Allahabad High Court
M/S Amway India Enterprises Private ... vs Commissioner Of Commercial Tax on 20 December, 2022
Author: Rohit Ranjan Agarwal
Bench: Rohit Ranjan Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved on 12.12.2022 Delivered on 20.12.2022 Court No. - 10 Case :- SALES/TRADE TAX REVISION No. - 280 of 2022 Revisionist :- M/S Amway India Enterprises Private Limited Opposite Party :- Commissioner Of Commercial Tax Counsel for Revisionist :- Gaurav Dwivedi,Ram Prakash Dwivedi Counsel for Opposite Party :- C.S.C. with Case :- SALES/TRADE TAX REVISION No. - 281 of 2022 Revisionist :- M/S Amway India Enterprises Private Limited Opposite Party :- Commissioner Of Commercial Tax Counsel for Revisionist :- Gaurav Dwivedi,Ram Prakash Dwivedi Counsel for Opposite Party :- C.S.C. with Case :- SALES/TRADE TAX REVISION No. - 282 of 2022 Revisionist :- M/S Amway India Enterprises Private Limited Opposite Party :- Commissioner Of Commercial Tax Counsel for Revisionist :- Gaurav Dwivedi,Ram Prakash Dwivedi Counsel for Opposite Party :- C.S.C. with Case :- SALES/TRADE TAX REVISION No. - 283 of 2022 Revisionist :- M/S Amway India Enterprises Private Limited Opposite Party :- Commissioner Of Commercial Tax Counsel for Revisionist :- Gaurav Dwivedi,Ram Prakash Dwivedi Counsel for Opposite Party :- C.S.C. Hon'ble Rohit Ranjan Agarwal,J.
1. All these four connected Commercial Tax Revisions were heard together which arise out of common order passed by Commercial Tax Tribunal, Ghaziabad Bench-I, Ghaziabad in Second Appeal No. 466/2016 (2008-09), Second Appeal No. 467/2016 (2009-10), Second Appeal No. 468/2016 (2010-11), and Second Appeal No. 79 of 2019 (2011-12) dismissing the appeals vide judgment and order dated 29.04.2022. All the four revisions were admitted on the following question of law:-
"ii. Whether the Tribunal is correct in law in stating that Entry No. 100 in Part-A of Schedule-II of the UPVAT Act is specific in nature and it covers brochures which are nothing but printed material even though brochures are comprehended within the meaning of Books in Entry No. 7 of the Schedule-I of the UPVAT Act and which in law is a specific entry."
2. While in Commercial Tax Revision No. 281 of 2022, the Court admitted the revision on an additional question of law which is as under:-
"iv. Whether the term Porridge occurring in Entry No. 36 of the Schedule of UPVAT Act excludes instant porridge as the latter sui generis a class of instant food as opposed to natural food."
3. As the first question which has been framed in all the four revisions is same, thus they are heard together and are decided by a common order.
4. Before proceeding to decide the question of law as framed above, a cursory glance of the facts of the case is necessary for better appreciation, which are as under:-
5. Applicant/revisionist is a private limited company registered under the provisions of the Companies Act, and is engaged in the business of resale of goods by way of "direct selling method" in almost all States of India including the State of U.P. The applicant is registered under the Uttar Pradesh Value Added Tax Act, 2008 (hereinafter called as ''VAT Act') and the Central Sales Tax Act, 1956 (hereinafter referred as ''CST Act'). The dispute in Revision No. 280 of 2022 relates to the Assessment Year 2008-09, in Commercial Tax Revision No. 281 of 2022 for the Assessment Year 2010-11, Revision No. 282 of 2022 for Assessment Year 2009-10, and Revision No. 283 of 2022 relates to Assessment Year 2011-12.
6. Initially, an assessment was made where no tax was imposed on the product brochure of the applicant, however, in re-assessment proceedings under Section 29(1) of the VAT Act, a tax liability @ 4% was imposed on the brochure sold by the applicant classifying them as "printed material" covered under Entry No. 100 of Schedule II-A of VAT Act denying the exemption as provided under Entry No. 7 of Schedule-I. Against the order of assessing authority dated 07.01.2014, an appeal under Section 55 of the VAT Act was preferred before the Additional Commissioner (Grade-II) Appeal-III, Ghaziabad which was dismissed on 16.07.2016. Against the order of first appellate authority, a second appeal was preferred before the Commercial Tax Tribunal (Bench-I), Ghaziabad and all the four appeals for the assessment year 2008-09, 2009-10, 2010-11 and 2011-12 were heard and decided by a composite order dated 29.04.2022. Hence, the present revision.
