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PETITIONER: STATE OF HARYANA

       Vs.

RESPONDENT: DALMIA DADRI CEMENT LTD.

DATE OF JUDGMENT20/11/1987

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  JT 1988 (3)     1

ACT:      Punjab General  Sales Tax  Act, 1948:  s. 5(2)(a) (iv)- Cement-Sale of to Electricity Board for use in generation or distribution of  energy-Deduction  of  from  dealer’s  gross turnover-Whether permissible.      Words  &   Phrases:  Expression  "for  use"  must  mean "intended for  use"-s.5(2)(a)(iv), Punjab  General Sales Tax Act, 1948.      Section 5(2)(a)(iv)  of the  Punjab General  Sales  Tax Act, 1448  exempted goods  sold to any undertaking supplying electric energy  to public,  for use by it in the generation or distribution of such energy.

HEADNOTE: %      The assessee-respondent  was sought to be reassessed to sales tax,  in respect  of supply  of cement  to the  Punjab State Electricity  Board in the years 1964-65 and 1965-66 on the basis  of the  certificates issued  by the  Board to the effect that  it was  required for  use in  the generation or distribution of  electrical energy, on the ground of nonuser of the  goods for  the said  purpose. The Tribunal dismissed the appeal of the assessee.      On a  reference the  High Court  came to the conclusion that the  assessee who  made sales to the Board on the basis of the  certificates was  not required to prove further that the cement was actually so used.      Dismissing the State’s appeal by Special leave, ^      HELD: The  assessee-respondent is entitled to exemption under s.  5(2)(a)(iv) of  the Punjab  General Sales Tax Act, 1948. [4G]      The mere  fact that some of the cement supplied was, in fact  used   by  the  Punjab  State  Electricity  Board  for activities not  directly connected  with the  generation  or distribution  of   electrical  energy,   cannot   make   any difference regarding the availability of the exemption. [4D- E] 2      In order to get exemption it need not be shown that the goods in  question were  actually used  in the generation or distribution of electrical energy. On a plain reading of Cl. (a)(iv) of  sub-s. (2)  of s.  5 of the Act it is clear that

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the expression  "for use"  therein must  mean "intended  for use". If  the intention  of the legislature was to limit the exemption only  to such  goods sold as were actually used by the  untertaking  in  the  generation  and  distribution  of electrical energy,  the phraseology  used in  the  exemption clause would  have been  different, as,  for example, "goods actually used" or "good used". [4H; 5A-B]      In the  instant case,  the certificates  issued by  the Board clearly  showed that  the intention  of the  Board was that the  cement should  be  used  for  a  purpose  directly connected with  the generation or distribution of electrical energy. There  is no  material to show that the certificates were false  certificates given  by the Board, having another use in  mind, or that they were fraudulently obtained by the assessee in collusion with the Board. [5H; 6A-B]      Associated Cement  Co. Ltd.  Kymore M.P.  v.  Assistant Commissioner of  Sales Tax, Jabalpur Region, Jabalpur & Anr; [1971] 28  S.T.C. 629  and Spedding Dinga Singh & Co. v. The Punjab State, [1968] 22 S.C.C. 319 distinguished.

JUDGMENT:      CIVIL APPELLATE  JURlSDlCTlON: Civil  Appeal Nos 937-38 of 1975      From the  Judgment and  order dated  4.11.1974  of  the Punjab and  Haryana High  Court in Govt. Sales Tax Reference No 37 of 973      Ravinder Bana and C.V. Subba Rao for the Appellants      Serv Mitter and Madan Gopal Gupta for the Respondent.      The Judgment of the Court was delivered by      KANIA, J.  These appeals  by special leave are directed against the  decision of  a Division Bench of the High Court of Punjab  & Haryana  on a reference under Section 22 of the Punjab General  Sales Tax  Act (hereinafter  referred to  as ’the Act  ). The  short facts  necessary for the disposal of these appeal are as follows:      The respondent-assessee  supplied cement  in the  years 1964-65 3      and 1965-66  to  the  Punjab  State  Electricity  Board      (referred to hereinafter as the Board’) on the basis of      the certificates issued by the Board to the effect that      the cement  was required  for use  in the generation or      distribution  of   electrical  energy  In  the  initial      assessment  proceedings   on   the   basis   of   these      certificates the sales of cement by the assessee to the      Board were  exempted. The  exemption was  granted under      section 5(2)(a)(iv) of the Act.      Section 5(2)(a)(iv) of the Act reads as under:           5(2).  In   this  Act   the  expression   ’taxable           turnover’ means  that part  of the  dealer’s gross           turnover during  any period  which  remains  after           deducting therefrom-           (a) x x   xxxx   x                (i) xx xxx xxx xx                (ii) xx xxx xxx                (iii) x x x x                (iv)  Sales   to  any  undertaking  supplying                     electrical energy  to the public under a                     licence or sanction granted or deemed to                     have  been   granted  under  the  Indian                     Electricity Act,  1910(IX  of  1910)  of                     goods for use by it in the generation or                     distribution of such energy; xxx".

