Archive for the ‘Interpretation of Exemption Notification’ Category

Mangalam Yarn Agencies versus Assistant Commissioner, Commercial Taxes

April 25, 2009

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
7

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/

JK Lakshmi Cement Versus Commercial Taxes Officer

April 20, 2009

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009
1/40
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
J UD G M E N T
Lakshmi Cement vs. Commercial Taxes
(A Division of J.K.Corp. Officer, Spl.Circle, Pali.
Ltd. (Now renamed as J.K.
Lakshmi Cemnt Ltd.),
Jaykaypuram, Distt. Sirohi.
S.B.CIVIL SALES TAX REVISION PETITION NO.613/2005
DATE OF JUDGMENT : 17S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009
1/40
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
J UD G M E N T
Lakshmi Cement vs. Commercial Taxes
(A Division of J.K.Corp. Officer, Spl.Circle, Pali.
Ltd. (Now renamed as J.K.
Lakshmi Cemnt Ltd.),
Jaykaypuram, Distt. Sirohi.
S.B.CIVIL SALES TAX REVISION PETITION NO.613/2005
DATE OF JUDGMENT : 17 April, 2009
P R E S E N T

HON’BLE DR.JUSTICE VINEET KOTHARI

Mr.Dinesh Mehta and
Mr.Ramit Mehta, for the petitioner assessee.
Mr.Rishabh Sancheti for
Mr.Vinit Mathur for the Revenue.

REPORTABLE

BY THE COURT:

1. The Assessee, a cement manufacturer within the State of
Rajasthan has filed this revision petition under Section 86 of the
Rajasthan Sales Tax Act, 1994 being aggrieved by the judgment of
the Tax Board dated 23/9/2005 allowing the revenue’s appeal and

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009
2/40
holding that the assessee was not entitled to avail the partial
exemption from sales tax under the Notification dated 6/5/1986 for
the asssessment year 2001-02 because it had made some inter-state
sales during the said year in question and had availed concessional
rate of tax @ 6% under the later Notification dtaed 21/1/2000 which
contained a condition No.3 that if the assessee avails such
concessional rate of tax under the Notification dated 21/1/2000, he
would not avail the benefit of partial exemption from sales tax under
the Notification dated 6/5/86.

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009
2/40
holding that the assessee was not entitled to avail the partial
exemption from sales tax under the Notification dated 6/5/1986 for
the asssessment year 2001-02 because it had made some inter-state
sales during the said year in question and had availed concessional
rate of tax @ 6% under the later Notification dtaed 21/1/2000 which
contained a condition No.3 that if the assessee avails such
concessional rate of tax under the Notification dated 21/1/2000, he
would not avail the benefit of partial exemption from sales tax under
the Notification dated 6/5/86.
The assessing authority had imposed additional tax on the
respondent assessee for the aforesaid period by the assessment order
dated 26/8/2003 in view of the circular issued by the Commissioner
of Commercial Taxes Department on 16/4/2001 which was issued by
the Commissioner explaining the Notification dated 21/1/2000. The
first appellate authority – Deputy Commissioner (Appeals) however
allowed the first appeal filed by the assessee on 3/1/2004 and held
that the assessee would be entitled to avail such partial exemption in
respect of inter-state sales made on which concessional rate of 6%
was not availed by him under the Notification dated 21/1/2000.

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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3. The Revenue took the matter further before the Tax Board and
the appeal of the Revenue was allowed by the learned Tax Board on
23/9/2005 and aggrieved of the same, assessee has come before this
Court in the present revision petition.
4. I have heard learned counsels on both the sides at length and
perused the relevant Notifications, impugned orders and judgments
cited at the bar.
5. The case in hand involves interpretation of the Notification
dated 6/5/86 and 21/1/2000 which are reproduced hereunder in
extenso for ready reference:“
NOTIFICATION DATED 6/5/1986

S.No.625 : F.4 (72) FD Gr.IV/81-18 Dated
6/5/1986

S.O.23.-In exercise of the powers conferred by
S.8(5), CST Act, 1956, the State Govt. in supersession
of the FD Notfn No.F.4 (72) FD Gr./IV/81-36 dated
3.12.1985(S.No.584), hereby directs that, with
immediate effect, any dealer, having his place of
business and manufacturing goods in the State of
Rajasthan, may claim partial exemption from the tax

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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payable in respect of the sales by him of such goods in
the course of inter-State trade or commerce by way of
reduction at the rate of 50% of the tax so payable on
increased sales upto 50% and at the rate of 75% of the
tax so payable on increased sales made over and above
the aforesaid 50%, in the manner and subject to the
conditions as follows:

(1) Such reduction of tax shall be allowed to a
dealer only after and in respect of the increase which is
effected in the percentage of the quantum of goods sold
in the course of inter-State trade or commerce out of the
total quantum of goods sold within the State and in the
course of inter-State trade or commerce and dispatched
to Head Office, Branch Office, Depot or agent outside
the State for sale outside the State, during any
accounting year as against such percentage during the
accounting year 1984-85;
(2) in the case of a dealer who commenced the
manufacture of goods in the State of Rajasthan on or
after 1.1.1985, the average of the aforesaid percentages
in respect of the other manufacturers in the State in the
relevant industry during the accounting year 1984-85,
calculated and determined by the assessing authority
with the approval of the Commissioner, shall be
deemed to be the percentage in respect of such dealer
for the accounting year 1984-85;
(3) This increase effected in the percentage, as
referred to in clause (1) above in respect of the sales in
the course of inter-State trade or commerce, to be
considered shall be limited to the extent of the decrease
in the percentage in respect of the despatch of goods to
Head Office, Branch Office, Depot or agent outside the
State for sale outside the State, during the relevant
accounting year as against such percentage during the
accounting year 1984-85; and

