Advocate Supreme Court of India

Saturday, April 25, 2009

Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR.

JUDGMENT

M/s Manglam Yarn Agencies Vs.
Assistant Commissioner,
Commercial Taxes, Special
Circle, Bhilwara.

S.B. SALES TAX REVISION PETITION NO.129/2008
against the judgment and order dt.10.1.2001
passed by Raj. Tax board, Ajmer in Appeal
No.1802/2006/Bhilwara.

Date of order
: 25th September, 2008

PRESENT

HON'BLE DR. JUSTICE VINEET KOTHARI

Mr. Dinesh Mehta for the petitioner.
Mr. Vineet Mathur with Mr. Rishab Sancheti for the respondents.

REPORTABLE

BY THE COURT:

1. The question of law which was framed for consideration
in the present revision petition filed by the assessee is as under:

“Whether the exemption notification No.1490

dated 17.9.2001 SO No.183 issued under Section

15 of the RST Act exempting sale or purchase of

all kinds of man-made fibers and man-made yarn

to which the rate of tax in respect thereof exceeds

2% also covered the turn-over tax imposed on the

respondent-assessee under Section 13A of the

RST Act, 1994 or the said exemption is limited to

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

the individual sale or purchase of the specified
commodities in the said notification.”

2. The Revenue Authorities, all three, concurrently held
against the petitioner-assessee that the notification dated 17.9.2001

did not cover the turnover tax payable by the assessee under Section

13A of the Rajasthan Sales Tax Act, 1994 (hereinafter referred to as

'the Act').

3. Before coming to the controversy and case laws, it is
considered expedient to reproduce provisions of the Act and

exemption notification and rate notification in question for ready

reference :

“13-A. Levy of turnover tax.-

(1) Every registered dealer and every dealer who is liable
to get himself registered under section 3, and whose
total turnover in a year exceeds three lacs rupees,
whether or not the whole or any portion of such
turnover is liable to tax under any other provisions of
this Act, shall be liable to pay turnover tax, from such
date and at such rate as may be notified by the State
Government but not exceeding ten percent of his gross
annual turnover.
(2) No tax under sub-section (1) shall be payable on that

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

part of turnover which relates to:

(i)
sale or purchase of exempted goods;
(ii)
sale or purchase of goods in the course of inter-
State trade or commerce;
(iii) sale or purchase of goods in the course of export
out of the territory of India or sale or purchase
in the course of import into the territory of
India;
(iv) all amounts collected by way of tax under the
provisions of this Act or the Central Sales Tax
Act, 1956 (Central Act 74 of 1956);
(v)
all amounts allowed to dealers in respect of
goods returned to the dealer when goods are
taxable on sales provided that the goods were
returned within a period of six months from the
date of delivery of the goods and the accounts
show the date on which, and the amount for
which, refund was made;
(vi) all amounts realised by a dealer by the sale of
his business as a whole;
and except as provided above, no other
deduction shall be made from the gross turnover
of a dealer for the purpose of this section.
(3) For the purpose of assessment, collection and refund
of tax levied under this section, the provisions
pertaining to assessment, collection and refund under
other provisions of this Act and Rules made
thereunder shall mutatis mutandis apply.”
“15.
Exemption of tax.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

Notwithstanding anything contained in this Act,
where the State Government is of the opinion that it is
necessary or expedient in the public interest so to do,
it may, by notification in the Official Gazette, the
exempt fully or partially, whether prospectively or
retrospectively from tax the sale or purchase of any
goods or class of goods or any person or class of
persons, without any condition or with such condition
as may be specified in the notification.”

4. The relevant notification providing for rate of turnover
tax of 0.25 % dated 30.3.2000 and notification dated 17.9.1981

exempting the rate of tax on all kinds of man-made fibers and man-

made yarn exceeding 2% subject to certain conditions, are also

reproduced herein-under:

“NOTIFICATIONS ON TURNOVER TAX
FINANCE DEPARTMENT
Tax Division
NOTIFICATIONS

Jaipur, March 30, 2000

S.O. 377.-In exercise of the powers conferred by
section 13A of the Rajasthan Sales Tax Act, 1994
(Rajasthan Act No.22 of 1995), the State Government
being of the opinion that it is expedient in the public
interest so to do, hereby notifies that every registered
dealer and every dealer who is liable to get himself
registered under the Act and whose total turnover is not

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

less than fifty lac rupees in a year, shall be liable to pay
turnover tax under the said section, at the rate of 0.25%.

[F.4(1)FD/Tax Div./2000-301]
By order of the Governor,

V. Srinivas,
Deputy Secretary to Government.”
“S.NO.1340 No.F.4(18)FD/Tax-Div./97-Part-III-92, Dated : 17-09-2001

In exercise of the powers conferred by section 15 of the
Rajasthan Sales Tax Act, 1994 (Rajasthan Act No.223 of 1995), the
State Government being of the opinion that it is expedient in the
public interest so to do, hereby exempts from tax sale or purchase of
all kinds of man made fibers and man made yarn whether synthetic or
non-;synthetic, collusosic or non-cellulosic, blended or not and waste
thereof, worsted and semi-worsted woolen yarn including carpet
woolen yarn, embroidery yarn, cotton yarn and cotton yarn waste, to
the extent to which the rate of tax in respect thereof exceeds 2%, on
the following conditions, namely :

1. that these commodities are used as raw material for manufacture of
fabrics in the State ; and
2. that such manufacturer shall issue to the selling dealer a certificate
in the Form appended to this notification.
CERTIFICATE
I, ..........................(Name)................... (Status) authorised to
make purchase on behalf of M/s ...................... (Name and address of

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7

the purchasing dealer), do hereby certify that the ............................
(description of goods) purchased from M/s ......... (complete address
of the seller), holder of R.C. No................... (RST) ................ (CST),
as per cash memorar dum/bill No.................. Dated ...................... will
be used as raw material for manufacture of fabric in the State of
Rajasthan.”

