Case: Hindustan Paper Corporation Ltd. Etc Vs. State of Kerala and Others

a case where the exemption operates only in certain circumstances. The learned counsel submits that the decisions o f this court in Indian Aluminum and Industrial Cables have been considered and explained by this Court in Pine Chemicals and, therefore, the principle of those decisions cannot be read as supporting the States submissions. 11. While we see the force in the submissions of Sri Iyer, learned counsel for the State of Kerala, we cannot give effect to the same in the light of the binding decision in Pine Chemicals which deals with an almost similar exemption notification. The Government of Jammu &Kashmir had issued orders providing for exemption from the State sales tax both on raw-materials and finished products for a period of five years from the date the unit goes into production. Question had arisen whether the said exempt ion attracts the exemption contained in Section 8(2A) of the Central Act? The said question was answered in the affirmative by V., Ramaswami, J. speaking for the Bench. The learned Judge examined the scheme of sub-section (1) and (lA) of Section 6 as well as of sub-sections (1), (2) and(2A) of Section 8 and then observed:On a plain reading of Section 8(2-A) of the Central Sales tax Act it deals with the liability of a dealer to pay tax under the Act on his interstate sales turnover relating to any goods on the turnover relating to such goods if the sale had taken place inside the State is exempt from payment of sales tax under the sales tax law of the appropriate State. It provides that if an intrastate sale or purchase of a commodity by the dealer is exempt from tax generally or subject to tax gen erally at a rate which is lower than 4 per cent than his liability to tax under the Central Sales Tax Act when such commodity is sold on inter-state trade would be either nil or as the case may be shall be calculated at a lower rate. Explanation states as to when the sale or purchase shall not be deemed as to be exempt from tax generally under the sales tax law. That is to say an intrastate sale or purchase shall not be deemed as to be exempt from tax generally under the sales tax law. 12. That is to say an intrastate sale or purchase of a commodity shall not be deemed as exempt from State tax generally if the exemption is given only (1) in specified circumstances or under specified conditions or (2) the tax is leviable on the sale or purchase of such goods at specified stages or (3) otherwise than with reference to the turnover of the goods. These conditions or limitations are therefore with reference to the transaction of sale or purchase. The main clause deals with the turnover of a dealer which term would include any dealer or any class of dealers The existence or otherwise of the three Limitations under the explanation above referred to on claiming exemption under Section 8(2-A) of the Central Sales Tax Act will therefore have to be tested with reference to the transaction of sale or purchase as the case may be of the dealer who claims the exemption in respect of his intrastate sale or purchase of the same goods.Thus the specified circumstances and the specified conditions referred to in the explanation should be with reference to the local turnover of the same dealer who claims exemption under Section 8(2-A) of the Central Sales Tax Act. 13. The learned Advocate-General for the State contended that the conditions that the industry should have been set up and commissioned subsequent to the Government Orders 159 and 414 above referred to and the commodity sold by him in order to claim the exemption under the said government order, shall be those manufactured by that industry are conditions or specified circumstances within the meaning of the explanation and, therefore, the dealer (Pine Chemicals) is not entitled to any exemption under Section 8(2-A) of the Central Sales Tax Act. We are unable to agree with this submission of the learned counsel for the State. The facts which the dealer has to prove to get the benefit of the government orders are intended only to identify the dealer and the goods in respect of which the exemption is sought and they are not conditions or specifications of circumstances relating to the turnover sought to be exempted from payment of tax within the meaning of those provision. The specified circumstances and the specified conditions referred to in the explanation should relate to the transaction of sale of the commodity and not identification of the dealer or the commodity in respect of the exemption is claimed. These conditions relating to identity of the goods and the dealer are always there in every exemption and that cannot be put as a condition of sale. We have already held that not only sale by the manufacturer to dealer that is exempt under the government orders but since the General Sales Tax Act had adopted only a single point levy, even the sub- sequent sales would be covered by the exemption order. Therefore, the question whether the tax is leviable on the sale or purchase at specified stage does not arise for consideration. This is not also a case where the exemption is with reference to something other than the turnover of the goods. (emphasis added) The learned Judge then dealt with the decisions of this Court in Indian Aluminum and Industrial Cables and distinguished them pointing out that the exemption concerned in those cases was clearly a conditional one. The learned Judge pointed out that the exemption concerned therein was with respect to sales of an undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (9 of 1910), of goods for use by it in generation or distribution of such energy. 14.

