Citation Codes

Equivalent Citations

citation codes

Case Number

Special Civil Application No. 591 of 2014* with Special Civil Application No. 592 of 2014

Advocates

For Appellant/Petitioner/Plaintiff: Jaimin Gandhi For Respondents/Defendant: Uchit N. Sheth

Judges

Akil Kureshi
Sonia Gokani, JJ.

Acts

Central Excise Tariff Act, 1985 in place of Central Excises and Salt Act, 1944,
section 45(6) read with section 45(4) of the Gujarat Sales Tax Act
Importance) Act, 1957 (hereinafter referred to as "the Act of 1957")
Central Excises and Salt Act, 1944 (now Central Excise Act, 1944)
GUJARAT SALES TAX ACT 1969
schedule of Central Excises and Salt Act, 1944.
Rule 60 of the Gujarat Sales Tax Rules, 1970
Central Excises and Salt Act, 1944. Revenue
clause (a) of sub-section (1) of section 67,
Central Excises and Salt Act, 1944
Central Excise Tariff Act, 1985. 22.
47 of the Bombay Sales Tax Act.
Central Excise Tariff Act, 1985.
Sub-section (1) of section 67
Bombay Sales Tax Act, 1959
rule 67(1) of the GST Act
section 5, sub-section (1)
Sub-rule (2) of rule 67
Bombay Sales Tax Act.
Importance) Act, 1957
Sales Tax Act.
45. Rule 67

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Smart Summary

Structured Summary of the Opinion (Akil Abdul Hamid Kureshi, J.)

Factual and Procedural Background

The respondent is a dealer registered under the Sales Tax Act who traded mainly in patasa, harada, sakaria and alchidana. For the years 2002-03 and 2003-04 the respondent claimed exemption from sales tax on sales and purchases of these items under the Gujarat Sales Tax Act; the Commercial Tax Inspector accepted the returns and passed assessment orders on 18.2.2005 without additions.

The Deputy Commissioner of Commercial Tax issued an initial notice in form-45 and later a notice in form-49, and on 1.1.2009 passed two revisional orders levying tax on the transactions under entry 167 of Schedule-IIA to the Gujarat Sales Tax Act. The revisional authority distinguished the Supreme Court decision in State of Gujarat v. Sakarwala Brothers and concluded that the respondent's goods did not fall under entry 86 of Schedule I, applying instead entry 167 (sweets/sweetmeats).

The respondent preferred a revision application before the Gujarat Value Added Tax Tribunal (the tribunal). The respondent raised three principal contentions: (1) the form-49 notice referred only to patasa so the Commissioner could not tax other items; (2) the items were covered by entry 86 because additional excise duties on them were not exempted (vendors had paid those duties); and (3) alternatively, the items fell under entry 8 of Schedule-IIA and were exempt by Government notifications. The tribunal accepted the first two contentions and set aside the revisional orders to that extent; it did not consider the alternative contention under entry 8.

The State challenged the tribunal's judgment by filing these writ petitions after the court found a tax appeal would not be maintainable against the tribunal's order.

Legal Issues Presented

Whether the revisional authority could pass a final revisional order taxing items other than those specified in the notice in Form 49 (procedural fairness under Rule 67 and the requirement of reasonable opportunity).
Whether patasa, harada, sakaria and alchidana fall within the meaning of "sugar" for the purpose of entry 86 of Schedule I to the Gujarat Sales Tax Act (and hence are exempt if the condition in that entry is satisfied).
In the alternative, whether those items fall under entry 8 of Schedule-IIA and are thus exempt by virtue of exemption notifications issued by the State Government.
Whether, as contended by the State, the condition in the exemption entry requires the dealer himself to have paid the additional duty of excise (and whether the decision in Delhi Cloth & General Mills Co. Ltd. applies to impose such an onus).
Whether penalty under section 45(6) read with section 45(4) of the Gujarat Sales Tax Act was rightly imposed (as raised by the State).

Arguments of the Parties

State's Arguments (Learned AGP Shri Jaimin Gandhi)

The goods in question did not fall under entry 86 of Schedule I because the vital condition in that entry (regarding additional duties of excise) was not satisfied; the legislative intent was that only goods where the dealer had paid the additional duty could claim the benefit.
Reliance was placed on the Supreme Court decision in Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan [1980] 46 STC 256 for the proposition that proof of payment by the dealer may be required under certain notifications.
Entry 8 of Schedule-IIA does not contain a defined meaning of 'sugar' (unlike entry 86), so the term should be given its common-usage meaning and should exclude patasa, harada, sakaria and alchidana; therefore classification under entry 167 (sweets/sweetmeats) was correct.
When tax was short-paid, penalty under section 45(6) read with section 45(4) was rightly imposed.