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(4) No claim for such reduction of tax shall be
allowed in respect of levy-cement.
NOTIFICATION DATED 21/1/2000

S.No.1301 : F.4 (1) FD/Tax Div/99-266 dated
21.1.2000

S.O. -In exercise of the powers conferred by S.8
(5), CST Act, 1956, the State Govt. hereby directs that
the tax payable under sub-sections (1) and (2) of the
said section, by any dealer having his place of business
in the State, in respect of sale of cement made by him
from any such place of business in the State, in the
course of inter-State trade or commerce, shall be
calculated at the rate of 6% on the following
conditions, namely:1.
That the dealer shall record the correct
name with full and complete address of the purchaser in
the bill or cash memorandum for such inter-State sale to
be issued by him;
2. That the burden of proof that the
transaction was in the nature of inter-State sale shall be
on the dealer; and
3. That the dealer making inter-state sales
under this notfn shall not be eligible to claim benefits
provided by notfn No.F.4(72)FD/Gr.IV/81-18 dated
6.5.86 as amended from time to time (S.No.625)”
6. Mr. Dinesh Mehta and Mr. Ramit Mehta, learned counsels
appearing for the petitioner assessee submitted that akin to the

Notification dated 21/1/2000 earlier also the State Government has

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issued a Notification on 7/3/1994 following which the Commissioner
had issued a Circular dated 15/4/1994 explaining the said Notification
dated 7/3/1994 and which explanation given by the Head of the
Department namely the Commissioner, Commercial Taxes
Department, was correct interpretation of the Notification and the
assessee was continued to be given the benefit of partial exemption
under the Notification dated 6/5/1986, notwithstanding the
notification dated 7/3/1994 which contained same condition no.3 as
contained in the Notification datd 21/1/2000 and the assessment was
made in the case of assessee upto the year 2000-2001 and, therefore,
for the assessment year 2001-02 involved in the present revision
petition, the Revenue cannot take a different stand that assessee is not
entitled to similar benefit of partial exemption in respect of inter-state
sales made by it other than those covered by the Notification dated
21/1/2000. They submitted that since the Notification dated 6/5/1986
granted partial exemption in the form of reduction of tax payable
under the Central Sales Tax Act depending upon the increase of interstate
sales made by the assessee during the particular year compared
with the base year 1984-85 and such exemption was given under the
Notification dated 6/5/1986, to encourage the assessee having place

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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of manufacture within the State of Rajasthan to make inter-state sales
taxable under the Central Sales Tax Act as against the branch
transfers or depot transfers on which no CST was payable, the State
gave this partial exemption depending upon such shift from branch
transfers to inter-state sales by the assessee and the quantum thereof,
therefore, this partial exemption could not be curtailed by a later
Notification providing for a concessional rate of tax under the CST
Act subject to condition like the condition no.3 in the Notification
dated 7/3/1994 or Notification dated 21/1/2000 and at least those
inter-state sales on which tax @ 6% was not charged by the assessee
under the said Notification dated 21/1/2000, the increase in the interstate
sales in comparison to the base year 1984-85 should be allowed
to be computed under the Notification dated 6/5/1986 and the benefit
of partial exemption should be given accordingly.

7. Learned counsel for the assessee further submitted that the
assessee is claiming benefit of partial exemption only in respect of
such inter-state sales made by it which are not covered by the
Notification dated 21/1/2000 and, therefore, the benefit of partial
exemption cannot be hit or prohibited totally in view of condition

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no.3 in the Notification dated 21/1/2000. In other words, Mr.Mehta
submitted that condition no.3 of the Notification dated 21/1/2000
operated only for inter-state sales made under the said Notification
availing the benefit of concessional rate of tax of 6% and the said
condition could not enlarge or expand the said Notification dated
21/1/2000 and prohibit the assessee from availing the partial
exemption, under the Notification dated 6/5/1986 altogether.

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no.3 in the Notification dated 21/1/2000. In other words, Mr.Mehta
submitted that condition no.3 of the Notification dated 21/1/2000
operated only for inter-state sales made under the said Notification
availing the benefit of concessional rate of tax of 6% and the said
condition could not enlarge or expand the said Notification dated
21/1/2000 and prohibit the assessee from availing the partial
exemption, under the Notification dated 6/5/1986 altogether.
In order to appreciate the controversy, it is also considered
appropriate to reproduce the previous Notification dated 7/3/1994 and
ensuing circular issued by the Commissioner on 15/4/1994 also for
ready reference.
“NOTIFICATION DATED 7/3/1994

S.No.928 : F.4(8) FD Gr.IV/94-70 dated
7.3.1994

S.No.200.-In exercise of the powers conferred
by S.8 (5), CST Act, 1956 and in supersession of this
deptt notfn No.F.4 (72) FD Gr.IV/82-34 dated
27.6.1990 (S.No.806), the State Govt. hereby directs
that the tax payable under sub-sections (1) and (2) of
the said section, by any dealer having his place of
business in the State, in respect of the sales of cement
made by him from any such place of business in the

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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course of inter-State trade or commerce shall be
calculated at the rate of 4 per cent without furnishing
of declaration in form “C” or certificate in form “D”
on the following conditions, namely;

(i) that the dealer shall record the name and
full and complete address of the purchaser in the bill
or cash memorandum for such inter-State sale to be
issued by him;
(ii) that the burden to prove that the
transaction was in the nature of inter-State sale, shall
be on the dealer; and
(iii) that the dealer making inter-State sales
under this notification shall not be eligible to claim
benefit provided for by the notfn No.F.4 (72)
FD/Gr.IV/81-18, dated 6.5.1986 as amended from
time to time (S.No.625).
This notification shall come into force from
1.4.1994 and shall remain in force upto 31.3.1997.”

CIRCULAR DATED 15/4/1994

“…. ….. .

