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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SALES TAX REFERENCE NO. 37 OF 2010
The Commissioner of Sales Tax
Maharashtra State, Mumbai
8th Floor, Vikrikar Bhavan,
Sardar Balwant Singh Dhodi Marg,
Mazgaon, Mumbai-400 010. ... Applicant
Vs.
M/s. Shoe Bazar Queen,
19/28, Commercial Chamber,
Yusuf Meharalia Road Junction,
Mumbai-400 003. ... Respondent
WITH
SALES TAX REFERENCE NO. 17 OF 2009
The Commissioner of Sales Tax,
Maharashtra State,
8th Floor, Vikrikar Bhavan,
Mazgaon, Mumbai-400 010. ... Applicant
Vs.
M/s. Anarkali Footwear,
504, Sai Commercial Centre,
Linking Road, Khar,
Mumbai-400 052. ... Respondent
WITH
SALES TAX REFERENCE NO. 18 OF 2009
The Commissioner of Sales Tax,
Maharashtra State,
8th Floor, Vikrikar Bhavan,
Mazgaon, Mumbai-400 010. ... Applicant
Vs.
M/s. Anarkali Footwear,
504, Sai Commercial Centre,
Linking Road, Khar,
Mumbai-400 052. ... Respondent
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WITH
SALES TAX REFERENCE NO. 106 OF 2009
The Commissioner of Sales Tax,
Maharashtra State, Mumbai,
8th Floor, Vikrikar Bhavan,
Sardar Balwantsingh Dhodi Marg,
Mazgaon, Mumbai-400 010. ... Applicant
Vs.
M/s. Trends Shoes,
C/o. Pradhan Embroidery Stores,
125-127, Bazargate street,
Fort, Mumbai-400 001. ... Respondent
WITH
SALES TAX REFERENCE NO. 108 OF 2009
The Commissioner of Sales Tax,
Maharashtra State, Mumbai,
8th Floor, Vikrikar Bhavan,
Sardar Balwantsingh Dhodi Marg,
Mazgaon, Mumbai-400 010. ... Applicant
Vs.
M/s. Trends Shoes,
C/o. Pradhan Embroidery Stores,
125-127, Bazargate street,
Fort, Mumbai-400 001. ... Respondent
......
Mr. V. A. Sonpal, Special Counsel a/w Ms. Jyoti Chavan, A.G.P. for
the Applicant-State in all STRs.
Ms. N. R. Badheka a/w Mr. Parth Badheka and Ms. Lata Nagal for
the Respondent in STR/37/2010.
......
CORAM : S. C. DHARMADHIKARI &
PRAKASH D. NAIK, JJ.
DATE : APRIL 28, 2017.
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ORAL JUDGMENT (PER S. C. DHARMADHIKARI, J.) :
Sales Tax Reference No. 37 OF 2010
1. The Commissioner of Sales Tax filed applications styled as Reference Application Nos. 4 of 1998 and 99 to 105 of 2001 before the First Bench of the Maharashtra Sales Tax Tribunal at Mumbai.
2. These Reference Applications arose out of the judgment and order dated 10th October, 1997, in Second Appeal No. 188 of 1997 and the judgment and order dated 5th May, 2001 in Second Appeal Nos. 950 to 956 of 1999.
3. In the present Sales Tax Reference, we are concerned with the dealer M/s. Shoe Bazaar Queen, who shall be referred to, hereafter, as the original appellant.
4. After hearing both sides at great length, on 17th March, 2006, the Tribunal forwarded the following two questions for the opinion and answer by this Court:
(i) Whether on the facts and circumstances of the case, and on the true and correct interpretation of the provisions of law, the Tribunal was justified in law in holding that the ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 4/61 901-STR-37-2010.doc Sales of leather goods are admissible for deduction as resales under Section 8(2) of the Bombay Sales Tax Act, 1959, even though corresponding purchases of these goods were covered by Entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors?
(ii) Whether on the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in law in holding that no principle of estoppel is applicable to the conditions introduced in Entry A-39 w.e.f. 11.6.1988 for the purpose of allowance of claim of exemption from tax by the claimant dealer?
5. We have to notice certain facts. At the outset, we clarify that as far as the Tribunal's judgment and order dated 5th May, 2001, from which reference application Nos. 99 to 105 of 2001 arose, the Tribunal has dismissed them. It is clarified that the orders therein do not suffer from any bias. Hence, no question of law arises from such an order.
6. We are, therefore, confining our judgment to the above two questions.
7. The statement of facts forwarded by the Tribunal reveals that the original appellant, a proprietary concern and duly registered under the provisions of the Bombay Sales Tax Act, 1959 ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 5/61 901-STR-37-2010.doc (for short "the Bombay Act"), is not a manufacturer. It is a reseller in foot-wears. It does not hold any trade mark at all. The original appellant made large purchases for the period under dispute which, going by the facts from the appeal itself, is 1992-93, from several Cobblers' Societies. These Cobblers' Societies are duly registered dealers under the Bombay Act. They also hold a certificate of exemption under entry 39(a) of Schedule A of the Bombay Act. The original appellant did not hold any certificate of exemption.
8. The original appellant was filing returns. No claim under Section 5 of the Bombay Act was made in such returns. According to the original appellant, it deals in Schedule C-II goods. The taxes are leviable on the turnover thereof, but from such turnover, it can claim reduction insofar as resale of the goods, and which claim is referable to Section 8 of the Bombay Act. As per the chart, and which was provided to the Tribunal in the order on the Reference Application, it is apparent that the assessment order dated 21st March, 1996 was made and the total dues as per the said assessment order were Rs.21,47,115/-, whereas, dues as per the ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 6/61 901-STR-37-2010.doc first appellate order were determined at Rs.16,68,082/-. Thus, the claim on account of resale was disallowed. Being aggrieved by the order passed by the assessment officer, so also the first appellate authority, the subject Second Appeal was filed before the Maharashtra Sales Tax Tribunal. The Second Appeal No. 188 of 1997 was decided on 10th October, 1997. The Tribunal framed the points for its consideration, to which, we will make a reference later on. For completion of the factual narration, suffice it to state that the Tribunal allowed this appeal. The order of the first appellate authority was set aside. The resale to the tune of Rs.60,38,491/- against the purchases of Rs.53,54,630/- of the very goods has been allowed. Even consequential relief in interest under Section 36(3)(b) has been given. The penalty imposed under Section 36(2)(c) of the Bombay Act was deleted.
9. An attempt was made to rectify this judgment by making an application under Section 62 of the Bombay Act. That attempt was made by the Revenue in the light of the statutory amendment brought in subsequently, but with retrospective effect. The Rectification Application No. 20 of 1999 moved in that behalf was ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 7/61 901-STR-37-2010.doc disposed of by the Tribunal holding that in the light of the retrospective amendment to Section 8, a case for rectification is made out. The Tribunal, accordingly, allowed the Rectification Application and restored the Second Appeal to its file by an order dated 11th October, 2002. The original appellant, being not satisfied with such restoration, filed a Writ Petition bearing No. 41 of 2003 in this Court. By consent, an order was passed on 9 th June, 2003 in that Writ Petition. The result of the consent order was that the order dated 11th October, 2002 in Rectification Application No. 20 of 1999 was set aside by consent of the parties.
10. However, the Revenue sought reference to this Court of the questions of law arising from the Tribunal's main order dated 10th October, 1997 in Second Appeal No. 188 of 1997. It is that application which has been allowed on 17th March, 2006. It is because of that order that the above two questions of law have been forwarded for our opinion and answer.
11. Mr. Sonpal, learned Special Counsel appearing on behalf of the Revenue, at whose instance these questions have been ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 8/61 901-STR-37-2010.doc referred, would submit that the Tribunal's earlier order on the appeal raises the above questions squarely. He would submit that there is a basic fault in the understanding of the Tribunal about the ambit and scope of the entries and the Schedule itself. The Bombay Act contains the provisions to which he makes an elaborate reference to submit that interpretation of those provisions by the Tribunal is not correct and proper. After referring to the brief facts in a written note, Mr. Sonpal would submit that on 11th August, 1988, Schedule entry A-39 was amended and the exemption was restricted to only those dealers who purchased goods from certified producer. The conditions were that i) the seller must be a dealer; ii) the seller must be certified by the Commissioner of Sales Tax; iii) The seller should not hold trade mark or patent in respect of the goods sold or does not hold patent in respect of the method or process of manufacturing the goods sold. Thus, it was clear that the dealers, who purchased goods from producers exempted in A-39(1), were exempted without conditions from the payment of tax before 11 August, 1988. After 11th August, 1988, there was a conditional exemption.
