The
State of Uttar Pradesh & Anr Vs. M/S. Hindustan Safety Glassworks (P) Ltd. [1996] INSC
429 (20 March 1996)
Sen,
S.C. (J) Sen, S.C. (J) Singh N.P. (J) Sen,J.
CITATION:
1996 AIR 1519 JT 1996 (5) 549 1996 SCALE (3)11
ACT:
HEAD NOTE:
[WITH
Civil Appeals Nos. 110 and 2961 of 1977 AND Civil
Appeals Nos. 4591-92 of 1996 (Arising out of S.L.P. (C) Nos. 245-46 of 1978)
AND Civil Appeals Nos. 1302, 1303, 1304, 1305 of 1978 AND Civil Appeals Nos.
4593-4594 of 1996 (Arising out of S.L.P. (C) Nos. 7842 and 1522 of 1979).]
This
case arises out of a Gazette Notification dated 9th January, 1970 issued by the Government of Uttar Pradesh granting
exemption from payment of sales tax to various newly set up industrial
undertakings.
The
notification was to the following effect:
"Whereas,
it has been brought to the notice of State Government that the Seven Industrial
Units mentioned in Schedule below have started the manufacture of goods
mentioned in Column II of the Schedule with effect from the date noted against
each;
And,
whereas, the State Government is of opinion that it is necessary so to do for
increasing the production of the said goods manufactured by the said Industrial
Units;
Now,
therefore, in exercise of the powers under section 4-A of the U.P. Sales Tax
Act, 1948 (U.P. Act No.8.XV of 1948), the Governor is pleased to declare that
the turnover in respect of the said goods manufactured by the said Industrial
Units shall be exempt from payment of sales tax for a period of three years
with effect from the date of publication of this notification in the official
Gazette;
SCHEDULE
-------- ----------------------------------------------------- Sl. Name of the
Goods manufactured Date of No. Industrial starting Units production
------------------------------------------------------ Column-I Column-II
Column-III ------------------------------------------------------ 1. . . . . .
. . . . . . . .
2. . .
. . . . . . . . . . .
3. . .
. . . . . . . . . . .
4. . .
. . . . . . . . . . .
5. . .
. . . . . . . . . . .
6. . .
. . . . . . . . . . .
7. M/s.Hindustan
Mirrors and February Safety Glass Toughened 1969.
Works
Private Glass Ltd., Allahabad.
------------------------------------------------------
As a result of this notification, the notified goods became exempt from sales
tax with effect from February, 1969 for a period of three years from the date
of publication of the notification in the official Gazette. The claim of the
respondent, Hindustan Safety Glass Works (P) Ltd., is that it was entitled to
exemption from payment of tax under the Central Sales Tax Act by virtue of the
provisions of Section 8 (2A) of the Central Sales Tax Act before its amendment
by Act No.61 of 1972 which came into force with effect from 1.4.1973. The
position after the amendment came was examined by this Court in the case of
Commissioner of Sales Tax, J & K and others v. Pine Chemicals Ltd. and
others, (1995) 1 SCC 58. In that case, it was held that where the sale or
purchase of the goods was exempt generally under the State Sales Tax Law, the
benefit of the exemption under Section 8 (2A) of the Central Sales Tax Act
would be available to an assessee. But, if the exemption granted was not of
general nature, then the assessee could not claim the benefit of any exemption
provided by Section 8(2A). In that case, the Government Order No. 159 provided
exemption to large and medium scale industries in the State of Jammu &
Kashmir from payment of sales tax both on raw materials and finished products
for a period of five years from the date on which the unit went into
production. By a subsequent Government Order dated 25.8.1971, the earlier order
was modified and it was provided that the State sales tax paid by large and
medium scale industries on the raw materials procured by them for the initial
five years of the production would be refunded to such industries. Similarly
such industries were granted exemption from payment of State Sales Tax on their
finished products for a period of five years from the date the unit went into
production.
It was
pointed out in that case that because of the aforesaid Government Order the assessee
could not claim benefit of exemption under Section 8 (2A) of the Central Sales
Tax Act because the exemption was not a general one, the exemption under
Government Order No.159 was not with reference to goods or a class of category
of goods, but with reference to an industrial unit producing them and their
manufacture and sale within a particular period.
In the
instant case, the exemption has not been granted to the goods generally.
