Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR.

JUDGMENT

M/s Manglam Yarn Agencies Vs.
Assistant Commissioner,
Commercial Taxes, Special
Circle, Bhilwara.

S.B. SALES TAX REVISION PETITION NO.129/2008
against the judgment and order dt.10.1.2001
passed by Raj. Tax board, Ajmer in Appeal
No.1802/2006/Bhilwara.

Date of order
: 25th September, 2008

PRESENT

HON'BLE DR. JUSTICE VINEET KOTHARI

Mr. Dinesh Mehta for the petitioner.
Mr. Vineet Mathur with Mr. Rishab Sancheti for the respondents.


REPORTABLE

BY THE COURT:


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


“Whether the exemption notification No.1490

dated 17.9.2001 SO No.183 issued under Section

15 of the RST Act exempting sale or purchase of

all kinds of man-made fibers and man-made yarn

to which the rate of tax in respect thereof exceeds

2% also covered the turn-over tax imposed on the

respondent-assessee under Section 13A of the

RST Act, 1994 or the said exemption is limited to


STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

the individual sale or purchase of the specified
commodities in the said notification.”

2. The Revenue Authorities, all three, concurrently held
against the petitioner-assessee that the notification dated 17.9.2001

did not cover the turnover tax payable by the assessee under Section

13A of the Rajasthan Sales Tax Act, 1994 (hereinafter referred to as

'the Act').

3. Before coming to the controversy and case laws, it is
considered expedient to reproduce provisions of the Act and

exemption notification and rate notification in question for ready

reference :


“13-A. Levy of turnover tax.-


(1) Every registered dealer and every dealer who is liable
to get himself registered under section 3, and whose
total turnover in a year exceeds three lacs rupees,
whether or not the whole or any portion of such
turnover is liable to tax under any other provisions of
this Act, shall be liable to pay turnover tax, from such
date and at such rate as may be notified by the State
Government but not exceeding ten percent of his gross
annual turnover.
(2) No tax under sub-section (1) shall be payable on that

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

part of turnover which relates to:


(i)
sale or purchase of exempted goods;
(ii)
sale or purchase of goods in the course of inter-
State trade or commerce;
(iii) sale or purchase of goods in the course of export
out of the territory of India or sale or purchase
in the course of import into the territory of
India;
(iv) all amounts collected by way of tax under the
provisions of this Act or the Central Sales Tax
Act, 1956 (Central Act 74 of 1956);
(v)
all amounts allowed to dealers in respect of
goods returned to the dealer when goods are
taxable on sales provided that the goods were
returned within a period of six months from the
date of delivery of the goods and the accounts
show the date on which, and the amount for
which, refund was made;
(vi) all amounts realised by a dealer by the sale of
his business as a whole;
and except as provided above, no other
deduction shall be made from the gross turnover
of a dealer for the purpose of this section.
(3) For the purpose of assessment, collection and refund
of tax levied under this section, the provisions
pertaining to assessment, collection and refund under
other provisions of this Act and Rules made
thereunder shall mutatis mutandis apply.”
“15.
Exemption of tax.



STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

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

4. The relevant notification providing for rate of turnover
tax of 0.25 % dated 30.3.2000 and notification dated 17.9.1981

exempting the rate of tax on all kinds of man-made fibers and man-

made yarn exceeding 2% subject to certain conditions, are also

reproduced herein-under:


“NOTIFICATIONS ON TURNOVER TAX
FINANCE DEPARTMENT
Tax Division
NOTIFICATIONS


Jaipur, March 30, 2000

S.O. 377.-In exercise of the powers conferred by
section 13A of the Rajasthan Sales Tax Act, 1994
(Rajasthan Act No.22 of 1995), the State Government
being of the opinion that it is expedient in the public
interest so to do, hereby notifies that every registered
dealer and every dealer who is liable to get himself
registered under the Act and whose total turnover is not

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

less than fifty lac rupees in a year, shall be liable to pay
turnover tax under the said section, at the rate of 0.25%.