12. Mr. Sonpal would submit that the original appellant is ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 9/61 901-STR-37-2010.doc admittedly not certified by the Commissioner of Sales Tax as above. It is not entitled to exemption. If it is not entitled to exemption in terms of A-39(2), then, it cannot, by any alternative process, avoid the obligation to pay tax. The original appellant is avoiding it on the ground that what the Revenue is attempting to do is to tax a resale.
13. Then, Mr. Sonpal invites our attention to Section 8 of the Bombay Act. He would submit that the Scheme of Section 8, Rule 42H and Rule 46B, both of the Bombay Sales Tax Rules, would demonstrate that if resales are to be allowed, it is necessary that the goods sold and claimed as resale must be in the same Schedule at the time of purchase and at the time of sales. In the present case, the goods at the time of purchases were covered by entry A-39 (pages 37 and 38 of the paper book) as exempt from tax and at the time of sales, the goods were covered by Schedule entry C-II 42 (pages 31 and 32 of the paper book). Thus, the requirement of law that the goods must fall in the same entry at the time of sales and purchases is not satisfied. The claim of re- sales cannot be allowed.
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14. Then, relying upon this Section further, Mr. Sonpal would submit that deduction of sales of goods purchased from registered dealer, and in terms of Section 8, can be claimed, provided a certificate under Section 12A is furnished or incorporated in seller's invoice. No doubt, the certificate as provided under Section 12A is incorporated in the seller's invoice. It is inherent in the Scheme of the Act that the tax is levied at single point and all subsequent sales are exempt since tax is to be collected in the first instance of sales. In other words, if on the first sale, there was no tax or it has not been suffered, then, subsequent sales cannot be claimed as resale merely because a certificate in terms of Section 12A of the Bombay Act is on record. If it is found that no tax is paid by the selling dealer despite the certificate being issued, the resale claim can be disallowed. It is to clarify this position that an explanation was inserted by amended Section 8 and relying upon the same, Mr. Sonpal would submit that this retrospective amendment would have a great bearing on the issue raised before us. Mr. Sonpal submits that the record will indicate that at the time of purchase by the original appellant, no tax was leviable. The goods were exempt under Schedule entry A-39. The ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 11/61 901-STR-37-2010.doc retrospective amendment has not been struck down and is in force. The retrospective amendment was made by the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 1999 and the decision of the Tribunal in the Second Appeal is dated 10th December, 1997. While referring to the question of law, the Tribunal has considered the amendment. The matter covered by the explanation was always present in the statute. It is now only amplified. Thus, looked at from any angle, the original appellant could not have succeeded in the Second Appeal.
15. Mr. Sonpal then sought to clarify the position by relying upon the wording of Schedule entry A-39. He submits that it is dealer specific and is not qua any goods. Any one who produces leather goods in cottage leather industry, which is not recommended by Khadi and Village Industries Commission (for short, "KVIC") or State KVIC and also not certified by the Commissioner, is not entitled to exemption. When a dealer is not entitled to exemption, then, the benefit of resale, and as set out in the Scheme of the Act, is not available to him. It is specifically provided in the Schedule entry itself that exemption is to the ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 12/61 901-STR-37-2010.doc purchaser on the condition of compliance with the requirements. Since there is a single point of tax and that can be gathered from Section 17A of the Bombay Act, then, all the more, the resale claim cannot be allowed. Mr. Sonpal is relying upon the wording of Section 17A to submit that where any entry (or part thereof) is transposed by its deletion from one of the Schedules and for its insertion or addition to another Schedule, then, if no tax on any sale or purchase of the goods specified in that entry (or part thereof) is leviable, the deductions provided in clause (ii) or clause (iii) of Section 8 and in clause (b) or clause (c) of Sub- section (1) of Section 9 shall not apply to the re-sale of those goods. It is in these circumstances that Mr. Sonpal would submit that the reasoning of the Sales Tax Tribunal is not in tune with the requirements stipulated by the Bombay Act, particularly for resale. Mr. Sonpal heavily criticizes these findings of the Tribunal in the appellate order, and particularly, paragraphs 45 to 50 thereof. Mr. Sonpal would submit that the Tribunal's reasoning is so faulty that it did not realize that there was a distinct Scheme prevailing prior to amendment and post amendment.
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16. Mr. Sonpal then criticizes the approach of the Tribunal in not rendering any definite reasons but only setting out illustrations after illustrations. Mr. Sonpal would submit that multiplying the illustrations would not assist in resolving the controversy which had to be done by an Appellate Court by referring to the facts and circumstances of the case before it and the entire record. By giving hypothetical examples, such complex issues cannot be resolved. Mr. Sonpal also submits that the Tribunal was not concerned in the present case with any supposed intention of the legislature. There was a clear stipulation in the statute. The language was plain, unambiguous and clear. There was no scope for any interpretation. In these circumstances, the case law referred by the Tribunal in its appellate judgment in the appeal is also not relevant for the purposes of resolving the issue.
17. Mr. Sonpal finally addressed us on the issue of estoppel [question (ii)]. In that regard, he would submit that the circulars were issued prior to the amendment of Schedule entry A-39 and the same would be of no assistance. After amendment on 11 th August, 1988, those dealers not possessing certificate from the ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 14/61 901-STR-37-2010.doc Commissioner are not entitled to any exemption on their sale of goods purchased from certified producers. Strangely, the Tribunal has used old circulars which are redundant after the amendment. The Tribunal also lost sight that it was not dealing with a claim for exemption but on account of resale. Hence, all the observations and findings are de hors the factual background and controversy. In such circumstances, he would submit that the questions of law, and forwarded by the Tribunal, be answered in favour of the Revenue and against the dealer.
18. Mr. Sonpal has relied upon the order passed by this Court in the case of M/s. Friends Stores Nagpur vs The State of Maharashtra, Sales Tax Reference No. 24 of 1970 decided on 28 th January, 1972.
