IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.6475 OF 2009
1. Prism Cement Limited, (formerly known as H & R Johnson (
A Public Limited Company incorporated
under the Companies Act, 1956 and
having its registered office at 305, Laxmi
Niwas Apartments, Ameerpet,
and having eligible unit at Village Gadab,
Taluka Pen, District: Raigad.
2. Akshay Raheja, Age about 27 yrs.,
Shareholder / director of the petitioner
No.1 r/at Rahejas, 7th Floor, Corner of
Mumbai – 400 054 …..Petitioners
Versus
1. State of
Finance Department, 3rd Floor,
Mantralay, Mumbai – 400 032.
2. Commissioner of Sales Tax,
Vikrikar Bhavan, Mazgaon,
Mumbai – 400 010.
3. Joint Commissioner of Sales Tax
(Prof. Tax) Thane Zone, Thane
Sales Tax Office, 3rd Floor,
Collector Office Compound,
Court Naka, Thane (W) 400 601
4. Assistant Commissioner of Sales Tax,
(Ass) B195
Raigad, Navi Mumbai.
5. Director of Industries,
State, New Administrative Building,
Opp. Mantralaya, Mumbai – 400 032
6. The
North Block,
Mr.V Shridharan, Senior Advocate with Mr.Prakash Shah & Mr.Jas Sanghvi
i/by PDS Legal for the petitioners.
Mr.E P Bharucha, Senior Advocate with Mr.V A Sonpal, AGP for respondent
Nos.1 to 4.
Mr.A J Rana, Senior Advocate with Mr.Girish
Kumar for respondent No.6.
Mr.G S Jetly and Mr.D B Shroff, senior Advocates with Mr.Karl Shroff, Mr.P C
Joshi and Mr.Pradeep S Jetly with Mr.H N Vakil for intervenors.
CORAM: J.P. Devadhar & R.Y. Ganoo, JJ.
Reserved on:
Pronounced on:
JUDGMENT:
(Per J.P. Devadhar, J.)
1. This writ petition is filed to challenge the three trade circulars issued by the Commissioner of Sales Tax, Mumbai ('Commissioner' for short) on 27th May 2002, 20th July 2002 and 8th February 2007 respectively and various notices issued by the Deputy Commissioner of Sales Tax in the month of February 2009 under Section 38 of the Bombay Sales Tax Act, 1959 (BST Act for short) for revising the assessments made for Assessment Years 20022003 to 20042005.
While admitting the above writ petition on
2. By the aforesaid three trade circulars, the Commissioner has informed the trade that under Section 8(5) of the Central Sales Tax Act, 1956( 'CST Act' for short) as amended by Finance Act 2002 with effect from
only in respect of interstate sales to the registered dealers or to the Government covered under Section 8(1) of the CST Act unless such sales are supported by declarations in form 'C' or 'D' respectively as provided under Section 8(4) of the CST Act. By the said circulars, the traders are further informed that as a result of the amendment, any Notification issued under Section 8(5) of the CST Act prior to
3. Based on the above interpretation of the amended Section 8(5) of the CST Act and based on the impugned trade circulars, proceedings have been initiated to recover tax on sales of goods effected in the course of interstate trade or commerce by the unit of the petitioner No.1 to the dealers or persons other than the registered dealers / Government covered under Section 8(1) of the CST Act during the period 20022003 to 20042005.
In other words, the impugned proceedings are initiated to recover tax in respect of sales of goods covered under Section 8(2) at the rates specified therein as according to the Revenue, after the 2002 amendment, the State Governments do not have powers to exempt tax payable under Section 8(2).
4. The question, therefore, to be considered in this Writ Petition is, whether Section 8(5) of the CST Act as amended by Finance Act, 2002 restricts the powers of the State Government to grant exemption either wholly or partially only in respect of sales of goods in the course of interstate trade or commerce to registered dealers / the Government subject to furnishing declaration in form 'C' or form 'D' as the case may be ? If the answer is yes, then, whether Section 8(5) of the CST Act as amended by Finance Act 2002 affects the vested right of the eligible unit of the petitioner No.1 set up under the 1993 Scheme to claim exemption under Notification dated 5th July 1980 issued under the unamended Section 8(5) upto the quantum specified / date specified, insofar as it relates to interstate sales of goods to dealers other than registered dealers / Government ?
5. The relevant facts are that in the year 1998 the petitioner No.1 company had established an industrial unit in the backward area at Village Gadab, Taluka Pen, District Raigad at a cost of Rs.341.92 crores with a view to avail total exemption from payment of tax under the BST Act and the CST Act as per the Package Scheme of Incentives 1993 ('1993 Scheme' for short) upto the quantum specified and upto the period specified in the Eligibility / Entitlement Certificate issued by the respective authorities under the 1993 Scheme.
6. As per the Entitlement Certificate originally issued to the unit of the petitioner No.1 on 24th march 1998, the aggregate quantum of exemption from payment of tax under the BST Act and the CST Act in respect of sales of goods manufactured in the unit of the petitioner No.1 was upto Rs.273.54 crores and was required to be availed during the period from 1st April 1998 to 31st March 2003. Subsequently, the quantum of exemption has been enhanced and the period for availing the exemption has also been extended upto
7. It is not in dispute that the unit of the petitioner No.1 being covered under the 1993 Scheme, the goods manufactured in the unit of petitioner No.1 falling under Entry E3 of the Notification issued under Section 41 of the BST Act, when sold within the State were exempt from payment of whole of the tax under the BST Act upto the quantum specified or the period specified in the Entitlement Certificate, whichever is earlier.
