The two judge bench of Supreme Court of India has dimissed an appeal filed by J.K. Lakshmi Cement Ltd against the denial of dual benefit of Partial exemption from the sales tax payable in respect of inter-State sales.
The appellants are manufacturers and sellers of Grey Portland Cement. As per the Notification No. F4(72)FD/Gr.IV/81-18 dated 06.05.1986, the State of Rajastan granted partial exemption from central sales tax payable in respect of inter-State sales, the benefit of which was not available to levy on cements. From the assessment year 1989-90 to 1997-98 the appellant had been granted benefit of partial exemption under the notification dated 06.05.1986 except for the assessment year 1995-96 and 1996-97 as no claims were made by the appellants being not eligible.
In the meanwhile, another notification was issued by the Government to the effect that in respect of inter-State sales of cement, tax payable under sub-sections (1) and (2) of the said Section shall be calculated at the rate of 4% without furnishing declaration in Form ‘C’, inter alia, subject to the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986.
Circular No. 2/94-95 dated 15.04.1994 was further issued to clarify that inter-State sales of cement duly supported by ‘C’ and ‘D’ forms shall be eligible for benefit of partial exemption notification dated 06.05.1986 and that such benefit would not apply to inter-State sales which are not supported by declarations in declarations in Forms ‘C’/‘D’. Another notification was issued in the year 1997 stating that that CST on inter-State sales of cement shall be calculated at the rate of 4% inter alia subject to fulfilment of the condition that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided by partial exemption notification dated 06.05.1986. This notification remained in force upto 31.03.1998. Further, the Government issued Circular No. 94-95/119 in order to clarify the applicability of partial exemption notification dated 06.05.1986 vis-a-vis notification dated 07.03.1994 and subsequent notifications dated 12.03.1997 and 21.01.2000.
By the said circular the competent authority purported to state that the dealer can avail of the benefit of either of these two notifications in any financial year meaning thereby that if he opts for the benefit under notification dated 06.05.1986 for the year 2000-2001, he would not be entitled to claim simultaneous benefit in respect of the same year under the notification dated 21.01.2000.
The grievance of the appellants are that the Governement, on the basis of the Circular issued in 2001, has initiated re-assessment proceedings against them for the assessment year 2000-2001, seeking to disallow the benefits under notification dated 06.05.1986 on a purported retrospective application of the Circular dated 16.04.2001.When the matter was challenged before the High Court, the Court held that the said circular cannot be applied retrospectively.
While dismissing the appeal, the bench comprising of Justice Dipak Misra and Justice C Nagappan held that, “The 21.01.2000 notification applies to a dealer having a place of business in the State and is in respect of sale of cement made by him from any place of business within the State in the course of inter-State trade or commerce. Apart from the above, certain other conditions are to be satisfied. They are (a) sales-tax in respect of inter-State sales as per the notification would be calculated at the rate of 6% and (b) the dealer making inter-State sales under notification dated 21.01.2000 would not be eligible to claim benefit provided in the notification dated 06.05.1986. Clause 3 of the notification lays down that if a dealer claims benefit under notification dated 21.01.2000, he is not eligible to claim the benefit under notification dated 06.05.1986. Benefit under the two notifications cannot be claimed at the same time. It is simple and clear”.
“A dealer making inter-State sales under the notification dated 21.01.2000 is disqualified and not eligible to claim benefit under the notification dated 06.05.1986. The reason is to deny dual benefit and also the notification dated 06.05.1986 computes the benefit on the basis of turnover. Bifurcation and division of turnover would lead to distortion and cause anomalies”, the bench said.
“As the factual score would depict, Notification dated 07.03.1994 was applicable from 1st April, 1994 to 31st March, 1997. It was not applicable with effect from 1st April, 1997. In such a situation, the plea of the appellant that dual benefits were availed of under notification dated 07.03.1994 post 1st April, 1997 is unacceptable and has to be rejected. Be it noted, by another notification No. 97-122 dated 12.03.1997, the State Government had rescinded notification dated 07.03.1994 and directed that the Central Sales Tax shall be calculated @ 4%, subject to the condition that the dealer making inter State sales in this notification would not be eligible to claim benefit of partial exemption under the notification dated 06.05.1986. The notification dated 12.03.1997 had remained in force upto 31st March, 1998. The circular dated 15.04.1994 in express words was not applicable to the notification dated 21.01.2000”.
While rejecting the contentions of appellant, the court said that, It is limpid that the circular dated 15.04.1994, when in force, had referred to the notifications dated 07.03.1994 as well as 06.05.1986. Under the notification dated 07.03.1994, the rate of central tax on inter-State sale of cement was unconditionally fixed at 4%, even when there was no declaration in Form C and Form D. The notification dated 06.05.1986 relating to inter-State sale required Form C and Form D, for availing the benefit. The circular did not in clear and categorical terms lay down that dual or multiple benefits under the two notifications could be availed of by the same dealer. It, however, appears that both the assessee and the Revenue had understood the circular dated 15.04.1994 to mean that inter-State transactions would qualify and would be entitled to partial exemption under the notification dated 06.05.1986, when accompanied with Form C and D and for inter-State sale transactions without Form C and D, benefit of notification dated 07.03.1994 would apply.
The bench also observed that, “the circular dated 15.04.1994 was ambiguous and, therefore, as long as it was in operation and applicable possibly doctrine of contemporanea exposition could be taken aid of for its applicability. It is absolutely clear that the benefit and advantage was given under the circular and not under the notification dated 07.03.1994, which was lucid and couched in different terms. The circular having been withdrawn, the contention of contemporanea exposition does not commend acceptation and has to be repelled and we do so. We hold that it would certainly not apply to the notification dated 21.01.2000”.
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