Respondent's Arguments (Learned Counsel Shri Uchit Sheth)

The notice in form-49 was defective insofar as it did not propose levying tax on items other than patasa; therefore the Commissioner could not impose tax on items not referred to in the final notice.
The items patasa, harada, sakaria and alchidana are covered under entry 86 because, on the authority of Sakarwala Brothers, the term 'sugar' as defined by the statute has an expanded meaning that includes these items; these items were not exempted from additional excise duty (vendors paid the duty), so entry 86 applies.
Alternatively, the items fall under entry 8 of Schedule-IIA (a successor to entry 3E) and, by virtue of exemption notifications issued over time, are exempt from payment of sales tax; legislative history shows an intent not to levy sales tax on sugar including these items.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Gujarat v. Sakarwala Brothers [1967] 19 STC 24	The Supreme Court and this Court recognized an expanded/technical definition of "sugar" (based on sucrose content/central excise definitions) that includes products such as patasa, harada and alchidana.	The court relied on Sakarwala Brothers to accept that the items in question are to be regarded as "sugar" for the purposes of entry 86 (and related entries), and noted that this interpretation has been consistently applied; this supported the tribunal's conclusion that the items fall within the exemption entry.
Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan [1980] 46 STC 256	Deals with a situation where an exemption notification required the dealer to furnish proof to the Assessing Officer that additional excise duty had been paid — thereby creating an onus on the dealer.	The court distinguished this decision on the facts: Delhi Cloth was decided where the notification itself imposed an onus on the dealer to prove payment. Entry 86 here only conditions exemption on the fact that additional duty is not exempt; it does not impose an onus on the dealer to prove that he personally paid the excise duty. Thus Delhi Cloth was inapplicable to deny exemption in the present case.

Court's Reasoning and Analysis

The court's analysis proceeded in two main strands: (A) procedural validity of the revisional order, and (B) substantive classification and legislative history regarding "sugar" and the relevant schedule entries.

(A) Procedural issue — Notice and revisional power

The court examined section 67(1)(a) of the GST Act (the Commissioner's revisional power) and the GST Rules: Rule 60 (form-45) concerns production of accounts/documents/information; Rule 67 requires notice in form-49 to any person likely to be adversely affected before an appellate or revisional order is passed.
The court held that a form-45 notice (under Rule 60) is a preparatory step and is not substitutive of the form-49 notice required by Rule 67. The statutory requirement to give reasonable opportunity under form-49 is specific to revision/appellate orders.
Because the final notice in form-49 in the present case mentioned only patasa, the Commissioner could not lawfully pass a revisional order that imposed tax on other items not specified in form-49; doing so would violate the notice requirement and the assessee's right to a reasonable opportunity of being heard. The tribunal's conclusion on this procedural point was thus justified and endorsed.

(B) Substantive issue — Interpretation of entries and legislative history

The court traced the legislative history: earlier entry 42 (Schedule I) and entry 3E (Schedule IIA) were the predecessors of entry 86 (Schedule I) and entry 8 (Schedule IIA). The definition of "sugar" for the relevant entries derived originally from the Central Excises and Salt Act, 1944 (based on sucrose content) and later referenced corresponding sub-headings in the Central Excise Tariff Act, 1985. The effect of these changes was, in substance, to retain the same technical definition of "sugar."
The court observed that the entry 42 → 86 language and entry 3E → 8 language, together with exemption notifications, were intended to operate in tandem: goods defined as sugar in entry 42/86 were exempt if the condition (relating to additional excise duty) was met; goods not satisfying that condition would be taxed under the corresponding Schedule IIA entry, for which exemption notifications were issued in many cases.
Applying Sakarwala Brothers, the court accepted that patasa, harada, sakaria and alchidana — which have more than 90% sucrose — are technically "sugar" for the purposes of the entries in the GST Act.
On the specific condition in entry 86 (that levy and collection of additional duties of excise is not exempted on account of any exemption or drawback), the court held that the condition refers to whether the additional duty is exempted by law, not whether the dealer himself paid the duty. In the present case there was no contention that the additional duty was exempted or that any drawback was granted; suppliers/manufacturers paid the additional duty at the point of clearance. Therefore the condition of entry 86 was satisfied.
The court distinguished Delhi Cloth & General Mills because that decision arose where the relevant notification imposed an express obligation on the dealer to furnish proof that the additional duty had been paid. No such onus was present in the plain words of entry 86.
Even if the goods did not fall under entry 86, the court reasoned from the legislative history and the identity of definitions that the goods would fall under entry 8 (successor of entry 3E) and be covered by the State's exemption notifications. Thus classification under entry 167 (sweets/sweetmeats) was not sustainable.

