K. Mohan Ram, J.@mdashThe main question that is involved for consideration in these writ petitions is as to whether interstate sales of watery coconuts are liable to sales tax under Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act).
2. Learned Counsel on either side submit that the above said question has to be considered in the light of the provisions set out hereunder:
i. Section 6 of the Central Act:
Liability to tax on interstate sales:
(1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of interstate trade or commerce during any year on and from the date so notified:
PROVIDED that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of Sub.section (3) of Section 5 is a sale in the course of export of those goods out of the territory of India.
(1A) A dealer shall be liable to pay tax under this Act, on a sale of any goods effected by him in the course of interstate trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State.
ii. Section 8(2)(A) of the Central Act:
(as it stood from 1.4.1973 to 10.5.2002)
(2-A) Notwithstanding anything contained in Sub.section (1-A) of Section 6 or Sub.section (1) or clause (b) of Sub.section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or any other name), shall be nil or, as the case may be, shall be calculated at the lower rate.
iii. Section 8(2)(C) of the Central Act (as it stands today effective from 11.5.2002):
(2) The tax payable by any dealer or his turnover insofar as the turnover or any part thereof relates to the sale of goods in the course of interstate trade or commerce not falling within Sub.section (1),-
(a)...
(b)...
(c) in the case of goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally shall be nil, and for the purpose of making any such calculation under clause (a) or clause (b), any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
Explanation : For the purposes of this Sub.section, a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditiions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.''
iv. Section 14 of the Central Act:
Section 14(vi) of the Central Act (as it stood from 15.1.1957 to 31.3.1973):
vi. Oil seeds that is to say, seeds yielding non-volatile oils used for human consumption, or in industry or in the manufacture of varnishes, soaps and the like or in lubrication and volatile oils used in medicines, perfumes, cosmetics and the like.
Section 14(vi) of the Central Act as it stands today (effective from 1.4.1973)
viii. Coconut (i.e copra excluding tender coconuts) (cocos nucifera).
v. Section 15 of the Central Act:
(as it stood from 1.10.1958 to 10.5.2002)
Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State
Every sales tax law of a State shall, insofar as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:
a. The tax payable under that law in respect of any dealer or purchase of goods inside the State shall not exceed for per cent of the sale or purchase price thereof and such tax shall not be levied at more than one stage.
Section 15 of the Central Act as it stands today:
(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof.
vi. II Schedule - Tamilnadu General Sales Tax Act, 1959 (hereinafter referred to as the State Act):
____________________________________________________________________
S.No. Description of Goods Point of Levy Effective From
1. 2. 3. 4.
____________________________________________________________________
3-B Dessicated coconut At the point of 27.3.2002
first sale in
the State
6(viii) 6. Oil seeds, that is At the point of
to say, (as it stood last purchase in ...
prior to 1.4.1994) the State
Coconut (i.e copra
excluding tender
coconuts
(cocos nucifera)
6(viii) At the point of
as last purchase
amended Coconut including in the State by 1.4.1994
by Act copra (cocos nucifera) a dealer for
32/1994 crushing oil
____________________________________________________________________
vii. III Schedule - the State Act:
Part A : enumerates the goods that are subjected to additional duties of excise and for which sales tax cannot be levied. (Part B was inserted for the first time by Act 32 of 1994).
Part B : Entry 10 : coconut, copra and tender coconut other than those falling under the Second Schedule (with effect from 1.4.1994).
Entry 17 : coconut, copra other than those falling under the Second Schedule (effective from 27.3.2002)
Entry 28 : fresh vegetables, tender coconut, potatos, garlic and fruits (effective from 27.3.2002).
viii. Clarifications/Circulars issued by the Commissioner of Commercial Taxes:
-------------------------------------------------------------------------------
''Acts Cell - III/65/65129/98/12.3.1999
Circular
--------
Sub: C.S.T.Act, 1956 - Clarification on rate of tax of
interstate sale of coconuts - regarding.
Ref : This office Lr. No. Acts Cell III/84896/96 dated
22.7.1998.
