REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1410 OF 2007
M/s. CASIO India Co. Pvt. Ltd. ... Appellant
Versus
State of Haryana ... Respondent
With
Civil Appeal No. 1411 of 2007
Civil Appeal No. 5450 of 2013
J U D G M E N T
Dipak Misra, J.
Regard being had to the similitude of the issue in all the appeals,
they were heard together and disposed of by a common judgment. As the
principal principle that constitutes the bedrock of the decision in the
subject matter of assail in Civil Appeal No. 1410 of 2007, we shall advert
to the facts exposited therein and also dwell upon the legal issue and,
needless to say, that would govern the fate of all the appeals.
2. Presently to the layout of facts in Civil Appeal No. 1410 of 2007.
The appellant-company is engaged in the business of manufacture and sale of
Radio Pagers having its unit at plot No. 4, Phase-I, Udyog Vihar, Gurgaon,
Haryana. It is registered under the provisions of Haryana General Sales Tax
Act, 1973 (for short, “the Act”), Haryana General Sales Tax Rules, 1975
(for short, “the Rules”) and the Central Sales Tax Act, 1956 (for brevity,
“CST Act”) In the year 1995-96, the assessee-company after purchase of
Radio Pagers from M/s Bharati Telecom Limited was also engaged in inter-
state sale of the said Radio Pagers and in course of the said transaction,
did not charge any sales tax from the purchasers on the basis of
Notification No. SO 89/CA.74/56/S.8/95 dated 04.09.1995 issued under
Section 8(5) of the CST Act read with Rule 28A(4)(c) of the Rules. The
appellant filed its return and claimed exemption placing reliance on the
said notification, but the claim of exemption put forth by the assessee was
not accepted by the assessing officer vide assessment order dated October
05, 2001. Being aggrieved by the order of assessment, the appellant
preferred an appeal before the Joint Excise and Taxation Commissioner
(Appeal), Rohtak Circle, Rohtak who dismissed the appeal vide order dated
May 2, 2002.
3. Being dissatisfied with the order passed in appeal, the appellant
knocked at the doors of the Sales Tax Tribunal, Chandigarh (for short ‘the
tribunal’) which dismissed the appeal by its order dated September 9, 2002.
The dismissal of the appeal by the tribunal compelled the appellant to
prefer Writ Petition No. 2346 of 2003, seeking a direction to the tribunal
to make a reference to the High Court. The High Court accepting the prayer
of the assessee called for a reference from the tribunal, and the tribunal
vide its order dated 14.10.2003 in S.T.M. No. 82 of 2002-03 made a
reference to the High Court for its opinion.
4. After stating the case, the tribunal referred the following questions
for the opinion of the High Court:-
“(i) Whether the notification dated 04.09.1995 issued under Section 8(5) of
the CST Act is relatable to the exemption of goods or the person selling
it?
(ii) Whether in view of the notification dated 04.09.1995 issued under
Section 8(5) of the CST Act and Rule 28A of the Rules, the inter-state
sales of the goods manufactured by an “exempted unit”, even by any other
dealer, is exempted from the levy of the Central Sales Act?”
5. Before the High Court it was contended by the assessee that the
notification dated 04.09.1995 issued by the State Government provides for
grant of exemption on the sale of goods manufactured in the State of
Haryana by any dealer holding valid exemption certificate under Rule 28 of
the Rules and not to the dealer and, therefore, the goods sold by the
assessee in the course of inter-state trade were not liable to be taxed.
In support of the said proposition, reliance was placed on International
Cotton Corporation (P) Ltd. v. Commercial Tax Officer, Hubli[1], Pine
Chemicals Ltd. and others v. Assessing Authority and others[2], Khadi and
Village Soap Industries Association and another v. State of Haryana and
others[3], State of Rajasthan v. Sarvotam Vegetables Products[4] and
Commissioner of Sales Tax v. Industrial Coal Enterprises[5].
6. On behalf of the revenue, it was urged that the notification in
question provided for grant of exemption only on the sale of goods
manufactured in the State by a dealer holding valid exemption certificate
under Rule 28 of the Rules, subject to the condition that such dealer had
not charged tax under the CST Act on the sale of goods manufactured by it,
and not in respect of the sale of goods by other dealers in the course of
inter-state trade. It was the stand of the revenue that the assessee had
not been granted exemption certificate under Rule 28A of the Rules and as
such, the goods sold by it in course of inter-state trade were not exempted
from the tax under the CST Act merely because the same had been purchased
from M/s Bharati Telecom Limited which possesses a valid exemption
certificate. Reliance was placed on the decision of this Court in State
Level Committee and another v. Morgardhsammar India Ltd.[6].
7. The High Court referred to Section 8(2A) and 5 of the CST Act and
Rule 28A(2)(n) and (4)(c) of the Rules and notification dated 04.09.1995;
distinguished the authorities cited by the assessee and came to hold that
the expression “notional sales tax liability” as used in Rule 28A(2)(n)
takes within its fold not only the amount of tax payable on the sales of
finished goods of the eligible industrial unit under the Act but also the
amount of tax payable under the CST Act on the sales of finished products
of the eligible industrial units made in the course of inter-state trade
or commerce and branch transfers or consignment sales outside the State of
Haryana. Reference was made to clause (c) of sub-rule (4) of Rule 28A of
the Rules to opine that the scope of exemption was extended to the goods
manufactured by an eligible industrial unit availing exemption under Rule
28A at all successive stage(s) of sale or purchase subject to the condition
that the dealer effecting successive purchase or sale furnishing a
certificate in form ST-14A which is required to be obtained from the
assessing authority duly filled in and signed by the registered dealer to
whom such goods were sold. Thereafter, the High Court analysed the Rules
and in that context stated thus:-
“A reading of the provisions reproduced above shows that the expression
“notional sales tax liability” takes within its fold not only the amount of
tax payable on the sales of finished goods of the eligible industrial unit
under the State Act, but also the amount of tax payable under the Central
Act on the sales of finished products of the eligible industrial unit made
in the course of inter-state trade or commerce and branch transfers or
consignment sales outside the State of Haryana (Rule 28A (2) (n)). Clause
(c) of sub-rule (4) of Rule 28A extends the scope of exemption to the
goods manufactured by an eligible industrial unit availing exemption under
Rule 28A at all successive stage(s) of sale or purchase subject to the
condition that the dealer effecting successive purchase or sale furnishes
to the Assessing a certificate in form ST-14A which is required to be
obtained from the Assessing Authority duly filled in and signed by the
Registered dealer to whom such goods were sold. Sub-rule (6) of Rule 28A
lays down the mechanism for grant of exemption/entitlement certificate. Sub-
rule (7) envisages renewal of exemption certificate and lays down the
procedure for grant of renewal. Section 8(2A) of the Central Act contains a
non-obstante clause. It lays down that notwithstanding anything contained
in Section 6(1A) or sub-section (1) or clause (b) of sub-Section (2) of
Section 8, the tax payable under the Central Act by a dealer on his
turnover in so far as the turnover or a part thereof relates to the sale of
any goods, the sale or purchase of which is exempted from tax under the
State Act or is subjected to tax at a rate lower than 4% shall be nil or
shall be calculated at the lower rate. Sub-section (5) of Section 8 also
begins with a non-obstante clause. It empowers the State Government to
grant exemption from payment of tax or levy of tax at a lower rate on the
dealer having his place of business in respect of the sales made by him in
the course of inter-State trade or commerce. It also empowers the State
Government to direct that no tax shall be payable under the Central Act or
tax shall be calculated at lower rates in respect of all sales of goods or
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 class of dealers specified in the notification.
