M/S
Malnad Areca Processing & Marketing Ltd Vs. The dy. Commissioner of Commercial
Taxes (Assessment) and [2008] INSC 530 (28 March 2008)
Dr. ARIJIT PASAYAT & D.K. JAIN REPORTABLE CIVIL APPEAL NO. 2225 OF 2008 (Arising out of SLP (C) No. 5968 of
2006) Dr. ARIJIT PASAYAT, J
1. Leave granted.
2. Challenge in this appeal is to the order passed by a Division Bench of
the Karnataka High Court dismissing the Writ Petition and the Sales Tax
Revision Petition filed by the appellant.
3. The Writ Petition No.18392/2005 was filed under Articles 226/227 of the
Constitution of India, 1950 (in short the 'Constitution') with a prayer to
quash the assessment orders on the ground that they are contrary to the policy
notification issued by the Karnataka Government. The Sales Tax Revision
Petition was filed under Section 23(1) of the Karnataka Sales Tax Act, 1957 (in
short the 'Act') against the judgment and order dated 29.6.2004 passed by the
Karnataka Appellate Tribunal, Bangalore (in short the 'Tribunal').
4. The only question that arose for consideration in the petitions before
the High Court was whether the assessee- industry was eligible for exemption in
respect of purchase tax leviable under Section 6 of the Act on the value of
arecanut purchased from member-growers and consignment of arecanut outside the
State for sale, as also the levy of turnover tax under Section 6-B and cess
under Section 6-D of the Act by virtue of the Notification issued by the State
Government pursuant to the Government Order No.CI.30SPC.96(I) dated 15.3.1996
as amended by Government Order No.CI.30.SPC.96(I) dated 14.5.1999.
5. The assessee was engaged in the processing of arecanut purchased from
members growers and sale thereof to non resident commission agents. The
assessee was registered as a new industrial unit with the Directorate of
Commerce and Industries and claimed to be governed by package of New Industrial
Policy, 1996 and Package of Incentives and Concessions under 1996-2001 Scheme
and eligibility certificate in that regard had been issued. Though initially
the claim was accepted, subsequently, the revisional authority initiated
proceedings under Section 21(1) of the Act and revised the assessment orders
and levied purchase tax under Section 6 along with the turnover tax under
Section 6-B of the Act and cess under Section 6-D of the Act on the ground that
the appellant is eligible for sales tax exemption only on the sales turnover of
manufactured goods in terms of the Government Order dated 15.3.1996 as amended
by Government Order dated 14.5.1999 and thus Notifications did not cover tax
leviable under Section 6 of the Act on the purchase value of arecanut effected
from registered and unregistered dealers. It is to be noted that the writ
petition related to the assessment years 2001-2002 and 2002-2003 while revision
petition related to assessment years 1999-2000 and 2000-2001.
6. Stand of the assessee before the High Court was that the expression
"commercial tax, incentives and concessions" finds its place in the
Government Order dated 14.5.1999. It was the assessee's stand that the
expression "tax" covers the tax leviable under the provisions of the
Act and there was no justifiable reason to exclude purchase tax levied or
leviable under Section 6 as the same was tax under the provisions of the Act.
Stand of the revenue on the contrary was that what is exempted under the
Government orders and the implementation notification is only "sales
tax" and not "purchase tax" levied under Section 6 of the Act.
It was pointed out that the Government Orders dated 15.3.1996 and 14.5.1999 and
Notification issued by the State Government in exercise of its powers under
Section 19(C) of the Act in implementing the Government orders exempts only tax
payable under the Act in respect of the goods manufactured and sold by the
industrial units. The High Court after referring to various clauses in the
Government Order and the Industrial Policies accepted the stand of the revenue.
7. The stand taken before the High Court was re-iterated by learned counsel
for the appellant.
8. With reference to one of the items covered by Notification i.e. coffee
curing unit, it was stated that there was no question of any exemption being
given at the time of purchase. It was therefore submitted that the purchasers
have been given the additional benefits only. For the purpose of making the
benefit meaningful purchase tax has to be included. It is to be read into it.
The exemption is at the discretion of the Government and there cannot be any
doubt about it. But it was the deliberate policy of the State Government to
grant the benefit under Section 6. The levy of purchase tax is under certain
circumstances.
9. Learned counsel for the State on the other hand submitted that both the
GOs dated 15.3.1996 and 14.5.1999 lay emphasis on manufacture and sale. It is
pointed out that the articles purchased by the appellant are processed and sent
to places outside the State and they purportedly sell the goods in the course
of inter State trade in other States. The stress is on sale and not purchase of
raw materials. The GOs speak of exemption or deferment. It is never the
intention of the State Government, it is pointed out, to grant the benefit to a
dealer who after getting the benefit effected sales purportedly in course of
inter State sale in some other States. There is no logic for granting such
exemption.
