Case: M/s. CASIO India Co. Pvt. Ltd Vs. State of Haryana

. The appellant-company is engaged in the business of manufacture and sale of Radio Pagers having its unit at plot No. 4, Phase-I, Udyog Vihar, Gurgaon, Haryana. It is registered under the provisions of Haryana General Sales Tax Act, 1973 (for short, "the Act"), Haryana General Sales Tax Rules, 1975 (for short, "the Rules") and the Central Sales Tax Act, 1956 (for brevity, "CST Act") In the year 1995-96, the assessee-company after purchase of Radio Pagers from M/s Bharati Telecom Limited was also engaged in inter-state sale of the said Radio Pagers and in course of the said transaction, did not charge any sales tax from the purchasers on the basis of Notification No. SO 89/CA.74/56/S.8/95 dated 04.09.1995 issued under Section 8(5) of the CST Act read with Rule 28A(4)(c) of the Rules. The appellant filed its return and claimed exemption placing reliance on the said notification, but the claim of exemption put forth by the assessee was not accepted by the assessing officer vide assessment order dated October 05, 2001. Being aggrieved by the order of assessment, the appellant preferred an appeal before the Joint Excise and Taxation Commissioner (Appeal), Rohtak Circle, Rohtak who dismissed the appeal vide order dated May 2, 2002.3. Being dissatisfied with the order passed in appeal, the appellant knocked at the doors of the Sales Tax Tribunal, Chandigarh (for short `the tribunal) which dismissed the appeal by its order dated September 9, 2002. The dismissal of the appeal by the tribunal compelled the appellant to prefer Writ Petition No. 2346 of 2003, seeking a direction to the tribunal to make a reference to the High Court. The High Court accepting the prayer of the assessee called for a reference from the tribunal, and the tribunal vide its order dated 14.10.2003 in S.T.M. No. 82 of 2002-03 made a reference to the High Court for its opinion.4. After stating the case, the tribunal referred the following questions for the opinion of the HighWhether the notification dated 04.09.1995 issued under Section 8(5) of the CST Act is relatable to the exemption of goods or the person selling it?(ii) Whether in view of the notification dated 04.09.1995 issued under Section 8(5) of the CST Act and Rule 28A of the Rules, the inter-state sales of the goods manufactured by an "exempted unit", even by any other dealer, is exempted from the levy of the Central SalesBefore the High Court it was contended by the assessee that the notification dated 04.09.1995 issued by the State Government provides for grant of exemption on the sale of goods manufactured in the State of Haryana by any dealer holding valid exemption certificate under Rule 28 of the Rules and not to the dealer and, therefore, the goods sold by the assessee in the course of inter-state trade were not liable to be taxed. In support of the said proposition, reliance was placed on International Cotton Corporation (P) Ltd. v. Commercial Tax Officer, Hubli, (1975) 35 STC 1 , Pine Chemicals Ltd. and others v. Assessing Authority and others, (1992) 85 STC 432, Khadi and Village Soap Industries Association and another v. State of Haryana and others, (1992) 85 STC 432, State of Rajasthan v. Sarvotam Vegetables Products, (1996) 101 STC 547  and Commissioner of Sales Tax v. Industrial Coal Enterprises, (1999) 114 STC 365. On behalf of the revenue, it was urged that the notification in question provided for grant of exemption only on the sale of goods manufactured in the State by a dealer holding valid exemption certificate under Rule 28 of the Rules, subject to the condition that such dealer had not charged tax under the CST Act on the sale of goods manufactured by it, and not in respect of the sale of goods by other dealers in the course of inter-state trade. It was the stand of the revenue that the assessee had not been granted exemption certificate under Rule 28A of the Rules and as such, the goods sold by it in course of inter-state trade were not exempted from the tax under the CST Act merely because the same had been purchased from M/s Bharati Telecom Limited which possesses a valid exemption certificate. Reliance was placed on the decision of this Court in State Level Committee and another v. Morgardhsammar India Ltd., (1996) 101 STC 1. 7. The High Court referred to Section 8(2A) and 5 of the CST Act and Rule 28A(2)(n) and (4)(c) of the Rules and notification dated 04.09.1995; distinguished the authorities cited by the assessee and came to hold that the expression "notional sales tax liability" as used in Rule 28A(2)(n) takes within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial unit under the Act but also the amount of tax payable under the CST Act on the sales of finished products of the eligible industrial units made in the course of inter-state trade or commerce and branch transfers or consignment sales outside the State of Haryana. Reference was made to clause (c) of sub-rule (4) of Rule 28A of the Rules to opine that the scope of exemption was extended to the goods manufactured by an eligible industrial unit availing exemption under Rule 28A at all successive stage(s) of sale or purchase subject to the condition that the dealer effecting successive purchase or sale furnishing a certificate in form ST-14A which is required to be obtained from the assessing authority duly filled in and signed by the registered dealer to whom such goods were sold. Thereafter, the High Court analysed the Rules and in that context statedreading of the provisions reproduced above shows that the expression "notional sales tax liability" takes within its fold not only the amount of tax payable on the sales of finished goods of the eligible industrial unit under the State Act, but also the amount of tax payable under the Central Act on the sales of finished products of the eligible industrial unit made in the course of inter-state trade or commerce and branch transfers or consignment sales outside the State of Haryana (Rule 28A (2) (n)). Clause (c) of sub-rule (4) of Rule 28A extends the scope of exemption to the goods manufactured by an eligible industrial unit availing exemption