Notification dated 4.9.1995 declares that no tax shall be payable under the
Central Act w.e.f. 1.4.1988 on the sale of goods manufactured in the State
of Haryana by any dealer holding a valid exemption certificate under Rule
28A of the Rules, provided that such dealer has not charged tax under the
Central Act on the sale of goods manufactured by him.”
8. After so stating, the High Court referred to the notification dated
04.09.1995 and observed that it was not happily worded and thereafter, it
proceeded to hold that the tribunal was correct in following its earlier
order for arriving at the conclusion that the notification did not exempt
the goods sold in the course of inter-state trade by dealer other than
those who held valid exemption certificate granted under Rule 28A of the
Rules. It further ruled that if the State Government wanted to extend the
benefit of exemption from payment of tax under the CST Act to the sale of
goods effected by a dealer in the course of inter-state trade irrespective
of the fact that such dealer did not hold valid exemption certificate under
Rule 28A of the Rules, then it would have incorporated the language of Rule
28A(4)(c) of the Rules in the notification and would not have put a rider
that such dealer should not have charged tax under the CST Act on the sale
of goods manufactured by it.
9. Thus, the ultimate conclusion recorded by the High Court is that
successive sales of goods manufactured by dealer holding valid exemption
certificate were exempt from payment of sales tax so long as they were
inter-state sales but in respect of sale of goods by a dealer not holding
exemption certificate under Rule 28A in the course of inter-state trade,
the benefit of exemption envisaged under notification dated 04.09.1995 was
not available to such dealer. The Division Bench proceeded to clarify that
in respect of stages of sale which are exempt from payment of tax under the
Act are covered by Rule 28A(4)(c) but notification dated 04.09.1995 was
applicable only to sale of goods manufactured by the exempted unit. Being
of this view, it answered the reference in favour of the revenue and
against the assessee.
10. Mr. Balbir Singh, learned senior counsel appearing for the appellant,
has submitted that though the notification was made under the CST Act, it
exempts goods as well as manufacture. Learned senior counsel would submit
that on a plain reading of the notification, it is demonstrable that the
exemption is on the sale of goods and there is no reference to unit or
category of dealers for the purpose of extending the exemption. Once the
language is clear, submits Mr. Singh, there is no scope of searching for
intendment and, in fact, a bare perusal of the notification is sufficient
to determine its applicability or non-applicability. To sustain the
submission, he has drawn our attention to the authority in Govt. of A.P &
others. v. P. Laxmi Devi[7]; Ranbaxy Laboratories Ltd. v. Union of India
and others[8]; Bansal Wires Industries Ltd. & another v. State of Uttar
Pradesh and others[9] and Parle Biscuits (P) Ltd. v. State of Bihar &
others[10]. Learned senior counsel has further contended that the High
Court has committed an error in noting that in the notification, there is
no similar expression as used in Rule 28A(4) of the Rules. According to
him, the reasoning given by the High Court is fallacious on two scores,
namely, (i) Rule 28A(4)(c) of the Rules exempts all subsequent sales made
in the State of Haryana, as one product can be sold any number of times
within the State, whereas there can be only one inter-state sale from the
State of Haryana, and consequently there is no requirement of any reference
to subsequent sale in notification dated 04.09.1995; and (ii) Rule
28A(4)(c) of the Rules provides a mechanism to confirm that goods are
manufactured by a person holding exemption certificate in terms of Rule 28A
by providing the requirement to furnish a certificate in the form of
certificate ST-14A. Section 8(5) of the CST Act mandates the requirement
of issuance of Form C by the buying dealer which is to be issued by the
sales tax authorities of purchasing State and, therefore, there is no
requirement for such mechanism to be provided in the notification. It is
highlighted by him that if the interpretation placed by the High Court is
accepted, it would tantamount to making exempted goods chargeable to tax
and further, the goods manufactured by eligible manufacturer would not
remain competitive in spite of exemption being given to such manufacturer
unless all subsequent stages including inter-state sales are exempt from
payment of tax. The emphasis is on exemption at subsequent stages including
inter-state sale. Mr. Singh has drawn immense inspiration from the proviso
to the notification dated 04.09.1995 to bolster the submission that it
restrains the eligible manufacturer from charging any tax on its sales as
otherwise it would amount to unjust enrichment.
11. Mr. Sanjay Kumar Visen, learned counsel for the respective
respondent(s), per contra, while supporting the order passed by the High
Court, would submit that benefit of exemption has been granted for
promoting new industry in the State and this is in consonance with Rule 28A
of the Rules which provides unit holding a valid exemption certificate
which sells goods purchased by it in the State without charging any tax and
the said Rule also exempts all subsequent intra-state sales as such.
Elaborating further, it is urged that notification dated 04.09.1995 issued
under sub-section (5) of Section 8 of the CST Act can extend the benefit of
tax exemption to only such inter-state sales of goods which are purchased
inside the State by a unit holding valid exemption certificate and hence,
the exemption from CST Act is subject to the condition that the dealer
effecting inter-state sale should hold a valid exemption certificate
irrespective of the goods sold in the course of inter-state trade and
commerce and purchased by him inside the State. Learned counsel would
submit that while interpreting a notification of the present nature, strict
interpretation has to be followed as per law laid down by this Court in
NOVOPAN India Ltd., Hyderabad v. Collector of Central Excise and Customs,
Hyderabad[11].
12. To understand the controversy in proper perspective, it is necessary
to refer to Section 8(2A) and 5 of the CST Act. They read as follows:-
“(2A) Notwithstanding anything contained in sub-section (1-A) of Section 6
or sub-section (1) or clause (b) of sub-section (2) of this Section, the
tax payable under this Act by a dealer on his turnover in so far as the
turnover or any part thereof relates to the sale of any goods, the sale or,
as the case may be, the purchase of which is, under the sales tax law of
the appropriate State, exempt from tax generally or subject to tax
generally at a rate which is lower than four percent (whether called a tax
or fee or by any other name), shall be nil, or as the case may be, shall be
calculated at the lower rate.
xx xx xx xx
(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 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 sub-section (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
sub-section(1) or sub-section (2) as may be mentioned in the notification.”