Similarly, interstate sales of goods manufactured in the unit of petitioner No.1 to dealers covered under Section 8(1) and 8(2), were, by virtue of Notification dated 5th July 1980 issued under Section 8(5) of the CST Act were exempt from tax payable under the CST Act upto the quantum specified or period specified in the Entitlement Certificate, whichever was earlier.
8. Cumulative Quantum of Benefits ('CQB' for short) availed by the unit of the petitioner No.1 under the 1993 Scheme by way of exemption under the BST Act (under the Maharashtra Value Added Tax 2002 after the repeal of the BST Act) and under the CST Act were liable to be determined on the basis of the rates of tax applicable to the sales effected under the BST Act and the CST Act respectively. In other words, although under the 1993 Scheme, the unit was exempt from payment of tax under the BST Act and the CST Act on all sales within the State and interstate sales, the CQB had to be determined by applying the rate of tax applicable under the BST Act and the CST Act on such sales as if the exemption was not available so that the total exemption availed by the unit under the BST Act and the CST Act does not exceed the monetary ceiling specified in the Entitlement Certificate.
9. Even though the unit of petitioner No.1 covered under the 1993 Scheme was totally exempt from the tax payable under Section 8(1) and 8(2) of the CST Act by virtue of the Notification dated 5th July 1980 issued under the unamended Section 8(5) of the CST Act upto the quantum specified and upto the date specified in the Entitlement Certificate. However, according to the Revenue, in view of the amendment of Section 8(5) by Finance Act 2002, the State Governments do not have the power to grant exemption in respect of sales of goods covered under Section 8(2) and, hence, the Notification dated 5th July 1980 would stand modified to that extent and consequently, after the amendment of Section 8(5) by Finance Act 2002, the exemption under Notification dated 5th July 1980 cannot be availed in respect of the sales of goods in the course of interstate trade or commerce to dealers covered under Section 8(2) of the CST Act. It is the contention of the petitioners that even under the amended Section 8(5), the State Governments are empowered to exempt the tax payable by any dealer under Section 8(2) and, therefore, the petitioners are entitled to avail the benefit of exemption under Notification dated 5th July 1980 upto the quantum specified and upto the period specified in the Entitlement Certificate.
10. To appreciate the rival contentions, we quote herein below entire Section 8 of the CST Act as amended by Finance Act 2002:
“ Rates of tax on sales in the course of interstate trade or commerce.
8. (1) Every dealer, who in the course of interstate trade or commerce
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government goods of the description referred to in subsection
(3) shall be liable to pay tax under this Act, with effect from such date as may be notified by the Central Government in the Official Gazette for this purpose, which shall be two per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, or, as the case may be, under any enactment of that State imposing value added tax, whichever is lower:
Provided that the rate of tax payable under this subsection by a dealer shall continue to be four per cent of his turnover, until the rate of two per cent takes effect under this subsection.
(2) The tax payable by any dealer on his turnover insofar as the turnover or any part thereof relates to the sale of goods in the course of interstate trade or commerce not falling within subsection (1)
(a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale or purchase of such goods inside the appropriate State;
(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and
(c) 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 shall be nil, and for the purpose of making such calculation under clause (a) or clause (b), any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
Explanation. For the purposes of this subsection, a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions 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.
(2A) ........
(3) The goods referred to in clause (b) of subsection(1)
(a) ......
(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in the telecommunications network or in mining or in the generation or distribution of electricity or any other form of power;
(c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale;
(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c).
(4) The provisions of subsection (1) shall not apply to any sale in the course of interstate trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner
(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or
(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorized officer of the Government:
Provided that the declaration referred to in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.
(5) Notwithstanding anything contained in this section, the State Government may on the fulfillment of the requirements laid down in subsection (4) by the dealer, if it is satisfied that it is necessary so to do in the public interest, by Notification in the Official Gazette and subject to such conditions as may be specified therein, direct,
(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of interstate trade or commerce, to a registered dealer or the Government from any such place of business of any such goods or classes of goods as may be specified in the Notification, or that the tax on such sales shall be calculated at such lower rates than those specified in subsection (1) or subsection (2) as may be mentioned in the Notification;
(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the Notification, which are made, in the course of interstate trade or commerce, to a registered dealer or the Government by any dealer having his place of business in the State or by any class of such dealers as may be specified in the Notification to any person or to such class of persons as may be specified in the Notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in subsection
(1) or subsection
(2) as may be mentioned in the Notification.”
11. For better appreciation of the dispute, we quote herein below Section 8(5) of the CST Act, as it stood before the amendment by Finance Act 2002:
“(5) Notwithstanding anything contained in this section, the State Government may, if it is satisfied that it is necessary so to do in the public interest, by Notification in the Official Gazette, and subject to such conditions as maybe specified therein, direct,
(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of interstate trade or commerce, from any such place of business of any such goods or classes of goods as may be specified in the Notification, or that the tax on such sales shall be calculated at such lower rates than those specified in subsection
(1) or subsection
(2) as may be mentioned in the Notification;
(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the Notification, which are made, in the course of interstate trade or commerce, by any dealer having his place of business in the State or by any class of such dealers as may be specified in the Notification to any person or to such class of persons as may be specified in the Notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in subsection
(1) or subsection
(2) as may be mentioned in the Notification.”
12. On perusal of Section 8(1) of the CST Act, as amended by Finance Act 2002, it it seen that every dealer, who in the course of interstate trade or commerce sells any goods to the Government or sells goods of the description referred to in Section 8(3) to a registered dealer other than the Government is liable to pay tax at two per cent of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law / value added tax, whichever is lower.
