Corporate Laws :- Sales Tax -Sales Tax Holidays =
whether the Government Order No.CI 30 SPC 96 dated 15th March, 1996, namely, the Industrial Policy merely provides for sales tax concession and incentives and nothing more.?
The core issue raised in these appeals, in our opinion, is no more res integra. It has been answered in the decision of this Court in “Malnad Areca Processing and Marketing Limited vs. Deputy Commissioner of Commercial Taxes (Assessment) and Others”, reported in (2008) 11 SCC 536.
This very Industrial Policy, 1996 was considered by the Court. The Court opined that
the same provides for exemption only in respect of sales tax and not for purchase tax as such.
As observed in the case of Malnad (supra), the State can levy tax both at the sale point and/or at the purchase point. That distinction being clear, the question of assuming that the purchase tax was also part of the industrial policy under consideration cannot be countenanced. As a result, we find no reason to deviate from the view taken by the High Court in following the principle expounded in the decision of Malnad (supra).
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).10680-10683 OF 2011
M/S HIGH RANGE COFFEE CURING PVT.LTD. APPELLANT(S)
VERSUS
THE STATE OF KARNATAKA & ORS.ETC. RESPONDENT(S)
WITH
CIVIL APPEAL NO.10684 OF 2011
O R D E R
1. Heard counsel for the parties.
2. The opening ground urged by the
appellant is that the High Court ought not to
have entertained the appeals on merits without
condoning the delay in filing of appeals. This
argument though attractive at the first blush,
does not take the matter any further as we find
the delay was only of 71 and 283 days
respectively and sufficient explanation has been
offered by the respondent(s) which could be
condoned in the interest of justice and we order
accordingly.
2
3. The core issue raised in these appeals,
in our opinion, is no more res integra. It has
been answered in the decision of this Court in
“Malnad Areca Processing and Marketing Limited
vs. Deputy Commissioner of Commercial Taxes
(Assessment) and Others”, reported in (2008) 11
SCC 536.
4. This very Industrial Policy, 1996 was
considered by the Court. The Court opined that
the same provides for exemption only in respect
of sales tax and not for purchase tax as such.
The relevant discussion in this behalf can be
discerned from paragraph Nos.15 to 19 of the
said decision, which read thus:
“15. In the government order what is
provided to new industrial units is
the sales tax exemption or deferral
of sales tax under the Act and the
Central Sales Tax Act, 1956 (in short
“the CST Act”).
16. Clause 5 of the Government
Order dated 15-3-1996 of the
Industrial Policy, 1996-2001 provides
for sales tax concession and
incentives. The said clause provides
for an option to industrial
investments in the tiny/SSI/medium
3
and large-scale sectors to claim
either sales tax exemption or sales
tax deferral.
17. A sale and a purchase are two
different aspects of the same
transaction. Whether sale or
purchase, it will have same
ingredients, both in common law and
also under the Sale of Goods Act. As
stated by this Curt in Devi Das Gopal
Krishnan v. State of Punjab1, the
transaction, which the sales tax laws
are concerned with, is a transfer of
property in goods for price, inter
vivos, both in the case of sale as
well as purchase.
18. In the government order, what
is provided to the new industrial
units, is an option to claim sales
tax exemption or deferment of sales
tax both under the Act and the CST
Act. In the field of taxation, it is
recognized that the power to classify
the objects or persons to be taxed or
exempted from levy is with the
legislature. It also enjoys the power
to select persons or transactions. A
law of the State, could therefore,
levy tax both at the sale point and
at the purchase point.
1 AIR 1967 SC 1895 = (1967) 3 SCR 557
4
19. Under the government order, the
policy of the Government as spelt out
is, that tiny and small-scale
industries and medium-and large-scale
industries may exercise their option
either for sales tax exemption or
sales tax deferment for number of
years prescribed in the government
order itself. In the context in which
these expressions are used, they only
mean “sales tax holiday” or exemption
from payment of sales tax for number
of years specified, depending on
where the tiny or small-scale
industry is located. “Sales tax”
refers to any tax which includes
within its scope all “business of
sale of goods” specified in the
Schedule. Similarly, “sales tax
deferral” only means the aforesaid
industries are entitled to collect
tax but they need not pay sales tax
collected immediately to the State.
