CASE LAWS
2016-TIOL-160-SC-CT
JK LAKSHMI CEMENT LTD Vs CTO: SUPREME COURT OF INDIA (Dated: September 16, 2016)
Central Sales Tax Act, 1956 - Section 8(5).
Keywords: partial exemption - inter-State sales - stock transfer - beneficial circular - doctrine of 'contemporanea exposition' - principle of estoppel - res judicata.
Whether if a dealer making inter-State sales and taking benefit under a particular notification on the basis of turnover, stands disqualified to claim similar benefit under another notification because dual benefit claimed by the assessee would lead to distortion and anomalies - YES: SC
Whether if careful scrutiny of the language employed in a notification does not yield two views on the same issue, it does still justify two interpretations resorted to by the assessee - NO: SC
Whether the principle of estoppel would apply if a Circular alters the benefits granted under a Notification to the detriment of an assessee - YES: SC
The appellant is a Public Limited Company. It is engaged in the business of manufacturing and selling Grey Portland Cement. In exercise of powers conferred by Section 8(5) of CST Act, 1956, the Government of Rajasthan had issued a Notification No. F4(72)FD/Gr.IV/81-18 dated 06.05.1986 allowing partial exemptions from the sales tax payable in respect of inter-State sales in the manner and subject to the conditions mentioned therein. Partial exemption was granted under the said notification at the rate of 50%/75% on the basis of increase in the percentage of the entire inter-State sales and decrease in percentage of stock transfers but the benefit under the said notification was not available on levy cement. From AY 1989-90 to 1997-98 the assessee had been granted benefit of partial exemption under the notification dated 06.05.1986 except for the AY 1995-96 and 1996-97 as no claims were made by the assessees being not eligible.
The State, in exercise of powers conferred by Section 8(5) of the CST Act, issued Notification No. F4(8)FD/GR.IV/94-70 dated 07.03.1994 superseding the notification dated 09.01.1990 and directing that in respect of inter-State sales of cement, tax payable under sub-sections (1) and (2) of the said Section shall be calculated at the rate of 4% without furnishing declaration in Form ‘C’, inter alia, subject to the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986. This notification remained in force from 01.04.1994 to 31.03.1997.
The CCT vide Circular No. 2/94-95 dated 15.04.1994 clarified that inter-State sales of cement duly supported by ‘C’ and ‘D’ forms shall be eligible for benefit of partial exemption notification dated 06.05.1986 and that such benefit would not apply to inter-State sales which were not supported by declarations in Forms ‘C’/‘D’.
By a further Notification No. 97-122 dated 12.03.1997 issued under Section 8(5) of the CST Act, the State Government rescinded the Notification No. 94-70 dated 07.03.1994 and directed that CST on inter-State sales of cement shall be calculated at the rate of 4% inter alia subject to fulfilment of the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986. This notification remained in force upto 31.03.1998.
A re-assessment notice was issued to assessee for disallowing the said partial exemption on the ground that while calculating the benefits under notification dated 06.05.1986 the appellant-company had not included the figure of sale of levy cement made in the base year, that is, 1984-85. The said re-assessment notice was challenged by the assessee which was dismissed by the Rajasthan HC.
On appeal, Deputy Commissioner (Appeals), who allowed the appeal on 03.01.2004 holding that the assessee would be entitled to avail such partial exemption in respect of inter-State sales made on which concessional rate of 6% was not availed of by it under notification dated 21.01.2000.
The Revenue approached the Rajasthan Tax Board, who had allowed the appeal filed by the revenue. Against which assessee filed an appeal before the High Court where it was held that condition no. 3 of Notification No. 21.01.2000 has to be given its plain and clear meaning and cannot be restricted only to the specific transaction of sale covered by notification dated 21.01.2000 itself and when the condition no. 3 unequivocally states that once the assessee avails of the benefit of concessional rate of tax under notification dated 21.01.2000, he cannot get the partial benefit as envisaged in the Notification dated 06.05.1986 and accordingly repelled the stand of the assessee.