5. The principal submissions made by the learned counsel
for the petitioner-assessee Mr. Dinesh Mehta are as follows:(
a)
That since the exemption notification dated 17.9.2001
came after the turnover tax rate notification dated
30.3.2000 providing for 0.25% turnover tax, the exemption
notification dated 17.9.2001 should be deemed to have an
overriding effect and the rate of tax on sale of all kinds of
man made fibers and man made yarn including the turnover
tax cannot exceed 2% and, therefore, the turnover tax
levied by the Assessing Authority and upheld by the
appellate authorities upto the Tax board is wrong in law
and the same deserves to be quashed and set aside.
(b)
That turnover tax in effect is also a tax on sale or purchase
of the commodity and, therefore, the notification dated
17.9.2001 would cover that also.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

(b)
Since the word 'tax' has been defined in Section 2(41) of
the Act as any tax or other levy by any name leviable under
the provisions of the Act and 'turnover tax' has not been
separately defined, therefore, 'turnover tax' is included
within the definition of 'tax' under Section 2(41) of the Act
and is governed by the notification dated 17.9.2001.
(c)
That since Section 13-A(2) of the Act stipulates that no
turnover tax shall be payable in relation to sale or purchase
of exempted goods, therefore, the exemption over 2% rate
of tax granted under the notification dated 17.9.2001
cannot be indirectly taken away by imposition of turnover
tax under Section 13A of the Act.
(e)
That since the Hon'ble Supreme Court in S. Kodar V. State
of Kerala – 1974 (34) STT 73 SC as well as this Court in
Merta Trade & Industries Vs. State of Rajasthan & Ors. (
2002) 13 STO 462 (Raj) held that turnover tax is nothing
but tax on purchase or sale of goods and is as good as
additional rate of tax on such purchase or sale of the goods,
therefore, the exemption over 2% of rate of tax under
notification dated 17.9.2001, would exempt the essessee
from levy of turnover tax also.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7

(f)
That the judgments of Hon'ble Supreme Court in Sun Oil
Company (P) Ltd. & Anr. Vs. State of West Bengal & Ors.
-(1998) 111 STC 420 upholding the decision of West
Bengal Taxation Tribunal in Kejriwal Electronics Pvt. Ltd.
& Co. V. Commercial Tax Officer (1991) 81 STC 20
(WBTT) [FB] and over ruling the decision of Single Judge
of Calcutta High Court in the case of ABN Food &
Beverage Pvt. Ltd. V. Assistant Commissioner of
Commercial Taxes (1990) 77 STC 339 (Cal.) was
distinguishable from the facts of the present case since
exemption provisions contained under Section 4AA in
West Bengal Act referred to only Section 4 for exemption
whereas Section 15 of the Rajasthan Act without reference
to any specific provisions for levy of tax, empowered the
State Government to exempt fully or partially the assessee
from payment of tax on the sale or purchase of any goods,
and, therefore, the exemption in the present case under the
notification dated 17.9.2001 exempted the assessee from
turnover tax also.
(g)
that relying on the decisions of the Hon'ble Supreme Court
in Mangalore Chemicals & Fertilizers Ltd. V. Dy.
Commissioner of Commercial Taxes and ors.-1991 (83)

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STC 234 and Unionof India & Ors. Vs. Wood Papers Ltd.

& Anr. -1991 (83) STC 251, the learned counsel for the

petitioner-assessee urged that while interpreting the taxing

statute including the exemption notifications, the Rule of

interpretation to be adopted is that while strict

interpretation has to be given to decide the question

whether the subject falls within the exemption or not but

once exemption is held applicable, full play to such

exemption clause has to be given :

“The choice between a strict and a liberal
construction arises only in case of doubt in regard
to the intention of the Legislature manifest on the
statutory language. Indeed, the need to resort to
any interpretative process arises only where the
meaning is not manifest on the plain words of the
statute. If the words are plain and clear and
directly convey the meaning, there is no need for
any interpretation. It appears to us the true rule of
construction of a provision as to exemption is the
one stated by this Court in Union of India V.
Wood Papers Ltd. [1991] 83 STC 251 infra ; 1991
JT (1) 151 at 155:

“True, speaking, liberal and strict
construction of an exemption provision are to be
invoked at different stages of interpreting it. When
the question is whether a subject falls in the
notification or in the exemption clause then it
being in nature of exception is to be construed

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

strictly and against the subject but once ambiguity
or doubt about applicability is lifted and the
subject falls in the notification then full play
should be given to it and it calls for a wider and
liberal construction...”

The learned counsel for the petitioner-assessee
submitted that exemption under notification dated
17.9.2001 cannot be narrowly construed and would also
cover exemption from turnover tax.

6. These submissions are opposed by Mr. V.K. Mathur
appearing with Mr. Rishab Sancheti in the following manner:(
a) That
the notification dated 17.9.2001 exempts only
individual transactions of sale or purchase of all kinds of
man made fibers and man made yarn from the rate of tax
exceeding 2% subject to condition of the same being used
as raw material for manufacture of fabrics in the State and
subject to further condition of manufacture giving
certificate in prescribed form appended in the said
notification and, therefore, the same does not include the
turnover tax leviable on the gross annual turnover of the
assessee in the year.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

(b) That event of taxation for levy of tax on sale or purchase on
each transaction is different from levy of turnover tax on
the gross annual turnover exceeding a particular limit of
turnover and these two being different concepts, cannot be
mixed up and, therefore, the Revenue Authorities have
rightly held the assessee not entitled to the exemption from
turnover tax under the notification dated 17.9.2001.
(c) The words 'on' is absent before the words 'sale or purchase
of all kinds of man made fibers and man made yarn' in the
notification dated 17.9.2001 and, therefore, the turnover tax
which is levied on gross sale value or turnover of the
assessee during particular year cannot be covered by the
said exemption notification and the said notification clearly
exempts only individual transaction of sale or purchase
from tax exceeding 2% rate subject to condition of
certificate of the commodity being used as raw material for
manufacture of fabrics in the State, whereas the turnover
tax on the basis of gross annual turnover as determined
under Section 13A of the Act on which the turnover tax at
the rate of 0.25% was leviable if the turnover exceeded
Rs.50 lacs in a year.
(d) That the controversy was longer res integra and was

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

covered by the decision of the Hon'ble Supreme Court in
case of Sun Oil Company Vs. State of West Bengal (supra)
and, therefore, the present revision petition filed by the
assessee deserve to be dismissed as being without force.