If understood in this manner and
thereafter the New Industrial Policy
of the State Government for the years
1993-1998 and the exemption
notification is looked into, the only
conclusion that can be drawn is, what
is exempted under the notification
issued by the State Government is tax
5
leviable under Section 5 of the Act
on the goods manufactured and sold by
an industrial unit. Therefore, the
notification is in no way in variance
or contrary to the industrial policy
for the years 1993-1998. the above
position has been rightly highlighted
by the High Court.”
5. We are in agreement with the opinion as
recorded in the aforesaid decision, that the
Government Order No.CI 30 SPC 96 dated 15th
March, 1996, namely, the Industrial Policy
merely provides for sales tax concession and
incentives and nothing more.
6. Counsel for the appellant was at pains
to distinguish the judgment on the argument that
it has only considered the situation covered
under Section 6 of the Karnataka Sales Tax Act,
1957, whereas Section 5 of the Act deals with
both sale as well as purchase, and purchase
being the part of the same sale, the benefit
under the policy concerned must be extended also
for purchase, especially, because of the
amendment to the policy by inserting the
industry of the appellant in Appendix-IV. We are
6
not impressed by this submission.
7. The fact that the appellant/assessee’s
industry has been included or added in AppendixIV does not mean that the substance of the
policy has undergone any change. The purport of
amendment is only to include more industries
which were left out in the first notification of
15th March, 1996.
8. Counsel for the appellant had also
placed reliance on the Constitution Bench
decision of this Court in Devi Das Gopal
Krishnan (supra), in particular, paragraph 24,
which reads as under:
"Bearing that in mind let us look at
clause (ff) in Section 2 of the
Principal Act in which the said
clause was inserted. The ingredients
of the definition of "purchase" are
as follows : (i) there shall be
acquisition of goods; (ii) the
acquisition shall be for cash or
deferred payment or other valuable
consideration; (ii) the said valuable
consideration shall not be other than
under a mortgage, hypothecation,
charge or pledge. Clause (h) of
Section 2 defines thus :
7
"sale" means any transfer of
property in goods other than
goods specified in Schedule C
for cash or deferred payment or
other valuable consideration
but does not include a
mortgage, hypothecation, charge
or pledge.”
If we turn to the Sale of Goods Act,
Section 4 thereof define contract of
sale of goods. It reads :
"Contract of sale of goods is a
contract whereby the seller
transfers or agrees to transfer
the property in goods to the
buyer for a price...“
The essential requisite of sale are
(i) there shall be a transfer of
property or agreement to transfer
property by one party to another; and
(ii) it shall be for consideration of
money payment or promise thereof by
the buyer. A sale and a purchase are
different aspects of the same
transaction. If we look at it from
the standpoint of a purchaser it is
purchase and if we look at it from
the standpoint of the seller it is a
sale. Whether purchase or sale it
shall have the said ingredients both
in common law and under the Indian
8
Contract Act. 'Price' has been
defined in the Sale of Goods Act to
mean money consideration for the sale
of goods : see Section 2(10) of the
Indian Sale of Goods Act. It will,
therefore, be seen that the
definition of “purchase” in the Act
prima facie appears to be wider in
scope than “sale”. While transfer of
goods from one person to another is
the ingredient of “sale” in general
law, acquisition of goods, which may
in its comprehensive sense take in
voluntary as well as involuntary
transfers, is an ingredient of
“purchase” in clause (ff). While
“price”, i.e., money consideration,
is the ingredient of “sale”, cash,
deferred payment or any valuable
consideration is an ingredient of
'purchase’. But a closer scrutiny
compels us to give a restricted
meaning to the expression
"acquisition" and "price".
