State Taxation Tribunal - Tamil Nadu
Indian Sugar And General Industry ... vs Commercial Tax Officer And Anr. on 6 May, 1999
JUDGMENT
J. Kanakaraj, J. (Chairman)
1. The petitioner is a company engaged in the export and import of sugar. For the year 1994-95 they had imported 13,000 m.t. of refined sugar from Thailand. They had effected sales in Tamil Nadu and also to dealers outside the State. However, since the outside dealers took delivery of the goods in Tamil Nadu the entire sales were treated as local sales. According to the petitioner they did not collect sales tax because they thought that the goods were exempt from sales tax. When a demand notice was served on them on June 24, 1994, they promptly filed Writ Petition Nos. 12275 to 12277 of 1994 on the file of the High Court. The High Court granted stay of recovery of sales tax in respect of sales effected prior to June 24, 1994. Those writ petitions were transferred to the Special Tribunal and numbered as T.P. Nos. 2413 to 2415 of 1997 and disposed of on June 17, 1997 permitting the petitioners to file objections. Thereafter the present impugned order has been passed on September 16, 1998 imposing tax to the tune of Rs. 41,36,520 and penalty of Rs. 62,04,780. In O.P. No. 1959 of 1998 the order of assessment dated September 16, 1998 is challenged. In O.P. No. 1960 of 1998 a declaration is sought for to invalidate the serial number 63 of Part D of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 as inserted by Tamil Nadu Act 24 of 1993, as being contrary to Sections 14 and 15 of the Central Sales Tax Act and Section 4 of the Tamil Nadu General Sales Tax Act. It is also contended that the said entry 63 is violative of Articles 14, 301 and 304 of the Constitution of India.
2. The commodity sugar was not declared as goods of special importance under Section 14 of the Central Sales Tax Act, 1956 when the said Act was enacted with effect from December 21, 1956. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 was enacted by Parliament to declare goods of special importance in inter-State trade and commerce. In this enactment sugar was declared as one of the items and therefore subject to the restrictions and conditions prescribed in Section 15 of the Central Sales Tax Act. However, Section 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was deleted by the second amendment to the Central Sales Tax Act and the goods specified in the said Section 7 were directly incorporated into Section 14 of the Central Sales Tax Act. The commodity sugar was inserted as Sub-Clause (viii) to the said section and it reads as follows :
"Sugar, as defined in item number 8 of the First Schedule to the Central Excises and Salt Act, 1944 (Act 1 of 1944)."
During the relevant period the said item number 8 of the Central Excises and Salt Act was as follows :
"Sugar means any form of sugar containing more than 90 per cent of sucrose."
By the Finance Act (14 of 1961) the word sugar was defined elaborately as follows :
"Sugar means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight to 105o centigrade, would be more than ninety."
The levy of excise duty was as follows :
"1. Sugar other than khandsari or palmyra--33 1/2 per cent ad valorem.
2. Khandsari sugar--that is to say, sugar in the manufacture of which, neither a vacuum pan nor a vacuum evaporator is employed--15 per cent ad valorem.
3. Palmyra sugar--that is to say, sugar manufactured from jaggery obtained by boiling the price of the Palmyra palm--Nil."
3. Thereafter, the Parliament introduced a separate enactment called Central Excise Tariff Act, 1985 in the place of the Schedule to the Central Excises and Salt Act, 1944. In the new enactment various kinds of sugar were incorporated under various headings and sub-headings in Chapter XVII. Consequently, Section 14(viii) of the Central Sales Tax Act was amended to be in tune with the Central Excise Tariff Act, 1985. The Parliament choose only certain sub-headings of sugar for being declared as goods of special importance in inter-State trade and commerce. Actually Section 14(viii) of the Centra! Sales Tax Act, with which alone we are concerned, was as follows :
"(viii) Sugar covered under sub-heading numbers 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule of the Central Excise Tariff Act, 1985 (5 of 1986)."
It is therefore necessary to look into the sub-headings in the Central Excise Tariff Act above referred to.
They are as follows :
Hea- ding No. Sub- heading No. Description of goods Rate of duty Basic Additional (1) (2) (3) (4) (5) 17.01 Cane or beet sugar and chemically pure sucrose, in solid form 1701.10
-Sugar, in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power.
Nil Nil 1701.20
-Khandsari sugar -Sugar, other than khandsari sugar ;
Nil 1701.31
-Required by the Central Government to be sold under clause (f) of subsection (2) of section 3 of the Essential Commodities Act, 1955 (10 of 1955).
