Gujarat High Court
Oil And Natural Gas Corporation Ltd vs Assistant Commissioner Of Sales Tax on 14 June, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 7738 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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OIL AND NATURAL GAS CORPORATION LTD.
Versus
ASSISTANT COMMISSIONER OF SALES TAX & ANR.
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Appearance:
MR S.N.SOPARKAR, LD.SR.ADV WITH MR AKSHAT KHARE(5912) for the
Petitioner(s) No. 1
MRS SUMAN KHARE(2226) for the Petitioner(s) No. 1
MR CHINTAN DAVE, AGP for the Respondent(s) No. 1
RULE SERVED for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 14/06/2024
ORAL JUDGMENT
Page 1 of 83
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NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr.S.N.Soparkar with learned advocate Mr.Akshat Khare for petitioner and learned Assistant Government Pleader Mr.Chintan Dave for the respondents.
2. Rule, returnable forthwith. Learned Assistant Government Pleader Mr.Chintan Dave waives service of notice of rule for and on behalf of the respondent-State.
3. Having regard to the controversy in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.
4. By this petition under Article 227 of the Constitution of India, the petitioner has Page 2 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined prayed for quashing and setting aside the order dated 18.01.2016 passed by the Gujarat Value Added Tax Tribunal (for short 'the Tribunal') in Revision Application No.39 of 2004. The petitioner has further prayed for holding that the respondents are not entitled to collect any turnover tax (for short TOT) from the petitioners as per Assessment Orders dated 12.02.2001 and to give remission in the amount of TOT payable by the Oil Marketing Companies on the sale effected by the petitioner. The petitioner has also prayed for quashing and setting aside the revisional order dated 26.12.2003 passed by the Special Commissioner of Sales Tax, Gujarat State- respondent No.2 and order dated 12.02.2001 passed by the Assistant Commissioner of Sales Tax assessing the liability of TOT amounting to Rs.3,65,65,350/- by declaring that the Page 3 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined petitioner is liable to pay TOT by virtue of statutory exemption as per entry No.173 under Section 49(2) of the Gujarat Sales Tax Act, 1969 (for short 'the Act'). It is also prayed to hold and declare that the Oil Marketing Companies (OMCs) are not liable to pay TOT in the turn over of sale on which the petitioner has already paid TOT by virtue of statutory provisions and to give further directions to respondents to refund the TOT to OMCs qua TOT on which the petitioner has already paid the TOT.
5. Brief facts of the case are as under :
5.1. The petitioner-Oil and Natural Gas Corporation Limited is engaged in business of exploration, Mining, Processing, Distribution of Hydrocarbon Products and allied activities.Page 4 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 5.2. In the year 1993-94, the petitioner has sold LPG (Liquefied Petroleum Gas) and NGL (Natural Gas Liquids) to various dealers namely Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL). These buyers who are purchasing petroleum products from the petitioner are collectively referred as OMCs. These OMCs further re-sell LPG and NGL to respective end users which complete the entire supply chain for petroleum products.
5.3. By virtue of entry No.173 under Section 49(2) of the Act "Sales of Petroleum Products including liquefied petroleum Gas, manufactured or purchased or imported from across the customs frontiers by any of the special specified companies to any other specified companies (including ONGC as well as Page 5 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined OMCs)" are wholly exempted from any tax under the Act.
5.4. As per Section 49(2) of the Act, the transactions i.e. turnover of sales between ONGC and OMCs for the sale of petrolatum products are not to be calculated in total turn over of sales for levying tax under the Act.
5.5. The word "tax" has been defined in Section 2(32) of the Act which includes turn over tax also and therefore the sale of petrolium products to OMCs by ONGC are only exumpted from tax under the Act including TOT. 5.6. The Government of Gujarat introduced TOT on goods in Schedule-II and III by notification No.GUJ.8-1988 with effect from 06.08.1988. As per the said notification, TOT was introduced on sale or purchase by any Page 6 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined dealer who is liable to pay tax as per Section 3 of the Act if the total TOT exceeds Rs.99,99,999/- in a year. The TOT was levied as single point tax meaning thereby that the TOT was to be paid only one time within the supply chain.
5.7. Sub-section (2) of Section 10A of the Act, ennumerates the deduction of sales for caluclating the total turnover for the purpose of assessing TOT. As per clause (f) of Sub- section 2 of Section 10A of the Act, sales of goods which are wholly exepmted from tax as per Section 49(2) of the Act were not included in the total turnover of sales for assesing TOT. Therefore, exumptions granted under the Section 49(2) of the Act were also considered for the purpose of TOT.
5.8. The Governmnet thereafter, issued Page 7 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined notification dated 01.04.1993 withdrawing the exemption by way of ommission of Section 10A(2)(f) of the Act stating that turnover of sales which were exempted under Section 49(2) of the Act were now to be calculated and included in total turn over of sales for the purpose of assessment of TOT. Therefore, the sale between ONGC and OMCs which was exempted vide entry No.173 under Section 49(2) of the Act was to be considered by including the same in total turnover of sales for the purpose of assessing the TOT and said notification was made effective from 01.04.1993. 5.9. The Assistant Commissioner of Sales Tax (Petrolium-I)(Division-I), Ahmedabad (hereinafter referred to as "assessing authority") by assessing order dated 12.02.2001 passed under Section 41(3) of the Act assessed the liability of TOT amounting to Page 8 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Rs.3,65,65,350/- upon the petitioner ONGC for the financial year 1993-1994. The petitioner paid the assessed TOT to the respondents but being aggrieved and dis-satisfied from the assessment order, also preferred an appeal before the Deputy Sales Commissioner, Appeal- 2, Ahmedabad for the refund of the amount paid as turnover tax firstly on the ground that the TOT was introduced by the State Government as single point tax and OMCs has already paid the said TOT on the entire subsequent re-sale amount to the end user and secondly that the said sale by ONGC are wholly exempted from the ambit of the tax. It was therefore contended that there has been a double taxation by the respondent-authorities and thereby, the petitioner-ONGC is liable to get refund of the turnover tax paid pursuant to the assessment order. The appellate authority by order dated Page 9 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 09.10.2002 allowed the appeal in favour of the petitioner and passed an order of refund of Rs.67,19,16,209/- along with interest. It was held by the appellate authority that as per the further clarification from the Government of Gujarat by Gazette Notification dated 01.02.1994, the amendment in Section 10A of the Act for deleting the clause (f) of Sub- section (2) of Section 10A was from 01.04.1994. Therefore, relying upon the decision of the Tribunal in the case of M/s Yeast Alco Enzime Limited and M/s. Darshan Metal Private Limited, the appellate authority allowed the appeal by passing an order of refund of TOT recovered from the petitioner for the financial year 1993-94 along with interest.
