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PETITIONER: MURLI MANOHAR AND CO. AND ANR.

       Vs.

RESPONDENT: STATE OF HARYANA AND ANR. ETC. ETC.

DATE OF JUDGMENT25/10/1990

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. SAIKIA, K.N. (J) REDDY, K. JAYACHANDRA (J)

CITATION:  1990 SCR  Supl. (2) 343  1991 SCC  (1) 377  JT 1990 (4)   189        1990 SCALE  (2)821

ACT:     Haryana   Sales  Tax  Act,  1973:  Sections   9(1)   and 24--Assessee-Purchasing  raw  materials  in  state   without paying tax--Manufacturing goods--Selling them to dealer  who exported  goods out of India-Assessability  to  tax--Whether arises.     Central   Sales   Tax  Act,  1956:   Sections   5(1)   & 5(3)--Distinction between.

HEADNOTE:     Each  of  the  appellants/petitioners  is  a  registered dealer  in  the State of Haryana. He purchased  certain  raw materials in the State without paying purchase tax  thereon, in  view  of the provision contained in section  24  of  the Haryana  Sales Tax Act, 1973. He manufactured certain  goods in the State with the aid of the said raw materials. He then sold the manufactured goods to dealers who, in turn, export- ed  those  goods out of India. On these facts  the  assessee claimed  that he was not liable to pay the purchase  tax  on the  raw materials, imposed under section 9(1) of the  Sales Tax  Act.  The  Department denied the relief  on  the  short ground  that the sales effected by the appellants  were  not sales  in  the  course of export outside  India  within  the meaning  of section 5(1) of the Central Sales Tax  Act.  Ac- cording  to  the Department, they  were  only  "penultimate" sales,  which may be deemed to be ’export sales’ because  of the fiction created under section 5(3) of the C.S. Act 1956, but  that was not enough to escape from the clutches of  the charge in section 9(1). Accordingly, the claim of the asses- see  was rejected by the taxing authorities. The High  Court also rejected the assessee’s petition..     Before  this  Court, it was contended on behalf  of  the assessees that the effect of section 5(3) of the C.S.T.  Act was  to expand the scope of section 5(1) and include  within the  concept of sales in the course of export outside  India also  the ’penultimate’ sales; that a reference to, and  the meaning  of, section 5(1) could not be understood without  a reference  to section 5(3); and that as a result of  section 5(3),  such  penultimate sales became export  sales  falling beyond  the purview and competence of State legislature.  It was further submitted that purchases of

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344 raw  material  used in the manufacture of goods  inside  the State  attracted  the tax under section  9(1)  unless  those manufactured goods were dealt with in one of three ways; (1) disposed of by way of sale inside the State;     (2)  despatched to a place outside the State but by  way of a sale in the course of inter-State trade or commerce; or (3)  despatched to a place outside the State but by  way  of sale in the course of export outside the territory of India.     In the alternative, it was contended that as the  asses- see  had sold goods to other parties in India,  those  sales must be either local sales or inter-state sales; and that in any  view of the matter, it would be a sale covered  by  the exceptions in section 9(1), and the assessee’s purchases  of raw material would not attract tax under section 9(1).     On the other hand, on behalf of the State it was,  inter alia  contended that there were no facts on record  to  sub- stantiate the claim on behalf of the assessee that the sales in question fulfilled the conditions set out in section 5(3) of the C.S.T. Act. It was submitted that the assessees would be  entitled to an exemption from the impugned purchase  tax only if their sales were export Sales within the meaning  of section  5(1) of the C.S.T. Act, which they admittedly  were not.     Alternatively, it was submitted that section 9(1)(b) had been declared unconstitutional by this Court in the Goodyear case (1990 2 SCC 71) and the assessee could seek no  implied exemption  from  its language. Therefore, if section  9  was left  out,  the language of section 6 (  as  amended)  which brought to charge all purchases and sales in the State would be attracted and so the impugned taxation of purchases would be in order. Allowing the appeals and the petitions, this Court,     HELD:  (1) The language of  section  9(1)(a)(ii)---later section  9(1)  (b)--using the words "within the  meaning  of sub-section  (1) of section 5 of the Central Sales Tax  Act, 1956"  have  to be given full meaning; in other  words,  the exemption  under section 9(1) has to be restricted  only  to export  sales  failing  within the scope  of  section  5(1). [360F-G] Mohammed  Sirajuddin v. State, [1975] Supp. 1 SCR  169,  re- ferred to.     (2)  The language of the two  provisions  simultaneously introduced  in  section 24(1)(a) and (b)  makes  interesting reading. The proviso to 345 clause  (a)  refers only to "sale by him in  the  course  of export outside the territory of India within the meaning  of section  5 of the Central Sales Tax Act, 1956"  whereas  the proviso  to clause (b) refers to "sale by him in the  course of export outside the territory of India within the  meaning of  sub-section  (3) of section 5 of the Central  Sales  Tax Act,  1956". Thus, the statute, within the  same  provision, has  made  a  distinction between a sale in  the  course  of export  within  the  meaning of section 5 and  such  a  sale within the meaning of section 5(3). [361C-D]     (3)  The  High Court was right in  concluding  that  the assessee  was not entitled to the exemption under section  9 because  the sales made by him were not sales in the  course of export outside the territory of India within the  meaning of section 5(1) of the Central Sales Tax Act. [362A]     (4)  What  was declared unconstitutional by  this  Court when it declared section 9(1)(b) of the Act unconstitutional in Goodyear case was only the levy of a tax where raw  mate- rials  were  purchased  and used inside the  State  for  the