[F.4(1)FD/Tax Div./2000-301]
By order of the Governor,

V. Srinivas,
Deputy Secretary to Government.”
“S.NO.1340 No.F.4(18)FD/Tax-Div./97-Part-III-92, Dated : 17-09-2001

In exercise of the powers conferred by section 15 of the
Rajasthan Sales Tax Act, 1994 (Rajasthan Act No.223 of 1995), the
State Government being of the opinion that it is expedient in the
public interest so to do, hereby exempts from tax sale or purchase of
all kinds of man made fibers and man made yarn whether synthetic or
non-;synthetic, collusosic or non-cellulosic, blended or not and waste
thereof, worsted and semi-worsted woolen yarn including carpet
woolen yarn, embroidery yarn, cotton yarn and cotton yarn waste, to
the extent to which the rate of tax in respect thereof exceeds 2%, on
the following conditions, namely :


1. that these commodities are used as raw material for manufacture of
fabrics in the State ; and
2. that such manufacturer shall issue to the selling dealer a certificate
in the Form appended to this notification.
CERTIFICATE
I, ..........................(Name)................... (Status) authorised to
make purchase on behalf of M/s ...................... (Name and address of



STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
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the purchasing dealer), do hereby certify that the ............................
(description of goods) purchased from M/s ......... (complete address
of the seller), holder of R.C. No................... (RST) ................ (CST),
as per cash memorar dum/bill No.................. Dated ...................... will
be used as raw material for manufacture of fabric in the State of
Rajasthan.”

5. The principal submissions made by the learned counsel
for the petitioner-assessee Mr. Dinesh Mehta are as follows:(
a)
That since the exemption notification dated 17.9.2001
came after the turnover tax rate notification dated
30.3.2000 providing for 0.25% turnover tax, the exemption
notification dated 17.9.2001 should be deemed to have an
overriding effect and the rate of tax on sale of all kinds of
man made fibers and man made yarn including the turnover
tax cannot exceed 2% and, therefore, the turnover tax
levied by the Assessing Authority and upheld by the
appellate authorities upto the Tax board is wrong in law
and the same deserves to be quashed and set aside.
(b)
That turnover tax in effect is also a tax on sale or purchase
of the commodity and, therefore, the notification dated
17.9.2001 would cover that also.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

(b)
Since the word 'tax' has been defined in Section 2(41) of
the Act as any tax or other levy by any name leviable under
the provisions of the Act and 'turnover tax' has not been
separately defined, therefore, 'turnover tax' is included
within the definition of 'tax' under Section 2(41) of the Act
and is governed by the notification dated 17.9.2001.
(c)
That since Section 13-A(2) of the Act stipulates that no
turnover tax shall be payable in relation to sale or purchase
of exempted goods, therefore, the exemption over 2% rate
of tax granted under the notification dated 17.9.2001
cannot be indirectly taken away by imposition of turnover
tax under Section 13A of the Act.
(e)
That since the Hon'ble Supreme Court in S. Kodar V. State
of Kerala – 1974 (34) STT 73 SC as well as this Court in
Merta Trade & Industries Vs. State of Rajasthan & Ors. (
2002) 13 STO 462 (Raj) held that turnover tax is nothing
but tax on purchase or sale of goods and is as good as
additional rate of tax on such purchase or sale of the goods,
therefore, the exemption over 2% of rate of tax under
notification dated 17.9.2001, would exempt the essessee
from levy of turnover tax also.

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7


(f)
That the judgments of Hon'ble Supreme Court in Sun Oil
Company (P) Ltd. & Anr. Vs. State of West Bengal & Ors.
-(1998) 111 STC 420 upholding the decision of West
Bengal Taxation Tribunal in Kejriwal Electronics Pvt. Ltd.
& Co. V. Commercial Tax Officer (1991) 81 STC 20
(WBTT) [FB] and over ruling the decision of Single Judge
of Calcutta High Court in the case of ABN Food &
Beverage Pvt. Ltd. V. Assistant Commissioner of
Commercial Taxes (1990) 77 STC 339 (Cal.) was
distinguishable from the facts of the present case since
exemption provisions contained under Section 4AA in
West Bengal Act referred to only Section 4 for exemption
whereas Section 15 of the Rajasthan Act without reference
to any specific provisions for levy of tax, empowered the
State Government to exempt fully or partially the assessee
from payment of tax on the sale or purchase of any goods,
and, therefore, the exemption in the present case under the
notification dated 17.9.2001 exempted the assessee from
turnover tax also.
(g)
that relying on the decisions of the Hon'ble Supreme Court
in Mangalore Chemicals & Fertilizers Ltd. V. Dy.
Commissioner of Commercial Taxes and ors.-1991 (83)

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STC 234 and Unionof India & Ors. Vs. Wood Papers Ltd.