13. Similarly, Section 8(2) of the CST Act as amended by Finance Act 2002 provides that the rate of tax payable by any dealer on sales not covered under Section 8(1) of the CST Act, shall be (a) in the case of declared goods at twice the rate applicable to the sale or purchase of such goods within the appropriate State, (b) in the case of goods other than declared goods, at the rate of ten per cent or at the rate applicable to sale of such goods in the appropriate State, whichever is higher; and (c) if the sale or purchase of any goods under the Sales Tax law of the appropriate State is exempt generally then the tax payable on interstate sale of such goods under the CST Act shall be Nil.
14. Section 8(3) of the CST Act enumerates the categories of goods covered under Section 8(1)(b) of the CST Act. Section 8(4) of the CST Act provides that the rate of tax prescribed under Section 8(1) of the CST Act shall not apply unless the dealer selling the goods in the course of interstate trade or commerce furnishes a declaration in form 'C' when goods are sold to registered dealers and declaration in form 'D' when goods are sold to the Government.
15. Thus, reading Section 8(1) and 8(4) of the CST Act together it becomes clear that the lower rate of tax prescribed under Section 8(1) of the CST Act on sale of goods in the course of interstate trade or commerce to the Government or to a registered dealer is applicable only if the requirements of Section 8(4) viz. furnishing declaration in form 'C' or form 'D' are complied with. The obligation to furnish declaration in form 'C' or form 'D' is only in respect of sales covered under Section 8(1) and not in respect of sales covered under Section 8(2).
16. The Apex Court in the case of Shree Digvijay Cement Company Limited V/s. State of Rajasthan and others reported in (2000) 117 STC 395 (S.C.) overruling its decision in the case of the very same assessee reported in (1997) 106 STC 11 (S.C.) has held that though Section 8(4)
requires furnishing of form 'C' or form 'D' in respect of the sales covered under Section 8(1), in view of the nonobstante clause contained in Section 8(5), it is open to the State Government to dispense with the requirements of Section 8(4) in respect of the sales covered under Section 8(1) of the CST Act. In other words, the Apex Court in the aforesaid case has held that the State Governments under Section 8(5) of the CST Act can waive the requirement of Section 8(4), viz. furnishing particulars in form 'C' or 'D' in respect of sales covered under Section 8(1) of the CST Act.
17. To overcome the decision of the
18. As per impugned circulars issued by the Commissioner under Section 8(5) as amended by Finance Act 2002, the powers of the State Government to grant exemption are restricted only in respect of sales in the course of interstate trade or commerce to the dealers who fulfill the requirement of Section 8(4), namely the registered dealers or the Government covered under Section 8(1). Accordingly, proceedings have been initiated to recover tax from the petitioners in respect of sales in the course of interstate trade or commerce to dealers other than the registered dealers / Government after the amendment of Section 8(5) by Finance Act 2002. Challenging the trade circulars issued by the Commissioner and also the proceedings initiated pursuant thereto, the present Writ Petition is filed.
19. We have heard Mr.Shridharan, learned Senior Advocate appearing on behalf of the petitioners and Mr.G.S. Jetly & Mr.D.B. Shroff, Senior Advocates, Mr.P.C. Joshi, Mr.C.B. Thakkar, Advocates as intervenors since they are also appearing in some cases where similar issue is raised. Similarly, we have heard Mr.E.P. Bharucha, learned Senior Advocate on behalf of respondent Nos.1 to 5 and Mr.A.J. Rana, learned Senior Advocate on behalf of respondent No.6.
20. It is contended on behalf of the petitioners that the object of amending Section 8(5) by Finance Act 2002, as is evident from the notes on clauses, is to overcome the decision of the Apex court in the case of Shree Digvijay Cement Company Limited (supra) wherein it was held that the State Governments in exercise of powers under Section 8(5) can waive the requirements of Section 8(4), viz. furnishing form 'C' or 'D' in respect of sales of goods covered under Section 8(1) of the CST Act. The object of the 2002 amendment was to withdraw the power of the State Government to waive the requirement of Section 8(4) in respect of sales covered under Section 8(1) and not to take away the powers of the State Government to grant exemption in respect of sales covered under Section 8(2) of the CST Act.
21. It is further contended on behalf of the petitioners that insertion of the words “on the fulfilment of the requirements laid down in subsection 4 by the dealer” in the opening part of the amended Section 8(5) would necessarily apply where the State Governments intend to grant exemption in respect of sales covered under Section 8(1) and not in respect of the sales covered under Section 8(2) because the requirements of Section 8(4) has to be fulfilled only in respect of sales covered under Section 8(1) and not in respect of sales covered under Section 8(2). If the intention of the legislature was to restrict the powers of the State Governments to grant exemption only in respect of sales covered under Section 8(1) by fulfilling the requirements of Section 8(4), then, the legislature would not have made any references to the exemption to be granted in respect of the sales covered under Section 8(2) in Section 8(5)(a) and in Section 8(5)(b). The very fact that Section 8(5) as amended by Finance Act 2002 refers to the powers of the State Governments to issue Notification prescribing rates of tax lesser than those specified in Section 8(2), clearly shows that even under the amended Section 8(5), the State Governments are empowered to grant exemption in respect of sales covered under Section 8(1) and also under Section 8(2) of the CST Act.
22. It is further contended on behalf of the petitioners that Section 8(5)(b) not only refers to sales of goods to registered dealers or the Government by any dealer or class of dealers in the State, but also refers to sales to 'any person or to such class of person as may be specified in the Notification'. The words “all sales …...... by any dealer …. to any person …. shall be calculated at such lower rates than those specified in ….. subsection (2) as may be mentioned in the Notification” in Section 8(5)(b) make it abundantly clear that the State Governments are empowered to grant exemption either wholly or partially in respect of sales not only to registered dealers or the Government but also empowered to grant exemption in respect of sales of goods to any person or class of persons. Therefore, when the legislature expressly confers powers upon the State Government to grant exemption in respect of sales of goods covered under Section 8(1) as also on sales covered under Section 8(2), the expression “on the fulfillment of the requirements laid down in subsection (4) by the dealer” in the opening part of amended Section 8(5) would necessarily apply wherever applicable, that is, only in respect of sales covered under Section 8(1) and not in respect of the sales covered under Section 8(2) of the CST Act.