Rs.25per quintal Rs. 25 per quintal 1701.39
-Other Rs.45per quintal 17.02 1701.30
-OtherOther sugars, including chemically pure lactose, maltose, glucose and fructose in any form and preparations thereof ;
sugar syrups not containing added flavouring or colouring matter ; artificial honey, whether or not mixed with natural honey ; caramel. -Other sugars, including chemically pure lactose, maltose, glucose and fructose in any form ;
Rs. 45 per quintal 1702.11
-Palmyra sugar Nil Nil 1702.19
-Other 15%
4. From the said of the Tamil Nadu Government, the position was indicated by Section 8, read with serial number 5 of the Third Schedule to the Tamil Nadu General Sales Tax Act. By the Tamil Nadu General Sales Tax (Fourth Amendment) Act, 1993 certain amendments were carried out in the Second and Third Schedule of the Tamil Nadu General Sales Tax Act. Serial No. 91 of the Second Schedules exempt sugar manufactured without the aid of power. The Third Schedule as per serial No. 31 exempt sugar other than the khandsari sugar (purchased or manufactured in India). It is in this context that the respondents have proceeded to invoke serial No. 63--Part D being the residuary entry, for charging the sales of imported sugar. Inasmuch as the levy is under the First Schedule read with Section 3(2) of the Tamil Nadu General Sales Tax Act, there is also a corresponding levy under the Tamil Nadu Additional Sales Tax Act, 1970 and surcharge under the Tamil Nadu Sales Tax (Surcharge) Act, 1971.
5. In the background of the above legislative exercise in respect of the commodity sugar, the argument of the petitioner is that the declaration by the Parliament under Section 14(viii) of the Central Sales Tax Act, 1956 stating that sugar covered under sub-headings 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985 prevents and disables the State Legislature to tax sugar as a commodity subject to Section 15 of the said Act. In other words, the argument is that the commodity sugar as such is declared as an article of special importance, be it imported sugar or sugar manufactured in India. Consequently, it is argued that serial No. 63, Part D of the First Schedule in so far as it purports to levy a tax on imported sugar is ultra vires Sections 14 and 15 of the Central Sales Tax Act and Article 286 of the Constitution of India. Therefore, unless the procedure prescribed in Section 15 of the Central Sales Tax Act is followed and Section 4 of the Tamil Nadu General Sales Tax Act prescribes the point of levy and fixes the rate of tax within the limits of Section 15 of the Central Sales Tax Act, the impugned action of the respondents is illegal and unconstitutional. On the contrary the answer of the respondents is that what is declared as goods of special importance relates only to the specific sub-headings mentioned in Section 14(viii) and not to the commodities sugar in general. In other words, the Parliament declared only certain kinds of sugar as goods of special importance in the course of inter-State trade and commerce. The commodity refined sugar imported by the petitioners from Thailand does not at all fall under any of the description covered under the various sub-headings mentioned in Section 14(viii) of the Central Sales Tax Act.
6. Therefore, the dispute between the parties is at the threshold namely, as to whether imported goods is declared goods or not. If this question is answered one way or the other, most of the other contentions automatically stand resolved.
7. The issues to be decided in these two O.Ps. are as follows :
1. Whether imported sugar has been declared to be goods of special importance and if so subject to the restrictions prescribed under the Central Sales Tax Act and Article 286 of the Constitution of India ?
2. Whether exemption granted to sugar produced and manufactured in India under serial number 3 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 by Tamil Nadu Amendment Act 3 of 1994 with effect from August 11, 1993, thus imposing tax on imported sugar is violative of Articles 14, 301 and 304 of the Constitution of India ?
8. The answer to the first issue will, to a large extent, provide a solution to the second issue, as well. Taking up the first issue we have already extracted the necessary provisions. Mr. C. Natarajan, for the petitioner starts with a reference to [1986] 61 STC 190 (Ker) [State Trading Corporation of India Ltd v. Assistant Commissioner (Assessment)I]. In that case the Kerala High Court was considering whether imported sugar will fall under the exemption given under entry 5 of Schedule III to the Kerala Act. They held imported sugar was included in the words :
"Sugar, produced in a factory ordinarily using power in the course of production of sugar--
'Sugar' means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105o Centigrade, would be more than ninety."
and therefore exempt under Section 9 of Kerala Act.
9. Similarly in [1979] 43 STC 208 [Mehta Brothers (Labella). Surat v. State of Gujarat] the Gujarat High Court considered the question whether the entry 40 of Schedule I to the Gujarat Act made under Section 5 of that Act included imported artificial silk cloth manufactured outside India. That entry read "rayon or artificial silk fabrics" as given in item 22 of the First Schedule to the Central Excises and Salt Act, 1944. Observed the Gujarat High Court :
"Be it noted in this connection that the word 'manufacture', though it is defined in Clause (f) of Section 2 of the Excise Act, does not bear the meaning 'manufactured in India' according to the said statutory definition. Even according to the legislative dictionary, therefore, in the Excise Act, the word 'manufactured' is not necessarily to be read as manufactured in India."
10. To the same effect is the decision of the Madras High Court in [1984] 55 STC 39 (Tirunagar Co-operative Stores Limited v. State of Tamil Nadu). Entry 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act exempted the following goods :
"Cotton fabrics, woollen fabrics and rayon or artificial silk fabrics, as defined in items 19, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944 (Central Act 1 of 1944)."
11. The assessee dealt with foreign fabrics which were not manufactured in India, but were confiscated smuggled foreign woollen and artificial silk fabrics, and successfully claimed exemption under the above entry. It was held that it is not a condition for exemption that the goods must have suffered excise duty.
