reported in 66 STC 1 (SC), 94 STC, 93 (SC) and 108 STC 1 (SC), for the purpose of deriving support for his conclusion that the subsequent legislative amendment with respect to the notification granting relief will prevail and even if the earlier notifications are not withdrawn or subsequently su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come into effect from 01.04.1994. The learned Special Commissioner has therefore rightly taken the said decision into revision and held that the applicant was liable to pay turnover tax and the relief was wrongly granted to the applicant. (17) The above view is also supported by the decision of this Tribunal in the case of M/s. Super Nova Engineering Pvt. Lta. V/S. State of Gujarat in Revisional Application No. 111 of 1999 decided on 09.04.2007. This Tribunal, after reproducing Section 10A of the Act has observed that on a plain reading of Section 10A, it has been clearly mentioned that turnover tax shall be levied on the total turnover of all taxable goods. By virtue of sub-clause (f) of sub-section 2 of Section 10A, the goods wholly or partially exempt from payment of tax under sub-section 2 of Section 49 are excluded. While considering and calculating the total taxable turnover, the goods fully or partially exempt for payment of tax under Section 49 (2) of the said Act were not required to be considered. Prior to 01.04.1993, sub-clause (f) covers sales of goods fully exempt from payment of tax under Section 49. On or from 01.04.1993, the said sub-clause has been deleted from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. In view of the foregoing reasons and reliance placed on plain interpretation of the provisions of Section 10A as it has come into effect from 01.04.1993, it appears that the reliance placed by the learned advocates for the petitioners on the various decisions would not be applicable in the facts of the case. In view of the plain and simple interpretation of the provisions of Section 10A with effect from 01.04.1993, the petitioner would be liable to pay TOT even on turnover of sales made to OMCs irrespective of the exemption under Section 49 (2). 19. The contention of the petitioner that OMCs have also paid TOT is required to be considered by the respondent-authority for granting remission to OMCs and it is for the OMCs to claim such remission from the respondent-authority and not the ONGC who is liable to pay TOT as per Section 10A with effect from 01.04.1993. Learned Senior Adv Mr. S.N. Soparkar for the petitioner referred to the proposal made by the respondent-authority granting remission to the OMCs for the TOT paid by it so as to availed double levy of the TOT. As the petitioner-OMGC is liable to pay the TOT, the respondent- authority may consider such proposal made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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