Holding and Implications

Holding: The petitions filed by the State are dismissed. The court expressly endorsed the tribunal's conclusions: the revisional orders exceeded the scope of the notice in form-49 and thus were procedurally flawed in respect of items other than patasa; substantively, patasa, harada, sakaria and alchidana fall within the statutory definition of "sugar" for the relevant schedule entries and, given that additional duty of excise was not shown to be exempted, entry 86 applies; alternatively, such goods would fall under entry 8 and be covered by exemption notifications.

DISPOSITION: Both petitions are dismissed.

Implications:

The tribunal's order in favour of the respondent is upheld and the State's revisional orders (to the extent they taxed the listed items) stand set aside by virtue of the court's dismissal of the State's petitions.
The court clarified that the condition in entry 86 concerns whether additional duty of excise is exempt by law (or subject to drawback), not whether the dealer personally paid that duty; manufacturers/suppliers paying the additional duty is consistent with the application of the exemption entry.
The Commissioner (or his delegate) must comply with the notice requirement in Rule 67 (form-49) and cannot lawfully impose tax on items not specified in that notice.
As the opinion does not purport to create an express new binding precedent beyond affirming and applying earlier authorities and the statutory text, the direct effect is the affirmation of the tribunal's disposition in this factual matrix and the dismissal of the State's challenge.

(End of summarized opinion content; all information above is drawn exclusively from the provided opinion.)

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State Of Gujarat v. Virumal Santumal

Akil Abdul Hamid Kureshi, J.

1. These petitions are filed by the State Government challenging the judgment of the Gujarat Value Added Tax Tribunal ("the tribunal" for short) dated 4.8.2009.Since issues are repetitive in nature and are likely to arise in many similar cases, we have heard learned counsel for the parties at length and we propose to dispose of the petition finally by this judgment.

2. Briefly stated, the facts are as under :

2.1 The respondent, is a dealer registered under the Sales Tax Act. The respondent deals mainly in patasa, harada, sakaria and alchidana. In the returns for years 2002-03 and 2003-04, the assessee had claimed exemption from payment of sales tax under the Gujarat Sales Tax Act on the sale and purchase of such items namely, patasa, harada, sakaria and alchidana. His returns were assessed by the Commercial Tax Inspector. He passed orders of assessment on 18.2.2005 accepting the returns of the assessee making no additions.

2.2 The Deputy Commissioner of Commercial Tax was prima facie of the opinion that the respondent was not entitled to exemption. He therefore, after issuing notices passed two separate orders both dated 1.1.2009 levying tax on such transactions under entry no. 167 at the rate of 696 on the transactions. In such order he distinguished the decision of Supreme Court in case of the State Of Gujarat v. Sakarwala Brothers [1967] 19 STC 24 in order to hold that the case of the respondent does not fall under entry 86 of Schedule-I to the Gujarat Sales Tax Act, 1969 ('the GST Act' for short). This was on the premise that, according to him, the important condition of the said entry namely, the levy and collection of additional duties of excise, should not be exempted on account of any exemption or drawback, was not fulfilled. He also did not accept the assessee's contention that even if the cases did not fall under entry 86, the same would fall under entry 8 of Schedule-IIA to the GST Act and would consequentially be exempted from payment of any tax by virtue of exemption notifications issued by the State Government. This was on the premise that according to him term 'sugar' appearing under entry 86 of Schedule-I had a wider meaning as explained by the Supreme Court in case of Sakarwala Brothers (supra) whereas no such meaning could be ascribed to the term 'sugar' used in entry 8. Resultantly, the common parlance meaning of the term 'sugar' would have to be applied and it would exclude items such as patasa, harada, sakaria and alchidana. He accordingly taxed the transactions under entry 167 of Schedule-IIA to the GST Act pertaining to sweets and sweetmeats including shrikhand, basudi and doodhpak.

2.3 Aggrieved by the order of revisional authority, the petitioner preferred a revision application before the tribunal. The petitioner raised three fold contentions.