12. In [1994] 92 STC 471 (Mad.) (State of Tamil Nadu v. Asian Engineering Company) it was held that rubber belting was declared goods and unless the State Act fixes the rate and stage of taxation they are not exigible to tax. The Supreme Court in [1985] 60 STC 1 (Govind Saran Ganga Saran v. Commissioner of Sales Tax) said the same thing, namely, that if the State Act does not fix the ascertainable point of taxation clearly no tax was payable on declared goods.
13. The above decisions do not significantly advance the case of the petitioners. Before us we are facing an entirely new situation. To recapitulate the facts, at the relevant point of time Section 14(viii) of the Central Sales Tax Act says :
"Sugar covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)."
14. Emphasis is laid on the word "covered" and the actual sub-headings. Some meaning has to be given for the word "covered" as against the word "defined" which is normally employed. Whether it conveys a broader or narrower meaning, we can safely assume that unless the sugar in question can be classified under the sub-headings, the petitioners cannot succeed. It cannot also be disputed that there are different types of sugar in the market. For instance even the various clauses in the chapter 17 of the Customs Tariff Act indicate the fulfilment of certain specifications. Clause 2 says that for the purpose of sub-headings 1701.10, 1701.20, 1701.31 and 1701.39 sugar means any form of sugar in which the sucrose content if expressed as a percentage of the material dried to constant weight at 105o C would be more than 90. We do not see how these specifications can be verified in the case of imported sugar. But more importantly let us take each sub-heading mentioned in Section 14(viii) of the Central Sales Tax Act. Before doing so we must also notice the Rules for the interpretation contained in the Schedule to the Customs Tariff Act. They are as follows :
"I. Where in column (3) of this Schedule, the description of an article or group of articles under a heading is preceded by '-', the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of articles is preceded by '-', the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of article or group of articles which has'-'."
15. If at alt, the imported sugar can be brought only under sub-heading 1701.39. By virtue of Rules of Interpretation noticed above it must relate to "sugar other than khandsari sugar ; not required to be sold under the Essential Commodities Act". As rightly pointed out by the respondents it is not as if imported sugar was directed to be sold under Section 3 of the Essential Commodities Act and there is a balance to be covered under 1701.39. On the other hand there is a residuary Clause 1701.90 which has a single hyphen and refers "others". This means 1701.90 refers to "cane or beet sugar and chemically pure sucrose in solid form". Therefore, all other types of sugar are covered by 1701.90 which unfortunately for the petitioner is not included in Section 14(viii) of the Central Sales Tax Act.
16. The next argument of Mr. C. Natarajan, is that a declaration under Section 14 of the Central Sales Tax Act should be looked into from the angle of the purpose for which a declaration is made. Even if follow the parameters as given in the Text Book Chaturvedi's Central Sales Tax Laws, we are unable to hold in favour of the petitioners. The following characteristics should be exhibited by the commodity for finding a place in the list. They are :
"(i) it should be raw material or largely in the nature of raw material ; (ii) either as raw material, or later as finished goods based on such material, it should, in terms of volume of inter-State transactions, be of special importance in inter-State trade ; and (iii) in terms of the country as a whole, it should also be of special importance from the point of view of the consumer or industry."
The above parameters are for the Parliament and when Parliament has clearly indicated what types of sugars are "declared goods" we have no say in the matter.
17. Therefore, on the first issue we hold in favour of the Revenue that imported sugar is not declared goods as per Section 14(viii) of the Central Sales Tax Act as it stood at the relevant time. As we have already indicated once we hold that imported sugar formed a class of its own in the matter of inter-State trade and commerce there is no reason a different treatment should not be meted to the commodity under serial No. 3 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 by Tamil Nadu Act 3 of 1994 with effect from August 11, 1993, by exempting only sugar manufactured in India. We are supported in our view by the judgment of the Second Bench of Special Tribunal in Mohd. Zackria v. State of Tamil Nadu (O.P. Nos. 288 and 290 of 1999 dated April 6, 1999) [1999] 115 STC 697 (Mad.). Reliance is also placed by State on [1984] 55 STC 47 (Nemichand Parasmal and Company v. Deputy Commercial Tax Officer, Evening Bazaar Assessment Circle, Madras), [1996] 103 STC 1 (SC) (State of Bihar v. Bihar Chamber of Commerce) and [1999] 112 STC 93 (Kar) (Varalakshmi Silk House v. State of Karnataka). Learned counsel for the petitioner specifically conceded that he is not arguing question of invalidity Under Articles 301 and 304 of the Constitution of India. Therefore, we find issue 2 also in favour of the Revenue. In fine both the O.Ps. are dismissed. All interim orders are vacated.
18. The matter having been mentioned, in O.P. No. 1959 of 1998 the petitioner is challenging the order of assessment dated September 16, 1998 for the year 1994-95. It is open to the petitioner to challenge the order by filing a regular statutory appeal on points, not decided by this Special Tribunal. The time taken during the pendency of the O.P. shall be deducted in calculating the period of limitation for filing the appeal.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 6th day of May, 1999.