7. I have heard learned counsels at length and given my
thoughtful consideration to the controversy in hand and also the
judgments cited at the Bar.
8. While it is true that the turnover tax is nothing but tax on
turnover viz. Aggregation of sale or purchase of goods and is,
therefore, exigible with reference to Entry 54 of List II of Seventh
Schedule to the Constitution of India, but the exigibility of the
turnover tax is upon happening of different kind of taxable event. It
gets attracted when the gross annual turnover exceeds a particular
limit or bench mark. The character of tax remains the tax on sale or
purchase of goods, but the levy is attracted if the criteria of its levy is
fulfilled as defined in Section 13-A of the Act. The whole of the
turnover does not attract the turnover tax. The exclusion of turnover
mentioned in sub-section (2) of Section 13A has to be made viz.
turnover of exempted goods, turnover of goods sold in the course of
inter State trade or commerce or in the course of export out of India
etc. The levy of turnover tax is also subject to restrictions imposed
under Article 286 of the Constitution of India and Sections 14 and 15

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7

of the CST Act as held by this Court in Merta Trade & Industries'
case (supra) but the question is, can rate of turnover tax prescribed in
the notification dated 30.3.2000 at 0.25% on the taxable turnover as
determined under Section 13A of the Act exceeding Rs.50 lacs, be
further slashed down by implied exemption by a subsequent
notification about the rate of tax in relation to sale or purchase of all
kinds of man made fibers and man made yarn under notification dated
17.9.2001. The answer has to be in the negative. The reason is that
notification dated 17.9.2001 which in fact reduced the rate of tax
applicable on the said commodity to 2% or in other words granted
exemption from rate of tax in excess of 2% on the individual
transaction of sale or purchase of the said commodity subject to
fulfillment of conditions specified in the said notification itself. The
said notification issued under Section 15 of the Act which is the only
source of power available with the State Government to grant
exemption does not refer to tax leviable under Section 13A of the
Act. As rightly contended by the learned counsel for the Revenue
there is no intendment about tax, there is no equity about tax. On a
plain reading of the notification as per golden rule of the
interpretation i.e. to go by the plain language of the text of the
notification, one can only come to the conclusion that the said
notification dt.17.9.2001 operates in a different field, whereas the
levy of turnover tax under Section 13A operates in another field. If
the State Government wanted to exempt turnover tax under Section

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7

13 A also, nothing prevented the State Government from issuing such
separate notification or to mention it specifically in the same
notification also. The exemption under Notification dated 17.9.2001
is available with reference to individual transaction of sale or
purchase only, is further fortified by the certificate appended in the
said Notification as a condition for grant of exemption, which
certificate can be given by the purchasing dealer only in respect of
individual sale or purchase of goods. There is no concept of implied
exemption or exemption by stretching exemption notification to cover
the turnover tax also whereas the same is not clearly exempted under
the said notification dated 17.9.2001. As is well-known on the other
hand, the taxing statutes including the exemption notifications have
to be strictly construed and plainly read. On a plain reading of the
notification, it does not appears to the Court that the State
Government has exempted turnover tax also under the said
notification dated 17.9.2001.

9. As a matter of fact, the similar kind of controversy which
was dealt at a great length by the West Bengal Tribunal in Kejriwal
Electronics Private Ltd.'s case (supra), the controversy has been
finally decided by the Apex Court in Sun Oil Company's case (supra)
in the following manner:“
In the West Bengal Sales Tax Act, 1954,

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

the Legislature itself has clearly and
unambiguously referred to the two forms of
impost, one under section 4, which is referred to as
“a tax” and the other under section 4-AAA, which
is referred to as “a turnover tax”. The difference in
nomenclature is consistently maintained in those as
well as other sections of the Act. Under Section 4AA
which provides for exemption, the
empowerment to notify that no tax shall be payable
relates to “tax” levied under section 4. Therefore,
Notification No.1809/F.T. dated April 1, 1976,
issued under section 4-AA obviously refers to the
tax under section 4 and not to “turnover tax”
imposed under section 4-AAA. A small-scale
industrial unit is not entitled exemption from
payment of turnover tax during the period of the
validity of the eligibility certificate by virtue of the
notification issued under Section 4-AA.

Kejriwal Electronics Private Limited & Co.

V. Commercial Tax Officer [1991] 81 STC 20
(WBTT) [FB] approved.
ABN Food & Beverage Pvt. Ltd. v.

Assistant Commissioner of Commercial Taxes

[1990] 77 STC 339 (Cal) overruled.

Decision of the West Bengal Taxation
Tribunal in SUN OIL Co. Vs. PVT LTD. V.
STATE OF WEST BENGAL [1994] 93 STC 24
affirmed.”

10. Another judgment which was relied upon by the learned
counsel for the assessee in the case of Additional Commissioner Vs.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7

Arihant Industries -2002 127 STC page 419 is also of no avail to the
petitioner assessee. The learned Single Judge in that case held that
the words used in the notification “exempts from tax” on a plain
reading of the notification indicated that the women entrepreneurs in
tiny sectors have been exempted from the payment of tax under the
Act. The word 'tax' has been defined under Section 2(r) which means
tax leviable under the provisions of the Act. The sales tax is leviable
under Section 4 of the Purchase Tax is leviable under Section 11 of
the Act and thus, the exemption notification refers to all tax leviable
under the Act which includes Sales Tax as well as purchase tax. The
said judgment did not touch upon the controversy in hand at all. As
already observed the turnover tax leviable under Section 13A is not
the same as sales tax or purchase tax leviable on the individual
transaction of sale or purchase. It is a levy on the basis of gross
turnover of the assessee exceeding a particular limit and treating the
class of dealers, who have turnover over that particular limit as a
different class, the legislature has imposed turnover tax under Section
13A of the Act. The constitutional validity of the turnover tax was
upheld by the Hon'ble Supreme Court in S. Kodar's case itself (supra).
The judgments of Supreme Court in Manglore Chemicals and Wood
Paper's case (supra) in this context help the case of Revenue more in
the present case rather than the assessee.