23. Relying upon a decision of the Apex Court in the case of K.V. Kamath V/s. K. Rangappa Baliga & Company reported in 1969 (1) SCC 255, it is contended on behalf of the petitioners that when a sentence in a statute contains several antecedents and several consequences, then they are to be read distributively by applying the principle of 'REDDENDO SINGULA SINGULIS'. The submission is that where there are general words of description followed by enumeration of particular things and the general words apply to some things and not to others, then, by applying the principle of REDDENDO SINGULA SINGULIS it must be held that the general words would apply only to those thing to which they apply and not to other things. In the present case, the general words 'on the fulfillment of the requirements laid down in subsection (4) by the dealer' are followed by the words “all sales of goods by any dealer or any class of persons to a registered dealer or the Government” and the words “to any person or class of persons”. Since the requirements of fulfilling the conditions of Section 8(4) apply only in the case of sales of goods to 'registered dealer or the Government' it must be held that the said conditions would apply only in respect of sales of goods to the registered dealer / Government under Section 8(1) and not in respect of sales of goods to any person or persons covered under Section 8(2) of the CST Act.
24. Relying on the decisions of the Apex Court in the case of State of Madras V/s. N.K. Nataraja Mudaliar reported in (1968) 22 STC 376 (S.C.) and Video Electronics Private Limited V/s. State of Punjab reported in (1990) 77 STC 82 (S.C.), it is contended on behalf of the petitioners that the power to grant exemption conferred upon the State Governments under Section 8(5) is to meet the unforeseen circumstances. For example, if there is famine in the State of Bihar and the dealers in the State of Maharashtra want to sell goods to a charitable institution in the State of Bihar at a reasonable price for distribution to those who are starving at Bihar, it would be in public interest for the State of Maharashtra to grant exemption to the dealers in Maharashtra in respect of the sales of goods to the particular charitable institution in the State of Bihar. It is contended that the Central Sales Tax, though levied and collected in the name of Central Government, it is a part of the sales tax levy imposed for the benefit of the States and, therefore, while it is within the domain of the State Governments whether to grant or not to grant exemption, it cannot be said that the State Governments do not have power to grant exemption in respect of sales of goods to dealers other than the registered dealers or the Government. With a view to achieving the industrial development or with a view to provide tax incentives to attain economic equality in growth and development, the State Governments may float schemes by granting total or partial exemption to the dealers or class of dealers or to any person or class of persons, as the case may be. If the contention of the Revenue is accepted, it would mean that the
State Governments cannot grant exemption in respect of sales of goods to unregistered dealers even if it is necessary in public interest to do so. Such a construction put forth by the Revenue which is contrary to the language used in the Section and which is contrary to the public purpose cannot be accepted.
25. It is further contended on behalf of the petitioners that even after the amendment of Section 8(5) by Finance Act 2002 various State Governments including the Government of Maharashtra have issued Notifications granting exemption on sales of goods in the course of interstate trade or commerce to dealers other than registered dealers or the Government. Therefore, having exercised the powers of granting exemption to sales of goods to dealers other than the registered dealers or the Government on the footing that even after the 2002 amendment, the State Governments do have power to grant exemption in respect of sales of goods to dealers other than the registered dealers or the Government, it is not open to the Revenue to turn around and contend that by the 2002 amendment the State Governments are denuded of the powers to grant exemption on sales of goods to dealers other than the registered dealers / Government.
26. Alternatively, it is contended on behalf of the petitioners that assuming for the sake of argument it is held that the legislature by the 2002 amendment has restricted the power of State Governments to grant exemption only in respect of sales of goods to registered dealers or the Government, even then, the said amendment would not affect the vested rights of the petitioners to avail exemption upto the quantum specified / the date specified under the 1993 Scheme, as per Notification dated 5th July 1980 issued under Section 8(5) as it stood prior to the 2002 amendment. The submission is that though the amendment to Section 8(5) by Finance Act 2002 became effective from 11th May 2002, the right of the petitioners to avail exemption on all sales under the BST Act and the CST Act upto the quantum specified and date specified got crystallised prior to 11th May 2002 and, therefore, unless the legislature has specifically taken away that right by retrospective amendment, it is not open to the Revenue to contend that in view of the amendment to Section 8(5) by Finance Act 2002, the rights vested in the petitioners to avail total exemption upto quantum specified or till 31st March 2012 whichever is earlier has been taken away. In support of the above contention, reliance is placed on the decisions of the Apex Court in the case of Govinddas V/s. Income Tax Officer reported in (1976) 1 SCC 906, MRF V/s. Assistant Commissioner reported in (2006) 8 SCC 702, S.L. Srinivasa Jute Twine Mills (P) Limited V/s. Union of India reported in (2006) 2 SCC 740 and Southern Petrochemicals Industries Limited V/s. Electricity Inspector reported in (2007) 5 SCC 447. Reliance is also placed on a Division Bench decision of the Madras High Court in the case of Diebold Systems (P) Limited V/s. Additional Commercial Tax reported in (2011) 39 VST 335 (Mad.), wherein it is held that even after the 2002 amendment, the State Governments have power to grant exemption in respect of sales of goods to persons other than the registered dealers / Government.
