1987 (11) TMI 94 - SC - VAT / Sales Tax

Sales of cement exempt when electricity board issues certificates of intended use; certificates valid absent fraud

SC held that sales of cement to a state electricity board qualified for exemption where the board issued certificates stating the goods were for use in ... Demand - expression 'taxable' - Turnover - Exemption on sales of cement to Punjab State Electricity Board based on certificates issued by the Board - generation or distribution of electrical energy - HELD THAT:- We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression 'for use' must mean 'intended for use'. If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, 'goods actually' used or 'goods used'. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion with the Board. The mere fact that some of the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption. In view of the conclusion set out in the previous paragraph, we do not feel called upon to go into the question whether certificates granted by the Board must be regarded as conclusive in a matter of granting exemption. We may, however, point out that the certificate contemplated under Section 5(2)(a)(iv) of the Act cannot compare with the certificate in Form C which is a statutory certificate nor can it be regarded as completely conclusive. We are not called upon in this case to consider in what circumstance the assessing authority can go behind the certificate. It is clear that in the present case no such circumstances existed. In the result, the appeals must fail and are dismissed Issues:Interpretation of Section 5(2)(a)(iv) of the Punjab General Sales Tax Act for exemption on sales of cement to Punjab State Electricity Board based on certificates issued by the Board.Detailed Analysis:1. Background: The case involved appeals against a decision of the High Court of Punjab & Haryana regarding the exemption granted under Section 5(2)(a)(iv) of the Act for sales of cement to the Punjab State Electricity Board based on certificates issued by the Board.2. Exemption Claim: The respondent-assessee supplied cement to the Board based on certificates stating the cement was for use in the generation or distribution of electrical energy. Initially, the sales were exempted under Section 5(2)(a)(iv) of the Act.3. Reopening of Assessment: Subsequently, the assessment was reopened, and additional demands were made by the Deputy Excise and Taxation Commissioner, contending that the exemption was not applicable as the cement was not used directly in activities related to electrical energy generation or distribution.4. Tribunal and High Court: The assessee challenged the additional demands before the Sales Tax Tribunal, which upheld the demands. A reference was made to the High Court, which concluded that the assessee did not need to prove the actual use of cement in electrical energy activities to claim the exemption.5. Interpretation of Exemption Clause: The appellant argued that the exemption required proof of actual use of the cement in electrical energy activities. However, the Court held that the phrase 'for use' in the exemption clause meant 'intended for use,' not necessarily actual use.6. Precedent and Interpretation: Reference was made to a previous decision by the Madhya Pradesh High Court, but the Court distinguished it, emphasizing the intention behind the use of goods for exemption eligibility.7. Intent vs. Actual Use: The Court clarified that the crucial factor was whether the cement was intended for direct use in electrical energy activities, as evidenced by the certificates issued by the Board, regardless of some cement being used for other purposes.8. Conclusive Certificates: The Court noted that the certificates issued by the Board were crucial in determining the exemption eligibility, emphasizing their importance in establishing the intent behind the sale of goods.9. Conclusion: Ultimately, the Court dismissed the appeals, upholding the decision that the exemption applied based on the intended use of the cement for electrical energy activities, as indicated by the certificates issued by the Board.