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

Explanation:
1[ds]While we see the force in the submissions of Sri Iyer, learned counsel for the State of Kerala, we cannot give effect to the same in the light of the binding decision in Pine Chemicals which deals with an almost similar exemption notification. The Government of Jammu &Kashmir had issued orders providing for exemption from the State sales tax both on raw-materials and finished products for a period of five years from the date the unit goes into production. Question had arisen whether the said exempt ion attracts the exemption contained in Section 8(2A) of the Central Act? The said question was answered in the affirmative by V., Ramaswami, J. speaking for the Bench. The learned Judge examined the scheme of sub-section (1) and (lA) of Section 6 as well as of sub-sections (1), (2) and(2A) of Section 8 and then observed:On a plain reading of Section 8(2-A) of the Central Sales tax Act it deals with the liability of a dealer to pay tax under the Act on his interstate sales turnover relating to any goods on the turnover relating to such goods if the sale had taken place inside the State is exempt from payment of sales tax under the sales tax law of the appropriate State. It provides that if an intrastate sale or purchase of a commodity by the dealer is exempt from tax generally or subject to tax gen erally at a rate which is lower than 4 per cent than his liability to tax under the Central Sales Tax Act when such commodity is sold on inter-state trade would be either nil or as the case may be shall be calculated at a lower rate. Explanation states as to when the sale or purchase shall not be deemed as to be exempt from tax generally under the sales tax law. That is to say an intrastate sale or purchase shall not be deemed as to be exempt from tax generally under the sales tax lawThat is to say an intrastate sale or purchase of a commodity shall not be deemed as exempt from State tax generally if the exemption is given only (1) in specified circumstances or under specified conditions or (2) the tax is leviable on the sale or purchase of such goods at specified stages or (3) otherwise than with reference to the turnover of the goods. These conditions or limitations are therefore with reference to the transaction of sale or purchase. The main clause deals with the turnover of a dealer which term would include any dealer or any class of dealers The existence or otherwise of the three Limitations under the explanation above referred to on claiming exemption under Section 8(2-A) of the Central Sales Tax Act will therefore have to be tested with reference to the transaction of sale or purchase as the case may be of the dealer who claims the exemption in respect of his intrastate sale or purchase of the same goods.Thus the specified circumstances and the specified conditions referred to in the explanation should be with reference to the local turnover of the same dealer who claims exemption under Section 8(2-A) of the Central Sales Tax ActThe learned Advocate-General for the State contended that the conditions that the industry should have been set up and commissioned subsequent to the Government Orders 159 and 414 above referred to and the commodity sold by him in order to claim the exemption under the said government order, shall be those manufactured by that industry are conditions or specified circumstances within the meaning of the explanation and, therefore, the dealer (Pine Chemicals) is not entitled to any exemption under Section 8(2-A) of the Central Sales Tax Act. We are unable to agree with this submission of the learned counsel for the State. The facts which the dealer has to prove to get the benefit of the government orders are intended only to identify the dealer and the goods in respect of which the exemption is sought and they are not conditions or specifications of circumstances relating to the turnover sought to be exempted from payment of tax within the meaning of those provision. The specified circumstances and the specified conditions referred to in the explanation should relate to the transaction of sale of the commodity and not identification of the dealer or the commodity in respect of the exemption is claimed. These conditions relating to identity of the goods and the dealer are always there in every exemption and that cannot be put as a condition of sale. We have already held that not only sale by the manufacturer to dealer that is exempt under the government orders but since the General Sales Tax Act had adopted only a single point levy, even the sub- sequent sales would be covered by the exemption order. Therefore, the question whether the tax is leviable on the sale or purchase at specified stage does not arise for consideration. This is not also a case where the exemption is with reference to something other than the turnover of the goods. (emphasis added) The learned Judge then dealt with the decisions of this Court in Indian Aluminum and Industrial Cables and distinguished them pointing out that the exemption concerned in those cases was clearly a conditional one. The learned Judge pointed out that the exemption concerned therein was with respect tosales of an undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (9 of 1910), of goods for use by it in generation or distribution of such energy.