5.10. It appears that a proposal dated 17.12.2002 was made by the Assessing Authority Page 10 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined to the respondent No.2-Special Commissioner of sales-tax and based upon such proposal, Suo- moto revision proceedings was initiated. After hearing the petitioner, the respondent No.2 by order dated 24.12.2003 passed under Section 67 of the Act quashed and set aside the appellate order dated 09.10.2002 and it was held that the amendment in Section 10A of the Act by way of deletion of clause (f) of Sub-section (2) was with effect from 01.03.1993 and not from 01.04.1994 and as a consequence, the exemption granted to ONGC on sale of petroleum products to OMCs vide entry No.173 under Section 49(2) of the Act was not to be applicable while deciding the total turnover of sales for the purpose of was not to be applicable while deciding the total turnover of sales for assessing the turnover of sales for the purpose of assessing total turnover. Page 11 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 5.11. The petitioner-ONGC was made liable to pay TOT for financial year 1993-94 and recovery proceedings were also ordered to be initiated.
5.12. Feeling aggrieved and dis-satisfied by the order dated 24.12.2003 passed by the respondent no.2, the petitioner preferred revision application No.39 of 2004 before the Tribunal on the following grounds:
"(a) Firstly, TOT was levied / introduced primarily as a single point tax which is to be payable at the last point re-sale between OMCs to end user.
(b) Secondly, by virtue of section 7 of GST Act, for the goods as specified in Schedule - II Part A, there cannot be double taxation on the same quantum of turnover of sale of goods. Thus in case Page 12 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined of resale of goods, the dealer is liable to get deduction of purchase price from total turnover of sales.
(c) Thirdly, as per section 11 of GST Act, the assessing authority has also assessed TOT on re-sale of goods by OMCs which has resulted into a double taxation. The authority have interpreted the provisions of section 10A in isolation only by not reading with Sec.2(32), 3, 7, 11 & 49(2) which clearly suggest that the first point sale of petroleum products by ONGC to OMCs are entirely exempted from the ambit all taxes under GST Act.
(e) Lastly, ONGC has paid TOT to respondent on the basis of assessment order due to mistake of law by mis-
constructing amended provisions of Sec.10A as it creates only technical or Page 13 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined notional liability to pay TOT." 5.13 The Tribunal by the impugned order dated 18.01.2016 rejected the revision application No.39 of 2004 by upholding the reasoning of the respondent No.2 that the TOT was only dependent on the total taxable turn over beyond prescribed threshold and it was a singly point levy of tax prior to amendment of Section 10A of the Act but after amendment of Section 10A of the Act by virtue of withdrawal of clause (f) of Sub-section (2) of Section 10A of the Act with effect from 01.04.1993 exemption granted to ONGC was not available. It was also held that the decision of the Tribunal in case of Yeast Alco Enzyme Limited and M/s.Darshan Metal Private Limited cannot be applied to the facts of the case of the petitioner on the ground that in the said Page 14 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined case, the Tribunal had no occasion to interpret the law with respect to the specific amendment for levy of TOT.
5.14. The Tribunal also referred to and relied upon the decision of the Apex Court reported in 66 STC 1 (SC), 94 STC 93 (SC) and 108 STC 1 (SC) for holding that the subsequent legislative amendment with respect to the notification withdrawing relief will prevail even if the earlier notification is not withdrawn and thereby, the subsequent notification would supersede the earlier notifications. It was therefore held that by virtue of legislative amendment in Section 10A of the Act with effect from 01.04.1993, the petitioner was liable to pay TOT for the financial year 1993-94.
6.1. Learned Senior Advocate Mr.S.N.Soparkar Page 15 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined for the petitioner submitted that the Tribunal failed to consider that as per entry No.173 under Section 49(2) of the Act under which when the provisions of the Act are not applicable to the sales made by the petitioner to OMCs, the petitioner would also not be liable to pay the TOT which is also a tax as defined under Section 2(32) of the Act. 6.2. It was submitted that the respondent- Authority and the Tribunal has failed to consider the concept of first point sale in supply chain of petroleum products and TOT is single point tax and therefore, as the sale made by the petitioner ONGC to OMCs is exempted by entry No.173 under Section 49(2) of the Act on sale of the petroleum products, the TOT cannot be levied on such sales. Page 16 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 6.3. It was therefore submitted that the ONGC sales petroleum products to OMCs who resale these products to the retailer/end user and therefore, the first point sale is between ONGC and OMCs and last point sale is between OMC and retailer or end user and the respondent-authority has already collected sales tax and TOT on the total turnover on last point sale from OMCs which also includes the first point sale. It was therefore submitted that for purpose of eradicating double tax, the first point sale has been exempted from any tax under the Gujarat Sales Tax by entry No.173 under Section 49(2) of the Act. Learned Senior Advocate Mr.S.N.Soparkar submitted that the first point sale between ONGC and OMCs therefore has been exempted from all taxes under the Act and the said sales are also deemed to be exempted from TOT. It was Page 17 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined therefore submitted that denying such exemption for the purpose of assessing TOT would result in double taxation which is against the basic moral and conscious levy of TOT.
6.4. It was submitted that it is not in dispute that the OMCs has already paid TOT on total turnover of local sales / resale which are inclusive of the first point sale made by ONGC and therefore when the respondents have already received TOT from OMCs assessed on total turnover of resale, then they are liable to refund the TOT collected from the petitioner-ONGC. Learned Senior Advocate Mr.S.N.Soparkar referred to and relied upon the letter dated March 29, 2004 from Hindustan Petroleum Corporation Limited wherein it is stated that the TOT introduced by the Gujarat Government had been paid on sale of petroleum Page 18 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined products in the State of Gujarat locally from the purchases made from OMCs including ONGC under Entry No.173 of notification under Section 49(2) of the Gujarat Sales Tax Acts. It was further stated in the letter that TOT was withdrawn effective from 01.04.1997 on the products hence, the same were not paid subsequently.
6.5. It was therefore submitted that the TOT is already paid by the OMCs on the sale made to the retailer or end users and therefore, the petitioner ONGC is not liable to pay the turn over tax again.
6.6. It was therefore submitted that the Revisional Authority and Tribunal have committed an error by quashing and setting aside the order passed by the appellate authority holding that the petitioner-ONGC is Page 19 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined not liable to pay the TOT.
6.7. Learned Senior Advocate Mr.S.N.Soparkar has relied upon Section 11 of the Act to submit that the respondents are bound to refund/remit the TOT to OMCs inasmuch as the TOT collected from ONGC as the respondent has remitted such TOT to gain on such turnover of sale on which ONGC has already paid TOT. Reliance was placed on the remission order for gain produced at Annexure-I to point out that the remission is granted to Gas Authority of India Limited for TOT paid by the ONGC on the sale made to it. It was therefore submitted that the OMCs are therefore entitled to remissions if the TOT paid by the ONGC is upheld.