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manufacture  of finished goods which were  then  simply--and without any sale--despatched--rather, consigned--outside the State. There is, however, nothing unconstitutional about the two  other  consequences that flow on the  language  of  the clause: one express and the other implied; one in favour  of the  Revenue and the other in favour of the  assessee,  viz. (1)  that  there will be a tax on the purchase  of  the  raw materials  if the manufactured goods are disposed of in  the State  itself  otherwise than by way of sale; and  (2)  that there will be no tax on the purchase of the raw materials if the manufactured goods are despatched from the State  conse- quent on a (i) local sale; (ii) inter-State sale; or (iii) a sale  in the course of export. These two aspects of  section 9(1)(b) survive even after the judgment of this Court in the Goodyear case. [363G-H; 364A-C] Goodyear, case [1990] 2 SCC 71, explained.     (5)  Section 9(1) is both a charging and exempting  sec- tion.  Even after the decision in Goodyear case  the  charge under  a part of clause (b) still survives and so  also  the exemption provided in the latter part of clause (b).  [364E; C]     (6) Since the sales effected by the assessee fail within one  of  the three exempted categories set  out  in  section 9(1)(b), there can be no levy of purchase tax under  section 9(1) of the Sales Tax Act. [363C] (7) The purchase of raw materials by the assessees are not 346 chargeable  to tax either under section 9(1)or section 6  or section 24(3). [366G]

JUDGMENT:     CIVIL APPEELATE JURISDICTION: Civil Appeal No. 6202 (NT) of 1983.     From  the  Judgment  and Order dated 3.2.  1981  of  the Punjab and Haryana High Court in L.P.A. No. 128of 1981.     Raja  Ram  Aggarwal, Arvind Minocha,  H.K.  Singh,  S.K. Bagga, S.C. Patel and S.K. Gambhir for the Appellants.     Kapil Sibal, Additional Solicitor General, S.P. Goel, A. Subba  Rao,  C.V.S. Rao, Mahabir Singh, Bishambher  Lal  and K.C. Dua for the Respondents. The Judgment of the Court was delivered by     RANGANATHAN, J. 1. All these appeals and writ  petitions raise  a common question regarding the interpretation  of  s 9(1)  of  the Haryana Sales Tax Act, 1973  (hereinafter  re- ferred to as ’the Act’). Counsel state that the facts in all these  appeals are identical and that the only facts  neces- sary  (or,  atleast, on record before us), on the  basis  of which the issue us is to be decided, are these: Each of  the appellants/  petitioners (hereinafter referred to  compendi- ously  as ’assessees’), is a registered dealer in the  State of Haryana. He purchased certain raw materials in the  State without  paying tax thereon, in view of the  provision  con- tained  in  s. 24 of the Act. He then  manufactured  certain goods  in the State with the aid of said raw  materials.  He then  sold the manufactured goods to dealers who,  in  turn, exported  those  goods out of India. On these facts,  it  is claimed, the assessee is not liable to pay the purchase  tax on the raw materials imposed under s. 9(1) of the Act.  This claim  has been rejected by the taxing authorities  and  the High Court and hence these appeals. The writ petitions  have been  filed  directly  in this Court in view  of  a  learned single  Judge  of the High Court having  decided  the  issue against  the  assessees as early as 25.11.  1980  in  C.W.P.

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1227/80, which was also affirmed by a Division Bench later-     2. The Act is a much-amended one and Some of its  provi- sions  have been recently amended with retrospective  effect from  27th May, 1971 a point of time when actually a  prede- cessor Act (the Punjab General Sales Tax Act, 1948) had been in  force. The provisions of the statute, relevant  for  our purpose, and their relevant amendments may be noticed first: 347 1. Section 2(e)     (a)  Originally  s. 2(e) defined ’export’ to  mean  "the taking  out of goods from the State to any place outside  it otherwise  than by way of sale in the course of  inter-State trade or commerce."     (b)  Act  44  of 1976, added, at the end  of  the  above definition, the following words w.e.f. 1.4.1976: "or in the course of export out of the territory of India." I1. Section 2(p)     (a) S. 2(p) defined the expression ’turnover’ as includ- ing  "the  aggregate  of  the  amounts  of  the  sales   and purchases   ..........  made by any dealer" in any  capacity during  a given period. Explanation 2 to the second  defini- tion provided: "(2)  The proceeds of the sale of any goods on the  purchase of  which  tax is leviable under this Act  or  the  purchase value  of  any goods on the sales of which tax  is  leviable under  this Act, shall not be included in the turnover,  but the purchase value of the goods liable to tax under  section 9 shall be included."     (b) Act 13 of 1989 amended the Explanation by inserting, in  it, after the words "section 9", the words  "or  section 24".     (c)  Act  1 of 1990 has amended  the  above  Explanation retrospectively  to  say that the words  "but  the  purchase value of the goods liable to tax under section 9 or  section 24  shall be included" shall be omitted and shall be  deemed always to have been omitted with effect from 27.5. 1971.  So we  have to proceed on the basis that the  underlined  words never were there in el. (p) of section 2. The 1990 Act  also inserted  an Explanation 6 to the clause w.e.f.  31.3.  1983 which reads: "(6) The purchase of barley or of goods used in the manufac- ture  of  guar  gum, scientific goods,  utensils  and  metal handicrafts shall not form part of the turnover of a  dealer for  the period he is entitled to purchase the goods on  the authority of his certificate of registration without payment of  sales  tax  under section 24, provided  these  are  used exclusively for the specified purposes." 348 111. Section 6 Section 6, the charging section, read as under: "6.  Incidence of taxation--(1) Subject to other  provisions of  this Act, every dealer whose gross turnover  during  the year  immediately  preceding the commencement  of  this  Act exceeded  the  taxable quantum, Defined in s.  7,  shall  be liable to pay tax under this Act on all sales and  purchases effected after the coming into force of this Act.          Provided  that  this section shall not apply  to  a dealer who deals exclusively in goods specified in  Schedule B. Goods on which no tax is leviable: s. 6 read with s. 15. (2)  Every  dealer to whom sub-section (1)  does  not  apply shall, subject to other provisions of this Act, be liable to pay  tax under this Act on the expiry of thirty  days  after the  date on which his gross turnover during any year  first exceeds the taxable quantum;          Provided that this sub-section shall not apply to a