The aforesaid provision clearly enables the State Government to
exempt the tax payable under the CST Act in public interest by issuing
appropriate notification. For the said purpose, the State Government has
to be satisfied and is also entitled to impose conditions which have to be
specified in the notification.
13. Keeping in view the aforesaid provision and the notification which we
shall refer to hereinafter, the factual score is to be appreciated. It is
not in dispute that the appellant had sold the goods in question which were
manufactured by M/s Bharati Telecom Limited that was holding a valid
exemption certificate under Rule 28A of the Rules. The appellant had
claimed central sales tax exemption of such goods in terms of notification
dated 04.09.1995 by urging that such exemption was in respect of sale of
goods which were manufactured by any dealer in the State of Haryana who
held a valid exemption certificate. The core controversy pertains to the
interpretation of notification dated 04.09.1995 which has been issued by
the competent authority in exercise of power under Section 8(5) of the CST
Act. It reads as follows:-
“Notification dated 4.9.1995”
“No.S.O.89/CA. 74/56/S.8/95 dated 4.9.1995
– In exercise of the powers conferred by sub-section (5) of Section 8 of
the Central Sales Tax Act, 1956 the Governor of Haryana being satisfied
that it is necessary so to do in the public interest, hereby directs that
no tax under the said Act shall be payable with effect from 1.4.1988, on
the sale of goods, manufactured in the State of Haryana by any dealer
holding a valid exemption certificate under Rule 28-A of the Haryana
General Sales Tax Rules, 1975 during the period of exemption: provided that
no tax under the said Act has been charged by such dealer on the sale of
goods manufactured by him.”
14. The above notification has been issued in exercise of powers
conferred by sub-section (5) to Section 8 of the CST Act by the Governor of
Haryana in public interest. As per the notification, no tax is payable
under the aforesaid Act w.e.f. 1st April, 1988 on sale of goods during the
period of exemption that are manufactured in the State of Haryana by any
dealer, who holds a valid exemption certificate under Rule 28A of the
Rules. Proviso to the said notification stipulates that the dealers should
have also not charged any tax under the Central Sales Tax Act on the sale
of goods manufactured by him.
15. As mentioned earlier, sub-section (5) to Section 8 of the CST Act
begins with the non-obstante clause and empowers State Governments to issue
a notification in the official gazette subject to the condition(s) as may
be specified and under clause (a) direct that no tax shall be payable by
any dealer having his place of business in the State in respect of sale in
the course of inter-state trade or commerce, etc. and under clause (b) in
respect of all sales of goods or classes of goods, etc. In this context,
Rule 28A is extremely relevant. The said Rule, as per heading relates to
class of industries, period and other conditions for exemption/deferment
from payment of tax. Sub-rule 1, 2(f), (j), (k), (l), (n) clauses (i),
(ii), (iii), (4)(a) and sub-rule 4(2)(c) of Rule 28A are relevant and
reproduced below:-
“Sub-Rule (1): The industries covered under this rule shall not be entitled
to any deferment or exemption from payment of tax under any other
provisions of these rules.
Rule 2(f): ‘Eligible industrial unit’ means:
(i) a new industrial unit or expansion or diversification of the existing
unit, which-
(I) has obtained certificate of registration under the Act;
(II) is not a public sector undertaking where the Central Government held
51 per cent or more shares;
2(j): “eligibility certificate” means a certificate granted in Form ST-72
by the appropriate screening committee to an eligible industrial unit for
the purpose of grant of exemption deferment;
(k) “exemption certificate” means a certificate granted in Form ST-73 by
the Deputy Excise and Taxation Commissioner of the district to the eligible
industrial unit holding eligibility certificate which entitles the unit to
avail of exemption from the payment of sales or purchase tax or both, as
the case may be;
(l) “entitlement certificate” a certificate granted in Form ST-72 by the
Deputy Excise and Taxation Commissioner of the district to the eligible
industrial unit holding eligibility certificate which entitles it to get
deferment of sales tax.
(n) “notional sales tax liability” means –
(i) amount of tax payable on the sales of finished products of the eligible
industrial unit under the local sales tax law but for an exemption computed
at the maximum rates specified under the local sales tax law as applicable
from time to time; and
Explanation: The sales made on consignment basis within the State of
Haryana or branch transfer within the State of Haryana shall also be deemed
to be sales made within the State and liable to tax;
(ii) amount of tax payable under the Central Sales Tax Act, 1956, on the
sales of finished products of the eligible industrial unit made in the
course of inter-State trade or commerce computed at the rate of tax
applicable to such sales as if these were made against certificate in Form
C on the basis that the sales are eligible to tax under the said Act.
Explanation: The branch transfers or consignment sales outside the State of
Haryana shall be deemed to be sale in the course of inter-State trade or
commerce.
Note:- The expression and terms, if any appearing in this rule not defined
above shall unless the context otherwise requires carry the same meaning as
assigned to them under the Act and rules made there under.
(3) Option – An eligible industrial unit may opt either to avail benefit of
tax exemption or deferment. Option once exercised shall be final except
that it can be changed once from exemption to deferment for the remaining
period and balanced quantum of benefit.
(4)(a) Subject to other provisions of this rule, the benefit of tax
exemption or deferment shall be given to an eligible industrial unit
holding exemption or entitlement certificate, as the case may be to the
extent, for the period, from year to year in various zones from the date of
commercial production or from the date of issue of entitlement exemption
certificate as may be opted as under.
4(2)(c) The goods manufactured by an eligible industrial unit availing
exemption under this rule shall be exempt from the levy of tax at all the
successive stage(s) of sale or purchase subject to the condition that the
dealer affecting the successive purchase or sale furnishes to the assessing
authority a certificate in Form ST-14A to be obtained from the assessing
authority as against payment of such sum as may be fixed by the State
Government from time to time, duly filled in and signed by the registered
dealer by whom such goods were purchased.”
16. Sub-rule (1) makes it clear that industries are covered under this
rule and the said industries would not be entitled to any deferment or
exemption from payment of tax under any other provisions of these rules.
The expression ‘eligible industrial unit’ is defined in clause (f) to sub-
rule (2). Similarly, ‘eligibility certificate’, ‘exemption certificate’,
etc. are defined in clauses (j) and (k) to sub-rule (2). Clause (n) to sub-
rule (2) defines the expression ‘notional sales tax liability’ and clause
(ii) states that the amount of tax payable under the CST Act on sales of
finished product of eligible industrial unit made in the course of inter-
state trade or commerce shall be computed at the rate of tax applicable as
if the sales were made against form ‘C’. In other words, inter-state trade
or commerce of finished products of eligible industrial units will be
treated as notional sales tax liability. The reference in this clause is to
the eligible industrial unit and sales of finished products made by the
said units, which are sold in the course of inter-state trade or commerce.
