Research › Search › Judgment

Rajasthan High Court · body

2002 DIGILAW 157 (RAJ)

Royal PVC Shoes Pvt. Ltd. v. State of Rajasthan

2002-01-17

O.P.BISHNOI, RAJESH BALIA

body2002
Honble BALIA, J.–Heard learned counsel for the parties. (2). The writ petition No. 3971/2000 was filed by the petitioner- appellant challenging the assessment order dated 15.07.2000 (Annexure-3), which was passed under the Central Sales Tax Act by which inter-State sale of shoes and chappals relating to the category of footwears, which were not made of leather and whose value was upto Rs. 100 only. The assessee has claimed that the sale related to footwears `a class of which were not made of leather and whose value did not exceed Rs. 100/-, are generally exempted vide notification dated 7.3.94 issued by the State Govt. in exercise of its powers conferred under Sec. 4(2) of the Rajasthan Sales Tax Act, 1954. Therefore, inter-State turnover of such goods was also exempt from CST under Sec. 8(2-A) of the Central Sales Tax Act, 1956. (3). The assessee has relied on the decision of this Court reported in Shiv Sainath Rubber Industries Pvt. Ltd. vs. State of Rajasthan & Another (1), in which the question that has been raised in the revision petition about the exemption claimed by the assessee under Sec. 8(2-A) of the CST Act, 1956 with reference to notification dated 8.03.1988 issued by the State Govt. under Sec. 4(2) of the RST Act, 1954. Under the said notification all kinds of footwear not manufactured or marketed by large scale or medium scale industries upto the value of Rs. 20, were exempted. (4). The case of the revenue under Sec. 8(2-A) of the Central Sales Tax Act was that the exemption under notification dated 8.03.1988 was not a general and unconditional exemption under the State Laws and therefore, no benefit could be availed under Sec. 8 (2-A) of the Central Sales Tax Act. (5). It was the contention of the revenue in Shiv Sainaths case was that fixing of the value on goods and grant of exemption only to the small scale industries amounted to two conditions under which alone benefit could be availed under the Act of 1954, therefore, the exemption would not extend to the turnover which was taken place in the course of inter-State trade and commerce under Sec. 8(2-A). (6). (6). This Court has held that twin requirement of the notification dated 8.03.1988 related to identify the goods and the criterion laid down to identify the dealer in such class of goods in respect of which exemption is granted, are not the conditions or the specifications of circumstances relating to the turnover sought to be exempted from payment of tax within the meaning of Section 8(2A). It was also held that the facts which were required to be proved only to identify the dealer and goods in respect of which exemption is sought, are not conditions or specifications related to turnover sought to be considered relating to goods which have been exempted generally without any condition. For coming to this conclusion, this Court has relied on two decisions of the Supreme Court: (1) Pine Chemicals Ltd. vs. Assessing Authority (2) and (2) Hindustan Paper Corporation Ltd. vs. State of Kerala (3). (7). The Assessing Officer in the present case relying on the decision of Rajasthan Taxation Tribunal, Ajmer rendered in the case of M/s. Ajay Polymers Pvt. Ltd. Bhiwadi (4), in which Rajasthan Taxation Tribunal has held that the exemption granted under the Rajasthan Sales Tax Act, 1954 under Sec. 4(2) is not extended to turnover under the inter-State turnover. Levied tax on inter- State turnover of shoes upto value of Rs. 100/- which were not made of leather. The tax levied on such turnover of Rs. 5,82,954/- @ 10% was set aside on appeal before Dy. Commissioner (Appeals). The order of Dy. Commissioner (Appeals) followed the circular dt. 23.2.98 issued by Commissioner. Said assessment under CST Act has been re-opened on the basis of audit objection and tax as aforesaid was again levied on the turnover which was exempt under item 5 of notification dt. 7.3.94. (8). The petitioner has filed the writ petition without availing the alternative remedy before this Court. The writ petition has been dismissed solely on the ground of existence of an alternative remedy and reserving right of petitioner to pursue the alternative remedy of appeal. (9). 