2015 (6) TMI 1016
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....as 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 authority had held that the assessee had transferred the manufact....
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....AA 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 India [1989] 42 ELT 353 (Patna) and the judgments of various High C....
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....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 such rate not exceeding four per cent., as may be prescribed and different rates may be prescribed ....
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....ed 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 return in the prescribed form to the prescribed authority within a prescribed time and shall include the purchase price of such turnover in his return, and pay....
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....ny 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 goods under Schedule B or Schedule C, as the case may be, unless such purchased goods are resold by such dealer. Sub-section (2) thereof provides that where the specified goods are declared ....
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....irtue 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 liable to pay tax under this Act, 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 despatches the goods, so manufactured, to....
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....s 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 as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods, so used in the manufacture, and acc....
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....nted 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 (SC), the apex court disagreed with its earlier judgment in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC); [1991] 188 ITR 402 (SC) and upheld the validity of the said provisions. 21. It appears that again by Act 16 of 1995, the said section 13AA was substituted as it stands today. Ho....
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....sary 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, there was no provision to tax a purchaser if he avails of himself of the concessional rate of tax at the time of purchase of raw materials, uses the same in the manufacture of taxable goods, but does not sell the same in the State, thereby resulting in loss of revenue to the State. (2) What was the mischief and defect for which the common law did not provide ? The defect that ....
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.... 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 the State should forego its tax revenue on purchase of raw material. In the light of the above scheme of section 9, it would not be right, in our respectful opinion, to say that the tax is not upon the purchase of raw material but on the consignment of the manufactured goods. It is well-settled that taxing power can be utilised to encourage commerce and industry. It can also be used to serve the interests of economy and promot....
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....t. 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 manufacture. Here again it may be noticed that the tax levied is a purchase tax on the purchase of raw material and not upon the consignment of the manufactured goods. The object of this provision too is the same as of the Haryana provision. The levy is waived where the manufactured goods are sold within the State, or sold in the course of inter-State trade or commerce or sold in the course of export. It is retained and collected where the goods are take....
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....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 leviable in respect of specified goods under Schedule B or Schedule C or in the case of section 13A, where a discretion is available to prescribe different rates of purchase tax for different classes of dealers, insofar as section 13AA is concerned, the Legislature in its wisdom, has specifically determined the levy of purchase tax at the fixed rate of two per cent. for all classes of purchasers, irrespective of the nature of the goods or the dealers. 30. It will be appropriate to refer to the ....
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....ction, 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 depriving sales tax which the State would have earned from such sales at a higher rate. 31. It will also be relevant to refer the following observations of the apex court in the case of Bengal Immunity Company Limited [1955] 6 STC 446 (SC); AIR 1955 SC 661 (page 589 in 6 STC): "(168) I see no force in this contention. It is a cardinal rule of construction that when there are in a statute two provisions which are in conflict with each other such that both of them cannot stand, they should, if possible, be....
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....etween 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 Schedule C. Perusal of Schedule B and Schedule C would also reveal that the rate of tax is specifically provided for each of the entries. The relevant clause of the Schedule to the notification, would also reveal that the notification refers to sale or purchase by a registered dealer of goods covered by entry 10 in Part I of Schedule C. Part I of Schedule C specifies the rate of tax at two per cent. We find that applying the principles of harmonious construction, the notification will have to be construed to apply to the rate of tax....
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.... 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 India Ltd. [1990] 76 STC 71 (SC); [1991] 188 ITR 402 (SC) again by an Ordinance dated December 6, 1989 it was brought on statute book, with retrospective effect and also provision for validating and saving provisions, by removing the disability pointed out by the honourable Supreme Court. The intention of the Legislature, in bringing the said provisions on the statute book, is writ large from the Statement of Objects and Reasons while bringing the said provisions on the statute book in the year 1982 and reincorporating them with retrospective e....
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....by 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 assessee, who purchases raw material from the State of Maharashtra, manufactures goods in the State of Maharashtra using the State infrastructure, would be required to pay only 0.5 per cent. of purchase tax for the said assessment year. As held by the apex court in the case of Hotel Balaji [1993] 88 STC 98 (SC), the taxing power can be utilised to encourage commerce and industry. Section 13AA is intended to encourage industry and at the same time derive revenue. If the interpretation as sought to be placed by the assessee is to be accepted, it will frustrat....