TaxTMI 
TaxTMI 
2016 (11) TMI 214
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.... the State to the buyers outside the State? 2. Whether the Tribunal was right in law in holding that the said Entry 69 has made no difference even after its amendment w.e.f. 3.10.2008 by treating IntraState sale of LPG for domestic use by the consumers of the State, and InterState sale of LPG in bulk outside the State, on the same footing? 3. Whether by virtue of modification in entry no.69 of the exemption notification pertaining to sales of Liquefied Petroleum Gas for domestic use by addition of words "by the consumers of the State", with effect from 3.10.2008, the respondent assessee was liable to pay tax at the rate specified under section 8(1) of the CST Act on such sales?" 2. These questions arise in the following factual background. The respondent assessee Reliance Industries Limited, is registered under the Gujarat Value Added Tax Act ("the VAT Act" for short) and under the Central Sales Tax Act ("the CST Act" for short) and is engaged in refining and sale of petroleum products. During the period under consideration, assessee had sold Liquified Petroleum Gas ("LPG" for short) for domestic use to LPG Infrastructure Pvt. Ltd. the purchasing dealer. Accord....
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....ng that interState sales of LPG for domestic use subsequent to 3.10.2008 is liable to tax under the CST Act, is incorrect. The interState sales of LPG for domestic use would invite nil rate of tax under section 8(1) of the CST Act read with entry 69, even after the amendment made in the said entry with effect from dated 3.10.2008. 5. It is this judgement which the State has challenged in the tax appeal. After these tax appeals were admitted, Reliance Industries Limited filed Special Civil Application No.13691/2014. The prayer made in the said petition is to declare the notification dated 3.10.2008 issued by the Government of Gujarat under which the said words "by the consumers of the State" came to be added to entry 69 as unconstitutional. The alternative prayer made by the petitioner is to declare that the said amendment dated 3.10.2008 does not result in denial of exemption from levy of tax by the State Government on sale of Liquified Petroleum Gas when such sale is in the course of interState trade and commerce. In other words, prayer of the petitioner is to hold that the said amendment in entry 69 does not result in liability of the petitioner to pay CST on the interState sa....
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....from 1.4.2007, the tax on interState sales has to be at the rate applicable to local sales as per the VAT Act. According to him, the applicable rate of tax must mean the schedule rate as fixed by the legislature and not the effective rate of tax. 3) He submitted that notification dated 3.10.2008 issued by the Government of Gujarat amending entry 69 nowhere attempts to impose tax on sale of goods during the course of interState trade and commerce. The said notification is therefore, not unconstitutional as being outside the competence of the State legislature. 4) Learned Advocate General relied on several decisions, reference to which would be made at an appropriate stage. 7. On the other hand learned counsel Shri Venkataraman for the assessee submitted that the amendment to entry 69 with effect from 3.10.2008 would not authorise the State to levy tax on interState sales. He therefore, submitted that by virtue of such entry if the State is endeavoring to levy any such tax, same would be beyond the legislative competence of the State legislature. He however, submitted that such interpretation may not be necessary, since even in face of such amendment, by virtue o....
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....ively, it was contended that in any case, the judgment of this Court in case of Oil and Natural Gas Corporation Limited(supra) was rendered per incuriam or at any rate sub silentio. 7.4) Our attention was drawn to the speech of Hon'ble Finance Minister made to the State legislature while presenting the annual budget for the year 20142015. In such address, he had stated as under : "In order to give relief to the customers of L.P.G. For domestic use in the State, the State Government has exempted the L.P.G. for domestic use in the State. But, due to interpretation of the relevant provisions of the Central Sales Tax in the judicial system, this tax exemption becomes available also to the Gas companies to their interstate sales of L.P.G. for domestic use. As a result, the tax revenues of the State are adversely affected. Therefore, in order to obviate such a loss, I propose to delete the entry relating to exemption of L.P.G. for domestic use in the State given vide Notification under Section 5(2) of the Gujarat Value Added Tax Act, 2003. A separate mechanism will be put in place with the Gas companies in order that there is no increase in the prices of L.P.G. for ....
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....n. Under subsection( 1) of section 6, subject to the other provisions contained in the Act every dealer is liable to pay tax under the said Act on all sales of goods effected by him in course of interState trade or commerce during any year from the notified date. Subsection( 1A) was added to section 6 by the Amending Act 28 of 1969 but with retrospective effect from 5.1.1957 and reads as under : "(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of interState trade or commerce not withstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State." 10. Section 8 of the CST Act pertains to the rate of tax on sales in the course of interState trade or commerce. Under subsection( 1) of section 8, as it stands presently, every dealer, who in the course of interState trade or commerce, sells to a registered dealer goods of the description referred to in subsection( 3), is liable to pay tax under the said Act, at the rate of two per cent of his turnover or at the rate applicable to the sale or purcha....