27. Accordingly, it is contended on behalf of the petitioners that the words used in Section 8(5) as amended by Finance Act 2002 clearly show that even after the amendment, the State Governments are empowered to grant exemption not only in respect of sales in the course of interstate trade or commerce to registered dealers or the Government but also in respect of sales to unregistered dealers or any person or class of persons. Alternatively, it is contended that even if it is held that Section 8(5) as amended by Finance Act 2002 restricts the powers of the State Governments, such restriction does not affect the rights vested in the petitioners by the State Government in exercise of powers under Section 8(5) as it stood prior to its amendment to avail the exemption upto the quantum specified / date specified.
28. Mr.Bharucha, learned senior Advocate appearing on behalf of respondent Nos.1 to 5 and Mr.Rana, learned senior Advocate appearing on behalf of respondent No.6, on the other hand submitted that after the amendment of Section 8(5) by Finance Act 2002, the State Governments have the power to grant exemption from tax only in respect of transactions which fulfil the requirements of Section 8(4). Since the requirements of Section 8(4) are to be fulfilled only in respect of sales covered under Section 8(1), it must be held that the power to grant exemption under Section 8(5) is restricted to sales covered under Section 8(1) i.e. sales to the registered dealers and the Governments. It is contended that prior to the 2002 amendment, the State Governments under Section 8(5)(a) and Section 8(5) (b) were empowered to grant total or partial exemption not only in respect of sales of any goods or class of goods to a registered dealer / Government but also were empowered to grant total or partial exemption in respect of interstate sales to unregistered dealers or any person or class of persons specified in the Notification. After the 2002 amendment, the Parliament by inserting the words 'on the fulfillment of the requirements laid down in subsection (4) by the dealer' in the operative part of Section 8(5) made it expressly clear that the State Governments can grant exemption only in respect of those sales which comply with the requirements of Section 8(4). The submission is that since the requirements of Section 8(4) are required to be fulfilled only in respect of sales covered under Section 8(1), the powers of the State Governments under the amended Section 8(5) must be held to be restricted to sales to registered dealer / Government covered under Section 8(1) and not in respect of the sales covered under Section 8(2) of the CST Act.
29. It is further contended on behalf of the Revenue that reference to the words “subsection 2” and the words “to any person or such class of persons as may be specified in the Notification” in the amended Section 8(5) (a) and (b) no doubt create difficulty in accepting the contention of the
Revenue. However, it is contended that in view of the words “on the fulfillment of the requirements laid down in subsection (4) by the dealer” in the opening part of Section 8(5), it is clear that the legislature intended to confer power on the State Governments to grant exemption only in respect of those sales which comply with the requirements of Section 8(4) i.e. sales to registered dealer / Government and, therefore, the words 'to any person or class of persons' in Section 8(5)(b) must be held referable to registered dealer / Government specified in the Notification. The submission is that, since the registered dealer under Section 8(4) is required to execute declaration with prescribed particulars and under Section 8(5) the name of the registered dealer is required to be specified in the Notification, the words 'any person or persons in Section 8(5)(b) must be held referable to the registered dealers / Government and not to any other person. Thus, according to the Revenue under the amended Section 8(5)(b) triple criteria has to be satisfied for availing the benefit of exemption, i.e. firstly, the sales should be made to a registered dealer or the Government; secondly, the necessary form 'C' or form 'D' ought to be issued by the purchasing dealer and thirdly the purchasing dealer (who had to be a registered dealer or a Government) had to be notified in the exemption Notification. Accordingly, it is contended on behalf of the Revenue that the words 'to any person or to such class of persons as may be specified in the Notification' in Section 8(5) (b) is referable to the registered dealers or the Government specified in the Notification.
30. If the aforesaid argument is not acceptable for any reason, then, alternatively, counsel for the Revenue contend that the words 'subsection (2) as also to any person or to such class of persons' in Section 8(5)(a) and (b) must be treated as redundant and ignored to give a purposive interpretation to the Section and its amendment. The submission is that if the words in a statute are inappropriately and incautiously used by the draftsman, then the proper course is to ignore the surplus or redundant words so as to give a purposive interpretation to the amended statute and achieve the object with which the amendment was brought about. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of Labour Contract Cooperative Society V/s. Director of Mines & Geology reported in 1993 Supp (2) SCC 315, McMonagle V/s. Westminster City Council reported in 1990 2 AC 720 at page 726 and Salman V/s. Duncombe reported in (1886) 11 AC 627 (PC).
31. Referring to the 'report of the Taxation Enquiry Commission' submitted in the year 195354, it is contended on behalf of the Revenue that unlike in the case of registered dealers who have to execute declaration in 'C' form duly signed by the appropriate authority of the State Government in the case of unregistered dealers, there being no control, there is every possibility of avoidance of tax when sales are made to unregistered dealers. To prevent such revenue loss by way of tax avoidance, the legislature by the 2002 amendment to Section 8(5) has restricted the powers of the State Governments to grant exemption only in respect of sales in the course of interstate trade or commerce who fulfill the requirement of Section 8(4) i.e. sales to registered dealers or the Government.
32. It is contended on behalf of the Revenue that the legislative policy is to discourage interState
trade to unregistered dealers. The Parliament by amending Section 8(5) merely made it consistent with the legislative policy of discouraging interstate trade with unregistered dealers. It is contended that the
33. As regards the applicability of the principles of the maxim 'REDDENDO SINGULA SINGULIS' is concerned, it is argued on behalf of the Revenue that the said maxim applies only in cases where a sentence in a statute contains several antecedents and several consequences, whereas ,in the present case there is only one antecedent i.e. fulfillment of the requirement as mentioned in subsection (4) by the dealers' and, therefore, the said maxim has no application in the present case.