6.8. It was further submitted that the amendment in Section 10A of the Act introduced Page 20 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined by Gazette Notification dated 31.03.1993 with effect from 01.04.1993 and clause (f) of Sub- section (2) of Section 10A of the Act was deleted and subsequently, explanation by Gazette Notification was issued on 01.07.1994 wherein, Sub-section (1A) of Section 10A of the Act was added which specifically states that the TOT would be levied on turnover of sales by dealer who is liable to pay tax under Section 3 and Section 3A of the Act and turnover is required to exceed Rs.50,00,000/-. It was therefore submitted that as per Section 3(5)(a) of the Act, if sale of petroleum products from ONGC to OMCs are exempted from tax under the Act then such sales are also implicitly exempted from TOT. 6.9. In support of his submissions, learned Senior Advocate Mr.S.N.Soparkar referred to and relied upon the following decisions: Page 21 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined (1) Commissioner of Customs (Import Mumbai) versus Dilip Kumar and Company and others reported in 2018 (9) SCC page 1 wherein it is held as under:
"24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision making. Insofar as taxation statutes are concerned, Article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be Page 22 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined expanded/interpreted to include those, which were not intended by the Legislature.
35. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements.
This, however, did not in any
manner tinker with the view that
an ambiguous exemption clause
should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemption notification which requires Page 23 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally."
(2) Govind Saran Ganga Saran Versus Commissioner of Sales Tax reported in 1985 (suppl) SCC 205 wherein it is held as under :
"5. In the instant case, we are concerned with the taxation of goods which under Section 14 of the Central Sales Tax Act have been declared to be of special importance in inter-State trade or commerce. Where the turnover of such goods is subjected to tax under the sales tax law of a State, Section 15 prescribes the maximum rate at which such tax may be imposed and requires that such tax shall not be levied at more than one point. The two conditions have been imposed in order to ensure that inter-State trade or commerce in such goods is not hampered by heavy taxation within the State occasioned by an excessive rate of tax or by multi point taxation. S. 15 enacts Page 24 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined restrictions and conditions which are essential to the validity of an impost by the State on such goods. If either of the two conditions are not satisfied, the impost will be invalid. Now in order that tax should not be levied at more than on stage it is imperative that the sales tax law of the State should specify either expressly or be, necessary implication the single point at which the tax may be levied. Alternatively, it may empower a statutory authority to prescribe such single point for the purpose. Where such point is not prescribed, either by the statute or by the statutory delegate, no compliance is possible with Section 15. The single point at which the tax may be imposed must be a definite ascertainable point so that both the dealer and the sales tax authorities may know clearly the point at which the tax is to be levied.
6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which Page 25 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness ill the legislative scheme defining any of those components of the levy will be fatal to its validity."
(3) Alembic Chemical Works Company Limited Baroda versus Union of India reported in 1979 ELT 258 Gujarat wherein it is held as under :
"4. Mr. Patel next argued that it is settled law that the Act and the excise notification in fixing the measure have to be read as one interacted scheme, as laid down in J.K. Steel Limited v. Union of India A.I.R. 1970 S,C. 1173, Page 26 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined at page 1187, by referring to the earlier decision in Kallash Nath v. State of U.P. A.I.R. 1957 S.C. 790. It is true that the levy and exemption are parts of the same scheme of taxation because the two together carry into effect the purpose of the legislation and, therefore, to find out the true scheme of a taxing measure, we have not merely to take into consideration the levy but also exemption granted. That ratio of their Lordships is for the purposes of interpretation of a taxing scheme where the charging section has to be interpreted alongwith the relevant exemption as one whole integrated scheme. What Mr. Patel argues is to make Rule 9A nugatory. The contention of Mr. Patel is based on the footing that when an exemption is granted, the goods ceased to be excisable goods within the meaning of the Act and that is why when the exemption was withdrawn, the measure of the rate would not be the rate as in force on the date of removal as prescribed by Rule 9A but on the assumption that for the next time these Page 27 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined goods were made excisable. Once it is held that the goods had already become excisable but only duty was foregone because of the exemption issued under the Act, there is no foundation for Mr. Patel's argument that the levy was unconstitutional. The payment was foregone only so long as the exemption remained in force. Once the exemption was withdrawn, full excisability was attracted to the goods in question."
(4) Cheminova India Limited versus Sales Tax Officer reported in (2002) 126 STC 334 Gujarat wherein it is held as under:
"14. We may also note the principle laid down by the apex Court in Hico Products Ltd. v. Collector of Central Excise (1994) 71 ELT 339. In that case, the apex Court has held that the exemption from duty by means of a statutory notification does not take away the levy or have the effect of erasing levy of duty ; the object of the exemption notification is to forgo due duty and to Page 28 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined confer certain benefits upon the manufacturer or the buyer or the consumer through the manufacturer, as the case may be. Of course, that was a decision under the Central Excise Act and the Rules framed thereunder, but, in our opinion, the principle laid down therein is of general application to exemptions under all taxing enactments."
(5) Inmauri Gopalam and Mandala Nagendrudu and Others versus The State of Andhra Pradesh and another reported in 1963 14 SCC 742 SC wherein it is held as under:
"No doubt, statutes have to be construed as a whole so as to avoid any inconsistency or repugnancy among its several provisions, but if there is nothing to modify, nothing to alter, or nothing to qualify the language of a statute, the words and sentences have to be construed in their ordinary and natural meaning [vide 36 Hals (3rd Edn.) s. 585]. What we are now concerned with is a fiscal provision and it has often been said that there is no equity in a Page 29 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined taxing statute and either the subject is within it or not, on the words of the enactment or the rules validly made thereunder. In a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the words of the provision. If the tax-payer is within the plain terms of the exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered from the construction of the words of the statute or rule or by necessary implication therefrom, the matter is different, but that is not the position here. In this connection we might refer to the observations of Lord Watson in Salomon v. Salomon & Co.(1):
"Intention of the legislature is a common but very slippery phrase, which, popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to Page 30 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined enact it. In a Court of Law or Equity, what the legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary intendment."
Learned counsel for the State is possibly right in the submission that the object behind the framers of the notification was to avoid double taxation but the operation of an enactment or of a notification has to be judged not by the object which the legislature or the notifying authority, as the case may be, may have had in mind but by the words which it has employed to effectuate the legislative intent. In the case before us the operative words of the notification are to be found in the 1st paragraph granting the exemption and it was not disputed that the appellants were within that provision. The next question would be as to whether the exemption to which the appellants were manifestly entitled under the 1st paragraph of the notification they have been deprived of by the operation of the Page 31 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined proviso. If the proviso on its proper construction, as we have endeavoured to point out earlier, cannot apply to cases where an additional duty of excise is not leviable under clause 3 of the Bill it would follow that the operation of the exemption is unaffected by the proviso. The appellants were therefore entitled to the relief from sales tax granted by the notification dated December 13, 1957."
