Commissioner Of Sales Tax, Madhya Pradesh v. Kapoor Dori Niwar And Co., Gwalior

1. This is a consolidated reference under Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, at the instance of the Commissioner of Sales Tax. The question, which the Sales Tax Tribunal has referred for decision, is-

Whether or not, on the facts and circumstances of the case, the sale of niwar by the assessee in this case, which is exempt from tax under the State law by virtue of Notification No. 738/3694/V-SR dated 1st April, 1959, under the State Act as the assessee is a registered dealer, is also exempt in the hands of the assessee under the Central Sales Tax Act ?

2. The assessee, M/s. Kapoor Dori Niwar & Co., Gwalior, is a registered dealer engaged in the manufacture and sale of niwar. In assessment proceedings of sales tax under the Central Sales Tax Act, 1956, (hereinafter referred to as the Act), for each of the periods, namely, from 1st April, 1959, to 31st August, 1959, from 1st September, 1959, to 18th August, 1960, and from 19th August, 1960, to 5th September, 1961, the assessee claimed that as sales of niwar were exempt from tax under the State Act, namely, the M.P. General Sales Tax Act, 1958, its turnover of inter-State sales of niwar could not be taxed in view of Section 8(2A) of the Act. This claim was rejected by the assessing officer. The appeals preferred by the assessee against the assessment orders in regard to these three periods were rejected by the Deputy Commissioner of Sales Tax. The assessee then filed appeals before the Sales Tax Tribunal which were allowed.

3. By Section 12 of the M.P. General Sales Tax Act, 1958, it is provided that the State Government may, subject to such restrictions and conditions as may be specified, by notification, exempt in whole or in part any class of dealers or any goods or class of goods from the payment of tax under the 1958 Act for such period as may be specified in the notification. In exercise of the powers conferred by this section, the State Government issued a notification on 1st April, 1959, published in the Extraordinary Gazette of that date, exempting from payment of sales tax sales of niwar by a dealer registered under the 1958 Act. Under that notification, the exemption was granted for a period of one year from the date of the notification. But this period of exemption was later on extended up to 31st March, 1963. Section 8(1) of the Central Sales Tax Act is as follows:

8. (1) Every dealer, who in the course of inter-State trade or commerce-

(a) sells to the Government any goods; or

(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3) ; shall be liable to pay tax under this Act, which shall be one per cent, of his turnover.

Sub-section (2) of Section 8 deals with the tax payable by any dealer on the sale of goods in the course of inter-State trade or commerce not falling within Sub-section (1). Then follows Sub-section (2A) which is in the following terms :

(2A) Notwithstanding anything contained in Sub-section (1) or Sub-section (2), if under the sales tax law of the appropriate State the sale 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 one per cent, (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale 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 exempt from tax generally under the sales 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 will be seen that under Sub-section (1) of Section 8 a dealer is liable to pay tax at the rate of one per cent, of his turnover on all sales in the course of inter-State trade or commerce, if the sales are effected to the Government or to a registered dealer. But under Sub-section (2A) the rate of tax specified under Sub-section (1), namely, one per cent, of the turnover, is not applicable if the goods sold are generally exempt under the State sales tax law. The goods so exempted under the State Sales Tax Act are exempt from payment of sales tax under the Central Sales Tax Act also. Likewise, if the rate of tax on the goods sold is less than one per cent, under the State sales tax law, then the rate of tax is the lower rate prescribed by the State Act.

4. In the present case, there is no dispute that the sales effected by the assessee fall under Section 8(1) of the Act. It is also clear from the notification issued by the State Government on 1st April, 1959, in exercise of its powers under Section 12 of the M.P. General Sales Tax Act, 1958, that the sales of niwar effected by the assessee, a registered dealer, were exempt from sales tax. The exemption granted to the sales of niwar by a registered dealer under the aforesaid notification was without any restriction or limitation so far as sales by a registered dealer were concerned. It was no doubt for a period of one year in the first instance arid then extended up to 31st March, 1963. But the period during which this exemption from payment of tax operated cannot in any sense be regarded as any condition imposed in relation to the exemption. During the period of exemption, the sales of niwar by a registered dealer 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-section (2A) of Section 8 of the Act.

