Full Judgment Text
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PETITIONER:
COMMISSIONER, SALES TAX, U.P.
Vs.
RESPONDENT:
AGRA BELTING WORKS, AGRA
DATE OF JUDGMENT29/04/1987
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
PATHAK, R.S. (CJ)
RAY, B.C. (J)
CITATION:
1987 SCR (3) 93 1987 SCC (3) 140
JT 1987 (2) 514 1987 SCALE (1)1061
ACT:
U.P. Sales Tax Act, 1948--Section 3-AD--Imposition of
sales tax on ‘beltings of all kinds’--Effect of Notifica-
tions of 1958 and 1973.
HEADNOTE:
The State Government issued a Notification on November
25, 1958 In exercise of power vested under Section 4 of the
U.P. Sales Tax Act, 1948. This Notification exempted ’cotton
fabrics of all varieties’ from sales tax. Under it, patta as
an item of cotton fabric stood exempted from tax liability.
Subsequently, another Notification was issued on December 1,
1973 under Section 3-A of the Act. This Notification pre-
scribed a rate of tax higher than that provided by Section 3
of the Act which contains the charging provision and pre-
scribes a uniform rate of tax on sales. Section 3-A empowers
the State Government to modify the rate of tax by Notifica-
tion. This Notification of 1973 was issued without withdraw-
ing the earlier Notification of 1958.
The High Court, affirming the order of the Tribunal,
held that in the absence of a Notification withdrawing the
earlier Notification of 1958, sales tax would not be exigi-
ble in terms of the Notification of 1973.
Allowing the Appeal,
HELD: (Per majority Pathak, CJI and Ranganath Misra, J.,
Ray, J. dissenting)
1. The High Court was not justified in holding that in
the absence of a notification withdrawing the earlier Noti-
fication of 1958, sales tax would not be exigible in terms
of the Notification of 1973. The order of the Tribunal,
which has been affirmed by the High Court, is set aside and
the assessment restored. [96G]
2. The Notification of 1958 issued under Section 4 of
the Act exempted ’cotton fabrics of all varieties’ from
sales tax. The Notification of 1973 under Section 3-A of the
Act prescribed sales tax of 7% on the sale of beltings of
all kinds. There is no dispute that patta is a kind of
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belting material and, on being treated as cotton fabric, was
exempted from sales tax. [95FG]
3. Section 3 is the charging provision; Section 3-A
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authorises variation of the rate of tax and Section 4 pro-
vides for exemption from the tax. When after a Notification
under Section 4 granting exemption from liability, a subse-
quent Notification under Section 3-A prescribes the rate of
tax, the intention is to withdraw the exemption and make the
sale liable to tax at the rate prescribed in the Notifica-
tion. [96B-D]
4. 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 Notifi-
cation of recall of exemption is a condition precedent to
imposing tax at any prescribed rate by a valid Notification
under Section 3-A, the second Notification can easily be
treated as a combined Notification--both for withdrawal of
exemption and also for providing higher tax. [96D-E]
5. The exemption was in regard to a class of goods and
while the exemption continues, a specific item has now been
notified under Section 3-A of the Act. [96F]
(Per Ray, J. dissenting)
1. Cotton beltings fail within ’beltings of all kinds’
as notified under Section 4 of the Act, being exempt from
the imposition of sales tax. As there is a general exemption
granted by the Notifications issued in 1957 and 1958 exempt-
ing ’cotton fabrics of all kinds’, it is not possible to
hold, in any view of the matter, that it will be excisable
to sales tax on the basis of the Notification dated December
1, 1973 under Section 3-A of the said Act, by the Govern-
ment. i98F; G-H]
2. So long as the general exemption granted under Sec-
tion 4 with regard to ’cotton fabrics of all kinds’ contin-
ues, no sales tax can be imposed on beltings of all kinds
which fail within the ’cotton fabrics of all kinds’ and the
general exemption under Section 4 will prevail over the
Notification made under Section 3-A of the Sales Tax Act.
[99GH]
3. It is not possible to subscribe to the view that
since the Notification under Section 3-A has been made
subsequent to the Notification issued under Section 4 of the
Act, the subsequent Notification under Section 3-A will
prevail over the general exemption granted under Section 4
of the Act. [99H; 100A]
95
Porritts & Spencer Asia Ltd. v. State of Haryana, [1978]
42 S.T.C. 433 (SC); State of Tamil Nadu v. Navinchandra &
Company, [1981] (48) S.T.C. 118 (Madras); Delhi Cloth and
General Mills Co. Ltd. v. State of Rajasthan and Others,
[1980] 4 S.C.C. 71; Commissioner of Sales Tax v. M/s Dayal
Singh Kulfi Wala, Lucknow, [1980] U.P.T.C. 360 and Commis-
sioner of Sales Tax v. Rita Ice Cream Co., Gorakhpur, [1981]
U.P.T.C. 1239, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1134 (NT)
of 1987.
From the Judgment and Order dated 2.3. 1984 of the
Allahabad High Court in Sales Tax Revision No. 146 of 1983.