The rate of tax on the last purchase of coconuts was reduced to 2% with effect from 5.3.1997 by notification issued u/s 17(1) of the TNGST Act, 1959 in notification No. II(1)/ CTRE/25(b)/97 dated 1.4.1997. Therefore, it is clear that interstate sale of coconuts is taxable at 2% with ''C'' form from 5.3.1997 to 31.3.1997. However, another notification was issued u/s 8(5) of the CST Act in notification No. II (1)/CTRE/22(a-11)/97 dated 5.3.1997 reducing the tax payable in respect of sale of coconuts or copra in the course of interstate trade to 2%. Though it is generally mentioned in the notification that ''the tax payable by any dealer under the said Act'' without mentioning section 8(1) and 8(2), the intention of the Government was to reduce the tax payable u/s 8(2) of the CST Act. If the intention of the Government was to reduce the rate of tax to 2% only on production of ''C'' form, then there is no necessity to issue a separate notification under the CST Act, since the rate of tax is already 2% as per the reduced rate available under the Tamilnadu General Sales Tax Act.
The Government have made a variation to the notification No. II(1)/CTRE/25(b)/97 dated 1.4.1997 reducing the rate from 4% to 1% in respect of the tax payable by any dealer under the said Act at the point of last purchase of coconut including copra in the State for crushing oil in notification No. II/(1)/CTRE/41(c-3)/98 dated 27.3.1998. In view of this notification the interstate sale of coconut with ''C'' form is taxable at 1% and without ''C'' form at 2% with effect from 27.3.1998.
The Government by notification No. II(1)/CTRE/ 43(d-6)/98 dated 7.4.1998 have reduced the rate to 1% in respect of the sale of coconut including copra effected by any dealer in the course of interstate Trade/Commerce. Hence, the interstate sale of coconut is taxable at 1% with or without ''C'' form.
In the above circumstances, the rates of tax under the CST Act 1956 on the interstate sale of coconuts are claried as follows:
____________________________________________________________
Period With ''C'' Form Without ''C'' Form
____________________________________________________________
5.3.97 to 26.3.98 2% 2%
27.3.98 to 6.4.98 1% 2%
7.4.98 onwards 1% 1%
____________________________________________________________
It is also clarified that the reduced rate of tax modified by the Government is related to the goods falling under entry 6(viii) of Second Schedule to the TNGST Act, 1959. The interstate sale of goods falling under entry 10 of Part B of Third Schedule to the TNGST Act, 1959 continues to be exempted from tax.
All the Deputy Commissioners (CT) are requested to bring to the notice of Subordinate Officers, the above clarification. The Territorial Deputy Commissioners are requested to instruct the Assessing Officers to complete the assessments under the Central Sales Tax Act relating to coconut without waiting for orders as instructed in the reference cited.
3. Mr.C.Natarajan, learned Senior Counsel appearing for some of the petitioners submitted the following propositions and contentions:
i. Section 28A is in the nature of an advance ruling provision to enable trade and commerce to transact business and organising their affairs. Tax structure is an important component of price and the provison is intended in public interest;
ii. An adverse circular issued by the Commissioner of Commercial Taxes is not binding on the assessee who can challenge it either before an appellate forum or before Court;
iii. A beneficial statutory circular favourable to the assessee can be enforced by the assessee. But the Revenue cannot question its own circulr as contrary to law or erroneous and cannot even take a stand (before a Court) contrary to the circular. Even an appeal cannot be preferred questioning the correctness of the circular. Even a show cause notice contrary to circular is without jurisdiction and ab initio void. This is so even in respect of a non-statutory circular;
iv. If the circular gives an interpretation of statutory provision beneficial to assessee on which a different view is expressed by the Supreme Court, even so, the circular has been held to bind till withdrawn;
v. The pending reference to the Larger Bench by the Honourable Supreme Court is on the question whether a circular can be required to be complied with by Revenue, even if the Supreme Court declares the law differently which by virtue of Article 141 of The Constitution is binding on all Courts within the territory of India;
vi. The heading of Section 8 of the Central Act is ''rate of tax on sales in the course of interstate trade and commerce''. Rate is an important component of tax legislation;
vii. To the extent material, Section 8(2-A) deals with ''sale of any goods the sale or purchase of which is exempt from tax generally;
viii. The focus of Section 8(2-A)/Section 8(2)(c) is on the goods and the enquiry is, are the goods exempt from tax generally? The explanation negatives a case where the exemption from tax under the State law is in specified circumstance or specified condition;
