M/S MYSORE POLYMERS & RUBBER PRODUCTS LTD vs. THE COMMISSIONER OF COMMERCIAL TAXES

The Deputy Commissioner of Commercial Taxes (Assessment-11), Fast Track, Bangalore-560 009.

The Deputy Commissioner of Commercial Taxes, (Int.3), South Zone, Bangalore-560 047.

The State of Karnataka Rept., By its Finance Secretary, Vidhana Soudha, Bangalore-1. …Appellants

The brief facts leading to the above appeal are as under:

The returns filed by the assessee in respect of its turnover for the assessment year 2002-03 which had been initially accepted and in the return, the assessee had claimed nil tax liability under Section 6-B but had offered the other part of its turnover for tax under the other provisions of the Act. However, the assessment was reopened under Section 12-A of the Act by issue of notice and the Assessing Officer heard representative of the assessee and concluded the reassessment order on 29.7.2004, holding that the assessee is liable to pay resale tax under Section 6-B and accordingly, brought to tax that part of the turnover of the assessee which was liable to tax under Section 6-B and in view of the non-disclosure in the earlier returns about the liability under Section 6-B levied penalty also.

For the assessment year the returns filed for 2003-04 was yet to be processed. In the interregnum there was an inspection of the premises of the assessee by the

The respondent/dealer questioned the legality of these two orders by filing W.P.34986/2004 before this

One other argument that is sought to be raised on behalf of the petitioner/dealer was in view of the tenth proviso to Section 6-B of the Act and also in the writ petitioner’s case tenth proviso to Section 6-B getting attracted the turnover was not liable to tax under Section 6-B in terms of tenth proviso to this Section.

It was also contended that in view of Explanation II for the purpose of the 2nd proviso to Clause (a) to Sub- section 3 of Section 5 elaborating the expression ‘oil company; that the purchases made by the petitioner/company from MRPL or in other sale by MRPL in favour of writ petitioner oil company is deemed not a sale and likewise, the sale by petitioner/oil company to another oil company is also being deemed as not a sale in favour of a non-oil company in such circumstances when there was no sale at all, there was no scope for levy of resale tax on the turnover and therefore, there was no

Before the learned Single Judge, the writ petition was resisted by the State by filing statement of objections. It was sought to be contended that the caption given to the Section cannot be a decisive factor, the liability in a taxing provision cannot be inferred by merely looking at the heading of the Section but what is material is the contents of the charging section. Where the charging section creates a liability in a transaction and it is clear and unambiguous, the liability so created cannot be relieved by the heading of the Section.

The writ petitioner would be liable to tax under Section 5(3)(a) being the earliest of the dealers effecting sales of the product in the State but for the provisions of the 2nd proviso to Section 5(3)(a). Read with explanation 2 to Section 5(3)(a) and the fiction is not even considered to be the first sale of the sale by the earliest of the dealers and the 2 Proviso to Section 5(3)(a) takes care of the liability in its provision and as such there being no liability

Though Section 6-B was by way of substitution of the earlier provision of what is known as turnover tax being levied, the only significant change that has been brought about in Section 6-B resale tax is to enable a dealer to pass on the liability under Section 6-B whereas earlier the turnover tax under Section 6-B as it stood earlier was to be borne by the dealer and was not permitted to be passed on to the purchaser. The other contention urged on behalf of the assessee were all unfounded and therefore he has prayed for dismissal of the writ petition.

The arguments relating to the effect that the explanation to Section 5(3)(a) of the Act has over the matter in question found favour with the learned Single Judge.

Before recording the submissions made at the bar in this appeal, it is to be noticed that STRP 112/08 and STA Nos.11 and 12/08 are also connected with this appeal and all these matters are heard together.

In STRP 112/08, the sales tax revision petition under Section 23(1) of the Act is by the assessee/dealer being aggrieved by the order passed by the tribunal dated 6.5.2008 passed in STA 299/06 dismissing the appeal of the assessee which was in turn directed against the first appellate authority which also dismissed the appeal of the assessee against the order of the three assessing authorities. The contention of the assesee that it was not

The assessing authority had rejected such contention of the assessee that it was not liable to pay tax under Section 6-B in view of the fiction created by the 3 rd proviso to Section 5(3)(a) and this had been successively affirmed by the first appellate authority and the Karnataka Appellate Tribunal and therefore, this revision petition by the assessee/dealer.

