TaxTMI 
TaxTMI 
2015 (6) TMI 1016
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....exemption from tax on purchase, whether the Tribunal was justified in holding that the said exemption on purchase will not cover, purchase tax levied under section 13AA, unless specific exemption entry is inserted by Government ?" 2. The facts, in brief, giving rise to the present references, are as under: The assessee, who is registered under the provisions of the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956 (hereinafter referred to as "the said Act" and "the Central Act"), is an importer/exporter of diamonds and manufacturer of gold jewellery. The place of business of the assessee is situated at Mumbai and it is also having branches at Surat and Hyderabad. The assessee was assessed for the financial year 2000-01 and 2001-02 under the provisions of the said Act by assessment order dated March 26, 2004 and March 31, 2005, respectively by the Assistant Commissioner of Sales Tax. As per the said assessment orders, the assessee was held to be entitled for refund of Rs. 50,128 for the financial year 2000-01, whereas for the financial year 2001-02, the assessee was held liable to pay an additional amount of Rs. 2,85,862. For the said period, the assessing authori....
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....otification, inasmuch as what is being levied under section 13AA is also a purchase tax. The learned counsel submits that when the language of the notification is plain and simple, there is no question of taking recourse to other principles of interpretation. The learned counsel submits that from plain interpretation of the notification issued under section 41, it will be abundantly clear that the purpose of the notification is to give benefit of reduced rate of tax whenever purchase tax is liable to be paid and the distinction sought to be carved out by the authority and the learned Tribunal is without any basis. 5. The learned counsel, relying on the judgment of the apex court in the case of Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98 (SC) submits that the honourable apex court itself has held that the tax under section 13AA is in effect a purchase tax. The learned counsel therefore submits that, in view of the settled legal position, there is no reason as to why the benefit of exemption notification should not be given to the assessee. The learned counsel also relies on the judgment of the Patna High Court in the case of Tata Iron & Steel Co. Ltd. v. Union of Ind....
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....then there shall be levied, subject to the provisions of subsection (2) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the Schedules aforesaid. (2) Subject to the provisions contained in sub-section (1), where a dealer, who is liable to pay tax under the provisions of this Act, purchases any goods specified in Schedule B or C from a person or a Government, who or which is not a dealer or a dealer who is not a registered dealer then unless the goods so purchased are resold by the dealer, there shall be levied, subject to the provisions of sub-section (2) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the Schedules aforesaid. Explanation.-For the purposes of this section, the term 'capital assets' shall have the same meaning as assigned to it in the Income tax Act, 1961. 13A. Levy of purchase tax in certain cases.-Where a dealer, holding a certificate of entitlement, purchases any goods on a declaration referred to in clause (g) of section 12, there shall be levied a purchase tax on the turnover of such purchases at suc....
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.... sales or purchases from payment of the whole or any part of any tax payable under the provisions of this Act any notification issued under this section may be issued so as to be retrospective to any date not earlier than the January 1, 1960. (2) Where any dealer or person has purchased any goods under a declaration given by him under any of the notifications issued under this section and - (a) any of the conditions subject to which such exemption was granted, or (b) any of the recitals or the conditions of the declaration, are not complied with, for any reason whatsoever, or, in any other case, where such dealer or person was not entitled to issue such declaration, then without prejudice to the other provisions of this Act such dealer or person, shall be liable to pay purchase tax on the purchase price of the goods so purchased and the purchase tax shall be levied at the rates set out against each of such goods in column 4 of Schedules B and C, notwithstanding that such dealer or person was not liable to pay tax under section 3, and accordingly the dealer or the person who has become liable to pay purchase tax under this subsection shall file a ....
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....sent reference, deals with a dealer who is liable to pay tax under the Act and who purchases any goods specified in Part I of the Schedule C, directly or through commission agent, from any person and uses such goods in the manufacture of taxable goods and dispatches the goods, so manufactured, to his own place of business or to his agents place of business situated outside the State within India. It provides that such a dealer shall be liable to pay, in addition to the sales tax paid or payable, if any, or, as the case may be, the purchase tax levied or leviable, if any, under the other provisions of the said Act in respect of purchase of such goods, a purchase tax at the rate of two per cent., on the purchase price of the goods so used in the manufacture. 11. Section 13B deals with the power of the State Government to specify goods or classes of goods as specified goods by issuing a notification which is subject to the condition of previous publication. It provides that in respect of such specified goods, the purchase tax shall be leviable on the turnover of purchase of the specified goods effected by a dealer, at the rate of purchase tax leviable in respect of the specified go....