.2/94/-95

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..
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. : 15 …, 1994

. : ..16 (…) ../../94-95/108 %

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%%4

. 07.03.1994 .
.+ .. 1 …, 1994 .31 .
., 1995 .
..5. .6 …
4.. … .. .%.8+ …6 .. .6 “. .
..

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009

“.” .5 .<.

.
.. “.” .5 ..
-.. .”. …
..4 4% .6 ..
.@. .. ..*.-..
.% .*. …
4.. … …% .
.


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…../.%%%

.-4/81-10, .”.
. 06.05.1985 .
.
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.

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.

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.: 15.04.1994

. : ..16(…) ../../94-95/102
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9. The circular dated 15/4/1994 quoted above was withdrawn by
the Commissioner, Commercial Taxes Department on 16/4/2001 after

the Notification dated 21/1/2000 was promulgated. The said circular

of Commissioner, Commercial Taxes Department issued on

16/4/2001 is also reproduced hereunder for ready reference:

“Kar-Niti Prapatra No.2001/1

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009

GOVERNMENT OF RAJASTHAN
COMMERCIAL TAXES DEPARTMENT

No.F-16 (Budget) Tax/CCT/94-95/119 Dated April 16th, 2001
All Dy. Commissioners
All Assistant Commissioners
All Commercial Taxes Officers.
All Assistant Commercial Taxes Officers.

C I R CU L A R

A question has been raised as to the applicability of
Finance Department notification No.F.4(72)FD/Br.IV/81-18
dated 06.05.1986 vis-a-vis notification No.F/(8)
FD/Gr.IV/94-70 dated 07.03.1994 and similar subsequent
notification dated 12.03.1997 and the existing notification
dated 21.01.2000. The issue has been examined and it is
clarified that a dealer can avail the benefit of either of these
two notifications in any financial year. For instance, if he opts
for benefit under notification dated 06.05.1986 for the
financial year 2000-2001, he would not be entitled to claim
simultaneous benefit in the same year under the notification
providing for reduce rate of tax on cement in course of interstate
trade or commerce without any supportive Form C or D.
Consequently, if the benefit of notification dated 06.05.1986 is
being availed in any financial year, the dealer shall be
debarred from claiming any benefit under notification dated
6.5.1986 for the same assessment year.

Keeping in view the above status, the Circular No.F.16
(Budget)Tax/CCT/94-95/108 dated 15.04.1994 is hereby
withdrawn and the dealers will be entitled to claim benefit of
either of the two notifications in any financial year. Action
may be taken accordingly.

Sd/(
P.K.Deb)
Commissioner

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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Commercial Taxes, Rajasthan, Jaipur”

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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Commercial Taxes, Rajasthan, Jaipur”
Learned counsel for the petitioner assessee also submitted that
similar Notification besides cement industry as quoted above were
also issued on different occasions for other commodities also subject
to the same condition no.3 and few such Notifications are S.No.1335
F.4(1)FD/Tax Div/2000-303 dated 30.3.2000, as corrected on
24.4.2000, S.No.1436 F.4(12)FD/Tax Div/2001-28 dated 29/3/2001
& S.No. 1563 F.4(3)FD/Tax Div/2002-175 dated 22/3/2002, as
corrected by corrigendum effective from 22.3.2002.
Since, however, no controversy is raised before this Court by
any of the dealer of those commodities and the condition in those
Notifications are also similar to the Notification already reproduced
herein above, there is no need to reproduce these Notifications also.

11. Learned counsel for the petitioner assessee also brought to the
notice Court that for the preceding year 2000-2001 the petitioner had
filed a writ petition in this Court challenging the notice for
rectification given by the assessing authority in pursuance of the

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009

Circular dated 16/4/2001 issued by the Commissioner and that writ

petition no.6192/2003 came to be disposed of by the learned Single

Judge of this Court in the following manner. The said order is quoted

below:

“Heard the learned counsel for the parties.

After hearing the arguments from the counsel for
the petitioner, departmental representative Mr.
Harphool, Dy.Commissioner (Commercial Taxes) was
called by the Government Advocate for his assistance.
After hearing the arguments of the parties, it clearly
bears out that Annexure-5 was withdrawn on 16.04.01.
Prior to this date, the assessee was entitled to the
benefits which the assessee is claiming as was conferred
by the clarification dated 15.04.94. Thus, the notice
dated 19.08.03 pertaining to the assessment year 200001
for rectification does not appear to be justified.
Instead of making interference in writ jurisdiction, the
petitioner is directed to appear before the authority
issuing notice as aforesaid and will put forward his case
set up by him. The authority will consider the
notification in right perspective.

While deciding the case, it will also clarify its
position as to why the notification which could only be

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prospective and effective after 16.04.01, a rectification
notice was issued him for the assessment year 2000-01.
The clarification will be sent to this Court.

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prospective and effective after 16.04.01, a rectification
notice was issued him for the assessment year 2000-01.
The clarification will be sent to this Court.

Sd/(
B.Prasad), J.”

In pursuance of the said order, the assessing authority had
dropped the rectification proceedings vide order dated 24/11/2003
and accordingly the said writ petition came to be finally disposed of
with the additional order passed by the same learned Single Judge on
13/5/2004 in the following terms:

“13/5/04
Hon’ble Mr.B.Prasad, J.

Mr.R.Mehta, for pet.
Mr.B.S.Bhati, for Resp.

Perused the explanation.
Explanation is accepted.
No further order is required to be passed.
The matter is disposed of finally.”

