JUDGMENT R. M. Sahai, J. - Under S. 11 of the U.P. Sales Tax Act, 1948, (hereinafter referred to as the Act), the Judge (Revisions) Sales Tax, Meerut, has, at the instance of the assessee, who is common in both these references, referred to this Court the following two questions of law :
1. Whether on the facts and circumstances of the case the turnover of the assessee was exempt from tax generally in view of Notification No. ST-2409/X-902(15)/68 dated 28.5.1969 as amended by notification No. ST-6996/X-902(15)/68 dated 27.8.1969 for U.P. Sales and so also for inter State under S. 8(2A) of the Central sales Tax Act ?
2. Whether on the facts and circumstances of the case amendment of Notifications referred to in question No. 1 by S. 31(3) (a) of U.P. Act 38/75 (S. 30(3) of U.P. Ordinance 12 of 1975) narrowed it down to exemption for intra-State sales alone as held by Additional Judge (Revisions) Sales Tax, Meerut.
2. The facts of these two cases have been out in the orders of reference. Suffice it to state that the assessee is a manufacturer of tin containers in Ghaziabad, Uttar Pradesh.
3. Notification No. ST-2409/X-902/(15)/68 dated 28.5.1969, issued under the U.P. Sales Tax Act read as follows;
The turnover with effect from the date of publication of this notification in the Gazette, is exempt from the payment of sales tax in respect of sanitary cans manufactured by the M/s. Poyasha Industrial Co. Ltd., Ghaziabad during a period of three years."
4. The above notification was amended by Notification No. ST-6996/X-902(15)/68 dated 27.8.1969, by substituting for the words "Sanitary cans", the words "open top sanitary cans and Lithographed/plain general line in containers."
5. By clause 30(3) of U.P. Ordinance 12 of 1975, the above notification was further amended by substituting for the words the turnover in respect of "the turnover of sales made within the State by the manufacturing dealer in respect of."
6. U.P. Ordinance No. 12 of 1975 was substituted by U.P. Act No. 38 of 1975. S. 31(3) of U.P. Act No. 38 of 1975 corresponds to clause 30(3) of the Ordinance.
7. The assessee in these two references claimed that the tin containers manufactured by it and sold in the course of inter-State trade in the assessment years 1969-70 and 1970-71, were not liable to tax under the Central Sales Tax Act since such sales within the State of U.P. had been exempted from the State Sales Tax under the aforesaid Notification dated 28.5.1969. Its claim was rejected by the Judge (Revisions) who took the view that in view of the amendment of the notification by U.P. Act No. 38 of 1974, the assessees sales of tin container were not exempted generally but were exempted only when such sales were made within the State and that hence the inter-State sales of such tin containers did not attract the exemption under S. 8(2A) of the Central Sales Tax Act.
8. Shri Ashok Gupta, learned counsel for the assessee, contended that the view taken by the Judge (Revisions) Sales Tax was clearly erroneous. His argument was as follows : The State Legislature can State sales and purchases only and can also provide Tax on intra-State Sales and purchases only. Hence the exemption granted to the assessee in the present case in respect of its sales of tin containers within the State, should be regarded as a general exemption of tin containers under the State Sales Tax Act. Consequently, under S. 8(2A) of the Central Sales Tax Act, the assessees inter-State sales of tin containers were entitled to be exempt from the Central Sales Tax.
9. The learned Standing counsel who appeared for the State of U.P., argued in support of the view taken by the Judge (Revisions) Sales Tax.
10. Under Entry No. 54 of List II of the 7th Schedule to the Constitution, the State Legislature can enact law providing for levy of Sales tax only on sales or purchases within the State and not inter-State sales and purchases of goods. It follows that by or under an enactment of the State sales tax can be granted only in respect of sales and purchases that take place within the State and such exemption cannot be granted in respect of inter-State sales and purchases of goods. When under the U.P. Sales Tax Act, sales of tin containers by the assessee within the State of U.P. are exempt, such exemption should, in our opinion, be regarded as a general exemption of all sales of tin containers by the assessee in Uttar Pradesh and not as exemption under any specified conditions or any specified circumstances. Though U.P. Ordinance No. 12 of 1975 and U.P. Act No. 38 of 1975, substituted the words "the turnover of sales made within the State by the manufacturing dealer in respect of "for the word "the turnover in respect of", in the notification granting exemption to the assessee, such substitution of words has not rendered the exemption any less a general exemption from the State sales tax on all sales made by the assessee in the State of Uttar Pradesh. We are unable to agree with contrary view taken by the Judge (Revisions) Sales Tax.
