State
of Haryana Vs. Dalmia Dadri Cement Ltd. [1987] INSC 343 (20 November 1987)
MUKHARJI,
SABYASACHI (J) MUKHARJI, SABYASACHI (J) RANGNATHAN, S.
CITATION:
JT 1988 (3) 1
ACT:
Punjab
General Sales Tax Act, 1948: s. 5(2)(a) (iv)- Cement-Sale of to Electricity
Board for use in generation or distribution of energy-Deduction of from
dealer's gross turnover-Whether permissible.
Words
& Phrases: Expression "for use" must mean "intended for
use"-s.5(2)(a)(iv), Punjab General Sales Tax Act, 1948.
Section
5(2)(a)(iv) of the Punjab General Sales Tax Act, 1448 exempted goods sold to
any undertaking supplying electric energy to public, for use by it in the
generation or distribution of such energy.
HEADNOTE:
%
The assessee-respondent was sought to be reassessed to sales tax, in respect of
supply of cement to the Punjab State Electricity Board in the years 1964-65 and
1965-66 on the basis of the certificates issued by the Board to the effect that
it was required for use in the generation or distribution of electrical energy,
on the ground of nonuser of the goods for the said purpose. The Tribunal
dismissed the appeal of the assessee.
On
a reference the High Court came to the conclusion that the assessee who made
sales to the Board on the basis of the certificates was not required to prove
further that the cement was actually so used.
Dismissing
the State's appeal by Special leave, ^
HELD:
The assessee-respondent is entitled to exemption under s. 5(2)(a)(iv) of the
Punjab General Sales Tax Act, 1948. [4G] The mere fact that some of the cement
supplied was, in fact used by the Punjab State Electricity Board for activities
not directly connected with the generation or distribution of electrical
energy, cannot make any difference regarding the availability of the exemption.
[4D- E] 2 In order to get exemption it need not be shown that the goods in
question were actually used in the generation or distribution of electrical
energy. On a plain reading of Cl.
(a)(iv)
of sub-s. (2) of s. 5 of the Act it is clear that the expression "for
use" therein must mean "intended for use". If the intention of
the legislature was to limit the exemption only to such goods sold as were
actually used by the untertaking in the generation and distribution of electrical
energy, the phraseology used in the exemption clause would have been different,
as, for example, "goods actually used" or "good used". [4H;
5A-B] In the instant case, the certificates issued by the Board clearly showed
that the intention of the Board was that the cement should be used for a
purpose directly connected with the generation or distribution of electrical
energy. There is no material to show that the certificates were false
certificates given by the Board, having another use in mind, or that they were
fraudulently obtained by the assessee in collusion with the Board. [5H; 6A-B]
Associated Cement Co. Ltd. Kymore M.P. v. Assistant Commissioner of Sales Tax,
Jabalpur Region, Jabalpur & Anr; [1971] 28 S.T.C. 629 and Spedding Dinga
Singh & Co. v. The Punjab State, [1968] 22 S.C.C. 319 distinguished.
CIVIL
APPELLATE JURlSDlCTlON: Civil Appeal Nos 937-38 of 1975 From the Judgment and
order dated 4.11.1974 of the Punjab and Haryana High Court in Govt. Sales Tax
Reference No 37 of 973 Ravinder Bana and C.V. Subba Rao for the Appellants Serv
Mitter and Madan Gopal Gupta for the Respondent.
The
Judgment of the Court was delivered by KANIA, J. These appeals by special leave
are directed against the decision of a Division Bench of the High Court of Punjab
& Haryana on a reference under Section 22 of the Punjab General Sales Tax
Act (hereinafter referred to as 'the Act ). The short facts necessary for the
disposal of this appeal are as follows:
The
respondent-assessee supplied cement in the years 1964-65 3 and 1965-66 to the
Punjab State Electricity Board (referred to hereinafter as the Board') on the
basis of the certificates issued by the Board to the effect that the cement was
required for use in the generation or distribution of electrical energy In the
initial assessment proceedings on the basis of these certificates the sales of
cement by the assessee to the Board were exempted. The exemption was granted
under section 5(2)(a)(iv) of the Act. Section 5(2)(a)(iv) of the Act reads as
under:
5(2).
In this Act the expression 'taxable turnover' means that part of the dealer's
gross turnover during any period which remains after deducting therefrom- (a) x
x xxxx x (i) xx xxx xxx xx (ii) xx xxx xxx (iii) x x x x (iv) Sales to any
undertaking supplying electrical energy to the public under a licence or
sanction granted or deemed to have been granted under the Indian Electricity
Act, 1910(IX of 1910) of goods for use by it in the generation or distribution
of such energy; xxx".
There
is no dispute that the Board was an undertaking supplying the electrical energy
to the public and that it held a licence or a sanction under the Indian
Electricity Act, 1910. The assessing authority on the basis. Of the
certificates took the view that the cement was sold by the assessee to the
Board for use by it in the generation or distribution of electricity energy.
