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2003 DIGILAW 308 (HP)

HIMALAYA COMMUNICATION v. STATE OF H. P.

2003-10-16

K.C.SOOD, V.K.GUPTA

body2003
JUDGMENT V.K. Gupta, J.:- Two Notifications, being Notification No. EXN-F(9)1/97 dated 20th July, 2001 and Notification No. EXN-F(9)1/97 dated 31st January, 2002 are under challenge in this petition filed by the petitioner M/s. Himalaya Communications Ltd., under Article 226 of the Constitution of India. To understand and appreciate the background under which these two impugned Notifications have been issued, it shall be worth while to take notice of some important facts leading to the filing of this petition. 2. The petitioner is carrying on the business of the manufacture of jelly filled telephone cables/optical fibre cables at Baddi District Solan in the State of Himachal Pradesh. Government of HP. in the year 1999 formulated and announced certain incentive in its Industrial Policy Guidelines and also accordingly framed and promulgated Rules notifying these incentives, concessions and facilities, which inter alia, also included the charging of Central Sales Tax at the confessional rate of 1% under the Central Sales Tax, 1956, on goods manufactured by both new as well as existing industrial units and this incentive of confessional rate: of Central Sales Tax of 1% was to remain in operation till 31st March, 2009. The petitioner is relying upon Para 7.1.5 of the Industrial Policy Guidelines and Rules, which we reproduce hereunder for our ready reference:- "7.1.5 Central Sales Tax at a confessional rate of 1% shall be leviable on the goods manufactured by new and existing industrial Units except produce of breweries, distilleries, non-fruit/vegetable winderies and bottling plant (both for country liquor and Indian Made Foreign Liquor) upto 31.3.2009." 3. Consequently, therefore, in the light of, and based upon the aforesaid Industrial Policy and in exercise of the statutory power conferred upon the State Government by clause (b) of sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (1956 Act, for short). Notification No. EXN-F(9)2/1999 dated 23rd July, 1999 was issued by the Government of H.P., which, inter alias, provided that the tax levied under sub-section (1) of Section 8 of 1956 Act would be calculated at the rate of 1% of the taxable turn over of all goods sold in the course of Inter-State trade or commerce and that this confessional rate would be operative with immediate effect and shall be available till the period ending 31st March, 2009. Para 2 of this Notification being relevant for our purposes, may be reproduced as hereunder. Para 2 of this Notification being relevant for our purposes, may be reproduced as hereunder. It reads thus:- "2. Now, therefore, in exercise of the powers conferred by clause (b) of sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (Central Act No. 74 of 1956), the Government of H.P. is pleased to direct that in respect of the sale in the course of Inter-State trade or commerce of the goods (other than those manufactured by the breweries, distilleries, non-fruit vegetable based wineries and bottling plants (both of country liquor and Indian made foreign liquor) manufactured by the dealers running any existing industrial unit or new industrial units (other than those new industrial units which are located in the tax free industrial zone in the State of H.P., and are registered as dealer with Excise and Taxation Department, H.P., the tax levied under sub-section (1) of Section 8 of the said Act shall be calculated any payable at the rate of 1% of the taxable turnover of such goods with immediate effect for the period ending 31.3.2009." 4. It. is the contention of the petitioner in the writ petition that moved and influenced as it was pursuant to the aforesaid Industrial Policy Guidelines and the aforesaid 1999 Rules, the petitioner set up an industrial unit for the manufacture of jelly-filled telephone cables/optical fibre cables on 17.4.2000 at Baddi, in the District of Solan, H.P. which was an industrially developing area. The petitioner further contends that the petitioner has as its customers Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL). The petitioners contention is that itself up the aforesaid unit with an investment of Rs. 40 crores and the unit provides employment to more than 250 persons directly and provided indirect employment to more than 400 persons. The various other relevant averments have been made in the writ petition in including the petitioner getting itself registered both under the H.P. General Sales Tax Act as well as the 1956 Act, as also with the Excise and Taxation Officer, Nalagarh, District Solan. It is at this stage that we come to the fact of issuance of Notification No. EXN-F(9)1/97 dated20.7.2001. This notification was issued by way of amending and modifying thee notification dated 23.7.1999 with respect to two aspects. It is at this stage that we come to the fact of issuance of Notification No. EXN-F(9)1/97 dated20.7.2001. This notification was issued by way of amending and modifying thee notification dated 23.7.1999 with respect to two aspects. The first was that in respect