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PETITIONER: STATE OF RAJASHTAN & ANR.ETC.ETC.

       Vs.

RESPONDENT: SARVOTAM VEGETABLES PRODUCTS ETC.ETC.

DATE OF JUDGMENT:       09/04/1996

BENCH: VENKATASWAMI K. (J) BENCH: VENKATASWAMI K. (J) VERMA, JAGDISH SARAN (J) BHARUCHA S.P. (J)

CITATION:  JT 1996 (4)    53        1996 SCALE  (3)346

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P.JEEVAN REDDY.J.      These appeals  are preferred  against the judgment of a Division Bench  of the Rajasthan High Court allowing a batch of special  appeals filed  by the respondents-assessees. The special appeals  were preferred  against the common judgment of a  learned Single Judge of that Court dismissing the writ petitions filed by them. The matter arises under the Central Sales Tax Act, 1956.      The  respondents-assessees   are  manufacturers  and/or dealers in  edible oils  and stainless  steel sheets. During the relevant  years, they  effected a large number of inter- State sales  to various  dealers in Bombay and Gujarat. They obtained C-forms  from the  purchasing dealers and submitted them in their assessment proceedings. On survey and inquiry, it was  found that many of the C-forms were either not valid or not  genuine. Some of them were found to have been issued to  dealers   other  than   the  respondents.   Accordingly, antievasion   proceedings   were   commenced   against   the respondents. Notices  were issued calling upon them to show- cause why  additional tax  and penalty  be  not  levied  and recovered  from   them.  It   is  at  that  stage  that  the respondents approached  the Rajasthan  High Court  by way of writ petitions  contending that  since the inter-State sales effected by  them are covered by the Exemption Notifications dated 26th  December, 1986/17th  April, 1990 and because the said notifications do not require the production of a C-form as a  condition for availing the exemption provided thereby, they were  under no  obligation to  produce the  same and no action can  be taken  against  them  for  producing  alleged invalid or  spurious C-forms.  It was, of course, their case that if the C-forms are found to be invalid or spurious, the responsibility lies  upon the  purchasing dealers who issued them and  that they  themselves were  in no  way responsible therefor. The  learned Single Judge disagreed with the legal

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submission (based  upon Exemption Notifications) put forward by the  respondents and  dismissed their  writ petitions. On appeal,  however,   the  Division   Bench  has   upheld  the respondents contention  and allowed the special appeals (and the writ petitions) filed by the respondents.      Section 8  of the  Central Sales Tax Act prescribes the rates of  tax on inter-State sales. Sub-section (1) provides that "Every  dealer, who  in the course of inter-State trade or commerce  - (a) sells to the Government any goods; or (b) sells to  a registered  dealer, other  than the  Government, goods of  the description  referred to  in sub-section  (3); shall be  liable to  pay tax under this Act, which shall be- four percent  of his  turnover." Sub-section  (2) says  that inter-State sales not falling under sub-section (1) shall be liable to  be charged at the higher rates mentioned therein. Sub-section (3)  specifies the  goods for  the  purposes  of Clause (b) of Sub-section (1) of Section 8. It is sufficient to mention  that sub-section  (3) contemplates certain goods or   class of  goods  being  Specified  the  certificate  of registration of  the purchasing  dealers, which are intended either for  re-sale or  for being  used as  raw-material for manufacturing other goods or for other purposes mentioned in the sub-section. Sub-section (4) then states:      "(4) The  provision of  Sub-section      (1) shall  not apply to any sale in      the course  of inter-State trade or      commerce unless  the dealer selling      the   goods    furnishes   to   the      prescribed   authority    in    the      prescribed manner -      (a) a  declaration duly  filled and      signed by  the registered dealer to      whom the  goods are sold containing      the prescribed  form obtained  from      the prescribed authority: or.      (b) if  the goods  are sold  to the      Government, not  being a registered      dealer,  a   certificate   in   the      prescribe  form   duly  filled  and      signed by a duly authorized officer      of the Government.           Provided that  the declaration      referred  to   in  clause   (a)  is      furnished  within   the  prescribed      time or within such further time as      that authority  may, for sufficient      cause, permit." Sub-section (5)  confers upon the State Government the power of exemption.  The power  of exemption can be exercised both with reference to dealers as well as with reference to good. The exemption  can be granted either wholly or partially and subject to such conditions as may be imposed in that behalf. Sub-section (5) reads as follows:      "(5)    Notwithstanding    anything      contained  in   this  section,  the      State  Government  may,  if  it  is      satisfied that  it is  necessary so      to do  in the  public interest,  by      notification   in    the   official      Gazette,  and   subject   to   such      conditions  as   may  be  specified      therein, direct,      (a) that  no  tax  under  this  Act      shall  be  payable  by  any  dealer

