Citation Codes

Equivalent Citations

citation codes

Case Number

Sales Tax Reference No. 479 of 1965 connected with Sales Tax References Nos. 480, 481, 482 and 483 of 1965

Judges

R.S Pathak
R.L Gulati, JJ.

Acts

Clause (b) of Sub-section (1) of Section 4 of the U.P. Sales Tax Act, 1948 (U.P. Act No. XV of 1948),
Section 9 of the Andhra Pradesh General Sales Tax Act, 1957.
Section 3-A of the U.P. Sales Tax Act, 1948,
Section 4(1)(a),
Section 4(1)(b).

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Smart Summary

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

Two questions were referred to the Court by the Judge (Revisions) Sales Tax. The assessee is a manufacturer and seller of "Jin's" and carried on business at branches in Faizabad, Lucknow, Agra and Bareilly. Multiple Sales Tax References arose from assessment proceedings for the years 1957-58 and 1958-59 relating to these branches (Sales Tax Reference Nos. 479–483 of 1965).

In the assessments the assessee claimed exemption from sales tax under Notification No. ST-4485/X dated 14th December, 1957. The Sales Tax Officer rejected the claim on the ground that additional Central excise duty had not been paid in respect of the biris manufactured and sold, and therefore the exemption under the notification was not available. The assessee's appeals to the Judge (Appeals) Sales Tax and subsequent revision applications to the Judge (Revisions) Sales Tax were dismissed. The Judge (Revisions) made references to this Court at the instance of the assessee.

Two notifications were central to the dispute: Notification No. ST-905/X dated 31st March, 1956 (which declared turnover in respect of certain goods, including "Biris", to be taxed at one anna per rupee), and Notification No. ST-4485/X dated 14th December, 1957 (which in partial modification exempted certain goods, including cigars, cigarettes, biris and tobacco, from tax from 14th December, 1957, provided additional Central excise duties leviable thereon had been paid and proof furnished to the assessing authority).

Legal Issues Presented

Whether under the circumstances of the case proof of payment of additional excise duty was incumbent, without which the turnover from 14th December, 1957 onward was not exempt?
In any case, whether the turnover was exempt or not, did the relevant item of Notification No. ST-905/X (issued under Section 3-A) stand modified by Notification No. ST-4485 dated 14th December, 1957, so as to make this turnover taxable under Section 3 of the Act?

Arguments of the Parties

Assessee's Arguments

The assessee contended that Notification No. ST-4485/X dated 14th December, 1957 did not require proof of payment of additional excise duty to entitle the dealer to exemption for turnover of biris from 14th December, 1957 onward.
The assessee further contended that with the making of Notification No. ST-4485/X dated 14th December, 1957 the earlier Notification No. ST-905/X dated 31st March, 1956 stood superseded (i.e., the later notification displaced the earlier one).

Revenue / Sales Tax Officer's Arguments

The Sales Tax Officer rejected the exemption claim on the ground that the additional Central excise duty had not been paid in respect of the biris, so the exemption under Notification No. ST-4485/X was not available to the assessee.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Chhota Bhai Jetha Bhai v. State of U.P., A.I.R. 1962 S.C. 1614	Establishes that where an exemption is available only on proof of payment of additional duties of excise, the benefit cannot be availed of unless payment is established.	The Court held that this decision concludes the point before it and supported the view that proof of payment of additional excise duty is incumbent for claiming exemption under Notification No. ST-4485/X.
Innamuri Gopalam v. State of Andhra Pradesh, [1963] 14 S.T.C. 742	Where notification confers exemption subject to a proviso requiring proof of levy/collection of additional excise duty, if no additional duty is leviable then the proviso does not apply and absolute exemption follows.	The Court distinguished this case: it was held not to assist the assessee because there additional duties were not leviable, whereas in the present matter additional duty was leviable and therefore the proviso in ST-4485/X (requiring proof) is applicable.
Beharilal Shyamsunder v. Sales Tax Officer, [1966] 17 S.T.C. 508	States that the validity of a notification cannot be assailed in a reference arising out of an order of an authority created by the statute under which the notification was made.	The Court relied on this principle to decline entering into the controversy over whether the notification purported to grant exemption under Section 4(1)(a) or Section 4(1)(b) of the Act, treating such a challenge as inappropriate in the reference context.
Tikaram & Sons Ltd. v. Commissioner of Sales Tax, U.P., (Civil Appeals Nos. 1682–1691 of 1967) decided March 22, 1968, [1968] 22 S.T.C. 308	Holds that a party which has voluntarily submitted to the jurisdiction of a revisional authority and to the High Court cannot later challenge that jurisdiction when the judgment goes against it.	The Court observed that Tikaram does not assist the assessee; it invoked the principle that a party who has submitted to the revisional process cannot later deny the High Court's jurisdiction to decide the question referred by the revisional authority.