(6) M/s. Swadesh Polytex LImited versus Collector of Central Excise reported in 1990 (2) SCC 358 wherein it is held as under:
"On an analysis and comparison of the notifications No. 201/79, No. 102/81 and the circulars, it is clear that the clarification in the form of trade notice issued in respect of rule 56-A was as much applicable to that rule as to notification No. 201/79. [272D] (2) It is true that when in a fiscal provision, is benefit of exemption is to be considered, this' should be strictly considered. But the strictness of the construction of exemption notification Page 32 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation. After all, exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade. [272E-F] (3) The quantity of ethylene glycol required to produce a certain quantum of polyester fiber is determined by the chemical reaction. It is not possible to use a lesser quantum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fiber. It is not as if the appellants have used excess ethylene glycol wontedly to produce the methanol. It is also clear that the appellants are not engaged in the production of methanol but in the production of polyester fiber. [272H; 273A] (4) The Tribunal, in the instant case, failed to interpret the words of the exemption notification No. 201/79 properly and fully. The said notification exempted all excisable goods on which the duty of excise was leviable and in the Page 33 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined manufacture of which any goods falling under Tariff Item No. 68 (i.e. inputs) had been used from so much of the duty of excise already paid on the inputs. The excisable goods, namely, polyester fiber, were not wholly exempt from duty nor chargeable to nil rate of duty. It cannot be read in the notification that the notification would not be available in case non-excisable goods arise during he course of manufacture. In fact, the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fiber which is excisable goods and not in respect of methanol which arises as a by- product as a part and parcel of chemical reaction. It ap- pears further on a comparison of the rule 56-a and the notification No. 201/79 that these deal with identical situations."
(7) Annand Taluka Co-operative Cotton Sale Ginning and Pressing Society Limited versus State of Gujarat reported in 1980 45 STC 63 Page 34 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined wherein it is held as under:
"15. Before we proceed to consider the interaction of these various entries, it would be necessary to remember that, in the context of a statute dealing with sales tax at a single point in a series of sales, the purpose of an enumeration of different goods is to indicate the types of goods, each of which would constitute a separate class. The ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified is considered as a separately taxable item for the purposes of single point taxation in a series of sales unless the contrary is shown. It is well-known that, sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for the purposes of sales tax.Page 35 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. However, when a distinct commercial commodity emerges, it becomes a separate object of taxation so long as it retains its identity: see State of Tamil Nadu v. Pyare Lal Malhotra. In the process of interpretation of the abovesaid three entries and of Judging their interaction and, if need be, of their harmonisation, this fundamental principle must always be borne in mind."
(8) Government of Kerala and Another versus Mother Supreior Adoration Convent reported in (2021) 5 SCC 602 wherein it is held as under :
"17. In Union of India Versus Wood Papers Ltd. The rule as to exemption notifications in tax statutes was felicitously laid down as follows: (SCC Page 36 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined p. 20. c para 4) "4. Entitlement of exemption depends on construction of the expressin "any factory commencing production"
used in the Table extracted above. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective, etc. That is why its construction, unlike charging provision. has to be tested on different touchstone. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule Page 37 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined or principle requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject fails in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. Therefore, the first exercise that has to be undertaken is if the production of packing and wrapping material in the factory as it existed prier to 1964 is covered in the notification."
18. This statement of the law was followed in a number of judgments. Suffice to say that in Star Industries v. Commr. of Customs, a large number of judgments are referred to for the same Page 38 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined proposition (see paras 32 to 34).
19. However, there is another line of authority which states that even in tax statutes, an exemption provision should be liberally construed in accordance with the object sought to be achieved if such provision is to grant incentive for promoting economic growth or otherwise has some beneficial reason behind it. In such cases, the rationale of the judgments following Wood Papers' does not apply. In fact, the legislative intent is not to burden the subject with tax so a that some specific public interest is furthered. Thus, in CST v. Industrial Coal Enterprises, this Court held: (SCC pp. 616-17, paras 11-12)"
(9) Commissioner of Trade Tax, Uttarpradesh and others versus Santosh Kumar Kushwaha reported in 2022 (5) SCC 752 wherein it is held as under:
"10. The Commissioner, Trade Tax, Uttar Pradesh vide Circular No. 723 dated 3- Page 39 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 5-2005 had inter alia specified that the adjustment under sub-section (3) of Section 3-H shall be accepted in the same manner, as the adjustment of normal amount of trade tax in eligibility certificate under Section 4-A. The interpretative consequence of the circular was read by the assessing authorities to mean that the adjustment in State Development Tax was to be made on proportional basis, rather than including it in the monetary limit specified in Column 5 of Annexure 1 and the limit in the eligibility certificate.
13. It is a general rule of interpretation of taxing statutes that there is no room for any intendment and they are to be read in the light of what is clearly expressed and enforced literatim of ad verbum. There are no equitable considerations or implications or assumptions or presumptions as to import provisions to supply any assumed deficiency in taxing statutes."Page 40 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 6.10. Referring to the above decisions, it was submitted that the respondent No.2 and the Tribunal have failed to consider that once the sale between the ONGC and OMCs is exempted under Section 49(2) of the Act, for all intents and purpose, such exemptions from the provisions of the Act would continue to apply even if clause (f) of Sub-section (2) of Section 10A of the Act is deleted with effect from 01.04.1993. It was submitted that the basic exemption which was already granted by notification cannot be said to be not applicable for TOT under Section 10A of the Act. It was submitted that beneficial purpose of the exemption contained in Section 49(2) of the Act must be given full effect to the line and therefore no tax including the TOT can be levied on the turnover of sale between the ONGC and OMCs.
Page 41 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 6.11. It was submitted that there is no dispute that TOT is a single point tax in series of sales and therefore, the ordinary meaning to be assigned to a taxable items in the list of specified items is that each item specified is considered is separately taxable item for the purpose of single point taxation in series of sales unless the contrary shown. It was therefore submitted that once the turnover of sales between ONGC and OMCs are exumpt from all intents and purpose, the same cannot be considered or included in turnover for levy of TOT which is also a tax defined under Section 2(32) of the Act. 6.12. It was therefore submitted that the tax should not be levied at more than one stage as the TOT is levied under a single point tax at the first instance of sale and once there is Page 42 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined an exemption of turnover of sale between ONGC and OMCs, no TOT can be levied on the ground that the exemption under Section 49(2) of the Act is not to be applied in view of the deletion of clause (f) of Sub-section 2 of Section 10A of the Act.