19. On the other hand, Ms. Badheka, learned counsel appearing on behalf of the original appellant submits that, firstly, the Reference by the Tribunal is of a question which does not arise from the order in the Second Appeal. The Tribunal has forwarded a question for opinion of this Court which is not based on the ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 15/61 901-STR-37-2010.doc findings and conclusions in the second appellate order. The Tribunal has completely misconstrued and misinterpreted the issue. On a Reference Application, a question even of law, which never arose from the order passed in appeal, could not have been referred for this Court's opinion. There was no occasion for the Tribunal to have forwarded such question and as is reproduced by us above. She would submit that this Court, therefore, should not answer any hypothetical or academic question or issue. The matter must be approached squarely in the light of the factual position and emerging from the record. She would submit that even the factual position, as assumed by the Tribunal while making the reference, is contrary to the record. In that behalf, she hands over a complete compilation of the documents. She would submit that this Court must restrict itself to the controversy arising from the order of the second appellate court, namely, the Tribunal. In the Second Appeal, the Tribunal was considering a question somewhat distant from the one referred to this Court's opinion. Therefore, going by the Schedule entry, the claim for resales and particularly, bearing in mind Section 8 clause (ii) of the Bombay Act, the question must be answered. If looking at these provisions, ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 16/61 901-STR-37-2010.doc the question as proposed and forwarded does not arise at all, and particularly, in the factual background, then, this Court is not obliged to answer the same. This Court, then, can return the Reference unanswered by keeping the question open for decision in an appropriate case. Ms. Badheka has elaborated her oral arguments by tendering the written submissions. She devoted most part of it to the material documents and which, she claims, were not forwarded together with the statement of facts. It was the duty of the Tribunal, according to her, to not only forward the statement of facts, but all allied papers. No selective forwarding of papers and documents is permissible. The entire record of the Second Appeal before the Tribunal should have been forwarded. That contains several documents and very vital for the issue. Ms. Badheka would submit that the basic claim of the original appellant rests on the certificate issued by the Commissioner to the vendor cobblers' societies as being the KVIC unit and entitled to claim its sales as tax free in terms of Schedule entry A-39(a) of the Bombay Act. It was therefore, specifically requested that the Tribunal should forward, alongwith Reference, certificates issued to the so-called cobblers' societies for the relevant years. She ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 17/61 901-STR-37-2010.doc would submit that such certificates issued by the commissioner were not produced despite demand at all earlier stages. The Tribunal, in disposing of the Second Appeal, has taken on record and relied on the xerox copies of these certificates issued to the vendors. The State and the Commissioner, despite a specific demand, have not forwarded these relevant certificates as enclosures to the Reference Application. The questions framed are based on these certificates issued to the vendor cobblers' societies. The very contents of these certificates, if produced, would falsify all the claims made by this application. That is why the original appellant has forwarded the certificates issued to all the suppliers for the period 1992-1993. These certificates are issued to the registered dealer by the Sales Tax Officer and were renewed every year. Then, the present application is filed in undue haste without attaching the papers normally required to be attached. The Reference Application also is not attached to the present record. Even the grounds of appeal before the first appellate authority and the second appellate authority are not attached. The assessment order, as attached, is incomplete. Ms. Badheka would, therefore, submit that this Court is really handicapped and should not ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 18/61 901-STR-37-2010.doc answer the questions in the absence of these material documents. The Tribunal has also not forwarded the relevant trade circulars and which have an important bearing on the issue. She would therefore submit that once the Tribunal has not followed the practice of drawing up a statement of admitted facts and forwarding of the relevant records, then, this Court should return the Reference. Then, she would submit that the present Reference is peculiar. The Reference Application before the Tribunal is disposed of not only by passing an order on the same, but on seven other Applications. The seven other Applications were for different assessment years. The subject matter and the issue is the same. The findings on the issue of bias are identical. The Tribunal has rejected the Applications to forward the questions of law and at the instance of the Revenue in these seven cases. The rejection is on the ground that the Tribunal has quashed the orders of assessment on a finding of bias. The Tribunal held that the orders are vitiated by bias. This being a finding of fact, the State has not challenged the order of the Tribunal rejecting these Reference Applications. However, even when the assessment order in the present matter is vitiated by a bias, then, the same decision and ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 19/61 901-STR-37-2010.doc conclusion, as reached in the seven other cases, should have been reached by the Tribunal in the present matter.
20. Without prejudice to the above contentions, Ms. Badheka would submit that the respondent's claim for deduction is based on Section 8(ii) of the Bombay Act. The returns are filed claiming exemption from sales tax by way of deduction from taxable turnover under Section 8(ii). Ms. Badheka would submit that Section 8(ii) deals with resales by the dealer on or after the appointed day from the registered dealer, otherwise than on a declaration furnished under Section 11 or 12, if the requirements of Section 12A are satisfied. She would submit that there are clear findings of fact. These findings are based on undisputed facts. The undisputed facts are, the vendors held registration certificate and issued their sale bills incorporating the requisite details in terms of Section 12A. She would submit that despite such clear stipulation, the State was desirous of taxing the transaction. The assessment order confirms Rs.61,65,760/- as Registered Dealer Purchase. The Tribunal has correctly allowed the deduction of resale as claimed. The Revenue, however, has based its question by relying on ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 20/61 901-STR-37-2010.doc certain certificates claimed to have been issued by the Commissioner to the vendors of the original appellant. The Revenue feels that the sales of vendors are tax free. The assessment and the first appellate orders state that deduction under Section 8(ii) cannot be allowed on the ground of certain amendment to Schedule entry A-39(a) in 1988. It is alleged that the vendors claim exemption under entry 39(a) of Schedule A of the Act, but since the original appellant, as purchaser, did not hold some certificates in terms of that entry, and issued by the Commissioner, it was not entitled to the claim as laid under Section 8(ii) or exemption from tax in terms of Schedule entry A- 39(a). Hence, the claim of second sale being tax free cannot be allowed. This was a erroneous approach and the Tribunal in its judgment in Second Appeal of the original appellant, held that it had claimed deduction under Section 8(ii) and not exemption under Section (5) of the BST Act.
21. In any case, according to Ms. Badheka, the entry A-39, as it existed, must be read together with the change effected after 11 th August, 1988. The amendment to the definition of the term ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 21/61 901-STR-37-2010.doc "resale" as appearing in Section 2(26) denotes that it is to disallow a claim of resale to trade mark holders. Such dealers cannot be allowed resale under Schedule entry A-39. The purpose in making such amendment ought to be noticed and only then it would be evident that dealers, who are not trade mark holders and not importers, but only producers, remain untouched. The recommendation to be made by KVIC is restricted to those and spelt out by the language of the entry itself. There is no question of any recommendation for the original appellant and to be made by KVIC. The Tribunal was convinced that even if the first sale is exempted, the statute is framed for a single time tax, the sales subsequent to the first sale which is exempted, will also be exempted. In that regard, the Tribunal rightly relied upon the judgment in the case of Anand Distillery vs. The Assistant Commissioner of Sales Tax, Panaji reported in Volume 52 STC 262 (Bom.) and Shanmuga Traders, Etc. vs. State of Tamil Nadu and Others reported in Volume 114 SCT 1 (SC). It is in tune with this law that the circular has been issued by the Commissioner. Once the very certificate issued to the respective vendor societies, in terms, states that the resale of goods ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 22/61 901-STR-37-2010.doc purchased from the respective vendors shall be free, then all the more, there was no occasion for the Tribunal to make any Reference. The question of law proposed and forwarded for this Court's opinion and answer is, therefore, not arising from the finding in the second appellate order.
22. The wording of the question itself is criticized by Ms. Badheka. She would submit that the crucial facts have been overlooked. In that regard, paragraph 36 of the Tribunal's judgment and order in the second appeal would clinch the issue. She would submit that there was no challenge to the order passed by the Tribunal in the Second Appeal. Whether the certificates were availed of by the vendors or not is not an issue or question determined by the Tribunal. There is an assumption in the question that is framed that the certificates were not issued or that requirement in that regard was not complied with. There is no pleading that the vendors availed of the certificate in dealing with the present dealer (original appellant). In any case, what a third party has done has nothing to do with the case of the original appellant, and particularly, when it relies on the certificate issued ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 23/61 901-STR-37-2010.doc under Section 12A by the vendors.
23. It is in these circumstances she would submit that question No. (i) was not required to be referred at all. In any event, if that question is referred, then, without prejudice to the objection of the respondent, it be answered against the Revenue.