10. In order to appreciate the rival submissions the Notification and
Government order need to be noted. The Notification dated 15.11.1996, so far as
relevant, provided as follows:
"(i) (a) hereby exempts the tax payable under the said Act in respect
of goods manufactured and sold by new industrial units mentioned in column (2)
of the 'Table-A' below, located in the zones specified in column (3) and during
the period and to the extent mentioned in column (4)."
11. The subsequent Government order dated 14.5.1999 so far as relevant reads
as follows:
"Para II(7) of Annexure III to Government Order No.CI 30 SPC 96, dated
15.3.1996 shall be modified to read as under:
"Commercial tax incentives and concessions under the said order shall
be available only for the manufacturing units as defined for the purposes of
Karnataka Sales Tax Act. However, certain specified categories of non
manufacturing units as detailed in Appendix IV shall be eligible for the incentives
and concessions as per the said order."
12. As rightly submitted by learned counsel for the respondents there is no
change so far as the requirement in the notification dated 15.11.1996 relating
to prescription that the goods manufactured and sold by new industrial units.
13. Clause 5 of the 1996 Industrial Policy reads as follows:
"Clause 5: Sales Tax Concession for new Units:
Industrial investments in the Tiny/SST/Medium and Large Scale Sectors would
be provided with the option of either Sales Tax exemption or sales tax deferral
(KST/CST). The option is allowed one time only, at the initial stage of
availing the concession."
Clause 7 reads as follows:
"7. Incentives and concessions under this order shall be available only
for 'manufacturing' units as defined for the purpose of Karnataka Sales Tax
Act. However, specified categories of 'Non-manufacturing' units, as detailed in
Appendix-IV shall also be eligible for the incentives and concessions as per
this order."
14. There appear to be some amount of confusion as to the effect of the two
clauses 5 and 7. It is to be noted that the confusion relating to entitlement
of manufacturing and non manufacturing units was sought to be clarified by the
Government Order. Primary objective of the subsequent Government Order dated
14.5.1999 was to extend benefit under Government Order dated 15.3.1996 to
certain non- manufacturing units.
15. In the Government Order what is provided to new industrial units is the
sales tax exemption or deferral of sales tax under the Act and the Central
Sales Tax Act, 1956 (in short the 'CST Act').
16. Clause 5 of the Government Order dated 15.3.1996 of the industrial
policy 1996-2001 provides for sales tax concession and incentives. The said
clause provides for an option to industrial investments in the tiny/SSI/medium
and large scale sectors to claim either sales tax exemption or sales tax
deferral.
17. A sale and a purchase are two different aspects of the same transaction.
Whether sale or purchase, it will have same ingredients, both in common law and
also under Sale of Goods Act. As stated by this Court in Devi Dass Gopal
Krishnan v. State of Punjab (AIR 1967 SC 1895), the transaction, which the Sales Tax
Laws are concerned with, is a transfer of property in goods for price, inter vivos,
both in the case of sale as well as purchase. In the Government Order, what is
provided to the new industrial units, is an option to claim sales tax exemption
or deferment of sales tax both under the Act and CST Act. In the field of
taxation, it is recognized that the power to classify the objects or persons to
be taxed or exempted from levy is with the legislature. It also enjoys the
power to select persons or transactions. A law of the State, could therefore,
levy tax both at the sale point and at the purchase point. Under the Government
Order, the policy of the Government as spelt out is, that tiny and small scale
industries and medium and large scale industries may exercise their option
either for sales tax exemption or sales tax deferment for number of years
prescribed in the Government Order itself. In the context in which these
expressions are used, they only mean "sales tax holiday" or exemption
from payment of sales tax for number of years specified, depending on where the
tiny or small scale industry is located. "Sales tax"
refers to any tax which includes within its scope all 'business of sale of
goods' specified in the Schedule. Similarly, "Sales tax deferral"
only means the aforesaid industries are entitled to collect tax but they need
not pay sales tax collected immediately to the State. If understood in this
manner and thereafter the New Industrial Policy of the State Government for the
years 1993-1998 and the exemption notification is looked into, the only
conclusion that can be drawn is, what is exempted under the notification issued
by the State Government is tax leviable under Section 5 of the Act on the goods
manufactured and sold by an industrial unit. Therefore, the notification is in
no way in variance or contrary to the industrial policy for the years
1993-1998. The above position has been rightly highlighted by the High Court.
18. In that view of the matter, we find no infirmity in the impugned order
of the High Court. The appeal is dismissed. There will be no order as to costs.
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