Case: Commissioner of Sales Tax, U.P Vs. Agra Be.L.T.Ing Works, Agra

RANGANATH MISRA, J. 1. Special leave granted. 2. Delay of six days is condoned. 3. The short question for consideration in this appeal at the instance of the Revenue is whether the High court was justified in holding that in the absence of a notification withdrawing the earlier Notification dated 25-11-1958 made in exercise of power vested under Section 4 of the U.P. Sales Tax Act, 1948, Sales, tax would not be exigible in terms of the Notification dated 1-12-1973 issued under Section 3A of that Act. 4. This notification of 1958 exempted cotton fabrics of all varieties from sales tax. It is not disputed that under it sale of patta, the goods in question on being treated as cotton fabric was exempted from sales tax. The notification of 1973 made under Section 3A of the Act prescribed sales tax of seven per cent on the sale of beltings of all kinds. There is no dispute now that patta is a kind of belting material. 5. Section 3 of the Act contains the charging provision and prescribes a uniform rate of tax on sales. Section 3A empowers the State Government to modify the rate of tax by notification. The notification of 1973 in fact prescribes a rate of tax higher than provided by Section 3. In 1958, under the notification referred to above, patta as an item of cotton fabric stood exempted from tax liability. The High Court has referred to some of its earlier decisions and has concluded thus : Thus the consistent view of this Court throughout has been that by issuing a separate notification under Section 3A, the earlier exemption granted under Section 4 of the Act cannot be negatived. If the State wanted to tax beltings of all kinds , it has to amend the general notification issued under Section 4- by deleting cotton fabric belts from the notification issued under Section 4 of the Act. 6. As has been pointed out above, Section 3 is the charging provision; Section 3 A authorises variation of the rate of tax and Section 4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under Section 3A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4 granting exemption from liability, a subsequent notification under Section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under Section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification - both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State arid the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption continues, a specific item has now been notified under Section 3A of the Act.

Decision reasoning: 1[ds]6. As has been pointed out above, Section 3 is the charging provision; Section 3 A authorises variation of the rate of tax and Section 4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under Section 3A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4 granting exemption from liability, a subsequent notification under Section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under Section 3A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification - both for withdrawal of exemption and also for providing higher tax. When power for both the operations vests in the State arid the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notification. We would like to point out that the exemption was in regard to a class of goods and while the exemption continues, a specific item has now been notified under Section 3A of the Act.