of the goods sold to BSNL the tax that would be levied under sub-section (1) of Section 8 of 1956 Act would be 4% of the taxable turnover of the goods and that in respect of such sale of goods made to BSNL, declaration in Form “CC” would be furnished by the petitioner and the format of Form "CC" was also prescribed in the Notification dated 20.7.2001. In so far as the notification dated 20.7.2001 amended the notification dated 23.7.1999, the following relevant extracts of the notification dated 20.7.2001 may be reproduced, which read thus :- “(i) In para 2 of the said notification, the following proviso shall be added, namely :- "Provided that in respect of sale of goods made to Bharat Sanchar Nigam Limited the tax levied under sub-section (1) of Section 8 of the said Act shall be calculated and payable @ 4% of the taxable turnover of such goods for the period ending 31.3.2009"; and (ii) In para 4, in sub-para (ii), the following proviso shall be add, namely :- "Provided that in respect of Bal. of goods made to Bharat Sanchar Nigam Limited, declaration in following Form "CC" shall be furnished........:............" 5. Notification dated 20.7.2001 was followed by issuance of second Notification No. EXN-F(9)1/97 dated 31.1.2002 whereby once again by way of amending the notification dated 23.7.1999, it was provided that in respect of goods manufactured and sold for use in telecommunications, in pursuance of any agreement to sell entered into after the publication of the notification dated 31.1.2002, the sale being either to BSNL, or MTNL or VSNL, the tax leviable and payable under sub-section (2) of Section 8 of 1956 Act shall be calculated and payable @ 2% of the taxable turnover. It also provided that if the sale is mad to the aforesaid three Corporations or any of them in pursuance of agreements to sell but these agreements having been entered into before the date of publication of the notification dated 31.1.2002, the tax leviable and payable under sub-section (2) of Section 8 of 1956 Act shall be respectively calculated and payable @ 4%, 12% and 12% of the taxable turnover of such goods in so far as it applies to sale of goods to BSNL, MTNL and VSNL respectively. The notification dated 31.1.2002, therefore, amended the notification dated 23.7.1999, in effect and substance, to the following extent:- (1) If the agreements to sell have been executed between the petitioner and the aforesaid three Corporations or any one of them after 31.1.2002 (the date of issuance or publication of this notification), with respect to goods sold to these Corporations or any one of them and the sale being in the course of inter-State Trade or commerce, the tax leviable would be @ 2% of the taxable turnover; (2) If the aforesaid agreements to sell had however been executed before 31.1.2002, the rate of tax would be 4%, 12%, and 12%, respectively, if the goods had been sold to BSNL, MTNL or VSNL, as the case may be. 6. For ready reference, the entire text of the notification dated 31.1.2002 is reproduced here under and it reads thus :- "1. Whereas the Governor of H.P. is satisfied that it is necessary in the Public Interest to do so. 2. 6. For ready reference, the entire text of the notification dated 31.1.2002 is reproduced here under and it reads thus :- "1. Whereas the Governor of H.P. is satisfied that it is necessary in the Public Interest to do so. 2. Now, therefore, in exercise of the powers conferred by clause (b) of sub-section (5) of Section 8 of the Central Sales Tax Act, 1956 (Central Sales Tax Act No. 74 of 1956), the Governor of H.P. is pleased to direct that in this Department Notification No. No. EXN-F(9)2/1999 dated 23rd July, 1999 (hereinafter called the said notification) published in R.H.P. (Extra)) dated 27th July, 1999, the following amendments shall be mad with immediate effect, namely :- (i) In para 2 of the said notification, for the proviso (added to amendment notification No. EXN-F(9)1/97 dated 20th July, 2001, published in Rajpatra H.P. (Extra-Ordinary) dated 24th July, 2001), the following proviso shall be substituted, namely :- "Provided that in respect of goods manufactured and sold for use in telecommunications, in pursuance of agreements to sell, entered into on or after the date of publication of this amendment notification in the Official Gazette, in the course of inter-State trade or commerce to the Bharat Sanchar Nigam Ltd., or the Mahanagar Telephone Nigam Ltd., or Videsh Sanchar Nigam Ltd., the tax leviable and payable under subsection (2) of Section of Section 8 of the aforesaid Act shall be calculated and payable at the rate of 2% of the taxable turnover of such goods for the period ending 31st March, 2009." "Provided further that in respect of the goods manufactured and sold for use in telecommunications in pursuance of agreements to sell, entered into before the date of publication of this amendment notification in the Official Gazette, in the course of inter-State or commerce Mahanagar Telephone Nigam Ltd. and the Videsh Sanchar Nigam Ltd. the tax leviable and payable under sub-section (2) of Section 8 of the said Act shall be respectively calculated and payable at the rate of 4%, 12% and 12 of the taxable turnover of such goods"; and (ii) In proviso to sub-para (ii) of para 4 and the Form "CC" appended thereto for the words, letters and signs"the Bharat Sanchar Nigam Limited" and "B.S.N.L.". the words and sings "the Bharat Sanchar Nigam Limited" the Mahanagar Telephone Nigam Limited" the Videsh Sanchar Nigam Limited" shall be substituted." 