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12. Learned counsel for the assessee, therefore, submitted that the
Tax Board has erred in holding that the petitioner assessee was not
entitled to avail the benefit of partial exemption under the
Notification dated 6/5/86 and, therefore, the revision petition
deserves to be allowed for the assessment year 2001-02 also.
13. Per contra, Mr. Rishabh Sancheti for Mr.Vinit Kumar Mathur
for the Revenue vehemently submitted that on a plain construction of
condition no.3 of the Notification dated 21/1/2000, quoted above, it
was clear that the petitioner assessee was not entitled to avail any
benefit under the Notification dated 6/5/86 in view of clear
stipulation made in condition no.3 of the Notification dated
21/1/2000 and it not open to the assessee to segregate the inter-state
sales made by him in two parts, one covered by Notification dated
21/1/2000 and other not so covered.
14. He further submitted that it is well settled that the provisions of
taxing statutes, particularly exemption notifications have to be strictly
construed as per well settled legal position in this regard and the plain
language of the Notification, without attributing any redundancy, has

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to be literally construed and there is no scope for any intendment. He
submitted that though Notification dated 6/5/1986 continued to
operate during the year in question i.e. 2001-02 also but since the
assessee had admittedly made inter-state sales and availed the
concessional rate of tax @ 6% which otherwise in the absence of
furnishing prescribed declaration form in Form `C’ as required under
Section 8(1) (2) of the CST Act was not available, the assessee was
bound to be deprived of the benefit of partial exemption under the
Notification dated 6/5/86 and the assessee cannot contend that those
inter-state sales in respect of which he has not availed 6% rate of tax
under the Notification dated 21/1/2000 should still be eligible for
partial exemption from tax under the Notification dated 6.5.86.

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to be literally construed and there is no scope for any intendment. He
submitted that though Notification dated 6/5/1986 continued to
operate during the year in question i.e. 2001-02 also but since the
assessee had admittedly made inter-state sales and availed the
concessional rate of tax @ 6% which otherwise in the absence of
furnishing prescribed declaration form in Form `C’ as required under
Section 8(1) (2) of the CST Act was not available, the assessee was
bound to be deprived of the benefit of partial exemption under the
Notification dated 6/5/86 and the assessee cannot contend that those
inter-state sales in respect of which he has not availed 6% rate of tax
under the Notification dated 21/1/2000 should still be eligible for
partial exemption from tax under the Notification dated 6.5.86.
Mr. Sancheti very emphatically explained the condition no.3
and submitted that if what the assessee contended was right, the
words, “the dealer making” in the condition no.3 of the Notification
dated 21/1/2000 would be rendered otiose and redundant because
then only it could be construed to mean that on the inter-state sales
under this Notification (namely Notification dated 21/1/2000) the
assessee shall not be eligible to claim benefits provided by

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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Notification dated 6/5/1986. To explain, the said condition no.3 is
reiterated below by the aforesaid three words marked in bold.

“3. That the dealer making inter-state sales
under this notfn shall not be eligible to claim benefits
provided by notfn No.F.4(72)FD/Gr.IV/81-18 dated

6.5.86 as amended from time to time (S.No.625)”
16. Mr. Sancheti relied upon the decision of Hon’ble Surpeme
Court in the case of State of Jharkhand & Ors. vs. Ambay Cements
& Anr. -(2005) 1 SCC 368, Commissioner of Central Excise,
Chandigarh-I vs. Mahaan Dairies – 2004 (166) E.L.T. 23 (S.C.) in
support of his contention that the exemption provision in a taxing
Statute has to be construed strictly and not liberally and the Court
cannot grant exemption under the Industrial Policy ignoring the
eligibility condition prescribed therein in the exemption Notification.
17. Having heard the learned counsels and after giving my
thoughtful consideration to the rival contentions raised at the bar, this
Court is of the opinion that the present revision petition of the
petitioner-assessee deserves to be dismissed and the assessee cannot

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be held entitled to the benefit of partial exemption under the
Notification dated 6.5.86 for the assessment year year 2001-02 in
question. The reasons are as follows.

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be held entitled to the benefit of partial exemption under the
Notification dated 6.5.86 for the assessment year year 2001-02 in
question. The reasons are as follows.
It is well, nay, settled that the eligibility criteria for availing
exemption under the taxing statutes have to be strictly construed and
the plain language of the Notification has to be given its literal
meaning as per the golden principle of interpretation that plain
language should be construed literally without any intendment or
interpretation. It is equally well settled that there is no equity or
intendment about tax.
19. It would be worthwhile to refer to a recent Supreme Court
decision in the case of Tata Cummins Ltd. vs. State of Jharkhand
& Ors. -2006(16) Tax up-date 199 in which Hon’ble Supreme Court
dealt with the clause 28 of the Industrial Policy of the State of Bihar
which stipulated that the new industrial units as well as existing units
which are not availing of any of the facilities deferment or tax free
purchases or sales under any notification announced earlier, shall be
allowed to opt for set-off of Jharkhand sales tax paid on the purchases

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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of raw material within the State. The assessee who were availing the

benefit of deferment scheme on the effective date given in the said

clause 28 approached the Court and claimed that the said benefit of

deferment under a separate scheme operated in a different field and

that could not prevent the assessee from availing the benefit of set-off

of Jharkhand sales tax on the purchases of raw material in terms of

clause 28 of the Industrial Policy. Negativing the said claim, the Apex

Court held as under:

“The Industrial Policy mentions the Commercial

Tax Reforms in Clause 28 on the said Policy. Clause

28.1 reads as under :
“28.1 New Industrial Units as well as existing units
which are not availing any facility of Tax-deferment or
Tax free purchases of tax free sales under any
notification announced earlier, shall be allowed to opt
for set off, of Jharkhand Sales Tax paid on the purchases
of raw materials within the State of Jharkhand only
against Sales Tax payable either JST or CST on the sale,
excluding stock transfer or consignment sale outside the
state, of finished products made out from such raw
materials subject to limitation of six months or the same
financial year from the date of purchase of such raw
materials.”

The question in this case is whether the appellant

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S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
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is entitled to the benefit of Clause 28.1.