(1) Firstly, that the initial notice issued in form-45 by the revisional authority included all the items namely, patasa, harada, sakaria and alchidana whereas the final notice issued in form-49 referred only to the sale of patasa. The revisional authority therefore, could not have travelled beyond the notice issued in form-49 and taxed items other than patasa for which no final notice was issued.

(2) The second contention was that all items were covered under entry 86 since the levy and collection of additional duties of excise was not exempted. Such duties were in fact, paid by the vendors from whom he had made purchases of the goods.

(3) The third and alternative contention of the assessee was that if the items did not fall under entry 86, they would be covered under entry 8. By virtue of exemption notifications issued by the Government from time to time, the sales and purchases thereof would be fully exempted from payment of any sales tax.

2.4 The tribunal accepted the first two contentions of the petitioner. The tribunal held that in the notice in form-45, the Deputy Commissioner had referred to all the items, but in the notice in form-49, he confined his case only to sale of patasa. He therefore, could not have passed the final order levying tax on all items. The tribunal held that by virtue of decision of Supreme Court in case of Sakarwala Brothers (supra), the products in question were sugar for the purpose of entry 86 and since the additional duty of excise was not exempted, the goods were covered under such entry. In light of such conclusion, the tribunal did not examine the alternative contention of the assessee that if the items did not fall under entry 86, they would be covered under entry 8 and by virtue of exemption notifications issued by the Government from time to time, no tax was leviable in any case. It is this judgment of the tribunal which the State has challenged before us.

3. We may record that previously a tax appeal was filed. However, the Court was of the opinion that against the order passed by the tribunal in the revision petition, tax appeal would not be maintainable. The State therefore, preferred these writ petitions.

4. Learned AGP Shri Jaimin Gandhi for the State raised the following contentions :

(1) That the goods in question did not fall under entry 86 of schedule-I to the GST Act since the vital condition contained therein was not satisfied. He submitted that such condition must be viewed in the background of legislative intent namely, that in case of only those goods where additional duties of excise has been paid by the dealer, can he claim the benefit of entry 86. In the present case, admittedly, the dealer had not paid such tax. The fact that the vendor had paid such tax on the goods at the point of manufacture is of no relevance.

(1.1) In this context reliance was placed on the decision of Supreme Court in case of Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan, [1980] 46 STC 256.

(2) Entry 8 of Schedule-IIA does not contain definition of sugar unlike in entry 86 of Schedule-I. The term 'sugar' therefore, for the purpose of entry 8 cannot be given wider meaning. Items such as patasa, harada, sakaria and alchidana are not considered sugar in common understanding. These items therefore, would not fall in the said entries and were correctly classified under entry 167 as sweet and sweetmeats.

(3) When the tax was short-paid, penalty under section 45(6) read with section 45(4) of the Gujarat Sales Tax Act was rightly imposed.

5. On the other hand, learned counsel Shri Uchit Sheth for the respondent assessee opposed the petitions, raising the following contentions :

(1) The notice issued by the revisional authority was defective. The notice in form-49 did not propose levying of tax on items other than patasa. No such tax therefore, could have been imposed on all items.

(2) All the items were covered under entry 86 of schedule-I to the GST Act. He referred to the decision of the Supreme Court in case of Sakarwala Brothers (supra) wherein, in background of similar language used by the Legislature in Bombay Sales Tax Act, it was held that patasa, harada, sakaria and alchidana would be covered under the definition of term 'sugar' in the expanded meaning given by the Legislature. He pointed out that these items were not exempted from payment of additional duty of excise. They would therefore fall under entry 86.

(3) In any case, the items would fall under entry 8 of Schedule-IIA which is a successor entry of entry 3E of the same Schedule. He took us through the legislative history and changes made from time to time to contend that at all points of time, the intention was clear namely, not to levy sales tax on sale and purchase of sugar including patasa, harada, sakaria and alchidana.

6. section 67 of the gst act pertains to revision. clause (a) of Sub-section (1) of section 67 provides that subject to the provisions of section 66 and any rules which may be made on this behalf, the Commissioner on his own motion within three years or on application made to him within one year from the date of any order passed by officer appointed under section 27, may call for and examine the record of any such order and pass such order as he thinks fit and proper within twelve months from the date of service of notice for revision. Sub-section (1) of section 67 thus empowers the Commissioner under the circumstances mentioned therein to exercise revisional powers.