7. the words and sings "the Bharat Sanchar Nigam Limited" the Mahanagar Telephone Nigam Limited" the Videsh Sanchar Nigam Limited" shall be substituted." 7. The issue which,thus may arise for our consideration in this petition is as to whether having once notified the chargeability of the confessional rate of tax @ 1 % on the turnover of the goods in terms of the notification dated 23.7.1999, and this notification having been statutory issued under sub-section (5) of Section 8 of 1956 Act and admittedly without revoking, rescinding, withdrawing, or superseding this notification, or for that matter without in any manner modifying, reducing or increasing the confessional rate of tax @ 1%, with respect to the goods manufactured and sold by the petitioner, was it open to the respondents to specify increased rate of tax, firstly @ 4% as was introduced in the notification dated 23.7.2001 and thereafter @ 2% with respect to all the three Corporations if the agreements to sell were executed after 31.1.2002 and 12% if the agreements to sell were executed before the aforesaid date. Is this act of the respondents discriminatory towards the petitioner and has the petitioner been discriminated against the given a hostile treatment, in violation of Article 14 of the Constitution ? 8. Mr. Vjvek Tankha, learned senior Counsel appearing for the petitioner submitted that once having promised and assured that the petitioner, on the basis of the 1999 policy guidelines and incentives was entitled to the confessional tax rate of 1%, it was not open to the respondents to have practised hostile discrimination against the petitioner and increase the tax at higher rate of 4%, of course later on bringing it down to 2%. 9. Mr. Khanna, learned Senior Counsel appearing for the respondents not he other hand while referring to the Notification dated 23.7.1999 (supra) has drawn our attention to the specific language employed in para 2 of this Notification, wherein it has specifically and categorically been laid down that the tax levied under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956, shall be calculated and payable @ 1 % of the taxable turnover of the goods in question. (Emphasis supplied by us) 10. (Emphasis supplied by us) 10. Section 6 of 1956 Act is the charging section inasmuch as it is by virtue of this Section that every dealer has been made liable to pay tax under this Act on all sales of goods effected by him in the course of inter-State trade or commerce. Under Section 8 of the Act varying and different rates of tax on sales in the course of inter-State trade or commerce have been prescribed and for the purposes of the present discussion, it may conveniently be observed and stated that under sub-section (1) and sub-section (2), two types of (and hence, different) rates of taxes have been prescribed. Whereas under sub-section (1), the rate of tax prescribed is 4% of the turnover if a dealer in the course of inter-State trade or commerce sells any type of goods to the Government or sells goods of-the description specifically referred to in sub-section (3) to a registered dealer. In other words, there are two types of purchasers mentioned in sub-section (1) to whom a dealer makes the sale of goods: the first type of purchaser is the Government, and the second is a registered dealer. Of course, with respect to both these types of purchasers, the sale transactions are also differently defined; whereas to a Government purchaser any type of goods may be sold, to a registered dealer-purchaser, with a view to attract the levy of 4% tax, only such goods are to be sold which match the description referred to in sub-section (3) of Section 8 of the Act. 11. In contradistinction to sub-section (1), in sub-section (2) of Section 8, there are two clauses with the sale of the declared good where the tax has to be calculated at twice the rate applicable to the sale of similar goods inside the state and clause (b) deals with sale of goods other than the declared good where the calculation of the tax has been prescribed @ 10%, or at the rate applicable to the sale of such goods inside the State, whichever is higher. But apart from the aforesaid two rates of taxes with respect to either the declared goods or the non-declared goods, another important distinction between subsection (1) and sub-section (2) is that under sub-section (1), there is a clear distinction or classification with respect to the types of purchasers, namely, either the Government Purchaser or the Registered Dealer Purchaser, under sub-section (2), there is no such distinction or classification which, therefore, conveys clear legislative intent that the sale of goods undertaken under sub-section (2) can be to any purchaser, of course other than the Government Purchaser or the Registered Dealer Purchaser, meaning in other words, unregistered dealer purchaser as well. To sum it up, therefore, what it means is that if the goods are sold to a dealer who is unregistered, sub-section (1) shall not be attracted, and the rate of tax shall be levied in terms of sub-section (2). 