The Commissioner Commercial Tax vs S/S Canteen Stores Department
2023 Latest Caselaw 2138 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Reserved on:- 04.01.2023
 
Delivered on:- 20.01.2023
 

 
Court No. - 10
 

 
Case :- SALES/TRADE TAX REVISION No. - 301 of 2013
 
Revisionist :- The Commissioner Commercial Tax
 
Opposite Party :- S/S Canteen Stores Department
 
Counsel for Revisionist :- S.C.
 

 
With
 

 
Case :- SALES/TRADE TAX REVISION No. - 303 of 2013
 

 
Revisionist :- The Commissioner Commercial Tax
 
Opposite Party :- S/S Canteen Stores Department
 
Counsel for Revisionist :- S.C.
 
Counsel for Opposite Party :- Vaibhav Tripathi
 

 
With
 

 
Case :- SALES/TRADE TAX REVISION No. - 149 of 2014
 

 
Revisionist :- The Commissioner Commercial Tax
 
Opposite Party :- M/S Canteen Stores Department
 
Counsel for Revisionist :- S.C.
 
Counsel for Opposite Party :- Suyash Agarwal
 

 
With
 

 
Case :- SALES/TRADE TAX REVISION No. - 152 of 2014
 

 
Revisionist :- The Commissioner Commercial Tax
 
Opposite Party :- M/S Canteen Stores Department
 
Counsel for Revisionist :- S.C.
 
Counsel for Opposite Party :- Suyash Agarwal
 

 
With
 

 
Case :- SALES/TRADE TAX REVISION No. - 92 of 2014
 

 
Revisionist :- The Commissioner Commercial Tax
 
Opposite Party :- M/S Canateen Stores Department
 
Counsel for Revisionist :- S.C.
 
Counsel for Opposite Party :- Suyash Agarwal
 

 
Hon'ble Rohit Ranjan Agarwal,J.

1. Heard Sri A.C. Tripathi, learned Standing Counsel for the revisionist-State and Sri Rakesh Ranjan Agarwal, learned Senior Advocate assisted by Sri Suyash Agarwal, learned counsel for the opposite party-Assessee.

2. These connected five revisions arise out of the judgments and orders dated 05.09.2013 and 28.09.2012 allowing the second appeal filed by the Assessee. The Revision No.92 of 2014, Revision No.152 of 2014 and Revision No.149 of 2014 were admitted on the following question of law:-

"Whether under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in granting exemption on the sale of goods by the Canteen Stores Department to different Canteen Store Department situate outside the State treating the transaction covered under section 8(2A) of Central Sales Tax Act whereas exemption under State Law is conditional and there is no notification."

3. While the Revision No.301 of 2013 and Revision No.303 of 2013 were admitted on the following question of law:-

"Whether under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in granting exemption u/s 8 of the Central Sales Tax Act whereas exemption under Notification No. 7037 dated 31.1.1985 was conditional in nature and not general as such benefit under section 8(2A) of the Central Sales Tax Act is illegal?"

4. As the issue, in both the sets of revisions, are one and the same, with the consent of the parties, the revisions are being heard together and decided by a common order.

5. Facts, in brief, are that the Assessee is a Canteen Stores Department of the Defence Ministry and it sells goods to various Unit Run Canteens (URC). Further, these canteens, which come under the Defence Ministry, make sale to its various employees in different departments. From the Meerut Depot of CSD, goods are sold to all the canteens situated in the western U.P. After the State of Uttarakhand was carved out in the year 2000, the goods were sold to canteens at Uttarakhand also.

6. The Assessee disclosed its sale to canteens as inter-State sale for the relevant years. The Assessing Authority while making an assessment for the different assessment years held the sale made by the Assessee to its canteens to be an inter-State sale, but refused to grant exemption under Section 8 (2A) of the Central Sales Tax Act, 1956 (hereinafter called as ''CST').

7. Aggrieved by the assessment order, Assessee preferred a first appeal which was partly allowed. Dissatisfied with the order of the first appellate authority, Second Appeal Nos.328 of 2004, 294 of 2005 and 356 of 2006 for assessment years 2001-02 (Central), 2002-03 (Central), 2003-04 (Central) and Second Appeal No.182 of 2009 for assessment year 2000-01 (under Section 21(2)) and Second Appeal No.258 of 2009 for assessment year 2001-02 (under Section 21(2)) were filed. The Tribunal by the two judgments dated 28.09.2012 and 05.09.2013 allowed the appeals of the Assessee and held the sale made by the CSD to the canteens stores to be exempted from Central Sales Tax in view of Section 8(2A)/8(2C) (by Amendment dated 11.05.2002 in the CST, Section 8 (2C) was substituted in place of Section 8 (2A)), hence the present revisions.

