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Murli Manohar and Company and anr. Vs. the State of Haryana and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition No. 1227 of 1980
Judge
Reported in[1987]65STC165(P& H)
AppellantMurli Manohar and Company and anr.
RespondentThe State of Haryana and anr.
DispositionPetition dismissed
Cases ReferredGeorge Maijo & Company v. State of Andhra Pradesh
Excerpt:
.....effect from 1st april, 1976. under sub-section (3) the sale or purchase of goods preceding the sale or purchase occasioning the export of goods out of the territory of india is also a sale in the course of such export provided some conditions prescribed therein are satisfied. sub-section (1) of section 6 of the central sales tax act as mentioned in section 9(1) (a) (ii) and section 24(b)(iii) of the sales tax act will therefore, include sub-section (3) of section 5 of the central sales tax act as well with the result that the petitioners shall not be liable to pay tax on the purchase of raw materials against their registration certificate in view of the sales made in terms of section 5(3) of the central sales tax act. 16. in the result, all the writ petitions fail and are dismissed..........of the sales tax act. for this purpose; reliance has also been placed on section 5(3) of the central sales tax act read with article 286 of the constitution.5. section 9 of the sales tax act deals with the liability to pay purchase tax. sub-section (1) of this section reads :(1) where a dealer liable to pay tax under this act purchases goods, other than those specified in schedule b, from any source in the state and-(a) uses them in the state in the manufacture of,- (i) goods specified in schedule b, or(ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the state or in the course of inter-state trade or commerce or in the course of export out of the territory of india within the meaning of sub-section (1) of section.....
Judgment:

J.M. Tondon, J.

1. This order will dispose of Civil Writ Petitions Nos. 1227 (Murli Manohar and Company v. State of Haryana), 1922 (Bharat Carpet Manufac-turers v. Assessing Authority) and 2390 of 1980 (Bharat Carpet Manufacturers v. Assessing Authority) wherein the point involved is common.

2. The petitioners in an the petitions are registered dealers under the Haryana General Sales Tax Act, 1973 (hereinafter the Sales Tax Act). They purchased raw material for the manufacture of goods on the basis of the certificate issued in their favour without payment of any tax. Messrs. Bharat Carpet Manufacturers, the petitioners in Civil Writ Petitions Nos. 1922 and 2390 of 1980, purchased raw material for the manufacture of carpet and durees whereas Messrs. Murli Manohar and Company, the petitioner in Civil Writ Petition No. 1227 of 1980, purchased raw material for the manufacture of pickles, etc. The Assessing Authority, Panipat, vide order dated 20th March, 1980, (annexure P.2 in C.W.P. No. 2390 of 1980) reopened the assessment of Messrs. Bharat Carpet Manufacturers under the Sales Tax Act for the year 1977-78 and determined their liability at Rs. 20,060.58. The Assessing Authority, Panipat, vide order dated 19lh March, 1980 (annexure P.1 in C.W.P. No. 1922 of 1980) determined the liability of the same party for the year 1978-79 at Rs. 17,342.19. Messrs. Bharat Carpet Manufacturers have filed C.W.P. No. 2390 of 1980 challenging the revised (on reopening) assessment order (P.2) for the year 1977-78 and C.W.P. No. 1922 of 1980 challenging the assessment order (P. 1) for the year 1978-79.

3. The Assessing Authority, Panipat, vide order dated 29th February, 1980 (P. 1) reopened the assessment of Messrs Murli Manohar and Company for the year 1977-78 and determined their liability at Rs. 10,109. Messrs. Murli Manohar and Company have filed C.W.P. No. 1227 of 1980 challenging the assessment order (P.1).