Court's Reasoning and Analysis

The Court proceeded by examining the precise wording of the two notifications central to the dispute and the statutory provisions under which they were issued.

For the first question, the Court analysed Notification No. ST-4485/X dated 14th December, 1957. The notification expressly stated that "no tax shall be payable ... provided that the additional Central Excise Duties leviable thereon from the closing of business on December 13, 1957 have been paid on such goods and that the dealers thereof furnish proof to the satisfaction of the assessing authority that such duties have been paid." The Court concluded that the notification unambiguously conditions the exemption on payment of the additional excise duty and the furnishing of proof to the assessing authority. The Court relied on the Supreme Court's decision in Chhota Bhai Jetha Bhai to hold that where the benefit of an exemption is available only on proof of payment of additional duties of excise, that benefit cannot be availed of unless payment of the additional duty is established. The Court distinguished Innamuri Gopalam on the ground that in that case no additional duties were leviable, so the proviso did not apply there; that distinction meant Innamuri Gopalam did not aid the assessee here.

With respect to procedural jurisdiction and challenges to the validity of notifications, the Court noted the settled principle (citing Beharilal Shyamsunder) that the validity of a notification cannot be assailed in a reference arising out of an order of an authority created by the statute under which the notification was made. The Court also considered the Tikaram decision to underscore that a party who had submitted to the revisional process could not later contest the High Court's jurisdiction to determine the reference.

For the second question, the Court examined the contention that Notification No. ST-4485/X (14th December, 1957) superseded Notification No. ST-905/X (31st March, 1956). The Court analysed the language of ST-4485/X and held that it is a "partial modification" which comes into play only when its stated conditions are satisfied (i.e., payment of additional excise duty and furnishing of proof). If those conditions are not present, the later notification does not operate, and therefore the earlier notification (ST-905/X) continues to apply. The Court concluded that ST-4485/X does not automatically or universally supersede ST-905/X; supersession occurs only insofar as the conditions of the later notification are met.

Holding and Implications

Holding (First Question): The court answered the first question in the affirmative — that is, proof of payment of the additional Central excise duty (and furnishing proof to the satisfaction of the assessing authority) is incumbent; unless payment is established the exemption under Notification No. ST-4485/X cannot be availed of.

Holding (Second Question): The court answered the second question in the negative — Notification No. ST-4485/X dated 14th December, 1957 does not automatically supersede Notification No. ST-905/X dated 31st March, 1956; the later notification modifies the earlier one only when the specific conditions set out in the later notification are satisfied.

Implications:

Direct effect on the parties: The assessee cannot claim exemption under ST-4485/X for turnover from 14th December, 1957 unless it establishes payment of the additional Central excise duty and furnishes proof acceptable to the assessing authority; where those conditions are not satisfied the turnover remains taxable under the earlier notification ST-905/X.
Procedural implication noted by the Court: Challenges to the validity of a notification are not appropriate in a reference arising under the statute by which the revisional authority and the High Court's jurisdiction have been invoked (per the authorities cited), and a party that has submitted to the revisional jurisdiction cannot later deny that jurisdiction.
The Court did not record any wider change in precedent beyond applying and distinguishing the cited authorities to the facts before it; the decision determines the entitlement to exemption under the specific notifications and circumstances in these references.

This summary is strictly confined to the information and reasoning contained in the provided opinion. No information has been added or inferred beyond that text.

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Anwar Khan Mehboob Co. v. The Commissioner Of Sales Tax, U.P

1. In this and the connected references the following two questions have been referred for the opinion of this Court by the Judge (Revisions) Sales Tax.

(1) Whether under the circumstances of the case the proof of payment of additional excise duty was incumbent without which the turnover of 14th December, 1957, onward, was not exempt ?

(2) In any case whether the turnover was exempt or not, the relevant item of Notification No. ST-905/X issued under Section 3-A stands modified by Notification No. ST-4485 dated 14th December, 1957, as to make this turnover taxable under Section 3 of the Act ?