8. Sri A.C. Tripathi, learned Standing Counsel appearing for the Revenue submitted that the Tribunal was not justified in granting exemption under Section 8 of the Central Sales Tax Act relying upon the notification dated 31.01.1985 which was conditional and only on the fullfillment of the condition, the exemption could have been provided. He further contended that there is no notification issued under Section 8(5) of the CST granting exemption on supply of goods from one canteen store department to another outside the State, the benefit could not have been passed upon the dealer. He has placed reliance upon the decision of Apex Court in case of Commissioner of Sales Tax, Jammu and Kashmir and Others Vs. Pine Chemicals Ltd. and Others, 1995 U.P.T.C. 609. He further contended that the Tribunal was not justified in relying upon the decision of Co-ordinate Bench of this Court in case of M/s Dabur India Limited, Ghaziabad Vs. Commissioner of Trade Tax, 2005 U.P.T.C. 666. He then placed the Notification dated 31.01.1985, wherein in column-2 sales to or purchases and sales by Canteen Stores Department/Military Canteens of all goods, other than those specified in the list is made subject to the condition which is laid down in column-3, the benefit of exemption of tax under the Central Sales Tax Act could be granted, only on fulfillment of the condition.

9. According to State counsel, once there was no fulfillment of the condition and no finding has been recorded by the Taxing Authority. Reliance placed by the Tribunal upon the judgment of M/s Dabur India Limited (supra) and the circular issued by the Commissioner, Trade Tax, U.P. dated 23rd July, 1987 cannot be relied upon.

10. Sri Rakesh Ranjan, learned Senior Counsel appearing for the Assessee submitted that the Assessee is Canteen Stores Department which runs under the Defence Ministry, and it supplies goods to the various canteens stores in the western region of the State as well as to Uttrakhand. According to him, the sale made to the canteens at Uttarakhand is exempted under Section 8(2A) of the CST. He placed reliance upon the Circular of the Commissioner Trade Tax dated 23.07.1987 and also on the decision of the Co-Ordinate Bench of this Court in case of M/s Dabur India Limited (supra).

11. According to learned Senior Counsel, a Circular issued by Commissioner is binding upon the department, and they cannot contend contrary to it. Reliance has also been placed upon the decision in case of Commissioner of Sales Tax Vs. S/s Agrawal Rolling Mills, Mirzapur 2003 U.P.T.C. 1248.

12. I have heard learned counsel for the respective parties and perused the material on record.

13. The questions of law on which these revisions have been admitted are as to whether the Tribunal was justified in granting exemption under Section 8 of the CST on the sales of goods by the Canteen Stores Department to different Canteen Stores situated outside the State of U.P. treating these transactions covered under Section 8(2A) of the CST Act relying upon the exemption Notification No.7037, dated 31.01.1985.

14. It is not in dispute to both the parties that the goods have been sold by the Canteen Stores Department to the various Canteen Stores situated in the State of Uttarakhand which is an inter-State sale. The Assessee in its return has disclosed the inter-State sale made to its canteens at Uttarakhand. The Assessing Authority while accepting the inter-State sale had refused to grant exemption under Section 8(2A)/8(2C) on the ground that the condition as provided in the Notification dated 31.01.1985 has not been complied with.

15. The Tribunal relying upon the decision in case of M/s Dabur India Limited (supra) held the sale to be exempted under Section 8(2A) on the basis of the Circular dated 23rd July, 1987. The Co-ordinate Bench had considered the Notification dated 31.01.1985, but found that as the Circular of the Commissioner Trade Tax dated 23rd July, 1987 was binding upon the department in view of the judgment of the Apex Court in the case of Commissioner of Sales Tax, A.P. Vs. M/s Indra Industries 2000 U.P.T.C. 472, and also on the decision of Paper Products Ltd. Vs. Commissioner of Central Excise, 1999 (7) SCC 84, the department cannot deny the benefit.