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dealer who deals exclusively in goods specified in Schedule B. Provided further that  ..... XXX                                                      XXX XXX Explanation--For  the  purposes of sub-section (1)  and  (2) "purchased" shall mean the purchase of declared (As  defined in s. 2(c) of the Central Sales Tax Act, 1956) goods  speci- fied in Schedule C and goods falling under section 9.     (b) S. 6 was amended by Act I of 1990 to read as follows with retrospective effect from 27.5. 1971: "S.  6 Incidence of taxation--(1) Every dealer  whose  gross turnover  during the year immediately preceding  the  coming into  force of the provisions of this section  exceeded  the taxable quantum shall be liable to pay tax on all sales  and purchases effected after the coming into force of the provi- sions of this section. 349          Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in  Schedule B.          (2)  Every dealer to whom sub-section (1) does  not apply shall be liable to pay tax on all sales and  purchases effected  on  the expiry of thirty days after  the  date  on which  his gross turnover during any year first exceeds  the taxable quantum.          Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in  Schedule B: Provided further that  ..... XXX                                                      XXX XXX     The  earlier Explanation, however, is omitted  with  the same retrospective effect. IV. Section 9     (a) S. 9(1) has undergone several amendments: by Act  44 of 1976, Act 11 of 1979, Act 3 of 1983, Act 11 of 1984,  Act 16  of  1986 and Act 1 of 1988. Act 1 of 1990  has  also  an impact, as we shall indicate later. The section originally read thus: "S.  9  Liability to pay purchase tax--Where a  dealer  pur- chases  goods other than those specified in the  Schedule  B from any source in the State and-- (a) uses them in the State in the manufacture of (i) goods specified in Schedule B; or          (ii)  any other goods and disposes of the  manufac- tured  goods  in any manner otherwise than by  way  of  sale whether  within  the State or in the course  of  inter-State trade  or  commerce or in the course of export  out  of  the territory of India; 350 (b) exports them in  the circumstances in which no tax is payable  under  any other provision of this Act, there shall be levied,  subject to  the provisions of section 17, a tax on the  purchase  of such  goods  at such rate as may be notified  under  section 15."     (b)  Act  44 of 1976 made two amendments  to  this  sub- section. The first amendment was to insert, after the  open- ing  words, "where a dealer", the words "liable to  pay  tax under this Act". The second amendment, which is crucial  for the  purposes  of this case, is the addition at the  end  of sub-clause (ii) of clause (a) above, the words: "within  the meaning of sub-section (1) of section 5 of  the Central Sales Tax Act, 1956."

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These amendments were effective from 1.4.1976.     (c)  Act 11 of 1979 redrafted the above  provision,  ex- cluded milk from clause (b) and added clause (c). After this amendment, effective from 9.4.1979, the provision read thus: "9(1) Where a dealer liable to pay tax under this Act, (a) purchases goods, other than those specified in  Schedule B,  from any source in the State and uses them in the  State in the manufacture of goods specified in Schedule B; or (b) purchases goods, other than those specified in  Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and disposes of  the manufactured goods in any manner otherwise  than  by way  of  sale whether within the State or in the  course  of inter-State trade or commerce or in the course of export out of the territory of India within the meaning of  sub-section (1) of section 5 of the Central Sales Tax Act, 1956; or (c) purchases goods, other than those specified in  Schedule B, from any source in the State and exports them, in the circumstances in which no tax is payable under any 351 other provision of this Act, there shall be levied,  subject to  the provisions of section 17, a tax on the  purchase  of such  goods  at such rate as may be notified  under  section 15."     (d)  A doubt had arisen whether the words "disposes  of" used in clause (a)(ii)--later, clause (b)--above was compre- hensive enough to include cases of despatches by a dealer of the manufactured goods otherwise than by way of sale as, for example, by way of stock transfer. The State Government  had issued  a notification dated 19.7.74 (even before  the  1976 amendment)  clarifying  the position with an answer  to  the question in the affirmative but this notification as well as the interpretation favoured by it were quashed by a decision of the High Court reported as Goodyear India Ltd. v.  State, [1982]  53 STC 163. This led to the amendment of S. 9(1)  by Act  3 of 1983. This amendment substituted a new clause  (b) for  the  earlier one w.e.f. 27.5.71,inserted a  new  clause (bb) w.e.f. 9.4.79 and added a proviso. Actually clauses (b) and (bb) are identical, except that the latter excludes milk from Its purview w.e.f. 9.4.79. However, to avoid  confusion both the clauses may be set out here: (b) purchases goods, other than those specified in  Schedule B,  from any source in the State and uses them in the  State in the manufacture of any other goods and either disposes of the  manufactured goods in any manner otherwise than by  way of sale in the State or despatches the manufactured goods to a  place outside the State in any manner otherwise  than  by way  of sale in the course of inter-State trade or  commerce or  in the course of export outside the territory  of  India within  the  meaning of subsection (1) of section 5  of  the Central Sales Tax Act, 1956;or; (bb) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the  State in the manufacture of any other goods and  either disposes  of the manufactured goods in any manner  otherwise than by way of sale in the State or despatches the  manufac- tured  goods  to  a place outside the State  in  any  manner otherwise  than by way of sale in the course of  inter-State trade  or  commerce or in the course of export  outside  the territory of India within the meaning of sub-section (1)  of section 5 of the Central Sales Tax Act, 1956; or". 352 The proviso added was in the following terms: "Provided  that no tax shall be leviable under this  section on scientific goods and guar gum, manufactured in the  State