The arguments are common and the period of assessment is 2002-03 and 2003-04 i.e., first two years after introduction of resale tax under Section 6-B of the Act.

The assessee/dealer in this case is a manufacturing dealer who had occasion to supply rubber tubes to Ceat Company which was brand holder of the Ceat and the product being marketed under this brand name i.e., the assessee/dealer is a supplier of part of a product in respect of which M/s Ceat Tyres holds the

STA 11 and 12/08 are also appeals and they are linked along since they too raise the question of the taxability of the asseessee/dealer under Section 6-B of the Sales Tax Act. In this case the assessee is a manufacturer and seller of electrical motors which is supplied to Kirloskar electric Company – the brand holder’s name is affixed and sold by the assessee/dealer and therefore is also a dealer who is covered under the 3rd proviso to Section 5(3)(a) as in the case of assessee in STRP 112/08. Except for this difference on facts insofar as the legal position is concerned, the contentions are the same or

In the instant case, the assessment orders are of 2003-04 and 2004-05 respectively and the appeals by the assessee/dealers are directed against the revisional orders passed by the Additional Commissioner of Commercial Taxes revising the orders passed by the First Appellate Authority who had allowed the appeal of the assessee/dealer to hold that assessee/dealer was not liable to pay resale tax under Section 6B of the Act.

This view was held to be erroneous and prejudicial to the revenue. Therefore the order was revised by the Additional Commissioner after issue of notice and the order passed by the assessing authority holding that the assessee was liable to pay tax under Section 6-B for the relevant assessment year was restored. It is in this background the assessee/dealer being aggrieved has preferred these two appeals.

In the writ appeal the respondent/assessee- dealer is represented by Sri Rabinathan and Thirumalesh. Revision petitioner in STRP by the assessee is represented and argued by Sri Keshava Murthy - learned counsel and the sale tax appeal of the assessee i.e.,STA 11/2008 and 12/2008 are being argued by Sri Surendran Thumbochetty.

We have heard learned counsel for the State and learned counsel for the assessee at length.

Appearing on behalf of the appellant/State, Smt Sujatha – learned Govt. Advocate has by pointing out the provisions of Section 6-B of the Act and the provisions of the provisos to Section 5(3)(a) of the Act, has vehemently urged that the scope and ambit of Section 5(3)(a) has totally been misconstrued and has not been properly

On the question of understanding such a provision and interpretation of the same, submission of the learned Government Advocate is that the decision of this Court rendered in the case of UNIVERSAL TRANSFORMERS vs ASSISTANT COMMISSIONER OF COMMERCIAL TAXES reported in (2003)133 STC 356 is nearer home that it was clearly held in this case that the liability under Section 6-B when it was turnover tax but analogous and the charge under Section 6-B being on par with the charge as of now though it is named as resale tax and the case being one of supplier of goods to a brand holder or a manufacturer and it was held in this case that

Elaborate arguments are addressed by the learned Government Advocate with regard to the meaning and understanding of resale tax and in the background of the budget speech also. Submission is that on a careful reading of the budget speech, particularly paragraph 170, 171 and 177 which is also relied upon by the learned counsel for the assessee, it is not necessarily indicated that the levy of resale tax is only in respect of a second or subsequent transaction and the mere fact that it was mentioned as one preceding the VAT, makes liable an assessee for a multiple point levy under VAT Act whereas

In respect of the effect of a budget speech and the manner in which it can collect or effect the charging section and also the legal position in regard to Budget Speech, it is submitted that whatever might have been the budget speech, unless it is translated into the statutory provision and made part of the statutory provision, the budget speech remains as a speech and does not in any way have a bearing on the operation of the provisions of the Act. Reliance is placed on a decision of the Division Bench of this Court rendered in the case of AMBERKAR PRE-STRESSED PRODUCTS vs THE ADDL. COMMISSIONER OF COMMERCIAL TAXES rendered on

It is submitted that it is only a caption and need not give the real purpose of the object of the levy and at any rate cannot be a guiding factor for collecting the tax. In support of such submission, reliance is placed on the decision of the Supreme Court in the case of MUNICIPAL COUNCIL, KOTA vs DIVISIONAL COMMISSIONER (2001)123 STC 49.