11. Even so, the learned Standing Counsel contended that the exemption granted to the assessee under the aforesaid notification in regard to the turnover of sales of tin containers, cannot be regarded as exemption from State sales tax generally on sales or purchases of tin containers. He maintained that the exemption was granted only in respect of sales effected by the assessee in the State of Uttar Pradesh and not on sales of tin containers effected by any other dealer or person in Uttar Pradesh. In other words, the contention of the learned Standing Counsel was that since the exemption was limited to the sales by the applicant assessee and did not extend to the sales of the same commodity by other dealers or persons, such exemption cannot be said to be a general exemption, but an exemption in specified conditions or specified circumstances for the purpose of S. 8(2A) of the Central Sales Tax Act. He maintained the findings recorded by the Judge (Revisions) that the goods which were manufactured by the assessee were unclassified items and therefore were not exempt from tax generally. He referred Ss. 6 and 8 of the Central Sales Tax Act and urged that the principle laid down by this Court in 1974 UPTC 502 was not applicable to the facts of the present case. He contended that the goods which were exempted from payment of tax in the case were taxable at single point and that once a Notification was issued granting exemption to the manufacturer it might be a case of the turnover of goods being exempted from tax generally but where, on the admitted facts, only one of the points in the series of sales had been exempted it could not be considered to be a case of general exemption. He relied on :
State of Punjab vs. M/s. Indian Aluminium Cables Ltd.
State of Andhra Pradesh vs. Associated Tanners.
Commissioner of Sales Tax, U.P. vs. M/s. Arjunlal Yoganath, Moradabad.
S. 6 (1-A) of the Central sales Tax Act reads as under :
".................................................................. ..................................................................."
"...... (1A). A dealer shall be liable to pay tax under this Act on sales of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State."
A perusal of the section makes it clear that the turnover of inter-State sale shall not be exempt, merely, because the goods are not liable under State law. In other words nontaxability of a goods under the State law is no more a ground for claiming it to be non-taxable under Central Sales Tax Act. The liability of the assessee therefore regarding inter State sale cannot be disputed.
12. Sub-S. (2A) of S. 8 of the Central Sales Tax Act, as it stood in the relevant assessment years, namely, 1969-70 and 1970-71, read as follows :
"Notwithstanding anything contained in Sub-S. (1) or sub-S. (2), if under the sales tax law of the appropriate State, the sales or purchase as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than two per cent (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover is so far as the turnover or any part thereof relates to the sales of such goods shall be nil or, as the case may be, shall be calculated at the lower rate.
EXPLANATION : For the purposes of this Sub-section a sale or purchase of goods shall not be deemed to be exempted from tax generally under sale tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods."
It substituted proviso to S. 8(1) as it originally stood. It relates to collection of tax but unequivocally declares that a dealer shall not be liable to pay tax on his turnover of purchase or sale if sale or purchase of such goods is exempt from tax generally in the appropriate State. It is in the nature of an exception to S. 6(1-A). The assessee, a dealer, can by virtue of the exception carved out by S.(-A) can still claim that no tax can be calculated on his turnover provided it is established that the goods in which he has carried on inter State trade were such that the turnover of those goods was exempt from tax generally under the State Act.
13. In 22 Sales Tax Cases 152 (supra) the turnover of dealer was exempt by virtue of Notification issued by State Government. The exemption did not extend to unregistered dealer. It was held by the Madhya Pradesh High Court :
"During the period of exemption, the sales of Niwar by a registered dealers were exempted from tax generally that is to say, universally and without any limitation. That being so, these sales are exempt from tax under the Central Sales Tax Act as provided by the substantive part of Sub-s. (2A) of S. 8 of the Act."
