TaxTMI 
TaxTMI 
2015 (12) TMI 1038
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....hese appeals and writ petitions relate either to the levy of additional tax under section 4A of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Act") and the mode and manner of payment of such additional tax, or both. The facts and contentions raised by the respective parties are also more or less common and hence, the same were heard together and are decided by this common judgment. 2. The appellants in these appeals and the respondents in the writ petitions are dealers who at the relevant time were enjoying the benefit of exemption from payment of general sales tax, sales tax or, as the case may be, purchase tax under the relevant notification issued by the State Government in exercise of powers under sub-section (2) of section 49 of the Act. Under the incentive schemes framed under section 49(2) of the Act, exemption was granted to a particular limit calculated in terms of the Scheme. The Scheme also lays down the method for computing the entitlement limit of tax exemption. For the purposes of such computation, the amount of tax leviable under the relevant provisions of the Act is required to be calculated and the same is adjusted against the exemption limit.....
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....Tribunal followed its earlier decision rendered in Second Appeal No.18/2006 and 19/2006 and allied matters. The Tribunal, in the orders from which the writ petitions arise, held that the assessees are liable to pay additional tax under section 4A of the Act computed on the basis of the assessee's liability to pay tax under the provisions of sections 3, 3A and 4 of the Act, however, insofar as the adjustment of such amount against the exemption limit is concerned, the Tribunal deviated from the previous view taken by it in the case of M/s. D.K. Trivedi and Sons and allied matters wherein it was held that though the assessees were entitled to exemption under section 49(2) of the Act, they were still liable to pay the additional tax in cash, and held that the assessees were entitled to adjust the amount of additional tax against the ceiling limit of tax exemption granted under section 49(2) of the Act. Against the orders passed by the Tribunal holding the dealers liable to pay additional tax under section 4A of the Act, the dealers are in appeal and against the order of the Tribunal holding that the dealers are entitled to adjust the additional tax against the ceiling limit of exempti....
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....n those on the sale or purchase of which no tax is payable under Section 5'. In the Bombay Act there was also a provision corresponding to Section 49 of the Act in Section 41 thereof which empowered the State Government subject to such conditions as it may impose to exempt by a notification published in the Official Gazette any specified class of sales or purchases from payment of the whole or any part of any tax payable thereunder if the State Government was satisfied that it was necessary so to do in the public interest. Still the definition of "taxable goods" in that Act did not refer to sales exempted under Section 41 thereof. But in the Act which repealed and replaced the Bombay Act the meaning of the expression "taxable goods" has been narrowed down as Section 2(33) of the Act reads - "taxable goods" means goods other than those on the sale or purchase of which no tax is payable under Section 5 (which corresponds to Section 5 of the Bombay Act) and Section 49 of the Act (which corresponds to Section 41 of the Bombay Act) or a notification issued thereunder. By this definition, the dichotomy that is stated to exist between "taxable goods" and "taxable events" has been given a ....
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....holding that the exemption by a notification under section 49(2) of the Act is neither given to the dealers nor to the goods but it is given to specified sales or purchases. According to the learned counsel, the observations made by the Tribunal are contrary to the definition of specified sales under section 2(33) of the Act. Reliance was placed upon the decision of the Madras High Court in the case of M/s. MRF Limited, Madras v. Union of India, 1988 (14) ECR 507 (Madras), wherein, the court has observed that there must be an excise duty for the time being in force and which is leviable on the goods; then only there could be the levy of additional duty under section 3(1) of the Central Excise Act. If no excise duty is in force and could be levied on the goods, then there was no question of levy of additional duty under section 3(1) of the said Act. When there is no excise duty in force and levied on the goods, by virtue of the exemption notifications, it is not possible to bring in a fiction that the goods are amenable and liable for levy of excise duty and exemption notifications have only suspended such levy and on that basis, there could be levy of additional duty under section ....