11. Thus, this Court finds no force in the contentions raised

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
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by the learned counsel for the assessee that the turnover tax imposed
upon the assessee should also be deemed to have been exempted
under the notification dated 17.9.2001 and nothing beyond 2% on
sale of all kind of man made fibers and yarn could be imposed in the
face of the said notification. The said notification, in the considered
opinion of this Court does not cover and exempt turnover tax leviable
under Section 13A of the Act and the said turnover tax imposed at
0.25% under notification dated 30.3.2000 is neither hit nor eclipsed
nor cut by the subsequent notification dated 17.1.2001.

12. The revision petition of the assessee is thus, found to be
devoid of merit. The same is accordingly dismissed. No order as to
costs.
[ DR. VINEET KOTHARI ], J.

item No._
babulal/

Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

Mahadev Marmo versus Union of India

1

1R

CIVIL WRIT No. 5078 of 2008

MAHADEV MARMO PVT. LTD.
V/S
UNION OF INDIA & ORS.

Mr. DINESH MEHTA, for the appellant / petitioner

Mr. VINEET KUMAR MATHUR], for the respondent UOI
Mr. RAVI BHANSALI ]
Mr. RISHABH SANCHETI] ]
Mr. P.S.BHATI ]
Mr. AJEET KUMAR SHARMA ] for applicants

Date of Order : 15.9.2008

HON'BLE SHRI N P GUPTA,J.
HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J.

ORDER

By this petition, the petitioner seeks to have
declared illegal, arbitrary and unconstitutional, the
following words in Policy Circular No.13(RE-2008) dt.
30.6.2008 produced with the writ petition as Annexure-4
“units who have been granted marble block import licence
under previous licensing years or are eligible to avail
license in the current licensing year (2008-09) under SIL
category”. Other relief as claimed is, that the petitioner
may be declared entitled to avail import license under
Annexure-4.

Necessary facts are, that according to the
petitioner, in exercise of powers conferred by section 5 of

2

2e
concerned Ministry published Foreign Trade Policy 20042009,
incorporating the provisions, relating to export and
import of goods and service. Then, the Director General of
Foreign Trade, New Delhi has issued annual supplement for
the year 2007-08 and 2008-09, and the said Director General
issued a Policy Circular No.1 (RE-2007) dt. 26.7.2007,
issuing guidelines for import of rough marble blocks/slabs
for the year 2007-08, laying down the entitlement or quota
of import of rough marble blocks, subject to ceiling
provided therein, however, out of the said quota,
individual importers were allocated their share of total
quantity of import. Accordingly, the petitioner has been
availing the quota. This licence was issued to the
petitioner for import, under Special Import Licences (SIL).
It is alleged, that till the year 2007-08, the import
licences have been issued, only under SIL, and there was no
policy for entrepreneurs, other than those availing licence
under SIL.

It is then alleged, that for the year 2008-09, the
Director General issued Policy Circular No.12 dt.
27.6.2008, laying down guidelines for import of rough
marble blocks for the year 2008-09, and the upper ceiling
of the total import was fixed at 1.40 lacks metric ton.
This Circular has been produced as Annexure-3. Then, the
said Director also issued a Policy Circular No.13 dt.

3

3,
according to which, units, who have been granted import
licences under SIL, or who are eligible for avail licences,
in the current year, under the SIL, have been excluded. It
is also alleged, that quantity of licence or entitlement of
licence thereunder, is in accordance with gang saw machines
installed in the premises. This Circular No.13 has been
produced as Annexure-4.

The precise challenge, for the above relief, is on
the ground, that according to Annexure-4, the eligibility
is based on the criteria being, units, who have installed
marble gang saw machine, and the units should have been in
operation since prior to 31.3.2001, and from out of this
category, 100% EOU's, units in SEZ, and units who have been
granted marble block import licence under previous
licensing years, or are eligible to avail licence in the
current licensing year (2008-09), under SIL category, has
been excluded. Then, it has also been provided, that all
eligible units as above, should have indigenous sales turn
over of marble slabs/tiles of Rs.1.00 crore and above in
each of three financial years 2004-05, 2005-06, 2007-08
(2006-07). According to the petitioner, exclusion of those
units, who have been granted licence under SIL, or who are
eligible to avail licence in the current licensing year
under SIL, is highly arbitrary and contrary to Foreign
Trade Policy, unjust and unwarranted, particularly in wake

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entitlement for import licence is 3000 metric ton marble
blocks/slabs for the first gang saw machine, and 1500

metric ton for additional gang saw machine. It is
contended, that once the Central Government decides to
permit import of such a huge quantity, based on

manufacturing capacity, exclusion of the units obtaining
import licence under SIL, is highly arbitrary and illegal.
It is also contended, that the Government could and should
have provided an option, to be exercised by an individual
entrepreneur, either to apply and avail licence under
Annexure-3, or Annexure-4. It is next contended, that
Annexure-4 has been issued to give benefit to the
particular sect of entrepreneurs, excluding the existing
licence holders, under SIL category.

Reply has been filed on behalf of the respondents,
contending inter alia, that Annexure-4 was issued,
especially to redress the grievance of the entrepreneurs,
who were not given the import licence under SIL Scheme, and
the petitioner, who was, and is enjoying the benefits under
SIL Scheme, cannot question, when the benefit is extended
to those entrepreneurs, who were not enjoying the benefit
under the SIL Scheme. It is also contended, that by
Annexure-4, Government has broad based licensing, by
including units, which were earlier not covered under the
SIL Category. The policy has been devised in consultation

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of the industries. It is contended, that if the option
suggested by the petitioner is provided, very purpose of
broad basing the eligible entities would be defeated. It is
also contended that on the same consideration, 100% EOU
units, and units in SEZ, have been excluded. It is denied
that there is vast difference between the maximum quantity
of import, given under the import licence to the
petitioner, and the quantity to which the entrepreneur may
be entitled, under Annexure-4, rather the quantity 3000
metric ton is upper most ceiling, which can be allowed to
importers. Thus, the apprehension of the petitioner is
unfounded.