34. It is further contended on behalf of the Revenue that the fact that various State Governments including the Government of Maharashtra even after the 2002 amendment have wrongly granted exemption to the dealers not covered by Section 8(1), it cannot be inferred that Section 8(5) as amended by Finance Act 2002 empowers the State Governments to grant exemption on sales of goods to dealers other than registered dealers or the Government. In support of the above contention, reliance is placed on the decisions of the Apex Court in the case of Kastha Niwarak Grihnirman Sahakari Sanstha V/s. President, Indore Development Authority reported in (2006) 2 SCC 604 and Sneha Prabha V/s. Union of India reported in (1996) 7 SCC 426.
35. It is further contended on behalf of the Revenue that where the statute is amended, the benefits conferred upon the assessee under the unamended statute would come to an end to the extent the statute is amended. In such a case, it is not open to the assessee to contend by invoking the principles of promissory estoppel, that the accrued benefits cannot be taken away by statutory amendment, because, the principles of promissory estoppel do not apply to statutory amendments. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of Excise Commissioner V/s. Ram Kumar reported in (1976) 3 SCC 540 and Jit Ram Vs. State of Haryana reported in (1981) 1 SCC 11.
36. It is further contended on behalf of the Revenue that the amendment to Section 8(5) by Finance Act 2002 is not retrospective in nature as it does not take away the benefit granted or made available under the 1993 Scheme. The amendment neither provides for new levy of taxes nor does it reduces the gross amount of exemption nor does the period during which the exemption could be availed have been curtailed. In other words, even after the amendment of Section 8(5), the quantum of benefits conferred under the 1993 Scheme remain unaltered but the availment of the benefits in future is restricted to the sales in the course of interstate trade or commerce to registered dealers / Government against the production of 'C' or 'D' forms. Therefore, it cannot be said that the amendment to Section 8(5) is retrospective in operation. In support of the above contention, reliance is placed on the decision of the
37. Accordingly, it is contended that the impugned circulars issued by the Commissioner and the impugned actions initiated against the petitioners being in consonance with the amended provisions of Section 8(5) and also in accordance with the conditions attached to the Eligibility Certificate, the petition deserves to be dismissed with costs.
38. We have carefully considered the rival submissions.
39. The first question to be considered in this Writ Petition is, whether Section 8(5) of the CST Act as amended by Finance Act 2002 restricts the power of the State Governments to grant total or partial exemption from tax payable under the CST Act on interstate sales of goods which fulfill the requirements of Section 8(4) viz. sales of goods to the registered dealers / Government covered under Section 8(1) of the CST Act ?
In other words, the question is, whether by Finance Act 2002, the legislature has taken away the power of the State Government to exempt totally or partially the tax payable in respect of interstate sales of goods covered under Section 8(2) of the CST Act?
40. According to the Revenue, the legislative policy is to discourage sales in the course of interstate trade to unregistered dealers covered under Section 8(2) and in implementation of that policy, the Parliament by amending Section 8(5) has taken away the power of the State Government to grant exemption from payment of tax in respect of interstate sales to dealers covered under Section 8(2). The above argument of the Revenue is based on certain observations made in the report of the 'Taxation Enquiry Commission' submitted in the year 195354 on the basis of which the CST Act 1956 has been enacted.
41. The Taxation Enquiry Commission was appointed by the Central Government to consider the problem of tax on interstate sales arising on account of the restrictions imposed by Article 286 of the Constitution. In paragraphs 8, 17 and 18 of Chapter IV of the report, the Commission opined that complete exemption from tax on sales outside the State under Article 286 of the Constitution, places the exporting State in a disadvantageous position. It opined that a State with a backward economy and relying on revenue from the sales tax leviable on its main sources of agricultural or industrial raw materials suffers financially from the above restriction. The Commission opined that in the proposed Central legislation, there should be a provision for levy of sales tax on interstate trade specifying the rate at which the tax on sales in the course of interstate trade should be levied.
The main object of proposing levy of sales tax on interstate trade, according to the Commission, was to ensure that some revenue accrues to the exporting States without any undue burden on the consumers in the importing State. The Commission in its report observed that the rate of tax to be specified in the proposed Central legislation in respect of sales between the registered dealers of one State with the registered dealers of another State should be comparatively low preferably one per cent on all articles except on 'goods of special importance in interstate trade'.
42. While recommending lower rate of tax at one per cent in respect of interstate sales between the registered dealers of one State with the registered dealers of another State in the proposed legislation, the Commission recommended higher rate of tax in respect of interstate sales between unregistered dealers of one State with the unregistered dealers of another State, because, unlike the registered dealers, the unregistered dealers are not under the control or supervision of the State Government and, hence, lower rate of tax in case of interstate sales to unregistered dealers was likely to encourage avoidance of tax. The Commission recommended that in respect of interstate sales to unregistered dealers of another State, the rate of tax should be at the same rate which the exporting States would impose if such sales were to take place within the State. By that method, according to the Commission, the unregistered dealers and consumers will find themselves unable to secure any advantage by way of tax avoidance.
43. The aforesaid report of the Taxation Enquiry Commission led to the insertion of Entry 92A in List I (Union list) to the Seventh Schedule of the Constitution of India by the Constitution (Sixth Amendment) Act 1956 which reads thus :“
92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of interstate trade and commerce.”
44. In exercise of the powers conferred under Entry 92A in List I of the Seventh Schedule to the Constitution of India, the Parliament enacted the Central Sales Tax Act, 1956 wherein the principles and the levy of Central Sales Tax on interstate sales were formulated.