Admittedly, the appellant had been granted the
benefit of Sales Tax-deferment for a period of eight
years from 1995 to 31.12.2003 under the Old Bihar
Industrial Policy, 1995 read with Notification S.O.
No.478 and 479 both dated
22.12.1995.

Thus, it is an admitted case that on the effective
date i.e. 15.11.2000 the appellant was actually availing
the facility of Tax-deferment under the Notification
announced earlier. Hence in our opinion on a plain
reading of Clause 28.1 of the Industrial Policy, which
was introduced on 15.11.2000 in the State of Jharkhand,
the appellant is not entitled to the benefit under Clause

28.1.
Learned counsel for the appellant contends that if
we hold that Units which were actually availing the
facility of Tax-deferment on 15.11.2000, will not be
given the benefit under the Clause 28.1, the
consequence will be that hardly any unit will get the
benefit of Clause 28.1 because almost all the units of
State of Jharkhand were enjoying the Sales Tax-
deferment on 15.11.2000. Hence he submitted that such
an interpretation should be avoided.

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We are afraid we cannot accept this plea. It is
well settled that when the plain and grammatical
meaning of the provisions in an Act or Notification are
clear then the literal rule of interpretation has to be
applied. In the present case, in our opinion, Clause 28.1
is clear. The word used there are “not availing any
facility of Tax-deferment”. Thus the present continuous
tense has been used in Clause 28.1. In our opinion,
Clause 28.1 means that the benefit therein will be
available only if the facility of Tax-deferment is not
actually being availed of on the date of the Notification
of the Industrial Policy, which is 15.11.2000. It is well
settled when the meaning of a provision is clear, we
cannot depart from the literal rule of construction.”

20. Dealing with the similar kind of controversy arising under the
Rajasthan Sales Tax Incentive Scheme, 1987 and subsequent Sales

Tax New Incentive Scheme for Industries, 1989 the Hon’ble Supreme

Court in the case of M/s Vividh Marbles Pvt. Ltd. vs. Commercial

Tax Officer – 2007 (17) Tax up-date 307 held as under:

“It is not in dispute that the State formulated two
Schemes; one in the year 1987 and another in 1989.

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The said Schemes provided for different nature of
incentives. Although 1989 Scheme was framed during
pendency of 1987 Scheme, as noticed hereinbefore, the
same was given a retrospective operation in terms
whereof the entrepreneurs were given a choice to opt
either for 1987 Scheme or 1989 Scheme. Appellant
was aware thereabout. It opted for 1989 Scheme. The
sanction of eligibility provided that a formal eligibility
certificate as per law would be granted to the
appellant. The investment for capital, however, was
determined at Rs.66.49 lacs. The said sanction did not
amount to a grant of a certificate. The eligibility
certificate, as indicated hereinbefore, was granted only
on 07.12.1996, in terms whereof clearly 1989 Scheme
was applied. It was so explicitly stated in the
eligibility certificate also. It may be true that the
Assessing Authority committed a mistake in referring
to the 1987 Scheme in its order of assessment, but
thereby the appellant cannot be permitted to derive any
benefit to which it was not entitled under the law.
Appellant indisputably was eligible for grant of
exemption in terms of both the Schemes. It had opted
for the latter Scheme. While doing so, it must have
taken into consideration the benefits under both the
Schemes separately. Having opted for the 1989
Scheme, in our opinion, now the appellant cannot be

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permitted to turn round and contend that it should have
been granted the benefit of 1987 Scheme, only because
at a later stage it found the same to be more
beneficial.”

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permitted to turn round and contend that it should have
been granted the benefit of 1987 Scheme, only because
at a later stage it found the same to be more
beneficial.”
In State of Rajasthan v/s. J.K.Udaipur Udyog Ltd. & Anr. (
2004) 137 STC 438, the Hon’ble Supreme Court again dealing with
the case arising under the Rajasthan Sales Tax/Central Sales Tax
Exemption Scheme for Industries, 1998 held that the concession or
exemption given by the Government is a defeasible right of the
industry and if by a later notification, the State reduced the
exemption, the assessee had no right to claim that the State should not
recover from the dealer the tax which the dealer has lost opportunity
to recover from its customer. The Court further held that what is
granted can be withdrawn unless the Government is precluded
from doing so on the ground of estoppel, which principle is itself
subject to considerations of equity and public interest. Para no.25 and
26 of the said judgment are opportune in this regard and, therefore,
they are quoted below:
“25 An exemption is by definition a freedom from an

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obligation which the exemptee is otherwise liable to

discharge. It is a privilege granting an advantage not

available to others. An exemption granted under a

statutory provision in a fiscal statute has been held to be

a concession granted by the State Government so that

the beneficiaries of such concession are not required to

pay the tax or duty they are otherwise liable to pay

under such statute. The recipient of a concession has no

legally enforceable right against the Government to

grant a concession except to enjoy the benefits of the

concession during the period of its grant. This right to

enjoy is a defeasible one in the sense that it may be

taken away in exercise of the very power under which

the exemption was granted. [See: Shri Bakul Oil

Industries & Anr. V.State of Gujarat; 1987 (1) SCC 31;

Kasinka Trading v. Union of India (1995)1 SCC 274;

Shrijee Sales Corpn. v. Union of India (1997) 3 SCC

398].

26. In this case the scheme being notified under the
power in the State Government to grant exemptions both
under Section 15 of the RST and Section 8(5) of the CST
in the public interest, the State Government was
competent to modify or revoke the grant for the same
reason. Thus what is granted can be withdrawn unless
the Government is precluded from doing so on the

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ground of promissory estoppel, which principle is itself
subject to considerations of equity and public interest.
[See: Sales Tax Officer v. Shree Durga Oil Mills (1998)
1 SCC 572]. The vesting of a defeasible right is
therefore, a contradiction in terms. There being no
indefeasible right to the continued grant of an exemption
(absent the exception of promissory estoppel), the
question of the respondent companies having an
indefeasible right to any facet of such exemption such as
the rate, period etc. does not arise.”