Having heard the matter, the Apex Court held that,
++ a dealer making inter-State sales under the notification dated 21.01.2000 is disqualified and not eligible to claim benefit under the notification dated 06.05.1986. The reason is to deny dual benefit and also the notification dated 06.05.1986 computes the benefit on the basis of turnover. Bifurcation and division of turnover would lead to distortion and cause anomalies. Notification dated 07.03.1994 was applicable from 1st April, 1994 to 31st March, 1997. It was not applicable with effect from 1st April, 1997. In such a situation, the plea of the appellant that dual benefits were availed of under notification dated 07.03.1994 post 1st April, 1997 is unacceptable and has to be rejected. Be it noted, by another notification No. 97-122 dated 12.03.1997, the State Government had rescinded notification dated 07.03.1994 and directed that the Central Sales Tax shall be calculated @ 4%, subject to the condition that the dealer making inter State sales in this notification would not be eligible to claim benefit of partial exemption under the notification dated 06.05.1986. The notification dated 12.03.1997 had remained in force upto 31st March, 1998. The circular dated 15.04.1994 in express words was not applicable to the notification dated 21.01.2000. It is limpid that the circular dated 15.04.1994, when in force, had referred to the notifications dated 07.03.1994 as well as 06.05.1986. Under the notification dated 07.03.1994, the rate of central tax on inter-State sale of cement was unconditionally fixed at 4%, even when there was no declaration in Form C and Form D. The notification dated 06.05.1986 relating to inter-State sale required Form C and Form D, for availing the benefit. The circular did not in clear and categorical terms lay down that dual or multiple benefits under the two notifications could be availed of by the same dealer. It, however, appears that both the assessee and the Revenue had understood the circular dated 15.04.1994 to mean that inter-State transactions would qualify and would be entitled to partial exemption under the notification dated 06.05.1986, when accompanied with Form C and D and for inter-State sale transactions without Form C and D, benefit of notification dated 07.03.1994 would apply;
++ the understanding by the assessee and the Revenue, in the obtaining factual matrix, has its own limitation. It is because the principle of res judicata would have no application in spite of the understanding by the assessee and the Revenue, for the circular dated 15.04.1994, is not to the specific effect as suggested and, further notification dated 07.03.1994 was valid between 1st April, 1994 up to 31st March, 1997 (upto 31st March, 1997 vide notification dated 12.03.1997) and not thereafter. The Commercial Tax Department, by a circular, could have extended the benefit under a notification and, therefore, principle of estoppel would apply, though there are authorities which opine that a circular could not have altered and restricted the notification to the determent of the assessee. Circulars issued under tax enactments can tone down the rigour of law, for an authority which wields power for its own advantage is given right to forego advantage when required and considered necessary. This power to issue circulars is for just, proper and efficient management of the work and in public interest. It is a beneficial power for proper administration of fiscal law, so that undue hardship may not be caused. Circulars are binding on the authorities administering the enactment but cannot alter the provision of the enactment, etc. to the detriment of the assessee. Needless to emphasise that a circular should not be adverse and cause prejudice to the assessee. (See: UCO Bank, Calcutta v. Commissioner of Income Tax, West Bengal 2002-TIOL-697-SC-IT-LB;
++ the controversy herein centres round the period from 1st April, 2001 to 31st March, 2002. The period in question is mostly post the circular dated 16.04.2001. As we find, assessee has pleaded to take benefit of the circular dated 15.04.1994, which stands withdrawn and was only applicable to the notification dated 07.03.1994. It was not specifically applicable to the notification dated 21.01.2000. The fact that the third paragraph of the notification dated 21.01.2000 is identically worded to the third paragraph of the notification dated 07.03.1994 but that would not by itself justify the applicability of circular dated 15.04.1994. We may note another contention that has been advanced before us. It is based upon the doctrine of contemporanea exposition. In our considered opinion, the said doctrine would not be applicable and cannot be pressed into service. Usage or practice developed under a statute is indicative of the meaning prescribed to its words by contemporary opinion. In case of an ancient statute, doctrine of contemporanea exposition is applied as an admissible aid to its construction. The doctrine is based upon the precept that the words used in a statutory provision must be understood in the same way in which they are usually understood in ordinary common parlance by the people in the area and business. (See : G.P. Singh's Principles of Statutory Interpretation, 13th Edition-2012 at page 344). It has been held in Rohitash Kumar and others v. Om Prakash Sharma and others (2013) 11 SCC 451that the said doctrine has to be applied with caution and the Rule must give way when the language of the statute is plain and unambiguous. On a careful scrutiny of the language employed in paragraph 3 of the notification dated 21.01.2000, it is difficult to hold that the said notification is ambiguous or susceptible to two views of interpretations. The language being plain and clear, it does not admit of two different interpretations. In this regard, we may state that the circular dated 15.04.1994 was ambiguous and, therefore, as long as it was in operation and applicable possibly doctrine of contemporanea exposition could be taken aid of for its applicability. It is absolutely clear that the benefit and advantage was given under the circular and not under the notification dated 07.03.1994, which was lucid and couched in different terms. The circular having been withdrawn, the contention of contemporanea exposition does not commend acceptation and has to be repelled and we do so. We hold that it would certainly not apply to the notification dated 21.01.2000. In view of the aforesaid analysis, we do not find any merit in the instant appeal and the same is, accordingly, dismissed. There shall be no order as to costs. In view of the judgment passed in Civil Appeal No. 102 of 2010, this appeal also stands dismissed. There shall be no order as to costs.