24. As far as question no.(ii) is concerned, once again our attention is invited to the entries by Ms. Badheka. She would submit that if the articles sold by the KVIC units were to be taxable in the hands of the producers or dealers in the chain of marketing, then, anomalous situation would arise. Such subsequent dealers do not hold such certificate as required under entry A39(a). No trader would buy from such cobbler society if the trader's purchases from such cobbler society are tax free, but re-sales are taxable. This would defeat the very purpose of grant of exemption to promote KVIC units. In any case, the KVIC Board would never recommend traders and direct the Commissioner to issue certificate to traders as it is concerned only with it's own units. That is how Ms. Badheka invites our attention to the Khadi ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 24/61 901-STR-37-2010.doc and Village Industries Commission Act, 1956 (for short, "the KVIC Act") itself. She would submit that the KVIC Act and Rules, as compiled by her, would indicate that the said Act enacted by the Parliament is to provide for the establishment of a Commission for the development of khadi and village industries and for matters connected therewith. She invites our attention to the definition of the term "village industry" as appearing in Section 2(h). She would submit that all the provisions of the KVIC Act, read together and harmoniously, would indicate that, it is to promote such articles of artisans and village industries, that the Commission is established and set up. Therefore, it would like the products of such artisans and village industries to reach all corners of the country. It would never put any fetter or restriction on their free marketing and trading. In the circumstances, she would submit that though before the Tribunal it was argued that under the KVIC Act, no dealer buying from such society and reselling the goods is eligible to be given such a certificate so as to enable him to claim exemption under the Bombay Act. Still, the Tribunal was aware that in law, there is nothing which would restrain or restrict the successive dealers. There is no requirement that they should hold ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 25/61 901-STR-37-2010.doc certificate from the Commissioner. The certificate to be issued by the seller is as stipulated in terms of Section 12A. That certificate is to be issued in the prescribed form. That form nowhere prescribes that the dealer purchasing from certified KVIC units will be liable to pay tax on its resales. No such certificates are issued by the vendor society. Once exempted, the subsequent sales will remain exempted, as also is the case of sales of any other articles listed in Schedule A. There is no exemption claimed by this original appellant. It had filed returns claiming deduction on turnover in terms of Section 8(ii) of the Bombay Act. Hence, we should note the amendment, and upon perusal of the same, arrive at a conclusion and consistent with the factual finding rendered by the Tribunal in the second appellate order. The admitted facts are that the resale of goods purchased from the co-operative societies, which were all registered dealers, were eligible to deduction under Section 8(ii) of the Bombay Act. All such sales of the vendors were endorsed with certificates under the provisions of Section 12A. It was duly certified that the sales are made by the vendors as registered dealers liable to pay sales tax. Once such declaration is given and with the specification as above, then, ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 26/61 901-STR-37-2010.doc there is no other question to be considered. Therefore, the requirements of Section 8(ii) are complied with. In that regard, she has relied upon the finding in paragraph 48 of the Tribunal's order (running page 128 of the paper book). In such circumstances, if a registered dealer, purchasing from unit exempt under entry 136 as package scheme of incentives, is allowed resale by the State, there is no reason why the original appellant in this case should be denied the benefit. In such circumstances, she would submit that the arguments of Mr. Sonpal do not deserve to be accepted. She would submit that the questions in this Reference be answered against the Revenue and in favour of the dealer.
25. For properly appreciating the above controversy, we would first make a reference to the Bombay Sales Tax Act, 1959. We would have to make a reference to the provisions as they stood at the relevant time, namely, 1992-93. At the same time, we would notice some amendments and which have a material bearing on the controversy.
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26. At the relevant time, the Bombay Sales Tax Act, 1959 had 79 Sections divided into nine (9) Chapters. It had the Schedules A, B and C.
27. We have before us, a copy of this Act as amended up to 1st May, 1998. It is an Act to consolidate and amend the law relating to the levy of tax on the sale or purchase of certain goods in the State of Bombay. Chapter I contains Section 2 titled as "Definitions". We are concerned with this Section, and particularly with certain definitions. The term "Commissioner" as defined under Section 2 Clause (7) means the person appointed to be the Commissioner of Sales Tax for the purposes of this Act. Section 2(11) defines "dealer" to mean any person who whether for commission, remuneration or otherwise carries on business of buying or selling goods in the State, and includes the Central Government, or any State Government which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to its members. There are Exceptions carved out, namely 3 in number, and then there is an Explanation. We need not refer to the same in great details. For ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 28/61 901-STR-37-2010.doc our purpose, the other definition, and which is relevant, is of the term "Registered dealer" which appears under Section 2(25) to mean, a dealer registered under Section 22. The term "re-sale" is defined in Section 2(26) and that provision reads as under :
"2(26) "re-sale", for the purposes of sections 7, 8, 8A, 12, 13, 13AA and 13B means sale of purchased goods-
(i) in the same form in which they were purchased, or
(ii) without doing anything to them which amounts to, or results, in a manufacture, and the word "re-sale" shall be construed accordingly;"
28. We are concerned in the present case with all the Sections referred in this definition, namely, Sections 8, 8A and 12. It is enough if we summarize this definition by holding that for the purposes of the above Sections and enumerated in the definition, re-sale means a sale of purchased goods in the same form in which they were purchased or without doing anything to them which amounts, or results in a manufacture and the word "re-sale" shall be construed accordingly. The term "sale" is defined in Section 2(28). The term "tax" is defined in Section 2(32) to mean a sales tax or purchase tax as the case may be, payable under the Bombay Sales Tax Act. The term "taxable goods" is defined under Section ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 29/61 901-STR-37-2010.doc 2(33) to mean goods other than those on the sale or purchase of which no tax is payable under Section 5. The term "turnover of purchases" and "turnover of sales" are defined in Sections 2(35) and 2(36) respectively. After scanning the above definitions, we go to Chapter II which is styled as "Incidence and Levy of Tax" Section 5 therein deals with 'Sales and purchases of certain goods free from all tax'.
29. Section 5 was referred by Mr. Sonpal, and therefore, we reproduce it and as it stood at the relevant time.
"5. Sales and purchases of certain goods free from all tax.
(1) Notwithstanding anything in this Act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule A, no tax shall be payable on the sales or purchases of any goods specified in that Schedule.
(2) The State Government may by notification in the Official Gazette, add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein; and thereupon, the said Schedule shall be deemed to be amended accordingly; and the amendment so made shall take effect from the date of the publication of the notification in the Official Gazette or from such other date as may be mentioned therein."
A perusal of this Section would reveal as to how 'sales and purchases of certain goods free from all tax' is the heading of this ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 30/61 901-STR-37-2010.doc Section. In Sub-section (1), it is stated that notwithstanding anything in the Bombay Act, but subject to the conditions or exceptions, if any, set out against each of the goods specified in column 3 of Schedule A, no tax would be payable on the sales or purchases of any goods specified in that Schedule. Sub-section (2) of Section 5 reserves the power in the State Government to add to, or enlarge, any entry in Schedule A, or relax or omit any condition or exception specified therein. Then, Section 6 provides for taxes payable by a dealer. The tax has to be paid subject to the provisions of the Act and to any rules made thereunder, by a dealer who is liable to pay tax. That tax or taxes are leviable in accordance with the provisions of this Chapter II of the Bombay Act.
30. Section 7 provides for single point levy of sales tax on declared goods specified in Schedule B. Then comes Section 8 and that provides for (levy of value added) sales tax on goods specified in Schedule C. Section 8 reads as under:
"8. (Levy of value added) sales tax on goods specified in Schedule C.::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 :::
vikrant 31/61 901-STR-37-2010.doc (1) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule C at the rate set out against each of them in column 3 thereof, but after deducting from such turnover,-
(i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under section 14;
(ii) resales of goods purchased by the dealer on or after the appointed day from a Registered dealer, otherwise than on a declaration furnished under section 11 or 12, if the requirements of section 12A are satisfied;
[Provided that, resales of goods purchased by the dealer from a registered dealer during the period commencing on the 1st July 1981 and ending on the day immediately preceding the date of commencement of the Maharashtra Tax Laws (Levy and Amendment) Act, 1988, on a declaration furnished under section 8A shall not be deducted from such turnover.]
(iii) resales of goods purchased by the dealer on or after the appointed day from a dealer liable to pay tax under section 4, if a certificate as provided in sub-section (2) 12A is furnished; and
(iv) sales of goods to a Commission agent furnishing a declaration as provided in section 12.
(v) sales of goods to a dealer holding the Certificate of Entitlement, who purchases such goods by furnishing a declaration as provided in clause (g) of section 12".
A perusal of this Section would reveal as to how there shall be levy on the turnover of sales of goods specified in Schedule C. A sales tax at the rate set out against each of them in column 3 thereof, but after deducting from such turnover (i) resales of goods on the purchase of which the dealer is liable to pay ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 32/61 901-STR-37-2010.doc purchase tax under section 14, and (ii) resales of goods purchased by the dealer on or after the appointed day from a Registered dealer, otherwise than on a declaration furnished under section 11 or 12, if the requirements of section 12A are satisfied.
31. Then there are further sections which follow and confer power to specify points of sale at which goods may be taxed, provisions of Section 8A not to apply to declared goods, deduction of resales during pendency of application by dealer for grant of patent or registration of trade mark (Sections 8A to 8C) and exclusion of certain purchases for purposes of deductions under Section 7 and 8, which is set out in Section 10A. By Section 11, tax is payable at reduced rate on certain sales, and by Section 12, no deduction from turnover except on declarations.
