IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR.

JUDGMENT

M/s Manglam Yarn Agencies Vs. Assistant Commissioner,

Commercial Taxes, Special
Circle, Bhilwara.

S.B. SALES TAX REVISION PETITION NO.129/2008

against the judgment and order dt.10.1.2001
passed by Raj. Tax board, Ajmer in Appeal No.1802/2006/Bhilwara.

Date of order : 25th September, 2008

PRESENT

HON'BLE DR. JUSTICE VINEET KOTHARI

Mr. Dinesh Mehta for the petitioner.

Mr. Vineet Mathur with Mr. Rishab Sancheti for the respondents.
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REPORTABLE
BY THE COURT:-

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

“Whether the exemption notification No.1490 dated 17.9.2001 SO No.183 issued under
Section 15 of the RST Act exempting sale or purchase of all kinds of man-made fibers and
man-made yarn to which the rate of tax in respect thereof exceeds 2% also covered the turn-
over tax imposed on the respondent- assessee under Section 13A of the RST Act, 1994 or the
said exemption is limited to the individual sale or purchase of the specified commodities in
the said notification.”

2. The Revenue Authorities, all three, concurrently held against the petitioner-
assessee that the notification dated 17.9.2001 did not cover the turnover tax payable by the
assessee under Section 13A of the Rajasthan Sales Tax Act, 1994 (hereinafter referred to as
'the Act').

3. Before coming to the controversy and case laws, it is considered expedient to

reproduce provisions of the Act and exemption notification and rate notification in question
for ready reference :-

“13-A. Levy of turnover tax.--

(1) Every registered dealer and every dealer who is liable to get himself registered under
section 3, and whose total turnover in a year exceeds three lacs rupees, whether or not the
whole or any portion of such turnover is liable to tax under any other provisions of this Act,
shall be liable to pay turnover tax, from such date and at such rate as may be notified by the
State Government but not exceeding ten percent of his gross annual turnover.

(2) No tax under sub-section (1) shall be payable on that part of turnover which relates to:-
(i) sale or purchase of exempted goods;
(ii) sale or purchase of goods in the course of inter-State trade or commerce;
(iii) sale or purchase of goods in the course of export out of the territory of India or sale or
purchase in the course of import into the territory of India;
(iv) all amounts collected by way of tax under the provisions of this Act or the Central Sales
Tax Act, 1956 (Central Act 74 of 1956);
(v) all amounts allowed to dealers in respect of goods returned to the dealer when goods
are taxable on sales provided that the goods were returned within a period of six months from
the date of delivery of the goods and the accounts show the date on which, and the amount
for which, refund was made;
(vi) all amounts realised by a dealer by the sale of his business as a whole;
and except as provided above, no other deduction shall be made from the gross
turnover of a dealer for the purpose of this section.

(3) For the purpose of assessment, collection and refund of tax levied under this section, the
provisions pertaining to assessment, collection and refund under other provisions of this Act
and Rules made thereunder shall mutatis mutandis apply.”

“15. Exemption of tax.-

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

4. The relevant notification providing for rate of turnover tax of 0.25 % dated
30.3.2000 and notification dated 17.9.1981 exempting the rate of tax on all kinds of man-
made fibers and man-made yarn exceeding 2% subject to certain conditions, are also
reproduced herein-under:-

“NOTIFICATIONS ON TURNOVER TAX

FINANCE DEPARTMENT
Tax Division
NOTIFICATIONS

Jaipur, March 30, 2000

S.O. 377.- In exercise of the powers conferred by section 13A of the Rajasthan Sales
Tax Act, 1994 (Rajasthan Act No.22 of 1995), the State Government being of the opinion that
it is expedient in the public interest so to do, hereby notifies that every registered dealer and
every dealer who is liable to get himself registered under the Act and whose total turnover is
not less than fifty lac rupees in a year, shall be liable to pay turnover tax under the said
section, at the rate of 0.25%.

[F.4(1)FD/Tax Div./2000-301]
By order of the Governor,
V. Srinivas,
Deputy Secretary to Government.”