7. Rule 60 of the Gujarat Sales Tax Rules, 1970 ("the GST Rules" for short) pertains to notice for production of accounts, documents etc., and provides that where the Commissioner requires any dealer to produce any accounts or documents or to furnish any information under section 59, he shall issue a notice therefor in form 45. Rule 67 pertains to notice to person likely to be affected adversely and reads as under :

67. Notice to person likely to be affected adversely

(1) Before an appellate or revising authority passes an order in appeal or revision which is likely to affect the appellant or applicant or any other person adversely, it shall serve on him a notice in Form 49 and shall give him a reasonable opportunity of being heard.

(2) Before the Commissioner including an officer below the rank of Commissioner who has been delegated the powers of the Commissioner under clause (a) of Sub-section (1) of section 67, passes any order under the said section, which is likely to affect adversely to any person who is a party to such proceeding, he shall serve on such person a notice in Form 49 and shall give him a reasonable opportunity of being heard.

8. It can thus be seen that notice under form-45 which can be issued under rule 60 of the GST Rules is for production of accounts or documents or information as may be required by the Commissioner. Neither rule 60 nor form-45 therefore, has any relevance to the power of Commissioner to revise an order passed by the authority appointed under section 67 of the gst act. It is at best, a step preparatory to the issuance of notice for exercising revisional powers. Before doing so, if the Commissioner requires examination of any accounts, documents or requires any information from any dealer, he may call upon the dealer to do so in terms of rule 60 of the GST Rules. On the other hand, rule 67 is specific and requires the Commissioner to issue notice in form-49 to a person likely to be affected adversely, to give him reasonable opportunity of hearing before any appellate or revisional order is passed by the appellate or revisional authority. Sub-rule (2) of rule 67 further clarifies that before the Commissioner or officer who has been delegated powers of the Commissioner under clause (a) of Sub-section (1) of section 67 passes any order under the said section which is likely to affect adversely to any person who is a party to such proceedings, he shall serve on such person a notice in form-49 and also grant him a reasonable opportunity of being heard.

9. It thus becomes clear that notice under rule 60 in form-45 is not a notice of Commissioner or his delegatee to take an order under revision. Such notice is to be issued in terms of rule 67 in form-49. It is meant to give person likely to be adversely affected by the appellate or revisional order, a reasonable opportunity of being heard.

10. Under the circumstances any mention of the items in form-45 would have no relevance for exercising revisional power by the Commissioner under rule 67(1) of the GST Act Whether any reference was made to such items in the notice under form-45, the power of the Commissioner can be exercised under section 67(1) only if a notice has been given of reasonable opportunity of being heard to an assessee before the order is revised and such notice is prescribed in form-49. In the present case, admittedly in the notice under form-49 mention was made by the Commissioner only for taxing patasa and no other items. His final order therefore, could not have travelled beyond such notice which would fall foul of requirement of rule 67 and reasonable opportunity of being heard to the assessee. To that extent in our view tribunal was perfectly justified in coming to its conclusion which we have recorded earlier.

11. Coming to the central controversy, we may notice that Schedule-I to the GST Act pertains to goods, the sale or purchase of which is free from all taxes. This schedule is framed under section 5, sub-section (1) whereof provides that subject to conditions or exceptions if any set out against each of the goods specified in column 3 of Schedule-I, no tax shall be payable on the sales or purchases of any goods specified in that Schedule. Entry 86 of Schedule-I reads as under:

12. In order to appreciate the entries in question in the background of legislative intention, we may refer to legislative changes made from time to time. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as "the Act of 1957") was enacted in the year 1957. From the preamble to the Act, it can be seen that the same was enacted to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds among the States in pursuance of the principles of distribution formulated and the recommendations made by the Finance Commission in its report. Section4 of the Act of 1957 provides that during each financial year, there shall be paid out of consolidated fund of India to the States in accordance with the provisions of the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year as are specified in that Schedule.

13. For the period between 6.5.1970 to 9.4.1981, Schedule-I to the GST Act contained entry-42 as under :

14. It can thus be seen that as per entry 42, sugar falling in the said category would be exempt from payment of sales tax without any condition. The term 'sugar' was defined in the Central Excises and Salt Act, 1944 as under :

Sugar' means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105 C, would be more than ninety.