17. The purport and impact of Rule 28-A is with reference to eligible
industrial unit, is not only clear from the definition clauses which define
eligibility certificate, exemption certificate, etc. but also from sub-rule
(4)(a) which stipulates that the benefit of tax exemption or deferment
shall be given to an eligible industrial unit holding exemption or
entitlement certificate for the period specified. Clause (c) to sub-rule
(4)(2) postulates that goods manufactured by an eligible industrial unit
availing of exemption under this Rule shall be exempt from levy of tax on
all successive stage/stages of sale or purchase, subject to the dealer
affecting the said purchase or sale furnishing a certificate in the form of
ST-14A obtained from the assessing authority. This clause has the effect
of granting exemption from levy of tax at all successive stages of sale and
purchase in intra-state trade or commerce i.e. within the State of Haryana.
To put it differently, it extends the benefit granted under clause (n)(ii)
which relates to inter-state trade or commerce to intra-state sale or
purchase. Such sales may be one or successive and tax at all stages is
exempt. The exemption, therefore, is good specific, subject of course to
other conditions being satisfied.
18. It is not disputed that on all intra-state sales no tax has been
charged as the said transactions were treated as exempt by the tax
authorities. However, in the course of inter-state sales, it is submitted
by the revenue that the exemption would be limited and available only if
the manufacturer i.e. the eligible industrial unit makes sale in inter-
state trade or commerce, but if a third party, who had procured the goods
from the eligible industrial unit makes inter-state sale, such trade or
commerce would not be exempt. The contention of the State suffers from
incorrect appreciation and understanding of the purport and objective
behind Rule 28A and the notification in question. The basic objective and
purpose is to exempt the goods manufactured in the State when they are
further transferred in the course of inter-state or intra-state trade or
commerce. Therefore, reference is made to the eligible industries and the
goods manufactured by the said industries, which are entitled to exemption.
The exemption notification refers to the sale of goods manufactured by a
dealer holding a valid exemption certificate. The emphasis is on the goods
manufactured. However, it is confined by the condition that the said
manufacture should be within the exemption period and by a dealer holding
an exemption certificate.
19. We have reproduced the exemption notification above and referred to
the language employed. At this juncture, it is absolutely necessary to
understand the language employed in the proviso to the notification. If
there was no proviso to the notification there would have been no
difficulty whatsoever in holding that the exemption is qua the goods
manufactured and was not curtailed or restricted to the sales made by the
manufacturer dealer and would not apply to the second or subsequent sales
made by a trader, who buys the goods from the manufacturer-dealer and sells
the same in the course of inter-state trade or commerce. It is pertinent
to note that, clause (ii) of sub-rule (n) refers to sale of finished
products in the course of inter-state trade or commerce where the finished
products are manufactured by eligible industrial unit. There is no
stipulation that only the first sale or the sale by the eligible industrial
unit in Inter State or Trade would be exempt. The confusion arises, as it
seems to us, in the proviso to the notification which states that the
manufacturer-dealer should not have charged tax. It needs no special
emphasis to mention that provisos can serve various purposes. The normal
function is to qualify something enacted therein but for the said proviso
would fall within the purview of the enactment. It is in the nature of
exception. [See : Kedarnath Jute Manufacturing Co. Ltd v. Commercial Tax
Officer[12]]. Hidayatullah, J. (as his Lordship then was) in Shah Bhojraj
Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha[13]
had observed that a proviso is generally added to an enactment to qualify
or create an exception to what is in the enactment, and the proviso is not
interpreted as stating a general rule. Further, except for instances dealt
with in the proviso, the same should not be used for interpreting the main
provision/enactment, so as to exclude something by implication. It is by
nature of an addendum or dealing with a subject matter which is foreign to
the main enactment. (See : CIT, Mysore etc. v Indo Mercantile Bank
Ltd[14]). Proviso should not be normally construed as nullifying the
enactment or as taking away completely a right conferred.
20. Read in this manner, we do not think the proviso should be given a
greater or more significant role in interpretation of the main part of the
notification, except as carving out an exception. It means and implies
that the requirement of the proviso should be satisfied i.e. manufacturing
dealer should not have charged the tax. The proviso would not scuttle or
negate the main provision by holding that the first transaction by the
eligible manufacturing dealer in the course by way of inter-state sale
would be exempt but if the inter-state sale is made by trader/purchaser,
the same would not be exempt. That will not be the correct understanding
of the proviso. Giving over due and extended implied interpretation to the
proviso in the notification will nullify and unreasonably restrict the
general and plain words of the main notification. Such construction is not
warranted.
21. Quite apart from the above, Rule 28A(4)(c) supports the
interpretation and does not counter it. The said rule exempts all intra-
state sales including subsequent sales. The reason for enacting this
clause is obvious. The intention is to exempt all subsequent stages in the
State of Haryana and the eligible product can be sold a number of times,
without payment of tax. Intra-state sales refer to sale between two
parties within the State of Haryana. Inter-state transaction results in
movement of goods from State of Haryana to another State. Thus, clause
(ii) of sub-rule 2(4) refers to inter-state trade or commerce and the
notification does not refer to subsequent sales as in case of Rule
28A(4)(c). Whether or not tax should be paid on subsequent sales/purchase
in the other State cannot be made subject matter of Rule 28A or the
notification. Inter-State sale from the State of Haryana will be only once
or not a repeated one. Therefore, there is no requirement of reference to
subsequent sale. In this context, it is rightly submitted by the assessee
that there is only one inter-State sale from the State of Haryana and the
interpretation as suggested by the revenue would tantamount to making the
exempted goods chargeable to tax, and the said goods would cease to enjoy
the competitive edge given to the manufacturer in the State of Haryana. It
will be counter-productive.
22. In view of aforesaid analysis, we allow the appeals and set aside all
the impugned orders and hold that assessees shall reap the benefit of the
notification dated 04.09.1995 as interpreted by us. There shall be no
order as to costs.
...............................J.
[Dipak Misra]
...............................J.
[Shiva Kirti Singh]
New Delhi.
March 29, 2016.
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[1] (1975) 35 STC 1
[2] (1992) 85 STC 432
[3] (1992) 85 STC 432
[4] (1996) 101 STC 547
[5] (1999) 114 STC 365
[6] (1996) 101 STC 1
[7] (2008) 4 SCC 720
[8] (2011) 10 SCC 292
[9] (2011) 6 SCC 545
[10] (2005) 9 SCC 669
[11] (1994) Suppl. 3 SCC 606
[12] AIR 1966 SC 12
[13] AIR 1961 SC 1596
[14] AIR 1959 SC 713
-----------------------
28
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1410 OF 2007
M/s. CASIO India Co. Pvt. Ltd. ... Appellant
Versus
State of Haryana ... Respondent
With
Civil Appeal No. 1411 of 2007
Civil Appeal No. 5450 of 2013
J U D G M E N T
Dipak Misra, J.