Rejoinder has been filed by the petitioner,
reiterating the averments of the writ petition. However,
additional pleadings taken therein are, that the
eligibility criteria of quota, to which each unit is
entitled, are different under Annexures-3 and 4, inasmuch
as under Annexure-3, the unit is entitled on the basis of
eligible turnover of the previous year, whereas under
Annexure-4, entitlement is according to the turnover and
number of gang saw machines, installed in the unit before
2001.

During the pendency of this petition, certain
applications have been filed by individual entrepreneurs,

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grant of licence under Annexure-4, so also by some of the
persons, who have been granted some licences, seeking their
impleadment as party respondent of the writ petition.
Replies to those applications have been filed, and before
proceeding with the arguments on the main writ petition, we
have heard learned counsel for the applicants, and in view
of the averments contained at page 50 of the paper book,
being internal page 5 of the rejoinder, the applications
are allowed, and all the applicants are impleaded as party
respondents.

Thereafter, we have heard learned counsels on the
merits of the matter.

At the outset, it may be observed that by
Annexure-4, the persons like petitioner, who have been
enjoying, and are availing, import licences under the SIL,
have not been, altogether excluded from their entitlement
to get import licence, rather they continue to remain
entitled to avail the licence under the SIL. Therefore, it
cannot be said, that by issuing the policy scheme Annexure4,
the persons including the petitioner have been deprived
to do their business or profession, within the meaning of
Article 19(1)(g).

Coming to the aspect of the arbitrariness, as

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7g
of the total import has been fixed at 1.40 lacks metric
ton, under Annexure-3, and identical upper limit has been
fixed separately under Annexure-4, thus they do not
overlap, in the manner, that one does not take away the
share of other. Then much of the apprehension of the
petitioner, is based on the entitlement to obtain licence
up to 3000 metric ton on one gang saw machine, and 1500
metric ton for additional gang saw machine, may be taken
up. From a combined reading of Annexures-3 and 4, it would
be clear, that the eligibility to get the licence to the
extent of quantity of marbles, to be imported under
licence, to be availed under Annexure-3, depends on the
figure to be worked out, on the basis of eligible turnover
for the year 2007-08 i.e. the turnover of eligible firms
for the year 2006-07, or the turnover of these firms for
the year 2004-05 with the cap of 10%, whichever is less.
Likewise, under Annexure-4, the eligibility of the unit for
getting import licence is to be pro rata, on the basis of
average indigenous sales turnover of marble slabs/tiles,
only in the financial years 2004-05, 2005-06 and 2006-07.
Thus, inherently and basically, the entitlement to import
licence for particular quantity of marbles under both
Annexure-3 and 4 is, relatable to the turnover of the firm
concerned. Under Annexure-3, it is relatable to eligible
turnover for the relevant years with a specified cap, while
under Annexure-4, it is relatable to average indigenous

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less, the same criterion has been applied for determining
the eligibility, viz. depending on the turnover, under
Annexure-3 and Annexure-4 respectively. Then so far as the
limit of 3000 metric ton for one marble gang saw, and 1500
metric ton for additional gang saw is concerned, it is
clear, that this is the upper most overall ceiling for each
individual applicant. Significantly, under Annexure-3, no
such overall ceiling has been prescribed. Obviously, with
the result, that a person, falling under Annexure-3, in a
given case, may even be eligible for import licence for
marble, to an extent, for beyond the one permissible under
Annexure-4.

Thus, it cannot be said, that the policy, being
Annexure-4, is either arbitrary or irrational. May be, that
in given individual case, for the individual entrepreneur,
at a given point of time, and for given reason also,
Annexure-4 may appear to be more beneficial than Annexure3,
but then, for deciding the validity of Annexure-4, that
alone cannot be considered. We have to consider the two
policies Annexure-3 and Annexure-4 on their own, and
consider the various aspects thereof, as considered above.
However with a view to satisfy our ultimate judicial
conscience, we asked the rough figures, from the
respondents about the number of persons having licenses, or
having applied under the two policy circulars, and we have

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under SIL, is around or less than 30, while the persons
applying for, or having granted licenses under Annexure-4
far exceed 100. It would suffice to observe, that the
ultimate upper limit of import under Annexure-3, as well as
Annexure-4, is 1.40 lacks metric ton. It is simply required
to be comprehended, that on the one hand, as per Annexure3,
the total quantity 1.40 lacks metric ton is available
for obtaining import licence, to the persons numbering
around 30, on the other hand, same quantity of goods is
available for obtaining import licence to persons, under
Annexure-4, far outnumber 100. This, by itself, is enough
to dispel all contentions, regarding arbitrariness,
irrationality of Annexure-4.

The writ petition thus lacks merit, and is,
therefore, dismissed summarily.

( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J.

/m.asif/

Mahadev Marmo versus Union of India

Kamra Bottling Versus Commissioner of Central Excise

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

OTHER TAX REF. CIVIL No. 5 of 2005

KAMRA BOTTLING CO
V/S
COMMISSIONER CENTRAL EXCISE JAIPUR

Mr. R.D. Sidhu, for the appellant / petitioner/
Mr. Rishabh Sancheti for Mr. V.K. Mathur, for the respondent

Date of Order : 3.4.2008

HON'BLE SHRI N P GUPTA,J.
HON'BLE SHRI SANGEET LODHA,J.

ORDER

This is a petition under Section 35(H) of the
Central Excise Act by the assessee, on the following
question framed in the application :

“Whether the substantive benefit of exemption can
be denied for procedural irregularities?”

The necessary facts are, that the petitioner is a
manufacturer of aerated water. The manufacturer used to
manufacture aerated water in two brands; one being Campa,
and another being Mr. Dik Soda. Out of the two products,
the product manufactured in the name of Campa is excisable.
However, the product in the name of Mr. Dik is not
excisable, being covered by exemption notification.

The controversy involved in the present case arose
in the circumstances, that petitioner is using inputs in
manufacture of two products, and is availing MODVAT Credit
on such inputs. As the inputs for the two products are

common, the question arose, because the petitioner sought
to avail the MODVAT Credit, with respect to the product, on
which excise duty is not leviable. But the department did
not allow such Credit, on the ground, that there is no
provision for reversal.