7.3.94. (8). The petitioner has filed the writ petition without availing the alternative remedy before this Court. The writ petition has been dismissed solely on the ground of existence of an alternative remedy and reserving right of petitioner to pursue the alternative remedy of appeal. (9). The writ petition was admitted after hearing the learned counsel for the petitioner as well as learned counsel for the respondents by over-ruling the objections as to maintainability of the writ petition inspite of existence of alternative remedy by pointing out the circumstances in which the existence of alternative remedy in the present case cannot be considered to be equally efficacious alternative remedy. (10). The Court has opined that the matter relates to considering the question whether the decision of this Court which governs the issue arising out of these proceedings and binds all subordinate Tribunals within the State stands impliedly over-ruled by a later decision of Supreme Court which is stated to have taken a different view and determination of entire issue on one way or other depends solely on this aspect of the matter, concerning effect of decision of Supreme Court in Commissioner of Sales Tax J. & K. vs. Pine Chemicals Ltd. (5). (11). The primary contention on behalf of revenue in this case has been that the principle enunciated by the Supreme Court in Pine Chemicals Ltd. (supra) has since been over-ruled by the Supreme Court on a review application in that very case also other group of issues including that of Hindustan Paper Corporation Ltd. in (supra). Therefore, by necessary implication the ratio in decision of this Court in Shiv Sainath Rubber Industries Pvt. Ltd.s case also stands over-ruled. The nature of the exemption which has been granted vide notification dated 7.03.1994 (Annexure-1), therefore, cannot be considered to be exempt from tax generally or subject to tax generally at a rate which is lower than 4 per cent whether called a tax or fee or by any other name within the meaning of sub-sec. (2-A) of Sec. 8 of the Central Sales Tax Act, 1956 (for short `the Act of 1956) for exempting. (12). (2-A) of Sec. 8 of the Central Sales Tax Act, 1956 (for short `the Act of 1956) for exempting. (12). It is contended by the learned counsel for the petitioner- appellant that the ratio laid in Pine Chemicals Ltd. by the Supreme Court in 85 STC has been only partially reversed, limited to the extent the exemption is granted with reference to any industrial unit producing any article and is limited to such articles produced or sold within the limited period, have been held not to be related to identification of the assessee or the goods to have been held to be condition under which the exemption is granted. However, where the exemption is with reference to determine the goods or class or category of goods which has been exempted, ratio has not been reversed. (13). Under notification, it has been contended by Mr. Mehta, that where the exemption is granted spells out the criterion for classifying the goods or class of goods or the category of goods which have been selected for exemption, such criterion for classifying or identifying the goods subjected to exemption as a class or a category, is not taken out of purview of exemption under Sec. 8(2-A) of the CST Act from the ratio laid by the Supreme Court in Pine Chemicals Ltd.s case decided earlier, subsequent the decision of the Supreme Court on review in Commissioner of Sales Tax vs. Pine Chemicals Ltd. in (supra), does not affect the availability of benefit of exemption to the turnover of goods in question, while fulfils the criteria of availing the benefit of exemption generally and unconditionally on all shoes falling in class of shoes for which alone exemption is extended under the notification dated 7.03.1994 under the Act of 1954. (14). In all circumstances such exemption ought to be treated as exemption relating to class of shoes falling within the exemption net which are exempted generally and unconditionally. It is not necessary for availing exemption under Sec. 8(2-A) of the CST that all goods falling broadly in one description must be subject to exemption. It is enough even if, only a class or category of goods of broad category is enjoying exemption generally and cannot be treated as goods subject to exemption only on specified conditions. (15). It is not necessary for availing exemption under Sec. 8(2-A) of the CST that all goods falling broadly in one description must be subject to exemption. It is enough even if, only a class or category of goods of broad category is enjoying exemption generally and cannot be treated as goods subject to exemption only on specified conditions. (15). This would necessitate close examination of two cases of Pine Chemicals Ltd. For the sake of convenience we shall refer to them first Pine Chemicals case and second Pine Chemicals case. (16). The notification, which was in consideration before the Supreme Court in first and second Pine Chemicals case was issued under Jammu & Kashmir Sales Tax Act, under the Government Order exemption was granted from State Sales Tax, by way of incentive to a class of dealers on purchase of raw-material and sale of finished products for a period