ix. Section 8 of the State Act is captioned ''exemption from tax'' and states ''not liable to pay any tax'' in respect of the goods specified in the Third Schedule. ''Such goods'' specified in the Third Schedule are exempt;
x. Section 8 is subject to such restrictions and conditions as may be prescribed. The restriction or condition should be found in the Third Schedule. Serial No. 10 of the Third Schedule (upto 31.3.1994) and later Serial No. 17 and Serial No. 28 of the Third Schedule (from 1.4.1994) specified ''coconut, copra and tender coconut'', ''other than those falling under the Second Schedule''. ''Falling'' refers to ''goods'' excluded and not transaction;
xi. It is of no account that the word ''coconut i.e copra'' considered in the context of Sections 14(vi)(viii) of the Central Act may be wide to include ''watery coconut'', ''dried coconut'', ''desiccated coconut'' or ''copra''. The tax treatment in the State law alone is relevant to consider Section 8(2-A)/Section 8(2-c) because it is open for the State to tax one class and exempt another class of goods falling u/s 14(vi)(viii);
xii. In Section 14(vi)(viii), the words are ''coconut i.e copra excluding tender coconut''. By contrast, from 1.4.1994, the State Act deletes the words ''excluding tender coconut'' which has significance. Serial No. 6(viii) of the Second Schedule states ''coconut including copra'' incorporating the words ''for crushing oil''. The words in the State Act invite the principle of noscitur a sociss so that the word ''coconut'' is restricted to the class of goods to which copra belongs such as dried coconut, desiccated coconut;
xiii. ''Coconut'' is the genus and the specie are ''watery coconut'', ''dried coconut'', ''copra'', ''desiccated coconut'' and ''tender coconut''. The Second Schedule deals with a class of goods as captioned by Serial No. 6 as ''oil seeds, that is to say'' and sub.items (viii) ''coconut including copra''. Tax is on the last purchae by dealer ''for crushing oil'';
xiv. Use of the words ''coconut including copra'' under the caption ''oil seeds'' in the Second Schedule, with the further expression ''for crushing oil'' identifies that class of coconut which is oil bearing and fit for crushing;
xv. Serial No. 10 and the later Serial No. 17 of the Third Schedule read with Section 8 deal with coconut not belonging to the class falling under the Second Schedule. Watery coconuts (generally used for culinary/pooja purposes) not sharing the character of ''copra'' in the Second Schedule remain in the Third Schedule;
xvi. It cannot be disputed that if a class of coconut is generally exempt, there is no central sales tax. Classification may be with reference to value/price or characteristic or some feature popularly found. Goods of that clause fall u/s 8(2-A)/8(2-c) of the Central Act;
xvii. The judgments relied by the Revenue are with reference to the goods the sale or purchase of which was generally taxable under the State Act, but the exemption was on transaction effected in a specified condition or circumstance. The present case is a converse one, where the goods in the Third Schedule are generally exempt u/s 8, but the tax is on one class of goods coconut (i.e. Copra) fit for crushing;
xviii. When Serial No. 6(viii) of the Second Schedule taxes only the last purchase by oil mill, in no other situation, ''coconut including copra'' is taxed under the Act. If so, Section 8 read with Serial No. 10/Serial No. 17 of the Third Schedule are unnecessary to exempt rest of the transactions. This interpretation renders Serial No. 10/Serial No. 17 of the Third Schedule otiose and purposeless. Revenue is wrong in stating that Serial No. 6(viii) of the Second Schedule and Serial No. 10/Serial No. 11 of the Third Schedule deals with the same class of goods. This fails in respect of watery coconuts; and
xix. The mention of desiccated coconut in Serial No. 3-B of the Second Schedule with effect from 27.3.2002 is of no effect. The consequence is to exclude desiccated coconut (described as a shredded copra by the Supreme Court) as a class from the rest of the exempted goods in Serial No. 10/Serial No. 17 of the Third Schedule, just as coconut i.e copra of the Second Schedule found fit for crushing oil.
4. In fine, the plea on behalf of the assessees is that having regard to the circular issued by the Commissioner of Commercial Taxes in - Acts Cell - III/65129/98 dated 12.3.1999 clarifying the position that the transactions in question are not taxable at any rate in view of the exemption accorded in the Third Schedule to the State Act and having regard to Section 8(2A) of the Central Act, the transactions are exempt from the levy in question and that notwithstanding any pronouncements in this regard, as long as the circular dated 12.3.1999 holds the field, there is no scope for subjecting the interstate sales of watery coconuts to levy under the Central Act.