Specified goods (mirrors and toughened glass) produced by a specified company
have been exempted from payment of sales tax for a specified period of time. It
is not the case of the assessee that mirrors and toughened glass have been
generally exempted from payment of tax. Therefore, in view of the ratio laid
down in the aforesaid case of Commissioner of Sales Tax v. Pine Chemicals Ltd.
(supra), it must be held that the assessee will not be entitled to get benefit
of Section 8(2A) of the Central Sales Tax Act in the facts of this case.
On
behalf of the respondent, it has been contended by Mr. Raja Ram Agarwal that
sub-section (2A) of Section 8 of the Central Sales Tax Act was amended with
effect from 1.4.1973. He drew our attention to the language of the section before
its amendment, which was as under:
"8(2A).
Notwithstanding anything contained in sub-sec. (1) or sub- section (2) if under
the sales tax laws of the appropriate state the sales or purchases as the case
may be, of any goods by a dealer is exempt from tax generally or is subject to
tax generally at a rate which is lower than two percent (whether called a tax
or fee or by any other name), the tax payable under this Act on his turnover in
so far as the turnover or any part thereof, relates to the sale of such goods
shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation: For the purposes of this
sub-section a sale or purchase of goods shall not be deemed to be exempt from
tax generally under the sale tax law of the appropriae State if under that law
it is exempt only in specified circumstances or under specified conditions or
in relation to which the tax is levied at specified stages or otherwise than
with reference to the turnover of the goods." It has been contended that
under the old Act the exemption was in respect of a dealer whereas under the
amending Act exemption was in respect of goods. Under the repealed provisions,
it would have been sufficient if a dealer was exempted from payment of tax
generally. It was not necessary to establish that exemption had to be granted
to the goods in order to get the benefit of the provisions of Section 8 (2A).
Having
regard to the language of the section before its amendment, we are unable to
uphold the contention of Mr. Agarwal. The exemption from the Central Sales Tax
Act under the repealed provision was in respect of 'sales or purchases ........
of any goods by a dealer'. The section granted exemption to any goods of a
dealer when such goods were 'exempt from tax generally .......'. In order to
take advantage of this Section 8(2A), a dealer will have to establish that sale
or purchase of the goods in question was exempt from tax generally. If it was a
special exemption granted to him because his undertaking was a new industrial
undertaking or for any other reason for a limited period, then the exemption
will not be of general nature and he will not be entitled to get the benefit of
this sub-section.
There
was an Explanation to the old sub-section (2A) of Section 8, which made it
clear that if the exemption was only in specified circumstances or under
specified conditions or in relation to which the tax was levied at specified
stages or otherwise than with reference to the turnover of goods, then the sale
or purchase of goods shall not be deemed to be exempted from tax generally.
In the
instant case, the exemption has been granted only in respect of specified goods
produced by certain specified newly set up undertakings mentioned in the
notification. The benefit of exemption will be available to these new
undertakings for a period of three years. In other words, at a specified stage
of development of these industries they will be given a special benefit which
will not be available generally to other industries producing goods of similar
nature. Therefore, we fail to see how the aforesaid case of Commissioner of
Sales Tax v. Pine Chemicals Ltd. (supra) can be distinguished on the ground
that it was a decision given under post-amendment law. In fact, it does not
appear that by the amendment of sub- section (2A) of Section 8 any change has
been brought about in respect of meaning or the concept of sale or purchase of
goods exempt from tax generally.
We
were also referred to a decision of this Court in the case of M/s. Indian Aluminium
Cables Ltd. v. State of Haryana, (1976) 4 SCC 27. In that case the question was
whether inter-State sale of electrical goods to State Electricity Undertaking
under Section 5( 2) (a) (iv) of the Punjab Sales Tax Act, though exempt under
the State Act was not exempt from the Central Sales Tax. After referring to the
Explanations to Section 8 (2A), it was held that there would be no exemption
under the Central Sales Tax Act if the sale, which was exempted under State
Act, was only 'in specified circumstances or under specified conditions'. This
decision goes against the contention advanced on behalf of the respondent. In
that case, this Court pointed out that exemption under the State Act was under
the specified circumstances and that sale must be to an undertaking engaged in
supplying electrical energy to the public under the licence granted under the
Indian Electricity Act. There was also specified condition that the goods
purchased by the undertaking must be used for generation or distribution of
electrical energy.