6.13. It was therefore submitted that the order passed by the respondent No.2 and the Tribunal are required to be quashed and set aside and the order passed by the Appellate Authority granting refund of the TOT paid by the petitioner may be restored. 7.1. On the other hand, learned Assistant Government Pleader Mr.Chintan Dave for the respondents submitted that TOT was levied by Gujarat Sales Tax (2nd Amendment) Act, 1988 by inserting Section 10A . Reference was made to Clause 5 of the statements of objects and Page 43 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined reasons while introducing the bill seeking second amendment to year 1988 to submit that as per clause 5, new Section 10A proposed to be inserted by this clause seeks to impose new tax called TOT at different rates ranging from one percent to one and half percent on the different turn over limits of a sale effected by a dealer of goods specified in Schedule-II and III of the Act when the turnover exceed Rs.99,99,999/- and such dealer would not be entitled to collect this tax from the buyers. It was therefore submitted that the TOT or single point tax to be paid by the dealer, if its turnover exceeds Rs.99,99,999/- on the products specified in Schedule II and III. It was further pointed out that by Gujarat Sales Tax Amendment (amendment) Act, 1993, Section 10A was amended and clause (a) was inserted to the effect that for the words "taxable Page 44 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined turnover of sales effected by him of all taxable goods", the word "taxable turnover of tax effected by him of all taxable goods and also the goods wholly and partially exempt from the payment of tax under Sub-section (2) of Section 49 was substituted. It was submitted that for purpose of levy of TOT as per Section 10A of the Act, all the turnover would include all the exemption under Section 49(2) of the Act. It was therefore submitted that the contention raised on behalf of the petitioner that the exemption granted under Section 49(2) of the Act would operate even if there is a taxable turnover to be calculated as per Section 10A of the Act which specifically exclude such exemption, is not tanable.
7.2. Learned Assistant Government Pleader Mr.Chintan Dave invited the attention of the Page 45 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Court to the statements at objects and reasons of the amendment bill of 1993, more particularly, clause (2) thereof which stipulates that with a view to mobilising additional resources, it was proposed to introduce new slab of TOT at the rate of two percent on the turn over exceeding Rs.8 Crore and sales or resales of goods against certificate as provided in Section 13 of the Act would henceforth be liable to TOT and likewise, sales of goods wholly or partially exumpted from payment of tax under Section 49(2) of the Act would also be liable to TOT. It was therefore submitted that there was a specific legislative intent to levy TOT on the goods which are exempted under Section 49(2) of the Act. It was therefore submitted that contention of the petitioner that because there is exemption under Section 49(2) of the Page 46 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Act as per entry No.173 from the provisions of the Act, TOT would not be leviable, is contrary to the legislative intent and the scheme of the levy of the TOT.
7.3. In support of his submissions, learned Assistant Government Pleader Mr.Chintan Dave referred to and relied upon the following decisions:
(1) Commissioner of Sales-Tax U.P. versus Agra Belting Works reported in 1987 3 SCC 140 wherein it is held as under:
"3. Theshort question for consideration in this appeal at the instance of the Revenue is whether the High Court was justified in holding that in the absence of a notification withdrawing the earlier notification dated 25.11. 1958 made in exercise of power vested under section 4 of the U.P. Sales Tax Act, 1948, Sales Tax would not be eligible in terms of the notification Page 47 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined dated 1.12. 1973 issued under section 3A of that Act.
6. As has been pointed out above, section 3 is the charging provision; section 3A authorises variation of the rate of tax and section 4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under sections 3A as also under section 4 is exercisable by the State Government only. When after a notification under section 4 granting exemption from liability, a subsequent notification under section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid Page 48 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined notification under section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification-both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State and the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption continues a specific item has now been notified under section 3A of the Act."
(2) Sales Tax Officer, Sector IX, Kanpur versus Dealing Daily Products and Another reported in 1994 (suppl)(2) SCC 639 wherein it is held as under:
"3. The State of U.P. has been issuing, from time to time, notifications under Section 4 of the Act, exempting milk and milk products from the levy of Page 49 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined sales tax. It has also been issuing from time to time notifications under Section 3-A notifying the rates of tax on sale/purchase of different goods. In this case, we are concerned with one notification under Section 4 namely the one dated 21-5-1974 and two notifications under Section 3-A dated 4-11-1974 and 30-5- 1975. The notification under Section 4 dated 21- 5-1974 exempted milk and milk products from the levy of tax. Ice- cream was understood to be a milk product and, therefore, exempt. However, by notifications issued under Section 3-A (dated 4-11-1974 and 30-5-1975) a rate of tax was prescribed expressly for ice-cream among other goods.
4. In CST v. Agra Belting Works1 a Bench of this Court comprising R.S. Pathak, C.J., Ranganath Misra and B.C. Ray, JJ. held, by a majority, that Sections 3, 3-A and 4 of the U.P. Sales Tax Act are parts of the taxing scheme incorporated in the Act, and therefore, where a notification is issued under Section 3-A prescribing a rate of tax Page 50 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined for goods, which may have been exempted from tax by an earlier notification under Section 4, it must be held that the intention was to withdraw the exemption and make the sale leviable to tax at the rate prescribed in the notification. It was held that it is not necessary in such a case that a specific or separate notification withdrawing or revoking the exemption is issued. Following the said decision it must be held that the exemption granted to ice-cream by notification dated 21-5-1974 was undone by the notification dated 4-11-1974 as well as by the notification dated 30-5- 1975."
(3) Kasinka Trading and Another versus Union of India and Another reported in (1995) 1 SCC 274 wherein it is held as under :
"23. The appellants appear to be under the impression that even if, in the altered market conditions the continuance of the exemption may not have been justified, yet, Government Page 51 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined was bound to continue it to give extra profit to them. That certainly was not the object with which the Notification had been issued. The withdrawal of exemption "in public interest" is a matter of policy and the court would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was necessary in the "public interest".