of five years from the date the unit claiming exemption goes into production. As the notification suggests it referred to no particular goods or class of goods but the reference was to `the goods manufactured by units for a period of five years from the date of commencement of the production. (17). The Supreme Court, in the first instance, in the first Pine Chemicals case, has held while considering the claim to exemption under Section 8 (2-A) of CST Act read with Explanation appended thereto said that inter-State sale or purchase of commodity shall not be deemed to be exempt from tax generally, if the exemption is given only (i) in specified circumstances or under specified conditions or (ii) the tax is levied on the sale or purchase of such goods at specified stages or (iii) otherwise than with reference to the turnover of the goods. (18). These conditions or limitations are, therefore, with reference to the transaction of sale or purchases. (19). The main clause deals with the turnover of ``a dealer which term would include ``any dealer or ``any class of dealers. The existence or otherwise of the three limitations under the explanation above referred to on claiming exemption under section 8(2-A) of the Central Sales Tax Act will, therefore, have to be tested with reference to the transaction of sale or purchase as the case may be of the dealer who claims the exemption in respect of his intra-State sale or purchase of the same goods. Thus, the specified circumstances and the specified conditions referred to in the explanation should be with reference to local turnover of the some dealer who claims exemption under Section 8(2-A) of the Central Sales Tax Act. (20). The Court further went on to say that the facts which the dealer has to prove to get the benefit of the Government orders are intended only to identify the dealer and the goods in respect of which the exemption is sought and they are not conditions or specifications of circumstances relating to the turnover sought to be exempted from payment of tax within the meaning of those provisions. The specified circumstances and specified conditions referred to in the Explanation should relate to the transaction of sale of the commodity and not identification of the dealer or the commodity in respect of which the exemption is claimed. These conditions relating to identity of the goods and the dealer are always there in every exemption and that cannot be put as a condition of sale. (21). We may notice that the circumstances mentioned in the notification of the Govt. Order issued by Jammu and Kashmir Govt. which was in question before the Supreme Court had referred to only identification of manufacturer and it was circumscribed by two conditions namely the date on which such manufacturer has gone into production and sales of the turnover on which exemption is claimed must have been made within a period of five years from the said date of the commencement of the production. (22). The Court held in the first case that the manufacturer is entitled to get benefit for a period of five years from the date his unit comes into production and consequently the appeal of Pine Chemicals was allowed. (23). The application was moved for review. The matter was again examined by the Supreme Court on review application. The Court on review said : ``We must give due regard and attach due meaning to the expression ``generally which occurs in the sub-section and which expression has been defined in the Explanation. If the said expression had not been there, it could probably have been possible to argue that inasmuch as the goods sold by a particular manufacturer-dealer are exempt from the State tax in his hands, they must equally be exempt under the Central Act. If the said expression had not been there, it could probably have been possible to argue that inasmuch as the goods sold by a particular manufacturer-dealer are exempt from the State tax in his hands, they must equally be exempt under the Central Act. But sub- section (2-A) requires specifically that such exemption must be a general exemption and not an exemption operative in specified circumstances or under specified conditions. Can it be said that the goods sold by the dealers in this case are exempt from tax generally under the State sales tax enactment ? The answer can only be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium scale industrial unit within five year of its commencement of production and sold within the said period, i.e. in certain specified circumstances alone. The exemption is not a general one but a conditional one. (24). While laying down the condition with reference to notification in question, the Court further made it clear : ``The exemption under the Government Order No. 159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale within a particular period. For the purposes of the Government order, the nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within which they are manufactured and sold. (25). The Court emphasised that distinction between exemption granted to the goods or class of goods or category of goods or any person to the exemption extended to a very class of manufacture on certain fulfilment of circumstances being existence on certain other circumstances. It said : ``Exemption provided by Government Order No. 159, to repeat, is not with reference to goods but with reference to the industrial unit. So long as it is (i) a large or medium scale industry and (ii) it manufacturers and sells goods within the five years of its going into production, the sale of such goods is exempt irrespective of the nature or classification of goods. Similar goods may be manufactured by another unit but if it does not satisfy the above two requirements, the goods manufactured and sold by it would not be entitled to exemption from tax. (26). Similar goods may be manufactured by another unit but if it does not satisfy the above two requirements, the goods manufactured and sold by it would not be entitled to exemption from tax. (26). It is apparent that in the review application the Court reversed the judgment in first Pine Chemicals Ltd.s case only to the extent the Court on earlier occasion included the conditions extending the benefit of exemption only to class of dealers in certain circumstances attached with the dealer in respect of sale of goods manufactured by him, if they are sold within the specified period from the date of commencement of commercial production by the dealer and these circumstances did not relate to identification of goods or class or category of goods selected for exemption. (27). However, the Court laid stress and reiterated the position that exemption envisaged u/sub-sec. (2-A) of Sec. 8 is eligible to the goods or class of goods or category of goods, but is not related to the circumstances laying down the specification for selection the dealer to whom exemption under the State is extended. In such circumstances, exemption is qua the dealer specifying the certain conditions or existence of certain circumstances in the case of the dealers chosen for availing the benefit. Such exemption under the State Law does not invoke sub- sec. (2-A) of Sec.8 of CST Act. But, where the conditions or circumstances spelt out for the purpose of classification of goods which are to be subjected to exemption, for availing exemption unconditionally, the ratio of first Pine Chemicals case relating thereto, has not been upturned. (28). While dealing with Hindustan Paper Corporation Ltd.s case (supra), which was also subject matter of review, and decided by the same judgment, it was stated by the Court that for the same reason for which first Pine Chemicals Ltd.s a case has been reversed, said judgment automatically follow the suit. (29). In the light of aforesaid, if we examine the decision of M/s. Shiv Sainath Rubber Industries Pvt. Ltd. (supra) it is apparent that the Court in the aforesaid decision was dealing with a notification issued under the Act of 1954 in 1988 it reads as under: ``All kinds of footwear not manufactured or marketed by large scale or medium scale industries upto the value of Rs. 20. (30). It is apparent that the exemption was available on class of goods viz. 20. (30). It is apparent that the exemption was available on class of goods viz. shoes where value did not exceed Rs. 20/-, but the exemption was not available to all shoes whose value did not exceed Rs. 20/- in all circumstances, but was available only in case sale of exempted class or shoes is by dealer who is a manufacturer and not belonging to the class of large scale or medium scale industries. (31). In other words, the exemption was extended only to the manufacturer in the small scale sector in respect of class of shoes. (32). This Court by relying on the decision in first Pine Chemicals case (supra) and Hindustan Paper Corporation Ltd. (supra) has held that both the conditions relating to the identification of dealer as well as identification of goods are not within the inhibition of Sec. 8(2-A) of CST Act and therefore, its inter- State turnover shall be eligible for exemption under Sec. 8(2A). (33). Apparently, in the second Pine Chemicals case it has been held that circumstances making benefit of exemption available to a class of dealers only, does not come within the scope of Sec. 8(2-A). Therefore, it must be held that the decision of this Court in M/s. Shiv Sainath Rubber Industries Pvt. Ltd. stand impliedly over-ruled by the decision in second Pine Chemicals Ltd.s case (supra). (34). However, we are not concerned herewith the