5. Learned Government Advocate appearing for the department however urged that as under the notification dated the 1st April, 1959, the exemption was confined only to sales by a registered dealer and was only for a stated period, that exemption was only one in "specified circumstances or under specified conditions" and, therefore, the explanation to Sub-section (2A) of Section 8 applied and the sales of niwar could not be deemed to be exempt from tax generally under the State Sales Tax Act. We are unable to accede to this contention. No doubt, under the notification dated the 1st April, 1959, sales effected by an unregistered dealer were not exempted from tax. The exemption was granted in respect of sales of niwar by a class of dealers, namely, registered dealers. So far as sales of niwar by registered dealers are concerned, the exemption is general, universal and without, any restriction or condition. The expression "exempt only in specified circumstances or under specified conditions", occurring in the explanation to Sub-section (2A), means such circumstances or conditions the non-existence or non-performance of which precludes the grant of exemption; so that if those circumstances do not exist or those conditions are not performed, then the sales of goods cannot be exempted from tax even if they are effected by a class of dealers to whom exemption is granted and during the period for which exemption is granted. The notification dated the 1st April, 1959, does not prescribe any such conditions or circumstances with regard to grant of exemption on sales of niwar by registered dealers. It must be noted that Sub-section (2A) of Section 8 of the Act does not speak of exemption under the State sales tax law of sale or purchase of any goods by all dealers. It says "if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax". The words "a dealer" used in Sub-section (2A) mean a registered as well as an unregistered dealer. Therefore, there can be no room for the argument that as under the notification dated the 1st April, 1959, exemption has not been granted in respect of sales of niwar by unregistered dealers, the exemption from tax is not general in regard to sales by registered dealers.

6. The Sales Tax Tribunal has based its conclusion that the sales of niwar effected by the assessee are exempt from tax under the Central Sales Tax Act, on the decision of the Supreme Court in State of Mysore v. Lakshminarasimhiah Setty and Sows [1965] 16 S.T.C. 231. That was a case where a dealer in powerloom and handloom textiles was assessed to tax for the year 1957-58 under Section 9 of the Central Sales Tax Act, as it stood before its amendment in 1958. It was contended by the dealer that as he was not the first or the earliest of successive dealers in respect of the turnover and, therefore, not liable to be taxed under the Mysore Sales Tax Act, 1957, he could not also be taxed under the Central Sales Tax Act. While dealing with the provisions of Sections 8 and 9 of the Central Sales Tax Act, before they were amended in 1958, the Supreme Court held that the expression "levied" in Section 9(1) of the Central Act referred to the expression "levied" in Section 5(3)(a) of the Mysore Act and, therefore, the Central Act had not made a departure in the manner of levy of tax on the specified goods which were taxed only at a single point under the State Act. On the analogy of the reasoning given in the Supreme Court's decision, the Sales Tax Tribunal held in the present case that the exemption granted to the assessee under the local Act was applicable under the Central Sales Tax Act also. On the construction put by us on Sub-section (2A) of Section 8 of the Act, after it was amended in 1958, it is not necessary to consider whether the decision of the Supreme Court in State of Mysore v. Lakshminarasimhiah Setty and Sons [1965] 16 S.T.C. 231, is applicable here, or its applicability is ruled out by the non obstante expression "notwithstanding anything contained in Sub-section (1) or Sub-section (2)" with which Sub-section (2A) of Section 8 of the Act begins.

7. For these reasons, our answer to the question is in the affirmative. The Commissioner of Sales Tax, M.P., shall pay costs of this reference. Counsel's fee is fixed at Rs. 150.