Regard being had to the similitude of the issue in all the appeals,
they were heard together and disposed of by a common judgment. As the
principal principle that constitutes the bedrock of the decision in the
subject matter of assail in Civil Appeal No. 1410 of 2007, we shall advert
to the facts exposited therein and also dwell upon the legal issue and,
needless to say, that would govern the fate of all the appeals.
2. Presently to the layout of facts in Civil Appeal No. 1410 of 2007.
The appellant-company is engaged in the business of manufacture and sale of
Radio Pagers having its unit at plot No. 4, Phase-I, Udyog Vihar, Gurgaon,
Haryana. It is registered under the provisions of Haryana General Sales Tax
Act, 1973 (for short, “the Act”), Haryana General Sales Tax Rules, 1975
(for short, “the Rules”) and the Central Sales Tax Act, 1956 (for brevity,
“CST Act”) In the year 1995-96, the assessee-company after purchase of
Radio Pagers from M/s Bharati Telecom Limited was also engaged in inter-
state sale of the said Radio Pagers and in course of the said transaction,
did not charge any sales tax from the purchasers on the basis of
Notification No. SO 89/CA.74/56/S.8/95 dated 04.09.1995 issued under
Section 8(5) of the CST Act read with Rule 28A(4)(c) of the Rules. The
appellant filed its return and claimed exemption placing reliance on the
said notification, but the claim of exemption put forth by the assessee was
not accepted by the assessing officer vide assessment order dated October
05, 2001. Being aggrieved by the order of assessment, the appellant
preferred an appeal before the Joint Excise and Taxation Commissioner
(Appeal), Rohtak Circle, Rohtak who dismissed the appeal vide order dated
May 2, 2002.
3. Being dissatisfied with the order passed in appeal, the appellant
knocked at the doors of the Sales Tax Tribunal, Chandigarh (for short ‘the
tribunal’) which dismissed the appeal by its order dated September 9, 2002.
The dismissal of the appeal by the tribunal compelled the appellant to
prefer Writ Petition No. 2346 of 2003, seeking a direction to the tribunal
to make a reference to the High Court. The High Court accepting the prayer
of the assessee called for a reference from the tribunal, and the tribunal
vide its order dated 14.10.2003 in S.T.M. No. 82 of 2002-03 made a
reference to the High Court for its opinion.
4. After stating the case, the tribunal referred the following questions
for the opinion of the High Court:-
“(i) Whether the notification dated 04.09.1995 issued under Section 8(5) of
the CST Act is relatable to the exemption of goods or the person selling
it?
(ii) Whether in view of the notification dated 04.09.1995 issued under
Section 8(5) of the CST Act and Rule 28A of the Rules, the inter-state
sales of the goods manufactured by an “exempted unit”, even by any other
dealer, is exempted from the levy of the Central Sales Act?”
5. Before the High Court it was contended by the assessee that the
notification dated 04.09.1995 issued by the State Government provides for
grant of exemption on the sale of goods manufactured in the State of
Haryana by any dealer holding valid exemption certificate under Rule 28 of
the Rules and not to the dealer and, therefore, the goods sold by the
assessee in the course of inter-state trade were not liable to be taxed.
In support of the said proposition, reliance was placed on International
Cotton Corporation (P) Ltd. v. Commercial Tax Officer, Hubli[1], Pine
Chemicals Ltd. and others v. Assessing Authority and others[2], Khadi and
Village Soap Industries Association and another v. State of Haryana and
others[3], State of Rajasthan v. Sarvotam Vegetables Products[4] and
Commissioner of Sales Tax v. Industrial Coal Enterprises[5].
6. On behalf of the revenue, it was urged that the notification in
question provided for grant of exemption only on the sale of goods
manufactured in the State by a dealer holding valid exemption certificate
under Rule 28 of the Rules, subject to the condition that such dealer had
not charged tax under the CST Act on the sale of goods manufactured by it,
and not in respect of the sale of goods by other dealers in the course of
inter-state trade. It was the stand of the revenue that the assessee had
not been granted exemption certificate under Rule 28A of the Rules and as
such, the goods sold by it in course of inter-state trade were not exempted
from the tax under the CST Act merely because the same had been purchased
from M/s Bharati Telecom Limited which possesses a valid exemption
certificate. Reliance was placed on the decision of this Court in State
Level Committee and another v. Morgardhsammar India Ltd.[6].
7. The High Court referred to Section 8(2A) and 5 of the CST Act and
Rule 28A(2)(n) and (4)(c) of the Rules and notification dated 04.09.1995;
distinguished the authorities cited by the assessee and came to hold that
the expression “notional sales tax liability” as used in Rule 28A(2)(n)
takes within its fold not only the amount of tax payable on the sales of
finished goods of the eligible industrial unit under the Act but also the
amount of tax payable under the CST Act on the sales of finished products
of the eligible industrial units made in the course of inter-state trade
or commerce and branch transfers or consignment sales outside the State of
Haryana. Reference was made to clause (c) of sub-rule (4) of Rule 28A of
the Rules to opine that the scope of exemption was extended to the goods
manufactured by an eligible industrial unit availing exemption under Rule
28A at all successive stage(s) of sale or purchase subject to the condition
that the dealer effecting successive purchase or sale furnishing a
certificate in form ST-14A which is required to be obtained from the
assessing authority duly filled in and signed by the registered dealer to
whom such goods were sold. Thereafter, the High Court analysed the Rules
and in that context stated thus:-
“A reading of the provisions reproduced above shows that the expression
“notional sales tax liability” takes within its fold not only the amount of
tax payable on the sales of finished goods of the eligible industrial unit
under the State Act, but also the amount of tax payable under the Central
Act on the sales of finished products of the eligible industrial unit made
in the course of inter-state trade or commerce and branch transfers or
consignment sales outside the State of Haryana (Rule 28A (2) (n)). Clause
(c) of sub-rule (4) of Rule 28A extends the scope of exemption to the
goods manufactured by an eligible industrial unit availing exemption under
Rule 28A at all successive stage(s) of sale or purchase subject to the
condition that the dealer effecting successive purchase or sale furnishes
to the Assessing a certificate in form ST-14A which is required to be
obtained from the Assessing Authority duly filled in and signed by the
Registered dealer to whom such goods were sold. Sub-rule (6) of Rule 28A
lays down the mechanism for grant of exemption/entitlement certificate. Sub-
rule (7) envisages renewal of exemption certificate and lays down the
procedure for grant of renewal. Section 8(2A) of the Central Act contains a
non-obstante clause. It lays down that notwithstanding anything contained
in Section 6(1A) or sub-section (1) or clause (b) of sub-Section (2) of
Section 8, the tax payable under the Central Act by a dealer on his
turnover in so far as the turnover or a part thereof relates to the sale of
any goods, the sale or purchase of which is exempted from tax under the
State Act or is subjected to tax at a rate lower than 4% shall be nil or
shall be calculated at the lower rate. Sub-section (5) of Section 8 also
begins with a non-obstante clause. It empowers the State Government to
grant exemption from payment of tax or levy of tax at a lower rate on the
dealer having his place of business in respect of the sales made by him in
the course of inter-State trade or commerce. It also empowers the State
Government to direct that no tax shall be payable under the Central Act or
tax shall be calculated at lower rates in respect of all sales of goods or
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 class of dealers specified in the notification.