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and sold by him in the course of export outside the territo- ry of India within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act. 1956."     (e)  Act  11 of 1984 effected no  material  change.  The exclusion of milk was decided to be dropped and so all  that this  amendment  did was to roll both clauses (b)  and  (bb) into one clause, reading thus: "4.  Amendment of section 9 of Haryana Act 20 of  197.3  For clauses (b) and (bb) of sub-section (1) of section 9 of  the principal  Act, the following clause shall  be  substituted, namely: "(b) purchases goods, other than those specified in Schedule B.  from any source in the State and uses them in the  State in the manufacture of any other goods and either disposes of the  manufactured goods in any manner otherwise than by  way of sale in the State or dispatches the manufactured goods to a  place outside the State in any manner otherwise  than  by way  of sale in the course of inter-State trade or  commerce or  in the course of export outside the territory  of  India within  the  meaning of subsection (1) of section 5  of  the Central Sales Tax Act, 1956;or.     (f) Amendment Act 8 of 1986 substituted, in the  proviso to  s. 9( 1 ), the words "scientific goods, guar gum,  uten- sils and handicrafts" in place of "scientific goods and guar gum" w.e.f. 26.2.86.       The  amendment  to S. 9(1) by Act 16 of  1986  is  not relevant for our purposes and we pass on to the two relevant amendments  effected  by  Act 1 of 1988. The  first  was  to change  the  marginal heading of the section to  read  thus: "9(1) Liability to pay tax on purchase value of goods".  The second was to omit the words "sub-section (1) of" at the end of  clause  (b). The relevant part of clause  (b),  as  thus amended, will, therefore, read: "despatches  the manufactured goods to a place  outside  the State in any manner otherwise than by way of sale  .....  in 353 the  course of export outside the territory of India  within the  meaning  of  section 5 of the Central  Sales  Tax  Act, 1956;" These amendments became effective from 31.12. 1987. V. Section 24     S.  24  is the next section relevant for  our  purposes. After its amendment by Act 44 of 1976, it read thus,  w.e.f. 28.11.76: "24.  Rights of registered dealer--Every  dealer  registered under  this Act shall be entitled to purchase, without  pay- ment of sales tax, the following goods within the State,  on the  authority of his certificate of registration by  giving to the dealer, from whom the goods are purchased, a declara- tion, duly filled and signed by him, containing such partic- ulars, on such form, obtained from such authority, as may be prescribed, and in case such form is not available with such authority, in such manner as may be prescribed,--          (a) any goods, other than those leviable to tax  at first stage of sale under section 17 or section 13, for  the purpose of- (i) resale in the State; or          (ii)  sale  in the course of inter-State  trade  or commerce;          (b)  containers  and packing  materials  and  other goods  (excluding those liable to tax at the first stage  of sale  under  section  17 or section 18),  specified  in  his certificate  of registration for use by him in the  manufac- ture, in the State, of any goods other than those  specified in Schedule B, for the purpose of--

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(i) sale in the State; or          (ii)  sale  in the course of inter-State  trade  or commerce; or (iii) sale in the course of export out of the territory of 354 India within the meaning of sub-section (1) of section 5  of the Central Sales Tax Act, 1956."     (b)  Act 3 of 1983 renumbered the above as s. 24(1)  and added, with effect from 31.3.83, a proviso each, to  clauses (a)  and  (b). These provisions read thus.  The  proviso  to clause (a) was: "Provided  that  a dealer registered under this  Act,  shall also  be  entitled to purchase barley,  without  payment  of sales  tax on the authority of his certificate of  registra- tion,  on  furnishing to the selling  registered  dealer,  a declaration referred to above, for sale by him in the course of export outside the territory of India within the  meaning of section 5 of the Central Sales Tax Act, 1956." and that to clause (b) read: "Provided  that  a dealer registered under this  Act,  shall also be entitled to purchase, without payment of sales  tax, on  the authority of his certificate of registration,  goods mentioned in clause (b) above, on furnishing to the  selling registered  dealer a declaration referred to above, for  use by him in the manufacture, in the State, of scientific goods and guar gum for the purpose of sale by him in the course of export outside the territory of India within the meaning  of sub-section  (3) of section 5 of the Central Sales Tax  Act, 1956." It also inserted, with retrospective effect from 1.4.76, the following sub-section. "(2)  Notwithstanding anything contained in form S.T. 15  or the certificate of registration issued under this Act or the Rules made thereunder, no dealer shall be entitled to  claim the  right envisaged in sub-section (1) so  renumbered,  for the  period from the first day of April, 1976, to the  third day of September, 1979 in contravention of the provisions of sub-section (1) so renumbered." The  Act  also  contained a section (s.  8)  validating  the notification  issued  under s. 9 read with s.  15  and  also validating  all  levy, assessment and  collection  of  taxes under s. 9 notwithstanding any judgment, decree or order  of any court or other authority. 355     (c)  Act 11 of 1984 changed the marginal heading of  the section  as "Rights and liabilities of registered  dealers". It added a clause (c) to sub-section (1) relating to use  of the  goods in the execution of works contract in the  State, with  which  we are not concerned. However, it added  a  new sub-section  (3) with retrospective effect from 27.5.  1971, to the following effect: "(3) Notwithstanding any other provisions of this Act or any judgment decree or order of any court or other authority  to the  contrary,  if  a dealer who  purchases  goods,  without payment  of tax, under sub-section (1) and fails to use  the goods  so purchased for the purposes specified  therein,  he shall  be liable to pay tax, on the purchase value  of  such goods,  at  the  rates notified under  section  15,  without prejudice to the provisions of section 50;           Provided  that the tax shall not be  levied  where tax  is payable on such goods under any other  provision  of this Act."     (d)  An  amendment of 1986 expanded the  proviso  to  S. 24(I)(b)  by  adding  "utensils and  metal  handicrafts"  to "scientific goods and guar gum", as in s. 9(1) proviso.