Thereafter
on the basis of an audit report, the assessment was re-opened by the Deputy
Excise and Taxation Commissioner (Appeals). The Deputy Commissioner started suo
moto proceedings under Section 21 of the Act and issued a show cause notice to
the assessee and, after giving a hearing to the assessee, he came to the
conclusion that the exemption was not attracted and the deductions which had
been granted by the original assessing authority, to the tune of Rs. 1 lac for
the year 1964-65 and Rs.2 lacs for the year 1965-66, had been 4 granted wrongly
and issued additional demands aggregating to Rs. 18,000.
The
assessee challenged the additional demands made before the Sales Tax Tribunal
Haryana but the challenge was replaced by the Tribunal and the appeal of the
assessee dismissed Therafter a reference was made by the Tribunal to the Punjab
& Haryana High Court under Section 22 of the Act. The Division Bench of the
High Court while disposing of the reference came to the conclusion that on a
true construction of the provisions of Section 5(2)(a)(iv) of the Act the
assesee, who made sales to the said Board on the basis of the certificates that
the cement was required for use in the generation and distribution of
electrical energy, is not required to prove further that the cement was
actually so used and, on the basis of this conclusion it decided the reference
in favour of the assessee It is this decision which is challenged before us.
The
submission of Mr R Bana. learned counsel for the appellant is that in order to
get the benefit of the exemption it is required that it should be established
before the Tax Authorities that the cement supplied by the assessee was actually
used by the Board in an activity directly connected with the generation or
distribution of electrical energy In the present case. the inquiry held by the
Deputy Commissioner showed that the assessee was not in a position to establish
such actual use by the Board and it appeared that a part of the cement supplied
was used by the Board in the construction of staff quarters and other
constructions which could not be said to be directly connected with the
generation or distribution of electrical energy .
It
was on the other hand submitted by the learned counsel for the respondent that
there was nothing to show that the certificates issued were false certificates
as such. that is certificates given with the knowledge that the cement
purchased was to be used partly in activities not directly connected with the
generation or distribution of electrical energy nor were the certificates
obtained by the assessee in collusion with the Board The assessee was entitled
to rely on the certificates and get the exemption We are unable to accept the
submission of Mr. Bana that, in order to get the exemption it must be shown
that the goods in question namely, the cement supplied by the assessee in this
case was 5 actually used in the generation or distribution of electrical energy.
It must be noted that the important words used in the relevant provisions are
"goods for use by it in the generation or distribution of such
energy" (emphasis supplied by us). On a plain reading of the relevant
clause it is clear that the expression "for use" must mean
"intended for use" If the intention of the legislature was to limit
the exemption only to such goods sold as were actually used by the undertaking
in the generation and distribution of electrical energy, the phraseology used
in the exemption clause would have been different as, for example, "goods
actually used" or "goods used.".
Mr.
Bana, in support of his submission, drew our attention to the decision of the
High Court of Madhya Pradesh in Associated Cement Co. Ltd., Kymore, M.P. v. Assistant
Commissioner of Sales Tax, Jabalpur Region, Jabalpur and Another, [1971] 28
S.T.C. 629. In that case the exemption provision was in pari materia with the
exemption provision before us. It was held by the Madhya Pradesh High Court
that everything sold to the Electricity Board for its use did not fall within
the exemption under Section 2(j)(a)(iii) of the Act. It was only when there was
direct use of the goods in the generation or distribution of electrical energy
that the goods sold to the Board could fall within the exemption.
We
may point out that this decision is not of any assistance in the case before us
as the dispute in that case centered on the question whether, in order to
attract the exemption, the goods supplied must be directly used in the
generation or distribution of electrical energy or whether indirect use of the
goods for the aforesaid purpose was enough. It appears that the Division Bench
which decided that case did not consider at all the question whether the
expression "for use" in the exemption clause meant "intended for
use" or it meant "actually used". The same is the position
regarding the decision of the High Court of Punjab & Haryana in Spedding
Dinga Singh & Co. v The Punjab State, [1968] 22 S.T.C. 319 which dealt with
the very sub-clause in question which dealt with the very sub-clause in
question before us.
We
are, therefore, of the view that the real question which we are called upon to
determine is whether, in the present case, the cement supplied was intended for
use directly in the generation or distribution of electrical energy. If it was
so intended, the exemption was attracted but not otherwise. The certificates
which we have referred to earlier issued by the Board clearly show that the
intention of the Board was that the cement should be used for a purpose
directly 6 connected with the generation or distribution of electrical energy.
There is no material to show that the certificates were false certificates
given by the Board, having another use in mind, or that they were fraudulently
obtained by the assessee in collusion with the Board. the mere fact that some
of the cement supplied was, in fact, used by the Board for activities not
directly connected with the generation or distribution of electrical energy
cannot make any difference regarding the availability of the exemption.
In
view of the conclusion set out in the previous paragraph, we do not feel called
upon to go into the question whether certificates granted by the Board must be
regarded as conclusive in a matter of granting exemption. We may, however,
point out that the certificate contemplated under Section 5(2)(a)(iv) of the
Act cannot compare with the certificate in Form 'C' which is a statutory
certificate nor can it be regarded as completely conclusive. We are not called
upon in this case to consider in what circumstance the assessing authority can
go behind the certificate. It is clear that in the present case no such
circumstances existed.
In
the result, the appeals must fail and are dismissed with costs.
P.S
.S. Appeals dismissed.
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