15. Question whether items such as patasa, harada, sakaria and alchidana, would fall within the term 'sugar' for the purpose of entry 47 of Schedule A of the Bombay Sales Tax Act, 1959 came up for consideration before this Court. It is an undisputed position that the definition of term 'sugar' for the said entry was identical to one adopted under entry 42 of Schedule-I to the GST Act. A division bench of this Court on a reference made by the Sales Tax Tribunal held that patasa, harda and alchidana were products of sugar and would be covered under the definition adopted for the purpose of said entry 47 of the Bombay Sales Tax Act. The Court agreed with the suggestion of learned Advocate General that items patasa, harada and alchidana bear a distinct and different name from sugar and are not commercially purchased or sold as sugar. However, the Legislature in entry 47 has not used word sugar simpliciter and covered the term as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944. The Court held that this definition did not intend merely to cover sugar as known in common parlance but was intended to cover all forms of sugar in any form which contains more than 9096 sucrose. It was observed that a definition which refers to the chemical contents of an article cannot be said to be a definition which is intended to cover the article as understood in common parlance. On such premises, the reference was answered in favour of the assessee. In the said case also, dispute was raised by the revenue that the item in question would fall in entry 31 which pertains to sweet and sweetmeats including shrikhand, basudi and doodhpak. The contention was however negatived in view of special definition of term "sugar" adopted by incorporation from the Central Excises and Salt Act, 1944. Revenue carried the matter in appeal before the Supreme Court. The Supreme Court confirmed the judgment of the High Court. It was noted that the chemical composition of patasa, Harada and Alchidana is same as that of the sugar as there is more than 9096 sucrose. The contention of the revenue that patasa, harda and alchidana were sugar and used on festive occasions and therefore, should be distinguished from sugar was not accepted observing that this circumstance has no relevance on the question of legal classification for the purpose of Bombay Sales Tax Act.

16. For the period between 10.4.1981 to 31.3.1989, entry 42 was modified in the following manner:

17. Thus, after 10.04.1981, exemption was available to sugar falling under entry 42 only when levy and collection of additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 was not exempted on account of any exemption or drawback granted under that Act. Rate of duty had to be provided for sugar not falling in entry 42. Schedule-IIA pertains to goods, the sale or purchase of which is subject to sales tax or purchase tax and rates of tax. Simultaneously, therefore, entry 3E was inserted in Schedule IIA as under:

18. Parallely, under exemption notification issued under section 49(2) of the gst act, by virtue of entry 133, sugar covered under entry 3E in Schedule-II Part A of the GST Act was exempted from payment of whole of the tax. It may be noted that entry 3E of Schedule-II Part A referred to Sugar as defined in item No. 1 of the first schedule of Central Excises and Salt Act, 1944.

19. Thus the definition of sugar for the purpose of entry 42 to Schedule I and entry 3E to Schedule-II Part A remained the same. By virtue of these entries, sugar falling under entry 42 would be exempt from payment of tax, if the condition contained in second column of entry was satisfied. If such condition was not satisfied, it would fall under entry 3E and would ordinarily be taxed at the rates specified therein. However, by way of exemption notification issued by the Government, such tax was also waived. We are informed that this was done in view of the representations made by the trade as is apparent from the circular dated 17.9.1981 issued by the Government. The circular refers to legislative changes made in entry 42, corresponding insertion of entry 3E in Schedule-IIA and issuance of exemption notification on account of difficulties faced by the trade which was brought to the notice of the Government through representations.

20. From 1.4.1989 to 31.3.1992, entry 42 was amended and read thus :

21. It can be seen that the first column of this entry underwent a change. Instead of sugar as defined in item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944, it was referred to as sugar covered under sub-heading Nos. 1701.20, 1701.31, 1701.39 and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985. This was necessary because the First Schedule to the Central Excises and Salt Act, 1944 (now Central Excise Act, 1944) came to be replaced by the Central Excise Tariff Act, 1985 and different headings and sub-headings were introduced for taxing various products. This change was thus purely consequential to the amendments made in the Central Excises and Salt Act, 1944 and introduction of newly enacted the Central Excise Tariff Act, 1985.