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....hat insofar as the goods, i.e., the bullion is concerned, it is undisputedly entitled to benefit of the notification under section 41 of the said Act. However, the only question that is required to be considered, is as to whether by virtue of the said notification issued under section 41, the liability of the assessee to pay the purchase tax as is provided in section 13A of the said Act would be affected or not. In other words, it is required to be considered, as to whether irrespective of the notification issued under section 41 of the said Act, an assessee is liable to pay the purchase tax at the rate of 2 per cent., on the assessee fulfilling the requirements as are provided in the said section. 16. For deciding the issue, we will have to consider the legislative history of section 13AA. It is to be noted that though the said Act is of 1959, section 13AA was brought on the statute book, for the first time, with effect from July 1, 1982 by Maharashtra Act 28 of 1982. The original section 13AA as enacted then, reads as under: "S. 13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are transferred to branches.- Where a dealer, who is liabl....
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.... court. This court upheld the validity of the said section. However, in the appeals before the apex court, the apex court in the judgment, in the case of Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC); [1991] 188 ITR 402 (SC) allowed the appeals and held section 13AA to be ultra vires. After the aforesaid judgment was delivered by the apex court on October 9, 1989, by an Ordinance dated December 6, 1989, section 13AA was again brought on the statute book, with retrospective effect, with validating and saving provisions, by removing the disability pointed out by the honourable Supreme Court. The Ordinance came to be replaced by Maharashtra Act 24 of 1990. 18. Section 13AA as substituted reads thus: "13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are not sold.-Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through Commission agent, (from any person) and uses such goods in the manufacture of taxable goods, then, unless the goods so manufactured are sold by the dealer, there shall be levied, in addition to the sales tax, paid or payable, if any, or....
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.... did not sell the same, it would result into loss of revenue to the State which was not intended. Therefore, with a view to protecting the revenue, it was expedient to re-enact section 13AA with retrospective effect with validating and saving provisions by removing the disability pointed out by the Supreme Court and to provide levy of purchase tax in general on all the purchases of raw materials at the concessional low rate and which are used in the manufacture of taxable goods which are not sold. 3. As both Houses of the State Legislature were not in session and the Governor of Maharashtra was satisfied that circumstances existed which rendered it necessary for him to take immediate action further to amend the Bombay Sales Tax Act, 1959, for the purposes aforesaid; the Bombay Sales Tax (Amendment) Ordinance, 1989 (Mah. Ord. IX of 1989) was promulgated on the December 6, 1989. 4. The Bill is intended to replace the said Ordinance by an Act of the State Legislature." 20. The validity of the said amended section 13AA again fell for consideration before the honourable apex court. In the case of Hotel Balaji v. State of Andhra Pradesh reported in [1993] 88 STC 98 (....
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....vils to which the former Act had given rise, and to the later Act which provided the remedy. These three being compared I cannot doubt the conclusion.' It appears to us that this rule is equally applicable to the construction of article 286 of our Constitution. In order to properly interpret the provisions of that article it is, therefore, necessary to consider how the matter stood immediately before the Constitution came into force, what the mischief was for which the old law did not provide and the remedy which has been provided by the Constitution to cure that mischief." Taking guidance from the aforesaid observations of the apex court, we will have to discern four factors as laid down by the apex court: (1) What was the common law before the making of the Act ? Before section 13AA was brought on statute book, rate of tax on raw materials included in Part I of Schedule C was prescribed at low rates, with an intention that the raw materials will be used in the manufacture of taxable finished goods, which would be sold in the State and State would be able to levy and recover normal rate of sales tax, on the goods so manufactured. However, th....
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....tate would be in a position to levy sales tax at higher rate. The remedy provided by the statute, was in order to com-pensate the loss of revenue which occasioned on the purchaser purchasing the raw material from the State at concessional rate, but did not sell the goods which were manufactured by using the said raw material in the State. 23. It will be relevant to refer to some of the observations of the apex court in the case of Hotel Balaji [1993] 88 STC 98 (SC) (pages 145 and 146 in 88 STC): "This statement accords with our understanding of the scheme of section 9 of the Haryana Act as set out hereinabove. To repeat, the scheme of section 9 of the Haryana Act is to levy the tax on purchase of raw material and not to forego it where the goods manufactured out of them are disposed of (or despatched, as the case may be) in a manner not yielding any revenue to the State nor serving the interests of nation and its economy, as explained hereinbefore. The purchased goods are put an end to by their consumption in manufacture of other goods and yet the manufactured goods are dealt with in a manner as to deprive the State of any revenue; in such cases, there is no reason why ....