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    having his place of business in the      State in  respect of  the sales  by      him, in  the course  of inter-State      trade or  commerce, from  any  such      place of business of any such goods      or  classes  of  goods  as  may  be      specified in  the notification,  or      that the tax on such sales shall be      calculated at such lower rates than      those specified  in subsection  (1)      or  sub-section   (2)  as   may  be      mentioned in the notification:      (b) that in respect of all sales of      goods or  sales of  such classes of      goods as  may be  specified in  the      notification, which  are  made,  in      the course  of inter-State trade or      commerce, by  any dealer having his      place of  business in  the State or      by any class of such dealers as may      be specified in the notification to      any person  or  to  such  class  of      persons as  may be specified in the      notification, no tax under this Act      shall be payable or the tax on such      sales shall  be calculated  at such      lower rates than those specified in      subsection (1)  or sub-section  (2)      as  may   be   mentioned   in   the      notification." The scheme of Section 8, insofar as it is relevant herein is this: sub-section  (1) of  Section 8 prescribes a lower rate of Central Sales Tax on two types of inter-State sales viz., (a) sales  to Government  of any  goods  and  (b)  sales  to registered dealers,  other than the Government, goods of the description referred  to in  sub-section  (3),which  may  be referred to  hereinafter referred  to as specified goods for the sake  of convenience. The rate of tax in these two cases is 4  per cent.  So far  as  the  sales  to  Government  are concerned, there  is no restriction as to the type or nature of goods  sold. All  inter-State sales  to Government of any goods whatsoever  fall under  clause (a) of sub-section (1). But so  far as  sales  to  registered  dealers  (other  than Government) are  concerned, they  must be sales of specified goods only  to become  eligible to  claim the  lower rate in sub-section (1). The sales not falling under sub-section (1) are taxed  at higher  rates provided in sub-section (2). (We are not  referring to  sub-section (2-a)  because it  is not relevant  for   the  present   purposes.)  Sub-section   (3) specifies the  goods for  the purposes  of Section 8 (1)(b). Sub-section (4)  is really  in the  nature of a provision to sub-section (1).  Sub-section (4)  imposes a condition which must be satisfied by the dealer seeking to avail of the rate of tax provided by sub-section (1). The condition prescribed by sub  section (4)  is (a)  if the  goods  are  sold  to  a registered  dealer,   the  selling  dealer  assessee  should furnish to  his assessing  officer a declaration duly filled and signed  by the  registered dealer  purchasing the  goods containing the prescribed particulars in the prescribed form obtained from the prescribed authority. (b) if the goods are sold  to  Government,  not  being  a  registered  dealer,  a certificate in the prescribed form duly filled and signed by a duly  authorized  officer  of  the  Government  should  be furnished by  the selling  dealer assessee  to his assessing authority. The  Rules made under the Act prescribe the forms