It was
contended on behalf of the respondent that in the case of Indian Aluminium
Cables Ltd. (supra), there is a passage which seems to suggest that the
decision of Allahabad High Court in the case of Hindustan Safety Glass Works
(P) Ltd. v. State of Uttar Pradesh, (1974) 34 STC (All.), was approved by this
Court.
We are
unable to uphold this contention. The judgment of Allahabad High Court in the
case of Hindustan Safety Glass Works (P) Ltd. (supra) and also some other
judgments of some other High Courts were referred to and distinguished on
facts. The distinguishing feature in the case of Hindustan Safety Glass Works
(P) Ltd. was that the stipulation that the turnover of such sales would, for a
period of three years be exempt from payment of sales tax did not amount to
exempting the turnover of such goods from tax under specified circumstances or
specified conditions as in the case of Indian Aluminium Cables Ltd. This Court
was not called upon to hold nor did it hold that this would amount to general
exemption of the goods from the sales tax.
In
that case the principle underlying section 6 was explained as under:
"Section
6 of the State Act does not speak of exemption, but deals with tax free goods.
In other words, Section 6 deals with specified goods on which no tax is
payable. Section 5 of the State Act deals with what has to be excluded from the
taxable turnover of the dealer. Both the sections deal with goods which do not
suffer from sales tax. Section 8 (2A) of the Central Act exempts goods from
inter-State sales tax where a tax law of the State has exempted them from sales
tax. The explanation to Section 8(2A) of the Central Act takes away the
exemption where it is not general and has been granted in specified
circumstances or under specified conditions. The provisions contained in
Section 5(2)(a)(iv) of the State Act exclude sales which are made under
specified circumstances or specified conditions. The specified circumstances
are that the sale must be to an undertaking engaged in supplying electrical
energy to the public under a license or sanction granted under the Indian
Electricity Act, 1910. The specified condition is that the goods purchased by
the undertaking must be used for the generation or distribution of electrical
energy.
If the
circumstances do not exist or if the conditions are not performed then the
sales of goods cannot be exempted from tax.
General
exemption means that the goods should be totally exempt from tax before similar
exemption from the levy of Central sales tax can become available. Where the
exemption from taxation is conferred by conditions or in certain circumstances
there is no exemption from tax generally." These observations completely
negate the argument now advanced on behalf of the respondent. The exemption in
the instant case has been granted to a few specified goods of some new
industries for a specified period of time. The exemption is not generally given
to all industries or all similar goods manufactured and sold in Uttar Pradesh.
Similar
goods produced by other industries will be taxable under the said Act.
Moreover
it has also to be noted that in the Notes on Clauses to the Bill introduced for
amending the Central Sales Tax Act by the Amendment Act of 1972 (61 of 72), it
was stated that "sub-clause (a) of Clause 5 sought to substitute a new
sub-section for existing sub-section (2A) of Section 8 of the principal Act.
The new sub-section seeks to bring out more clearly that an exemption or lower
rate of levy under the local sales tax law of the appropriate State would be available
in respect of an inter-State sale of goods only if such exemption or lower levy
is available generally with reference to such goods or such class of goods
under the local sales tax law." The purpose behind the amendment of
Section 8(2A) was to make the existing provisions clearer. In other words, the
object was not to bring about any change in the existing law but to set it out
in clearer words.
For
all these reasons, we are unable to uphold that the law laid down in the case
of Commissioner of Sales Tax v. Pine Chemicals Ltd. (supra) will not apply to a
case governed by Section 8(2A) before its amendment on 1.4.1973.
In
that view of the matter, the appeal is allowed.
There
will be no order as to costs.
CIVIL
APPEALS NOS.110 AND 2961 OF 1977 AND CIVIL APPEALS NOS. 4591-92, OF 1996
(ARISING OUT OF S.L.P. (C) NOS. 245-46 OF 1978).
Special
leave granted.
In
view of our judgment in Civil Appeal No.109 of 1977, the above appeals are
allowed. There will be no order as to costs.
CIVIL
APPEALS NOS. 1302, 1303, 1304, 1305 OF 1978 AND CIVIL APPEALS NOS. 1593-94 OF
1996 (ARISING OUT OF S.L.P. (C) NOS. 7842 AND 1522 OF 1979).
Special
leave granted.
In
view of our judgment in Civil Appeal No.109 of 1977, the above appeals are
dismissed. There will be no order as to costs.
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