2. The assessee manufactures and sells Jin's. It carries on business at branches situated at Faizabad, Lucknow, Agra and Bareilly. Sales Tax Reference No. 479 of 1965 arises out of assessment proceedings for the year 1957-58 in respect of the Bareilly branch, Sales Tax Reference No. 480 of 1965 relates to assessment proceedings for the assessment year 1957-58 in respect of the Faizabad branch, Sales Tax Reference No. 481 of 1965 arises out of an assessment for the year 1957-58 in respect of the Lucknow branch, Sales Tax Reference No. 482 of 1965 arises out of assessment proceedings for the assessment year 1958-59 in respect of the Agra branch and Sales Tax Reference No. 483 of 1965 arises out of assessment proceedings for the assessment year 1957-58 in respect of the Agra branch.

3. The assessee claimed exemption from tax in the assessment proceedings before the Sales Tax Officer. He rested the claim under Notification No. ST-4485/X dated 14th December, 1957. The Sales Tax Officer rejected the claim on the ground that the additional excise duty had not been paid in respect of the biris manufactured and sold by the assessee and, therefore, the exemption from sales tax granted by the said notification was not available. An appeal by the assessee was dismissed by the Judge (Appeals) Sales Tax and thereafter a revision application was dismissed by the Judge (Revisions) Sales Tax. That represents the course of proceedings in respect of each of the cases out of which these references arise.

4. At the instance of the assessee these references have been made to this Court by the Judge (Revisions).

5. To appreciate the contentions raised by the assessee before us, it will be convenient to set out the two notifications which are relevant. Notification No. ST-905/X dated 31st March, 1956, reads:

In exercise of the powers conferred by Section 3-A of the U.P. Sales Tax Act, 1948, as amended from time to time and in supersession of all previous notifications on the subject, the Governor of Uttar Pradesh is hereby pleased to declare that the turnover in respect of the goods specified in the List below shall not with effect from April 1, 1956, be liable to tax except-

(a) in the case of goods imported from outside Uttar Pradesh, at the point of sale by the importer ; and

(b) in the case of goods manufactured in Uttar Pradesh, at the point of sale by the manufacturer;

and the Governor is further pleased to declare that such turnover shall with effect from the said date be taxed at the rate of one anna per rupee.

List 1 ...

2 ...

3. Biris.

6. Notification No. ST-4485/X dated 14th December, 1957, is as follows:

In partial modification of Notifications No. ST-905/X, dated March 31, 1956, and No. ST-418/X-902(9)-52, dated January 31, 1957, and in exercise of the powers conferred by Clause (b) of Sub-section (1) of Section 4 of the U.P. Sales Tax Act, 1948 (U.P. Act No. XV of 1948), as amended up-to-date, the Governor of Uttar Pradesh is pleased to order that no tax shall be payable under the aforesaid Act with effect from December 14, 1957, by the dealers in respect of the following classes of goods provided that the additional Central Excise Duties leviable thereon from the closing of business on December 13, 1957, have been paid on such goods and that the dealers thereof furnish proof to the satisfaction of the assessing authority that such duties have been paid :

(1) ...

(2) ...

(3) Cigars, cigarettes, biris and tobacco that is to say any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, stalks and stems of the tobacco plant but does not include any part of a tobacco plant while still attached to the earth.

7. The first contention of the assessee is that Notification No. ST-4485/X dated 14th December, 1957, does not require proof of payment of additional excise duty in order to entitle the dealer to exemption from sales tax in respect of the turnover of bins from 14th December, 1957. The contention is plainly without substance. The notification clearly declares that sales tax shall not be payable with effect from 14th December, 1957, provided the dealer has paid additional Central excise duty leviable on the goods mentioned in the notification and furnishes proof to the satisfaction of the assessing authority that such duty has been paid. The matter now stands concluded by the decision of the Supreme Court in Chhota Bhai Jetha Bhai v. State of U.P. A.I.R. 1962 S.C. 1614 Reliance was placed upon a subsequent decision of the Supreme Court in Innamuri Gopalam v. State of Andhra Pradesh [1963] 14 S.T.C. 742. In that case, however, the Supreme Court had before it a notification issued under Section 9 of the Andhra Pradesh General Sales Tax Act, 1957. The opening words of the notification conferred an exemption from tax in respect of the sale of goods mentioned in the appendix to the notification. This was subject to a proviso which cut into and restricted the operation of the exemption clause so that in cases where additional duties of excise were leviable by the Central Government there would be no exemption unless the dealer proved that the additional duties of excise had been levied and collected. The Supreme Court held that as no additional duties of excise were leviable on the goods in question the case did not fall within the proviso and was, therefore, entitled to absolute exemption under the general provision. Where the benefit of the exemption is available only on proof of payment of the additional duties of excise, the decision in Innamuri Gopalam [1963] 14 S.T.C. 742. can be of no assistance to the assessee, and unless payment of the additional duty is established the benefit of the exemption cannot be availed of. In our opinion, the law laid down in Chhota Bhai Jetha Bhai A.I.R. 1962 S.C. 1614. concludes the point before us.

