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State of Gujarat Vs. Yakubbhai HajihakumutdIn and Co. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 10 of 1966
Judge
Reported in[1969]23STC117(Guj)
ActsCentral Sales Tax Act, 1956 - Sections 6, 6(1), 6(2), 8 8(1), 8(3) and 8(4)
AppellantState of Gujarat
RespondentYakubbhai HajihakumutdIn and Co.
Appellant Advocate Bhaishanker Kanga and; Girdharlal, Advs.
Respondent Advocate S.L. Mody, Adv.
Cases ReferredState of Madras v. P. Subbiah Pillai
Excerpt:
.....dealer from whom goods purchased in order to get exemption under section 6 (2) in respect of inter-state sales to registered dealer by transfer of documents of title during movements of goods - no indication under section 6(2) or its proviso that forms c should be obtained and produced - rule providing that exemption under section 6(2) would be given only if certificate in form c produced is ultra vires. - - when the revision application was dismissed, the opponent firm approached the tribunal the tribunal held that for claiming exemption under section 6(2) of the act, the only certificate which had to be produced was the certificate in form e-i and as all the relevant conditions of section 6(2) were satisfied, the opponent-firm was entitled to claim exemption in respect of these..........to make a reference of the aforesaid question to this court. 3. section 6 provides for the inter-state sales tax. clause (1) provides that subject to the other provisions in the act, every dealer shall with effect from the notified date, viz., 1st july, 1957, be liable to tax under the act on all sales effected by him in the course of inter-state trade or commerce during any year on and from that date. clause (2) then provides as under : 'notwithstanding anything contained in sub-section (1), where a sale in the course of inter-state trade or commerce of goods of the description referred to in sub-section (3) of section 8 (a) has occasioned the movement of such goods from one state to another; or (b) has been effected by a transfer of documents of title to such goods during their.....
Judgment:

Mehta, J.

1. The short question which has been referred by the Tribunal this reference is :

'Whether on the facts and in the circumstances of the case, the opponent-firm is entitled to claim exemption under sub-section (2) of section 6 of the Central Sales Tax Act, 1956, in respect of sales amounting to Rs. 9,100 effected by the said firm by transfer of documents of title during their movement from one State to another to the registered dealers of Saurashtra without production of declaration in Form C from their purchasers ?'

2. The short facts which have given rise to this reference are as under :

The opponent-firm is holding a registration certificate, It purchased timber in the course of inter-State trade or commerce and furnished to its vendor a declaration in Form C declaring that the goods purchased by it were covered by its certificate of registration and were of a class or classes specified in the certificate of registration as being intended for resale or for use by it in the manufacture or processing of goods for sale. The vendor of the opponent-firm had in its turn furnished certificate in Form E-I. These certificates were produced by the opponent-firm before the Sales Tax Officer during the assessment proceedings for the period from Kartik Sud 1, 2015, to 31st December, 1959. The opponent-firm subsequently sold the goods by transfer of documents of title to such goods during their movement from one State to another to the registered dealer in Saurashtra during the assessment period. When the opponent-firm claimed exemption in respect of those goods, the Sales Tax Officer rejected the claim for exemption for the sales amounting to Rs. 9,100 on the ground that the opponent-firm did not produce declarations in Form C from its purchasers. In appeal before the Assistant Commissioner of Sales Tax, the opponent tried to produce declarations in respect of sales to the dealers but those certificates were not admitted. When the revision application was dismissed, the opponent firm approached the Tribunal The Tribunal held that for claiming exemption under section 6(2) of the Act, the only certificate which had to be produced was the certificate in Form E-I and as all the relevant conditions of section 6(2) were satisfied, the opponent-firm was entitled to claim exemption in respect of these disputed sales amounting to Re. 9,100 and accordingly the Tribunal allowed the revision application. The Tribunal has, thereafter, been asked to make a reference of the aforesaid question to this Court.

3. Section 6 provides for the inter-State sales tax. Clause (1) provides that subject to the other provisions in the Act, every dealer shall with effect from the notified date, viz., 1st July, 1957, be liable to tax under the Act on all sales effected by him in the course of inter-State trade or commerce during any year on and from that date. Clause (2) then provides as under :

'Notwithstanding anything contained in sub-section (1), where a sale in the course of inter-State trade or commerce of goods of the description referred to in sub-section (3) of section 8

(a) has occasioned the movement of such goods from one State to another; or

(b) has been effected by a transfer of documents of title to such goods during their movement from one State to another;

any subsequent sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject to tax under this Act :

Provided that no Such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner a certificate duly filled and signed by the registered dealer from whom the goods were purchased, containing the prescribed particulars.'

4. Section 8 then deals with the rates of tax on sales in the course of inter-State trade or commerce. Section 8(1)(b) provides that every dealer who, in the course of inter-State trade or commerce - (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3), shall be liable to pay tax under the Act as provided therein. Sub-section (3) runs as under :

'(3) The goods referred to in clause (b) of sub-section (1) -

... ... ... (b) in the case of goods other than declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.'