“S.NO.1340 No.F.4(18)FD/Tax-Div./97-Part-III-92, Dated : 17-09-2001

In exercise of the powers conferred by section 15 of the Rajasthan Sales Tax
Act, 1994 (Rajasthan Act No.223 of 1995), the State Government being of the opinion that it
is expedient in the public interest so to do, hereby exempts from tax sale or purchase of all
kinds of man made fibers and man made yarn whether synthetic or non-;synthetic, collusosic
or non-cellulosic, blended or not and waste thereof, worsted and semi-worsted woolen yarn
including carpet woolen yarn, embroidery yarn, cotton yarn and cotton yarn waste, to the
extent to which the rate of tax in respect thereof exceeds 2%, on the following conditions,
namely :-
1. that these commodities are used as raw material for manufacture of fabrics in the State ;
and
2. that such manufacturer shall issue to the selling dealer a certificate in the Form appended
to this notification.
CERTIFICATE
I, ..........................(Name)................... (Status) authorised to make purchase on behalf
of M/s ...................... (Name and address of the purchasing dealer), do hereby certify that the
............................ (description of goods) purchased from M/s ......... (complete address of the
seller), holder of R.C. No................... (RST) ................ (CST), as per cash memorar dum/bill
No.................. Dated ...................... will be used as raw material for manufacture of fabric in
the State of Rajasthan.”

5. The principal submissions made by the learned counsel for the petitioner-
assessee Mr. Dinesh Mehta are as follows:-

(a) That since the exemption notification dated 17.9.2001 came after the turnover tax
rate notification dated 30.3.2000 providing for 0.25% turnover tax, the exemption notification
dated 17.9.2001 should be deemed to have an overriding effect and the rate of tax on sale of
all kinds of man made fibers and man made yarn including the turnover tax cannot exceed
2% and, therefore, the turnover tax levied by the Assessing Authority and upheld by the
appellate authorities upto the Tax board is wrong in law and the same deserves to be quashed
and set aside.

(b) That turnover tax in effect is also a tax on sale or purchase of the commodity and,
therefore, the notification dated 17.9.2001 would cover that also.

(b) Since the word 'tax' has been defined in Section 2(41) of the Act as any tax or other
levy by any name leviable under the provisions of the Act and 'turnover tax' has not been
separately defined, therefore, 'turnover tax' is included within the definition of 'tax' under
Section 2(41) of the Act and is governed by the notification dated 17.9.2001.

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

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

(g) that relying on the decisions of the Hon'ble Supreme Court in Mangalore Chemicals
& Fertilizers Ltd. V. Dy. Commissioner of Commercial Taxes and ors.- 1991 (83) STC 234
and Unionof India & Ors. Vs. Wood Papers Ltd. & Anr. - 1991 (83) STC 251, the learned
counsel for the petitioner-assessee urged that while interpreting the taxing statute including
the exemption notifications, the Rule of interpretation to be adopted is that while strict
interpretation has to be given to decide the question whether the subject falls within the
exemption or not but once exemption is held applicable, full play to such exemption clause
has to be given :-

“The choice between a strict and a liberal construction arises only in case of doubt in
regard to the intention of the Legislature manifest on the statutory language. Indeed, the need
to resort to any interpretative process arises only where the meaning is not manifest on the
plain words of the statute. If the words are plain and clear and directly convey the meaning,
there is no need for any interpretation. It appears to us the true rule of construction of a
provision as to exemption is the one stated by this Court in Union of India V. Wood Papers
Ltd. [1991] 83 STC 251 infra ; 1991 JT (1) 151 at 155:
“True, speaking, liberal and strict construction of an exemption provision are
to be invoked at different stages of interpreting it. When the question is whether a subject
falls in the notification or in the exemption clause then it being in nature of exception is to be
construed strictly and against the subject but once ambiguity or doubt about applicability is
lifted and the subject falls in the notification then full play should be given to it and it calls
for a wider and liberal construction...”

The learned counsel for the petitioner-assessee submitted that exemption

under notification dated 17.9.2001 cannot be narrowly construed and would also cover
exemption from turnover tax.

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

(b) That event of taxation for levy of tax on sale or purchase on each transaction is
different from levy of turnover tax on the gross annual turnover exceeding a particular limit
of turnover and these two being different concepts, cannot be mixed up and, therefore, the
Revenue Authorities have rightly held the assessee not entitled to the exemption from
turnover tax under the notification dated 17.9.2001.

(c) The words 'on' is absent before the words 'sale or purchase of all kinds of man made
fibers and man made yarn' in the notification dated 17.9.2001 and, therefore, the turnover tax
which is levied on gross sale value or turnover of the assessee during particular year cannot
be covered by the said exemption notification and the said notification clearly exempts only
individual transaction of sale or purchase from tax exceeding 2% rate subject to condition of
certificate of the commodity being used as raw material for manufacture of fabrics in the
State, whereas the turnover tax on the basis of gross annual turnover as determined under
Section 13A of the Act on which the turnover tax at the rate of 0.25% was leviable if the
turnover exceeded Rs.50 lacs in a year.

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

7. I have heard learned counsels at length and given my thoughtful consideration

to the controversy in hand and also the judgments cited at the Bar.

