Case: Associated Cement Cos. Ltd Vs. State Of Bihar

different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India and others vs. Wood Papers Ltd. and Another (1990 (4) SCC 256 ), Mangalore Chemicals and Fertilizers Ltd. vs. Deputy Commissioner of Commercial Taxes and others (1992 Supp (1) SCC 21) to which reference has been made earlier. 13. Notification no. 37 dated 25th February, 1993 is also relevant, more particularly, clause (2) thereof. There is no dispute that in terms of clause (1) cement is one of the scheduled goods. Clause (2) reads as under: "Where an Importer of India made foreign liquor, Vegetable and Hydro-generated Oil or Cement is liable to pay tax under sub-section (2) of Section 3 of the Ordinance becomes liable to pay tax under the Bihar Finance Act, 1981 by virtue of sale of such scheduled goods, his liability under the Bihar Finance Act, 1981 shall be reduced to the extent of tax paid under the Ordinance." 14. It is to be noted that reference therein is made to the Ordinance i.e. Bihar Ordinance No. 1/93. The same has been enacted. The notification has been issued in exercise of the powers conferred by sub-section (1) of Section 3 of the Entry Tax Act and proviso to sub-section (1) of Section 12 of the Act. 15. A bare reading of clause (2) of the notification makes the position clear that liability of importer of cement under the Act shall be reduced to the extent of tax paid under the Entry Tax Act where such importer become liable to pay tax under the Act by virtue of sale of the scheduled goods. 16. Stand of the respondents appears to be that since there was no liability in respect of portion of sales because of notification of the State Government So No. 479 dated 22.12.1995 as part of the Industrial Policy 1995 granting exemption from payment of sales tax on production of extended industrial unit which undertakes expansion of their capacity, no question of adjustment arises. To put differently stand of the respondent is that when there was no tax liability on such sales, there was no liability to pay any tax and, therefore, the benefit of adjustment available under clause (2) of the notification SO No. 37 dated 25.2.1993 does not arise. The interpretation put forward by the respondents found acceptance by the High Court. 17. Crucial question, therefore, is whether the appellant had any liability under the Act. The answer to this lies in Section 3 of the Act, which is extracted above and is the charging section. In Sub-section (1) subject to the provision of the part (i.e. part I) sales tax or purchase tax, as the case may be, shall be paid by every dealer as provided in the section itself. Section 7 speaks of exemption. Sub-section (3) of Section 7 stipulates that State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from sales tax or purchase tax certain sales or purchases as the case may be. The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the Statute and latter on computation in accordance with the provisions of the Statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessional rate. 18. The word liable in the Concise Oxford Dictionary means legally bound, subject to a tax or penalty, under an obligation". In Blacks Law Dictionary (6th Edn.) the word liable means bound or obliged in law or equity; responsible, chargeable, answerable, compellable to make satisfaction, compensation, or restitution.. obligated, accountable for or chargeable with". The above position was noted in Zungarrao Bhikaji Nagarkar vs. Union of India and others (1997(7) SCC 409). 19. Tax at the appropriate rate would have become payable but for the exemption. Decision in Australian Mutual Society vs. IRC (1962) AC 135) (PC.) has stated the position as follows: "The phrase exempt from taxation" (Land and Income Tax Act, 1954 (No. 6701) (New Zealand) Section 86(1) does not cover income that is not at all within the reach of the New Zealand tax laws. It refers to income that would, had it not been for the exemption, otherwise have been so taxable". 20. Therefore, it cannot be said that as tax was not paid on portion of the turnover of the scheduled goods i.e. cement, the assessee-appellant had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. There is no dispute that the assessee - appellant was liable to pay tax under sub-section (3) of Section 3 of the Entry Tax Act. Therefore, it was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable by it under the Act.21. Above being the position the notices issued by the respondent are without legal sanction and are quashed. The judgment of the High Court is set aside. 22.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]. Crucial question, therefore, is whether the appellant had any liability under the Act. The answer to this lies in Section 3 of the Act, which is extracted above and is the charging section. In Sub-section (1) subject to the provision of the part (i.e. part I) sales tax or purchase tax, as the case may be, shall be paid by every dealer as provided in the section itself. Section 7 speaks of exemption. Sub-section (3) of Section 7 stipulates that State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from sales tax or purchase tax certain sales or purchases as the case may be. The question of exemption arises only when there is a liability. Exigibility to tax is not the same as liability to pay tax. The former depends on charge created by the Statute and latter on computation in accordance with the provisions of the Statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessionalit cannot be said that as tax was not paid on portion of the turnover of the scheduled goods i.e. cement, the assessee-appellant had no liability under the Act. It was definitely liable to pay tax under the Act, but for the exemption. There is no dispute that the assessee - appellant was liable to pay tax under sub-section (3) of Section 3 of the Entry Tax Act. Therefore, it was entitled to reduction to the extent of tax paid under the Entry Tax Act while working out tax payable by it under the Act.21. Above being the position the notices issued by the respondent are without legal sanction and are quashed. The judgment of the High Court is set aside.