Notification dated 4.9.1995 declares that no tax shall be payable under the
Central Act w.e.f. 1.4.1988 on the sale of goods manufactured in the State
of Haryana by any dealer holding a valid exemption certificate under Rule
28A of the Rules, provided that such dealer has not charged tax under the
Central Act on the sale of goods manufactured by him.”
8. After so stating, the High Court referred to the notification dated
04.09.1995 and observed that it was not happily worded and thereafter, it
proceeded to hold that the tribunal was correct in following its earlier
order for arriving at the conclusion that the notification did not exempt
the goods sold in the course of inter-state trade by dealer other than
those who held valid exemption certificate granted under Rule 28A of the
Rules. It further ruled that if the State Government wanted to extend the
benefit of exemption from payment of tax under the CST Act to the sale of
goods effected by a dealer in the course of inter-state trade irrespective
of the fact that such dealer did not hold valid exemption certificate under
Rule 28A of the Rules, then it would have incorporated the language of Rule
28A(4)(c) of the Rules in the notification and would not have put a rider
that such dealer should not have charged tax under the CST Act on the sale
of goods manufactured by it.
9. Thus, the ultimate conclusion recorded by the High Court is that
successive sales of goods manufactured by dealer holding valid exemption
certificate were exempt from payment of sales tax so long as they were
inter-state sales but in respect of sale of goods by a dealer not holding
exemption certificate under Rule 28A in the course of inter-state trade,
the benefit of exemption envisaged under notification dated 04.09.1995 was
not available to such dealer. The Division Bench proceeded to clarify that
in respect of stages of sale which are exempt from payment of tax under the
Act are covered by Rule 28A(4)(c) but notification dated 04.09.1995 was
applicable only to sale of goods manufactured by the exempted unit. Being
of this view, it answered the reference in favour of the revenue and
against the assessee.
10. Mr. Balbir Singh, learned senior counsel appearing for the appellant,
has submitted that though the notification was made under the CST Act, it
exempts goods as well as manufacture. Learned senior counsel would submit
that on a plain reading of the notification, it is demonstrable that the
exemption is on the sale of goods and there is no reference to unit or
category of dealers for the purpose of extending the exemption. Once the
language is clear, submits Mr. Singh, there is no scope of searching for
intendment and, in fact, a bare perusal of the notification is sufficient
to determine its applicability or non-applicability. To sustain the
submission, he has drawn our attention to the authority in Govt. of A.P &
others. v. P. Laxmi Devi[7]; Ranbaxy Laboratories Ltd. v. Union of India
and others[8]; Bansal Wires Industries Ltd. & another v. State of Uttar
Pradesh and others[9] and Parle Biscuits (P) Ltd. v. State of Bihar &
others[10]. Learned senior counsel has further contended that the High
Court has committed an error in noting that in the notification, there is
no similar expression as used in Rule 28A(4) of the Rules. According to
him, the reasoning given by the High Court is fallacious on two scores,
namely, (i) Rule 28A(4)(c) of the Rules exempts all subsequent sales made
in the State of Haryana, as one product can be sold any number of times
within the State, whereas there can be only one inter-state sale from the
State of Haryana, and consequently there is no requirement of any reference
to subsequent sale in notification dated 04.09.1995; and (ii) Rule
28A(4)(c) of the Rules provides a mechanism to confirm that goods are
manufactured by a person holding exemption certificate in terms of Rule 28A
by providing the requirement to furnish a certificate in the form of
certificate ST-14A. Section 8(5) of the CST Act mandates the requirement
of issuance of Form C by the buying dealer which is to be issued by the
sales tax authorities of purchasing State and, therefore, there is no
requirement for such mechanism to be provided in the notification. It is
highlighted by him that if the interpretation placed by the High Court is
accepted, it would tantamount to making exempted goods chargeable to tax
and further, the goods manufactured by eligible manufacturer would not
remain competitive in spite of exemption being given to such manufacturer
unless all subsequent stages including inter-state sales are exempt from
payment of tax. The emphasis is on exemption at subsequent stages including
inter-state sale. Mr. Singh has drawn immense inspiration from the proviso
to the notification dated 04.09.1995 to bolster the submission that it
restrains the eligible manufacturer from charging any tax on its sales as
otherwise it would amount to unjust enrichment.
11. Mr. Sanjay Kumar Visen, learned counsel for the respective
respondent(s), per contra, while supporting the order passed by the High
Court, would submit that benefit of exemption has been granted for
promoting new industry in the State and this is in consonance with Rule 28A
of the Rules which provides unit holding a valid exemption certificate
which sells goods purchased by it in the State without charging any tax and
the said Rule also exempts all subsequent intra-state sales as such.
Elaborating further, it is urged that notification dated 04.09.1995 issued
under sub-section (5) of Section 8 of the CST Act can extend the benefit of
tax exemption to only such inter-state sales of goods which are purchased
inside the State by a unit holding valid exemption certificate and hence,
the exemption from CST Act is subject to the condition that the dealer
effecting inter-state sale should hold a valid exemption certificate
irrespective of the goods sold in the course of inter-state trade and
commerce and purchased by him inside the State. Learned counsel would
submit that while interpreting a notification of the present nature, strict
interpretation has to be followed as per law laid down by this Court in
NOVOPAN India Ltd., Hyderabad v. Collector of Central Excise and Customs,
Hyderabad[11].
12. To understand the controversy in proper perspective, it is necessary
to refer to Section 8(2A) and 5 of the CST Act. They read as follows:-
“(2A) Notwithstanding anything contained in sub-section (1-A) of Section 6
or sub-section (1) or clause (b) of sub-section (2) of this Section, the
tax payable under this Act by a dealer on his turnover in so far as the
turnover or any part thereof relates to the sale of any goods, the sale or,
as the case may be, the purchase of which is, under the sales tax law of
the appropriate State, exempt from tax generally or subject to tax
generally at a rate which is lower than four percent (whether called a tax
or fee or by any other name), shall be nil, or as the case may be, shall be
calculated at the lower rate.
xx xx xx xx
(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 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 sub-section (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
sub-section(1) or sub-section (2) as may be mentioned in the notification.”