32. Section 12 and 12A read as under:
"12. No deduction from turnover except on declarations.
There shall not be deducted from the turnover of sales, sales of goods to a Commission agent holding a Permit purchasing on behalf of his principal or to a Registered dealer, or to a dealer holding a Certificate of Entitlement as provided in sections 7, 8 and 8A unless-
(a) to (d) deleted.::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 :::
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(e) the Commission agent certifies in the prescribed
declaration form-
(i) that he is registered under the Central Sales Tax Act,1956;
(ii) that his principal is registered under the Central Sales Tax Act, 1956 for his place of business outside the State;
(iii) that the goods are purchased by him for his principal for the purpose of complying with the pre- existing agreement or order for sale entered into by such principal for or in relation to an export out of the territory on India by such principal himself or for packing of the goods for such export and that such goods will be so exported by such principal or will be so used in the packing of such goods; and
(iv) that he would obtain a declaration in the prescribed form from such principal to the aforesaid effect.
(f) the Registered dealer certifies in the prescribed declaration form that the goods purchased by him are intended for sale by him.
(g) the dealer holding the Certificate of Entitlement certifies in the prescribed declaration form,-
(i) that the goods purchases by him are raw material within the meaning of Explanation II to rule 31B of the rules,
(ii) that the goods are purchased by him for use in the manufacture of goods, for sale which are specified in the Eligibility Certificate, which will in fact be so used and sold by him or used in packing of goods so manufactured."
"12A. No deduction from turnover of certain sales except on a certificate.
(1) There shall not be deducted from the turnover of sales, the resales of goods purchased by a dealer after the commencement of the Bombay Sales Tax (Amendment) Act, 1965, from a Registered dealer, as provided in ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 34/61 901-STR-37-2010.doc sections 7, and 8 unless the dealer claiming deduction produces a bill or cash memorandum containing a certificate that the registration certificate of the selling dealer was in force on the date of sale of the goods to him. Such certificates shall be signed by the selling dealer or a person duly authorised by him in this behalf:
Provided that, where the certificate of registration of the selling dealer has been cancelled with effect from a date anterior to the date of the cancellation order, and such sale was made on or after such anterior date of cancellation, then subject to the provisions of sub- section (7) of section 22, the certificate signed as aforesaid shall be deemed to be invalid and to have been invalid on the date of such sale; and accordingly no deduction from the turnover of sales shall be allowed to the claimant dealer in respect of such resales.
(2) There shall not be deducted from the turnover of sales, the resales of goods purchased by a dealer from a dealer registered under the Central Sales Tax Act, 1956 and who is liable to pay tax under section 4, as provided in section 7, and 8 unless the dealer claiming deduction produces, a bill or cash memorandum containing a certificate that the selling dealer is liable to pay tax under section 4 on the sale of goods to him and that the said sale is in the course of business of the selling dealer. Such certificate shall be signed either by the selling dealer himself or by a person duly authorised by him in this behalf.
(3) Notwithstanding anything contained in section 8, on or after the date of commencement of the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 1997
(a) no deduction from turnover of sales as provided in that section shall be allowed to any dealer, if, the turnover of all sales or of all purchases of the said dealer has, in the preceding year, exceeded rupees forty lakhs;
(b) Subject to the provisions of clause (a), deduction from turnover of sales, as provided in that section ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 35/61 901-STR-37-2010.doc shall be allowed up to the time the turnover of sales or purchases of a dealer, in a year, does not exceed rupees forty lakhs and shall not be allowed thereafter.
(3A) Without prejudice to the provision of sub-section (3), no deduction from turnover of sale as provided in Section 8 shall be allowed to such class or classes of dealers as the State government may, by notification in the official gazette, specify.
(4) Notwithstanding anything contained in sub-section (3) of section 42, a selling dealer who has not been allowed the deduction from the turnover of sales, as provided in sub-section (3), may be granted a set off of tax, calculated in the prescribed manner with reference to the purchase price of goods purchased by him from a Registered dealer or from a dealer liable to pay tax under section 4, in such circumstances and subject to such conditions, as the State Government may prescribe."
A perusal of these provisions would indicate that either there has to be a sales of goods to a Commission agent holding a Permit purchasing on behalf of its principal or to a registered dealer or a dealer holding a Certificate of Entitlement as provided under Sections 7, 8 and 8A. By Section 12A, there is no deduction permissible from turnover of certain sales except on a certificate. The difference in the language of the two provisions is clear inasmuch as both may be providing deductions from turnover, but one provides for deduction on declarations and other provides on certificate.
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33. Since heavy emphasis has been laid on Section 17 and 17A, we reproduce them as well:
"17.Power to reduce rate of tax and to amend Schedules.
The State Government may, by notification in the Official Gazette, reduce any rate of tax specified in Schedule B or C in respect of any entry (or part thereof) in the said Schedule; and may, by like notification-
(a) omit or amend any entry (or part thereof), but not so as to enhance the rate of tax in any case;
(b) transpose any entry by deleting it from one of the Schedules and inserting it in or adding it to another;
and thereupon, the Schedule shall be deemed to have been amended accordingly:
Provided that, no notification which transposes any entry from one Schedule to another as aforesaid, shall be issued by the State Government unless it has been laid in draft before the Maharashtra Legislative Assembly and has been approved by resolution of that Assembly; and upon such approval, the notification may be issued and shall take effect in the form in which it is so approved.
Any notification issued under this section shall take effect from the date of the publication thereof in the Official Gazette or from such other date as may be mentioned therein."
"17A. No deductions under Section 8 in certain cases.
Where any entry (or part thereof) is transposed whether under section 17 or otherwise, by its deletion from one of the Schedules and its insertion in or addition to another Schedule, then if no tax on any sale or purchase of the goods specified in that entry (or part thereof) is leviable, the deductions provided in clause (ii) or clause (iii) of section 8 shall not apply to the resale of those goods."::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 :::
vikrant 37/61 901-STR-37-2010.doc By Section 17, there is a power conferred in the State Government which shall be exercised by issuance of a Notification in the Official Gazette to reduce rate of tax and to amend Schedules. By Section 17A, there will be no deductions under Section 8 in certain cases. Thus, Section 17A deals with the situation where any entry, or part thereof, is transposed whether under Section 17 or otherwise, by its deletion from one of the Schedules and its insertion in or addition to another Schedule, then, if no tax on any sale or purchase of the goods specified in that entry, or part thereof, is leviable, the deductions provided in clause (ii) or clause (iii) of section 8 shall not apply to the resale of those goods. Therefore, there has to be a fulfillment of the pre-
condition, namely, transposition, whether under Section 17 or otherwise. Secondly, there ought to be no tax on any sale or purchase of the goods specified in that entry or part thereof. It is only upon such situation that there will be no deduction provided in clause (ii) or clause (iii) of Section 8 and which provision deals with resale of the goods. In other words, the deductions under these clauses shall not apply to the resale of those goods. The reason for that is obvious, for the Government has exercised a ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 38/61 901-STR-37-2010.doc power, either in terms of Section 17 and clause (a) and (b) thereof, or otherwise.
34. It is not necessary to refer to all other provisions contained in this Chapters of the Bombay Act, for the simple reason that the Revenue may have referred to the same, but not each one of them can be said to be applicable.