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ground of promissory estoppel, which principle is itself
subject to considerations of equity and public interest.
[See: Sales Tax Officer v. Shree Durga Oil Mills (1998)
1 SCC 572]. The vesting of a defeasible right is
therefore, a contradiction in terms. There being no
indefeasible right to the continued grant of an exemption
(absent the exception of promissory estoppel), the
question of the respondent companies having an
indefeasible right to any facet of such exemption such as
the rate, period etc. does not arise.”
In another judgment in MRF Ltd. Kottayam vs.
Asstt.Commissioner (Assessment) Sales Tax and Ors. -(2006) 8
SCC 702 relied upon by the learned counsel for assessee-petitioner,
another Division Bench of the Supreme Court dealt with the similar
controversy. The statutory notification amending the earlier
exemption notification adversely effecting the rights already accrued
was challenged by the assessee on the principle of promissory
estoppel. From the facts obtaining before the Supreme Court it would
appear that original notification granting exemption for expansion in
manufacture of certain products including rubber based goods was
promulgated and relying thereon the assessee manufacturer

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commenced commercial production after investing huge amount and
it also obtained eligibility certificate from the competent authority.
The assessee under the said scheme was entitled to exemption for a
fixed period of seven years in respect of rubber based goods
manufactured by it. During the currency of the period of exemption
the State Government issued another notification excluding the
formation of compound rubber from the definition of `manufacture’
for the purpose of the original exemption notification. Such
subsequent notification was challenged by the assessee on the ground
that it was hit by the principle of promissory estoppel as well as by
doctrine of legitimate expectation and the assessee could not be
prematurely deprived of the exemption under the original notification.
Upholding the contention of the assessee, the Court held in para no.
43 as under:

“Under Section 10(1) of the Kerala General
Sales Tax Act, 1063, the State Government has the
power to make an exemption or reduction in rate either
prospectively or retrospectively in respect of nay tax
payable under that Act. However, the power of the
Government under Section 10(3) by notification in the

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gazette to cancel or vary any notification issued under
Section 10(3) cannot be exercised retrospectively. That
was the view taken by a Single Judge of the Kerala
High Court, which was later approved by a Division
Bench. The appeal preferred by the State of Kerala in
Dy.Commr.(Law) case, (2000) 9 SCC 286 was
dismissed and the judgment of the High Court has
therefore become final. Accordingly, it was held that
Section 10(3) does not confer the power to withdraw
an exemption with retrospective effect. The effect
thereof is that the amendment Notification SRO
No.38/98 has to be read so as not to take away or
disturb any manufacture’s pre-existing accrued right of
exemption for a period of 7 years. If SRO No.38/98 is
construed as now contended by the respondent, then
the inevitable consequence would be that SRO
No.38/98 would itself be rendered ultra vires Section
10(3) of the Act, and therefore, illegal, bad in law and
null and void.”

However, no such plea of promissory estoppel has been raised

in the present case against issuance of the later Notification dated

21/1/2000 and rightly so, therefore, this case law does not apply in

the facts of the present case.

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23. In State of Jharkhand vs. Ambay Cement -(2005) 1 SCC 368
cited by the learned counsel for the Revenue also, the Hon’ble
Supreme Court held that in order to avail exemption the unit had to
fulfill eligibility criteria and the requirement to obtain permission
from the Industries Department of the State Government before
31/8/2000 was a condition precedent for such units to be eligible to
exemption and in the absence of the unit having obtained that
permission, the High Court exercising its jurisdiction under Article
226 of the Constitution of India could not direct grant of exemption to
the writ petitioner-industrial unit, overlooking the mandatory
statutory conditions prescribed therefor, particularly in the absence of
any challenge to the validity of such condition. In para no.24, 25 and
26 of the said judgment, the Court held as under:
“24. In our view, an exception or an exempting
provision in a taxing statute should be construed strictly
and it is not open to the Court to ignore the conditions
prescribed in the Industrial Policy and the exemption
Notifications.

25. In our view, the failure to comply with the
requirements renders the writ petition filed by the

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respondent liable to be dismissed. While mandatory rule
must be strictly observed, substantial compliance might
suffice in the case of a directory rule.

26. Whenever the statute prescribes that a particular
act is to be done in a particular manner and also lays
down that failure to comply with the said requirement
leads to severe consequences, such requirement would
be mandatory. It is the cardinal rule of the interpretation
that where a statute provides that a particular thing
should be done, it should be done in the manner
prescribed and not in any other way. It is also settled
rule of interpretation that where a statute is penal in
character, it must be strictly construed and followed.
Since the requirement, in the instant case, of obtaining
prior permission is mandatory, therefore, noncompliance
of the same must result in canceling the
concession made in favour of the grantee-the respondent
herein.”
24. In G.P.Ceramics Pvt. Ltd. vs. Commissioner, Trade Tax,
Uttar Pradesh – (2009) 2 SCC 90 the Apex Court has reiterated in

para no.29 of the judgment that it is now a well established principle

of law that various eligibility criteria laid down in an exemption

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notification are required to be construed strictly, once it is found that
the applicant satisfies the same, the exemption notification should be
construed liberally.