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....m payment of tax on the sale or purchase of goods, are not liable to pay additional tax. The Tribunal, therefore, was not justified in holding that though the appellants were exempted from payment of sales tax, general sales tax or, as the case may be, purchase tax, it was still liable to pay additional tax under section 4A of the Act. 4.4 Alternatively, it was submitted that in case the court holds that the dealers are liable to pay tax under section 4A of the Act, the finding recorded by the Tribunal that such tax prior to the amendment of the aggregation clause with effect from 3rd March, 2001 is payable in cash, requires to be interfered with. 5. Mr. Uchit Sheth, learned advocate appearing on behalf of the respondents in the writ petitions reiterated the submissions advanced by Mr. Tanvish Bhatt, learned advocate for the appellants. The attention of the court was invited to the scheme of the Sales Tax Act and more particularly, the provision for exemption, to submit that an anomalous situation would arise if the dealers are held liable to pay additional tax under section 4A of the Act. In support of such contention, the attention of the court was invited to section 50 of ....
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....e in an exemption notification has been examined by this court in the case of Apollo Tyres Limited v. Sales Tax Officer, (1997) 106 STC 218 (Gujarat), wherein it has been held that the curtailment of incentive limit by a dealer enjoying exemption is for the purpose of limiting the loss of revenue which occurs to the State as a result of the fact that no tax is payable on the transaction. It was submitted that the fact that the State Government has provided for curtailment of the incentive limit by the amount of additional tax under section 4A of the Sales Tax Act by amendment dated 3rd March, 2001, shows that the State Government understood that there was loss of revenue to the State even in respect of additional tax as a result of the exemption notification and, therefore, had provided for curtailment of the incentive limit. 5.2 It was pointed out that the Department is relying upon the amendment dated 3rd March, 2001 to the exemption notification to contend that prior to that date, additional tax was payable in cash. It was submitted that the clause for incentive limit does not confer any exemption to the dealers, but is a provision meant for capping the maximum exemption that....
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....e notification issued under section 49(2) of the Act is merely clarificatory in nature. Section 4A of the Sales Tax Act was enacted for a period of one year from 1st April, 2000 and the amendment was made on 3rd March, 2001. It was argued that the State Government could not have intended to make the amendment only for a period of twenty seven days. More so, because when the additional tax was levied earlier, the aggregation clause of the exemption notifications specifically provided for curtailment by amount of additional tax. The reference to additional tax in the aggregation clause was deleted since the provision for additional tax itself was deleted from 1st April, 1992. Thereafter, when additional tax was levied again from 1st April, 2000, reference to additional tax in the aggregation clause has been reinstated. Thus, the amendment is clarificatory and retrospective and hence, the amount of additional tax has rightly been adjusted by the respondent dealer against the incentive limit. 5.5 Next, it was submitted that the additional tax has been demanded from the respondent dealer in cash for the period from 1st April, 2000 to 3rd March, 2001. There is no demand of additional ....
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.... of the Act provides for certain exclusions for the purpose of deduction under section 7 of the Act. One such exclusion under section 11(1)(b) of the Act is purchase of goods from any person whose sale of such goods has been wholly exempted from the payment of tax under section 49 or any notification issued thereunder. Thus, the legislature envisages that if sales of a dealer are exempted by a notification issued under section 49 of the Act, then the purchasing dealer is not entitled to claim resale deduction, which effectively means that the tax becomes payable by the purchasing dealer on its subsequent sales. It was submitted that merely because the respondent dealer curtailed the exemption limit, he cannot be held liable to pay tax in cash. It was urged that if the court holds that the additional tax is not payable, the respondent cannot be in a worse position. 6. Mr. K.H. Kaji, learned advocate appearing on behalf of the respondents in Special Civil Applications No.11904/2014 to 11906/2014 submitted that the notification imposing levy under section 4A of the Act came to be issued with effect from 1st April, 2000 and the aggregation clause in the notification issued under sec....
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....nted out that the assessment order was initially made in the case of the respondent dealer on 27th October, 2004; notice for revision was issued on 22nd January, 2008 and the assessment order was passed on 31st January, 2008. It was argued that under section 67 of the Act, an order can be taken in revision within three years from the date of such order, whereas in the present case, the notice admittedly being beyond a period of three years, the exercise of revisional jurisdiction was bad in law. 7. Mr. Akshay Vakil, learned advocate appearing for the petitioner in Special Civil Application No.83/2014 and for the respondent in Special Civil Application No.9055/2015 submitted that having regard to the amendment in the notification issued under section 49(2) of the Act with effect from 3rd March, 2001, adjustment of additional tax against the exemption limit could be considered from 3rd March, 2001; however, prior thereto, additional tax was neither required to be adjusted nor paid in cash. It was submitted that for the entire year, the petitioner was under the bonafide belief that there was no liability either to adjust additional tax under section 4A of the Act against the exempt....