Acquisition is the act by which a
person acquires property in a thing.
"Acquire" is to become the owner of
the property. One can, therefore,
acquire a property either by
voluntary or involuntary transfer.
But the Sales Tax Act applies only to
9
"sale" as defined in the Act. Under
clause (ff) of Section 2 of the Act
it is defied as a transfer of
property. As purchase is only a
different, aspect of sale, looked at
from the stand point of the
purchaser, and as the Act imposes tax
at different points in respect of
sales, having regard to the purpose
of the sale, it is unreasonable to
assume that the Legislature
contemplated different categories of
transactions when the taxable event
is at the purchase point. Whether it
is sale or purchase the transaction
is the same. If it was a transfer
inter vivos, in the case of a sale,
it must equally be so in the case of
a purchase. Context, consistency and
avoidance of anomaly demand a
restricted meaning. That it must only
mean transfer is also made clear by
the nature of the transactions
excluded from the acquisition,
namely, mortgage, hypothecation,
charge or pledge-all of them belong
to the species of transfer. We must,
therefore, hold that the expression
"acquisition" in clause (ff) of
Section 2 of the Act means only
"transfer".
10
9. The exposition in paragraph 24 of the
stated decision extracted above itself
recognizes the distinction between sale and
purchase as different aspects of the same
transaction. As observed in the case of Malnad
(supra), the State can levy tax both at the sale
point and/or at the purchase point. That
distinction being clear, the question of
assuming that the purchase tax was also part of
the industrial policy under consideration cannot
be countenanced. As a result, we find no reason
to deviate from the view taken by the High Court
in following the principle expounded in the
decision of Malnad (supra).
10. The companion appeal, Civil Appeal
No.10684 of 2011, again raises a technical plea
regarding justness of exercise of jurisdiction
by the High Court in recalling the entire
decision dated 9th March, 2004 at the instance of
the appellant, who had merely moved an
application for recall/clarification of one
sentence occurring in the said decision. The
fact remains that the appellant, after recall of
11
the entire decision, participated in the appeal
proceedings before the Division Bench and argued
the matter on merits. As a result, this
technical plea cannot be the basis to undo the
entire judgment which otherwise is in conformity
with the legal principle stated in the case of
Malnad (supra).
11. Hence, these appeals must fail and the
same are dismissed accordingly. All pending
applications are also disposed of.
..................,J.
(A.M. KHANWILKAR)
..................,J.
(DINESH MAHESHWARI)
NEW DELHI
FEBRUARY 05, 2020
12
ITEM NO.101 COURT NO.7 SECTION IV-A
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 10680-10683/2011
M/S HIGH RANGE COFFEE CURING PVT.LTD. Appellant(s)
VERSUS
THE STATE OF KARNATAKA & ORS. Respondent(s)
WITH
C.A. No. 10684/2011 (IV-A)
Date : 05-02-2020 These appeals were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE A.M. KHANWILKAR
HON'BLE MR. JUSTICE DINESH MAHESHWARI
For Appellant(s) Mr. Yashraj Singh Deora, Adv.
Ms. Shivangi Sud, Adv.
Ms. Sonal Mashankar, Adv.
For M/S. Mitter & Mitter Co., AOR
For Respondent(s) Mr. Basava prabhu S. Patil, Sr. Adv.
Mr. V. N. Raghupathy, AOR
Mr. Manendra Pal Gupta, Adv.
Ms. Rachitha Hirenath, Adv.
Ms. Rudrali Patil, Adv.
Mr. Joseph Aristotle S., AOR
Ms. Radha Rangaswamy, AOR
UPON hearing the counsel the Court made the following
O R D E R
The appeals are dismissed and all pending
applications are also disposed of in terms of
the signed reportable order.