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....l purchased by a manufacturer. However, it is waived in three situations (i) sale of manufactured goods within the State, (ii) inter-State sale and (iii) export sale of manufactured goods. It has been held that in other cases, it is not. 25. Insofar as the provisions with which we are concerned, the apex court has specifically observed thus (pages 149 and 150 in 88 STC): "The same is the position under section 13AA of the Bombay Sales Tax Act. The said provision, properly analysed, yields the following ingredients: (i) where a dealer who is liable to pay tax under this Act purchases any goods specified in Part I of Schedule C either directly or through commission agent, from a person who is or is not a registered dealer and (ii) uses such goods in the manufacture of taxable goods and (iii) despatches the goods so manufactured to his own place of business or to his agent's place of business situated outside the State within India, (iv) such dealer shall pay, in addition to the sales tax/ purchase tax paid or payable or levied or leviable, as the case may be, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufac....
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.... of export. It has further been held that, when the goods manufactured are not sold within the State, there is no reason as to why the State should not collect the levy on purchase of raw material. 28. It is further to be noted that, sections 13 and 13B of the said Act specifically refer to the rate of purchase tax leviable in respect of specified goods in Schedule B or Schedule C. Even insofar as section 13A is concerned, wherein a power is vested in the State Government to prescribe the purchase tax for different classes of dealers, on the turnover of purchase of goods on a dealer holding a certificate of entitlement, the State is empowered to prescribe different rates for different classes of dealers, however with an outer-limit of four per cent. It is pertinent to note that insofar as section 13AA is concerned, the Legislature has itself provided for levy of additional purchase tax, at the fixed rate of two per cent. and that too covering all classes of purchasers, irrespective of the nature of the goods. 29. It could thus be seen that insofar as the other provisions of the said Act like sections 13 and 13B are concerned, there is a reference to levy of purchase tax levia....
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....e contextual. A statute is best interpreted, when we know why it was enacted. It has been held that if a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different, than when the statute is looked at without the glasses provided by the context. It has been further held that with these glasses, we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say, as to fit into the scheme of the entire Act. It has been held that, no part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. As already discussed hereinabove, the purpose for bringing section 13AA on the statute book, was to compensate the loss of revenue, that occasioned on account of the purchasers purchasing raw material at concessional rates, using the same for manufacture of goods in the State and also using the State infrastructure, but however not selling the goods in the State, thereby depriv....
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....ept the said contention. We find that there is no conflict in the provisions and all the provisions of the statutes referred to hereinabove, can exist in harmony. Insofar as the judgment in the case of Varun Polymol Organics Ltd. [1995] 97 STC 55 (Bom), which is cited in support of the aforesaid proposition is concerned, we find that the said judgment, would not be applicable to the facts of the present case. The question that fell for consideration before this court in the said case, was as to whether in view of a conflict between a subordinate legislation, i.e., notification and the administrative circular, what would prevail. The court held that an administrative circular, cannot have an overriding effect over the notification issued under section 41, which is a subordinate legislation and as such, the notification issued under section 41, will have an overriding effect over the administrative circular. A case of conflict between section 41 with any other provision of the said Act did not arise for consideration. 33. As already discussed hereinabove, sections 13 and 13B make a specific reference to the rate of purchase tax in respect of goods covered under Schedule B or Sched....
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.... to read and to construe the two Acts together as if the two Acts are one, and while doing so to give effect to the provisions of the Act which is a later one in preference to the provisions of the principal Act wherever the Act has manifested an intention to modify the principal Act. The following observations of Lord Simonds in Fendoch Investment Trust Co. v. Inland Revenue Commissioners [1945] 2 ALL ER 140 (HL) made in connection with the construction of certain fiscal statutes are relevant here. He said at page 144: 'My Lords, I do not doubt that in construing the latest of a series of acts dealing with a specific subject-matter, particularly where all such Acts are to be read as one, great weight should be attached to any scheme which can be seen in clear outline and amendments in later Acts should if possible be construed consistently with that scheme'." (emphasis1 supplied) 35. As discussed hereinabove, the said Act has come into effect in 1959. Section 41 is on the statute book since beginning. However, section 13AA, has been brought on the statute book, for the first time on July 1, 1982. After the same was held to be ultra vires in the case of Goodyear....
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....ore than one construction is possible, the construction which preserves its workability and efficacy is to be preferred, to the one which would render it otiose or sterile. If the contention of the assesse is to be accepted, then the very purpose for which section 13AA is brought on the statute book would be defeated. By availing of the benefit of notification by paying the meager tax, the assessee would purchase the said goods, use them for manufacture by using State infrastructure and then take away finished goods, from the State to other State and thereby deprive the State its revenue, which it would have earned by way of sales tax, at much higher rates, if the goods were sold in the State. 37. If the contention of the assessee is to be accepted, then the purchaser who purchases raw material at concessional rate, uses them for manufacture in the State of Maharashtra and also sells them in the State will be required to pay purchase tax at the rate of 0.5 per cent. and the sales tax at the rate of four per cent. as provided in entry 98 of Part II of Schedule C and thereby required to pay total tax of 4.5 per cent. for the financial year 1999-2000, whereas the purchaser like the....