16. Argument from the State side to the extent that Notification dated 31st January, 1985 was conditional and the same has not been relied upon by the Co-ordinate Bench in M/s Dabur India Limited (supra), the benefit passed upon by the Tribunal could not be extended, is wholly misplaced. The Notification No.7037, dated 31st January, 1985 was published by the State Government granting exemption from 1st February, 1985 to the sale or purchase of goods mentioned in column-2 subject to condition specified in column-3. At serial no.18, purchases and sales by Canteen Stores Department/ Military Canteens has been exempted subject to the condition provided in column-3. Relevant part of the notification is extracted hereas under:-

"18. Sales to or purchases and sales by:-

(a) Canteen Stores Department/ Military Canteens, or

(b) U.P. Government Employees Welfare Corporation, of all goods, other than those specified in the list.

On conditions that it is certified by-

(a) an officer not below the rank of Commanding Officer or, as the case may be,-

(b) the Executive Director, or an officer not below the rank of Deputy Director duly authorised by him,

that the goods are meant fo being sold to:

(a) members of the Armed Forces of India/other defence establishments/Ex-servicemen;

(b) employees and ex-employees of the State- Government."

17. From the reading of Notification dated 31.01.1985, benefit has been extended not only to the Canteen Stores Department/ Military Canteens, but also to U.P. Govt. Employees' Welfare Corporation. The State Government found that there were certain contradictions to its earlier notifications which were issued in the years 1977 and 1981 in regard to Khadi Evam Gramodyog and Canteen Stores Department/ Military Canteens.

18. The Commissioner, Trade Tax, on 23.07.1987, issued a circular re-conciling the two earlier notifications, and on the basis of the directions of the State Government, directed that sales made to Khadi Gramodyog Board/ Military Canteens/ Canteen Stores Department and U.P. Rajya Karmchari Kalyan Nigam, Chetna are exempted from tax, and they are to be treated as exempted within the meaning of Section 8 (2A) of the CST. Thus, any sale made to institutions will be exempted from tax.

19. The Circular dated 23rd July, 1987 has to be read in harmony with the Notification dated 31.01.1985, as the Notification of 1985 also provided exemptions of tax subject to certain conditions. Due to contradictions existing between the earlier notifications of the Government, Circular dated 23.07.1987 was issued on the direction of the State Government re-conciling the said fact. Though, the Circular of 23rd July, 1987 does not take note of the Notification dated 31.01.1985, but it mentions of the Notification dated 03.02.1981 which disallowed the exemptions under Section 8(2A) of CST.

20. The argument of State Counsel cannot be accepted to the extent that the judgment of Dabur India Ltd. (supra) would not help the Assessee, due to the fact that the Co-Ordinate Bench had taken note of the Notification dated 31.01.1985, but placing reliance upon the Circular of 23rd July, 1987 has extended the benefit to the Assessee, therein.

21. From the reading of Circular dated 23.07.1987, it is clear that the intention of the Government was to extend the benefit to the sales and purchases made to Khadi Gramodyog Board, Military Canteens/ Canteen Stores Department and U.P. Rajya Karmachari Kalyan Nigam, Chetna treating it to be exempted within the meaning of Section 8 (2A) of the CST.

22. Mere not mentioning of the notification of the year 1985 in the Circular dated 23.07.1987 would not amount that the condition was not fulfilled and thus, no benefit could be extended to the Assessee. The sole purpose for issuance of circular in the year 1987 by Commissioner Trade Tax was to clarify the existing position on ground which had let to lot of contradictions, and the issue stood resolved after coming of the circular.

23. The Apex Court in Paper Products Ltd. (supra) and M/s Indra Industries (supra) has already clarified that circulars by Taxing Authorities are not binding on the Assessee, but the department could not take plea that they are not binding upon the department.

24. The issue raised by the department stands settled in the light of the judgment in M/s Dabur India Limited (supra). The only clarification, which is made, is that the Circular dated 23.07.1987 is, in fact, clarificatory in nature re-conciling the earlier notifications and has only put the controversy at rest, regarding the exemption to be granted under Section 8(2A) of the CST.

25. Considering the facts and circumstances of the case, I find that the judgment and order passed by the Tribunal needs no interference of this Court and all the revisions stand dismissed.

26. The questions of law, framed above, stand answered against the department, and in favour of the Assessee.

Order Date :- 20.1.2023

SK Goswami

[Rohit Ranjan Agarwal, J.]