The courts, do not interfere with the fiscal policy where the Government acts in "public interest" and neither any fraud or lack of bonafides is alleged much less established. The Government has to be left free to determine the priorities in the matter of utilisation of finances and to act in the public interest while issuing or modifying or withdrawing an exemption Notification under Section 25(1) of the Act." 7.4. It was therefore submitted that it is a matter of policy to the Government to levy the TOT even on the goods which are exempted under Page 52 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Section 49(2) of the Act and such policy is now part of the statutory provisions and in view of the above decisions, the respondent No.2 and Tribunal have rightly held that the petitioner-ONGC is liable to pay the TOT on the sales made by it to the OMCs as the turnover of the ONGC is to be enhanced with the turnover of sales between ONGC and OMCs in view of the amendment of Section 10A of the Act by the Gujarat Sales Tax Amendment Act, 1993 with effect from 01.04.1993 in view of the deletion of Section 10A(2)(f) in substitution of Section 1(a). 7.5. It was further submitted that the contention of the petitioner to the effect that further explanation and insertion of Section 10 of the Act with regard to the explanation "taxable turnover" means turnover of all taxable goods as derived after Page 53 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined deduction made under Sub-section (2) and the explanation taxable goods means the goods which are taxable or which would have been taxable under this Act but for exemption granted under Sub-section (2) of Section 49 would further clarify that the TOT is payable on the taxable goods including the goods which are exumpted under Section 49(2) of the Act forming part of the taxable turnover. It was therefore submitted that the turnover of all sales of the petitioner-assessee has exceeded Rs.50 lakhs and therefore TOT shall be payable on the total taxable turnover of the sales effected by the petitioner of all taxable goods at the rate specified in the table. It was therefore submitted that no interference may be made in the impugned order passed by the respondent No.2 and the Tribunal confirming the assessment order for levy of Page 54 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined turnover of sale made by the petition to OMCs with effect from 01.04.1993.
8. Having heard the learned advocates for the respective parties and having considered the provisions of the Act a short question which arises for the consideration is whether the petitioner-ONGC is liable to pay TOT on the turnover of sale made to OMCs in view of the provisions of Section 10A read with entry No.173 in schedule II of Section 49(2) of the Act or not. It would therefore be germane to refer to the relevant provisions of the Act :
"In the principal Act, after section 10, the following section shall be inserted, namely :-
10A. (1) Where the turnover of either of all sales of all purchases by any dealer liable to pay tax under section 3, Page 55 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined except the dealer referred to in sub- clause (f) of clause (10), of section 2, has first exceeded Rs.99,99,999 in any year, there shall be levied a turnover tax on the total turnover of sales effected by him of goods specified in schedules II and III, at the rates specified in the Table below.
Table Limit of turnover Rate of tax.
1. Where the total turnover One per cent of is one crore of rupees or tha total more but less than three turover.
crores of rupees.
2. Where the total turnover One and one-
is three crores of rupees or fourth per cent more but less than five of the total crores of rupees. turnover.
One and one-
3. Where the total turnover
half per cent
is five crores of rupees or
of the total
more.
turnover.
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undefined
(2) For the purpose of calculating the amount of tax payable under Sub-section (1), the following shall be deducted from the total turnover of sales, namely;-
(a) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 16;
(b) resales of goods purchased by the dealer from a Registered dealers otherwise than on a certificate furnished under section 12 or 13;
(c) resales of goods purchased by the dealer from a dealer liable to pay tax under Section 4 if a certificate as provided in the proviso to sub-section (1) of Section 4 is furnished;
(d) sales of goods or resales of goods to which clause (b) or clause (e) does Page 57 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined not apply, to a licensed dealer, a recognized dealer or a commission agent holding a permit, who purchases on behalf of a principal, upon such dealer or commission agent, as the case may be, furnishing certificate provided in section 13, by virtue of which the sales of goods specified in Schedule II-Part A are exempt from sales tax, Schedule II-Part B are exempt from general sales lax, and Schedule III are exempt from both sales tax and general sales tax
(e) sales of declared goods;
(f) sales of goods wholly exempt from payment of tax under section 49. (3) For the purpose of calculating the limit of turnover for arriving at the rate of tax payable by a dealer under sub section (1), deductions under Page 58 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined clauses (a) to (f) of sub-section (2) shall be ignored as if no such deductions were permissible. (4). The turnover tax shall be paid by the dealer before furnishing the declaration or return for the period in which the turnover either of all sales or of all purchases as computed from the commencement of the year first exceeds Rs.99,99,999. The tax so payable shall be for the period from the commencement of the year to the end of the period covered by such declaration or return and the dealer shall continue to be liable to pay the turnover tax for that year for all the subsequent periods till the end of that year.
(5) Notwithstanding anything contained in this Act, no dealer shall callect Page 59 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined any amount by way of turnover tax payable by him under this section."
STATEMENT OF OBJECTS AND REASONS This Bill seeks to amend the Gujarat Sales Tax Act, 1969 with a view to giving ellect to the proposals contained in the Statement of the Finance Minister in the Legislative Assembly on the 23rd June, 1988 and concessions announced by hin before the House on the 27th July, 1988.
Clause 5-New section 10A proposed to be inserted by this clause seeks to impose a new tax called turnover tax at diferent rates ranging from one per cent, to one and a half per cent. On the different turnover limits of sales effected by a dealer of goods specified in Schedules II and III to the said Act when the turnover exceeds Rs.99,99,999. Page 60 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Such dealer will not be entitled to collect this tax from the buyers."
9. By Gujarat Sales Tax Amendment Act, 1993, Section 10A was amended as under :
"2. In the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the principal Act"),in section 10A, -
(1) in sub-section (1),-
(a) for the words "taxable turnover of sales effected by him of all taxable goods" the words "taxable turnover of sales effected by him of all taxable goods and also the goods wholly or partially exempt from payment of tax under sub-section (2) of section 49 shall be substituted;
(b) in the Table,-
(i) in the item at serial No.4, after Page 61 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined the words "exceeds rupees four crores", the words "but does not exceed rupees eight crores" shall be added;
(ii) after the item at serial No.4, the following shall be added, namely ー Rupees ten lakhs plus two percent.
"5. Where taxable On the taxable turnover exceeds turnover in excess rupees eight crores of rupees eight crores."
(2) in sub-section (2), clauses (d) and
(f) shall be deleted.
"STATEMENT OF OBJECTS AND REASONS This Bill seeks to amend the Gujarat Sales Tax Act, 1969 with a riew to giving effect to the proposals contained in the Budget speech of the Finance Minister in the Legislative Page 62 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Assembly on the 17th February, 1993.
"Clause 2.-This clause seeks to amend section 10A. With a view to mobilizing additional resources, it is proposed to introduce a new slab of turnover tax at the rate of 2 per cent. on the turnover exceeding Rs. eight crores.
Sales on resales of goods against certificate as provided in section 13 would hence-forth be liable to turnover tax. Likewise, sales of goods wholly or partially exempt from payment of tax under section 49(2) would also be liable to turnover tax."
10. Section 2(32) as it existed for the relevant year in the year 1993 reads as under:
"2(32) : sales means sales tax, general tax, TOT or purchase tax payable under this Act."Page 63 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
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11. Section 10A is deleted by Gujarat Act No.15 of 1997 with effect from 01.04.1997. Prior to the deletion, Section 10A as is existed read as under :
"10A Levy of turnover tax on [all taxable goods] in case of certain dealers.