Assessee's appeal dismissed
2016-TIOL-2142-HC-AHM-IT
PR CIT Vs THANKYS EXPORTS PVT LTD: GUJARAT HIGH COURT (Dated: September 14, 2016)
Income Tax - Sections 40(A)(2)(b) & 143(3)
Keywords - Bad debts - Closing stock - Revision - Quantum additions
Whether when the revenue is not merely giving effect to the order of the Commissioner but is re-framing the assessment in accordance with law, that order can always be challenged - YES: HC
The assessee is a company. In the relevant year the assessee filed its return. The Assessing Officer framed the assessment u/s 143(3) which was taken in revision by the Commissioner in exercise of powers u/s 263. The Commissioner by an order came to the conclusion that the Assessing Officer had accepted several claims of the assessee without proper inquiries. The Commissioner concluded that the assessment was made in a carefree manner without proper application of mind therefore, set aside the assessment and directed the Assessing Officer to verify the said issues and make a de novo assessment. Pursuant to such direction, the Assessing Officer passed a fresh order of assessment in which, he made various additions. This order of assessment was challenged by the assessee before the Commissioner (A). The Commissioner allowed the appeal and deleted all additions. Against such order of the Appellate Commissioner, the Revenue had approached the Tribunal. The Tribunal rejected the appeal.
The HC held that,
++ when the Assessing Officer is not merely giving effect to the order of the Commissioner but is re-framing the assessment in accordance with law, his order is always open to challenge by the assessee on merits. The assessee need not question the authority of the Assessing Officer to pass such order. He accepted the revisional order and its directions participated in the fresh assessment proceedings and carried a feeling that it had satisfied the Assessing Officer about the validity of the claims. If the order of assessment belied such feeling of the assessee, it was always open for the assessee to carry the issues in appeal. Nothing prevented the assessee from questioning the directions of the Assessing Officer. The Revenue's stand on this issue is, therefore, not correct;
++ the remaining three issues pertained to the quantum additions made by the Assessing Officer but deleted by the Commissioner which order of the Commissioner was confirmed by the Tribunal;
++ having perused the materials on record and having heard learned counsel for the Revenue, we find that all three issues are in the realm of appreciation of evidence. When the Commissioner and the Tribunal concurrently on the basis of evidence on record found that the additions were not justified and when we further find that such findings are not perverse, no question of law arises.
Revenue's appeal dismissed
2016-TIOL-2141-HC-AHM-CT
CCT Vs SHAKTI CONTAINERS: GUJARAT HIGH COURT (Dated: September 09, 2016)
Central Sales Tax Act (CST Act) - Section 5 - Gujarat Value Added Tax - Section 45 & 46 - The Central Sales Tax Act (Registration and Turnover) Rules, 1957 - Rule 12 (10)
Keywords - Export - penultimate sale
Whether a declaration as per CST Act (Registration and Turnover) Rules, 1957 is mandatorily required to be provided in order to establish that sale of goods to exporters is penultimate sale in connection with export and is therefore exempt from tax - Yes: HC
Whether in the absence of a declaration as aforesaid, a mere declaration or assertion in respect of a sale being penultimate sale would be sufficient for claiming exemption from tax - No: HC
The assessee is a manufacturer of drums. It supplies drums to various companies engaged in manufacturing and export of chemicals. The drums are used as packing material in the export consignment. The assessee also sells the drums in the local market. To the extent of such sale, the assessee is liable and regularly pays local taxes. However, the sales of the drums to the exporters being penultimate sale in connection with the export, is exempt from payment of tax. The AO for the relevant AYs having granted such benefit as claimed by the assessee, the revisional authority took such orders into revision. AO raised an additional tax demand and interest on such unpaid tax. The AO also levied penalty @40% u/s 45(6). The assessee challenged the additional tax demand for the said two years by filing two separate revision petitions. The assessee also filed two further revision petitions questioning the levy of penalty. The Tribunal allowed the revision petitions.
