IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR.

<<>>
:: O R D E R ::
Commercial Taxes Officer
Circle 'D', Jodhpur Vs. M/s Bhawani Exports

(1) S.B. SALES TAX REVISION PETITION NO.580/1999

<<>>

Commercial Taxes Officer

Circle 'D', Jodhpur Vs. M/s Bhawani Emporium

(2) S.B. SALES TAX REVISION PETITION NO.581/1999

<<>>

Date of Order :::: 13th October 2008.

PRESENT
HON'BLE MR. JUSTICE DINESH MAHESHWARI
Mr.Rishabh Sancheti for
Mr.Vineet Kumar Mathur, for the petitioner.

Mr. Neeraj Jain for

Mr.Anjay Kothari, for the non-petitioner.
…

BY THE COURT:
These two revision petitions have been preferred by the revenue against the common
order dated 27.08.1998 as passed by the Rajasthan Tax Board, Ajmer whereby the Tax Board
has dismissed its similar appeals preferred against the common order dated 24.02.1995 as
passed by the Deputy Commissioner (Appeals), Jodhpur in the respective appeals preferred
by the dealers. Having been preferred against the common order and involving a similar
question, these revision petitions have been heard together; and are taken for disposal by this
common order.
The aspects relevant for determination of the question involved in the matter are that
while making assessments for the financial year 1990-91 in respect of the non-petitioners
dealers, the Assessing Authority observed that certain handicrafts items were purchased by
the dealers for re-sale under Form ST-17 but were sold for the purpose of exports under Form
ST-17B and, on the opinion that the purchase on Form ST-17 was not for exports, the
Assessing Authority issued notice to the dealers as to why purchase tax be not imposed; and,
for want of a plausible reply, the Assessing Authority proceeded to impose 10% purchase tax
and interest thereupon in the separate assessment orders dated 01.06.1994. The amount
involved in that regard in relation to the non-petitioner M/s Bhawani Exports (CR No.
580/1999) had been 10% tax on Rs. 1,80,000/- i.e., Rs. 18,000/- and interest at Rs. 13,320/-;
and that in relation to the non-petitioner M/s Bhawani Emporium (CR No. 581/1999) had
been 10% tax on Rs. 1,17,792/-, i.e., Rs. 11,779/- and interest at Rs. 8,716/-. In the said
assessment orders there had been certain other additions and impositions too but the same are
not the subject matter of these petitions.
Aggrieved by the aforesaid assessment orders dated 01.06.1994, the dealers preferred
respective appeals and the learned Deputy Commissioner (Appeals), Jodhpur proceeded to
partly allow the same. So far the subject matter of these two revision petitions is concerned,
the learned Appellate Authority observed that under the provisions of Sections 5 and 5-A of
the Rajasthan Sales Tax Act, 1954 [‘the Act of 1954’], in the given circumstances, purchase
tax could not be levied; that the goods were purchased from the registered dealers as per the
notification dated 01.12.1986 and were sold within the State to the exporters; the purchasers
of the dealers were the exporters who were entitled to purchase the goods from the registered
dealers in the State without paying the tax. In such a legal position, the purchase tax,
according to the Appellate Authority, could not have been levied on the dealers. It was also
observed that as per the first proviso to Section 5-A of the Act of 1954, if the goods were used
for the declared purposes, purchase tax could not be levied. The Appellate Authority,
therefore, proceeded to set aside the levy of purchase tax and the related component of
interest while partly allowing the appeals by the common order dated 24.02.1995.
In the appeals taken to the Tax Board by the revenue against the common order
aforesaid, on behalf of the dealers was referred a decision of this Court in CWP No.
1650/1993 in the context of the notification No. F.4(8) FD/Gr.IV/94-51 as issued by the
Finance Department on 07.03.1994. The learned member of the Tax Board proceeded to
observe that under Form ST-17 B the goods were sold for export; and before export, it had
been inter-State sale but there was no tax liability in the dealers in view of the said
notification dated 07.03.1994 (that has been mentioned as notification dated 07.03.1990 in
the impugned order but its correct date, admittedly, is 07.03.1994).
Aggrieved, the Department has preferred these two revision petitions and it is
submitted that the result as given out by the two Appellate Authorities had been that tax had
not been paid at any point and that would be in violation of the Act of 1954 and against the
legislative philosophy behind the laws of sales and purchase tax. With reference to the
notifications dated 01.12.1986 and 07.03.1994, it is submitted that the learned Appellate
Authorities have not properly looked at the meaning and purport of the same; and reliance on
the order passed by a Division Bench of this Court in CWP No. 1650/1993 has also been
misplaced.
Learned counsel for the petitioner has referred to the fact that the goods were
procured by the non-petitioners without payment of tax under Form ST-17 and that carried
specific declaration that the goods would be taxable at the last point. According to the learned
counsel, the declaration was definitely violated when the goods are attempted to be sold
under Form ST-17B. It is submitted that avoidance of tax by the dealers in this manner
cannot be countenanced.
The relevant parts of Section 5-A of the Act of 1954 dealing with levy of purchase
tax, as operative at the relevant point of time, read as under:-
5A. Levy of Purchase Tax.- (1) Every dealer who in the course of his business purchases any
goods other than exempted goods, in circumstances in which no tax under section 5 and 5E is
payable on the sale price of such goods, shall be liable to pay tax on the purchase price of
such goods at the same rate at which it would have been leviable on the sale price of such
goods under section 5 and 5E:

Provided that no tax under this section shall be levied on a dealer other than a casual
trader or any other dealer in goods (except cereals and pulses) notified for the purpose of
clause (ccc) of section 2 in respect of any year in which the aggregate of purchase price of all
the goods purchased by him does not exceed ten thousand rupees:

Provided further that the provisions contained in the first proviso to section 5 shall
apply to the tax leviable under this section as if for the word ‘sale’ wherever occurring
therein, the word ‘purchase’ were substituted.
(2) If any dealer has purchased any goods without paying any tax or after paying tax at
concessional or reduced rate of tax on the strength of any declaration furnished by him under
the Act, the purchase price of such goods shall be included in his taxable turnover, and such
dealer shall be liable to pay tax at the same rate at which it would have been leviable on the
sale price of such goods under section 5 and 5E:

Provided that if the dealer satisfies the assessing authority that the said goods have
been utilised for the purpose mentioned in the declaration form, the purchase price of such
goods shall not be included in his taxable turnover:

Provided further that the dealer shall be entitled to claim set-off of the tax paid by him
on the purchase price of such goods, against the tax payable on his taxable turnover.
(3)............''
The notification dated 01.12.1986, as reproduced in the revision petitions reads as under:-
'' F.5(118) FDGr.IV/71 dated 1.12.1986

S.O.131.- In pursuance of rule 15 of the RST Rules, 1955, and in supersession of FD

notfn No.F.5(40) FDRT/63-1 dated 23.3.1963 [S.No.53], as amended from time to time, the
State Govt. hereby directs that with immediate effect the tax payable under S.5 of the Act on
the sale of goods manufactured in Rajasthan by any manufacturer holding a certificate of
registration under the Act shall be at the following points, namely:-

(a) When sale is made by such manufacturer to (1) an unregistered dealer, (2) a consumer, (3)
a registered dealer for purposes other than sale within the State or sale in the course of inter-
State trade or commerce, or (4) a registered dealer who is entitled to claim exemption under
S.4(2) of the Act on the sale of such goods within the State, at the point of sale by the
manufacturer himself; and

(b) When sale is made by such manufacturer to a registered dealer for purposes of sale within
the State, whether or not to a deptt. of the State or Central Govt., on which tax under the Act
either at full rate or otherwise or at the rate according to [Ss.5C and 5CC] of the Act is paid,
or sale in the course of inter-State trade or commerce on which tax under the CST Act, 1956,
is paid, at the point of sale by such registered dealer on the condition that he undertakes to
pay such tax and a declaration, which shall be furnished to the AA to that effect in form ST
17 prescribed under the rules is obtained by such manufacturer from such registered dealer.”

The referred notification dated 07.03.1994 reads as under:-

“F.4(8) FD/Gr.IV/94-51 dated 7.3.1994

S.O.181.- In exercise of the powers conferred by sub-section (2) of Section 4 of the

Rajasthan Sales Tax Act, 1954 (Rajasthan Act No. 29 of 1954), the State Government being
of the opinion that it is expedient in the public interest so to do, hereby exempts from tax the
purchase of all goods made upto 31st March [1995] by a registered dealer liable to pay tax
under section 5A of the said Act on the following conditions; namely:-

(i) that the goods so purchased have been sold in the course of inter-State trade or commerce;
and
(ii) that any tax on the purchase of the said goods, if charged or collected, shall be paid to the
State Government, and if paid to the State Government, shall not be refunded.''