4. In all the three impugned assessments, the dispute is limited to the liability of the petitioners to pay tax under Section 9 of the Sales Tax Act. The petitioners did not pay tax on the raw material purchased against the registration certificate issued in their favour. After manufacturing the goods out of the raw material the petitioners sold the same to some parties who in turn exported them out of India. The petitioners claim that the sale of such goods by them to the exporting party is exempt from payment of tax under Section 9(1)(a)(ii) read with Section 24(b)(iii) of the Sales Tax Act. For this purpose; reliance has also been placed on Section 5(3) of the Central Sales Tax Act read with Article 286 of the Constitution.

5. Section 9 of the Sales Tax Act deals with the liability to pay purchase tax. Sub-section (1) of this section reads :

(1) Where a dealer liable to pay tax under this Act purchases goods, other than those specified in Schedule B, from any source in the State and-

(a) uses them in the State in the manufacture of,-

(i) goods specified in Schedule B, or

(ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or in the course of export out of the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956 :

(b) exports them,

in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of Section 17, a tax on the purchase of such goods at such rate as may be notified under Section 15.

6. The petitioners are registered dealers under the Sales Tax Act. Section 24 of this Act deals with the rights of registered dealer. It reads :

24. Every dealer registered under this Act shall be entitled to purchase, without payment of sales tax, the following goods within the State, on the authority of his certificate of registration by giving to the dealer, from whom the goods are purchased, a declaration, duly filled and signed by him, containing such particulars on such form, obtained from such authority, as may be prescribed and in case such form is not available with such authority, in such manner as may be prescribed,-

(a) any goods, other than those leviable to tax at first stage of sale under Section 17 or Section 18, for the purpose of-

(i) resale in the State ; or

(ii) sale in the course of inter-State trade or commerce ;

(b) containers and packing materials and other goods (excluding those liable to tax at the first stage of sale under Section 17 or Section 18, specified in his certificate of registration for use by him in the manufacture, in the State, of any goods other than those specified in Schedule B, for the purpose of-

(i) sale in the State ; or

(ii) sale in the course of inter-State trade or commerce; or

(iii) sale in the course of export out of the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956.

7. It is evident that a registered dealer is entitled to purchase raw material on the strength of his registration certificate without payment of any tax for the manufacture of goods which will be sold by him in the course of export out of the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956. He will continue to remain exempt from the payment of tax on the purchase of raw material under Section 9(1)(a)(ii) of the Sales Tax Act if the manufactured goods are exported out of the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act. It may be clarified that the goods manufactured by the petitioners have neither been disposed of in the State nor in the course of inter-State trade.

8. Section 5 of the Central Sales Tax Act reads :

5(1). A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

(2) ...

(3) Notwithstanding anything contained in Sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after and was for the purpose of complying with, the agreement or order for or in relation to such export.

9. Article 286 of the Constitution which has also been heavily relied upon may also be noticed at this stage. It read :

286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-

(a) outside the State ; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1).

(3) ...

10. The words 'sale or purchase which occasions export of the goods' have been interpreted by their Lordships of the Supreme Court in Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 (SC), to mean the last sale effected by the actual exporter who exported the goods out of the territory of India. In other words, only such exporter who actually exported the goods out of the territory of India has been held to be covered by Section 5(1) of the Central Sales Tax Act. The Parliament enacted Sub-section (3) of Section 5 by Act No. 103 of 1976 and made it effective with effect from 1st April, 1976. Under Sub-section (3) the sale or purchase of goods preceding the sale or purchase occasioning the export of goods out of the territory of India is also a sale in the course of such export provided some conditions prescribed therein are satisfied.

11. The argument of the learned counsel for the petitioners is that Sub-section (3) of Section 6 of the Central Sales Tax Act has been enacted by Parliament in exercise of the power under Article 286(2) of the Constitution. The limitation for the imposition of tax on the sale or purchase of goods prescribed in Article 286(1), therefore, shall necessarily apply to the preceding sale or purchase envisaged in Sub-section (3) of Section 5 of the Central Sales Tax Act. The argument proceeds that by implication, Sub-section (3) of Section 5 shall be taken as a part of Sub-section (1) thereof. Sub-section (1) of Section 6 of the Central Sales Tax Act as mentioned in Section 9(1) (a) (ii) and Section 24(b)(iii) of the Sales Tax Act will therefore, include Sub-section (3) of Section 5 of the Central Sales Tax Act as well with the result that the petitioners shall not be liable to pay tax on the purchase of raw materials against their registration certificate in view of the sales made in terms of Section 5(3) of the Central Sales Tax Act. Reliance has been placed on George Maijo & Company v. State of Andhra Pradesh [1980] 46 STC 41 (AP).