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   (e)  Act 1 of 1988, affecting from  31.12.1987,  omitted the  words "sub-section (1) of" in s. 24(I)(b)(ii). It  also omitted the proviso to the said clause. VI. Section 27     Section  27,  which defines "taxable  turnover"  is  not quite  relevant  for our purposes. We should  only  like  to mention  that the provisoes to s. 27(a)(iV),  s.  27(b)(iii) and  s. 27(c)(ii) inserted by Act 44 of 1976  w.e.f.  1.4.76 all  make  specific  reference to sales "in  the  course  of export  out of the territory of India within the meaning  of sub-section  (1) of section 5 of the Central Sales Tax  Act, 1956". The provisoes to s. 27(a)(iv), in particular, make  a clear  contrast between sales falling under sub-section  (3) and  those  failing  under sub-section (1) of s.  5  of  the C.S.T. Act. VII. Validation provision Act 1 of 1990 effected no amendments to s. 24 or 27. But  s. 14 of 356 this Act (which is a validation section on the same lines as those  contained  in the earlier amendment  Acts)  has  been referred to in the course of the arguments before us and can be usefully extracted. It reads: "14.  Notwithstanding any judgment, decree or order  of  any court  or tribunal or other authority to the  contrary,  any levy, assessment, re-assessment or collection of any  amount by  way of tax made or purporting to have been made and  any action taken or things done or purporting to have been taken or done before the commencement of the Haryana General Sales Tax  (Amendment  and Validation) Act, 1990, in  relation  to such  levy,  assessment, re-assessment  or  collection  made under  the  provisions  of section 9 or  subsection  (3)  of secton  24  of this Act shall be deemed to be as  valid  and effective  as  if such levy,  assessment,  re-assessment  or collection  had  been made or action taken  or  things  done under the provisions of clause (p) of section 2, section  6, section 15-A, section 17, section 27 and Schedule D appended to this Act and as amended by the provisions of the  Haryana General  Sales Tax (Amendment and Validation) Act, 1990  and shall not be called in question in any court or tribunal  or other authority and accordingly--          (i) all acts, proceedings or things done or  action taken by the State Government or by any officer of the State Government or by any authority, in connection with the levy, assessment, re-assessment or collection of such a tax shall, for  all purposes be deemed to be, and to have  always  been done or taken in accordance with law;          (ii)  no suit or other proceedings shall  be  main- tained or continued in any court or before any authority for the refund of any such tax so collected; and          (iii) no court or authority shall enforce a  decree or order directing the refund of any such tax so collected. These, then, are the relevant provisions of the Act.     Before turning to the question posed for our  considera- tion,  it  is necessary to refer to s. 5(1) of  the  Central Sales Tax Act, 1956. Thus sub-section read as follows: 357 "5.  When is a sale or purchase of goods said to take  place in the course of import or export--(1) A sale or purchase of goods  shah  be deemed to take place in the  course  of  the export  of the goods out of the territory of India  only  if the  sale  or purchase either occasions such  export  or  is effected  by a transfer of documents of title to  the  goods after  the  goods  have crossed  the  customs  frontiers  of India."

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This sub-section came up for the consideration of this Court in Mohammed Sirajuddin v. State, [1975] Supp. 1 S.C.R.  169. In  that  case the appellant’s goods were  exported  out  of India. The course of the transaction was that the  appellant sold goods to the State Trading Corporation (S.T.C.) but, to the  knowledge of both these parties, the goods were  to  be exported  to  fulfill contracts entered into by  the  S.T.C. with foreign buyers, the terms of such contracts between the foreign buyers and the S.T.C. being referred to in, and part of, the appellant’s contracts with the S.T.C. The apppellant claimed its sales to be "sales in the course of export"  and hence  exempt  under  s. 5 of the C.S.T.  Act.  This  Court, Khanna, J. dissenting, held that the sales of the  appellant were  not exempt u/s 5(1). The appellant had agreed to  sell his  goods  only to the S.T.C. and there was no  provity  of contract  between him and the foreign buyer. The court  held that  the movement of goods outside India was occasioned  by the  contract between the S.T.C. and the foreign  buyer  and not  by that between the appellant and the S.T.C. The  deci- sion caused several practical difficulties and called for an amendment  of the C.S.T. Act. The object and reasons of  the C.S.T.  (Amendment) Act (Act 103 of 1976), may  be  usefully extracted. It said: "According  to section 5(1) of the Central Sales Tax Act,  a sale  or  purchase  of goods can qualify as a  sale  in  the course of export of the goods out of the territory of  India only  if the sale or purchase has occasioned such export  or is  by a transfer of documents of title to the  goods  after gods  have crossed the customs frontiers of India.  The  Su- preme  Court  had held (vide: Mohd. Serajuddin v.  State  of Orissa,  36 S.T.C. 136 that the sale by an  Indian  exporter from India to a foreign importer alone qualifies ’as a  sale which  has occasioned the export of the goods. According  to the  Export Control Orders, exports of certain goods can  be made  only by specified agencies such as the  State  Trading Corporation.  In other cases also, manufacturers  of  goods, particularly in the small-scale and medium sectors, have to 358 depend  on some experienced export house for  exporting  the goods  because special expertise is needed for  carrying  on export  trade. A sale of goods made to an export  canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export  those goods  in compliance with an existing contract or  order  is inextricably  connected with the export of the  goods.  Fur- ther, if such sales do not qualify as sales in the course of export,  they would be liable to State sales tax  and  there would be a corresponding increase in the price of the goods. This  would make our exports incompetitive in  the  fiercely competitive  markets. It is, therefore, proposed  to  amend, with  effect  from the beginning of  the  current  financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the terri- tory  of India shall also be deemed to be in the  course  of such  export if such last sale or purchase took place  after and  was for the purpose of complying with the agreement  or order for, or in relation to, such export." S.  5(3),  inserted  by  the  above  Amendment  Act   w.e.f. 1.4.1976, reads thus: "(3) Notwithstanding anything contained in sub-section  (1), the last sale or purchase of any goods preceding the sale or purchase  occasioning the export of those goods out  of  the territory of India shall also be deemed to be in the  course of  such export, if such last sale or purchase’  took  place