35. Thus, Chapter II is dealing with incidence and levy of tax, Chapter III deals with sales tax authorities and Tribunal, Chapter IV deals with registrations, licences, authorizations, recognitions and permits and by Chapter V, returns, assessment, payment, penalty, recovery and refund of tax are the matters dealt with. Though there is a reference made to some of the provisions in this Chapter V, dealing with 'drawback, set-off, refund etc.', we do not think that the same are relevant. By Chapter VI, there is a liability to produce accounts and supply information and by Chapter VII, titled as 'proceedings', there are several provisions so as to enable determination of disputed questions and entertain appeals, reference applications etc. The offences and penalties are set out ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 39/61 901-STR-37-2010.doc in Chapter VIII, whereas, miscellaneous provisions are contained in Chapter IX. We have made a survey of the entire provisions so as to appreciate the contentions of Mr. Sonpal. At the relevant time, Schedule A-39 read thus:
39 (a) Products of Village Industries (1) When sold by a 1-7-1981 defined in the Khadi and Village producer or a dealer to Industries Commission Act, 1956 certified for this 10-8-1988 and the Bombay Khadi and purpose by the Village Industries Act, 1960; Commissioner after taking into account the
(b) Khadi and readymade recommendations of garments and other articles, the Khadi & Village prepared from Khadi. Industries Commission constituted under the Explanation: For the purposes of Khadi and Village this entry Khadi means any cloth Industries Commission woven on handloom in India Act, 1956, or, as the from cotton, silk or woollen yarn case may be, of the handspun in India or from the Maharashtra State mixture of any two or more of Khadi and Village such yarns. Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960, or (2) When sold by another dealer who has purchased the goods from a producer or dealer certified under condition (1) (Sales of man-made fibre and polyester and cotton blended silvers are exempted against BX from under Entry (215) by STA-
1085/CR-97-RES-8 dt. 29-7-85.
w.e.f. 25-6-85 to 30-9-1995) 39 (a) Such products of Village (1) When manufactured 11-8-1988 Industries as are defined in the and sold by a Producer, to Khadi and Village Industries or when imported and 30-4-1994 Commission Act, 1956 and sold by an importer, Bombay Khadi and Village certified for this ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 40/61 901-STR-37-2010.doc Industries Act, 1960, as may be purpose by the notified by the State Government Commissioner after from time to time for the taking into account the purpose of this entry. recommendations of the Khadi & Village Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956, or, as the case may be, of the Maharashtra State Khadi & Village Industries Board constituted under the Bombay Khadi and village Industries Act, 1960, or (2) When sold by a dealer who is certified for this purpose by the Commissioner after taking into account the recommendations of the Khadi and Village Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956, or, as the case may be, of the Maharashtra State Khadi and Village Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960 and who does not hold a trade mark or a patent in respect of the goods sold or who does not hold a patent in respect of the method or process of manufacturing the goods sold.
39 (a) Such products of Village (1) When manufactured 1-5-1994 Industries as defined in Khadi and sold by a producer, to and Village Industries or when imported and 30-9-1995 Commission Act, 1956 and sold by an importer, ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 41/61 901-STR-37-2010.doc Bombay Khadi and Village certified for this Industries Act, 1960, as the purpose by the State Government may, subject Commissioner after to such conditions as it may taking into account the deem fit, notify from time to recommendations of time. the Khadi & Village Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956, or, as the case may be, of the Maharashtra State Khadi & Village Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960, or (2) When sold by another dealer who has purchased the goods from a producer or dealer certified under condition (1)
(b) Khadi and readymade (1) When manufactured 11-8-1988 garments and other articles, and sold by a producer, to prepared from Khadi. or when imported and 30-9-1995 sold by an importer, Explanation: For the purposes of certified for this this entry Khadi means any cloth purpose by the woven on handloom in India, Commissioner after from cotton, silk or woollen yarn taking into account the handspun in India or from the recommendations of mixture of any two or more of the Khadi & Village such yarns. Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956, or, as the case may be, of the Maharashtra State Khadi & Village Industries Board constituted under the Bombay Khadi and Village Industries Act, 1960, or (2) When sold by another dealer who has purchased the goods ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:07 ::: vikrant 42/61 901-STR-37-2010.doc from a producer or dealer certified under condition (1) We are concerned with the Schedule A-39(a) as prevailing from 11th August, 1988 to 30th April, 1994.
36. A bare perusal of this would indicate that this entry was substituted w.e.f. 11th August, 1988 by Maharashtra Act No. 22 of 1988. It deals with products of village industries as are defined in the KVIC Act and the Bombay Khadi and Village Industries Act, 1960. Such products of these industries as may be notified by the State Government from time to time for the purpose of this entry are covered by this Schedule entry. However, in column 3 thereof, in item (1), a situation where these goods are manufactured and sold by producer, or when imported and sold by an importer, certified for this purpose by the Commissioner after taking into account the recommendations of the KVIC or, as the case may be, of the Maharashtra State Khadi & Village Industries Board, or when sold by a dealer, who is certified for this purpose by the Commissioner after taking into account the recommendations as above, and who does not hold a trade mark or a patent in respect ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 43/61 901-STR-37-2010.doc of the goods sold or who does not hold a patent in respect of the method or process of manufacturing the goods sold. Thus, two types of persons are dealt with by item (1) and item (2) appearing in column 3. One is a case of manufacturer and producer selling the goods, or when they are imported, the sale by an importer certified for this purpose by the Commissioner and after taking into account the recommendations of the two entities referred to herein above. The second is dealing with a sale by a dealer who is certified for this purpose by the Commissioner after taking into account the recommendations of the above entities and who does not hold a trade mark or a patent.
37. Therefore, for the purpose of this Schedule entry, there are specific conditions and which are to be found in Column 3. There are variations in this Schedule, but after 1 st May, 1994, and we ought not be concerned therewith.
38. The Tribunal, in the order on the appeal, may have reproduced several provisions and Sections of the Act and the Schedule but what we are really concerned with is a factual ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 44/61 901-STR-37-2010.doc position. What has emerged from the record is that 23 items were notified by the State Government at the relevant time and for the purpose of this entry.
39. Since reference is also made to Schedule entry C-II-42, dealing with footwear other than those specified in entry 3 in Schedule A, we reproduce the said entry as well;
42 Footwear other than those specified in entry 36 in Schedule A.
(a) When sold at a price not exceeding Rs.30/- 8% 8% 1-7-1981 to
per pair. 30-4-1994
(b) When sold at a price exceeding Rs. 30/- per 12% 12% 1-7-1981 to pair 30-11-1982
(b) When sold at a price exceeding Rs. 30 but 12% 12% 1-12-1982 to not exceeding Rs. 50/- per pair. 30-4-1994
(c) When sold at a price exceeding Rs. 50 per 15% 15% 1-12-1982 to pair. 30-4-1994 [Rate of tax is reduced to 8%, if the pair is sold upto Rs. 50/- and to 10% if sold above Rs. 50/- under entry (97B) by STA-1085/CR-97/RES-8 dt. 29-7-85 w.e.f. 25-6-1985].
[Whole of the tax is exempted on the sales or purchases of plastic or rubber footwear sold or purchased at a price not exceeding Rs.25/- per pair under entry(97B(ii-a)) by STA-1088-62- Tax-2 dt.25-3-1988 w.e.f. 1-4-1988] [Sales or purchases of footwear other than those made by hand without power, and plastic or rubber footwear exceeding Rs.25/- but not exceeding Rs.50/-; rate of tax is reduced to 8% and if sold or purchased at a price exceeding Rs.50/- per pair, rate is reduced to 10% under entry (97-B (iii)(a) (b) by STA-1085/CR- 97/RES-8 dt.29-7-1985 w.e.f. 25-6-1995.] [Entry 97B deleted w.e.f. 1-5-94 by STA- 1094/12/T-2 dt. 2-6-94].::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 :::
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42 Footwear 8% 8% 1-5-1994
to
30-9-1995
[By Entry (377(i)) Sales of plastic and rubber footwear when sold at a price not exceeding Rs. 50/- per pair whole of tax is exempted w.e.f. 1- 5-94].
[By Entry (377(ii)) Sales of orthopaedic footwear by a dealer recognised by the commissioner; whole of tax exempted w.e.f. 1-5-94].
[By Entry (377(iii)) Sales or purchases other than 377(i) or 377(ii); rate of tax is 4% w.e.f. 1-5-94 by STA-1094/12/T-2 dt. 2-6-94]. [In Entry 97(iv) in col. 2 and resales thereof deleted w.e.f. 1-5-94 by STA-1094/35/T-2 dt. 10-8-94].