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....f the Act, the goods would be liable to additional tax under section 2(32) read with section 4A of the Act. In support of her submission, the learned Assistant Government Pleader placed reliance upon the decision of the Supreme Court in the case of Associated Cement Companies Ltd v. State of Bihar, 2004 taxmann.com 1911 (SC), for the proposition that exigibility to tax is not the same as liability to pay tax. The former depends upon the charge created by the statute and the latter on computation in accordance with the provisions of the statute and the rules framed thereunder, if any. The liability to pay tax chargeable under section 3 of the Bihar Finance Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. The court observed that but for the exemption, the dealer would be liable to pay tax in terms of section 3. In other words, exemption presupposes a liability. Unless there is a liability, question of exemption does not arise. Liability arises in terms of section 3 and tax becomes payable at the rate as provided in section 12. The court held that it could not be said that as tax was not payab....
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....It was submitted that the said circular also clarifies that additional tax is distinct from sales tax, general sales tax and purchase tax and accordingly additional tax is not included in the term "tax" as provided by Condition No.19(i) of Entry 69. It was further pointed out that notification dated 3rd March, 2001 was introduced to include "additional tax" under Condition 19(i) of Entry 69. Accordingly, prior to such introduction by notification dated 3rd March, 2001, additional tax was not included under Condition 19(i). The notification is not retrospective in effect and so the attempt on the part of the respondents to apply such notification retrospectively is bad in law. It was submitted that for the purpose of interpreting any exemption of incentive provision, the benefit of doubt should be given to the State. In support of such submission, reliance was placed upon the decision of the Supreme Court in the case of Novopan India Limited, Hyderabad v. Collector of Central Excise and Customs, Hyderabad, 1994 Suppl. (3) SCC 606, for the proposition that the principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said ....
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....ales Tax Act, 1969 on the sales which are exempted by Entry pursuant to notification under section 49(2) of the said Act? (2) Whether the Gujarat Value Added Tax Tribunal has exceeded its jurisdiction in holding that the appellant was required to deposit additional tax in cash, when the said aspect was not even the controversy before it in the appeal of the appellant? 11. Tax Appeals No.413/2015 and 414/2015 have been admitted on the following two substantial questions of law:- (1) Whether the appellant is liable to pay additional tax under Sec.4A of the Gujarat Sales Tax Act, 1969 on the sales which are exempted by Entry 69 inserted pursuant to notifications issued under Sec.49(2) of the said Act? (2) Whether the Tribunal erred in deciding the appeals though the appeal of the appellant for earlier year which had direct bearing to the present case was yet pending before this Hon'ble Court and though the appeals before the Tribunal were only consequential? 12. Tax Appeals No.432 of 2007 and 433 of 2007 have been admitted on the following common questions: (i) Whether the Appellant is liable to Additional Tax U/s 4A of the Gujarat Sales Tax A....
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.... Similar exemptions have also been granted vide Entry No.255. The present case relates to exemption from payment of sales tax or general sales tax or, as the case may be, purchase tax by virtue of exemption granted under sub-section (2) of section 49 of the Act. It is an admitted position that the sales by eligible units of goods manufactured by them are exempt from the whole of the sales tax or general sales or both as the case may be by virtue of Entry 69 and 255 of the Concessions and Incentives under section 49(2) of the Act. 15. Section 4A of the Act with which we are primarily concerned in the present case reads thus:- 4A (1) There shall be levied and collected for a period of one year from the date commencement of the Gujarat Sales Tax (Second Amendment) Act, 2000, from every dealer liable to pay tax under section 3 or section 3A or under section 4; an additional tax on the sale or purchase of goods liable to tax under this Act, at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax, payable by such dealer : Provided that the additional tax shall not be levied on the sale or purchase of any of the declared g....
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.... tax remains, but the requirement to pay tax to fulfil such liability is done away with. In other words, while there is a liability to pay tax, in view of the exemption, there is no obligation to pay tax. 18. It may, however, be recalled that the first part of section 4A of the Act fixes the charge on the basis of liability to pay tax under sections 3, 3A and 4 of the Act. Therefore, in the light of the above decisions, the liability to pay tax under sections 3, 3A and 4 of the Act would continue despite the fact that the sale or purchase of goods are wholly exempt from payment of sales tax, general sales tax or, as the case may be purchase tax. Accordingly, additional tax would be leviable on a dealer who is liable to pay tax under sections 3, 3A and 4 of the Act, irrespective of the fact that the sale or purchase of goods is wholly exempt from payment of tax under those provisions. However, as noticed earlier, section 4A of the Act is in two parts. The second part of section 4A says that such additional tax shall be levied at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax payable by such dealer. Therefore, the sales ....