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in which  the aforesaid  declaration and certificate, as the case  may   be,  has   to  be   issued  by   the  purchasing dealer/Government. In the case of Government it is called D- form (certificate)  and in the case of registered dealers it is called  C-form (declaration)  - Vide  Rule 12(1)  of  the Central Sales  Tax (Registration and Turn-over) Rules, 1957. We shall  refer to  the contents of C-form alone. The C-form prescribed by  the  Rules  is  titled  "Form  C  -  Form  of Declaration". These  forms are  supplied by  the appropriate authority  under   the  Act  to  the  purchasing  registered dealers.  If   this  form,   containing  all   the  relevant particulars is  issued  by  the  purchasing  dealer  to  the selling dealer,  the latter  will collect  tax (passon  tax) from the  purchasing dealer  only at  the rate prescribed in Section 8(1):  otherwise, he  will collect tax at the higher rate, as  may be applicable, prescribed by Section 8(2). The purchasing dealer  must furnish all the particulars required by the  said declaration/form.  They include (1) name of the issuing State,  office of  issue, date of issue, name of the purchasing dealer alongwith his registration certificate No. and the  date from which the registration is valid and - (2) particulars  of   the  goods  purchased,  of  the  Bill/cash memo/challan concerning  the purchase  and the  purpose  for which the   goods  are   purchased. It  has to  be signed by the purchasing   dealer.  The   selling dealer  must produce these   ’C’ forms in his assessment proceedings if he wishes to   be taxed  at the  (lower) rate  in  Section  8(1).  The purpose of  the C-form  is obvious:  the parliament wants to tax specified  goods purchased  for specified purposes (sub- section (3) of Section 8) at a lower rate but anyone wishing to avail  of the said lower rate must obtain from purchasing dealer the  ’C’ form  and produce  it before  his  assessing officer. Thus, clause (b) of sub-section (1), subsection (3) and sub-section (4) go together. (Similarly, Section 8(1)(a) and sub-section (4) go together. The reason why the ’C’ form requires several  particulars to be stated is to ensure that the concessional  rate prescribed  by Section 8(1)(b) is not misused or  abused. With  the help of those particulars, the appropriate authority  or authorities  can verify  the truth and correctness  of the transaction. Both the selling dealer and purchasing  dealer are  under an  obligation to abide by the said  requirements of  law; otherwise  the  very  scheme underlying the  said provisions  breaks down.  This  crucial significance of the ’C’form needs to be kept in mind.      Sub-section (5)  of Section  8  confers  the  power  of exemption upon  the  State  Government.  As  is  well-known, almost every taxing enactment contains such a provision. The exemption under  Section 8(5)  can be  granted  either  with reference to  dealers or  class of dealers or with reference to goods  or classes of goods. The exemption can be total or partial. It  can also be subject to such condition as may be prescribed in that behalf.      In these  appeals we  are concerned  with two exemption notifications issued under Section 8(5). They are dated 26th December, 1986  and 17th  April, 1990  (which was  issued in super-session  of  the  notification  dated  26th  December, 1986).  It   would  be  appropriate  to  set  out  both  the notifications:      "Notification            No.F.4(92)      FD/Br.IV/82-41  Jaipur  dated  26th      Dec. 1986.      S.O.153 - In exercise of the powers      conferred  by  sub-section  (5)  of      Section 8  of the Central Sales Tax      Act, 1956 (Central Act 74 of 1956),

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    and  in   supersession  of  Finance      Department  Notification  No.F.2(8)      FD/Gr.IV/75-15, dated July 1, 1975,      the    State    Government    being      satisfied that  it is  necessary so      to do in the public interest hereby      directs with  immediate effect that      the tax  payable under  sub-section      (1) of  the  said  Section  by  any      dealer,   having   his   place   of      business in  the course  of  Inter-      state trade  or  commerce,  of  all      edible   oils   excluding   -   (1)      Hydrogenated    oils     (including      ’Vanaspati’), (2)  Palm Oil whether      refined or  not,  and  (3)  Refined      coconut oil  shall be calculated at      the lower  rate, as  in clause  (a)      below, on the condition namely      (a)  1-1/2%   where  the  assessing      authority  satisfied  that  oilseed      purchased for  the  manufacture  of      such oil have been subjected to tax      in accordance  with  Section-SC  of      the Rajasthan  Sales Tax  Act, 1954      (Rajasthan Act  29 of  1954) or  2-      1/2% were  the assessing  authority      is    satisfied    that    oilseeds      purchased for  the  manufacture  of      such oil have been subjected to tax      in accordance  with Section  SCC of      the Rajasthan  Sates Tax  Act, 1954      (Rajasthan Act 29 of 1954);      (b)   Claim    regarding    partial      exemption under  Finance Department      Notification   No.F.4   (72)   FD/-      Gr.IV/81-18,  dated   May  6,  1986      shall not be made and allowed.      (Pub. in  Raj. Gaz.  Ext. Part  IV-      C(II), dated 26.12.1986)      Note:-   This    Notification   was      superseded     by     Notifications      No.F.4(90)  FD/Gr.IV/82-101   dated      17.4.1990 (S.No.218)."      "Notification            No.F.4(90)      FD/Gr.IV/82-101, Jaipur  dated 17th      April, 1990      "S.O.4 -  In exercise of the powers      conferred  by   sub-section(5)   of      Section 8  of the Central Sales Tax      Act,  1956   (Central  Act   74  of      1956),and in  supersession of  this      department notification  No.F.4(TS)      FD/Gr.IV/82-41,     dated      26th      December,    1986,     the    State      Government  being  of  the  opinion      that it  is expedient in the public      interest so  to do,  hereby directs      with immediate  effect that the tax      payable under  sub-section  (1)  of      the said  section  by  any  dealer,      having his place of business in the      State in  respect of  sale by  him,      from any  such place of business in      the course  of inter-state trade or