(b) the sale of any goods by the All-India Spinners' Association or Gandhi Ashram, Meerut, and their branches or such other persons or class of persons as the State Government may from time to time exempt on such conditions and on payment of such fees, if any, not exceeding eight thousand rupees annually as may be specified by notification in the official Gazette.

9. It is urged that the notification grants an exemption in respect of commodities, which is a matter dealt with by Section 4(1)(a), and does not grant an exemption by reference to the persons or class of persons which is the subject of Section 4(1)(b). It is unnecessary for us to enter into this controversy, because it is now well settled that the validity of a notification cannot be assailed in a reference arising out of an order of an authority created by a statute under which the notification has been made. See Beharilal Shyamsunder v. Sales Tax Officer [1966] 17 S.T.C. 508. The assessee has, however, drawn our attention to the Judgment of the Supreme Court in Tikaram & Sons Ltd. v. Commissioner of Sales Tax, U.P. (Civil Appeals Nos. 1682 to 1691 of 1967 decided on March 22, 1968) [1968] 22 S.T.C. 308. That Judgment, in our opinion, does not assist the assessee. In that case, the Supreme Court held that the appellant having contended before the Judge (Revisions) under Section 10 of the Act that Explanation II to Section 2(h) of the Act is ultra vires and not having challenged the jurisdiction of the High Court to examine the said question of law in the reference arising out of the order of the Judge (Revisions) the Supreme Court would not permit the appellant to deny before it the jurisdiction of the revisional authority to decide the question or to challenge the jurisdiction of the High Court to examine the question of law referred to it by the Judge (Revisions). The Supreme Court pointed out:

In other words, it must be taken that the appellants had voluntarily submitted to the jurisdiction of the Revisional Authority and of the High Court on the matter in issue and having submitted to the jurisdiction and having taken the chance of Judgment in its favour, it is not right that the appellants should take exception to the jurisdiction of the High Court when the Judgment has gone against it. We cannot therefore permit the appellants to canvass in this "Court for the first time the question whether it was competent for the High Court to decide the question of law referred to it under Section 11 of the Act.

10. Accordingly, the first question is answered in the affirmative.

11. As to the second question, the contention of the assessee is that with the making of Notification No. 4485/X dated 14th December, 1957, the earlier Notification No. ST-905/X dated 31st March, 1956, stood superseded, and we are referred to the opening words of Notification No. ST-4485/X dated 14th December, 1957. Upon a careful reading of the notification we are unable to accept the contention. In our opinion, the notification supersedes the earlier notification only when it comes into play in the set of circumstances mentioned in it. If those circumstances are not present, the notification does not come into play, and no question can arise of the earlier notification being superseded. Notification No. ST-905/X dated 31st March, 1956, levies at a rate of one anna per rupee on the turnover in respect of goods at the point of sale mentioned in it. One of the commodities in the list appended to the notification is biris. Notification No. ST-4485/X dated 14th December, 1957, exempts the turnover of biris from sales tax provided additional Central excise duty has been paid on such biris and the dealer furnishes proof to the satisfaction of the assessing authority that the duty has been paid. The exemption is conditional and unless the conditions are satisfied the exemption is not attracted. In other words, if the conditions are absent, the notification does not come into play at all. If that notification does not come into play, then clearly it is the earlier notification which operates. That is our conclusion upon what we perceive to be the clear intent and scope of the terms of Notification No. ST-4485/X dated 14th December, 1957. In this view of the matter we answer the second question in the negative.

Anwar Khan Mehboob Co. v. The Commissioner Of Sales Tax, U.P

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee's Arguments

Revenue / Sales Tax Officer's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Anwar Khan Mehboob Co. v. The Commissioner Of Sales Tax, U.P

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