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....ch the tax is levied at specified stages or otherwise than with reference to the turnover of the goods. In plain terms, whenever the State Tax laws exempt the sale or purchase of the goods unconditionally, interState sales of such goods would invite nil rate of duty. 12. This structure in slightly different wording but along the same lines continued even after a few amendments were made in section 8 of the CST Act, particularly, in the Amending Act 61 of 1972 and under the Finance Act 20 of 2002. Under the Finance Act 2002, subsection (2A) was deleted. Subsection( 2) was also substantially changed. By virtue of clause(c) to subsection( 2), it was provided that in the case of goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally would be nil. 13. Section 8, as it stands presently, was amended by Amending Act 16 of 2007 with effect from 1.4.2007, relevant portion of which reads as under : "8. Rates of tax on sales in the course of interState trade or commerce: (1) Every dealer, who in the course of interState trade or commerce, sells to a registered dealer goods of the desc....
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....erce. Clause (va) to section 14 refers to liquified petroleum gas for domestic use. 16. Section 15 of the CST Act pertains to restrictions and conditions in regard to tax on sale or purchase of declared goods within a State, relevant portion of which reads as under : "15. Restrictions and conditions in regard to tax on sale purchase of declared goods within a State.Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed five per cent of the sale or purchase price thereof," 17. In terms of clause (va) of section 14, thus LPG for domestic use is one of the products which is declared as goods of special importance in interState trade or commerce. In view of clause(a) to section 15 of the CST Act, the Sales Tax law of the States would not be authorised to levy tax at the rate exceeding 5% on the sale or purchase price thereof. 18. Section 3 of the VAT Act pertains to incidence of tax. Subsectio....
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....l 22. This entry as per notification dated 23.9.2014, as noted earlier, was deleted altogether with effect from 1.10.2014. 23. In the context of these statutory provisions, we may first refer to the decision of this Court in case of Oil and Natural Gas Corporation Limited(supra). In the said case, several questions of law were involved. One of them was whether, the Tribunal was right in law in holding that, the interState sales of LPG, effected by the ONGC from the State of Gujarat to other States qualify for total exemption from payment of tax on the ground that intraState sales of LPG for domestic use by the consumers of the State was exempt from payment of whole of the tax as per entry 69 of the schedule to the exemption notification dated 31.03.2006. Thus, undisputably, the very question which we are trying to answer did arise before the Division Bench of this Court in case of Oil and Natural Gas Corporation Limited(supra). In this context, the counsel for the assessee had placed reliance on entry 69 to the exemption notification and section 8(1) of the CST Act. Reliance was also placed on the amendment in section 8(1) with effect from 1.4.2007. It was pointed o....
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....n the said judgment. We would not term the decision per incuriam since as noted, these aspects were argued before the Court and therefore, it cannot be stated that the Court was not aware about these provisions. However, these contentions recorded in the judgment have note been decided, do not find place in the discussion portion and in that view of the matter, the judgement may be termed sub silentio on the issue. If therefore, we are persuaded to take a different view on the interpretation of section 8(1) of the CST Act, in our understanding, we would be free to do so irrespective of the decision of this Court in case of Oil and Natural Gas Corporation Limited(supra). 26. With this, we may correlate different statutory provisions noted above. In terms of clause(3) of Article 286 of the Constitution, the State Law imposing tax on sale or purchase of goods declared by the Parliament to be of special importance in interState trade or commerce, shall be subject to such restrictions and conditions, as regard the system of levy, rates and other incidents of the tax as Parliament may specify. Section 14 of CST Act specifies various products including Liquified Petroleum Gas for domes....
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.... the appropriate State under the Sales Tax law of that State, whichever is lower. In that view of the matter, every interState sale of the said goods in terms of subsection( 1) of section 8 invites rate of tax at 2% of the turnover or at the rate applicable to the sale or purchase of such goods inside the State under the relevant Sales Tax law of the State, if the local tax is lower than 2%. The provision under subsection( 1) of section 8, in the present form, would have to be seen in the background of multiple statutory changes noted above. We may recall, by the Amending Act 1958, subsection( 2A) was inserted which provided for exemption from payment of central sales tax on interState sales of goods which are generally exempt from payment of local tax within a particular State. The term "exempt generally" is explained under the explanation as to exclude those exemptions which are granted in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise, with reference to the turnover of the goods. In plain terms, if certain goods are exempt unconditionally from the payment of local tax, subsection( 2A) of section 8,....