22. In essence the definition of term 'sugar' did not undergo any change. For the purposes of sub-heading Nos. 1701.10, 1701.20, 1701.31 and 1701.39, sugar means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105 C would be more than 90. Thus verbatim definition of term 'sugar' remained the same for these entries as contained in item No. 1 in the First Schedule to the Central Excises and Salt Act, 1944. In effect for purposes, thus entry 42 underwent no change despite amendments made therein which are purely consequential in nature. Simultaneously entry 3E to Schedule-IIA was also changed and read as under:

23. The significant change between existing entry 3E and entry 3E with effect from 1.4.1989, was that the words "Sugar as defined in Item No.1 of the First Schedule to the Central Excises and Salt Act, 1944" were deleted and now simpliciter description of goods read as "Sugar to which entry 42 in Schedule I does not apply." For all purposes, therefore, this was also consequential change in entry 3E which only dropped description of sugar as defined in item no. 1 of the First Schedule to the Central Excises and Salt Act, 1944 since the Schedule itself did not survive. It is true that so far in entry 42, no corresponding clarification was made to cover sugar as referred to in sub-heading Nos. 1701.10, 1701.20, 1701.31 and 1701.39 of the Schedule to the Central Excise Tariff Act, 1985. We may record that exemption notification under section 49(2) of the gst act and entry 133 by which sugar covered under entry 3E was exempted from payment of whole of the tax continued to hold the field.

24. With effect from 1.4.1992 to 31.3.2006, the entries were renumbered. Entry No. 42 to Schedule-I which was re-numbered No. 86, continued exactly in the same language. Like-wise entry 3E of Schedule-IIA was renumbered as entry 8 also in the same language which read as under :

25. Entry 133 of exemption notification under section 49(2) of the gst act was slightly changed. Instead of exempting sugar covered by entry 8 in Schedule-II Part-A, an exclusion clause was added namely, "other than sugar imported from all places out of India and sold within the State of Gujarat". Thus the tax structure remained the same. Entry 42 assumed No. 86. Entry 3E was renumbered as entry 8. Exemption entry under entry 133 continued to grant exemption but excluded sugar imported from any place out of India and sold within the State.

26. By virtue of such provisions, contained in the Schedules to the GST Act, it clearly emerges that case of the respondent is covered in entry 86 of Schedule-I of GST Act. The fact that by virtue of decision in case of Sakarwala Brothers (supra), such items are considered as sugar for the purpose of sugar covered under sub-heading Nos. 1701.10, 1701.20, 1701.31 and 1701.39 of the Schedule to the Central Excise Tariff Act, 1985, there is no dispute possible in fact, not seriously raised. Such sub-headings defined the term 'sugar' in the same manner as it was done under item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944. It was in this context interpreting the term 'sugar' defined in expansive manner, it was held that patasa, harada, sakaria and alchidana which contained more than 9096 sucrose are sugar for the purpose of the said entry. If this is clear, the goods can be ejected out of entry 86 only if conditions subject to which exemption is to be granted, are not satisfied. The condition is when levy and collection of additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, is not exempted on account of any exemption or drawback granted under that Act. If this condition is satisfied, it would not be open for the petitioner to deny the benefit of exemption to the respondent in terms of entry 86 of Schedule-I to the GST Act. In the present case, it is not even the case of the petitioner that levy and collection of additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, is exempted. The respondent had pointed out before the tribunal that his vendors pay full additional duty at the point of clearance of goods. State Government however, raised a curious contention namely, that such duty must be paid by the respondent. We do not see any such warrant in condition contained in entry 86. Condition in plain terms is that levy and collection of additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, should not be exempted on account of any exemption or drawback. When admittedly, the additional levy of duty is not exempted nor is the case of the petitioner that any drawback is granted, entry 86 would certainly apply. Such condition nowhere provides that such additional duty must be borne by the dealer. Additional duty of excise would be payable on manufacture of goods and would therefore, be paid by the manufacturer, in the present case the suppliers from whom the respondent dealer would be purchasing such goods.

27. The decision of Supreme Court in case of Delhi Cloth & General Mills Co. Ltd. (supra) was rendered in vastly different situation. It was a case whereunder the notification, exemption from payment of sales tax was available provided that the dealer furnished the proof to the satisfaction of the Assessing Officer that additional duty leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 had been paid. It was thus an additional condition and an onus was cast on dealer claiming exemption to demonstrate that not only the additional duty was not exempt, same was actually paid. It was in this background that the Supreme Court rendered its decision. Only condition of entry 86 is that additional levy and collection of additional duty of excise should not be exempt. There is no additional onus cast on the dealer to establish that same was actually paid.