Learned Assistant Collector vide order dated

16.03.95 held, that full exemption upto Rs. 30 lacs under
the Notification 1/93, in respect of Dik brand aerated
water is not admissible. It was also held, that
Classification list effective from 01.03.94 and 01.04.94
are accordingly modified, to deny the benefit of full
exemption upto Rs. 30 lacs, to Dik brand Aerated water.
It may be clarified here, that there is no
controversy, as to whether the Dik brand product is liable
to excise duty or not, as admittedly it is exempted. The
only controversy is, as to whether in the circumstances of
the present case, the petitioner is entitled to avail the
MODVAT Credit, with respect to inputs used for manufacture
of products, on which no excise duty is leviable?

The petitioner filed appeal which was dismissed
vide order dated 06th June, 2000, and then a further appeal
was filed before the learned Tribunal, which too was
dismissed vide order dated 06th February, 2003.

The petitioner placed strong reliance on the
judgment of Hon'ble Supreme Court, in the matter of
Chandrapur Magnet Wires (P) Ltd. Vs Collector of C. Excise,
Nagpur, reported in 1996(81) E.L.T.3 (S.C.) Page 3. This
reliance was placed before the learned Commissioner, so
also the learned Tribunal, and also before us.

Learned Tribunal found, that in Chandrapur Magnet
Wire's Case, the Hon'ble Supreme Court considered the case
of an SSI unit, which availed the benefit of SSI exemption,

in respect of final product after reversing the input-
credit, which they had earlier taken. In the instant case,
the reversal of input-credit was, admittedly, made after
clearance of the final product, under the exemption
notification, and therefore, it was found, that ratio in
Chandrapur Magnet case is not applicable to the instant
case.

With the assistance of learned counsels for the
parties, we have gone through the impugned judgment, and
have closely gone through the judgment of Hon'ble Supreme
Court, in Chandrapur Magnet case.

In Chandrapur Magnet’s case, of course the
controversy involved was, as to whether there is any
provision for reversal of MODVAT Credit, with respect to
the products, which are not liable to excise duty, or in
other words are exempted goods ? However, in that case, as
a fact, it was noticed, that the appellants therein had
reversed the MODVAT Credit availed by them, and it was
found to have been reversed prior to clearance of the
goods. The Hon'ble Supreme Court quoted para 3 of the
notification dated 28.02.93, which provides, that where a
manufacturer produces, alongwith dutiable final products,
final products, which would be exempt from duty by a
notification, and in respect of which it is not reasonably
possible to segregate the inputs, the manufacturer may be
allowed to take credit of duty paid on all inputs, used in
the manufacture of the final products, provided that credit
of duty paid on the inputs used in such exempted products
is debited in the credit account before the removal of such
exempted final products.

(Emphesys Supplied)

In our view, this notification and the judgment of
Hon’ble the Supreme Court, firstly, nullify and negative

the stand taken by the department, that there is no
provision for reversal of the MODVAT Credit taken, and
since in that case, it was found as a fact that the credit
was reversed before clearance of the goods, the appeal of
the assessee was allowed. In the present case also, so far
the legal proposition, about the appellant's entitlement to
exemption from payment of duty on exempted goods is
concerned, on that there is no dispute, inasmuch as the
appellant cannot be made liable to pay the excise duty on
exempted goods, simply because he has availed MODVAT
Credit. But the question here precisely is, as to whether
the appellant is entitled to retain the MODVAT Credit
already availed by him on such inputs consumed in
production of such exempted goods ?

In our view, the proviso contained in para 3 of
the said notification, as referred to above, is a complete
answer, which in no ambiguous terms provides, that the
credit of duty paid on the inputs, used in such exempted
products is debited, in the credit account, specially by
using the words, “before the removal of exempted final
products.”

An attempt was made by the learned counsel for the
petitioner to contend, that the petitioner had been
consistently following the practice of submitting monthly
returns in register RG 23, and therein, he was showing
reversal of credit, which was always being considered by
the department, and therefore, he is entitled to avail the
credit, and on the basis of that register, it was sought to
be contended, that this amounts to the petitioner reversing
the credit, before removal of goods.

In our view, the contention cannot be accepted,
for the simple reason, that the question as to whether
reversal has been effected before removal of the goods or
after removal of the goods, is purely a question of fact,

and all the authorities below have found it as a fact, that
un-disputedly the appellant reversed the credit after
removal of the goods.

On our request, learned counsel for the petitioner
read to us, even the memo of appeal, submitted before the
Tribunal below, and even therein also, we did not find any
contention, to the effect, that the appellant had reversed
the credit, before removal of the goods. Rather the whole
burden of the appeal was, that simply because the appellant
had availed the MODVAT Credit, he cannot be denied
exemption from payment of excise duty, on exempted goods.

Thus, since admittedly the appellant had not
reversed the credit before removal of the exempted final
products, we do not find any error in the orders of the
authorities below.

The reference application is therefore, dismissed.

( SANGEET LODHA ),J. ( N P GUPTA ),J.

/bjsh/

Kamra Bottling Versus Commissioner of Central Excise

Friday, April 24, 2009

Jhoomarmal Dhanraj versus Assistant Commercial Taxes Officer

http://courtnic.nic.in/jodh/judfile.asp?ID=CR&nID=42&yID=2007&doj=7/1/2008

1
SALES TAX REVISION PETITION NO.42/2007
M/s. Jhoomarmal Dhanraj
Vs.
ACTO, Ward-III, Circle -C, Jodhpur

Date of Order :: 1st July 2008

HON'BLE MR. JUSTICE DINESH MAHESHWARI

Mr.Dinesh Mehta for the petitioner
Mr.Rishabh Sancheti for
Mr.V.K.Mathur for the respondent

....

BY THE COURT:

By way of this revision petition, the petitioner-dealer
seeks to question the order dated 28.03.2006 as passed by
the Rajasthan Tax Board, Ajmer in Appeal No.700/2005
whereby, while setting aside the order dated 24.02.2005 as
passed by the Dy. Commissioner (Appeals), Bikaner, the order
dated 14.10.2003 as passed by the Assessing Authority under
Section 78 (5) of the Rajasthan Sales Tax Act, 1994 ('the Act
of 1994') has been restored.