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after,  and  was  for the purpose of  complying  with,  the’ agreement or order for or in relation to such export."     Now, coming to the facts of the present case, the asses- sees purchased raw materials inside the State of Haryana but paid  no  tax thereon, as they were registered  dealers  and furnished  the  declaration forms prescribed  under  s.  24. Their  sales  of the manufactured goods are to  persons  who have  exported the goods outside India and so,  they  claim, they  are not liable to pay the tax sought to be imposed  on them under s. 9(1). The department, however, has denied  the relief  on the short ground that the sales effected  by  the appellants  are  not sales in the course of  export  outside India within the meaning of s. 5(I) of the C.S.T. Act.  They are  only "penultimate" sales; they may be deemd to  be  ’e- xport sales’ because of the fiction created under S. 5(3) of the 359 C.S.T. Act but that is not enough to escape from the Clutch- es of the charge in s. 9(1).     Sri Rajaram Agarwal, learned counsel for the  assessees, contended that the effect of s. 5(3) of the C.S.T. Act is to expand  the scope of s. 5(1) and include within the  concept of  sales  in the course of export outside  India  also  the ’penultimate’  sales dealt with in Mohd.  Sirafuddin’s  case (supra),  A reference to, and the meaning of,  section  5(1) cannot be understood without a reference to section 5(3). As a  result of s. 5(3), such penultimate sales  become  export sales  falling  beyond the purview and competence  of  State legislatures.  The provisions in s. 9(1) of the Act need  to be  interpreted harmoniously and consistently with the  con- stitutional scheme. S. 9(1) is a charging section. Purchases of  raw  materials in the State used in the  manufacture  of goods inside the State attract the tax under s. 9(1)  unless those  manufactured  goods are dealt with in  one  of  three ways: (1) disposed of by way of sale inside the State; (2) despatched to a place outside the State but by way of  a sale in the course of inter-State trade or commerce; or (3)  despatched to a place outside the State but  by-way  of sale in the course of export outside the territory of India. He submitted that the transactions in the present case  fail under  category (3) above. In the alternative, he  submitted that,  clearly,  as the assessees had sold  goods  to  other parties  in  India, those sales must be either  local  sales falling  under  category (1) or  inter-State  sales  failing under  category (2). In any view of the  matter,  therefore, the assessee’s purchases of raw materials would not  attract tax under s. 9(1).     On  the other hand, Sri Gupta, learned counsel  for  the State.  submitted  that  there were no facts  on  record  to substantiate  the claim on behalf of the assessee  that  the sales  in  question fulfilled the conditions set out  in  s. 5(3)  of the C.S.T. Act, as claimed. He submitted that  even if the claim were to be accepted, the assessees would be  in no better position. He fully supported the reasoning of  the High Court and urged that full effect should be given to the words  "within the meaning of sub-section (I) of section  5" which found a place in s. 9(1)(b) till they were dropped  by Act  1  of 1988. If due regard be given to these  words,  he pointed out, the assessees would be entitled to an exemption from the impugned purchase tax only if their sales 360 were export sales within the meaning of section 5(1) of  the C.S.T.  Act  which they, admittedly were not.  He  submitted that  the argument that, to levy the tax imposed by s.  9(1)

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in  cases covered by s. 5(3) but not s. 5(1) of  the  C.S.T. Act  would  violate  Article 286 of  the  Constitution.  was misplaced and overlooks the vital circumstances that what s. 9(1)(b) taxes are the purchases of raw materials and not the manufactured  goods that were eventually exported.  Alterna- tively, he submits, s. 9(1)(b) has been declared unconstitu- tional  by this Court in the Goodyear case [1990] 2  SCC  71 and, therefore,, the assessees can seek no implied exemption from  its language. If s. 9 is left out, he says,  the  lan- guage  of s. 6 (as amended) which brings to charge all  pur- chases and sales in the State would be attracted and so  the impugned  taxation of the purchases would be in  order.  For these  reasons,  he  submits that the  writ  petitions  were rightly rejected by the. High Court and that the appeals  as well as writ petitions before us deserve to be dismissed.     It will be convenient first to dispose of the contention dealt  with  by  the High Court. For the  purposes  of  this argument  we shall assume that the sales made by the  asses- sees  were ’penultimate sales’ which would fall  within  the purview  of section 5(3) of the C.S.T. Act. The argument  on behalf of the Revenue, which has found favour with the  High Court  is that section 9(1) exempts only sales made  in  the course  of export within the meaning of section 5(1) of  the C.S.T. Act but not those under section 5(3) of the said Act. After careful consideration we think that this argument  was rightly accepted by the High Court. In the first place there is no dispute before us that section 5(3) covers a  category of  cases  which would not otherwise have  come  within  the purview of section 5(1), as explained in Mohd.  Sirajuddin’s case.    The   language   of   section    9(1)(a)(ii)--later 9(1)(b)--using the words "within the meaning of  sub-section (1) of section 5 of the Central Sales Tax Act, 1956" have to be  given full meaning; in other words, the exemption  under section  9(1)  has  to be restricted only  to  export  sales falling  within the scope of section 5(1). It  seems  clear, from the circumstances referred to below, that the  legisla- ture  deliberately used these words and intended to  give  a restricted  operation to section 9(1)(a)(ii)(b). These  cir- cumstances are:        (1) Section 9(1)(a)(ii), as originally framed, merely uses the words "in the course of export outside the territo- ry  of  India". Clause 9(1)(b) referred to cases  where  raw materials were purchased and exported and the word  ’export’ was  defined in section 2(c) as meaning "the taking  out  of the goods from the 361 State to any place outside it otherwise than by way of  sale in  the course of inter-State trade or commerce." Act 44  of 1976  amended the definition of ’export’ in section 2(c)  by adding the wide words "or in the course of export out of the territory  01’  India" w.e.f. 1.4. 1976. But  the  same  Act narrowed  down  the scope of clause (a)(ii)  by  adding  the restrictive words at the end of the clause.        (2)  If a reference is made to section 24, one  finds that  section 24(1)(iii) refers again to sub-section (1)  of section  5 of the Central Sales Tax Act only.  However,  the language  of the two provisoes simultaneously introduced  in section 24(1)(a) and (b) by Act 3 of 1983 makes  interesting reading.  The proviso to clause (a) refers only to "sale  by him  in the course of export outside the territory of  India within  the  meaning of section 5 of the Central  Sales  Tax Act,  1956",  whereas the proviso to clause  (b)  refers  to "sale  by him in the course of export outside the  territory of India within the meaning of sub-section 3 of section 5 of