Placing reliance in the case of the Judgment of the Supreme Court in MUNICIPAL COUNCIL, KOTA,

Based on the ratio of this judgment of the Supreme Court, it is submitted that the substance in the taxing statute is an ingredient of the charging section and not merely the heading is what is held in this case and this ratio is called to bolster the argument that the heading resale tax is not decisive of the nature of levy under Section 6-B of the Act.

One another decision relied upon by the learned Government Advocate to submit that the fiction created for a limited purpose cannot be extended to other provisions and for such purpose the case of FOOD CORPORATION OF INDIA vs COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA (2004) 138 STC 235, the Judgment of the Division Bench of this Court is relied upon wherein it has been held that the fiction created in proviso to Section 5(4) of the Act cannot be extended to Section 6 of the Act, for levy of purchase tax and this argument and this ratio is

Summing up the submissions, the learned Government Advocate submits that by pointing out to the statutory provisions and based on such judgment of this Court and the Supreme Court that at the first instance, a heading resale tax in itself is not conclusive; that on a reading of Section 6-B, the levy is not in any way indicated to be in respect of a transaction which is second or the subsequent transaction and not on the first transaction as the language of the section indicates that every registered dealer and every dealer who is liable to get himself registered under the Act and subject to the exceptions therein is liable to tax, the only mitigating factor being that the turnover in respect of the taxes under Section 6-B is attracted and levied, should not have been taxed or liable to tax under Section 5, 5A, 5B, 5C or 6. It is submitted in this regard that the argument of the assessee that it is exempted but it is still liable to tax, is not an argument

It is also submitted that the assessee and dealers in the present case are not governed by the provisos 1 to 11 and particularly 10th proviso to Section 6B to take them out of the purview of levy of tax under Section 6-B for the simple reason that none of the assessees are liable to pay tax when their goods are sold whether in favour of another oil company in case of the writ petitioner and to a brand holder as in the case of review petitioner and the appellant in STRP and the STA.

It is also submitted that the taxability of a particular product under the taxing enactment is dependent on the scope of the charging section, the subject matter of charge and the happening of an event which attracts the liability for payment of taxes and the nature of transaction of the present respondent, for the payment of taxes. If such possibilities are made clear in a charging section, the charge operates and takes effect and therefore submits that the levy under the provision of Section 6-B bearing as it does, all the characteristics of a charging section operates to its full and cannot be curtailed or restricted in its scope or ambit by the mere heading given to the Section 6-B as ‘levy of resale tax’.

A proviso to a Section being very much part of the Section and so also the 2nd and 3rd proviso to Section 5(3)(a), it is submitted that there is no liability under Section 5 of the Act in respect of dealers covered by 2nd and 3rd proviso to this Section. It is therefore that the turnover of such dealers in respect of which the provisos is attracted are not being taxed under Section 5 and could be

It is countering such arguments of the learned Government Advocate and strongly supporting the order passed by the learned Single Judge, the arguments are addressed on behalf of the respondents in the Writ Appeal No.1260/06 and the writ petitioner in Writ Petition by its counsel Sri. Rabinathan and Thirumalesh.

Sri Rabinathan has submitted that on reading the budget speech, particularly paragraph 177, it is clear that it is only a levy on resale. The background in which this Section i.e., resale tax was introduced is also highlighted and explained and as noticed by the Finance Minister in the budget speech. It is contended that sale by one oil company to another oil company is not a resale and at the best it can only be a sale and not a resale.

It is also submitted that though under the 2nd proviso to Section 5(3)(a) by a fiction, it is deemed to be as

In support of his submission that heading and marginal notes have a role to play in interpreting the provision, reliance is placed by Sri Rabinathan on the judgment of the Supreme Court in the case of J.P VARGHESE –vs- INCOME TAX OFFICER, ERNAKULAM AND ANOTHER reported in (1981) 131 ITR 597 (SC). Reliance is also placed on the judgment in the case of SHREE SAJJAN MILLS LTD –VS- COMMISSIONER OF INCOME TAX, M.P. AND ANOTHER reported in (1985) 156 ITR page 585 at page 597 and it is submitted based on this judgment of the Supreme Court that while taxing statute has to be strictly construed but reasonable construction is not excluded and for that purposes that