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    commerce,  of   all   edible   oils      excluding  (i)   Hydrogenated   oil      (including vanaspati)  (2) Palm oil      whether refined  or  not,  and  (3)      refined  coconut   oil   shall   be      calculated at the rate of 1-1/2% on      the following conditions:      (1) That  such dealer proves to the      satisfaction   of   the   Assessing      Authority that  the oil  seeds used      in the  manufacture of  such edible      oil have  already been suffered tax      under tax  Act 3%  within the state      of Rajasthan;      (f) That  such dealer  shall not be      entitled  claim  partial  exemption      under      Finance       Department      Notification No.F.4(72)  F.  81-18,      dated 6th  May, 1986  and  as  from      time to time.      (Pub. in Raj.Gaz. Ext.Part IV-C(II)      dated 18.4.1990)"      A reading  of the  notification of  26th December, 1986 shows that  the exemption  granted under the notification is not total  but partial. As against 4 per cent leviable under Section 8(1) the notification provides that the tax shall be paid at  the rate  of 1-1/2%.  or 2-1/2% as the case may be. The exemption  applies to  and extends  to all  edible  oils excluding those  oils as  are specified in the notification. Furthers the  exemption is subject to a condition viz., that the dealer  claiming the  exemption  imposed  satisfies  the assessing authority  that the  oil seeds  purchased for  the manufacture  such   oil  have   been  subjected  to  tax  in accordance of  with Section  5-C of  the Rajasthan Sales Tax Acts 1954  in which  cases the  sales tax will be charged at the rate  of 1-1/2%; in case the oil seeds purchased for the manufacture of  such oil  have been  subjected to  tax under Section 5-CC  of the  Rajasthan Act  then the  rate  of  tax leviable on  the inter-State sale of edible oils would be 2- 1/2% There  is yet another condition mentioned in clause (b) of the  said notification with which we are not concerned in these appeals and hence is not being referred to by US.      The Notification  dated 17th  April,1990  was issued in supersession  of   the  aforementioned   notification.  This notification too  exempts inter-State  sales of  all  edible oils excluding  certain oils  mentioned therein.  As against the tax  payable at  the rate  of 4% under section 8(1), the Notification prescribes a single rate of 1-1/2% provided the two conditions  mentioned therein  are satisfied.  The first condition is  that the  dealer proves to the satisfaction of the assessing  authority that  the oil  seeds  used  in  the manufacture of  such edible  oil have  already suffered  tax under the  Act at the rate of 3 per cent within the State of Rajasthan We need not refer to the second condition since we are not concerned with it in these appeals.      Now the  contention of  the respondents-dealers,  which has found  favour with  the Division Bench of the High Court is this:  the notifications and sub-section (5) of Section 8 whereunder   it   has   been   issued   are   self-contained notifications/provision. Section  8(5)  empowers  the  State Government to  grant exemption subject to such conditions as they  may  deem  fit  to  impose  in  public  interest.  The notifications do  impose certain  conditions.  They  do  not provide that  production of  a ’C’  form  is  essential  for availing the  benefit of  the notification.  If so,  no such