12. It is in the aforesaid background that the notification dated 23.7.1999 levied the confessional rate of tax @ 1% of the taxable turnover under sub-section (1) of Section 8 of the Act and the clear intention of the Government was that if the goods are sold either to the Government was that if the goods are sold either to the Government or to a Registered Dealer, the rate of tax, instead of 4% as prescribed under sub-section (1), would be 1% in view of the confessional taxation rate levied under the Notification. If one understands this intention and Scheme of the Notification, then one would have no difficulty in appreciating the contention of Mr. If one understands this intention and Scheme of the Notification, then one would have no difficulty in appreciating the contention of Mr. Khanna that Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited, or Videsh Sanchar Nigam Limited, none of these fell in the category of either Government-purchaser or a registered dealer purchaser because none of them was a registered dealer in terms of Section 2(f) read with Section 7 of 1956 Act, and, therefore, sales made to them by the petitioner could I not be considered to fall within the ambit and scope of sub-section (1) of Section 8 and hence such sales would fall within the ambit and scope of sub-section (2) of Section 8, and, therefore, it was open to the respondents, by issuance of notification dated 20.7.2001 (Annexure PE) to" provide that in respect of sale of goods made to Bharat Sanchar Nigam Limited, the tax levied should be calculated and payable @ 4% of the taxable turnover of the goods. Mr. Khanna submitted and we have no reasons to disagree with him that the expression "sub-section (1) of Section 8" as used in this Notification is a printing error and actually it should be held and construed to read as "under sub-section (2) of Section 8". It was with a view to implementing the confessional scheme that the furnishing and filing of form "CC" was provided for in the Notification dated 20.7.2001. In the same light would be the intention conveyed by the Notification dated 31.1.2002 (Annexure P/F) and actually the States intention of persisting with the confessional rate to encourage the petitioner is evidently clearing the Notification dated 31.1.2002 wherein 2% rate of taxable turnover with respect to the sale made to BSNL, MTNL or VSNL has been prescribed. 13. There is thus no confusion whatsoever. Notification dated 23.7.1999 levies 1% of tax if the sale is made by the petitioner to the Government Purchaser or a Registered Dealer Purchaser and this 1% is much lower than 4% as provided under sub-section (1). 13. There is thus no confusion whatsoever. Notification dated 23.7.1999 levies 1% of tax if the sale is made by the petitioner to the Government Purchaser or a Registered Dealer Purchaser and this 1% is much lower than 4% as provided under sub-section (1). If Notifications dated 20.7.2001 and 31.1.2002 had not been issued and if Notification dated 23.7.1999 alone held the field and was to operate by itself, the petitioner was liable to pay tax at the rates specified in clauses (a) or (b) of sub-section (2) of Section 8 with respect to the sales made to BSNL, MTNL or VSNL because these three purchasers, we may say at the risk of repetition, were neither Government Purchasers nor Registered Dealers and, therefore, sub-section (1) of Section 8 was not attracted with respect to sales made to them. With a view to actually help the petitioner, and with a view to bring down the rate of tax, (from the higher slab, as has been prescribed under subsection (2), the two notifications dated 20.7.2001 and 31.1.2002 were issued. In fact the notification dated 31.1.2002.was an improvement, as far as the interests of the petitioner were concerned, upon the Notification dated 20.7.2001 because there 4%, tax rate was Drought down still lower to 2%. Examined thus very carefully, we would have no hesitation in saying that the Government was under no obligation to grant this concession to the petitioner but perhaps looking to the fact that possibly the aforesaid Corporations were the only purchasers of the goods produced by the petitioner, the Government issued the aforesaid two notifications lowering the tax rate, thus granting benefit to the petitioner. 14. From what has been discussed above, it becomes abundantly clear that the petitioner cannot complain of any discrimination or any arbitrariness on the part of the respondents. Therefore, it cannot be said that Article 14 in any manner has been violated in the present case by the respondents. On the other hand the action of the respondents clearly is guided by objective criteria, has been very fair and indeed helpful to the petitioner. 15. For the foregoing reasons, this petition, not having any merit, is dismissed but without any order as to costs. All interim orders shall stand vacated. All applications disposed of. -