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    There is  no dispute  that the Board was an undertaking supplying the  electrical energy  to the  public and that it held a  licence or  a sanction  under the Indian Electricity Act, 1910.  The assessing  authority on  the basis.  Of  the certificates took  the view  that the cement was sold by the assessee to  the Board  for use  by it  in the generation or distribution of electricity energy.      Thereafter  on  the  basis  of  an  audit  report,  the assessment was  re-opened by  the Deputy Excise and Taxation Commissioner (Appeals).  The Deputy Commissioner started suo moto proceedings  under Section  21 of  the Act and issued a show cause  notice to  the  assessee  and,  after  giving  a hearing to  the assessee, he came to the conclusion that the exemption was  not attracted  and the  deductions which  had been granted  by the  original assessing  authority, to  the tune of Rs. 1 lac for the year 1964-65 and Rs.2 lacs for the year 1965-66, had been 4 granted wrongly and issued additional demands aggregating to Rs. 18,000.      The assessee  challenged the  additional  demands  made before the  Sales Tax Tribunal Haryana but the challenge was replaced by  the Tribunal  and the  appeal of  the  assessee dismissed      Therafter a  reference was  made by the Tribunal to the Punjab & Haryana High Court under Section 22 of the Act. The Division Bench  of the  High Court  while disposing  of  the reference came to the conclusion that on a true construction of the  provisions of  Section 5(2)(a)(iv)  of the  Act  the assesee, who  made sales  to the  said Board on the basis of the certificates that the cement was required for use in the generation and  distribution of  electrical energy,  is  not required to  prove further  that the  cement was actually so used and,  on the  basis of  this conclusion  it decided the reference in  favour of  the assessee  It is  this  decision which is challenged before us.      The submission  of Mr  R Bana.  learned counsel for the appellant is  that in  order  to  get  the  benefit  of  the exemption it  is required  that  it  should  be  established before the  Tax Authorities  that the cement supplied by the assessee was  actually used  by the  Board  in  an  activity directly connected  with the  generation or  distribution of electrical energy  In the  present case. the inquiry held by the Deputy  Commissioner showed that the assessee was not in a position  to establish such actual use by the Board and it appeared that  a part of the cement supplied was used by the Board in  the  construction  of  staff  quarters  and  other constructions  which  could  not  be  said  to  be  directly connected with  the generation or distribution of electrical energy .      It was  on the  other hand  submitted  by  the  learned counsel for  the respondent  that there  was nothing to show that the  certificates issued  were  false  certificates  as such. that is certificates given with the knowledge that the cement purchased  was to  be used  partly in  activities not directly connected  with the  generation or  distribution of electrical energy  nor were the certificates obtained by the assessee in  collusion  with  the  Board  The  assessee  was entitled to rely on the certificates and get the exemption      We are  unable to  accept the  submission of  Mr.  Bana that, in  order to  get the  exemption it must be shown that the goods  in question  namely, the  cement supplied  by the assessee in this case was 5 actually  used   in  the   generation  or   distribution  of

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electrical energy. It must be noted that the important words used in  the relevant provisions are "goods for use by it in the generation  or distribution  of such  energy"  (emphasis supplied by  us). On  a plain reading of the relevant clause it  is  clear  that  the  expression  "for  use"  must  mean "intended for  use" If  the intention of the legislature was to limit  the exemption  only to  such goods  sold  as  were actually used  by the  undertaking  in  the  generation  and distribution of  electrical energy,  the phraseology used in the exemption  clause would  have  been  different  as,  for example, "goods actually used" or "goods used.".      Mr. Bana,  in  support  of  his  submission,  drew  our attention to  the decision  of  the  High  Court  of  Madhya Pradesh in  Associated Cement  Co.  Ltd.,  Kymore,  M.P.  v. Assistant  Commissioner   of  Sales  Tax,  Jabalpur  Region, Jabalpur and Another, [1971] 28 S.T.C. 629. In that case the exemption provision  was in  pari materia with the exemption provision before  us. It was held by the Madhya Pradesh High Court that  everything sold to the Electricity Board for its use  did   not  fall  within  the  exemption  under  Section 2(j)(a)(iii) of  the Act.  It was only when there was direct use of  the goods  in  the  generation  or  distribution  of electrical energy  that the  goods sold  to the  Board could fall within the exemption.      We may  point out  that this  decision is  not  of  any assistance in the case before us as the dispute in that case centered on  the question  whether, in  order to attract the exemption, the  goods supplied  must be directly used in the generation or  distribution of  electrical energy or whether indirect use  of the  goods for  the aforesaid  purpose  was enough. It  appears that  the Division  Bench which  decided that case  did not  consider at all the question whether the expression "for use" in the exemption clause meant "intended for use"  or it  meant "actually  used".  The  same  is  the position regarding  the decision of the High Court of Punjab & Haryana  in Spedding Dinga Singh & Co. v The Punjab State, [1968] 22  S.T.C. 319 which dealt with the very subclause in question which  dealt with  the very  sub-clause in question before us.      We are,  therefore, of  the view that the real question which we  are called  upon to  determine is  whether, in the present case,  the cement  supplied  was  intended  for  use directly in  the generation  or distribution  of  electrical energy. If  it was  so intended, the exemption was attracted but not  otherwise. The  certificates which we have referred to earlier  issued  by  the  Board  clearly  show  that  the intention of  the Board  was that  the cement should be used for a purpose directly 6 connected with  the generation or distribution of electrical energy. There  is no  material to show that the certificates were false  certificates given  by the Board, having another use in  mind, or  that they were fradulently obtained by the assessee in  collusion with  the Board.  the mere  fact that some of  the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption.      In view  of the  conclusion set  out  in  the  previous paragraph, we  do not  feel  called  upon  to  go  into  the question whether  certificates granted  by the Board must be regarded as conclusive in a matter of granting exemption. We may, however,  point out  that the  certificate contemplated under Section 5(2)(a)(iv) of the Act cannot compare with the certificate in Form ’C’ which is a statutory certificate nor

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can it  be regarded  as completely  conclusive. We  are  not called upon  in this  case to  consider in what circumstance the assessing authority can go behind the certificate. It is clear  that  in  the  present  case  no  such  circumstances existed.      In the  result, the appeals must fail and are dismissed with costs. P.S .S.                                   Appeals dismissed. 7