Sub-section (2) of Section 4 of the Act of 1954, whereunder the said notification dated
07.03.1994 had been issued, is also reproduced hereunder for ready reference:
“4(2) Where the State Government is of opinion that it is necessary or expedient in the public
interest so to do, the State Government may, by notification in the Official Gazette exempt,
whether prospectively or retrospectively from tax the sale or purchase of any goods or class
of goods or any person or class of persons on such conditions and on payment of such fee as
may be specified in the notification.’’

It is not in dispute that initially the said notification dated 07.03.1994 was issued while
exempting from tax purchases of goods upto “31st March 1990”; and the notification was
later on amended to provide exemption from tax purchases of goods upto “31st March 1995”.
The transactions in question had been of the year 1990-91; and the said notification dated
07.03.1994 would clearly cover the same.
While issuing the said exemption notification on 07.03.1994, the State Government
was obviously aware of the existence of the notification dated 01.12.1986 and fact was
clearly in the knowledge of the State Government that purchases would have been made
under the declaration in Form ST-17 also. Per Section 4(2) of the Act of 1954, the State
Government had the authority to exempt from tax, whether prospectively or retrospectively,
the sale or purchase of any goods or class of goods or any person or class of persons on such
conditions and on payment of such fee as may be specified. Existing such position, when the
State Government proceeded to consciously issue the notification dated 07.03.1994, it cannot
be said that the benefits thereunder would not be available for the purchases made under ST-
17. There is no such indication available that the notification dated 07.03.1994 was
restrictive in its operation or that it was not intended to be available for the purchases made
under ST-17. If the notification dated 07.03.1994 was intended to be restrictive or
inapplicable for the purchases made under ST-17, such a relevant aspect would have been,
and was rather required to be, spelt out specifically. Instead and other way round, the said
notification has only provided that any tax on the purchase of the said goods, if charged or
collected, shall be paid to the State Government and if paid to the Government would not be
refunded.

On a plain reading of the notification dated 07.03.1994, the intention is manifest that on the
purchases of goods as made by a registered dealer upto 31.03.1995, the levy of purchase tax
was exempted if the goods were sold in the course of inter-State trade or commerce. The said
notification came to be issued much later i.e., on 07.03.1994 whereas Section 5-A for levy of
purchase tax had existed in the statute book since long. For this reason, the second clause in
the said notification provides that tax on purchase of the said goods, if charged or collected,
shall be paid to the State Government and if already paid, shall not be refunded. The obvious
corollary is that if no such tax has been charged or collected, the same is not to be levied. It is
not the case of the department that the dealers in the present cases had charged or collected
any such purchase tax.
For whatever reason the tax was not charged or collected, the operation of the said
notification dated 07.03.1994 is plain and clear; and in view thereof, there would arise no
question of the revenue suggesting levy of purchase tax in the present cases. In fact, such was
the position very fairly conceded by the revenue before the Division Bench of this Court in
CWP No. 1650/1993; and the Hon'ble Division Bench decided the said writ petition with the
following order:-
“1.2.95

Hon'ble Mr.J.R.Chopra,J.
Hon'ble Mr.P.K.Palli,J.

Mr.Rajendra Mehta for the petitioner.

Mr.B.C.Mehta )
Mr.A.K.Rajvanshy), for the respondents.
--

Mr.Rajendra Mehta submits that the Sales Tax Department itself has issued a
notification No.pa.4(8)FD/Gr.4/94-51 dated 7.3.1994, whereby the purchases made upto
31.3.1990 have been exempted under conditions no.1 and 2 mentioned in the aforesaid
notification. The contention of the petitioner is that he complies with those conditions and,
therefore, no assessment should have been ordered as regards levy of purchase tax. The
situation is not disputed by the learned counsel appearing for the opposite side.

2. In these circumstances assessment order (Annex.1) passed on 8.12.1992 for the period
1.4.1989 to 31.3.1990 passed by the respondent no.3 is set aside and it is hereby ordered that
respondents are not entitled to levy any purchase tax from the petitioner for the period
1.4.1989 to 31.3.1990 if they have already complied with the two conditions mentioned in the
aforesaid notification.

3. The writ petition is disposed of with the above observations.''

The said notification dated 07.03.1994 appears to be taking in its sweep the transactions of
the present nature too and existing such notification, demand of purchase tax does not appear
justified. There appears no illegality in the order passed by the Tax Board.
The revision petitions remain bereft of substance and are, therefore, dismissed. No costs.

(DINESH MAHESHWARI),J.
Mohan/