7. Sri Ashok Bhardwaj, learned counsel appearing for the revisionist submitted that Tribunal was not justified in dismissing the appeals by not granting the benefit of exemption as provided under Entry 7 of Schedule-I of the Act, as the brochure is covered under Entry 7 of Schedule-I. He has relied upon a decision of Division Bench of this Court in case of Commissioner of Sales Tax vs. Indo Arts, 1969 24 STC 342 All, and decision of Division Bench of Punjab and Haryana High Court in case of Thomson Press (India) Limited vs. State of Haryana, 1987 67 STC 54 P H.
8. According to learned counsel, the brochure is in the form of book and thus it is covered under the exemption clause of books and periodicals, and will not be covered under Schedule-II Part-A Entry 100 which is the list of goods taxed at 4%, as it is not a printed material like a pamphlet diary or calendar.
9. Sri Bhardwaj then submitted, that golden rule of interpretation is that the words should be read in ordinary, natural and grammatical manner and the principle of harmonious construction merely applies the rule that where there is a general provision of law dealing with a subject, and a special provision dealing with the same subject, then the special prevails over the general. Reliance has been placed upon decision of Hon'ble Apex Court in case of Commercial Tax Officer Rajasthan vs. M/s. Binani Cements Ltd. and another, Civil Appeal No. 336 of 2003, decided on 19.02.2014.
10. He then submitted that entry printed material is a general entry and no doubt in the absence of a specific entry for books, the item books be covered under the general entry, and once this Court has held brochure to be within the meaning of books, the authorities cannot deny the benefit. A reliance has also been placed upon a Division Bench judgment of Karnataka High Court in case of Nanjundeshwara Mart vs. State of Karnataka, 1992 84 STC 534 KAR.
11. Sri A.C. Tripathi, learned Standing Counsel appearing for the State submitted that after the implementation of the VAT Act in the State of U.P. in the year 2008, specific entries have been made in Schedule-I and Schedule-II-A which deciphers the goods which are exempted from tax from those goods which are liable to be taxed @ 4%.
12. According to State counsel, the charging Section 7-B of the VAT Act clearly provides that tax shall not be levied on certain sales and purchase of goods mentioned in Schedule-I. Entry 7 provides for exemption of tax on books and periodicals and journals including braille books, maps, charts and globe, work books bearing the name of the author thereon or prescribed in syllabus of any educational Board or Council.
13. Similarly, Schedule-II, Part-A encompasses the name and description of the goods which are to be taxed at 4%, and Entry 100 provides for printed material including diary and calendar. According to him, the brochure which has been printed by the applicant/revisionist comes under the heading "printed material" and is liable to be taxed @4% and is not entitled to exemption under Schedule-I Entry 7.
14. Sri Tripathi then contended that a taxing statute has to be interprated in the light of what is clearly expressed. It cannot imply anything which is not expressed. According to him these words of the charging provisions are unambiguous and open to true interpretations, the benefit of interpretation of charging provision (but not exemption provisions) is given to the assessee, however, any vagueness in the exemption clauses imposed go to the benefit of the revenue.
15. According to him, liberal and strict construction of exemption provisions are to be invoked at a different stage of interpreting, when the question is whether an assessee falls in the notification or in the exemption clause then it being in nature of exception has to be construed strictly and against the assessee.
16. According to Sri Tripathi, a person claiming exemption therefore has to establish that his case squarely falls within the exemption notification and while doing so, a notification should be construed against the assessee in case of ambiguity. Reliance has been placed upon Constitution Bench judgment of Apex Court in case of Commissioner of Customs (Import) Mumbai vs. Dilip Kumar and Company and others, 2018 (9) SCC 1.
17. I have heard the counsel for the parties and perused the material on record.
18. The question of law framed in all the four revisions, "Whether the Tribunal is correct in law in stating that Entry No. 100 in Part-A of Schedule-II of the UPVAT Act is specific in nature and it covers brochures which are nothing but printed material even though brochures are comprehended within the meaning of Books in Entry No. 7 of the Schedule-I of the UPVAT Act and which in law is a specific entry" is being taken up first and decided.
19. Before proceeding to decide the above question of law, a cursory glance of Section 7 of the VAT Act is necessary for better appreciation of the case as it is the charging section and the entire controversy hinges around Section 7, Schedule-I Entry 7 and Schedule-II-Part-A Entry 100 which are extracted hereasunder:-
"Section 7. Tax not to be levied on certain sales and purchases.-
No tax under this Act shall be levied and paid on the turnover of-
(a) sale or purchase where such sale or purchase takes place-
(i) in the course of inter-State trade or commerce; or
(ii) outside the State; or
(iii) in the course of the export out of or in the course of the import into, the territory of India;
(b) sale or purchase of any goods named or described in column (2) of the Schedule-I of this Act or;
(c) such sale or purchase; or sale or purchase of such goods by such class of dealers, as may be specified in the notification issued by the State Government in this behalf:
PROVIDED that while issuing notification under clause (c), the State Government may impose such conditions and restrictions as may be specified.