5. Per contra, it is contended on behalf of the State that the liability to tax is to be adjudged on the basis of the provisions contained in the statute and the circular dated 12.3.1999 does not in any way help the assessees to avoid the statutory liability. It is also urged on behalf of the State that the exemption granted under item No. 17 of Part B to the Third Schedule to the State Act being a conditional one and not a general exemption, it cannot enure to the benefit of the assessees by virtue of Section 8(2A) of the Central Act and consequently, the transactions in question are liable to tax. It is further contended that the law declared by Competent Courts is binding on all the authorities and the assessees as well and that any administrative instructions issued by the Departmental Authorities cannot divest the jurisdiction of the statutorily created Adjudicatory Authorities invested with quasi judicial powers to decide the issues raised before them objectively and in accordance with law.
6. Learned Counsel on either side referred to several decisions of the Courts including those of the Supreme Court of India and it is proposed to refer to only the following among them, which are relevant and necessary without much multiplication:
i.
We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue.
ii.
We have noticed that para 9 of Dhiren Chemical''s case is being misunderstood. It therefore becomes necessary to clarify para 9 of Dhiren Chemical''s case. One of us (Variava,J) was a party to the judgment of the Dhiren Chemical''s case and knows what was the intention in incorporating para 9. It must be remembered that law laid down by this Court is law of the land. The law so laid down is binding on all Courts/Tribunals and Bodies. It is clear that circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical''s case because of circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on interpretation now given by this Court in Dhiren Chemical''s case, the Revenue was likely to reopen cases. Thus para 9 was incorporated to ensure that cases where benefits of exemption notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where Revenue/Department had already contended that the benefit of an exemption notification was not available, and the matter was sub-judice before a Court or a Tribunal, the Court or Tribunal would also give effect to circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub-judice a Court/Tribunal is, after Dhiren Chemical''s case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that Courts/Tribunals have to ignore a judgment of this Court and follow circulars of the Board.That was not what was meant by para 9 of Dhiren Chemical''s case.
iii.
A disparate view has been taken in
Though the view expressed in
iv.
However, the learned Counsel for the appellant relied on the decisions in
v.
A circular by tax authorities is not binding on the Courts. It is not binding on the assesssee. However, the interpretation that is thereby placed by the taxing authority on the law is binding on that taxing authority. In other words, the taxing authority cannot be heard to advance an argument that is contrary to that interpretation.
vi. Commissioner of Sales Tax, MP v. Popular Trading Company (2000) 118 STC 379 wherein the Apex Court has laid down as follows:
The view taken by the High Court in this case has lost sight of the expression in the opening clause of the entry ''oil seeds, that is to say''. The phrase ''that is to say'' has been the subject matter of interpretation by this Court in State of Tamilnadu v. Pyare Lal Malhotra (1976) 37 STC 319. The expression ''that is to say'' is descriptive, enumerative and exhaustive and circumscribes to a great extent the scope of the entry. The entry provides for ''oil seeds, that is to say coconut'', which again says, ''i.e.copra and coconut including any other commodity''. An oil seed botanically means a seed which is a flowering plant''s unit of reproduction or germ capable of developing into another such plant. Seed which can yield oil is an oil seed. If a seed by reason of application of a scientific method produces oil is not necessarily understood to be an ''oil seed'' in a common parlance. If a commodity possesses all the qualities of an oil seed it cannot be excluded from the ambit of the expression ''oil seed''. Oil is generally extracted from dry coconuts, but in some parts of India it is extracted even from copra recovered from fresh coconuts. Copra of watery coconut before it dries up may not yield as much oil as dried copra. The oil which it yields may also contain some watery substance which has to be eliminated for the purpose of recovering pure coconut oil. At the same time, it yields sufficient quantity of oil. Thus, ''watery coconut'' while yielding oil merely because it yields some watery substance does not cease to be an ''oil seed'' and, therefore, it falls within the entry.
vii.
The simple question before us is whether the Bench which decided
The idea behind Sub.section (2-A) of Section 8 of the Central Sales Tax Act, which we have analysed hereinbefore, is to exempt the sale/ purchase of goods from the central sales tax where the sale or purchase of such goods is exempt generally under the State sales tax law. We must give due regard and attach due meaning to the expression ''generally'', which occurs in the Sub.section and which expression has been defined in the Explanation. If the said expression had not been there, it could probably have been possible to argue that inasmuch as the goods sold by a particular manufacturer-dealer are exempt from the State tax in his hands, they must equally be exempt under the Central Act. But Sub.section (2-A) requires specifically that such exemption must be a general exemption and not an exemption operative in specified circumstances or under specified conditions. Can it be said that the goods sold by the dealers in this case are exempt from tax generally under the State sales tax enactment ? The answer can only be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium scale industrial unit within five years of its commencement of production and sold within the said period, i.e in certain specified circumstances alone. The exemption is not a general one but a conditional one.