8. While it is true that the turnover tax is nothing but tax on turnover viz.
Aggregation of sale or purchase of goods and is, therefore, exigible with reference to Entry
54 of List II of Seventh Schedule to the Constitution of India, but the exigibility of the
turnover tax is upon happening of different kind of taxable event. It gets attracted when the
gross annual turnover exceeds a particular limit or bench mark. The character of tax remains
the tax on sale or purchase of goods, but the levy is attracted if the criteria of its levy is
fulfilled as defined in Section 13-A of the Act. The whole of the turnover does not attract the
turnover tax. The exclusion of turnover mentioned in sub-section (2) of Section 13A has to
be made viz. turnover of exempted goods, turnover of goods sold in the course of inter State
trade or commerce or in the course of export out of India etc. The levy of turnover tax is also
subject to restrictions imposed under Article 286 of the Constitution of India and Sections 14
and 15 of the CST Act as held by this Court in Merta Trade & Industries' case (supra) but the
question is, can rate of turnover tax prescribed in the notification dated 30.3.2000 at 0.25%
on the taxable turnover as determined under Section 13A of the Act exceeding Rs.50 lacs, be
further slashed down by implied exemption by a subsequent notification about the rate of tax
in relation to sale or purchase of all kinds of man made fibers and man made yarn under
notification dated 17.9.2001. The answer has to be in the negative. The reason is that
notification dated 17.9.2001 which in fact reduced the rate of tax applicable on the said
commodity to 2% or in other words granted exemption from rate of tax in excess of 2% on
the individual transaction of sale or purchase of the said commodity subject to fulfillment of
conditions specified in the said notification itself. The said notification issued under Section
15 of the Act which is the only source of power available with the State Government to grant
exemption does not refer to tax leviable under Section 13A of the Act. As rightly contended
by the learned counsel for the Revenue there is no intendment about tax, there is no equity
about tax. On a plain reading of the notification as per golden rule of the interpretation i.e. to
go by the plain language of the text of the notification, one can only come to the conclusion
that the said notification dt.17.9.2001 operates in a different field, whereas the levy of
turnover tax under Section 13A operates in another field. If the State Government wanted to
exempt turnover tax under Section 13 A also, nothing prevented the State Government from
issuing such separate notification or to mention it specifically in the same notification also.
The exemption under Notification dated 17.9.2001 is available with reference to individual
transaction of sale or purchase only, is further fortified by the certificate appended in the said
Notification as a condition for grant of exemption, which certificate can be given by the
purchasing dealer only in respect of individual sale or purchase of goods. There is no
concept of implied exemption or exemption by stretching exemption notification to cover the
turnover tax also whereas the same is not clearly exempted under the said notification dated
17.9.2001. As is well-known on the other hand, the taxing statutes including the exemption
notifications have to be strictly construed and plainly read. On a plain reading of the
notification, it does not appears to the Court that the State Government has exempted
turnover tax also under the said notification dated 17.9.2001.

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

“In the West Bengal Sales Tax Act, 1954, the Legislature itself has clearly and
unambiguously referred to the two forms of impost, one under section 4, which is referred to
as “a tax” and the other under section 4-AAA, which is referred to as “a turnover tax”. The
difference in nomenclature is consistently maintained in those as well as other sections of the
Act. Under Section 4-AA which provides for exemption, the empowerment to notify that no
tax shall be payable relates to “tax” levied under section 4. Therefore, Notification
No.1809/F.T. dated April 1, 1976, issued under section 4-AA obviously refers to the tax under
section 4 and not to “turnover tax” imposed under section 4-AAA. A small-scale industrial
unit is not entitled exemption from payment of turnover tax during the period of the validity
of the eligibility certificate by virtue of the notification issued under Section 4-AA.
Kejriwal Electronics Private Limited & Co. V. Commercial Tax Officer [1991] 81
STC 20 (WBTT) [FB] approved.
ABN Food & Beverage Pvt. Ltd. v. Assistant Commissioner of Commercial Taxes
[1990] 77 STC 339 (Cal) overruled.
Decision of the West Bengal Taxation Tribunal in SUN OIL Co. Vs. PVT LTD. V.
STATE OF WEST BENGAL [1994] 93 STC 24 affirmed.”

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

11. Thus, this Court finds no force in the contentions raised by the learned counsel
for the assessee that the turnover tax imposed upon the assessee should also be deemed to
have been exempted under the notification dated 17.9.2001 and nothing beyond 2% on sale of
all kind of man made fibers and yarn could be imposed in the face of the said notification.
The said notification, in the considered opinion of this Court does not cover and exempt
turnover tax leviable under Section 13A of the Act and the said turnover tax imposed at
0.25% under notification dated 30.3.2000 is neither hit nor eclipsed nor cut by the subsequent
notification dated 17.1.2001.

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

item No._
babulal/