14. In M/s. H. S. G. W. (P) Ltd. vs. State of U.P. the scope of Explanation to S. 8(2-A) was considered. It was held :
"The stipulation in the Notification that the turnover of such would for a period of three years, be exempt from payment of sales tax under the Sales Tax Act. The Notification does not in our opinion amount to exempting the turnover of such goods from tax under specified circumstances or specified conditions. Both there decisions were considered by the Supreme Court in M/s. Indian Aluminium Cables Ltd. vs. State of U.P.
15. While considering the Madhya Pradesh decision it was observed :
"The exemption granted to sales by a registered dealer under the Notification was without any restriction so far as sales by a registered dealer were considered. Though the period of exemption was fixed, it was not regarded as a condition imposed in relation to the exemption. It was also contended there that because the exemption was granted to the registered dealers the exemption was granted to a class of dealers and therefore, it should be construed to be an exemption in specified circumstances or under specified conditions. The court repelled the contention by stating that the exemption was to all registered dealers without any restriction or condition."
16. The observation of the Supreme Court while considered Hindustan Safety Glass Works case was :
"The stipulation in Notification in Hindustan Safety Glass Works case, that turnover of such sales would for a period of three years be exempt from payment of sales tax did not amount to exempting the turnover of such goods from tax under specified circumstances of specified condition."
17. We may point out that M/s. Indian Aluminium Cables Ltd. was decided both by the Supreme Court and the High Court in the light of S. 8(2-A) as it stood after the amendment in 1972. The omission of the word dealer by the amendment in 1972 is significant. But we are concerned with the unamended definition. The mischief sought to be remedied in 1958 was, as pointed out by us, only this that the mere exemption of a goods under the State Law did not mean that it was exempt under the Central Act as well.By S. 8(2-A) it was confined only in those cases where the sale or purchase of such goods by a dealer enjoyed general exemption under State law. In other words it was not general exemption of goods but general exemption from sale or purchase of goods of a dealer in the State which entitled a dealer a claim exemption from calculation under the Central Act.
18. It is not disputed that by virtue of a Notification issued under S. 4-A of the Sales Tax Act the turnover of the assessee was exempt from payment of tax. The effect of the Notification is that the turnover of the assessee at the point of manufacture became exempt from tax generally. The question, however, is that by making into consideration the Explanation can it be said that the turnover of the goods was exempt from tax generally when the tin containers manufactured by the assessee remained liable to tax on all other points.
19. Unlike Punjab Act S. 4 and 4-A of the U.P. Sales Tax Act are sections dealing with the general exemption. The sales of the point manufacture by the assessee was declared to be exempt from tax. Is the exemption in specified circumstances or under specified condition ?
20. In the case Hindustan Safety Glass Works (P) Ltd. the assessee was a manufacturer of toughened glass and mirror in its factory at Allahabad. Under S. 4-A of the U.P. Sales Tax Act, the Government had issued a notification dated 9-1-1970, declaring that in respect of turnover mirrors and toughened glasses manufactured by the assessee therein shall be exempt from payment of sales tax for a period of three years with effect from February 1969. The assessee therein had claimed that its turnover of inter-State sales in toughened glass were not liable to Central Sales Tax. This Court upheld that claim.
21. The decision of this court in M/s. Hindustan Safety Glass Works was noticed in Indian Aluminium Cables Ltd. and Anr. vs. State of Haryana by the Supreme Court which observed as follows at pages 111 and 112 :-
"It was held that for purposes of S. 8(2A) of the Central Act, sales of mirrors and toughened glass manufactured by the company was under no condition and in no circumstance liable to be taxed in the hands of the company. The reasons given were that normally it will be taken that the sale of mirror and toughened glasses by the company was exempt from tax generally unless it could be shown that such goods belonged to the class specified in the explanation to S. 8(2A) of the Central Act. As the toughened glasses and mirrors manufactured by the company did not fall in such a category in the turnover of sales of these goods in the hands of the company was not liable to tax under the Central Act.
