Case: State Of Jharkhand  Vs. M/S. La Opala R.G. Ltd

the respondent-dealer is a Public Limited Company incorporated under the provisions of the Companies Act, 1956 engaged in the manufacture of glass and glassware made of Opal glass. The industrial unit of the respondent-dealer is situated at Madhupur in Deoghar district, Jharkhand4. The respondent-dealer is a dealer registered under the provisions of the Bihar Finance Act, 1981 and the Central Sales Tax Act, 1956 (the Act, for short)5. The State Government, in exercise of its powers under clause (b) of sub-section 5 of Section 8 of the Act has issued the notification. Since the construction of the notification is in issue, we deem it appropriate to extract the notification. It reads as under:S.O.25, dated the 25th June, 2001 – In exercise of the powers conferred by clause (b) of sub-section (5) of Section 8f of the Central Sales Tax Act, 1956 (Act 74 of 1958) the Governor of Jharkhand is pleased to direct that tax payable under sub-section (1) or (2) of Section 8 of the said Act in respect of Sale of all types of glass and glass sheets in the course of interstate sale or commerce from any place of business in the State of Jharkhand shall be calculated at the rate of three per centum and no statutory form in this regard shall be required2. This notification shall come into force with effect from 16th June, 20016. Immediately after issuance of the notification, the respondent-dealer by letter dated 27.05.2002 had informed the authorities under the Act, that, since the respondent-dealer would be covered by the notification, the rate of tax payable on glassware in inter-state sales would be at the reduced rate of 3%. Unfortunately, the authorities did not respond to the request so made by the dealer7. Later, the authorities issued a letter dated 09.01.2004 to the respondent manufacturer, inter alia, directing him to deposit the tax in relation to its transactions in respect of the inter-state sales to registered and unregistered dealers at the rate of 4% and 12%, respectively. The respondent was also directed to show-cause as to why a penalty under Sections 16 and 16(9) of the Bihar Finance Act, 1981 and the Act should not be imposed and the respondent not be directed to correct the returns and deposit tax at the rate of 4%, if the sales is effected to registered dealers and at the rate of 12% if the inter-state sale is effected to un-registered dealers8. The respondent-dealer had filed its reply, dated 16.01.2004, wherein it took the stand that it was liable to charge and deposit tax at the rate of 3 per cent on sale in the course of inter-state trade in respect of its products; that the returns had been correctly filed and that the tax was validly deposited at the rate of 3 per cent9. After the issuance of the aforesaid letter/notice, the authorities by their letter dated 13.05.2004, rejected its stand and informed that the respondent would be liable to pay tax at the rate of 4 per cent on its inter-state sales if made to a registered dealer and at the rate of 12 per cent if made to an unregistered dealer10. Further, the respondent-assessee was informed by the authorities that the product manufactured by him is glassware and, therefore, not covered under the notification by letter dated 13.07.200411. The respondent-dealer, being aggrieved by the communications dated 09.01.2004, 13.05.2004 and 13.07.2004 had filed a Writ Petition before the High Court, inter alia, requesting the Court to issue a writ in the nature of certiorari to quash the aforesaid letters and direct the authorities under the Act to extend the benefit of the notification, which has come into force with effect from 16.06.200112. The High Court, after a detailed consideration of the issue before them, has come to the conclusion that the glassware manufactured by the respondent-dealer is a type of glass and therefore, it is entitled to the benefit of reduced rate of tax under the notification and, accordingly, has quashed the said letters

Reasoning: 19. We do not concur with the proposition put forth by Shri S.D. Sanjay, learned senior counsel that a notification which grants tax incentives should to be liberally construed in support of his submission. It is settled rule of construction of a notification that at the outset a strict approach ought to be adopted in administering whether a dealer/ manufacturer is covered by it at all and if the dealer/manufacturer falls within the notification, then the provisions of the notification be liberally construed20. Literally speaking, an exemption is freedom from any liability, payment of tax or duty. It may assume different applications in a growing economy such as provisioning for tax holiday to new units, concessional rate of tax to goods or persons for a limited period under specific conditions and therefore, in Union of India v. Wood Papers Ltd., (1990) 4 SCC 256  this Court has observed that construction of an exemption notification or an exemption clause in contrast with the charging provision has to be tested on different touchstone and held that the eligibility clause in relation to an exemption notification is given strict meaning and the notification has to be interpreted in terms of its language, however, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally.Therefore, it cannot be accepted that the expression types of glass could have been intended to refer to or include forms of glass28. In the present case, the respondent-dealer is a manufacturer of glassware. In our considered view, the glassware so manufactured by the respondent-dealer though made of glass cannot be considered or called as a type of glass in light of the aforesaid discussion and since the notification only provides for the reduction in the rate of tax of types of glass and not for forms of glass which is manufactured by the respondent as glassware, the respondent would not be covered by the notification.