5. Sub-section (4) then provides that the provisions of sub-section (l) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration as mentioned in clause (a) or a certificate as mentioned in clause (b) In the Central Sales Tax (Registration and Turnover) Rules, 1967, rule 12 reads as under :

'(1) The declaration and the certificate referred to in sub-section (4) of section 8 shall be in Forms C and D respectively.

(2) The certificate referred to in sub-section (2) of section 6 shall be in Form E-I or Form E-II, as the case may be.'

6. The relevant Form C is, therefore, prescribed under rule 12(1) and it must be produced only when the exemption is claimed under section 8(1). On the other hand, where the exemption is claimed under section 6(2) the relevant form is prescribed under rule 12(2) and it is in Form E-I, so far as the present case is concerned. From the aforesaid scheme of the Act, it is absolutely clear that section 6 is the charging section, which fixes the liability of the tax on inter-State sale. Under section 6(1), subject to the other provisions contained in the Act, every dealer has to pay tax under the Act on all the sales effected by him in the course of inter-State trade or commerce during any year from 1st July, 1957. Section 6(2) however, starts with a non obstante clause. It provides that notwithstanding anything contained in sub-section (1), (i) where a sale is in the course of inter-State trade or commerce, (ii) of the goods referred to in section 8(3), and (iii) the sale has occasioned during movement from one State to another or has been effected by a transfer of documents of title during their movement from one State to another, any subsequent sale to a registered dealer during such movement effected by a transfer of documents of title to such goods is clearly exempted from tax under the Act. The proviso, no doubt, lays down a condition for availing of this exemption and that condition is that the dealer effecting the subsequent inter-State sale must furnish to the prescribed authority in the prescribed manner a certificate duly filled in and signed by the registered dealer under section 6(2) i.e., Form E-I or E-II only. There would be no question of the certificate in Form C being furnished in such a case as the dealer does not claim any exemption under section 8(1). The dealer claims complete exemption from liability to tax itself under section 6(2) and for this purpose, as per the proviso in section 6(2), the certificate in Form E-I only has to be furnished. Section 6 is the charging section which provides a complete exemption on production of the relevant certificate E-I, while section 8(1) provides a limited exemption by providing taxation at a reduced rate, when the declaration in Form C is submitted. The two sections are totally different in their ambit and scope and the departmental authorities had mixed up the requirements of these two sections, when they insisted that even for claiming complete exemption under section 6(2) a certificate in Form C was necessary to be produced from the purchaser to whom the subsequent sale was made. In the case of a subsequent sale there would be a complete exemption when the certificate in Form E-I is furnished, which is the only relevant condition in the proviso to section 6(2) when all other conditions are admittedly fulfilled. The Tribunal was, therefore, right in its view that the assessee was entitled to get exemption under section 6(2) on the disputed sales.

7. The learned Advocate-General took up another point altogether that unless a certificate in Form C was produced, there would be nothing to show that goods fell within the description given in section 8(3). The learned Advocate-General argued that under section 6(2) subsequent sale must be of 'such goods' which must fall under section 8(3), and, therefore, he contended that such a certificate would be necessary. When we turn to section 8(3), it mentions the goods referred to as being specified in the certificate of registration of the registered dealer which is not the same certificate as the one which is contemplated in sub-section (4) By seeking to base the argument on the basis of section 8(3), the learned Advocate-General tries to raise a new question. The only question referred to us is whether the want of a certificate in Form C from the purchaser disentitles the assessee from claiming exemption under section 6(2). As we have already stated, the question of a certificate under section 8(4) in Form C under rule 12(2) could only arise when the limited exemption under section 8 is claimed and it cannot arise when the exemption is claimed under section 6(2). In fact, there was no dispute before the authorities on this question that the goods were 'such goods' within the meaning of section 8(3) and since this contention has been sought to be raised for the first time in this reference, it cannot be permitted and on that contention no opinion can be expressed by us.

8. Mr. Mody in this connection also rightly relied upon the decision of the Madras High Court in State of Madras v. P. Subbiah Pillai ([1967] 20 S.T.C. 263.) by the Division Bench, consisting of Veeraswami and Ramaprasada Rao, JJ. It was held that in order to get exemption under section 6(2) in respect of second inter-State sales to a registered dealer by transfer of documents of title during movement of goods, the only condition required by the proviso to section 6(2) was that the assessee should produce certificate in Form E-I obtained from the registered dealer from whom the goods were purchased. There was no indication either in section 6(2) or the proviso thereto that C Forms as such should be obtained and produced. It was, therefore, held that even if the rule had provided that the exemption under section 6(2) would be given only if a certificate in Form C was produced, the rule would be ultra vires. All that the revenue could require the dealer to do was to prove that the second sales were to registered dealers and the proof might take any form, not necessarily declarations in Form C. We are in agreement with the said view.

9. In the result, our answer to the reference is in the affirmative. The reference is accordingly disposed of. The State shall pay the costs of this reference to the assessee.

10. Reference answered in the affirmative.


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