(NEETU KHAJURIA)
COURT MASTER
(VIDYA NEGI)
COURT MASTER
(Signed reportable order is placed on the file.)
whether the Government Order No.CI 30 SPC 96 dated 15th March, 1996, namely, the Industrial Policy merely provides for sales tax concession and incentives and nothing more.?
The core issue raised in these appeals, in our opinion, is no more res integra. It has been answered in the decision of this Court in “Malnad Areca Processing and Marketing Limited vs. Deputy Commissioner of Commercial Taxes (Assessment) and Others”, reported in (2008) 11 SCC 536.
This very Industrial Policy, 1996 was considered by the Court. The Court opined that
the same provides for exemption only in respect of sales tax and not for purchase tax as such.
As observed in the case of Malnad (supra), the State can levy tax both at the sale point and/or at the purchase point. That distinction being clear, the question of assuming that the purchase tax was also part of the industrial policy under consideration cannot be countenanced. As a result, we find no reason to deviate from the view taken by the High Court in following the principle expounded in the decision of Malnad (supra).
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).10680-10683 OF 2011
M/S HIGH RANGE COFFEE CURING PVT.LTD. APPELLANT(S)
VERSUS
THE STATE OF KARNATAKA & ORS.ETC. RESPONDENT(S)
WITH
CIVIL APPEAL NO.10684 OF 2011
O R D E R
1. Heard counsel for the parties.
2. The opening ground urged by the
appellant is that the High Court ought not to
have entertained the appeals on merits without
condoning the delay in filing of appeals. This
argument though attractive at the first blush,
does not take the matter any further as we find
the delay was only of 71 and 283 days
respectively and sufficient explanation has been
offered by the respondent(s) which could be
condoned in the interest of justice and we order
accordingly.
2
3. The core issue raised in these appeals,
in our opinion, is no more res integra. It has
been answered in the decision of this Court in
“Malnad Areca Processing and Marketing Limited
vs. Deputy Commissioner of Commercial Taxes
(Assessment) and Others”, reported in (2008) 11
SCC 536.
4. This very Industrial Policy, 1996 was
considered by the Court. The Court opined that
the same provides for exemption only in respect
of sales tax and not for purchase tax as such.
The relevant discussion in this behalf can be
discerned from paragraph Nos.15 to 19 of the
said decision, which read thus:
“15. In the government order what is
provided to new industrial units is
the sales tax exemption or deferral
of sales tax under the Act and the
Central Sales Tax Act, 1956 (in short
“the CST Act”).
16. Clause 5 of the Government
Order dated 15-3-1996 of the
Industrial Policy, 1996-2001 provides
for sales tax concession and
incentives. The said clause provides
for an option to industrial
investments in the tiny/SSI/medium
3
and large-scale sectors to claim
either sales tax exemption or sales
tax deferral.
17. A sale and a purchase are two
different aspects of the same
transaction. Whether sale or
purchase, it will have same
ingredients, both in common law and
also under the Sale of Goods Act. As
stated by this Curt in Devi Das Gopal
Krishnan v. State of Punjab1, the
transaction, which the sales tax laws
are concerned with, is a transfer of
property in goods for price, inter
vivos, both in the case of sale as
well as purchase.
18. In the government order, what
is provided to the new industrial
units, is an option to claim sales
tax exemption or deferment of sales
tax both under the Act and the CST
Act. In the field of taxation, it is
recognized that the power to classify
the objects or persons to be taxed or
exempted from levy is with the
legislature. It also enjoys the power
to select persons or transactions. A
law of the State, could therefore,
levy tax both at the sale point and
at the purchase point.
1 AIR 1967 SC 1895 = (1967) 3 SCR 557
4
19. Under the government order, the
policy of the Government as spelt out
is, that tiny and small-scale
industries and medium-and large-scale
industries may exercise their option
either for sales tax exemption or
sales tax deferment for number of
years prescribed in the government
order itself. In the context in which
these expressions are used, they only
mean “sales tax holiday” or exemption
from payment of sales tax for number
of years specified, depending on
where the tiny or small-scale
industry is located. “Sales tax”
refers to any tax which includes
within its scope all “business of
sale of goods” specified in the
Schedule. Similarly, “sales tax
deferral” only means the aforesaid
industries are entitled to collect
tax but they need not pay sales tax
collected immediately to the State.