45. Section 8(1), as originally enacted, provided that every dealer who, in the course of interState
trade or commerce sells to a registered dealer goods of the description referred to in Section 8(3), shall be liable to pay tax under the CST Act at one per cent of the turnover. The proviso to Section 8(1), however, provided that if under the sales tax law of the appropriate State the tax on the sale or purchase of any goods by a dealer was exempt from tax generally or was at a rate lower than the rate prescribed under Section 8(1), then the rate of tax in relation to the sale of such goods in the course of interstate trade or commerce covered under Section 8(1) shall be nil or at the lower rate, as the case may be.
46. Section 8(2) of the CST Act as originally enacted, provided that the rate of tax in respect of sales of goods in the course of interstate trade or commerce not falling under Section 8(1) of the CST Act, for example, sales to unregistered dealers shall be the rate of tax payable if such sales had in fact taken place inside the appropriate State. Thus, by prescribing the rate of tax applicable to local sales to the sales in the course of interstate trade to unregistered dealers, the legislature sought to check the tax avoidance by the dealers in the exporting state and the unregistered dealers / customers in the importing State.
47. The rate of tax applicable to the sales of goods in the course of interstate trade or commerce to dealers covered under Section 8(1) and 8(2) have been amended from time to time. Prior to the 2002 amendment, the rate of tax payable in respect of sales covered under Section 8(1) was four per cent of the turn over and in respect of the sales covered under Section 8(2) the rate of tax in the case of declared goods was at twice the rate applicable to the sale of such goods inside the appropriate State and in the case of goods other than the declared goods, the rate of tax was ten per cent or at the rate applicable to sale of such goods inside the appropriate State, whichever was higher.
48. Thus, the legislative policy of the Government under the CST Act has always been to discourage tax avoidance resorted to by the dealers in respect of sales of goods in the course of interstate trade or commerce to unregistered dealers and not to discourage sales of goods in the course of interstate trade to unregistered dealers as wrongly contended by the Revenue. The said object of discouraging tax avoidance was sought to be achieved by imposing high rate of tax in respect of sales covered under Section 8(2). The said object is achieved even after the 2002 amendment by retaining the high rate of tax in respect of sales covered under Section 8(2).
49. In the absence of high rate of tax, the local sales of goods made to unregistered dealers in the State used to be shown in the books to have been made to fictitious dealers outside the State and then the very same goods were claimed to have been resold by those fictitious dealers to the unregistered dealers within the State. Thus, tax payable on sales of goods to a local customer within the State used to be evaded by the dealers by taking undue advantage of there being no tax on interstate sale. To prevent such Revenue loss to the exporting State, the legislature by accepting the recommendations of the Taxation Enquiry Commission imposed high rate of tax on sales of goods to unregistered dealers covered under Section 8(2) of the CST Act.
50. Validity of Section 8 of the CST Act which imposed high rate of tax in respect of sales covered under Section 8(2) were challenged on the ground that the said provisions violated Articles 301 and 304 of the Constitution. The Apex Court in the case of N.K. Nataraja Mudaliar (supra) and in the case of State of Tamil Nadu V/s. Sitolaxmi Mills reported in (1974) 4 SCC 408 upheld the constitutional validity of Section 8 of the CST Act and further held that the high rate of tax imposed under Section 8(2) does not directly or indirectly impede or hamper the free flow of trade, commerce and intercourse and that in appropriate cases, the State Governments under Section 8(5) are empowered to grant total or partial exemption from the higher rate of tax payable under Section 8(2). While upholding the reasonableness of high rate of tax on sales covered under Section 8(2), the
51. The question then to be considered is, whether there is any merit in the argument of the Revenue that after the 2002 amendment, the power of the State Governments to grant exemption under Section 8(5) is restricted only in respect of the transactions covered under Section 8(1) and not in respect of the transactions covered under Section 8(2) of the CST Act ?
52. It is not in dispute that prior to the 2002 amendment, notwithstanding the rates of tax prescribed in respect of interstate sales covered under Section 8(1) and 8(2), the State Governments under Section 8(5) could in public interest grant total / partial exemption from the tax payable under Section 8(1) or 8(2). It is also not in dispute that prior to the 2002 amendment, fulfilment of the requirements of Section 8(4) was mandatory in respect of the transactions covered under Section 8(1). However, the
53. The argument of the Revenue that since it is mandatory to fulfill the requirements of Section 8(4) while exercising power under Section 8(5), it must be held that the power of the State Governments to grant total / partial exemption in public interest is restricted only to the transactions which fulfil the requirements of Section 8(4) namely the transactions covered under Section 8(1) cannot be accepted because, Section 8(5) as amended by Finance Act, 2002 not only refers to the transactions covered under Section 8(1) but also refers to the transactions covered under Section 8(2). Therefore, when Section 8(5) as amended by Finance Act 2002 specifically refers to the power of the State Governments to grant total / partial exemption from the tax payable under Section 8(1) or 8(2), it is not possible to accept the contention of the Revenue that after the 2002 amendment, the power of the State Government under Section 8(5) to grant total / partial exemption is restricted only in respect of the transactions covered under Section 8(1).
54. If the legislature by inserting the words 'on the fulfilment of the requirements laid down in subsection 4 by the dealer' had intended to restrict the power of the State Governments to grant total / partial exemption only in respect of the tax payable under Section 8(1), then the legislature
would not have made any reference to the power of the State Government to grant total / partial exemption from tax payable under Section 8(2). The very fact that the legislature even after the 2002 amendment has retained in Section 8(5), the words that relate to the power of the State Governments to grant total / partial exemption from tax payable under Section 8(2), clearly show that the said amendment was not intended to affect the power of the State Governments to grant total / partial exemption from the tax payable in respect of the transactions covered under Section 8(2).