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the  Central Sales Tax Act, 1956". Thus the statute,  within the same provision, has made a distinction between a sale in the  course  of export within the meaning of section  5  and such a sale within the’ meaning of section 5(3).        (3) When we turn to s. 27 next, we find two provisoes introduced  in s. 27(1)(iv)(a) by Act 44 of 1976,  the  same amending  Act that introduced the extra words at the end  of s.  9(1)(a)(ii).  These  provisoes make  a  marked  contrast between  sates  failing  under sub-sections  (1)  and  those falling under subsection (3) of s. 5 of the C.S.T. Act.        (4) As will be seen from the extract of the  legisla- tive  amendments set out earlier the legislature has  subse- quently deleted the reference to sub-section 3 of section  5 in section 9(1)(b). However, this amendment, which has  been made  both in section 9 and in section 24 by Act 1  of  1988 has  not  been given any retrospective  effect.  Considering that the legislation is replete with instances of retrospec- tive  effect  (in some cases even to as early as a  date  as 7.9.1955), the failure or omission to give any retrospective effect  to the amendment to section 9 in this regard  is  an eloquent pointer to the intention of the legislature.     In  view of the circumstances outlined above, we are  of the opinion that the High Court was right in concluding that the assessee 362 was  not  entitled to the exemption under  s.  9because  the sales  made  by him were not sates in the course  of  export outside the territory of India within the meaning of section 5(1) of the Central Sales Tax Act.     Shri Rajaram Agarwal, learned counsel for the  assessees raised  a  new contention before us, which we  have  already referred  to as an alternative contention.  This  contention which  really seems to be unanswerable appears to have  been missed at the stage of the High Court but this contention is purely  one of law and merits consideration. The point  made by him was this. There is no dispute that the assessees have transferred  the manufactured goods by way of sale and  that these goods have been despatched to various ports of  India. The  exact terms of despatch are not clear and there are  no facts on record which will help us to understand the  course of  transactions  in the several cases before us.  But  Shri Agarwal  submitted that the sales made by the assessees  can only  fall within one of three categories. They  are  either local  sales or inter-State sales or export sales.  Each  of the assessee have sold its goods to another dealer, If  that dealer is also a resident of Haryana and has taken  delivery of  the goods in Haryana and exported them  thereafter,  the assessees’  sales  would be local sales. If  the  purchaser- dealer of the manufactured goods is in some other State  and the  goods  have been moved out of Haryana in  pursuance  of that sale, they would be inter-State sales. The goods  which have  been sold by the assessee must have been delivered  to the dealer in pursuance of the sale either within the  State or outside the State in India. In either event, it would  be a  sale covered by the exceptions in section 9(1). It  would be  a local sale or inter-State sale. The only third  possi- bility  is that assessee sold the goods to a dealer  outside India  and exported the goods in pursuance of that  sale  in which event it would be a sale within the meaning of section 5(1) of the Central Sales Tax Act.     We  think Shri Agarwal is right in saying that any  sale effected  by the assessees in the circumstances, which  have been set out by us earlier, must fall in one of three  cate- gories.  We are unable to conceive of a fourth  category  of sale, which could be neither a local sale nor an inter-State

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sale nor an export sale. Shri Gupta, on behalf of the State, contended  that the goods might have been directly moved  by the  assessee to a port for shipment abroad in pursuance  of an export contract entered into by the dealer who  purchased from  the assessee. Even in such a case if the transport  of goods  from the assessee’s place of business to the port  is in  pursuance of the terms of the sale, the movement of  the goods  would be occasioned by the sale made by the  assessee and would be an inter-State sale. If, on the other hand, the goods were sent 363 to the port by the assessee subsequent to and independent of the  sale made by him, then, for the purpose of that  trans- port, the assessee. would only be an agent of the  purchaser and  the movement of the goods in pursuance of the  contract of  sale entered into by the purchaser and would be  one  in the  course of export within the meaning of s. 5(1)  of  the C.S.T.  Act.  As pointed out by Sri Agarwal, even  in  Mohd. Sirajuddin’s  case (supra), although the  exemption  claimed for the sales as export sales was denied, the conclusion  of the  High  Court that the sales to S.T.C.  were  inter-State sales chargeable under s. 5(1) of the C.S.T. Act was upheld. We  are,  therefore, of the opinion  that  this  alternative contention urged by the learned counsel for the assessee has to  be accepted and it has to be held that, since the  sales effected  by  the  assessees fall within one  of  the  three exempted categories set out in section 9(1)(b), there can be no levy of purchase tax under section 9(1) of the Act.     Faced  with this situation, Shri Gupta, for  the  State, contended  that this argument will not avail  the  assessees as,  according  to him, s. 9(1)(b) of the Act has  been  de- clared unconstitutional by this Court and is, therefore, non est. It is somewhat curious that such contention should come from  the department which has charged the assessees on  the basis  of s. 9(1)(b). Nevertheless, we proceed  to  consider this  contention, as Sri Gupta says he can support  the  as- sessments, alternatively, under s. 6 of the Act, without any aid  from  s.  9 at all. This contention, it  seems  to  us, proceeds  on  a misconception of the issue before,  and  the ratio  of  the decision of this Court in the  Goodyear  case [1990]  2 SCC 71. That was a case in which certain  dealers, having purchased raw materials and manufactured goods inside the State despatched those goods outside the State otherwise than by way of sale. The State levied a purchase tax on  the raw  materials  u/s 9(1). Thereupon the  assessee  contended that  the levy of tax in the circumstances was in truth  and substance the levy of a tax on the manufactured goods on the event of their consignment outside the State otherwise  then by way of sale and that the State legislature was not compe- tent  to  levy such a tax. This contention was  accepted  by this Court. What was declared unconstitutional by this Court was,  therefore, only the levy of a tax where raw  materials are purchased and used inside the State for the  manufacture of  finished  goods which are then simply--and  without  any sale--despatched--rather, consigned-outside the State. There is,  however, nothing unconstitutional about the  two  other consequences  that flow on the language of the  clause:  one express and the other implied; one in favour of the  Revenue and the other in favour of the assessee viz. 364      (1) that there will be a tax on the purchase of the raw materials  if the manufactured goods are disposed of in  the State itself otherwise than by way of sale; and (2)  that  there will be no tax on the purchase of  the  raw materials if the manufactured goods are despatched from  the