12. The learned counsel for the State has argued that assuming that Sub-section (3) of Section 5 of the Central Sales Tax Act has been enacted by Parliament in exercise of the powers vested under Article 286(2) of the Constitution and that the sale and purchase envisaged therein will be subject to the limitations contained in Article 286(1), it cannot be inferred that Sub-section (3) of Section 5 has become a part of Sub-section (1) thereof. In this situation, the petitioners cannot justifiably claim exemption from the payment of tax under Section 9(1)(a)(ii) on the basis of Section 5(3) of the Central Sales Tax Act.

13. In my opinion, the contention of the learned counsel for the petitioners has no force. The petitioners purchased raw material against their registration certificate without payment of any tax. The petitioners manufactured the goods and sold the same to a party who in turn exported them out of India. The sale of manufactured goods by the petitioners to the exporter will be covered by Sub-section (3) of Section 5 and the export thereof by the exporter by Sub-section (1) of Section 5 of the Central Sales Tax Act. The petitioners have been made liable for the payment of purchase tax on the purchase of raw material. The transaction per se relating to the purchase of raw material is neither covered by Sub-section (3) nor Sub-section (1) of Section 5 of the Cenral Sales Tax Act. Article 286 of the Constitution has thus no relevancy in the matter of charging of tax on the purchase of raw materials by the petitioners, nor is the ratio of George Maijo's case [1980] 46 STC 41 (AP) applicable to the facts of the case under consideration.

14. Section 5(1) of the Central Sales Tax Act as interpreted by their Lordships of the Supreme Court in Mod. Serajuddin's case [1975] 36 STC 136 (SC) is restricted to the sale effected by actual exporter whereas Section 5(3) of this Act makes the sale or purchase preceding the sale or purchase occasioning the export of goods out of the territory of India also in the course of such export. The direct export out of the territory of India is thus covered by Sub-section (1) whereas the sale preceding thereof by Sub-section (3) of Section 5 of the Central Sales Tax Act. Sub-section (1) and Sub-section (3) of Section 5 of the Central Sales Tax Act are independent of each other. In this situation, it cannot be held that Sub-section (3) has merged in Sub-section (1) of Section 5 of the Central Sales Tax Act. The contention of the learned counsel for the petitioners that Sub-section (1) of Section 5 of the Central Sales Tax Act would necessarily include Sub-section (3) in the matter of application of Sections 9(1)(a)(ii) and 24(b)(iii) of the Haryana General Sales Tax Act, therefore, cannot be upheld.

15. The limitations imposed in Article 286 of the Constitution have no application in the matter of charging of purchase tax on the raw material purchased by the petitioners. It is, therefore, not constitutionally obligatory on the State Legislature to exempt such purchase of raw material by the petitioners from payment of tax. The State Legislature in its wisdom has exempted the purchase of raw material from the payment of tax where the manufactured goods are disposed of in the course of export out of the territory of India within the meaning of only Sub-section (1) of Section 5 of the Central Sales Tax Act. In other words, the State Legislature has not allowed exemption from the payment of tax on the purchase of raw material which is used for the manufacture of goods which are disposed of in terms of Sub-section (3) of Section 5 of the Central Sales Tax Act. The petitioners thus cannot justifiably claim the exemption from the payment of purchase tax on the purchase of raw material which was used for the manufacture of goods disposed of in terms of Sub-section (3) of Section 5 of the Central Sales Tax Act.

16. In the result, all the writ petitions fail and are dismissed with no order as to costs.


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