Having heard the parties, the High Court held that,
++ it can thus be seen that to satisfy the requirements of Section 5(4), a necessary declaration as prescribed under the Rules would have to be made. This would include declaration containing specified details. These details provided in items no.3 to 6 to the Schedule contain various information such as name of airport, seaport or land customs station through which the goods have been exported, name of airlines, ship etc. or other means of transport through which the export has taken place and such other relevant details. All these requirements would relate to actual export of goods sold by the assessee to the exporter. Only through such declarations would it be possible for the AO to verify the claim of a dealer that the goods supplied were for the purpose of export and were actually exported by the purchaser-exporter. Mere declaration or assertion by the assessee would not be sufficient. Only upon satisfying such requirements contained in Section 5(4), the assessee would be covered by the deeming fiction provided u/s 5(3) and can claim the benefit of the export sale. The Tribunal, in our opinion, therefore, committed an error in treating such requirements as procedural or technical. When the revisional authority noticed discrepancies in the different documents supplied by the assessee, he was within his rights to deny the benefit of tax exemption to such extent. Under the circumstances, the revisional orders insofar as raising tax demand with interest is concerned, we hold that the Tribunal should not have interfered;
++ at this stage, assessee submitted that in any case even if the benefit of Section 5(3) of the CST Act is to be denied, the sales should be taxed as local sales and not as inter-state sales since the respondent had sold the goods to the Valsad exporter. We find merit in this contention. When there was no dispute about the sale of drums by the petitioner to the Valsad purchaser, in absence of further proof of the goods having been exported, the authority can at best tax them on the basis of local sales. The revisional authority has instead taxed such sales treating them as inter state sales. The AO shall therefore revise the demand of sales tax on such basis;
++ with respect to penalty, we do not think it was a case where Commissioner should have even in exercise of discretionary powers, levied penalty. Section 45(5) of the Gujarat Sales Tax Act provides that in case of a dealer, the amount of tax assessed or reassessed exceeds the amount of tax already paid by more than 25%, the dealer would be deemed to have failed to pay the tax to the extent of difference between the amounts so assessed or reassessed and the amount paid. U/s 46(6) , in such a case, the assessee would be liable to pay penalty not exceeding 1 ½ times difference referred in sub-section 5. Thus, the penalty is discretionary and can be levied upto 1 ½ times the difference between the amount paid and tax assessed. When we do not find any attempt on part of the assessee to avoid payment of legitimate taxes, in facts of the case, we would not reverse the decision of the Tribunal to such extent. In that view of the matter, the question whether the penalty can be levied for the first time in a revisional proceedings is kept open.
Revenue's appeal partly allowed
2016-TIOL-2140-HC-P&H-CUS + Story
SUPREME CASTINGS LTD Vs JOINT DIRECTOR GENERAL OF FOREIGN TRADE: PUNJAB AND HARYANA HIGH COURT (Dated: August 17, 2016)
Cus - It is incongruous to cancel or suspend something that has ceased to exist - Obviously there is nothing subsisting to suspend or cancel, about a DEPB which has lost its validity, for it is no longer a DEPB but a piece of paper of no worth order of cancellation of the DEPB being illegal and without jurisdiction, the penalty imposed being a consequence thereof also cannot sustain - Petition allowed: High Court [para 19, 21, 24, 25, 27, 33, 34, 36]
Petition allowed
Observations of Tribunal -
+ As is clear from a reading of Para 7.14 (of the Export and Import Policy, 1997-2002) the objective of Duty Entitlement Pass Book Scheme is to neutralise the incidence of customs duty on the import content of the export product. The neutralisation is to be provided by way of grant of duty credit against the export product.
+ As per Para 7.15 of the Export Import Policy, the DEPB shall be valid for a period of 12 months from the date of issue. The DEPB in this case was issued on 25.8.2000. Thus, it remained valid only till 24.8.2001. The show cause notice for imposition of penalty u/s 11(2) of the 1992 Act was issued on 20.10.2003. Thereafter another show cause notice - cum-corrigendum was issued on 5.7.2004 proposing to cancel the DEPB ab initio. It was thereafter that the order dated 30.11.2004 was passed cancelling the DEPB imposing penalty of Rs. 2,00,000/- on the petitioner. All these actions are after the expiry of the period of validity of the DEPB.
+ Obviously, for something (in this case the DEPB) to be cancelled or suspended, it should be existing or subsisting. It is incongruous to cancel or suspend something that has ceased to exist. Obviously there is nothing subsisting to suspend or cancel, about a DEPB which has lost its validity, for it is no longer a DEPB but a piece of paper of no worth.
+ Once the period of validity of the DEPB has expired no action to cancel or withdraw it can be taken because then there is no ?DEPB' in existence to be cancelled and on which the cancellation order can operate. Cancellation of DEPB in such a situation is a meaningless order and can have no consequence.
+ Moreover, in Section 9(4) there is no power to cancel or suspend the licence retrospectively. ? It is well settled that no action taken under a statute can have retrospective effect in the absence of a specific provision in the statute conferring such power.
+ There being no provision in Section 9(4) to cancel the licence with retrospective effect, it has to be held that the DEPB could not have been cancelled ab initio from the date of issue.
+ The order of cancellation of the DEPB being illegal and without jurisdiction the penalty imposed being a consequence thereof also cannot sustain.