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....ssed by the learned Advocate General is accepted, entry 69 will materially alter section 8(1) of the CST Act. State VAT law would ensure that central sales tax would be payable though section 8(1) of the CST Act provides otherwise. Even learned Advocate General argued that State legislature cannot prescribe charging of central sales tax. 29. We have adopted this interpretation independent of reference to the Finance Minister's speech while presenting the annual budget for the financial year 20142015. It is true that in such speech, reference was made to exemption of the local tax on Liquified Petroleum Gas resulting into exemption from payment of central sales tax also. The Hon'ble Minister however, referred to the judicial system due to which, despite the intention of the State Government not to waive the central sales tax, this situation had come about. He was probably referring to the judgment of the Tribunal or the Court. His attempt therefore, to plug this unintentional waiver of the central sales tax, cannot be seen as his interpretation of the statutory provisions. Firstly, the speech of the Finance Minister made on the floor of the house for introducing a certain....
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....all be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State. The expression "in the manner" may give rise to two conflicting views, namely, (i) it is concerned only with the calculation of the tax, and (ii) it deals not only with the calculation of the rates but also the manner of levy of the tax. But s.9(1) dispels the ambiguity for it says that the tax payable by any dealer under the Central Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in subsection (2); and subs. (2) of s.9 empowers the appropriate State authorities to assess, collect and enforce payment of any tax payable by any dealer under the Central Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected. The expression "levy' means "impose". Under s.5(3) (a) of the Mysore Sales Tax Act, 1957, hereinafter called the State Act, tax shall be levied in the case of the sale of any of the goods mentioned in col. (2) of the Second Schedule by the first or the earliest of successive dealer....
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....ved as under : "The plain meaning of the said subsection is that if under the sales tax law of the appropriate State no tax is levied either at the point of sale or at the point of purchase at any stage the tax under the Act shall be nil. Reading section 6(1A) and section 8(2A) together along with the Explanation the conclusion deducible would be this : where the intrastate sales of certain goods are liable to tax, even though only at one point, whether of purchase or of sale, a subsequent interState sale of the same commodity is liable to tax, but where that commodity is not liable to tax at all if it were an intrastate sale the interState sale of that commodity is also exempt from tax. Where an intrastate sale of a particular commodity is taxable at a lower rate than 3 per cent then the tax on the interState sale of that commodity will be at that lowerrate. A sale or purchase of any goods shall not be exempt from tax in respect of interState sales of those commodities if as an intrastate sale the purchase or sale of those commodities is exempt only in specific circumstances or under specified conditions or is leviable on the sale or purchase at specified stages. On this ....
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....section( 2) does not provide for the lower of the two tax rates, 2% as prescribed for interState sales generally or the rate that may be prescribed by the local Sales Tax law. It prescribes only one rate of tax namely, that which is applicable to the sale or purchase of goods in question within the State on the local sales. There is therefore, no warrant to interprete the expression "rate applicable to the sale or purchase of such goods" used in subsection( 1) of section 8 as to mean the prescribed rate and not the rate which may be applicable taking into account the exemption totally or partially that may have been granted by the State Government. 34. We may refer to the authorities cited by the learned Advocate General. In case of Gwalior Rayon Silk Mfg. (WVG) Co. ltd. v. The Asst Commissioner of Sales Tax and others reported in (1974) 4 Supreme Court Cases 98, the Constitution Bench of the Supreme Court was considering whether section 8(2)(b) of the CST Act, as it stood at the relevant time, suffers from the vice of excessive delegation. The said provision provided that the tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the ....
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....vious that it has an overriding effect over the other provisions of the Act. It clearly provides that if the sale or purchase of any goods is exempt from tax generally under the sales tax law of the appropriate State, the tax payable under this Act by a dealer in respect of its turnover relating to the sale of such goods under this Act shall also be nil. It also provides that if the goods are subject to tax under the sales tax law of the State at a rate which is lower than 4 per cent, the tax on the turnover of such goods under this Act also shall be calculated at the lower rate. Explanation added to this subsection makes it clear that if under the State law, the sale or purchase of such goods is exempt only in specified circumstances or under specified condition or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods the sale or purchase of such goods shall not be deemed for the purposes of this subsection to be exempt from tax generally under the sales tax law of the State. In the instant case, looking at the notification dated July 24, 1981, it is clear that all sales of oilcakes including oilca....