(1) Where the turnover of all sales by any dealer liable to pay tax under section 3, [XX] has first exceeded rupees fifty lakh (In the year commencing on the 1st April, 1990 and every year thereafter] there shall be levied a turnover Tax, on the total [taxable turnover of sales effected by him of all taxable goods] [XX] at the rates specified in the Table below :
[(1A) Where the turnover of all specified sales by any dealer liable to pay tax under section 3A has first Page 64 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined exceeded rupees fifty lakhs or the aggregate of the turnover of all specified sales and the turnover of all sales by any dealer liable to pay tax under both the sections 3 and 3A has first exceeded rupees fifty lakhs, in any year in which the Gujarat Sales Tax (Amendment) Act, 1994 (Guj. 10 of 1994) comes into force, and every year thereafter, there shall be levied a turnover tax on taxable turnover of specified sales or the aggregate of taxable turnover of all specified sales and the taxable turnover of all sales effected by him of all taxable goods at the rates specified in the table below] Table Limit of taxable Rate of tax turnover
1.Where taxable turnover does not exceed rupees Nil fifty lakhs.Page 65 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
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2.Where taxable turnover One percent of exceeds rupees fifty taxable turnover in lakhs, but does not excess of rupees exceed rupees two fifty lakhs.
crores.
3.Where taxable turnover Rupees one lakh and exceeds rupees two fifty thousand plus crores, but does not one and one-fourth exceed rupees four percent on the crores Where taxable taxable turnover in turnover exceeds rupees excess of rupees two four crores; crores.
Rupees four lakhs
4. Where taxable
plus one and one-half
turnover exceeds rupees
percent on the
four crores; [but does
taxable turnover in
not exceed Rs. Eight
excess of rupess four
Crores] Eight Crores
crores.]
Rupees ten lakhs plus
two percent on the
Where taxable turnover
taxable turnover in
exceeds Rs. Eight Crores
excess of rupees
eight crores.]
Page 66 of 83
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NEUTRAL CITATION
C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024
undefined
(2) For the purpose of calculating the amount of tax payable under sub-section (1), the following shall be deducted from the total turnover of sales, namely :-
(a) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 16;
(b) resales of goods purchased by the dealer from a Registered dealer otherwise than on a certificate furnished under section 12 or 13;
(c) resales of goods purchased by the dealer from a dealer liable to pay tax under section 4, if a certificate as provided in the proviso to Sub-section (1) of section 4 is furnished;
(d) XXX]
(e) sales of declared goods;Page 67 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024
NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined
(f) XXX] [(3) **] (4) The turnover tax shall be paid by the dealer before furnishing the declaration or return for the period in which the [turnover of all sales, the turnover of all specified sales or, as the case may be, the aggregate of turnover of all specified sales and the turnover of all sales] as computed from the commencement of the year first exceeds rupees fifty lakhs.] The tax so payable shall be for the period from the commencement of the year to the end of the period covered by such declaration or return and the dealer shall continue to be liable to pay the turnover tax for that year for all the subsequent periods till the end of that Page 68 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined year.
(5) Notwithstanding anything contained in this Act, no dealer shall collect any amount by way of turnover tax payable by him under this section]* [Explanation: For the purposes of this section, -
(1) the expression "taxable turnover"
means turnover of all taxable goods as derived after deductions made under sub-section (2); and (2) the expression "taxable goods"
means the goods which are taxable or which would have been taxable under this Act but for exemption granted under sub-section(2) of section 49.]"
"Section 49.Exemptions (1)....
(2) Subject to such conditions as it may Page 69 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Gazette, [exempt any specified class of sales or of specified sales or of purchases) from payment of the whole or any part of [the tax] payable under the provisions of this Act."
12. Entry No.173 was inserted by GNFD No.49(180) dated 27.10.1986 as amended by GNFD No.49(193) dated 07.03.1988 which reads as under :
173 - Sales or Whole of Tax petroleum Old:IIA-
products 10,14,15, If the Hindustan including 32, 32A, Petroleum liquified 32B, 32D, Corporation, petroleum gas by 88A, 91. '[Indian Oil Oil and Natural Corporation and Gas Commission to New:II A 27, Bharat Petroleum Page 70 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined the Hindustan Corporation Petroleum Ltd.] sell the Corporation, 33, 34, 37, goods so '[Indian Oil 38, 40, 46, purchased within Corporation and 123, 156 the State of Bharat Gujarat.
Corporation Ltd.]
13. Considering the above provisions of the Act, it is clear that the sale made by the petitioner-ONGC to oil marketing companies was exempted as per Entry No.173 as notified by the Government in the year 1988 under Section 49(2) of the Act granting exemption from payment of whole or any part of the tax payable under provisions of the Act which includes the TOT as per Section 2(32) of the Act.
14. Section 10A inserted with Gujarat Sales Page 71 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Tax Amendment Act, 1988 provides for levy of TOT, however, in view of the contention of the petitioner that the provisions of Section 49(2) would override the provisions of Section 10A as once the exemption is granted from the provisions of the levy tax under the Act, the TOT cannot be accepted even on the assumption that the turnover tax is a single point levy, however, single point levy of tax is provided in Section 9 of the Act for the declared goods and there is no provision for single point of levy of sales tax, general sales tax and TOT except for the declared goods.
15. On perusal of Section 10A, it appears that the turn over tax is leviable on the taxable turnover of taxable goods beyound a prescribed threshold and any dealer whose taxable turnover crosses the threshold at whatever stage was liable to pay TOT. As per Section Page 72 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined 10A(2)(f) for the purpose of calculating amount of tax payable under Sub-section (1) of Section 10A i.e. TOT, the sales of goods wholly exumpted payment of tax under Section 49 was to be deducted and not to be considered as a part of the taxable turnover for levy of the TOT but after the amendment with effect from 01.04.1993, clause (f) of Sub-section (2) of Section 10A was deleted and as a result of such amendment, the TOT would be payable on the sales of goods exempted under Section 49 of the Act so far as calculation of the taxable turnover of taxable goods under Section 10A was concerned. This fact is further explained by insertion of explanation to Section 10A with effect from 01.04.1994. The said notification was issued to amend the Section 10A as a clarification to earlier amendment and therefore, the revisional Page 73 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined authority has rightly held that the amendment in Section 10A would be applicable from 01.04.1993 and not from 01.04.1994 as held by the appellate authority.
16. On perusal of the statement on objects to the Gujarat Sales Tax Amendment Act, 1993, it is clear that the intention of the legislature was to collect TOT by including the turnover which is exumpted under Section 49 of the Act. Therefore for the purpose of considering the TOT payable on the taxable goods would include the turnover of the goods which is exempted under Section 49 with effect from 01.04.1993. The Tribunal while considering the order passed by the revisional authority has held as under:
"(16) The learned Special Commissioner has specifically referred to the decisions of the Honourable Apex Court reported in 66 STC 1 (SC), 94 STC, 93 Page 74 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined (SC) and 108 STC 1 (SC), for the purpose of deriving support for his conclusion that the subsequent legislative amendment with respect to the notification granting relief will prevail and even if the earlier notifications are not withdrawn or subsequently superseded, they stood superseded by subsequent notifications.