If understood in this manner and
thereafter the New Industrial Policy
of the State Government for the years
1993-1998 and the exemption
notification is looked into, the only
conclusion that can be drawn is, what
is exempted under the notification
issued by the State Government is tax
5
leviable under Section 5 of the Act
on the goods manufactured and sold by
an industrial unit. Therefore, the
notification is in no way in variance
or contrary to the industrial policy
for the years 1993-1998. the above
position has been rightly highlighted
by the High Court.”
5. We are in agreement with the opinion as
recorded in the aforesaid decision, that the
Government Order No.CI 30 SPC 96 dated 15th
March, 1996, namely, the Industrial Policy
merely provides for sales tax concession and
incentives and nothing more.
6. Counsel for the appellant was at pains
to distinguish the judgment on the argument that
it has only considered the situation covered
under Section 6 of the Karnataka Sales Tax Act,
1957, whereas Section 5 of the Act deals with
both sale as well as purchase, and purchase
being the part of the same sale, the benefit
under the policy concerned must be extended also
for purchase, especially, because of the
amendment to the policy by inserting the
industry of the appellant in Appendix-IV. We are
6
not impressed by this submission.
7. The fact that the appellant/assessee’s
industry has been included or added in AppendixIV does not mean that the substance of the
policy has undergone any change. The purport of
amendment is only to include more industries
which were left out in the first notification of
15th March, 1996.
8. Counsel for the appellant had also
placed reliance on the Constitution Bench
decision of this Court in Devi Das Gopal
Krishnan (supra), in particular, paragraph 24,
which reads as under:
"Bearing that in mind let us look at
clause (ff) in Section 2 of the
Principal Act in which the said
clause was inserted. The ingredients
of the definition of "purchase" are
as follows : (i) there shall be
acquisition of goods; (ii) the
acquisition shall be for cash or
deferred payment or other valuable
consideration; (ii) the said valuable
consideration shall not be other than
under a mortgage, hypothecation,
charge or pledge. Clause (h) of
Section 2 defines thus :
7
"sale" means any transfer of
property in goods other than
goods specified in Schedule C
for cash or deferred payment or
other valuable consideration
but does not include a
mortgage, hypothecation, charge
or pledge.”
If we turn to the Sale of Goods Act,
Section 4 thereof define contract of
sale of goods. It reads :
"Contract of sale of goods is a
contract whereby the seller
transfers or agrees to transfer
the property in goods to the
buyer for a price...“
The essential requisite of sale are
(i) there shall be a transfer of
property or agreement to transfer
property by one party to another; and
(ii) it shall be for consideration of
money payment or promise thereof by
the buyer. A sale and a purchase are
different aspects of the same
transaction. If we look at it from
the standpoint of a purchaser it is
purchase and if we look at it from
the standpoint of the seller it is a
sale. Whether purchase or sale it
shall have the said ingredients both
in common law and under the Indian
8
Contract Act. 'Price' has been
defined in the Sale of Goods Act to
mean money consideration for the sale
of goods : see Section 2(10) of the
Indian Sale of Goods Act. It will,
therefore, be seen that the
definition of “purchase” in the Act
prima facie appears to be wider in
scope than “sale”. While transfer of
goods from one person to another is
the ingredient of “sale” in general
law, acquisition of goods, which may
in its comprehensive sense take in
voluntary as well as involuntary
transfers, is an ingredient of
“purchase” in clause (ff). While
“price”, i.e., money consideration,
is the ingredient of “sale”, cash,
deferred payment or any valuable
consideration is an ingredient of
'purchase’. But a closer scrutiny
compels us to give a restricted
meaning to the expression
"acquisition" and "price".