Prithvi Raj, Ashok K. Srivastava for the Appellant.
S.T. Desai, K.B. Rohtagi, S.K. Dhingra, Baldev Atreya
and Shashank Shekhar for the Respondent.
The following Judgments of the Court were delivered
RANGANATH MISRA, J. Special leave granted. Delay of six
days is condoned. The short question for consideration in
this appeal at the instance of the Revenue is whether the
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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
exigible in terms of the notification dated 1.12. 1973
issued under section 3A of that Act.
The notification of 1958 exempted ’cotton fabrics of all
varieties’ from sales tax. It is not disputed that under it
sale of patta, the goods in question on being treated as
cotton fabric was exempted from sales tax. The notification
of 1973 made under section 3A of the Act prescribed sales
tax of seven per cent on the sale of beltings of all kinds.
There is no dispute now that patta is a kind of belting
material.
Section 3 of the Act contains the charging provision and
prescribes a uniform rate of tax on sales. Section 3A empow-
ers the State Government to modify the rate of tax by noti-
fication. The notification of 1973 in fact prescribes a rate
of tax higher than provided by section 3. In 1958, under the
notification referred to above, patta as an item of cotton
fabric stood exempted from tax liability. The High Court has
96
referred to some of its earlier decisions and has concluded
thus:
"Thus the consistent view of this court
throughout has been that by issuing a separate
notification under section 3A, the earlier
exemption granted under section 4 of the Act
cannot be negatived. If the State wanted to
tax ’beltings of all kinds’, it has to amend
the general notification issued under section
4 by deleting cotton fabric belts from the
notification issued under section 4 of the
Act.’’
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 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 notifica-
tion--both for withdrawal of exemption and also for provid-
ing 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 notifica-
tion. 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.
The appeal is allowed. The order of the Tribunal which
has been affirmed by the High Court is set aside and the
assessment is restored. Parties are directed to bear their
respective costs throughout.
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B.C. Ray, J. I have had the privilege of going through
the judgment rendered by my learned brother but I am unable
to concur with the reasonings recorded by my learned brother
in his judgment so far as it relates to the scope and effect
of the notification dated 1.12.1973 made under Section 3A of
the U.P. Sales Tax Act, 1948 by providing for imposition of
sales tax on "beltings of all kinds" for the reasons given
hereunder:-
97
Under Section 4 of the 1J.P. Sales Tax Act, 1948 the
Government issued two notifications No. S.T. 4486/x dated
14.12.1957 and No. 4064/x-960(4)/58 dated 25.11. 1958 where-
by "cotton fabrics of all kinds" were exempted from the
imposition of sales tax under the Act. Thereafter on 1st of
December 1973 a notification was issued by the Government
under Section 3-A of the said Act which introduces in the
Schedule in Item No. 8 "beltings of all kinds" for imposi-
tion of sales tax. The sole question arising in this appeal
is whether beltings of all kinds are excisable to sales tax
by virtue of the notification dated 1.12. 1973 even though
they fall within "cotton fabrics of all kinds" which are
exempted from tax by virtue of the notifications dated
14.12. 1957 and 25.11. 1958. Similar question arose in the
case of Porritts & Spencer Asia Ltd. v. State of Haryana,
[1978] 42 S.T.C. 433 (SC) before this Court for considera-
tion. It was held by this Court that the words "all varie-
ties of cotton, woollen or silken textiles". In item 30 of
Schedule B to the Punjab General Sales Tax Act must be
interpreted according to its popular sense, meaning "that
sense which people conversant with the subject matter with
which the statute is dealing would attribute to it." This
Court further observed "whatever be the mode of weaving
employed, woven fabric would be "textiles". What is neces-
sary is no more than weaving of yarn and weaving would mean
binding or putting together by some process so as to form a
fabric. Moreover a textile need not be of any particular
size or strength or weight. It may be in small pieces or in
big rolls: It may be weak or strong, light or heavy,
bleached or dyed, according to the requirement of the pur-
chaser. The use to which it may be put is also immaterial
and does not bear in its character as a textile. It may be
used for making wearing apparel, or it may be used as a
covering or bed-sheet or it may be used as tapestry or
upholstery or as duster for clearing or as towel for drying
the body. A textile may have diverse uses and it is not the
use which determines its character as textile."
It was also held that the textile has only one meaning
namely a woven fabric and that is the meaning which it bears
in ordinary parlance. The Court therefore held that dryer
felts are textiles as these were made of yarn and the proc-
ess employed was that of weaving according to warp and woof
pattern. It therefore falls within the meaning of textiles
and so exempted from tax.
Similar question arose in the case of State of Tamil
Nadu v. Navinchandra & Company, [1981] (48) S.T.C. 118
(Madras) where exemption was claimed on the basis of a
notification under Section 4 of the Tamil Nadu General Sales
Tax Act 1959 in respect of hair-belting
98
and cotton-belting as falling within item No. 4 of the Third
Schedule of the said Act. This item No. 4 reads as follows:-
"All varieties of textiles (other than durries, carpets,
druggets and pure silk cloth) made wholly or partly of
cotton, staple fibre, rayon, artificial silk or wool includ-
ing handkerchiefs, towels, napkins, dusters, cotton velvets
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and velvetten, tapes, niwars and laces and hosiery cloth in
lengths."