Briefly put, the background facts and relevant aspects of
the matter are that on 11.10.2003 a truck bearing registration
No.RJ 19 G 2026 coming from Nokha to Jodhpur was checked
at Nagaur road by the empowered authorities under the Act of
1994 and upon demanding the documents, a bilti of M/s.
Kamal Road Lines, Nokha dated 11.10.2003 and a bill issued

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2

particulars of the goods were stated in the bill as '....
.
.
.S.T.F.(.....)'. The authorities checked the vehicle
and found it carrying damaged Moong and Urad; and
observed that the goods in question were liable to tax as pulse
but were wrongly sold as tax free goods in the name of ‘cattle
feed’. Hence, a notice under Section 78(4) (a) of the Act of
1994 was issued.

On 12.10.2003, the owner of dealer firm produced three
purchase bills dated 24.12.2002, 28.01.2003, and 31.01.2003
wherefrom it was noticed that earlier the dealer was
purchasing the goods in the name 'Moong Dal Damage' but
later on got it stated as 'Moong Dal Cattle Feed'. The
authorities formed the opinion that there had been a false
declaration where the goods in question were stated tax free
goods; and issued notice under Section 78(5) of the Act of
1994. The dealer submitted a reply to the notice that he had
dispatched ‘damaged Moong Dal (Cattle Feed)’ and to his
impression, it were sales tax free; and prayed that the matter
be decided immediately.

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3

The aforesaid order passed by the Assessing Authority
was, however, reversed by the Dy. Commissioner (Appeals)
on 24.02.2005 while accepting the appeal filed by the dealer
with the observations that the commodity in question had been
‘wastage of Moong Dal’, which is not used for human
consumption and is used as cattle feed; and remains exempt
from tax as such. The learned Dy. Commissioner (Appeals)
also observed that the Assessing Authority had not stated any
reason wherefor it were treated to be a case of the goods
meant for human consumption.

The matter was taken in appeal by the Department to
the Tax Board against the order so passed by the Dy.
Commissioner (Appeals). The dealer-petitioner did not appear

4

4

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Seeking to assail the order aforesaid, learned counsel
for the petitioner strenuously contended that the consignment
in question had admittedly been of damaged Moong Dal; and
such damaged Moong Dal being not fit for human
consumption, its natural use remains that of cattle feed and
was rightly dealt with as such by the petitioner-dealer. Learned
counsel submitted that when nothing was concealed by the
dealer and description of goods as damaged Moong Dal was
not found incorrect, the Assessing Authority could not have
levied tax and inflicted penalty merely because of his different
opinion about the description of the goods. Learned counsel
further submitted that in the proceedings under Section 78 of
the Act of 1994, the authority concerned could not have
decided on the question of taxability or rate of tax applicable
on the goods for the scope of enquiry being limited to consider
if the requisite documents were not furnished or if the
documents were false. According to the learned counsel, all
the requisite documents were furnished complete in all

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Learned counsel appearing for the Department
vehemently opposed with the submissions that the likely use
of the commodity cannot be decisive on its liability for taxation
and it is the classification of the goods that matters; that goods
in question being pulse, Moong Dal, were subject to sales tax
as such and merely by suggesting the consignment in
question to be of damaged pulse, the dealer could not have
declared it to be a cattle feed so as to evade tax. In support,
learned counsel referred to the decision of this Court in Gotilal
Bhonrilal (supra). Learned counsel further submitted that it is
very much within the domain of the authority concerned to
check the correctness of the documents and in the given case,
also to examine the question of taxability of goods. Learned

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Learned counsel for the petitioner rejoined with the
submissions that if the contentions as urged on behalf of the
Department were to be accepted, it would lead to an
unacceptable result that all the exercise of regular assessment
would be undertaken in the proceedings under Section 78 of
the Act of 1994, something not contemplated by the statute.
Learned counsel submitted that the said provision being
essentially meant to check evasion of tax during
transportation, any dispute about taxability of goods, by its
very nature, has to be left to be determined during regular
assessment proceedings.

Having considered the rival submissions, this Court is
clearly of opinion that this revision petition remains bereft of
substance. The observations and findings of the Rajasthan
Tax Board as reproduced hereinbefore remain

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8

The main plank of the submissions on behalf of the
dealer is that the goods in question being damaged pulse,
named 'Moong Dal Damaged', were purchased as cattle feed
and were sold as cattle feed, therefore, there had been no
false declaration in the documents in question. The
submission is fundamentally incorrect. The commodity
concerned had been nothing but a pulse, Moong Dal. Its
quality, be it excellent, or good, or average, or bad, or
damaged, in any event, would not alter its character as that of
a pulse. Even if it be assumed that the goods in question had
been ‘damaged Moong Dal’, it does not ipso facto lead to the
result that the so-called damage had changed the character of
the commodity from pulse to cattle feed. It cannot be assumed
that as soon as Moong Dal is damaged, it gets reduced to, or
turns into, a cattle feed and cannot be used for human
consumption at all.

In the case of Gotilal Bhonrilal (supra) this Court
rejected the contention that Urad and Gram be treated as
cattle feed and exempt from tax; and this Court held that the
Board was right, with reference to the fact that Urad and Gram
are primarily used for human consumption and it is only
incidental that these commodities are also used as the

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The entire case of the present petitioner is founded on
incorrect premise where the petitioner makes assumptive
submission that natural use of damaged Moong Dal is that of
cattle feed. This Court is unable to find any basis for such
assumption and any rationale behind such submission. The
natural and primary use of Moong Dal being for human
consumption, its incidental or alternative use, say because of
some qualitative change, has no bearing on its classification
for the purpose of taxability; and in any case, it cannot be
classified as cattle feed merely with reference to the so-called
damage. Thus, the description of the goods in the bill and bilti
accompanying the consignment was incorrect where a taxable
commodity (Moong Dal) was described as a non-taxable one
(Cattle Feed).

Once it was found that the goods were not correctly
described in the documents that stated a taxable commodity
as a non-taxable one, such documents were incorrect on the
relevant facts and material particulars; and could only have
been termed as false. The present one was clearly a case of
submission of false documents and the goods in movement
being not accompanied by true and faithful documents. The

10

Assessing Authority has not committed any error in imposing
penalty in this case.