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notification are required to be construed strictly, once it is found that
the applicant satisfies the same, the exemption notification should be
construed liberally.
From the conspectus of the above legal authorities, it is clear
that the condition no.3 of the Notification dated 21/1/2000 has to be
given its plain and clear meaning and cannot be restricted only to the
specific transaction of sale covered by the said Notification dated
21/1/2000 itself, irrespective of circulars issued by the Commissioner
which in any case could not override, nor they can expand the scope
of statutory notifications. The said condition no.3 in its own term is
very clear. Once the assessee avails the benefit of concessional rate of
tax under the Notification dated 21/1/2000, condition no.3 would
apply in its full force and logically. The said condition no.3 in clear
terms stipulates that dealer making inter-state sale under this
notification shall not be eligible to claim benefits (emphasize plurality
benefits) provided by the Notification dated 6/5/86 as amended from
time to time is very clear and it cannot be said that even though the
assessee had availed benefit of concessional rate of 6% under the
Notification dated 21/1/2000, it should still be further eligible for

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partial exemption from CST payable in respect of other inter-state
sales made by him during the same year under Notification dated
6/5/86.

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partial exemption from CST payable in respect of other inter-state
sales made by him during the same year under Notification dated
6/5/86.

26. One cannot lose sight of the fact that both the Notifications
dated 6/5/86 and 21/1/2000 provide for exemption or concession to
the assessee, a manufacturer of cement. While the Notification dated
6/5/86 does not specify any dealer or type of manufacturer, the later
Notification dated 21/1/2000 applies to manufacturers of cement. As
noted above, for other commodities manufacturers, other similar
notifications were also issued by the State Government. Therefore,
the State Government cautiously wanted not to apply or allow the
benefit of Notification dated 6/5/86 to those manufacturers or
specified dealers for which subsequent notifications like the one in
hand dated 22.1.2000 was issued, if they make sales and avail benefit

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of concessional rate of tax under these notifications issued under
Section 8(5) of the CST Act. Therefore, dissecting this condition and
still allowing the benefit of partial exemption under the Notification
dated 6/5/86 would be doing violence to the condition no.3 which
was never intended by the State Government. It is for the assessee to
opt either for availing benefit of concessional rate of tax under the
Notification dated 21/1/2000 or not to do so altogether. Once, he
does so and opts for the same, the applicability of the notification
dated 6/5/86 is excluded altogether and not in piece meal. Therefore,
it cannot be contended by the assessee that in respect of other inter-
State sales, still partial exemption may be allowed in terms of
Notification dated 6/5/86, applicability of which stands excluded.
Doctrine of exclusion and eclipse would apply in such cases rather
than doctrine of liberal construction.

27. The contention of learned counsel for the assessee that since
the Circular dated 15/4/1994 which was withdrawn later on on
16/4/2001 clarified that such benefit of Notification dated 6/5/86
would be applicable in respect of inter-state sales, if such sales were
made against declaration in Form `C’ or `D’ but not when such inter

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state sales are made without furnishing of declaration in form `C’ or
`D’ as specified in Notification dated 7/3/1994 and all assessments of
assessee were completed accordingly and on this ground for the
assessment year 2001-02 also similar benefit may be extended to the
assessee does not impress this Court. The principles of res judicata
do not apply in tax matters and all assessment years are independent
and moreso, the controversy for assessment year 2001-02 is after new
Notification dated 21/1/2000 and Circular dated 16/4/2001came into
being, which materially altered the situation which obtained while
previous Notification dated 7/3/1994 and Circular dated 15/4/1994
prevailed.

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state sales are made without furnishing of declaration in form `C’ or
`D’ as specified in Notification dated 7/3/1994 and all assessments of
assessee were completed accordingly and on this ground for the
assessment year 2001-02 also similar benefit may be extended to the
assessee does not impress this Court. The principles of res judicata
do not apply in tax matters and all assessment years are independent
and moreso, the controversy for assessment year 2001-02 is after new
Notification dated 21/1/2000 and Circular dated 16/4/2001came into
being, which materially altered the situation which obtained while
previous Notification dated 7/3/1994 and Circular dated 15/4/1994
prevailed.
The contention of the learned counsel for the petitionerassessee
that the Notification dated 6/5/86 contained a scheme of
exemption applicable to all kinds of dealers whereas the Notification
dated 21/1/2000 is transaction specific and, therefore, condition no.3
applicable to a transaction specific Notification cannot undo the
benefit available to a dealer under a scheme notified under Section 8
(5) of the Act is also devoid of merit. Section 8 (5) of the CST Act
which is reproduced hereunder does not empower the State

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Government to grant any exemption to any class of dealer or a dealer
as such and the power to grant exemption given to the State
Government under the Central legislation namely CST Act, 1956 is
restricted to be transaction specific only, namely inter-State sale i.e.
the taxable event covered under CST Act. Therefore, it is wrong to
contend that Notification dated 6/5/86 exempted a class of dealer or
manufacturer. Partial exemption granted is also relating to taxable
event in the form of taxable inter-state sales only and the rebate or
remission or partial exemption granted under the Notification dated
6/5/86 cannot and does not travel beyond the scope of Section 8(5) of
the CST Act and, therefore, the question is only whether the
subsequent Notification dated 21/1/2000 deprives the benefit of
partial exemption under the Notification dated 6/5/86 or not, which it
does, in the opinion of this Court, in view of condition no.3 of the
later Notification dated 21/1/2000.

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Government to grant any exemption to any class of dealer or a dealer
as such and the power to grant exemption given to the State
Government under the Central legislation namely CST Act, 1956 is
restricted to be transaction specific only, namely inter-State sale i.e.
the taxable event covered under CST Act. Therefore, it is wrong to
contend that Notification dated 6/5/86 exempted a class of dealer or
manufacturer. Partial exemption granted is also relating to taxable
event in the form of taxable inter-state sales only and the rebate or
remission or partial exemption granted under the Notification dated
6/5/86 cannot and does not travel beyond the scope of Section 8(5) of
the CST Act and, therefore, the question is only whether the
subsequent Notification dated 21/1/2000 deprives the benefit of
partial exemption under the Notification dated 6/5/86 or not, which it
does, in the opinion of this Court, in view of condition no.3 of the
later Notification dated 21/1/2000.