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....ay be, purchase tax, there is no obligation upon the dealer to pay such tax, and consequently, the sales tax, general sales tax or, as the case may be, purchase tax payable by the dealer would be nil and resultantly, the additional tax at the rate of 10% thereof would also be nil. This court is of the view that the legislature, appears to have consciously provided for additional tax to be computed at the rate of 10% of the sales tax, general sales tax or, as the case may be, purchase tax payable by a dealer, so as to ensure that such tax is payable only when the sale/purchase of goods is otherwise exigible to tax. In other words, in case where no tax is payable on the sale or purchase of goods, the legislature did not intend that additional tax should be collected thereon. Otherwise, there was no need to add the words "on the sales tax, general sales tax or, as the case may be, purchase tax, payable by such dealer". When the additional tax is to be computed on the tax payable, in the absence of any tax being payable, the question of computing additional tax at the rate of 10% thereof would not arise. 21. It is the case of the revenue that the liability to additional tax can be c....
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....ax would be nil. Therefore, while it could be said that having regard to the first part of section 4A of the Act, additional tax is leviable, considering the second part of the section, such additional tax would be nil as the tax payable by the dealer on sale or purchase of goods which are wholly exempt from payment of sales tax, general sales tax or, as the case may be, purchase tax would be nil. 23. Examining the issue from another angle, under section 50 of the Act, if any specified class of sales or specified sales or purchases is exempted under section 49 from the whole or any part of any tax payable under the Act, subject to any condition, then, in the event of breach of such condition in respect of any goods so sold or purchased, the seller or purchaser responsible for such breach shall, notwithstanding anything contained in section 3 or section 3A, be liable to pay tax on such sale, specified sale or purchase, as the case may be, to the extent to which it was exempted under section 49 from the payment of tax. Section 56 of the Act provides that no person shall collect any sum by way of tax in respect of sale or specified sale of goods on which by virtue of section 5 or s....
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....er, where the goods are wholly exempt, additional tax would have to be computed on the basis as if such sales are wholly exigible to tax. 26. In the aforesaid premises, while it cannot be said that additional tax is not leviable on the sale or purchase of goods which are wholly exempt from payment of sales tax, general sales tax or, as the case may be, purchase tax, however, such additional tax can only be calculated at the rate of ten paise in the rupee on the sales tax, general sales tax or, as the case may be, purchase tax actually payable by the dealer. For the purpose of computation of additional tax, the authorities cannot fall back upon the fictional basis of computation of sales tax, general sales tax or, as the case may be, purchase tax adopted for the purpose of computing the entitlement limit of tax exemption. If the actual tax payable is nil, which would be the case where the sale or purchase of goods is totally exempted, the additional tax at the rate of ten paise in the rupee would also be nil. The authorities under the Act, therefore, cannot recover additional tax under section 4A of the Act in relation to sale or purchase of goods which are wholly exempt from pay....
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....the date of the order passed by the officer appointed under section 27 to assist him. In the facts of the present case, the assessing authority had passed the order on 27th October, 2004, whereas the notice under section 67 came to be issued by the Joint Sales Tax Commissioner on 22nd January, 2008, which is clearly beyond a period of three years from the date of the order passed by the assessing authority. Clearly therefore, the exercise of revisional powers was barred by limitation. Similarly, in Special Civil Application No.83/2014, the assessing authority passed the order on 31st January, 2005, giving benefit of adjustment against the exemption limit to the respondent dealer and the notice under section 67 of the Act came to be issued on 29th May, 2008. Clearly therefore, the notice under section 67 of the Act was beyond a period of three years from the date of the order passed by the assessing authority. Under the circumstances, the exercise of revisional powers by the Commissioner was clearly barred by limitation. 29. It may be noted that in five tax appeals, that is, Tax Appeals No.35/2007, 36/2007, 37/2007, 1337/2006 and 1338/2006, the second question which has been rais....