It is also submitted that if as mentioned during the budget speech on the Finance Bill and as per the law made under the provisions of Section 6-B of the Act, resale tax was put into motion by substituting or replacing the earlier turnover tax and the Legislature would not have substituted that provision unless it is a new type of levy different from the earlier turnover tax, as a mere amendment would have sufficed. He has drawn our attention to the definition of the word ‘Substitution’ as given in Advanced Law Lexicon edited by Justice Y.C. Chandrachud and reads at page 4531 as under:

Sri Rabinathan has also drawn our attention to the statutory provisions of Section 5(3)(a) of the Act in particularly second proviso to Section 5(3)(a) of the Act which according to the learned Counsel exempts the sale from one oil company to another oil company and has submitted that though it is so exempted, nevertheless it does not cease to be liable under the provisions of Section 5(3)(a) of the Act but for exemption and therefore, the provisions of Section 6-B of the Act are not attracted for the reason that when there is liability under Section 5(3) of the Act, that is sufficient to exclude it from scope of levy of tax under Section 6-B of the Act. Reliance is placed for this submission about liability to pay tax on the judgment of the Supreme Court in the case of ASSOCIATED CEMENT COMPANIES LTD. –VS- STATE OF BIHAR AND OTHERS [(2004) 137 STC 389] at para 19 to 22. Learned Counsel has submitted that judgment of the Supreme Court on interpretation of double taxation avoidance agreement in the case of UNION OF INDIA –VS- AZADI BACHAO ANDOLAN reported in (2003) 263 ITR 706 at page 741 also supports the case of the

Sri Thirumalesh, learned Counsel submits that levy of penalty was also not justified particularly as the assessee was not notified earlier; that though the learned Single Judge had not gone into this question, assessee has raised this issue contention and therefore is definitely entitled to urge this issue in appeal by the State.

Sri Rabinathan, learned Counsel infact seeks to rely on the question of fact of budget speech. He submits that budget speech having impact on the language of Section and the scheme of the Act being and the other charging section of the Act only on the first sale or first purchase in the State and Section 6-B of the Act being only a provision under which a subsequent sale is sought to be taxed, the resale heading is appropriate and therefore unless there is resale in the sense that the transaction is in respect of a goods which has already underwent a sale transaction, resale tax is not attracted.

Sri Keshavamurthy, learned Counsel appearing for the petitioner in STRP 112/2008 which relates to the assessment years 2002-03 and 2003-04 of the revision

Sri Keshavamurthy, learned Counsel for the revision petitioner has placed reliance on the judgment of

Elaborating his submission, Mr. Keshavamurthy points out that in a sale by a person like the petitioner/dealer to a brand holder by a fiction, it is deemed not a sale and the first sale is treated as a sale by the brand holder and if so, there is no sale in the eye of law

Sri Surendran Thumbhoochetty, learned Counsel appearing for the appellants in connected appeals i.e., STA Nos. 11/2008 and 12/2008 relating to the assessment years 2003-04 and 2004-05 submits that the appellant/assessee is also a dealer who supplies goods to a brand holder viz., Kirloskar Electric Company Ltd., and the electric motors and generators manufactured by the appellant/assessee is supplied to this brand holder and therefore is covered by the third proviso to Section 5(3)(a) of the Act. Apart from adopting the submissions made on behalf of the respondent in writ appeal by Sri Rabinathana also submission made by Sri Keshavamuthy, learned Counsel appearing on behalf of revision petitioner in STRP 112/2008, Sri.Surendran Thumbhoochetty supplements the submission by placing reliance on the judgment of the

The submission is that the legal fiction created under Section 5(3)(a) of the Act should be given its full play and therefore, the transaction being not one in the nature of a sale transaction at all in the case of a sale by one oil company to another oil company in the case of either by one oil company or another oil company or by a dealer,

Sri. Keshavamurthy, learned Counsel appearing for the petitioner in the Sales Tax Revision Petition and Sri Surendran Thumbhoochetty, learned Counsel appearing for the appellants in STA Nos. 11/2008 and 12/2008 submitted that a decision in the writ appeal in one way or the other relating to the liability of such dealers, who are covered by the second or third proviso to Section 5(3)(a) of the Act in respect of liability to resale tax under Section 6- B of the Act equally governs the case of the revision petitioner and the appellant respectively and the argument is so far as liability of Section 6-B of the Act is concerned, it is one and the same, i.e., there is no tax liability under Section 6-B of the Act.