It was held that textiles haying a wider meaning than fab-
rics cottonbelting and hair-belting were included in the
expression cotton fabrics and as such they are exempted from
taxation falling within Item No. 4 of the Third Schedule as
it stood prior to its amendment.
It is pertinent to mention in this connection that in
the case of Delhi cloth and General Mills Co. Ltd. v. State
of Rajasthan and Others, [1980] (4) S.C.C. 71 the question
arose whether rayon tyre cord fabric manufactured by the
appellate company included within item No. 18 inserted in
the Schedule by the Rajasthan Taxation Laws (Amendment) Act,
1964 and rayon or artificial silk fabrics extended to exemp-
tion under Section 4(1) of the Rajasthan Sales Tax Act which
provides for exemption of sales tax of goods specified in
the Schedule. It has been held that the product falls within
the exempted item rayon or artificial silk fabrics in item
No. 18 of the Schedule inserted by Section 4 of the said
Act. This judgment was rendered by this Court to which one
of us was a party.
In the instant case the question arising for considera-
tion is whether patta covered by "cotton fabrics of all
varieties" is excisable to sales tax under the notification
dated 1.12. 1973 namely "beltings of all kinds". In view of
the decisions referred to hereinbefore cotton beltings fall
within the textiles of all varieties as notified under
Section 4 of the said Act being exempt from the imposition
of sales tax. The question that falls for consideration is
what is the effect of the notification issued under Section
3-A of the said Act on 1.12. 1973 mentioned in the Schedule
"beltings of all kinds". There is no dispute nor any chal-
lenge that these beltings.are cotton beltings falling within
cotton fabrics of all kinds and as there is a general exemp-
tion granted by the notification issued in 1957 and 1958
exempting ’cotton fabrics of all kinds’, it is not possible
to hold in any view of the matter that it will be excisable
to sales tax on the basis of the notification dated
1.12.1973 under Section 3-A of the said Act, by the Govern-
ment.
The next question for consideration is what is the effect of
a
99
notification under Section 3-A including an item in the
Schedule for imposition of sales tax though there is a
general exemption from sales tax under Section 4 of the
Sales Tax Act. It has been held in the case of Commissioner
of Sales Tax v. M/s Dayal Singh Kulfi Wala, Lucknow, [1980]
U.P.T.C. 360 as follows:-
"A fiscal statute like the one before me has to be
interpreted strictly. If there is any ambiguity or doubt it
should be resolved in favour of the subject. There is no
equity about tax. The taxing liability must be express and
absolute. In the present case, the specification of the
goods for purpose of section 3-A is one thing, but whether
or not such goods would be exempted from tax is the power
conferred upon the State Government under section 4 of the
Act. So long the exemption continues, the dealer can cer-
tainly urge and with jurtisification that the mere specifi-
cation of goods under section 3-A or declaring the point of
sales at such turnover liable to tax would not take away the
exemption from payment of tax which the goods enjoyed by
virtue of the exercise of power by the State Government
under Section 4 of the Act. The operating fields of the two
sections namely sections 3-A by itself cannot override the
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power under section 4. On the other hand, if certain goods
have been classified for purposes of by the State Govern-
ment, if such goods had been exempted from sales, the De-
partment cannot contend that the exemption should not be
construed in favour of the assessee."
In this case the question arose whether the general
exemption granted under Section 4 of the Act in respect of
milk and milk products is sufficient to exempt kulfi and
lassi in respect of which a separate notification was issued
under Section 3-A for imposition of tax.
A similar question also arose in the case of Commission-
er of Sales Tax v. Rita Ice Cream Co., Gorakhpur, [1981]
U.P.T.C. 1239 and it was held that so long as the general
exemption under Section 4 continues a particular item noti-
fied under Section 3-A of the Sales Tax Act cannot be taxed.
On a conspectus of all these decisions aforesaid, the
only irresistible inference follows that so long as the
general exemption granted under Section 4 with regard to
cotton fabrics of all kinds continues no sales tax can be
imposed on beltings of all kinds which fall within the
cotton fabrics of all kinds and the general exemption under
section 4 will prevail over the notification made under
section 3-A of the Sales Tax Act. I am unable to subscribe
to the view that since the notification under section 3-A of
the U.P. Sales Tax Act has been made subse-
100
quent to the notification issued under Section 4 of the said
Act, the subsequent notification under Section 3-A will
prevail over the general exemption granted under Section 4
of the said Act. In my considered opinion the reasonings and
conclusions arrived at by the High Court are unexception-
able.
The appeal is accordingly dismissed and the judgment and
order of the High Court of Allahabad is hereby affirmed.
N.P.V. Appeal
allowed.
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