The aforesaid provision clearly enables the State Government to
exempt the tax payable under the CST Act in public interest by issuing
appropriate notification. For the said purpose, the State Government has
to be satisfied and is also entitled to impose conditions which have to be
specified in the notification.
13. Keeping in view the aforesaid provision and the notification which we
shall refer to hereinafter, the factual score is to be appreciated. It is
not in dispute that the appellant had sold the goods in question which were
manufactured by M/s Bharati Telecom Limited that was holding a valid
exemption certificate under Rule 28A of the Rules. The appellant had
claimed central sales tax exemption of such goods in terms of notification
dated 04.09.1995 by urging that such exemption was in respect of sale of
goods which were manufactured by any dealer in the State of Haryana who
held a valid exemption certificate. The core controversy pertains to the
interpretation of notification dated 04.09.1995 which has been issued by
the competent authority in exercise of power under Section 8(5) of the CST
Act. It reads as follows:-
“Notification dated 4.9.1995”
“No.S.O.89/CA. 74/56/S.8/95 dated 4.9.1995
– In exercise of the powers conferred by sub-section (5) of Section 8 of
the Central Sales Tax Act, 1956 the Governor of Haryana being satisfied
that it is necessary so to do in the public interest, hereby directs that
no tax under the said Act shall be payable with effect from 1.4.1988, on
the sale of goods, manufactured in the State of Haryana by any dealer
holding a valid exemption certificate under Rule 28-A of the Haryana
General Sales Tax Rules, 1975 during the period of exemption: provided that
no tax under the said Act has been charged by such dealer on the sale of
goods manufactured by him.”
14. The above notification has been issued in exercise of powers
conferred by sub-section (5) to Section 8 of the CST Act by the Governor of
Haryana in public interest. As per the notification, no tax is payable
under the aforesaid Act w.e.f. 1st April, 1988 on sale of goods during the
period of exemption that are manufactured in the State of Haryana by any
dealer, who holds a valid exemption certificate under Rule 28A of the
Rules. Proviso to the said notification stipulates that the dealers should
have also not charged any tax under the Central Sales Tax Act on the sale
of goods manufactured by him.
15. As mentioned earlier, sub-section (5) to Section 8 of the CST Act
begins with the non-obstante clause and empowers State Governments to issue
a notification in the official gazette subject to the condition(s) as may
be specified and under clause (a) direct that no tax shall be payable by
any dealer having his place of business in the State in respect of sale in
the course of inter-state trade or commerce, etc. and under clause (b) in
respect of all sales of goods or classes of goods, etc. In this context,
Rule 28A is extremely relevant. The said Rule, as per heading relates to
class of industries, period and other conditions for exemption/deferment
from payment of tax. Sub-rule 1, 2(f), (j), (k), (l), (n) clauses (i),
(ii), (iii), (4)(a) and sub-rule 4(2)(c) of Rule 28A are relevant and
reproduced below:-
“Sub-Rule (1): The industries covered under this rule shall not be entitled
to any deferment or exemption from payment of tax under any other
provisions of these rules.
Rule 2(f): ‘Eligible industrial unit’ means:
(i) a new industrial unit or expansion or diversification of the existing
unit, which-
(I) has obtained certificate of registration under the Act;
(II) is not a public sector undertaking where the Central Government held
51 per cent or more shares;
2(j): “eligibility certificate” means a certificate granted in Form ST-72
by the appropriate screening committee to an eligible industrial unit for
the purpose of grant of exemption deferment;
(k) “exemption certificate” means a certificate granted in Form ST-73 by
the Deputy Excise and Taxation Commissioner of the district to the eligible
industrial unit holding eligibility certificate which entitles the unit to
avail of exemption from the payment of sales or purchase tax or both, as
the case may be;
(l) “entitlement certificate” a certificate granted in Form ST-72 by the
Deputy Excise and Taxation Commissioner of the district to the eligible
industrial unit holding eligibility certificate which entitles it to get
deferment of sales tax.
(n) “notional sales tax liability” means –
(i) amount of tax payable on the sales of finished products of the eligible
industrial unit under the local sales tax law but for an exemption computed
at the maximum rates specified under the local sales tax law as applicable
from time to time; and
Explanation: The sales made on consignment basis within the State of
Haryana or branch transfer within the State of Haryana shall also be deemed
to be sales made within the State and liable to tax;
(ii) amount of tax payable under the Central Sales Tax Act, 1956, on the
sales of finished products of the eligible industrial unit made in the
course of inter-State trade or commerce computed at the rate of tax
applicable to such sales as if these were made against certificate in Form
C on the basis that the sales are eligible to tax under the said Act.
Explanation: The branch transfers or consignment sales outside the State of
Haryana shall be deemed to be sale in the course of inter-State trade or
commerce.
Note:- The expression and terms, if any appearing in this rule not defined
above shall unless the context otherwise requires carry the same meaning as
assigned to them under the Act and rules made there under.
(3) Option – An eligible industrial unit may opt either to avail benefit of
tax exemption or deferment. Option once exercised shall be final except
that it can be changed once from exemption to deferment for the remaining
period and balanced quantum of benefit.
(4)(a) Subject to other provisions of this rule, the benefit of tax
exemption or deferment shall be given to an eligible industrial unit
holding exemption or entitlement certificate, as the case may be to the
extent, for the period, from year to year in various zones from the date of
commercial production or from the date of issue of entitlement exemption
certificate as may be opted as under.
4(2)(c) The goods manufactured by an eligible industrial unit availing
exemption under this rule shall be exempt from the levy of tax at all the
successive stage(s) of sale or purchase subject to the condition that the
dealer affecting the successive purchase or sale furnishes to the assessing
authority a certificate in Form ST-14A to be obtained from the assessing
authority as against payment of such sum as may be fixed by the State
Government from time to time, duly filled in and signed by the registered
dealer by whom such goods were purchased.”
16. Sub-rule (1) makes it clear that industries are covered under this
rule and the said industries would not be entitled to any deferment or
exemption from payment of tax under any other provisions of these rules.
The expression ‘eligible industrial unit’ is defined in clause (f) to sub-
rule (2). Similarly, ‘eligibility certificate’, ‘exemption certificate’,
etc. are defined in clauses (j) and (k) to sub-rule (2). Clause (n) to sub-
rule (2) defines the expression ‘notional sales tax liability’ and clause
(ii) states that the amount of tax payable under the CST Act on sales of
finished product of eligible industrial unit made in the course of inter-
state trade or commerce shall be computed at the rate of tax applicable as
if the sales were made against form ‘C’. In other words, inter-state trade
or commerce of finished products of eligible industrial units will be
treated as notional sales tax liability. The reference in this clause is to
the eligible industrial unit and sales of finished products made by the
said units, which are sold in the course of inter-state trade or commerce.
