G.S.T.R. No.6 of 1996 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH G.S.T.R. No.6 of 1996 Date of Decision: January 27,2009 M/s Seth Industrial Corporation,Ludhiana ..Applicant Versus The State of Punjab and another ..Respondents CORAM : HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR. JUSTICE H.S.BHALLA Present:- None for the applicant. Ms. Sudeepti Sharma, DAG, Punjab. 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reports or not? 3. Whether the judgment should be reported in the Digest? M.M.KUMAR, J. At the instance of the dealer, this court, vide order dated 29.7.1996, had directed the Sales Tax Tribunal, Punjab (for brevity, `the Tribunal') to refer the following questions of law for adjudication: “(i) Whether in the facts and circumstances of the case, where the State Government prescribes lower rate of tax under section 8(5) of the Central Sales Tax Act, 1956, can additional tax be levied under section 5-A of the Punjab General Sales Tax Act? (ii) Whether under the facts and circumstances of the case, the Hon’ble Tribunal was justified in upholding the G.S.T.R. No.6 of 1996 2 levy of interest under section 11-D of the Punjab General Sales Tax Act, 1948 read with section 9 (2) of the Central Sales Tax Act, 1956 on account of additional demand created by the revisional authority, even though the petitioner had paid the full amount of tax due as per returns filed and accepted by the assessing authority while framing assessment?” Facts, as per the statement of the Tribunal, are that the assessee is a registered dealer under Sales Tax Laws and is engaged in manufacturing/supply of cycles and cycle parts. The Assessing Authority made an assessment for the year 1986-87 on 28.6.1989. The assessment order was put to scrutiny. The Revisional Authority noticed that the assessment orders suffer from the vice of illegality and impropriety on account of non-charging of additional tax on the tax charged on inter-State sales to the tune of Rs.3,48,93,540/- against `C’ forms. The Revisional Authority, accordingly, levied additional tax on inter-State sales at the rate of 2 per cent under the Central Sales Tax Act, 1956 (for brevity, `the Act’) and further charged interest on the amount of additional tax by creating an additional demand of Rs.25,227/- vide order dated 27.3.1991. In other words, if tax liability was one lac, it rose to one lac two thousand because of 2% of additional tax. For the aforesaid propositions, the Revisional Authority placed reliance on an earlier decision rendered in the case of M/s Gurmukh Singh and Sons Vs. The State of Punjab (1988) STI 159. The Tribunal dismissed the appeal, which led to the filing of an application for referring the aforementioned questions of law as the dealer had claimed that such questions of law emerged from the order of the Tribunal. The request made by the dealer was declined by the Tribunal vide order dated 15.12.1993 by placing reliance on the decision of the Tribunal rendered in G.S.T.R. No.6 of 1996 3 Gurmukh Singh’s case (supra) and two other judgments of Hon’ble the Supreme Court rendered in the cases of Assistant Commissioner (Assessment) Sales Tax Special Circle versus Janatha Expeller Company and others, [1987] 64 STC 435 and Deputy Commissioner of Sales Tax versus Aysha Hosiery Factory (P) Ltd., [1992] 85 STC 106. Being dissatisfied, the dealer approached this court and vide order dated 29.7.1996, the aforementioned questions of law have been referred for adjudication. We have heard the State counsel and have perused the record with her able assistance. In order to appreciate the controversy raised, it would be profitable to read Section 8 of the Act, which is extracted below: “8 Rates of Tax on sales in the course of inter-State trade of commerce:- (1) xx xx xx (2) xx xx xx (3) xx xx xx (4) xx xx xx (5) Notwithstanding anything contained in this section, the State Government may on the fulfilment of the requirements laid down in sub-section (4) by the dealer if it 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 G.S.T.R. No.6 of 1996 4 commerce, to a registered dealer 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) as may be mentioned in the notification; (b) that in respect of all sales of goods are 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 to a registered dealer 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, 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) as may be mentioned in the notification.” From the perusal of Section 8 (5) of the Act, it is evident that the State Government may by notification in the Gazette if it is satisfied that it is in public interest may direct that no tax under the Central Sales Tax Act would 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. Once the aforesaid notification has been issued, then no additional tax would be payable by a dealer under Section 5-A of the Punjab General Sales Tax Act, 1948. Insofar as the State of Punjab is concerned, a notification effective from 1.10.1976 has been issued under Section 8(5) of the Act in respect of the sales of bicycles, including their parts, G.S.T.R. No.6 of 1996 5 assessories and attachments. The notification is reproduced hereunder for facility of reference:- “ Notification regarding rate of tax on inter-Sate sales of “bicycles including their parts and accessories” –Effective from 01.10.1976: PUNJAB GOVERNMENT EXCISE AND TAXATION DEPARTMENT Notification No. S.O.45/C.A. 74/56/S.8/76, dated the 30th September, 1976:- In supersession of Punjab Government, Excise and Taxation Department, Notification No.30/C.A./74/56/S.8/75, dated the 29th April, 1975, and in exercise of the powers conferred by clause (a) of sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the Governor of Punjab being satisfied that it is necessary so to do in the public interest, is pleased to direct that with effect from the first day of October, 1976, the tax payable by any dealer having his place of business in the State of Punjab in respect of the sales of bicycles, including (their parts, accessories and attachments thereof) made by him from any such place in the course of inter-State trade or commerce to any registered dealer having his place of business in any other State or Union Territory in India, shall be calculated at the rate of two per centum of his turnover in so far the turnover or any part thereof relates to such sales, subject to the production of the declaration in form `C’ as prescribed under sub-section (4) of section 8 of the Central Sales Tax, 1956.” The issue is no longer res integra and has come up for determination of the Supreme Court in the case of Aysha Hosiery Factory G.S.T.R. No.6 of 1996 6 (P) Ltd. (supra). It seems to be well settled that additional sales tax would not be leviable on inter-State sales or purchases of goods in regard to which notification has been issued by the concerned State under Section 8 (5) of the Act fixing a specific lower rate by keeping in view the larger public interest. It is in this regard that the following observations made in Aysha Hosiery Factory (P) Ltd. (supra) are relevant, which read thus: “…….However, sub-section (2-A) of this section states that notwithstanding anything contained in clause (b) of sub-section (2) the tax payable under the Central Sales Tax Act by the dealer where the intra-State sale of the same under the “sales tax law” of the State is “exempt from tax generally or subject to tax generally at a rate which is lower than four per cent shall be nil or, as the case may be, shall be calculated at the lower rate”. Thus if an intra-State sale by the dealer is exempt then his inter-State sale also will be exempt. If the intra-State sale is taxed at a rate which is lower than four percent, then his inter-State sale of the same commodity shall also have to be taxed at the lower rate applicable in the State. But where the rate of tax applicable to intra-State sale was more than four per cent then the rate applicable for inter-State sale will be 10 per cent or the rate applicable for the local sale whichever is higher….” The aforesaid view has also been affirmed in a subsequent judgment of Hon’ble the Supreme Court rendered in the case of Shree Digvijay Cement Co. Ltd. v. State of Rajasthan (2000) 1 SCC 688. As a sequel to the above discussion, the question of law is G.S.T.R. No.6 of 1996 7 answered in favour of the dealer and against the revenue. It follows that the decision of the Tribunal is liable to be set aside. Accordingly, the decision of the Tribunal concerning Additional Tax and interest thereon is set aside. The matter is disposed of in the above terms. ( M.M.KUMAR ) JUDGE January 27, 2009 ( H.S.BHALLA ) VK JUDGE