7. I have carefully considered the submissions of the learned Counsel on either side in the light of the statutory provisions, notifications and the case laws on the subject.
8. So far as the contention relating to the binding nature of the circulars issued by the Commissioner and its enforceability, despite as it is claimed, judicial pronouncements declaring the position of law to the contrary is concerned, the same does not merit acceptance to that extreme. Though several decisions have been pressed into service on behalf of the petitioners in this regard, reference to the following latest decisions, which are directly on the point involved for consideration in the above writ petitions would suffice.
9. The observations in the case of
10. The fact that those observations were not meant to lay down any general proposition of law, that the circulars will hold the field de hors the declaration of law by Courts, was made clear by the Supreme Court in the case of
11. Again in the decision in the case of
12. In the case of
13. In the case of
14. So far as the taxability of the transactions of the petitioners are concerned, the same requires to be adjudged in the light of the provisions of the Central Act and the provisions contained in the Second and Third Schedules to the State Act. In doing so, what is required to be considered at the threshold is as to whether ''watery coconuts'' dealt with by the assessees falls within the entry as found described in the Second Schedule to the State Act. The said entry is fashioned upon the entries in Section 14 of the Central Act.
15. The Apex Court, while considering the identical entry in the decision in the case of Commissioner of Sales Tax, MP v. Popular Trading Company (2000) 118 STC 379, held that an oil seed botanically means a seed, which is a flowering plant''s unit of reproduction or germ capable of developing into another such plant and that a seed, which can yield oil, is an oil seed and if a commodity possesses all the qualities of an oil seed, it cannot be excluded from the ambit of the expression. In arriving at such conclusions, Their Lordships of the Apex Court also noticed specifically that though oil is generally extracted from dry coconuts, in some parts of the country, it is extracted even from copra recovered from fresh coconuts. Though copra of watery coconuts before it dries up may not yield as much oil as dried copra, it was ultimately held therein that ''watery coconuts'' while yielding oil, merely because it yields some watery substance, does not cease to be an oil seed. There is, thus, no inconsistency or contravention of Section 14 of the Central Act.
16. A Constitution Bench of the Apex Court in the case of
17. So far as the entries in the Third Schedule to the State Act, on which heavy reliance is placed to claim exemption on the basis of Sections 8(2A) and 8(2C) of the Central Act is concerned, the nature of exemption engrafted in the relevant entries in the Third Schedule need consideration. The relevant entry in the Third Schedule unmistakably makes it clear that the exemption is not a general one relating to the commody coconut, copra, etc. But, what is exempt is only such of those, which does not fall under the relevant entry in the Second Schedule. As noticed earlier, except tender coconut, every other coconut i.e even watery coconut will fall under the taxable item. Inasmuch as the exemption granted is not in general terms, but in only specified circumstances and conditions, it cannot be availed of by the petitioners.
18. The question as to when an exemption is general in terms to avail of the benefit under Sections 8(2A) and 8(2C) of the Central Act and when it is only an exemption in specified circumstances and conditions is not res integra and has been adjudicated by more than one authoritative pronouncements of the Apex Court. It would suffice to advert to the decision in the case of
19. When it is held that the transactions are liable to tax and there is no general exemption as claimed on behalf of the petitioners, which would enure to them, the further question as to at what rate and in what circumstances they could be taxed in what manner are all matters for assessment by the Competent Authorities, who have jurisdiction in respect of such issues under the above Acts. As and when any order of assessment is passed, it is always open to them to vindicate their rights in accordance with and as are permissible in law.
20. For the foregoing reasons, except WP. No. 4883 of 2005, all the writ petitions are dismissed. No costs. Consequently, all connected pending WPMPs are also dismissed.
21. WP. No. 4883 OF 2005:
In the light of the decision rendered above, this writ petition is disposed of with a direction that the petitioner - assessee, in case has got any grievance against the impugned order, can challenge the impugned proceedings before the jurisdictional Appellate Authority as provided for under the State Act. Since the time prescribed for preferring the appeal would have already expired, the petitioner is given 30 days'' time from the date of receipt of a copy of this order to file the statutory appeal. If such an appeal is filed after satisfying the requirements of the statutory provisions, the Appellate Authority shall entertain the appeal without reference to the period of limitation prescribed under the relevant provisions of the State. Till the expiry of time hereby granted for filing the appeal, the respondents shall not give effect to the impugned order of assessment. Consequently, the connected WPMP is dismissed. No costs.