17. The purport and impact of Rule 28-A is with reference to eligible
industrial unit, is not only clear from the definition clauses which define
eligibility certificate, exemption certificate, etc. but also from sub-rule
(4)(a) which stipulates that the benefit of tax exemption or deferment
shall be given to an eligible industrial unit holding exemption or
entitlement certificate for the period specified. Clause (c) to sub-rule
(4)(2) postulates that goods manufactured by an eligible industrial unit
availing of exemption under this Rule shall be exempt from levy of tax on
all successive stage/stages of sale or purchase, subject to the dealer
affecting the said purchase or sale furnishing a certificate in the form of
ST-14A obtained from the assessing authority. This clause has the effect
of granting exemption from levy of tax at all successive stages of sale and
purchase in intra-state trade or commerce i.e. within the State of Haryana.
To put it differently, it extends the benefit granted under clause (n)(ii)
which relates to inter-state trade or commerce to intra-state sale or
purchase. Such sales may be one or successive and tax at all stages is
exempt. The exemption, therefore, is good specific, subject of course to
other conditions being satisfied.
18. It is not disputed that on all intra-state sales no tax has been
charged as the said transactions were treated as exempt by the tax
authorities. However, in the course of inter-state sales, it is submitted
by the revenue that the exemption would be limited and available only if
the manufacturer i.e. the eligible industrial unit makes sale in inter-
state trade or commerce, but if a third party, who had procured the goods
from the eligible industrial unit makes inter-state sale, such trade or
commerce would not be exempt. The contention of the State suffers from
incorrect appreciation and understanding of the purport and objective
behind Rule 28A and the notification in question. The basic objective and
purpose is to exempt the goods manufactured in the State when they are
further transferred in the course of inter-state or intra-state trade or
commerce. Therefore, reference is made to the eligible industries and the
goods manufactured by the said industries, which are entitled to exemption.
The exemption notification refers to the sale of goods manufactured by a
dealer holding a valid exemption certificate. The emphasis is on the goods
manufactured. However, it is confined by the condition that the said
manufacture should be within the exemption period and by a dealer holding
an exemption certificate.
19. We have reproduced the exemption notification above and referred to
the language employed. At this juncture, it is absolutely necessary to
understand the language employed in the proviso to the notification. If
there was no proviso to the notification there would have been no
difficulty whatsoever in holding that the exemption is qua the goods
manufactured and was not curtailed or restricted to the sales made by the
manufacturer dealer and would not apply to the second or subsequent sales
made by a trader, who buys the goods from the manufacturer-dealer and sells
the same in the course of inter-state trade or commerce. It is pertinent
to note that, clause (ii) of sub-rule (n) refers to sale of finished
products in the course of inter-state trade or commerce where the finished
products are manufactured by eligible industrial unit. There is no
stipulation that only the first sale or the sale by the eligible industrial
unit in Inter State or Trade would be exempt. The confusion arises, as it
seems to us, in the proviso to the notification which states that the
manufacturer-dealer should not have charged tax. It needs no special
emphasis to mention that provisos can serve various purposes. The normal
function is to qualify something enacted therein but for the said proviso
would fall within the purview of the enactment. It is in the nature of
exception. [See : Kedarnath Jute Manufacturing Co. Ltd v. Commercial Tax
Officer[12]]. Hidayatullah, J. (as his Lordship then was) in Shah Bhojraj
Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha[13]
had observed that a proviso is generally added to an enactment to qualify
or create an exception to what is in the enactment, and the proviso is not
interpreted as stating a general rule. Further, except for instances dealt
with in the proviso, the same should not be used for interpreting the main
provision/enactment, so as to exclude something by implication. It is by
nature of an addendum or dealing with a subject matter which is foreign to
the main enactment. (See : CIT, Mysore etc. v Indo Mercantile Bank
Ltd[14]). Proviso should not be normally construed as nullifying the
enactment or as taking away completely a right conferred.
20. Read in this manner, we do not think the proviso should be given a
greater or more significant role in interpretation of the main part of the
notification, except as carving out an exception. It means and implies
that the requirement of the proviso should be satisfied i.e. manufacturing
dealer should not have charged the tax. The proviso would not scuttle or
negate the main provision by holding that the first transaction by the
eligible manufacturing dealer in the course by way of inter-state sale
would be exempt but if the inter-state sale is made by trader/purchaser,
the same would not be exempt. That will not be the correct understanding
of the proviso. Giving over due and extended implied interpretation to the
proviso in the notification will nullify and unreasonably restrict the
general and plain words of the main notification. Such construction is not
warranted.
21. Quite apart from the above, Rule 28A(4)(c) supports the
interpretation and does not counter it. The said rule exempts all intra-
state sales including subsequent sales. The reason for enacting this
clause is obvious. The intention is to exempt all subsequent stages in the
State of Haryana and the eligible product can be sold a number of times,
without payment of tax. Intra-state sales refer to sale between two
parties within the State of Haryana. Inter-state transaction results in
movement of goods from State of Haryana to another State. Thus, clause
(ii) of sub-rule 2(4) refers to inter-state trade or commerce and the
notification does not refer to subsequent sales as in case of Rule
28A(4)(c). Whether or not tax should be paid on subsequent sales/purchase
in the other State cannot be made subject matter of Rule 28A or the
notification. Inter-State sale from the State of Haryana will be only once
or not a repeated one. Therefore, there is no requirement of reference to
subsequent sale. In this context, it is rightly submitted by the assessee
that there is only one inter-State sale from the State of Haryana and the
interpretation as suggested by the revenue would tantamount to making the
exempted goods chargeable to tax, and the said goods would cease to enjoy
the competitive edge given to the manufacturer in the State of Haryana. It
will be counter-productive.
22. In view of aforesaid analysis, we allow the appeals and set aside all
the impugned orders and hold that assessees shall reap the benefit of the
notification dated 04.09.1995 as interpreted by us. There shall be no
order as to costs.
...............................J.
[Dipak Misra]
...............................J.
[Shiva Kirti Singh]
New Delhi.
March 29, 2016.
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[1] (1975) 35 STC 1
[2] (1992) 85 STC 432
[3] (1992) 85 STC 432
[4] (1996) 101 STC 547
[5] (1999) 114 STC 365
[6] (1996) 101 STC 1
[7] (2008) 4 SCC 720
[8] (2011) 10 SCC 292
[9] (2011) 6 SCC 545
[10] (2005) 9 SCC 669
[11] (1994) Suppl. 3 SCC 606
[12] AIR 1966 SC 12
[13] AIR 1961 SC 1596
[14] AIR 1959 SC 713
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