Schedule-I Entry 7. Books and periodicals & journals including Braille books; maps; chart & globe; work books bearing the name of author thereon or prescribed in the syllabus of any Educational board or council.
Schedule-II Part-A Entry 100. Printed materials including diary and calendar."
20. From the reading of Section 7 of the VAT Act, it is clear that no tax under the Act is to be levied and paid on the turn over of sale and purchase which are mentioned in the said section. From the reading of Section 7(b), it is clear that tax is not levied on the sale or purchase of any goods named or described in Column (2) of Schedule I of the Act.
21. Schedule-I is the list of the exempted goods. Entry 7 has been inserted by the legislature granting benefit to these goods from being exempted from tax. While Part-A of Schedule-II is description of goods which are to be taxed @ 4% and Entry 100 is for the printed material including diary and calendar. The entire dispute is whether the brochure printed by the revisionist is entitled to exemption under Entry 7 of Schedule-I or to be taxed @ 4% being item covered under printed material at Entry 100 of Schedule-II Part-A.
22. An effort has been made by the assessee counsel to demonstrate that word book encompasses the brochure printed by revisionist and thus entitled to exemption on the strength of decision of Division Bench of this Court in case of Indo Arts (supra). The decision of Indo Arts (supra) was based upon the notification of taxing authorities issued on 01.05.1956 which had exempted books, magazines, exercise books from payment of tax. The Court then had found that brochure, booklets, magazine and folders are apprehended in the word "books" and thus they were liable to be exempted. The judgment was followed by the Punjab and Haryana High Court in case of Thomson Press (supra).
23. With the passage of time, State of U.P. enacted the VAT Act, 2008 and Section 7(b) provided that the goods mentioned in Column (2) of Schedule-I were liable to be exempted from tax. While the legislature simultaneously through Schedule-II had provided for the list of goods which were liable to be taxed @4%.
24. Thus to say that judgment in Indo Arts (supra) and Thomson Press (supra) will be applicable in the present case does not hold good, as much water has flown and the legislature while enacting the Act of 2008 had made specific provision as to what goods were liable to be exempted and what to be taxed at the rate specified in the Schedule. Entry 7 of Schedule-I specifically provides for the books and journals including braille books, maps, charts and globe and also work books bearing the name of the author thereon or prescribed in syllabus of any educational Board or Council. Simultaneously, Schedule-II Part-A is the list of goods which are to be taxed @ 4% and Entry 100 is of printed materials including diary and calendar. The argument of revisionist counsel to the extent that books include brochure cannot be accepted, as brochures are nothing but promotional and advertising material, which provide multiple information and have been rightly held by the Tribunal to be covered under the category printed material.
25. Prior to the Act of 2008, the field was occupied by the notification of 1956 which only provided for exemption of books, magazines and exercise books. There was no entry to the effect such as printed materials on which the tax was levied, thus, distinguishing between books and printed material.
26. In the present tax regime, Schedule-I and Schedule-II has distinguished between the exemption of goods, and the goods which are to be taxed @ 4%, a clear distinction has been made between the words books and printed material. By no word of imagination the printed information and advertising material can be claused and put into the category of books when there is a specific entry of printed materials imposing a tax liability upon an assessee.
27. The Constitution Bench of the Hon'ble Apex Court in Dilip Kumar (supra) had cleared the air in regard to concession/exemption/incentive/rebate/subsidy and have dealt the matter in extenso and held, that in the event of any ambiguity in the exemption notification the benefit of such ambiguity should be construed in favour of the revenue denying the benefit of exemption to the subject/assessee.
28. The Apex Court found that it is a settled law that any ambiguity in taxing statute should enure benefit of subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of the revenue. Relevant paras 35, 36, 52, 53, 63 and 65 of the judgment are extracted hereasunder:-
"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 strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally.
36. With the above understanding the stage is now set to consider the core issue. In the event of ambiguity in an exemption notification, should the benefit of such ambiguity go to the subject/assessee or should such ambiguity be construed in favour of the Revenue, denying the benefit of exemption to the subject/assessee? There are a catena of case laws in this area of interpretation of an exemption notification, which we need to consider herein. IRC v. James Forrest [IRC v. James Forrest, (1890) LR 15 AC 334 (HL)] is a case which does not discuss the interpretative test to be applied to exemption clauses in a taxation statute--however, it was observed that : (AC p. 338) ''... it would be unreasonable to suppose that an exemption was wide as practicable to make the tax inoperative, that it cannot be assumed to have been in the mind of the legislature' and that exemption ''from taxation to some extent increased the burden on other members of the community'. (AC p. 340) Though this is a dissenting view of Lord Halsbury, LC, in subsequent decisions this has been quoted vividly to support the conclusion that any vagueness in the exemption clauses must go to the benefit of the Revenue. Be that as it is, in our country, at least from 1955, there appears to be a consistent view that if the words in a taxing statute (not exemption clause) are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and it does not matter if the taxpayer escapes the tax net on account of the Legislature's failure to express itself clearly [see the passage extracted hereinabove from Kesoram Industries case [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] ].