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State consequent on a (i) local sale; (ii) inter-State sale; or (iii) a sale in the course of export. It  seems that these two aspects of s. 9(1)(b) survive  even after the judgment of this Court in the Goodyear case [1990] 2 SCC 71.     Shri  Gupta,  however,  drew our  attention  to  certain sentences  in the headnote as well as the body of the  above decision  where  certain wider expressions have  been  used, such as :"s. 9(1)(b) was ultra vires" "s. 9(1) and 24(3) are constitutionally  invalid"  "s.  9(1)(c)  is  ultra   vires" and"   .....  the latter part of s. 9(1)(b) is  ultra  vires and void". As pointed out above, s. 9(1) is both a  charging and  exempting section. Even after the decision  the  charge under  a part of clause (b) still survives and so  also  the exemption provided in the latter part of clause (b). But let us  examine what the position would be if we hold,  as  con- tended  by  Shri Gupta, that the effect of the  decision  is that  the words "or despatches the manufactured goods  to  a place outside the State in any manner otherwise than by  way of sale in the course of inter-State trade or commerce or in the  course of export outside the territory of India  within the  meaning of sub-section (1) of section 5 of the  Central Sales tax Act, 1956" in s. 9(1)(b) should be deemed to  have been deleted from the statute. Shri Gupta contends that,  if s.  9(1)  is left out of account for this reason,  the  pur- chases  of raw materials by the assessee would be liable  to tax under s. 6 of the Act. This argument will now be consid- ered.     The  contention  of Shri Gupta on this  aspect  proceeds thus:  s. 6, which is the charging section, both  originally and after its retrospective amendment in 1990, imposes a tax on  all  sales and purchases effected by a  dealer.  In  the original section, there was an Explanation which  restricted the meaning of purchases for the purposes of the section. It provided that only purchases of declared goods, goods speci- fied in 365 Schedule C and goods falling under s. 9 would be part of the ’turnover’.  In  other words purchases which  did  not  fall under  s. 9 i.e. which could not be taxed under  section  9, could  not  be taxed then under s. 6 either.  But  the  1990 amendment has omitted this Explanation retrospectively.  The result is that all purchases are now taxable in the State.     This  contention is an interesting one but it  overlooks the effect of s. 2(p) read with s. 15 of the Act. Though  s. 6, as amended, purports to make dealers liable to pay tax on their sales as well as purchases, the actual charge of  tax, under s. 15, is only imposed on the sales and purchases that form part of his taxable turnover. To ascertain what this one  has  to  turn to s. 2(p) of the  Act.  This  definition includes,  within the definition of ’turnover’ the  purchase value  of  goods  liable to tax under s. 9  but,  the  goods presently in question are not laible to tax under s. 9,  not only as contended for the assessees and held by us above but also on the hypothesis as to the invalidity of s. 9(1)(b) on which  the  present argument on behalf of the  Revenue  pro- ceeds.  The, definition also excludes from its purview  "the sale  proceeds  of goods on which purchase tax  is  leviable under this Act" and "the purchase value of any goods on  the sales of which tax is leviable under this Act". There can be no dispute that a tax is leviable under the Act on the goods in question when they are sold by a dealer and, indeed,  the assessees  would  have  had to pay tax  on  the  sales  made

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to--the  purchases  effected by--them but for  a  claim  for exemption under s. 24. The definition of ’turnover’  clearly postulates that goods are either to be taxed at the point of purchase or sale and the same transaction cannot be taxed as a sale in the hands of the dealer who sells to the assessees and  as a purchase in the hands of the assessees.  The  only exception was the limited class of goods covered by s. 9 but even  this exception has been left out with complete  retro- spective effect. We do not, therefore, think that Sri  Gupta is right in arguing that the purchase tax on the raw materi- als can be upheld under s. 6 itself even if the charge under s.  9 fails. Explanation 6, inserted in s. 2(p)  read,  with the  provisoes  inserted in s. 24(1)  w.e.f.  31.3.1983  and their amendment in 1986 have also a bearing in the cases  of raw  materials  purchased for manufacture of  guar  gum  and utensils where the purchase is exempt even if purchased by a registered  dealer  for  the purpose of  export  within  the meaning of s. 5(3) of the C.S.T. Act, 1956--and some of  the assessees  before  us are such manufacturers--out  we  leave these  amendments out of account as they are  relevant  only for  purposes of later assessment years. The  raw  materials purchased  by the assessees are goods on the sales of  which tax is leviable under the Act though the assessees are 366 exempt  from payment of such tax by reason of s. 24(1).  The value of the purchases cannot, therefore, be included Within the  definition of "turnover" and, consequently, s.  6  will not  come to the aid of the Revenue to support the  levy  of the impugned sales.     We  may also make a reference to sub-section (3)  of  s, 24, inserted with retrospective effect from 27.5.1971, which taxes  the  purchase of raw materials, when the  dealer  who purchases them had claimed exemption under section 24(1) but is found not to have used the goods for the purposes  speci- fied  therein  i.e.  for the manufacture of  goods  for  the purpose of (a) local sale; (b) inter-State sale; or (c)  sale in the course of export outside the  territory  of India within the meaning of sub-section (1) of section 5  of the C.S.T. Act. This  provision will not help the Revenue for  two  reasons: (i)  As held earlier, while discussing the alternative  con- tention of Shri Agarwal,sales in the course of export within the  meaning of s. 5(1) of the C.S.T. Act, 1956. It  may  be pointed  out that, after Act I of 1988, this provision  does not tax purchases even in cases where the manufactured goods are  disposed of only by way of ’penultimate  sales  falling under s. 5(3) but not under s. 5(1) of the C.S.T. Act, 1956, but  this amendment came later and will have to be left  out of account for the purpose of these cases; (ii) This  provi- sion  has been held to be ultra vires in the  Goodyear  case (supra).     We  have,  therefore, reached the  conclusion  that  the purchases of raw materials by the assessees are not  charge- able to tax either u/s 9(1) or s. 6 or s. 24(3). The appeals and petitions are, therefore, allowed. The relevant  assess- ments  to  tax will be  computed/modified  accordingly.  We, however, make no order regarding costs. R.S.S.                                Appeals  &   Petitions allowed. 367