Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8
PETITIONER:
STATE OF RAJASHTAN & ANR.ETC.ETC.
Vs.
RESPONDENT:
SARVOTAM VEGETABLES PRODUCTS ETC.ETC.
DATE OF JUDGMENT: 09/04/1996
BENCH:
VENKATASWAMI K. (J)
BENCH:
VENKATASWAMI K. (J)
VERMA, JAGDISH SARAN (J)
BHARUCHA S.P. (J)
CITATION:
JT 1996 (4) 53 1996 SCALE (3)346
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
B.P.JEEVAN REDDY.J.
These appeals are preferred against the judgment of a
Division Bench of the Rajasthan High Court allowing a batch
of special appeals filed by the respondents-assessees. The
special appeals were preferred against the common judgment
of a learned Single Judge of that Court dismissing the writ
petitions filed by them. The matter arises under the Central
Sales Tax Act, 1956.
The respondents-assessees are manufacturers and/or
dealers in edible oils and stainless steel sheets. During
the relevant years, they effected a large number of inter-
State sales to various dealers in Bombay and Gujarat. They
obtained C-forms from the purchasing dealers and submitted
them in their assessment proceedings. On survey and inquiry,
it was found that many of the C-forms were either not valid
or not genuine. Some of them were found to have been issued
to dealers other than the respondents. Accordingly,
antievasion proceedings were commenced against the
respondents. Notices were issued calling upon them to show-
cause why additional tax and penalty be not levied and
recovered from them. It is at that stage that the
respondents approached the Rajasthan High Court by way of
writ petitions contending that since the inter-State sales
effected by them are covered by the Exemption Notifications
dated 26th December, 1986/17th April, 1990 and because the
said notifications do not require the production of a C-form
as a condition for availing the exemption provided thereby,
they were under no obligation to produce the same and no
action can be taken against them for producing alleged
invalid or spurious C-forms. It was, of course, their case
that if the C-forms are found to be invalid or spurious, the
responsibility lies upon the purchasing dealers who issued
them and that they themselves were in no way responsible
therefor. The learned Single Judge disagreed with the legal
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8
submission (based upon Exemption Notifications) put forward
by the respondents and dismissed their writ petitions. On
appeal, however, the Division Bench has upheld the
respondents contention and allowed the special appeals (and
the writ petitions) filed by the respondents.
Section 8 of the Central Sales Tax Act prescribes the
rates of tax on inter-State sales. Sub-section (1) provides
that "Every dealer, who in the course of inter-State trade
or commerce - (a) sells to the Government any goods; or (b)
sells to a registered dealer, other than the Government,
goods of the description referred to in sub-section (3);
shall be liable to pay tax under this Act, which shall be-
four percent of his turnover." Sub-section (2) says that
inter-State sales not falling under sub-section (1) shall be
liable to be charged at the higher rates mentioned therein.
Sub-section (3) specifies the goods for the purposes of
Clause (b) of Sub-section (1) of Section 8. It is sufficient
to mention that sub-section (3) contemplates certain goods
or class of goods being Specified the certificate of
registration of the purchasing dealers, which are intended
either for re-sale or for being used as raw-material for
manufacturing other goods or for other purposes mentioned in
the sub-section.
Sub-section (4) then states:
"(4) The provision of Sub-section
(1) shall not apply to any sale in
the course of inter-State trade or
commerce unless the dealer selling
the goods furnishes to the
prescribed authority in the
prescribed manner -
(a) a declaration duly filled and
signed by the registered dealer to
whom the goods are sold containing
the prescribed form obtained from
the prescribed authority: or.
(b) if the goods are sold to the
Government, not being a registered
dealer, a certificate in the
prescribe form duly filled and
signed by a duly authorized officer
of the Government.
Provided that the declaration
referred to in clause (a) is
furnished within the prescribed
time or within such further time as
that authority may, for sufficient
cause, permit."
Sub-section (5) confers upon the State Government the power
of exemption. The power of exemption can be exercised both
with reference to dealers as well as with reference to good.
The exemption can be granted either wholly or partially and
subject to such conditions as may be imposed in that behalf.
Sub-section (5) reads as follows:
"(5) Notwithstanding anything
contained in this section, the
State Government may, if it is
satisfied that it is necessary so
to do in the public interest, by
notification in the official
Gazette, and subject to such
conditions as may be specified
therein, direct,
(a) that no tax under this Act
shall be payable by any dealer
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8
having his place of business in the
State in respect of the sales by
him, in the course of inter-State
trade or commerce, from any such
place of business of any such goods
or classes of goods as may be
specified in the notification, or
that the tax on such sales shall be
calculated at such lower rates than
those specified in subsection (1)
or sub-section (2) as may be
mentioned in the notification:
(b) that in respect of all sales of
goods or sales of such classes of
goods as may be specified in the
notification, which are made, in
the course of inter-State trade or
commerce, by any dealer having his
place of business in the State or
by any class of such dealers as may
be specified in the notification to
any person or to such class of
persons as may be specified in the
notification, no tax under this Act
shall be payable or the tax on such
sales shall be calculated at such
lower rates than those specified in
subsection (1) or sub-section (2)
as may be mentioned in the
notification."