28. This discussion would be sufficient to dismiss the petition. However, when an alternative contention has been raised by the respondent and argued by both the sides, we consider it proper to entertain the same also. We may recall that the alternative contention of the assessee was that even if the goods were not covered under entry 86, same would fall under entry 8 of Schedule-IIA to the GST Act and would be exempt from payment of tax by virtue of exemption notifications issued from time to time. The fact that sugar falling under entry 8, is exempt from payment of tax by virtue of exemption notifications is not in dispute. What the petitioner however, disputes is that the item in question would not fall under entry 8 since the term 'sugar' must be understood in common parlance term without giving it any artificial or expansive meaning, which is adopted for the purpose of entry 86. To our mind such contention is misconceived. We must however, first begin by considering that in Sakarwala Brothers (supra), this Court as well as Supreme Court recognized that in common parlance term and in common understanding, items such as patasa, harada, sakaria and alchidana, would not be covered under the term 'sugar'. It was only because of specific definition incorporated in the said entry as defined in item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944, that such terms were included.

29. Term 'sugar' for the relevant entry of Bombay Sales Tax Act, it was verbatim the same as entry 86. However, we have noticed the changes which were made by the State Legislature from time to time in predecessor entry 42 and entry 3E. We have noticed that when the condition was imposed in entry 42 for enjoying exemption and correspondingly, entry 3E to Schedule-IIA was introduced for taxing these goods which were not falling under entry 42, the definition of term 'sugar' in both the entries was identical. In clear terms, therefore, the intention was to tax sugar not covered under exemption entry 42 (now entry 86) under entry 3E (now entry 8) in which identical definitions were adopted for both the entries. Having done so, on the representations by the trade, the State Government issued exemption notification waiving entire sales tax even on sugar falling under entry 3E. It was only by virtue of deletion of the First Schedule to the Central Excises and Salt Act, 1944 and its replacement by the newly enacted Central Excise Tariff Act, 1985, that changes had to be made in entries 42 and 3E. Entry 42 post 1.4.1989 had reference to sub-heading Nos. 1701.10, 1701.20, 1701.31 and 1701.39 of the Schedule to the Central Excise Tariff Act, 1985 instead of item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944. We have noticed that despite these changes the definition of sugar in effect remained the same. It was therefore, also that in entry 3E the reference to sugar as defined in item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944 came to be deleted. It is true that post 1.4.1989, entry 3E only refers to sugar to which entry 42 of Schedule-I does not apply. However, looking to the historical changes made from time to time in such entry, we have not the slightest hesitation that even after 1.4.1989, entry 3E included sugar to which entry 42 in Schedule-I did not apply and the term 'sugar' had a common meaning for both entry 42 as well as entry 3E. Very insertion and existence of entry 3E was to specify rate of tax for sugar to which entry 42 did not apply. In other words sugar which was defined in entry 42 but was not included in it because the condition for inclusion was not satisfied would be taxed as per entry 3E of Schedule-IIA.

30. When seen in this light, we cannot accept the contention that for the purpose of entry 3E, we must discard definition of term 'sugar' as referred to in Central Excise Tariff Act, 1985 and must treat items such as patasa, harada, sakaria and alchidana as different from sugar as understood in common parlance.

31. We may notice that in a circular dated 3.4.1989 while explaining the changes made after 1.4.1989 in the GST Act, it was explained that in Schedule-I in entry 37, 40, 42, 43 and 44, if additional duty of excise is paid, sales tax is not to be levied. The definition of these terms were adopted from Central Excises and Salt Act, 1944. Now with the introduction of Central Excise Tariff Act, 1985 in place of Central Excises and Salt Act, 1944, definition of these terms is referred to from the said Act. Interestingly, in the Gujarat Value Added Tax Act also, similar entries and exemptions are provided. In that background, in circular dated 1.8.2012 issued by the State Government, it is provided that by virtue of decision of Supreme Court in case of Sakarwala Brothers (supra), items such as patasa, harada, sakaria and alchidana containing more than 90% sucrose are considered as sugar and therefore, would be exempt from payment of VAT. When the State Authorities themselves have clarified the situation, as mentioned above, we see no scope for any further debate. Quite independently also, we have given our own interpretation to various entries holding the field. We fully endorse the view of the tribunal. We further hold that even if case of the respondent does not fall under entry 86 of Schedule-I, by virtue of condition contained therein not being satisfied, same would fall under entry 8 of Schedule-IIA and not in entry 167 as contended by the Revenue. In the result, both the petitions are dismissed.

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State Of Gujarat v. Virumal Santumal

Structured Summary of the Opinion (Akil Abdul Hamid Kureshi, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

State's Arguments (Learned AGP Shri Jaimin Gandhi)

Respondent's Arguments (Learned Counsel Shri Uchit Sheth)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

State Of Gujarat v. Virumal Santumal

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