under Rule 28A at all successive stage(s) of sale or purchase subject to the condition that the dealer effecting successive purchase or sale furnishes to the Assessing a certificate in form ST-14A which is required to be obtained from the Assessing Authority duly filled in and signed by the Registered dealer to whom such goods were sold. Sub-rule (6) of Rule 28A lays down the mechanism for grant of exemption/entitlement certificate. Sub-rule (7) envisages renewal of exemption certificate and lays down the procedure for grant of renewal. Section 8(2A) of the Central Act contains a non-obstante clause. It lays down that notwithstanding anything contained in Section 6(1A) or sub-section (1) or clause (b) of sub-Section (2) of Section 8, the tax payable under the Central Act by a dealer on his turnover in so far as the turnover or a part thereof relates to the sale of any goods, the sale or purchase of which is exempted from tax under the State Act or is subjected to tax at a rate lower than 4% shall be nil or shall be calculated at the lower rate. Sub-section (5) of Section 8 also begins with a non-obstante clause. It empowers the State Government to grant exemption from payment of tax or levy of tax at a lower rate on the dealer having his place of business in respect of the sales made by him in the course of inter-State trade or commerce. It also empowers the State Government to direct that no tax shall be payable under the Central Act or tax shall be calculated at lower rates in respect of all sales of goods or classes of goods as may be specified in the notification which are made in the course of inter-State trade or commerce by any dealer having his place of business in the State or class of dealers specified in the notification. Notification dated 4.9.1995 declares that no tax shall be payable under the Central Act w.e.f. 1.4.1988 on the sale of goods manufactured in the State of Haryana by any dealer holding a valid exemption certificate under Rule 28A of the Rules, provided that such dealer has not charged tax under the Central Act on the sale of goods manufactured by him.After so stating, the High Court referred to the notification dated 04.09.1995 and observed that it was not happily worded and thereafter, it proceeded to hold that the tribunal was correct in following its earlier order for arriving at the conclusion that the notification did not exempt the goods sold in the course of inter-state trade by dealer other than those who held valid exemption certificate granted under Rule 28A of the Rules. It further ruled that if the State Government wanted to extend the benefit of exemption from payment of tax under the CST Act to the sale of goods effected by a dealer in the course of inter-state trade irrespective of the fact that such dealer did not hold valid exemption certificate under Rule 28A of the Rules, then it would have incorporated the language of Rule 28A(4)(c) of the Rules in the notification and would not have put a rider that such dealer should not have charged tax under the CST Act on the sale of goods manufactured by it.9. Thus, the ultimate conclusion recorded by the High Court is that successive sales of goods manufactured by dealer holding valid exemption certificate were exempt from payment of sales tax so long as they were inter-state sales but in respect of sale of goods by a dealer not holding exemption certificate under Rule 28A in the course of inter-state trade, the benefit of exemption envisaged under notification dated 04.09.1995 was not available to such dealer. The Division Bench proceeded to clarify that in respect of stages of sale which are exempt from payment of tax under the Act are covered by Rule 28A(4)(c) but notification dated 04.09.1995 was applicable only to sale of goods manufactured by the exempted unit. Being of this view, it answered the reference in favour of the revenue and against the assessee.

Court's reasoning:
do not think the proviso should be given a greater or more significant role in interpretation of the main part of the notification, except as carving out an exception. It means and implies that the requirement of the proviso should be satisfied i.e. manufacturing dealer should not have charged the tax. The proviso would not scuttle or negate the main provision by holding that the first transaction by the eligible manufacturing dealer in the course by way of inter-state sale would be exempt but if the inter-state sale is made by trader/purchaser, the same would not be exempt. That will not be the correct understanding of the proviso. Giving over due and extended implied interpretation to the proviso in the notification will nullify and unreasonably restrict the general and plain words of the main notification. Such construction is not warranted.21. Quite apart from the above, Rule 28A(4)(c) supports the interpretation and does not counter it. The said rule exempts all intra-state sales including subsequent sales. The reason for enacting this clause is obvious. The intention is to exempt all subsequent stages in the State of Haryana and the eligible product can be sold a number of times, without payment of tax. Intra-state sales refer to sale between two parties within the State of Haryana. Inter-state transaction results in movement of goods from State of Haryana to another State. Thus, clause (ii) of sub-rule 2(4) refers to inter-state trade or commerce and the notification does not refer to subsequent sales as in case of Rule 28A(4) (c). Whether or not tax should be paid on subsequent sales/purchase in the other State cannot be made subject matter of Rule 28A or the notification. Inter-State sale from the State of Haryana will be only once or not a repeated one. Therefore, there is no requirement of reference to subsequent sale. In this context, it is rightly submitted by the assessee that there is only one inter-State sale from the State of Haryana and the interpretation as suggested by the revenue would tantamount to making the exempted goods chargeable to tax, and the said goods would cease to enjoy the competitive edge given to the manufacturer in the State of Haryana. It will be counter-productive.