& Anr. -1991 (83) STC 251, the learned counsel for the

petitioner-assessee urged that while interpreting the taxing

statute including the exemption notifications, the Rule of

interpretation to be adopted is that while strict

interpretation has to be given to decide the question

whether the subject falls within the exemption or not but

once exemption is held applicable, full play to such

exemption clause has to be given :


“The choice between a strict and a liberal
construction arises only in case of doubt in regard
to the intention of the Legislature manifest on the
statutory language. Indeed, the need to resort to
any interpretative process arises only where the
meaning is not manifest on the plain words of the
statute. If the words are plain and clear and
directly convey the meaning, there is no need for
any interpretation. It appears to us the true rule of
construction of a provision as to exemption is the
one stated by this Court in Union of India V.
Wood Papers Ltd. [1991] 83 STC 251 infra ; 1991
JT (1) 151 at 155:

“True, speaking, liberal and strict
construction of an exemption provision are to be
invoked at different stages of interpreting it. When
the question is whether a subject falls in the
notification or in the exemption clause then it
being in nature of exception is to be construed


STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

strictly and against the subject but once ambiguity
or doubt about applicability is lifted and the
subject falls in the notification then full play
should be given to it and it calls for a wider and
liberal construction...”

The learned counsel for the petitioner-assessee
submitted that exemption under notification dated
17.9.2001 cannot be narrowly construed and would also
cover exemption from turnover tax.

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

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

(b) That event of taxation for levy of tax on sale or purchase on
each transaction is different from levy of turnover tax on
the gross annual turnover exceeding a particular limit of
turnover and these two being different concepts, cannot be
mixed up and, therefore, the Revenue Authorities have
rightly held the assessee not entitled to the exemption from
turnover tax under the notification dated 17.9.2001.
(c) The words 'on' is absent before the words 'sale or purchase
of all kinds of man made fibers and man made yarn' in the
notification dated 17.9.2001 and, therefore, the turnover tax
which is levied on gross sale value or turnover of the
assessee during particular year cannot be covered by the
said exemption notification and the said notification clearly
exempts only individual transaction of sale or purchase
from tax exceeding 2% rate subject to condition of
certificate of the commodity being used as raw material for
manufacture of fabrics in the State, whereas the turnover
tax on the basis of gross annual turnover as determined
under Section 13A of the Act on which the turnover tax at
the rate of 0.25% was leviable if the turnover exceeded
Rs.50 lacs in a year.
(d) That the controversy was longer res integra and was

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

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

7. I have heard learned counsels at length and given my
thoughtful consideration to the controversy in hand and also the
judgments cited at the Bar.
8. While it is true that the turnover tax is nothing but tax on
turnover viz. Aggregation of sale or purchase of goods and is,
therefore, exigible with reference to Entry 54 of List II of Seventh
Schedule to the Constitution of India, but the exigibility of the
turnover tax is upon happening of different kind of taxable event. It
gets attracted when the gross annual turnover exceeds a particular
limit or bench mark. The character of tax remains the tax on sale or
purchase of goods, but the levy is attracted if the criteria of its levy is
fulfilled as defined in Section 13-A of the Act. The whole of the
turnover does not attract the turnover tax. The exclusion of turnover
mentioned in sub-section (2) of Section 13A has to be made viz.
turnover of exempted goods, turnover of goods sold in the course of
inter State trade or commerce or in the course of export out of India
etc. The levy of turnover tax is also subject to restrictions imposed
under Article 286 of the Constitution of India and Sections 14 and 15