Section 6-B of the Act is no doubt introduced by way of amendment to the Act and by the substitution of the earlier Section 6-B, which had in the name of turnover tax as per the State Act No.5/2002 with effect from 1.4.2002.

This levy is a transitional levy, in the sense, it lasted only for three years, as it came to an end with the inception of the Karnataka Value Added Tax Act with effect from 1.4.2005. Budget Speech of the Finance Minister on this aspect, reads as under: “177. VAT entails multipoint levy of tax at all points of production and distribution. The second and subsequent dealers in the trade channel who are currently paying a nominal non passable turnover tax of 1% would have to pay tax under VAT which could be higher but collectable. As an intermediate measure and to prepare dealers for a smooth transit to VAT, I propose to introduce a collectable resale tax of 1.5%. Most of the commodities, which are totally exempt from tax on their second and subsequent sales, however, are proposed to be exempt from this new levy. This collectable new levy should induce the entire trade to issue bills on all their sales.”

The Budget Speech of the Finance Minister no doubt says that it is for preparing the assessee for a switch

While that may be introductory to the introduction of the Karnataka Value Added Tax Act, 2003 and the Finance Minister had an occasion to mention that in the background of introduction of resale tax under section 6-B of the Act, a perusal of the relevant paragraph in the Budget Speech, namely, paragraph 177, as noticed above, the preparation as noticed is for introduction of equitable resale tax at 1.5% and at the same time, care is being taken to ensure exemption enjoyed in respect of commodities which are so exempted earlier and their transaction and subsequent sales and also for inducing the entire trade to issue bills on all sales. Except for using word ‘resale tax’, it does not necessarily say that it is tax only on the second or third transaction, but what is assured is that second or third transaction which had

Paragraphs 170 and 171 which are introduction to the proposed amendments on the Sales Tax Act, only speaks of rationalization measures and what proposals are made for change etc. If a parallel is to be drawn between the Karnataka Value Added Tax Act, 2003 and the levy under section 6-B of the Act, then in fact an indication that Value Added Tax being a multi point levy of tax at all points of production and distribution and introduction of resale tax under section 6-B of the Act being to prepare trade for such purpose, the Budget Speech does not necessarily give an indication that there will not be any levy of resale tax at the first transaction though it is called as resale tax.

Now, coming to the significance of the Budget Speech and the heading under marginal notes etc., it is no doubt and as held by the Supreme Court in the two cases relied upon by learned counsel for the assessee – dealer, they are aides in construction. The question will arise only

Relevant portion of Section 6-B of the Act reads as under: “6-B. Levy of resale tax.- (1) Every registered dealer and every dealer who is liable to get himself registered under sub-Sections (1) and

On a reading of section 6-B of the Act, it is obvious that the liability under this section is on all registered dealers and those who are liable to get registered in respect of their total turnover but excluding such part of the turnover in respect of which the dealer is liable to pay tax under sections 5-A, 5-B, 5-C or 6 of the Act. That means the turnover which is liable for tax in these sections is kept out of the purview of the resale tax under section 6- B of the Act. The argument on behalf of the assessee – dealers is that though they enjoy exemption either under the second proviso to section 5[3][a] of the Act, as in the case of the writ petitioner, or under the third proviso of section 5[3][a] of the Act, as in the case of the revision

This argument is fallacious for the reason that under the proviso to section 5[3][a] of the Act, tax liability is exonerated on such dealers and they neither pay tax nor are they liable in respect of such part of the turnover under section 5 of the Act. The other sub sections and levy of tax under sections 5-A, 5-B, 5-C or 6 of the Act being in the alternative, they are not liable under any of these other provisions also and therefore even in respect of such turnover which is a transfer from one Oil company to another, supply of goods by manufacturer to a brand holder, it is nevertheless, forming part of the turnover for the purpose of section 6-B of the Act is not acceptable. A

Levy of tax on sale or purchase of goods.-

The further question is only as to whether the instant dealers in the case of writ petition being a dealer who is known as Oil Corporation in Explanation [2] to section 5[3][a] of the Act and in the revision petition and the appeal, the dealers being assessees who are covered by the third proviso, are liable to tax or not is an independent question which can be examined. But, if there is no liability under any of these statutory provisions, there is no gainsaying that liability under section 6-B of the Act is attracted.