The decision in M/s Maheshwari Minerals & Chemicals
(supra) has no co-relation with the case at hands. Therein, the
Assessing Authority held the assessee liable to pay tax on his
products, which, as per the order of Assessing Authority were
stone powder and chips and which, according to the assessee,
were poultry feed, ‘murgidana’. The Dy. Commissioner
(Appeals), however, held that the assessee was not given
opportunity of hearing and proceeded to remand the matter
but with certain observations that if it be found that the product
of the assessee is used as poultry feed either independently or
by mixing in other poultry feed, then the assessee be given
benefit under the relevant notification. Aggrieved with such
observations, the department preferred appeal to the Tax
Board; and the Tax Board proceeded to allow the appeal with
the finding that the product in question was not a poultry feed.

In the revision petition as preferred by the assessee, this
Court did not approve of the decision of the Tax Board where,
even without setting aside the finding of the Dy. Commissioner
that the assessee was denied opportunity of hearing before
the Assessing Authority, the order of remand as made by the
Dy. Commissioner (Appeal) was interfered with and the Tax
Board decided the question itself that the product in question

11

was poultry feed or not. This court held that entire issue should
have been sent to the Assessing Authority for deciding after
opportunity of hearing to both the parties; and this Court
observed that opportunity of hearing having not been extended
to the assessee, there was no factual foundation with the
Assessing Authority and the department too had no
opportunity to meet with the grounds whereupon the assessee
claimed his product to be the poultry feed. This Court set aside
the order passed by the Tax Board; and directed that the
Assessing Authority shall decide the issue in accordance with
law after opportunity of hearing to both the parties and
uninfluenced by any of the observations made by the Dy.
Commissioner (Appeals) or by the Tax Board.

In the aforesaid order, this Court has never decided that
use of the product by the particular purchaser would be
decisive of its nature and classification; and it was left to be
determined by the Assessing Authority as to whether the
product was ‘poultry feed’ as claimed by the assessee without
being influenced by the observations made by the appellate
authorities including those of the Dy. Commissioner (Appeals).
It is noticeable that in the said case, the tenor of the
observations of the Dy. Commissioner (Appeals) had been as
if the end use of product by the particular purchaser would be
decisive of the nature of the product in question but those

12

observations were not approved as such by this Court; and
this Court only observed that in the given situation the Dy.
Commissioner (Appeals) ‘rightly held that the product of the
assessee, if is found as poultry feed, then the assessee is
entitled the benefit’. This Court has not said that the finding as
to whether it were a poultry feed would be reached with
reference to the end use of the product. The question of
classification of the product was left to be determined by the
Assessing Authority, and to be determined without being
influenced by what was said by the Dy. Commissioner
(Appeals). The said decision in M/s Maheshwari Minerals‘s
case has no bearing on the question at hands nor supports the
case of the present petitioner.

The arguments relating to the scope of proceedings
under Section 78(5), in the fact situation of the present case,
do not carry even a technical value what to say of substance.
Apart from other aspects that the goods in movement should
be supported by the requisite documents, and such
documents should be produced at the time of checking, the
requirement further remains that the concerned documents
should not be false; and for submission of false document or
declaration, one incurs the liability for penalty. The documents
produced in the present case declared a commodity liable to
taxation (Moong Dal) as something not liable to taxation

13

(Cattle Feed). The declaration and thereby the documents
were, therefore, false and the petitioner having knowingly and
deliberately drawn such documents cannot escape the liability
under Section 78 (5) of the Act of 1994. The submission that
such enquiry as to determine the question of taxability of
goods in question cannot be made in the proceedings under
Section 78 is not correct. Whether a declaration is correct or
not is definitely within the domain of the Authority concerned to
examine while proceeding under Section 78 of the Act of 1994.
A declaration stating a taxable commodity as non-taxable one
by giving a different name to the commodity is the mischief
very much within the ambit of Section 78 of the Act of 1994;
and enquiry into the correctness of the particulars of the goods
as stated in the documents and, as a necessary corollary, into
the aspect of taxability of such goods, is squarely within the
ambit and scope of the proceedings under Section 78 of the
Act of 1994.

It is noticed that the learned Dy. Commissioner
(Appeals) had gone even farther than the case of dealer and
termed the goods in question as ‘wastage of Moong Dal’
without appreciating that there is essential difference in the
two terms, ‘wastage’ and ‘damaged’. A damaged material
does not, by the damage itself, become wastage. The dealer
himself never claimed it to be the ‘wastage of Moong Dal’. The

14

learned Dy. Commissioner (Appeals) further proceeded on
unwarranted and baseless assumption that the goods in
question were not meant for human consumption and were
used as cattle feed. The Tax Board has not committed any
error in reversing the order passed by the Dy. Commissioner
(Appeals) that proceeded on fundamentally incorrect premise.

It may in the passing be observed that apart from the
facts as noticed by the Assessing Authority that in the two bills
dated 24.12.2002 and 28.01.2003 the petitioner purchased the
commodity in question as 'Moong Dal Damage' and the
expression ‘cattle feed’ got inserted only in the later bill dated
31.01.2003, noticeable further it is that the goods in question
were sold by the petitioner dealer only on 11.10.2003. It is
difficult to even co-relate the said purchase bills of the month
of December 2002 and January 2003 with the sale effected as
late as in the month of October 2003, of the goods said to be
‘damaged’ Moong Dal.

Viewed from any angle, there appears no reason to

consider any interference in this case.
The revision petition fails and is, therefore, dismissed.

No costs.

(DINESH MAHESHWARI), J.

MK

Advocate Supreme Court of India

Advocate Rishabh Sancheti Contact Details

Saturday, April 25, 2009

Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

Mahadev Marmo versus Union of India

Mahadev Marmo versus Union of India

Kamra Bottling Versus Commissioner of Central Excise

Kamra Bottling Versus Commissioner of Central Excise

Friday, April 24, 2009

Jhoomarmal Dhanraj versus Assistant Commercial Taxes Officer

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