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direct,

(a) that no tax under this Act shall be payable
by any dealer having his place of business in the State
in respect of the sales by him, in the course of inter-
State trade or commerce, from any such place of
business of any such goods or classes of goods as may
be specified in the notification, or that the tax on such
sales shall be calculated at such lower rates than those
specified in sub-section (1) or sub-section (2) as may be
mentioned in the notification;
(b)……….”

29. The principles of res judicata or estoppel do not apply in taxing
statutes. There is hardly any need to re-emphasize these principles.

There is no estoppel against statute. It is also well settled that the

Circulars issued by the Commissioner do not have any statutory force

and they can neither restrict or expand the scope of statutory

Notification. The confusion on account of different interpretations

given in the Circulars dated 15/4/1994 & 16/4/2001, cannot enure to

the benefit of assessee, in view of clear terms of condition no.3 in the

Notification dated 21/1/2000 at least after 16/4/2001, when previous

Circular dated 15/4/1994 was withdrawn. As a matter of fact, the

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Hon’ble Supreme Court as well as this Court have consistently
deprecated the practice on the part of Commissioner, Commercial
Taxes Department to issue these kind of Circulars which directly
impede or interfere with the quasi-judicial discretion of the assessing
authority and force them to take a particular view of the law or
statutory notification. It would be opportune to refer to the judgment
of this court in the case of CTO Vs. M/s Bombay Machinery Store –
2007 (19 ) Tax up-date 315. This court in para no.12 quashed such
circulars issued by the Commissioner in respect of period prescribed
for constructive delivery for the purpose of Section 6(2) of the CST
Act and it was held as under;

“12. Therefore, the proposition of law by the
learned Commissioner in the impugned circulars that
“as per legal position, `transit’ gets over as soon as a
reasonable time elapses for the consignee to elect
whether he would take the goods away or leave them in
the transporters premises, because at the conclusion of
reasonable time there is deemed to be a constructive
delivery of goods from the transporter to the
consignee”, cannot be said to be a correct legal
position. The subsequent Circular dated 15.04.1998

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purportedly issued to ameliorate the situation for
dealers created by previous circular dated 16.09.1997,
merely ended up extending the time limit of days to 30
days by propounding a particular view of constructive
delivery. Commissioner giving a particular
interpretation of law purported binding on all the
assessing authorities is doubtful. There is no specific
provision in the Sales Tax Act, either under the RST
Act or under the CST Act, empowering the
Commissioner to issue such circulars, as against such
powers conferred under Section 19 of the Income Tax
Act on the Central Board of Direct Taxes. Even Section
119 of the Income Tax Act, which empowers the way
of its proviso restricts and provides that no such order,
instruction or direction shall be issued so as to require
any Income Tax authority to make a particular
assessment or dispose of a particular case in a
particular manner and such orders or instructions shall
also not interfere with the discretion of the
Commissioner(Appeals) in exercise of its appellate
functions. Therefore, this court cannot countenance the
issuance of such circulars by the Commissioner of
Sales Tax, which unduly fetter with the quasi-judicial
discretion of the assessing authorities, who are
expected in law to give their findings of fact and
interpret the statutory law in their own quasi-judicial

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discretion in accordance with the law as interpreted by
the Supreme Court or jurisdictional High Court. The
circulars issued by the Commissioner in the aforesaid
manner like done vide Circulars dated 16.09.1997 and
15.04.1998 are likely to hamper and throttle such
quasi-judicial discretion which vests with the assessing
authorities. Therefore, the aforesaid circulars issued by
the Commissioner aforesaid on 15.04.1999
(S.No.1132A) and 16.09.1997 (S.No.1115B) are in
conflict with the Division Bench decision of this Court
in Guljag Industries Ltd’s case (supra) and even
otherwise they are found to be without any authority or
law. Consequently, both these circulars are found to be
ultra vires and are hereby quashed.

13. In view of aforesaid, since there was no basis for
the learned Commissioner to stipulate the time frame of
10 days or 30 days and, thereafter to require the
assessing authority to invoke the concept of
constructive delivery so as to deny the exemption of
CST on subsequent sales made by transfer of
documents of title to the goods made under Section 6
(2) of Act, though requisite conditions of Section 6(2)
of the Act are fulfilled by the dealer and such circulars
have already been held to be ultra vires and have been
quashed and in absence of any other material justifying

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the denial of exemption under Section 6(2) of the Act
to the assessee, the impugned order of the Tax Board
allowing such exemption to the assesee is not required
to be interfered with in the present revision petitions
filed by the Revenue.”

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the denial of exemption under Section 6(2) of the Act
to the assessee, the impugned order of the Tax Board
allowing such exemption to the assesee is not required
to be interfered with in the present revision petitions
filed by the Revenue.”
Therefore, even though the assessee’s assessments might have
been completed in accordance with the Circular dated 15/4/1994
issued by the Commissioner and even the assessment of preceding
year 2000-01 in terms of the order passed by this Court in earlier writ
petition filed by the assessee as quoted above, the same does not
furnish a valid ground to allow petitioner-assessee to avail benefit of
partial exemption contrary to the condition no.3 of the Notification
dated 21/1/2000 for the assessment year 2001-2002, involved in the
present case.
31. Thus, this Court is of the considered opinion that the Tax Board
was perfectly justified in holding the assessee to be not entitled to
partial exemption under the Notification dated 6/5/86 for the
assessment year 2001-02 in question and the revision petition filed by
the petitioner-assessee is sans merit and is liable to be dismissed. The

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same is accordingly dismissed with no order as to costs.

S.B.C.Sales Tax Revision No.613/05- Lakshmi Cement vs. CTO, Pali.
Judgment dt:17/4/2009
40/40
same is accordingly dismissed with no order as to costs.

item no.5
baweja/


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