55. Apart from the above, by retaining the words 'any person or class of persons' in the amended Section 8(5)(b) it is made clear that even after the 2002 amendment, the State Governments under Section 8(5) are also empowered to grant total / partial exemption in public interest in respect of interstate sales to any person or class of persons covered under Section 8(2) of the CST Act. Thus, when Section 8(5) as amended by Finance Act 2002 specifically provides that the State Governments, subject to fulfiling the requirements of Section 8(4) by a dealer, may in public interest grant total / partial exemption in respect of all sales of goods or class of goods as may be specified in the notification, which are made in the course of interstate trade or commerce by any dealer or class of dealers as may be specified in the notification to a registered dealer or the Government covered under Section 8(1) or to any person or class of persons specified in the notification obviously covered under Section 8(2), it is reasonable to hold that the requirement of fulfilling the conditions of Section 8(4) would apply only to sales covered under Section 8(1) and not to sales covered under Section 8(2), because, fulfilling the requirements of Section 8(4) apply only in respect of sales covered under Section 8(1). We draw support for the above reasoning from the decision of the Apex court in the case of K.V. Kamath (supra) wherein it is held that where there are general words of description followed by enumeration of particular things and the general words apply to some things and not to others, then, by applying the principle of REDDEONDO SINGULA SINGULIS, it must be held that the general words would apply only to those thing to which they apply and not to other things.
56. The argument of the Revenue that the words 'any person or to such class of persons as may be specified in the notification' in Section 8(5) (b) are referrable to the registered dealers / Government specified in the notification cannot be accepted, because, Section 8(5)(b) distinctly refers to two separate notifications i.e. one notification specifying the names of the registered dealer / Government and another notification specifying the name of any person or class of persons to whom the State Government considers it necessary in public interest to grant total / partial exemption from tax payable under Section 8(1) or Section 8(2). It is relevant to note that the words 'any person or class of persons' were inserted to Section 8(5) by Central Sales Tax (Amendment) Act, 1972, with a view to empower the State Governments to grant in public interest total / partial exemption from tax payable under the CST Act as it was not possible to visualise in advance the cases in which such exemptions or reductions may be necessary. Therefore, when the power to grant exemption to any person or class of persons was conferred upon the State Governments to cater to the needs of unforeseen circumstances, it cannot be said that power has been taken away especially when Section 8(5) as amended by Finance Act 2002 specifically refers to the power of the State Governments to grant exemption from tax payable in respect of interstate sales to any person or any class of persons. In other words, when the legislature with a view to meet the unforeseen circumstances had conferred power upon the State Governments to grant total / partial exemption from tax payable by any person or class of persons under Section 8(1) or 8(2), in the absence of any material to show that either the unforeseen circumstances have ceased to exist or the State Governments have misused such power or for any other reason it became necessary to withdraw such power, the self destructive argument of the Revenue that by 2002 amendment the powers of the State Governments to grant exemption to any person or class of persons has been taken away cannot be accepted, especially the language used in the amended Section 8(5) negates such argument of the Revenue.
57. The alternative argument of the Revenue that the words 'subsection (2)' as also the words 'to any person or to such class of persons' in Section 8(5)(a) and 8(5)(b) must be treated as redundant and ignored is equally unsustainable, because, it is well established in law that the intention of the legislature is to be gathered from the language used in the statute and if the language is clear and unambiguous then that meaning has to be adopted and it is not open to the Court to give a different meaning by treating the words used in the statute as redundant or superfluous. The object of 2002 amendment was to make it mandatory to comply with the requirements of Section 8(4) in respect of transactions covered under Section 8(1) and while keeping the powers already conferred upon the State Governments intact, the said object has been achieved by inserting necessary words to that effect by the 2002 amendment. Therefore, the argument of the Revenue that reference to the words 'subsection (2)' and the words 'any person or class of persons' in Section 8(5) as amended by Finance Act 2002 are redundant or surplus cannot be sustained. In this view of the matter, we do not consider it necessary to deal with the decisions relied upon by the counsel for the Revenue in support of their contention that the redundant or surplus words in a statute must be ignored.
58. Once it is held that the powers vested in the State Governments under Section 8(5) are not divested by the 2002 amendment and that even after the 2002 amendment, the State Governments subject to compliance of Section 8(4) have power to grant exemption in respect of transactions covered under Section 8(1) as also under Section 8(2), we see no reason to consider the second and the alternative argument of the petitioners that Section 8(5) as amended by Finance Act 2002 does not affect the rights vested in the petitioners under PSI 1993 to avail the exemption upto the quantum specified / period specified in the Entitlement Certificate granted to
the petitioners.
59. For all the aforesaid reasons, we reject the self destructive argument of the Revenue that Section 8(5) of the CST Act as amended by Finance Act 2002, restricts the power of the State Governments to grant total / partial exemption in respect of interstate sales covered under Section 8(1) only. We further hold that even after the amendment of Section 8(5) by Finance Act 2002, the State Governments in public interest may subject to fulfillment of the requirements of Section 8(4) applicable to transactions covered under Section 8(1), grant total / partial exemption from tax payable on interstate sales covered under Section 8(1) as also under Section 8(2) of the CST Act. Since the trade circulars impugned in the petition and also the impugned proceedings initiated against the petitioners proceed on the footing that after the 2002 amendment, the State Governments do not have power to grant total / partial exemption in respect of the transactions covered under Section 8(2), the impugned trade circulars and the impugned notices issued under Section 38 of the BST Act are quashed and set aside.
60. Rule is made absolute in the above terms with no order as to costs.
(R.Y. Ganoo, J.)
(J.P. Devadhar, J.)