Insofar as the heading and marginal notes are concerned and decisions relied upon by the assessee –

Significance for our purpose is that in a taxing statute, the nomenclature or heading given is not conclusive, but to know as to what is substance of the matter, one has to go by the language of the charging section.

Smt. S. Sujatha, learned Additional Government Advocate, on the other hand, has placed reliance on the decisions of this court in the case of ‘M/S. AMBERKAR PRE-STRESSED PRODUCTS (supra) and submitted that irrespective of the Budget Speech, what matters ultimately is what part of the Speech is translated into statutory provision and submission that Budget Speech though it was called ‘resale tax’, and ultimately section 6-B was legislated with the caption ‘levy of resale tax’ etc., and that in itself is not conclusive to hold that there should be a resale commends our acceptance.

We are of the considered opinion that heading or the marginal note can only have a limited application and was determinative factor so long as charging section is clear and unambiguous and spells out the nature of liability, event, person, place or levy point person on whom levy is hoisted and the rate at which the levy is to be provided and therefore mere heading ‘levy for resale tax’ cannot be conclusive.

We notice that the learned single Judge has placed strong reliance on the division Bench decision of this court in the case of ‘MADHUR TRADING CO. AND OTHERS (supra).

Learned Additional Government Advocate has distinguished this case by pointing out that in this decision, the liability under section 6 of the Act what is known as ‘purchase tax’ was not attracted in the case of

The distinction is pointed out from the instant case i.e., the second and third proviso to section 5[3][a] of the Act and then proviso to section 5[3][c] of the Act. It is submitted by learned Additional Government Advocate that second and third proviso to section 5[3][a] of the Act operates only for the purpose of this section, whereas in proviso to section 5[3][c] of the Act, fiction operated for the entire purpose of the Act and therefore obviously its operation is extended even to section 6 of the Act.

This argument is an acceptable argument as we find that section 6-B of the Act is governed by the provisos appended to this section and the proviso to section 5[3][a] of the Act are only for the purpose of liability under section 5 of the Act and not for all other purposes.

The learned single Judge in allowing the writ petition has proceeded on the premise that the position of law and the facts are as in the case of MADHUR TRADING CO. [supra], holding that in view of the fiction deeming transaction to be not a sale under second and third proviso in respect of situations covered by it, the turnover even for the purpose of section 6-B of the Act is not a sale and therefore no tax is leviable etc.

In our considered opinion, the learned single Judge was in error in following the Judgment of the division Bench of this court in the case of MADHUR

In this case, the interpretation and the applicability of the third proviso to section 5[3][a] of the Act came in for consideration in the context of the liability under the then section 6-B of the Act (turnover tax) and it was clearly held that section 6-B turnover tax being an independent charging section and containing a rate and taxing event and therefore it is only exemption or benefit that are given under section 6-B of the Act alone that can matter and not exemption under section 5[3][a] of the Act that matters. In the present case, the principle is the same and in fact in respect of the assessees in the sales tax appeal and the revision petition, it is an identical situation

In fact, learned Additional Government Advocate has placed reliance on the decision of the division Bench of this court in the case of ‘FOOD CORPORATION OF INDIA (supra) to submit that distinction made by the learned Single Judge in the case of UNIVERSAL TRANSFORMERS [supra] and situation applied in the case of MADHUR TRADING CO. [supra] is noticed in this Judgment by the division Bench and distinction was for the purpose of section 5[3][c] of the Act and proviso to section 5[4] of the Act; that the question was also one in the circumstances as to whether fiction under section 5[4] is extended to levy of purchase tax under section 6 also and it was held that it cannot be extended.

In this view of the matter, we are of the opinion that the Budget Speech in itself cannot make any difference and fiction created for the purpose of section

However, learned counsel for the assessee – dealers have raised a strong contention to submit that the liability on the part of the dealers covered by the second and third proviso to section 5[3][a] of the Act is exempted because of the operation of the provisos to section 5[3][a] of the Act, but nevertheless tax continued to be leviable under section 5[3][a] of the Act but for the exemption. Submission is that exemption provision does not extinguish the liability and it is only because of the liability exemption is necessary. In support of this proposition, strong reliance is placed on the Judgment of the Supreme Court in the case of ‘ASSOCIATED CEMENT COMPANIES LTD., v. STATE OF BIHAR AND OTHERS’ reported in 137 STC 389.