52. After considering the various authorities, some of which are adverted to above, we are compelled to observe how true it is to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed (we are justified to say this) that the position is well settled in the interpretation of a taxing statute : It is the law that any ambiguity in a taxing statute should enure to the benefit of the subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of the Revenue--and such exemption should be allowed to be availed only to those subjects/assesses who demonstrate that a case for exemption squarely falls within the parameters enumerated in the notification and that the claimants satisfy all the conditions precedent for availing exemption. Presumably for this reason the Bench which decided Surendra Cotton Oil Mills case [Collector of Customs & Central Excise v. Surendra Cotton Oil Mills & Fertilizers Co., (2001) 1 SCC 578] observed that there exists unsatisfactory state of law and the Bench which referred the matter initially, seriously doubted the conclusion in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] that the ambiguity in an exemption notification should be interpreted in favour of the assessee.
53. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State.
63. In Tisco Ltd. v. State of Jharkhand [Tisco Ltd. v. State of Jharkhand, (2005) 4 SCC 272] , which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held : (SCC pp. 289-290) "44. The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (see Novopan India Ltd. v. CCE [Novopan India Ltd. v. CCE, 1994 Supp (3) SCC 606] )."
65. As already concluded in paras 53 to 55 and 63, above, we may reiterate that we are only concerned in this case with a situation where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored.
29. Thus, from the reading of the above, it is clear that the issue in regard to exemption clause is no more res-integra and the Apex Court has settled the question in favour of the revenue, that when there is an ambiguity in exemption notification or exemption clause, the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principal that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. The question of law framed above is thus answered in favour of the revenue and against the assessee.
30. Now coming to the question of law framed in Revision No. 281 of 2022 which was "Whether the term Porridge occurring in Entry No. 36 of the Schedule of UP VAT Act excludes instant porridge as the latter sui generis a class of instant food as opposed to natural food."
31. The argument raised from assessee side was that instant wheat porridge is nothing but Daliya (cracked wheat) and is exempted under Schedule-I of the VAT Act, as word "Porridge" finds place in Entry 36, Schedule-I. According to learned counsel, instant wheat porridge can be consumed after pouring and mixing with hot milk in it and was thus covered under the Entry Porridge, and the Tribunal was not correct to deny benefit.
32. On the other side, State counsel could not defend the judgment of the Tribunal on the ground that entry Porridge finds place only under the exempted item at Entry No. 36 of Schedule-I and no distinction has been made between the instant wheat porridge and Daliya (cracked wheat) under the list of goods which are taxed under the relevant schedule.
33. After hearing counsel for the parties and perusal of material on record, I find that the word "Porridge" has been mentioned in Entry 36 of Schedule-I of the VAT Act which are the list of exempted goods from tax which is as under:-
"Bun, rusk, bread excluding pizza bread; Atta, Maida, Suji, Besan; Gur, jaggery & edible variety of rab gur and Khandsari (3); Porridge; Honey and beehive; Sugar as defined in section 14 of the Central Sales Tax Act, 1956."
34. The Act does not make any distinction between the normal porridge and instant porridge, and the finding arrived by the Tribunal is a fallacy. The intention of legislature was clear that exemption from tax has to be given to the product Porridge whether it was instant Porridge or normal Porridge i.e. Daliya (cracked wheat).
35. The finding recorded by the Tribunal does not record any substantial finding so as to exclude instant wheat porridge under Entry 36 of Schedule-I of the exempted list of goods, when no distinction has been made by legislature. The Tribunal was not correct to read in between and deny the benefit to the assessee as granted by the taxing statute. The finding recorded by the Tribunal is hereby set aside.
36. Considering the facts and circumstances of the case, the question of law framed thus is answered in favour of the assessee and against the revenue.
37. In view of said fact, all the four revisions fail so far as question of law No. (ii) framed and judgment passed by the Tribunal needs no interference and the revision stands dismissed.
38. However, Revision No. 281 of 2022 as far as question of law No. (iv) framed stands partly allowed and the finding recorded by the Tribunal against the assessee on the said question is set aside.
Order Date :- 20.12.2022 V.S.Singh