The scheme of Section 8, insofar as it is relevant herein is
this: sub-section (1) of Section 8 prescribes a lower rate
of Central Sales Tax on two types of inter-State sales viz.,
(a) sales to Government of any goods and (b) sales to
registered dealers, other than the Government, goods of the
description referred to in sub-section (3),which may be
referred to hereinafter referred to as specified goods for
the sake of convenience. The rate of tax in these two cases
is 4 per cent. So far as the sales to Government are
concerned, there is no restriction as to the type or nature
of goods sold. All inter-State sales to Government of any
goods whatsoever fall under clause (a) of sub-section (1).
But so far as sales to registered dealers (other than
Government) are concerned, they must be sales of specified
goods only to become eligible to claim the lower rate in
sub-section (1). The sales not falling under sub-section (1)
are taxed at higher rates provided in sub-section (2). (We
are not referring to sub-section (2-a) because it is not
relevant for the present purposes.) Sub-section (3)
specifies the goods for the purposes of Section 8 (1)(b).
Sub-section (4) is really in the nature of a provision to
sub-section (1). Sub-section (4) imposes a condition which
must be satisfied by the dealer seeking to avail of the rate
of tax provided by sub-section (1). The condition prescribed
by sub section (4) is (a) if the goods are sold to a
registered dealer, the selling dealer assessee should
furnish to his assessing officer a declaration duly filled
and signed by the registered dealer purchasing the goods
containing the prescribed particulars in the prescribed form
obtained from the prescribed authority. (b) if the goods are
sold to Government, not being a registered dealer, a
certificate in the prescribed form duly filled and signed by
a duly authorized officer of the Government should be
furnished by the selling dealer assessee to his assessing
authority. The Rules made under the Act prescribe the forms
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8
in which the aforesaid declaration and certificate, as the
case may be, has to be issued by the purchasing
dealer/Government. In the case of Government it is called D-
form (certificate) and in the case of registered dealers it
is called C-form (declaration) - Vide Rule 12(1) of the
Central Sales Tax (Registration and Turn-over) Rules, 1957.
We shall refer to the contents of C-form alone. The C-form
prescribed by the Rules is titled "Form C - Form of
Declaration". These forms are supplied by the appropriate
authority under the Act to the purchasing registered
dealers. If this form, containing all the relevant
particulars is issued by the purchasing dealer to the
selling dealer, the latter will collect tax (passon tax)
from the purchasing dealer only at the rate prescribed in
Section 8(1): otherwise, he will collect tax at the higher
rate, as may be applicable, prescribed by Section 8(2). The
purchasing dealer must furnish all the particulars required
by the said declaration/form. They include (1) name of the
issuing State, office of issue, date of issue, name of the
purchasing dealer alongwith his registration certificate No.
and the date from which the registration is valid and - (2)
particulars of the goods purchased, of the Bill/cash
memo/challan concerning the purchase and the purpose for
which the goods are purchased. It has to be signed by
the purchasing dealer. The selling dealer must produce
these ’C’ forms in his assessment proceedings if he wishes
to be taxed at the (lower) rate in Section 8(1). The
purpose of the C-form is obvious: the parliament wants to
tax specified goods purchased for specified purposes (sub-
section (3) of Section 8) at a lower rate but anyone wishing
to avail of the said lower rate must obtain from purchasing
dealer the ’C’ form and produce it before his assessing
officer. Thus, clause (b) of sub-section (1), subsection (3)
and sub-section (4) go together. (Similarly, Section 8(1)(a)
and sub-section (4) go together. The reason why the ’C’ form
requires several particulars to be stated is to ensure that
the concessional rate prescribed by Section 8(1)(b) is not
misused or abused. With the help of those particulars, the
appropriate authority or authorities can verify the truth
and correctness of the transaction. Both the selling dealer
and purchasing dealer are under an obligation to abide by
the said requirements of law; otherwise the very scheme
underlying the said provisions breaks down. This crucial
significance of the ’C’form needs to be kept in mind.
Sub-section (5) of Section 8 confers the power of
exemption upon the State Government. As is well-known,
almost every taxing enactment contains such a provision. The
exemption under Section 8(5) can be granted either with
reference to dealers or class of dealers or with reference
to goods or classes of goods. The exemption can be total or
partial. It can also be subject to such condition as may be
prescribed in that behalf.