This is a case which arose under the provisions of Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act and by exemptions provided for in terms of the provisions of Industrial Policy

In this case, disallowance of deduction from the sales tax liability by the authorities and as had been approved by the High Court was reversed by the Supreme Court holding that exemption given in respect of that part of the turnover which qualified for the benefit under the Industrial Policy, does not make that turnover cease to be liable to tax, but the liability continued and it is only because of the exemption, the benefit was given to the assessee not to tax or not to levy tax and further the benefit of deduction from the sales tax turnover of the tax paid under the Entry of Goods Act cannot be denied to the assessee.

The so called exemption though cannot be termed as precise exemption is because of the language of the second and third provisos and which is very much part of section 5[3][a] of the Act. That means, because of the second and third provisos, there is no liability under section 5[3][a] of the Act which is the charging section, and in the hands of assessees who are dealers of the type referred to in the 2nd and 3rd provisos. It is not a mere

It is in this background that we have to hold that the liability under provisions of section 6-B of the Act from

One another argument on behalf of the assessee – dealer is that on the same analogy and in view of the tenth proviso to section 6-B of the Act also, the assessee is not liable to tax under section 6-B of the Act, submission is that because of the fiction when it is deemed not a sale at all, the question of levy under section 6-B of the Act cannot arise as levy is on the turnover mentioned in this section comprising of sale transactions and other transactions. If it is not sale at all under section 5[3][a] of the Act, then it is no sale for the purpose of tenth proviso

We have already noticed that the ratio of the decision of this court in the case of MADHUR TRADING CO. [supra] is not applicable to the present case and distinction noticed earlier in the case of UNIVERSAL TRANSFORMERS [supra] is equally applicable to the present case also to conclude that a fiction created for the purpose of Section 5(3)(a), levy on a dealer cannot be telescoped for the purpose of Section 6-B of the Act also, and therefore we reject this submission.

If the fiction created under the proviso to section 5[3][a] of the Act cannot be extended, then we notice that for the applicability of tenth proviso to section 6B of the Act and on the language of the tenth proviso, no case is made out for the assessee – dealer either about the amount

In the case of the respondent in writ appeal and writ petitioner – dealer as part of the assessment order and on noticing that the assessee had not paid tax liability earlier and the exercise was as a sequel to inspection, the Assessing Officer had levied penalty under the provisions of section 12-A[1-A] of the Act.

It is submitted by Learned Counsel for the writ petitioner – dealer that through the liability was determined as a sequel to certain inspection and assessment was reopened and assessee had in fact filed return earlier and had disclosed this turnover, but had claimed exemption and this was not in any way disputed

On the other hand, learned Additional Government Advocate has pointed out to the preamble to the levy of penalty in the order of the assessing authority and it is noticed that the assessee had not declared the turnover for the purpose of levy under section 6-B of the Act and in fact no monthly statements showed the subject turnover and claimed any exemption; that it was not disclosed at all; that the assessing authority had also recorded a finding that books of accounts of the assessee for the assessment year 2002-03 which was produced for examination also did not disclose transaction of sale of goods taxable under section 5 of the Act. The correctness of the statement is disputed.

Though a request is made by the assessee to file an appeal, we think that it is not possible for us to permit the assessee to take this course of action as assessee took its chances by approaching this court invoking writ jurisdiction which the assessee is aware is not appellate jurisdiction. Therefore, we do not go into this question any further, but the consequences follow on setting aside of the order of the learned single Judge and holding that the assessee is liable to pay tax under section 6-B of the Act in respect of the disputed turnover.

In this view of the matter, we conclude holding that the learned single Judge is in error in allowing the writ petition and that reliance placed on MADHUR TRADING CO. [supra] is not proper and following the decision and ratio allowing the writ petition is also not proper and argument of learned counsel on behalf of the assessee to the effect that Budget Speech concludes that it is only a levy on second or third sale transaction is not

The argument of the assessee that tenth proviso operates on them is also rejected by holding that the tenth proviso has no application to the writ petitioner – dealer or the dealers in the revision petition and the sales tax appeal.

Substantial question of law for the examination of which STRP 112/2008 has been admitted is answered in the affirmative, against the assessee and in favour of the revenue to sustain the impugned order of the tribunal.

As a consequence, STRP No.112/2008 and STA Nos.11/2008 and 12/2008 are all dismissed.