40. From the factual narration and the submissions of parties, which were fairly extensive, the Tribunal found that the Notification which was issued, referred to entry 39 of Schedule A appended to the Bombay Act w.e.f. 11th August, 1988. The Government of Maharashtra notified the products of the village industries to be the notified products for the purpose of entry 39. This Notification itself is reproduced at page 119 of the paper book. There are as many as 23 kinds of products of the industries which are found in the Notification. The Tribunal concluded from the same that these products are taxable in nature. To our mind, the Tribunal rightly understood the controversy before it. To our mind, and further, the Tribunal rightly noted that there are ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 46/61 901-STR-37-2010.doc conditions specified in Schedule A-39 and which, upon fulfillment, would make the sale and purchase of these products free from tax. The Tribunal also rightly referred to the object, namely, to promote the products of village industries as are defined by KVIC Act. These are products emerging from village industries. These industries are operating at village level are encouraging such artisans and skilled workers in rural areas who manufacture and produce products of day to day use, but do not find a market or do not have an access thereto on account of poverty and varied reasons. It is to promote their products and bring them in the main stream economy that the two Acts have been promulgated. The KVIC Act has a definite object and purpose and that to provide for the establishment of a Commission for the development of khadi and village industries and for matters connected therewith. Both are distinct terms and understood by the preamble itself. "Khadi" as defined in Section 2(d) means any cloth woven on handlooms in India from cotton, silk or woollen yarn handspun in India or from a mixture of any two or all of such yarns. Then, 'village industry' is defined in Section 2(h) to mean any industry located in rural area which produces any goods or ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 47/61 901-STR-37-2010.doc renders any service with or without the use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand rupees or such other sum as may be specified by a Notification by the Central Government. The proviso to this definition indicates that any industry specified in the Schedule and located in an area other than a rural area and recognised as a village industry at any time before the commencement of the KVIC (Amendment) Act, 1987 shall, notwithstanding anything contained in the sub-clause, continue to be village industry under this Act.
41. We need not refer to the KVIC Act and the provisions in further details. The Tribunal has rightly noted that it is this object and purpose which is sought to be achieved by encouraging the manufacturers and producers, importers and the dealers who deal in the products. However, though that fact has to be verified, it is upon a recommendation of the KVIC or the Bombay Board that the Commissioner of Sales Tax will issue the necessary documents/certificates. The Tribunal, therefore, in paragraph 36 of its order on the appeal, concludes that if the dealer dealing in ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 48/61 901-STR-37-2010.doc such items is an unregistered dealer, then, sales at the hands of such dealer and the purchase thereof would be taxable notwithstanding the entry A-39 which is meant for tax free goods. That is because the products which are described in entry A-39 are not tax free otherwise, but exigible to tax. It is only when the products are dealt with by the dealer specified, or rather certified, that all the benefits would follow. Therefore, the Tribunal understood this controversy in the first instance in a correct and proper perspective.
42. We are not in agreement with Mr. Sonpal that the Tribunal's order on the appeal was vitiated in any manner. Mr. Sonpal's argument centers around the fact criticism the Tribunal has, in the order on appeal, merely gave illustrations and did not assign any reasons for its conclusions. That is incorrect. We must read the order on the appeal in its entirety. So read, it is apparent that the illustrations are to support the reasons which have been assigned. After reproduction of relevant Sections, Schedule items and Notifications, the Tribunal, from paragraph 35 onwards, commences its reasoning and gives certain illustrations. The ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 49/61 901-STR-37-2010.doc Tribunal first clears the ground by referring to Section 5. Once Section 5 has been correctly understood by the Tribunal as its Sub- section opens with a non obstante clause, and refers to certain conditions based on which the goods can be termed as 'tax free', then the further finding by the Tribunal is logical. It follows from its earlier references.
43. In paragraph 42 of the order of the appeal, the Tribunal concludes that from the nature of the entries found in Schedule A, it will be seen that, subject to certain conditions, both the transactions of sale or purchase are not held to be exigible to tax. The Tribunal was making these observations in the light of the interpretation that it placed eventually on Schedule entry A-39. It rightly proceeds on the footing that this entry grants exemption to specified dealers and not to purchases or sales of the goods unlike the rest of the entries of Schedule A. It also mentioned that as many as 23 products/industries are notified by the Competent Authority. The goods are not tax free, but since they are referable to Khadi and Village Industries Act which is a Central Statute, that the exemption from the ambit of taxation falls. ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 :::
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44. In paragraph 43 and 44 of the Tribunal's order, the findings read thus:
"43. A dealer, like Khadi Bhandar, who is dealing in eight or nine figure turnover and is probably covering most of the 23 products notified by the government does not have to pay tax on its sales. The only condition is that it should be a registered dealer. Thus, in respect of all other goods found in Schedule A, the incidence of taxation does not occur at all. The dealer dealing in tax free goods need not be registered. Also, there is no bar to the source of such purchases. They may be imported from out of Maharashtra or out of India. They remain tax free. The entire sales or purchases of such goods do not invite any tax if no conditions are attached and these conditions are only in respect of the 'price' or 'packing', as mentioned above. It is only in respect of Schedule entry A-39 that it is the dealer who is exempted from the ambit of taxation. The purpose, as mentioned above, is to promote the Khadi and Village industries' products.
44. There is another angle of looking at this controversy. Unless the producer of the goods notified by the K.V.I.C. is also certified dealer under class (2), the goods sold by him will be taxable in his hands. What will happen to the goods purchased from such second dealer and resold? The answer is that unless second dealer is a registered dealer, the sale should be taxable notwithstanding the fact that the goods are of the category of Village Industries' produce or otherwise. All the resales, thereafter, will be tax free. Once a registered dealer intervenes, the goods remain free from tax throughout the chain of marketing."
Then, the Tribunal refers to the definition of the term "resale".
45. After reproducing, in paragraph 45, the definition of the term "resale" as appearing then in Section 2(26), the Tribunal ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 51/61 901-STR-37-2010.doc summarizes the pre-requisites or requirements on the fulfillment of which, resale takes place. They are rightly summarized in paragraph 45.
46. The Tribunal has also referred to the provisions as appearing after 11th August, 1988. The Tribunal observes that the structure of taxation has undergone a change. The Tribunal has noted those changes.
47. Ms. Badheka is right in contending that the whole controversy is approached by the Tribunal with reference to Section 8 Clause (ii) and when the Tribunal found that Rule 42-H of the Bombay Rules would also be relevant for that purpose it refers to the same.
48. It may be that the Tribunal then referred to several provisions. However, when it summarizes the whole issue and the conclusions broadly, it rightly makes a reference to the conditions specified in column 3 of Schedule entry A-39(a). In the first instance, it is the products manufactured and sold by producers or when imported and sold by an importer certified for the purpose ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 52/61 901-STR-37-2010.doc by the Commissioner and after taking into account the recommendations of the statutory entities, secondly, when such products of village industries as are defined in the KVIC Act and the Bombay Act, as may be notified from the State Government from time to time for the purpose of this entry, when sold by a dealer who is certified for this purpose by the Commissioner after taking into account the recommendations of the KVIC and the Bombay Board and who does not hold a trade mark or patent in the respective goods sold or who does not hold a patent in respect of the method or process of manufacturing the goods sold. Therefore, there are specific conditions when such products, as referred above, are sold by a dealer who is certified by the Commissioner. Such dealer should not be holding a trade mark or a patent. Now, a trade mark is referable to the goods sold and patent is referable to the method or process of manufacturing of the goods sold. Thus understood, we have no hesitation in concluding that the products, if sold by such dealers, would be tax free. It is in these circumstances that we have no hesitation in rejecting the submissions of Mr. Sonpal.
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49. The illustration set out in para 52 read by Mr. Sonpal cannot be read in isolation. All the paragraphs of the judgment would have to be read together. If so read, after referring to the submissions, the points for consideration and providing the factual backdrop, the Tribunal, while rendering its findings and conclusions, traces the legislative scheme, and by elaborately explaining it, does not invoke any principles of statutory interpretation unknown to law. It is referring to the settled principles to be applied while interpreting a taxing statute. Those alone have been invoked and applied.