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condition  should   be  read  into  notification.  The  only condition which  a dealer seeking to avail of the benefit of the notification  is to  satisfy are  those mentioned in the notification and  no other.  In other  words, the  condition mentioned in sub-section (4) of Section 8 cannot be insisted upon as  a condition  for obtaining  the benefit  under  the notification. We are of the opinion that the said contention is misconceived  and that  the Division  Bench of  the  High Court has erred grievously in accepting it.      Sub-section (5)  of Section  8 is  an integral  part of Section 8  and the  Act as  such. The  said power  has to be exercised in public interest. The power of exemption and its exercise is  to be  guided by  and be  consistent  with  the provisions of  the Act.  More important, the levy of central sales tax  and the  prescription  of  rate  is  not  by  the notifications but by the Act itself. Section 8(1) prescribes the rate  and sub-section  (4) the  condition that has to be satisfied for  availing of the rate in sub-section (1). What the notifications  do is  to reduce  the rate  prescribed by Section 8(1)  further, subject  to certain  conditions.  The conditions  prescribed   by  the   notifications   are   the conditions prescribed  for availing the further reduction of rate provided  by the notification. The notifications merely reduce the  rate of  tax; they  do not do away with the levy altogether. All  that the  notifications  have  done  is  to reduce the  rate of  tax from  4% to  1-1/2% (2-1/2%, as the case  may   be).  Separate  conditions  are  prescribed  for availing the  rate (which  itself is  a  concessional  rate) prescribed in  Section 8(1)  and for  availing  the  further reduction provided  by the  Notification. Those  two sets of conditions  are  prescribed  by  Section  8(4)  and  by  the notifications respectively.  One cannot conceive of the said notifications independent  of, or  apart from  section 8(1). They merely  reduce the  rate in  Section  8(4)  as  already mentioned. One  must first  satisfy the condition in section 8(4) to become eligible for the concessional rate in Section 8(1). It is only thereafter that he can claim the benefit of the said  notifications, for  which purpose  again he has to satisfy the  conditions prescribed  in the Notifications. It is therefore  wrong  to  think  that  Section  8(5)  or  the notifications are  self-contained and  operate de  hors  the other provisions  of the  Act/Rules. The  Division Bench has unfortunately failed  to  appreciate  the  Notifications  in their correct  perspective. We  are of  the opinion that the judgment under  appeal is  unsustainable in  law and  it  is accordingly set aside. The learned Single Judge was right in dismissing the writ petitions.      So far  as the  merits are concerned viz., the validity and genuineness  of C-forms  produced  by  the  dealers,  we express no  opinion. That is a matter to be gone into by the appropriate authorities  under the  Act in  the  proceedings which are yet to be concluded.      We are  unable to see how the decision of this Court in McDowell And  Company v.  Sales tax Officer (29) S.T.C. 163= 1972   (4)   S.C.C.   365)   is   of   any   help   to   the respondents/dealers. In  that decision,  it  was  held  that since  the   appellant  therein  did  not  comply  with  the condition  prescribed   in  the  notification,  it  was  not entitled to  its benefit.  The appellants’  case was that it effected sales to dealers in Pondicherry and Goa and that at the relevant  time the  Central Sales  Tax Act  had not been extended to  Pondicherry and that, therefore, the purchasing dealers  there   could  not  issue  C-forms.  The  appellant contended that  in such  a situation, he cannot be compelled to produce  C-forms  in  respect  of  sales  to  dealers  in

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Pondicherry. The  said contention  was rejected holding that since he  had not  produced the  declaration  prescribed  by Section 8  of the  Act and  the  notification,  he  was  not entitled  to   the  benefit   of  Section   8(1)   and   the notification. So  far  as  sales  to  dealers  in  Goa  were concerned, the benefit of the notification was denied on the ground that  the C-forms  were not  filled within  the  time prescribed.      Sri  Harish   N.Salve,  the  learned  counsel  for  the respondents-dealers submitted  that in  case this Court does not affirm  the decision  of the  Division Bench of the High Court, this  Court may  extend the  time for  filing the  C- forms. We do not think that any such direction is called for at this  stage. The  proviso to sub-section (4) of Section 8 has been interpreted and explained by this Court in State of Andhra Pradesh  &  Ors.  v.  M/s.Hyderabad  Asbestos  Cement Production Limited  &  Ors.  (1994  (5)  S.C.C.100).  It  is obvious that  the said  decision shall guide the authorities in the  matter. So  far as  the validity  or genuineness  of those forms  is concerned,  that is  a question  fact to  be decided in  each given  case. No  direction can  be given in that behalf.      The appeals  are allowed  accordingly.  The  appellants shall be entitled to their costs which are quantified at the rate of Rs. 5,000/- in each appeal.