In the case of Agra Belting Works, 66 STC 1 (SC), the question before the Honourable Supreme Court was whether the exemption granted by a notification by the Government of, Uttar Pradesh on cotton fabrics was still available or stood withdrawn by a subsequent notification. The Honourable Supreme Court has held that when, after a notification under Section 4 granting exemption from the liability to sales tax in respect of a certain class of goods, a subsequent notification under Section 3A prescribed the rate of tax leviable on an item of that class, the intention to withdraw the exemption and make the sales taxable at the rate prescribed in the notification came in force. In the case of Darling Dairy Page 75 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined Products, 94 STC 93 (SC), a similar issue came up before the Honourable Supreme Court. The Government of Uttar Pradesh had earlier exempted milk products by a notification under Section 4 of the UP Act and subsequently issued another notification under Section 3A prescribing the rate on sales of ice cream - a milk product. The Honourable Supreme Court after following its earlier decision has held that the exemption granted by earlier notification stood withdrawn by the subsequent one. It was further held that there was no need to issue a specific notification to withdraw the earlier notification. There is no dispute about the fact that the exemption from the payment of the turnover tax on sales exempted under Section 49 (2) was available till 31.03.1993. However, by virtue of an amendment in Section 10A of the Act, the intention of the legislature was clear to withdraw the concession and impose turnover tax on sales exempted under Section 49. As such, the Page 76 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined amendment in Section 10A was carried out by the legislature itself and clause (f) of sub-section (2) of Section 10A was deleted with effect from 01.04.1993. By virtue of legislative amendment under Section 10A effective from 01.04.1993, the previous notification dated 05.08.1988 was superseded for the exemption in the turnover tax. The applicant has therefore rightly paid the turnover tax initially on the sales exempted under Section 49 of the Act. It was also assessed as per the provisions of the prevailing law. However, the learned First Appellate Authority has removed the said levy of turnover tax on its erroneous presumption that the amendment has come into effect from 01.04.1994. The learned Special Commissioner has therefore rightly taken the said decision into revision and held that the applicant was liable to pay turnover tax and the relief was wrongly granted to the applicant. (17) The above view is also supported by the decision of this Tribunal in the Page 77 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined case of M/s.Super Nova Engineering Pvt. Lta. V/S. State of Gujarat in Revisional Application No.111 of 1999 decided on 09.04.2007. This Tribunal, after reproducing Section 10A of the Act has observed that on a plain reading of Section 10A, it has been clearly mentioned that turnover tax shall be levied on the total turnover of all taxable goods. By virtue of sub- clause (f) of sub-section 2 of Section 10A, the goods wholly or partially exempt from payment of tax under sub- section 2 of Section 49 are excluded. While considering and calculating the total taxable turnover, the goods fully or partially exempt for payment of tax under Section 49 (2) of the said Act were not required to be considered. Prior to 01.04.1993, sub-clause (f) covers "sales of goods fully exempt from payment of tax" under Section 49. On or from 01.04.1993, the said sub- clause has been deleted from the statute. As a result thereof, the sales of goods fully exempted from payment of tax under Section 49 (2) are not required to be excluded from the total Page 78 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined taxable turnover of sales of goods for the purpose of calculating turnover tax with effect from 01.04.1993. In view of this statutory provision, it is clear that the learned Special Commissioner was quite justified in considering the turnover of sales of goods covered by Entry 173 of notification issued under Section 49 (2) of the said Act for the purpose of considering and calculating total taxable turnover for the purpose of Section 10A of the Act."
17. The above findings of the Tribunal is in consonance with the provisions of the Act which existed at the relevant point of time inasmuch as Section 10A of the Act by amending Section 10A of the Act has specifically provided for levy of TOT on the goods on the turnover which is exempt under Section 49 of the Act and accordingly, Section 10A(1) was substituted by words "Where the turnover of all sales by any dealer liable to pay tax under Section 3, has first exceeded Rs.50 lakh Page 79 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined (in the year commencing on the 1st April, 1990 and every year thereafter)" there shall be levied a TOT, on the total taxable (taxable TOT effected by him of all taxable goods at the rates specified in the table below). By explanation it is clarified that the explanation "taxable turnover means turnover of all taxable goods as derived after deduction made under Sub-section (2) and the expression "taxable goods" means the goods which or which would have been taxable under this Act but for exemption granted under this Act but for exemption granted under Sub- section (2) of Section 49. Therefore, it is very Cleary that the provision of Section 10A would be applicable on the goods which are taxable but for exemption granted under Sub- section (2) of Section 49. Therefore, the turnover of sales made by ONGC to OMCs which Page 80 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined are otherwise exempted under Section 49(2) of the Act would be considered as a taxable goods for the purpose of Section 10A to include in taxable turnover if the total turnover of the dealer exceeds Rs.50 lakhs. Admittedly, the total turnover of ONGC is exceeding Rs.50 lakhs and therefore, the taxable turnover would include the taxable goods irrespective of whether such goods are exempted vide entry No.173 as per the notification issued pursuant to Section 49(2) of the Act.
18. In view of the foregoing reasons and reliance placed on plain interpretation of the provisions of Section 10A as it has come into effect from 01.04.1993, it appears that the reliance placed by the learned advocates for the petitioners on the various decisions would not be applicable in the facts of the case. In view of the plain and simple interpretation of Page 81 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined the provisions of Section 10A with effect from 01.04.1993, the petitioner would be liable to pay TOT even on turnover of sales made to OMCs irrespective of the exemption under Section 49(2).
19. The contention of the petitioner that OMCs have also paid TOT is required to be considered by the respondent-authority for granting remission to OMCs and it is for the OMCs to claim such remission from the respondent-authority and not the ONGC who is liable to pay TOT as per Section 10A with effect from 01.04.1993. Learned Senior Adv Mr.S.N.Soparkar for the petitioner referred to the proposal made by the respondent- authority granting remission to the OMCs for the TOT paid by it so as to availed double levy of the TOT. As the petitioner-OMGC is liable to pay the TOT, the respondent- authority may Page 82 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024 NEUTRAL CITATION C/SCA/7738/2016 JUDGMENT DATED: 14/06/2024 undefined consider such proposal made by the Sales Tax Commissioner to the Additional Chief Secretary (Finance Department) Government of Gujarat on 14.11.2008.
20. In view of the foregoing reasons, no interference is required to be made in the impugned order passed by the respondent No.2 and the Tribunal. The petition therefore fails. Rule is discharged. No orders as to cost.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) PALAK Page 83 of 83 Downloaded on : Fri Jun 28 21:34:19 IST 2024