In these appeals we are concerned with two exemption
notifications issued under Section 8(5). They are dated 26th
December, 1986 and 17th April, 1990 (which was issued in
super-session of the notification dated 26th December,
1986). It would be appropriate to set out both the
notifications:
"Notification No.F.4(92)
FD/Br.IV/82-41 Jaipur dated 26th
Dec. 1986.
S.O.153 - In exercise of the powers
conferred by sub-section (5) of
Section 8 of the Central Sales Tax
Act, 1956 (Central Act 74 of 1956),
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8
and in supersession of Finance
Department Notification No.F.2(8)
FD/Gr.IV/75-15, dated July 1, 1975,
the State Government being
satisfied that it is necessary so
to do in the public interest hereby
directs with immediate effect that
the tax payable under sub-section
(1) of the said Section by any
dealer, having his place of
business in the course of Inter-
state trade or commerce, of all
edible oils excluding - (1)
Hydrogenated oils (including
’Vanaspati’), (2) Palm Oil whether
refined or not, and (3) Refined
coconut oil shall be calculated at
the lower rate, as in clause (a)
below, on the condition namely
(a) 1-1/2% where the assessing
authority satisfied that oilseed
purchased for the manufacture of
such oil have been subjected to tax
in accordance with Section-SC of
the Rajasthan Sales Tax Act, 1954
(Rajasthan Act 29 of 1954) or 2-
1/2% were the assessing authority
is satisfied that oilseeds
purchased for the manufacture of
such oil have been subjected to tax
in accordance with Section SCC of
the Rajasthan Sates Tax Act, 1954
(Rajasthan Act 29 of 1954);
(b) Claim regarding partial
exemption under Finance Department
Notification No.F.4 (72) FD/-
Gr.IV/81-18, dated May 6, 1986
shall not be made and allowed.
(Pub. in Raj. Gaz. Ext. Part IV-
C(II), dated 26.12.1986)
Note:- This Notification was
superseded by Notifications
No.F.4(90) FD/Gr.IV/82-101 dated
17.4.1990 (S.No.218)."
"Notification No.F.4(90)
FD/Gr.IV/82-101, Jaipur dated 17th
April, 1990
"S.O.4 - In exercise of the powers
conferred by sub-section(5) of
Section 8 of the Central Sales Tax
Act, 1956 (Central Act 74 of
1956),and in supersession of this
department notification No.F.4(TS)
FD/Gr.IV/82-41, dated 26th
December, 1986, the State
Government being of the opinion
that it is expedient in the public
interest so to do, hereby directs
with immediate effect that the tax
payable under sub-section (1) of
the said section by any dealer,
having his place of business in the
State in respect of sale by him,
from any such place of business in
the course of inter-state trade or
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8
commerce, of all edible oils
excluding (i) Hydrogenated oil
(including vanaspati) (2) Palm oil
whether refined or not, and (3)
refined coconut oil shall be
calculated at the rate of 1-1/2% on
the following conditions:
(1) That such dealer proves to the
satisfaction of the Assessing
Authority that the oil seeds used
in the manufacture of such edible
oil have already been suffered tax
under tax Act 3% within the state
of Rajasthan;
(f) That such dealer shall not be
entitled claim partial exemption
under Finance Department
Notification No.F.4(72) F. 81-18,
dated 6th May, 1986 and as from
time to time.
(Pub. in Raj.Gaz. Ext.Part IV-C(II)
dated 18.4.1990)"
A reading of the notification of 26th December, 1986
shows that the exemption granted under the notification is
not total but partial. As against 4 per cent leviable under
Section 8(1) the notification provides that the tax shall be
paid at the rate of 1-1/2%. or 2-1/2% as the case may be.
The exemption applies to and extends to all edible oils
excluding those oils as are specified in the notification.
Furthers the exemption is subject to a condition viz., that
the dealer claiming the exemption imposed satisfies the
assessing authority that the oil seeds purchased for the
manufacture such oil have been subjected to tax in
accordance of with Section 5-C of the Rajasthan Sales Tax
Acts 1954 in which cases the sales tax will be charged at
the rate of 1-1/2%; in case the oil seeds purchased for the
manufacture of such oil have been subjected to tax under
Section 5-CC of the Rajasthan Act then the rate of tax
leviable on the inter-State sale of edible oils would be 2-
1/2% There is yet another condition mentioned in clause (b)
of the said notification with which we are not concerned in
these appeals and hence is not being referred to by US.
The Notification dated 17th April,1990 was issued in
supersession of the aforementioned notification. This
notification too exempts inter-State sales of all edible
oils excluding certain oils mentioned therein. As against
the tax payable at the rate of 4% under section 8(1), the
Notification prescribes a single rate of 1-1/2% provided the
two conditions mentioned therein are satisfied. The first
condition is that the dealer proves to the satisfaction of
the assessing authority that the oil seeds used in the
manufacture of such edible oil have already suffered tax
under the Act at the rate of 3 per cent within the State of
Rajasthan We need not refer to the second condition since we
are not concerned with it in these appeals.