notification dated 11.03.1988 which was subject matter of consideration by this Court in Shiv Sainath Rubber Industries Pvt. Ltd.s case, the notification under the Act of 1954 for the present purpose in its relevant part reads as under : ``In exercise of powers conferred by Sec.4(2), RST Act, 1954, the State Govt. hereby exempts from tax with immediate effect, under the said Act, the sale or purchase of the following all kinds of footwear, excluding the footwear made of leather, upto the value of Rs. 100. (35). We find that item No. 5 in the notification in question refers only to goods and goods alone and does not refer to any condition or circumstances limiting exemption of class of shoes which are not made of leather and where value does not exceed Rs. 100/-. Thus, it is clear that all shoes which fall in the specified class of shoes in item `J of Notification are generally exempt and not on specified conditions. (36). 100/-. Thus, it is clear that all shoes which fall in the specified class of shoes in item `J of Notification are generally exempt and not on specified conditions. (36). It may be seen that sub-sec. (2-A) of Section 8 does not restrict the exemption under the State laws only to the goods generally, but it envisages that exemption is available to goods, or any class of goods or category of goods generally. Thus, such exemption which may be available under the State to a class of goods or category of goods also is entitled to benefit under Sec. 8(2-A), if exemption in State laws is not further circumscribed by any condition within the meaning of Section 8(2-A) read with the Explanation appended thereto. The goods in question, which have been subjected to exemption are footwears upto the value of Rs. 100, which are not made of leather. It was open for the State Govt. to have exempted all footwears or to exempt only a class of footwears from the purview of the tax net. (37). In doing so, the criteria for classification or categorisation of the goods exempted by the State Govt. are directly referable to the purpose of categorisation or classification and not for any other purpose namely to identify the dealer or specifying the circumstances under which only such class of goods can avail exemption. The criterion laid to identify the goods or a class of goods which fall within the exemption, is not inhibited by any further condition which may affect the exemption granted to such class of goods under State Sales Tax Law so as to deny the same exemption under Sec. 8(2-A) of the CST Act. (38). In that view of the matter, we are of the opinion that notwithstanding implied over-ruling of decision in Shiv Sainath Rubber Industries Pvt. Ltd., the exemption under notification dated 7.3.94 is an exemption of class of shoes which are not made to leather and whose value do not exceed Rs.100/- are exempt generally under RST Act, 1954, therefore, inter-State turnover of such class of shoes is also exempt u/Sec. 8(2-A) of the CST Act. It is not in dispute before us that turnover in respect of which exemption under Sec. 8(2-A) is claimed, is related to such footwears which are not made of leather and whose value is only upto Rs. 100/-. It is not in dispute before us that turnover in respect of which exemption under Sec. 8(2-A) is claimed, is related to such footwears which are not made of leather and whose value is only upto Rs. 100/-. Therefore, such inter-State turnover is entitled to claim such exemption and no tax under CST is liable to be imposed. (39). Reference to a decision of Rajasthan Taxation Tribunal in M/s. Ajay Polymers (P.) Ltd. (supra) has been made in Assessment Order. Said judgment relates to period during which Notification dt. 7.11.88 was in force. The notification which was in force for the period in question was not before the Tribunal. I fact it does not refer to any other judgment than the II Pine Chemicals case, without referring to contents of Notification. The decision in M/s. Ajay Polymers (P) Ltd. has no relevance in considering the notification dt. 7.3.94. As noticed by us, the question whether any goods, or class of goods or a category of goods are exempt from tax or subjected to lower rate of tax generally or such exemption or concession in rate is subject to certain specified conditions or in specified circumstances, has to be determined with reference to particular notification issued under State Sales Tax Law before arriving at conclusion about extending such exemption under Sec. 8(2A) of CST Act, 1956. (40). This appeal is allowed and the judgment under appeal is set aside. The writ petition is also allowed. The impugned assessment order Annexure-3 annexed with the writ petition is also set aside. Demand notice in pursuance thereof shall stand discharged. (41). There shall be no order as to costs.