50. The Tribunal records a firm opinion that the appellant before it is entitled to resales in respect of its purchases effected from the KVIC dealers for the goods which are leather goods falling in entries C-II-42 and C-II-81, both at the time of purchase and sale. They are Schedule C goods when purchased and sold, and therefore, entitled to resale. We do not see how such conclusion can raise a question of law. When the Tribunal decided this matter and as elaborately as it did, how does any question of an interpretation of the provisions of law has not been clarified to ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 54/61 901-STR-37-2010.doc us. The question as framed for our consideration and opinion is that, whether the sales of leather goods are admissible for deduction as resales under Section 8(ii) of the Bombay Sales Tax Act, 1959 even though corresponding purchases of these goods were covered by entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors. The issue before the Tribunal's Bench in the Reference Application was whether the above conclusions of the Tribunal raise any question of law. The Tribunal has, in a very elaborate order on the Reference Application, running into about 115 paragraphs, possibly thought that the Schedule entry was not properly and correctly interpreted. Once we have referred to the Schedule entry ourselves, and independent of the Tribunal's conclusions analyzed it, we do not think that it was incorrectly interpreted or misconstrued or misinterpreted at all. Therefore, there was no occasion for the Tribunal to refer these questions.
51. Possibly, it was for the second time engaged by the Revenue in the very controversy and which had already consumed lot of its time. We find that lot of unnecessary discussion is made. Though ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 55/61 901-STR-37-2010.doc the Tribunal's order on the appeal was before the Bench when it decided the Reference Applications, and it has extensively revisited the very same provisions, we have not noticed any disagreement, much less recording of any different opinion. Therefore, the Tribunal need not have made elaborate re-exercise. If the Revenue was aggrieved and dissatisfied with the order in the appeal, it could have brought a further appeal to this Court. However, the Tribunal, while passing the referring order, was of the view that there is specific exemption to particular class of dealers and the tax was not payable by the particular class of dealers. Thus, making distinction between leviability and non- leviability, the Tribunal had come to the conclusion that even after addition of explanation to Section 8, that has not made any difference. We think that the insertion of the Explanation has led to the reference to this court. On facts, we find that all conditions of deduction for resale have been fulfilled. However, the Explanation added later is the focal point. The Explanation that was introduced to Section 8 came to be inserted by Maharashtra Act No. XVII of 1999 and the argument before the Tribunal on the Reference Application was that it shall be deemed to have always ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 56/61 901-STR-37-2010.doc been inserted.
52. However, that explanation reads thus:
"Explanation.- For the purpose of this section the expression 'resale of goods' means the resale of those goods on the sale of which tax was leviable under this section at the time of their purchase"
A perusal of this explanation would indicate that it defines, for the purpose of Section 8, the expression 'resale of goods' to mean resale of those goods on the sale of which, tax was leviable under this Section at the time of their purchase.
53. While making a reference of the above question to this Court, the Tribunal lost sight of the fact that in its order on the main appeal, it had already held that the tax was leviable. Once it was leviable, then, insertion of the explanation made no difference to the issue and controversy at hand. From the factual position emerging from the record of the appeal, even if the Tribunal had later on decided this matter, but with reference to the same provision or insertion of the explanation, the conclusion could not have been otherwise. If mere insertion of the explanation has led to a reference of the above question no. 1, then we are very sorry ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 57/61 901-STR-37-2010.doc to say that it is mere duplication. A lot of judicial time has been consumed and unnecessarily in this exercise.
54. We are, therefore, of the opinion that the Reference Application was decided unmindful of the fact that mere insertion of the Explanation does not render the conclusions recorded earlier perverse or vitiated in law. The second round on the same material was, therefore, unnecessary.
55. Mr. Sonpal has heavily relied upon a Division Bench judgment of this Court in the case of M/s. Friends Stores Nagpur (supra). In that case, the issue was for the assessment period 1 st April, 1962 to 31st March, 1963. There was a claim that M/s. Freinds purchased garments from registered dealers, the value of which was less than Rs.5 per piece, but when sold, it was much more than Rs.5 per piece. Therefore, it was entitled to deduct from its turn over the value of such goods. This turnover was estimated by the Sales Tax Officer but the Sales Tax Officer held that the goods which were purchased form the registered dealers and which were covered at the time of such purchase by entry 42 ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 58/61 901-STR-37-2010.doc of Schedule A to the Act, were liable to be taxed in accordance with the provision of the Bombay Act. The appellate authority, namely, the Assistant Commissioner of Sales Tax, also negatived the contention of the assessee that he was entitled to a deduction under Section 9(i)(ii) of the Act as it then stood. Section 9 of the Act, and as was referred to us, was deleted from 1 st October, 1995 by Maharashtra Act XVI of 1995. Sections 9 (i) and (ii) of the Act have been reproduced in the judgment of M/s. Friends Stores Nagpur. Though the order of the first appellate authority was confirmed by the Tribunal, since it took a view that the question whether on a proper construction of Section 9(ii) the assessee was entitled to a deduction from his total turnover in respect of the resales of the goods which were covered by entry 42 of Schedule A to the Act at the time of the purchase but at the time of the sale they were covered by entry 4 of Schedule D. That was a question of law. After noting the arguments of both sides, the Division Bench of this Court concluded that the reference to Section 9(i) and 9(ii) in the question referred by the Tribunal is a mistake. Clause (ii) of Section 9 was the applicable clause. Section 9 provides for a general sales tax on the turnover of sales of goods ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 59/61 901-STR-37-2010.doc specified in Schedule D at the rate set out against each of them in column 3 thereof. Under clause (ii), deduction is permitted in respect of resales of goods purchased from a registered dealer on or after the appointed day by a dealer who is not a licensed dealer at the time of purchases. Therefore, the Division Bench concluded that it is a self contained provision laying down the liability to general sales tax on the turnover of sales of goods specified in Schedule D. After analyzing the Section, the Division Bench concluded that before an assessee claims a deduction from his turnover, one of the conditions which he must satisfy is that the goods which are resold must be the goods which are specified in Schedule D and which he must have purchased from a registered dealer. Admittedly, in that case the goods in respect of which deduction was claimed, were not goods which were specified in Schedule D at the time when the assessee purchased them but they were covered by entry 42 of Schedule A. It is in that context that the principle of transposition was applied and to our mind, such is not the controversy before us at all. In such circumstances, the judgment in the case of M/s. Friends Stores Nagpur is of no assistance and was rightly distinguished by the Tribunal. Section ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 60/61 901-STR-37-2010.doc 17A of the BST Act, 1959, as reproduced above has no application to the facts before us.
56. We are of the opinion that once the above view is taken, then, the question of law, though strictly does not arise in the present case, would have to be answered against the Revenue and in favour of the dealer.
57. There is no question of any estoppel in the sense we are construing and interpreting a statutory provision and Schedule entry as forming part of the statute itself. In such circumstances, we do not see how a question about applicability of the principle of estoppel, as invoked by the Revenue in the peculiar facts and circumstances, would arise at all.
58. Once we take the above view, it is not necessary to make a detailed reference to the judgments brought to our notice by Ms. Badheka. She has referred to several judgments and which essentially cull out the principle that circulars issued by the Commissioner of Sales Tax would not bind the assessee or the Courts, but they bind the Tax Department. Once we have ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 ::: vikrant 61/61 901-STR-37-2010.doc approached the matter from the above angle, we do not think that any reference to the judgments, and particularly on the binding nature of the circulars of the Revenue, should detain us. We do not think each of these judgments, therefore, need to be referred by us.
59. As a result of the above discussion, we dispose of the Sales Tax Reference No. 37 of 2010 in the above terms. There will be no order as to costs.
Sales Tax Reference Nos. 17 of 2009, 18 of 2009, 106 of 2009 and 108 of 2009
60. It is conceded that in all matters and which are tagged alongwith Sales Tax Reference No. 37 of 2010, the questions of law forwarded for our opinion and answer are identical. Therefore, each of these References would stand disposed of in terms of this judgment.
(PRAKASH D. NAIK, J.) (S. C. DHARMADHIKARI, J.) ::: Uploaded on - 17/05/2017 ::: Downloaded on - 28/08/2017 00:46:08 :::