Now the contention of the respondents-dealers, which
has found favour with the Division Bench of the High Court
is this: the notifications and sub-section (5) of Section 8
whereunder it has been issued are self-contained
notifications/provision. Section 8(5) empowers the State
Government to grant exemption subject to such conditions as
they may deem fit to impose in public interest. The
notifications do impose certain conditions. They do not
provide that production of a ’C’ form is essential for
availing the benefit of the notification. If so, no such
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8
condition should be read into notification. The only
condition which a dealer seeking to avail of the benefit of
the notification is to satisfy are those mentioned in the
notification and no other. In other words, the condition
mentioned in sub-section (4) of Section 8 cannot be insisted
upon as a condition for obtaining the benefit under the
notification. We are of the opinion that the said contention
is misconceived and that the Division Bench of the High
Court has erred grievously in accepting it.
Sub-section (5) of Section 8 is an integral part of
Section 8 and the Act as such. The said power has to be
exercised in public interest. The power of exemption and its
exercise is to be guided by and be consistent with the
provisions of the Act. More important, the levy of central
sales tax and the prescription of rate is not by the
notifications but by the Act itself. Section 8(1) prescribes
the rate and sub-section (4) the condition that has to be
satisfied for availing of the rate in sub-section (1). What
the notifications do is to reduce the rate prescribed by
Section 8(1) further, subject to certain conditions. The
conditions prescribed by the notifications are the
conditions prescribed for availing the further reduction of
rate provided by the notification. The notifications merely
reduce the rate of tax; they do not do away with the levy
altogether. All that the notifications have done is to
reduce the rate of tax from 4% to 1-1/2% (2-1/2%, as the
case may be). Separate conditions are prescribed for
availing the rate (which itself is a concessional rate)
prescribed in Section 8(1) and for availing the further
reduction provided by the Notification. Those two sets of
conditions are prescribed by Section 8(4) and by the
notifications respectively. One cannot conceive of the said
notifications independent of, or apart from section 8(1).
They merely reduce the rate in Section 8(4) as already
mentioned. One must first satisfy the condition in section
8(4) to become eligible for the concessional rate in Section
8(1). It is only thereafter that he can claim the benefit of
the said notifications, for which purpose again he has to
satisfy the conditions prescribed in the Notifications. It
is therefore wrong to think that Section 8(5) or the
notifications are self-contained and operate de hors the
other provisions of the Act/Rules. The Division Bench has
unfortunately failed to appreciate the Notifications in
their correct perspective. We are of the opinion that the
judgment under appeal is unsustainable in law and it is
accordingly set aside. The learned Single Judge was right in
dismissing the writ petitions.
So far as the merits are concerned viz., the validity
and genuineness of C-forms produced by the dealers, we
express no opinion. That is a matter to be gone into by the
appropriate authorities under the Act in the proceedings
which are yet to be concluded.
We are unable to see how the decision of this Court in
McDowell And Company v. Sales tax Officer (29) S.T.C. 163=
1972 (4) S.C.C. 365) is of any help to the
respondents/dealers. In that decision, it was held that
since the appellant therein did not comply with the
condition prescribed in the notification, it was not
entitled to its benefit. The appellants’ case was that it
effected sales to dealers in Pondicherry and Goa and that at
the relevant time the Central Sales Tax Act had not been
extended to Pondicherry and that, therefore, the purchasing
dealers there could not issue C-forms. The appellant
contended that in such a situation, he cannot be compelled
to produce C-forms in respect of sales to dealers in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8
Pondicherry. The said contention was rejected holding that
since he had not produced the declaration prescribed by
Section 8 of the Act and the notification, he was not
entitled to the benefit of Section 8(1) and the
notification. So far as sales to dealers in Goa were
concerned, the benefit of the notification was denied on the
ground that the C-forms were not filled within the time
prescribed.
Sri Harish N.Salve, the learned counsel for the
respondents-dealers submitted that in case this Court does
not affirm the decision of the Division Bench of the High
Court, this Court may extend the time for filing the C-
forms. We do not think that any such direction is called for
at this stage. The proviso to sub-section (4) of Section 8
has been interpreted and explained by this Court in State of
Andhra Pradesh & Ors. v. M/s.Hyderabad Asbestos Cement
Production Limited & Ors. (1994 (5) S.C.C.100). It is
obvious that the said decision shall guide the authorities
in the matter. So far as the validity or genuineness of
those forms is concerned, that is a question fact to be
decided in each given case. No direction can be given in
that behalf.
The appeals are allowed accordingly. The appellants
shall be entitled to their costs which are quantified at the
rate of Rs. 5,000/- in each appeal.