(Per : HONOURABLE MR.JUSTICE V. M. SAHAI) 1. We have heard Mr.Saurabh G.Amin, learned counsel appearing for the appellant and Mr.Kabir Hathi, learned Assistant Government Pleader appearing for the respondents in this Appeal.
2. This Tax Appeal has been filed on the following proposed substantial questions of law.
1. Whether in the facts and circumstances of the case, the learned Tribunal was right in holding that there is a breach of conditions of Form No.19 ?
2. Whether, in the facts and circumstances of the case, merely because manufactured goods are sold to a Armed forces enjoying exemption from tax under section 49, can it be said that the appellant has not manufactured "taxable goods" and hence is liable to pay purchase tax under section 16 of the Gujarat Sales Tax Act ?
3. Whether in the facts and circumstances of the case, the penalty and interest could have been levied upon the appellant ?
3. The appellant is a primary co-operative society and is registered under Gujarat Sales Tax Act, 1969 and it holds recognition certificate under section 32 of the Act. The appellant is engaged in manufacturing and sale of Refined Edible Oil. In the course of business, the appellant had purchased un-refined edible oil by issuing form no.19 to the selling trader. The raw material was thereafter processed by the appellant and refined edible oil was manufactured which was supplied by the appellant to the Armed Forces of Defence Department of Government of India under section 49(1) of the Act. Sales made to Armed Forces are exempted from sales tax and therefore the appellant did not collect sales tax from the Armed Forces. The Commercial Tax Officer held that there was a breach of condition of form no.19 and the appellant was liable to pay purchase tax under section 16 of the Act for the assessment year 2003-2004, 2004-2005 and 2005-2006 and purchase tax was levied as well as penalty was also levied on the appellant under section 45 of the Act and interest was also levied under section 47 of the Act. This Tax Appeal is confined to the assessment year 2005-2006 only. The assessment order passed by the Commercial Tax Officer was challenged by the appellant before the Deputy Commissioner of Commercial Tax (Appeals-I) and the appellant has been dismissed on 25.4.2008. These orders were challenged by the appellant by filing Second Appeal no.298 of 2008 which has been dismissed by an order dated 30.9.2008 by which the Tribunal has held that the appellant has committed violation of form no.19 by not selling outcome as taxable goods, therefore, the appellant is liable to pay purchase tax. The assessment order and the appellate order were upheld.
4. It is not disputed by the learned counsel for the appellant that so far question nos.1 and 2 are concerned, they are covered by the Division Bench decision of this Court in Deepak Nitrite Ltd. v. State of Gujarat in Tax Appeal No.1110 of 2009 with Tax Appeal No.1111 of 2009 with Special Civil Application No.8926 of 2009 decided on 7.7.2010, wherein the Division Bench has held in paragraphs 32 to 34 as under:
"32. Therefore, the emphasis by the Revenue that what has to be seen are whether the goods are generally taxable or not is misplaced and unwarranted. What has been discussed by this High Court in the case of Madhu Silica has not been understood nor appreciated either by Revenue or the Tribunal. The controversy before the High Court was in the first instance as to whether provisions of section 15B of the Act are ultra vires the Constitution. To press home the said challenge the contention raised before the Court was that the said provision in effect is either a consignment tax or a duty in the nature of excise and hence beyond the legislative competence of the State Government. It was in context of the said challenge that the concept of generally taxable goods and fastening of the charge have been discussed by the Court in the judgment.
33. However, when it comes to a specific challenge as to leviability, and liability to pay tax i.e. purchase tax under section 15B of the Act, the Court has to read the provision as it stands and interpret the same, if there is any debate, to achieve the object with which the provision has been brought on the Statute book. A plain reading makes it clear that even if the goods purchased are generally taxable, or can be termed to be goods on which the charge is fastened, yet when the said provision has to be invoked and applied, a question has to be posed and answered: as to whether the goods purchased are taxable goods? For determining the same, the Court has to look at the definition given in the Statute. It is well-settled that a definition of a term in a law has to be read as it stands without either importing anything therein or removing any part of the definition. The only exception being where the context requires otherwise. In the instant case, even in the contextual setting, one need not travel beyond the plain meaning which flows from a plain reading of the definition of the term “taxable goods”.
34. Thus, for all intents and purposes, the definition of the term “taxable goods” means all goods except goods which are carved out in the definition itself, namely goods on which no tax is payable either under section 5 of the Act or under section 49(1) of the Act or under section 49(2) of the Act. Hence, even if the goods are generally taxable goods if no tax is payable they cannot be treated to be taxable goods, the emphasis being on liability to pay tax. Same meaning is available both under section 5 and section 49 of the Act when the Legislature has used the phrase “no tax shall be payable” (section 5) and “shall be exempt from the payment of the whole of the tax payable” (section 49(1)) and “exempt any specified class of sales - - - from payment of the whole or any part of the tax payable” (section 49(2)) (emphasis supplied). The Tribunal has thus misdirected itself in law in reading judgments of Madhu Silica (supra) and Cheminova (supra) without appreciating the true import of the relevant provisions discussed hereinbefore. In fact, the Tribunal has not even read and discussed the provisions. In none of the judgments relied upon by Revenue and the Tribunal has the true import of the term “taxable goods” been discussed and dealt with, because in none of the cases the issue ever arose."
5. Both the questions are covered by the aforesaid division bench decision. Therefore, we are of the considered opinion that question nos. A and B raised by the appellant do not raise any substantial question of law requiring consideration of this Court.
6. So far as question "C" is concerned, we admit this Appeal and formulate the following substantial question of law.
Whether in the facts and circumstances of the case, the penalty and interest could have been levied upon the appellant ?
With the consent of the learned counsel for the parties, we have taken up question no."C" for final disposal.
7. So far as the third question about levy of penalty and interest is concerned, the appellant was under a bonafide belief that the goods exempted under section 49 of the Act were not liable to tax in view of the Division Bench decision of this Court in Cheminova India Ltd. v Sales Tax Officer 2002(126) STC 334, wherein the Division Bench of this Court has held in para-14 that expression "taxable goods" what was meant was the gods which are generally taxable under the Act and that the charging event was not intended to be postponed till finished gods were finally and actually sold. Since the appellant was litigating under a bonafide belief that the goods were not taxable and therefore, no mens rea can be attributed to the appellant in not paying the taxes and the appellant has also not collected taxes from the Armed Forces.
8. For the aforesaid reasons, we do not find that imposition of penalty and interest was justified. We answer question "C" in favour of the assessee and against the department. The appeal is partly allowed. Penalty and interest levied against the appellant for the assessment year 2005-2006 is set aside.
(V.M.SAHAI,J) (N.V.ANJARIA,J) ***vcdarji