The stipulation in the notification in Safety Glass Works case ((1974) 34 S.T.C. 209) that the turnover of such sales would for a period of three years be exempt from payment of sales tax did not amount to exempting the turnover of such goods from tax under specified circumstances or specified conditions."
22. As the view taken by this court in M/s. Hindustan Safety Glass Works case has been disapproved by it, the contention of the learned Standing Counsel that the exemption granted under the aforesaid notification is favour of the assessee applicant, is not a general exemption under the State Sales Tax Act but only an exemption in specified condition or specified circumstances and that sub-S. (2A) of S. 8 of the Central Sales Tax Act is not attracted, can not be accepted.
23. Is the tax levied at a specified stage ? The phrase used int eh Explanation has to be read along with phrase sales or purchases as the case may be of goods by a dealer used in the substantive clause. The exemption is granted on the turnover of a dealer if sale or purchase of such goods is exempt from tax generally in the state. If the goods by a dealer is exempt from tax generally under the appropriate State the turnover of inter State sale shall become automatically exempt. That sale or purchase of the assessee in the State is exempt under S. 4A by virtue of Notification is not disputed. But it is urged that the goods beings taxable at multiple that the goods beings taxable at multiple point and the notification having granted exemption only at the point of manufacture the tax is leviable at specified stage - We do not see any merit in the submission. The word specified stage in the Explanation has to be read along with the word goods of a dealer used in S. 8(2-A). Is sale or purchase of goods by the dealer taxable at any specified stage in the appropriate state. The answer is obviously, no. The calculation of tax on the turnover of inter State sale has to be correlated with the taxability or otherwise of sale or purchase of such goods be the dealer is exempt from tax generally under the State Act the assessee shall not be liable to pay tax, notwithstanding the taxability on the turnover of inter State sale. The Explanation to the section cannot be read in isolation . If has to be read along with S. 8(2-A). If it is read along with S. 8(2-A) then the phrase specified circumstances, conditions and stages have to be read in relation to the goods, no doubt, but goods of the dealer.
23. In State of Andhra Pradesh vs. Associated Tanners there was no Notification granting any general exemption to the goods of the dealer under State Act, S. 6 of the Act declared that sale or purchase of declared goods are liable to tax at the point of sale or purchase. Tanned hides and skins were included in the Schedule. In these circumstances it was held not to be generally exempt. The difference in the effect of exemption under Ss. 6, 8 and 9 of the Act has been highlighted by the Bench at page 37.
"S. 8 of the state law declares that a dealer who deals in goods specified in the Fourth Schedule shall be exempt from tax under the Act in respect of such goods. Likewise S. 9 empowers the State Government to notify exemptions and deductions of tax. Thus, the law postulates goods which are exempt from tax or which can be made exempt from tax by a Government Notification. Such goods can broadly be categorised as goods which are generally exempt from tax. This is in telling contrast with S. 6 and the Third Schedule. This study of contrasts reinforces our inference that goods mentioned in the Third Schedule are not generally exempt from tax."
The decision in 1971 U.P. Tax Cases is also not helpful, It was also a case where neither the Act not notification granted any general exemption.
24. In the light of the foregoing discussion, our answers to the questions referred to us are as follows :-
1. On the facts and in the circumstances of the case the turnover of the assessee was exempt generally from State sales tax in view of Notification No. ST-2409/x-902 (15) 68 dated 28-5-1969, as amended by Notification No. ST-6996/x 902(15)/68 dated 27-8-1969, and consequently its inter State sales were also exempt from Central Sales Tax under S. 8(2A) of the Central Sales Tax Act.
2. On the facts and in the circumstances of the case the amendment of the aforesaid notification by clause 30(3) of U.P. Ordinance No. 12 of 1975, which was replaced by S. 31(3) (a) of U.P. Act No. 38 of 1975, did not narrow down the exemption to intra State sales only.
25. In the circumstances of these cases we direct the parties to bear their own costs.