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7


of the CST Act as held by this Court in Merta Trade & Industries'
case (supra) but the question is, can rate of turnover tax prescribed in
the notification dated 30.3.2000 at 0.25% on the taxable turnover as
determined under Section 13A of the Act exceeding Rs.50 lacs, be
further slashed down by implied exemption by a subsequent
notification about the rate of tax in relation to sale or purchase of all
kinds of man made fibers and man made yarn under notification dated
17.9.2001. The answer has to be in the negative. The reason is that
notification dated 17.9.2001 which in fact reduced the rate of tax
applicable on the said commodity to 2% or in other words granted
exemption from rate of tax in excess of 2% on the individual
transaction of sale or purchase of the said commodity subject to
fulfillment of conditions specified in the said notification itself. The
said notification issued under Section 15 of the Act which is the only
source of power available with the State Government to grant
exemption does not refer to tax leviable under Section 13A of the
Act. As rightly contended by the learned counsel for the Revenue
there is no intendment about tax, there is no equity about tax. On a
plain reading of the notification as per golden rule of the
interpretation i.e. to go by the plain language of the text of the
notification, one can only come to the conclusion that the said
notification dt.17.9.2001 operates in a different field, whereas the
levy of turnover tax under Section 13A operates in another field. If
the State Government wanted to exempt turnover tax under Section


STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7


13 A also, nothing prevented the State Government from issuing such
separate notification or to mention it specifically in the same
notification also. The exemption under Notification dated 17.9.2001
is available with reference to individual transaction of sale or
purchase only, is further fortified by the certificate appended in the
said Notification as a condition for grant of exemption, which
certificate can be given by the purchasing dealer only in respect of
individual sale or purchase of goods. There is no concept of implied
exemption or exemption by stretching exemption notification to cover
the turnover tax also whereas the same is not clearly exempted under
the said notification dated 17.9.2001. As is well-known on the other
hand, the taxing statutes including the exemption notifications have
to be strictly construed and plainly read. On a plain reading of the
notification, it does not appears to the Court that the State
Government has exempted turnover tax also under the said
notification dated 17.9.2001.

9. As a matter of fact, the similar kind of controversy which
was dealt at a great length by the West Bengal Tribunal in Kejriwal
Electronics Private Ltd.'s case (supra), the controversy has been
finally decided by the Apex Court in Sun Oil Company's case (supra)
in the following manner:“
In the West Bengal Sales Tax Act, 1954,


STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

the Legislature itself has clearly and
unambiguously referred to the two forms of
impost, one under section 4, which is referred to as
“a tax” and the other under section 4-AAA, which
is referred to as “a turnover tax”. The difference in
nomenclature is consistently maintained in those as
well as other sections of the Act. Under Section 4AA
which provides for exemption, the
empowerment to notify that no tax shall be payable
relates to “tax” levied under section 4. Therefore,
Notification No.1809/F.T. dated April 1, 1976,
issued under section 4-AA obviously refers to the
tax under section 4 and not to “turnover tax”
imposed under section 4-AAA. A small-scale
industrial unit is not entitled exemption from
payment of turnover tax during the period of the
validity of the eligibility certificate by virtue of the
notification issued under Section 4-AA.

Kejriwal Electronics Private Limited & Co.

V. Commercial Tax Officer [1991] 81 STC 20
(WBTT) [FB] approved.
ABN Food & Beverage Pvt. Ltd. v.

Assistant Commissioner of Commercial Taxes

[1990] 77 STC 339 (Cal) overruled.

Decision of the West Bengal Taxation
Tribunal in SUN OIL Co. Vs. PVT LTD. V.
STATE OF WEST BENGAL [1994] 93 STC 24
affirmed.”

10. Another judgment which was relied upon by the learned
counsel for the assessee in the case of Additional Commissioner Vs.


STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
7


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

11. Thus, this Court finds no force in the contentions raised

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08

STR 129/08 -M/s Manglam Yarn Agencies Vs. Assistant Commissioner, Commercial Taxes,
Special Circle, Bhilwara. Judgment dt.25.9.08
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by the learned counsel for the assessee that the turnover tax imposed
upon the assessee should also be deemed to have been exempted
under the notification dated 17.9.2001 and nothing beyond 2% on
sale of all kind of man made fibers and yarn could be imposed in the
face of the said notification. The said notification, in the considered
opinion of this Court does not cover and exempt turnover tax leviable
under Section 13A of the Act and the said turnover tax imposed at
0.25% under notification dated 30.3.2000 is neither hit nor eclipsed
nor cut by the subsequent notification dated 17.1.2001.

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

item No._
babulal/