Acquisition is the act by which a
person acquires property in a thing.
"Acquire" is to become the owner of
the property. One can, therefore,
acquire a property either by
voluntary or involuntary transfer.
But the Sales Tax Act applies only to
9
"sale" as defined in the Act. Under
clause (ff) of Section 2 of the Act
it is defied as a transfer of
property. As purchase is only a
different, aspect of sale, looked at
from the stand point of the
purchaser, and as the Act imposes tax
at different points in respect of
sales, having regard to the purpose
of the sale, it is unreasonable to
assume that the Legislature
contemplated different categories of
transactions when the taxable event
is at the purchase point. Whether it
is sale or purchase the transaction
is the same. If it was a transfer
inter vivos, in the case of a sale,
it must equally be so in the case of
a purchase. Context, consistency and
avoidance of anomaly demand a
restricted meaning. That it must only
mean transfer is also made clear by
the nature of the transactions
excluded from the acquisition,
namely, mortgage, hypothecation,
charge or pledge-all of them belong
to the species of transfer. We must,
therefore, hold that the expression
"acquisition" in clause (ff) of
Section 2 of the Act means only
"transfer".
10
9. The exposition in paragraph 24 of the
stated decision extracted above itself
recognizes the distinction between sale and
purchase as different aspects of the same
transaction. As observed in the case of Malnad
(supra), the State can levy tax both at the sale
point and/or at the purchase point. That
distinction being clear, the question of
assuming that the purchase tax was also part of
the industrial policy under consideration cannot
be countenanced. As a result, we find no reason
to deviate from the view taken by the High Court
in following the principle expounded in the
decision of Malnad (supra).
10. The companion appeal, Civil Appeal
No.10684 of 2011, again raises a technical plea
regarding justness of exercise of jurisdiction
by the High Court in recalling the entire
decision dated 9th March, 2004 at the instance of
the appellant, who had merely moved an
application for recall/clarification of one
sentence occurring in the said decision. The
fact remains that the appellant, after recall of
11
the entire decision, participated in the appeal
proceedings before the Division Bench and argued
the matter on merits. As a result, this
technical plea cannot be the basis to undo the
entire judgment which otherwise is in conformity
with the legal principle stated in the case of
Malnad (supra).
11. Hence, these appeals must fail and the
same are dismissed accordingly. All pending
applications are also disposed of.
..................,J.
(A.M. KHANWILKAR)
..................,J.
(DINESH MAHESHWARI)
NEW DELHI
FEBRUARY 05, 2020
12
ITEM NO.101 COURT NO.7 SECTION IV-A
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 10680-10683/2011
M/S HIGH RANGE COFFEE CURING PVT.LTD. Appellant(s)
VERSUS
THE STATE OF KARNATAKA & ORS. Respondent(s)
WITH
C.A. No. 10684/2011 (IV-A)
Date : 05-02-2020 These appeals were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE A.M. KHANWILKAR
HON'BLE MR. JUSTICE DINESH MAHESHWARI
For Appellant(s) Mr. Yashraj Singh Deora, Adv.
Ms. Shivangi Sud, Adv.
Ms. Sonal Mashankar, Adv.
For M/S. Mitter & Mitter Co., AOR
For Respondent(s) Mr. Basava prabhu S. Patil, Sr. Adv.
Mr. V. N. Raghupathy, AOR
Mr. Manendra Pal Gupta, Adv.
Ms. Rachitha Hirenath, Adv.
Ms. Rudrali Patil, Adv.
Mr. Joseph Aristotle S., AOR
Ms. Radha Rangaswamy, AOR
UPON hearing the counsel the Court made the following
O R D E R
The appeals are dismissed and all pending
applications are also disposed of in terms of
the signed reportable order.
(NEETU KHAJURIA)
COURT MASTER
(VIDYA NEGI)
COURT MASTER
(Signed reportable order is placed on the file.)
