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Judgment
Prakash Shrivastava, J.—By way of the present writ petition, the petitioner (assessee) has challenged the order dated October 11, 2002 passed by the Additional Commissioner, Commercial Tax, Indore, dismissing the revision petition of the petitioner by holding that the benefit of the exemption notification dated May 5, 1997, is not available for levy of tax u/s 9B of the Madhya Pradesh Commercial Tax Act, 1994.
The present matter relates to the assessment period April 1, 1997 to March 31, 1998. The petitioner is registered dealer engaged in the business of purchase and sale of tea including "loose tea". By the assessment order dated April 24, 2001 the assessing authority had levied tax, at the rate of 10 per cent u/s 9B of the Act and rejected the petitioner''s objection that in terms of the exemption notification issued u/s 9 of the Act, the reduced rate of tax should be charged. The revision preferred by the petitioner against this order was rejected by the revisional authority, by impugned order dated October 11, 2002.
The learned counsel for the petitioner submitted that the charging section is section 9 and once by the notifications dated May 9, 1997 and May 14, 1997, the rate of tax was reduced then for the levy of tax u/s 9B also the reduced rate of tax will be applicable. He submitted that the liability u/s 9B is co-related to charging section 9 and the same rate of tax should be applied for the purpose of section 9B as applicable for the purpose of section 9. He further submitted that Schedule II relates to section 9 and there is no separate Schedule for section 9B, therefore, any reduction of rate of tax u/s 9 will also apply for levy of tax u/s 9B.
The learned counsel appearing for the respondents supporting the impugned order submitted that no error has been committed by the tax authorities in not giving the benefit of reduced rate of tax since the reduction of rate was for the purpose of section 9 only and the rate of tax in the Schedule itself was not altered.
We have heard learned counsel for the parties and perused the record.
Section 9 of the Act provides for levy of tax on taxable turnable relating to goods specified in Schedule II at the rate mentioned in the corresponding entry in column (3) of the said Schedule. The dispute in the present matter is about rate of tax in respect of tax liability u/s 9B.
Section 9B, as existing during the relevant assessment year, reads as under :
9B. Levy of tax in special circumstances.-(1) Notwithstanding anything contained in clause (x) of section 2 and sub-section (1) of section 9, every such dealer liable to pay tax u/s 9 whose turnover in the year preceding the commencement of the Madhya Pradesh Vanijyik Kar (Sanshodhan) Adhiniyam, 1997, exceeds rupees one crore and every other dealer whose turnover in a year first exceeds rupees one crore shall, from the date of such commencement or from the date on which the turnover exceeds rupees one crore, as the case may be, be liable to pay tax on the resale of any goods specified in Parts II to VII of Schedule II and such tax shall be payable on such part of his turnover in respect of the said goods at the rate specified in column (3) of the said Schedule which remains after deducting therefrom-
(i) sale price of declared goods;
(ii) sale price of such goods at the hands of the registered dealer from whom they have been purchased;
(iii) amount arrived at in accordance with the provisions of subclause (v) of clause (w) of section 2;
(iv) any other deduction as may be prescribed, in such manner as may be prescribed.
(2) Every dealer who is liable to pay tax under sub-section (1) shall continue to be so liable until the expiry of two consecutive years during each of which his turnover has not exceeded the limits specified in sub-section (1) and on the expiry of such period his liability to pay tax shall cease.
Section 9B carves out a separate class of dealers who are liable to pay tax u/s 9 and whose turnover exceeds rupees one crore. This separate class of dealer is liable to pay tax on resale of goods at the rate specified in column (3) of Schedule II. Section 9B starts with non obstante clause which indicates that section 9B is not a part and parcel of section 9, but is a separate section applicable to the separate class of dealers covered by section 9B.
The State can provide different rate of tax for different class of dealers depending upon their turnover and the rate of tax on the sale of goods can vary with the turnover of the dealer and, therefore, it is well within the competence of the State to reduce the rate of tax applicable to the particular class of dealers without altering the rate of tax payable by another class of dealers.
The above view is supported by the Division Bench of this court in the matter of Chhattisgarh Cement Dealers Association and M. P. Chemists and Druggists Association v. State of M. P. reported in [2002] 2 TLD 25. The Division Bench, while upholding the constitutional validity of section 9B of the Act, has also considered the question of discrimination, which may arise for the reason of not extending the benefit of tax exemption to the dealers covered by section 9B and has held that if there is classification between two categories of traders such classification in relation to the exemption notification would also be valid. The Division Bench of this court has held that :
.. On a reading of the notification it is quite vivid that if the conditions precedent were satisfied the manufacturers as well as reseller were entitled to get the exemption but by virtue of section 9B the seller whose turnover exceeds Rs. 1 crore would not be entitled to avail of this benefit of exemption as postulated in this notification. The question that arises for adjudication is whether this situation is permissible in law or not. We have already come to the conclusion that there can be a classification of traders on the basis of the law laid down by the apex court. Classification on the basis of the turnover is permissible and there is rationale behind such classification the classification on that score is accepted to be valid. In our considered opinion if there is a classification between two categories of traders such classification in relation to the exemption notification would also be valid. The exemption notification might have at one point of time conferred the benefit on other categories or type of dealers subject to satisfaction of certain conditions precedent...
Thus, under the Scheme of the Act State can charge different rate of tax from the dealers under sections 9 and 9B and it is well within the power of the State to grant exemption to either dealers u/s 9 or 9B or both.
Section 17 of the Act gives power to the State Government to exempt any class of dealer or goods from payment of tax by issuing a notification to that effect.
The rate of tax prescribed for "tea" in Schedule II during the relevant assessment year was 10 per cent. The State Government had issued the notification dated May 9, 1997 u/s 17 reducing the rate of tax to four per cent in respect of "loose tea" u/s 9 of the Act. The relevant extract of notification dated May 9, 1997 is reproduced below :
20 Notification No. A-3-35-97-ST-V(23), dated May 9, 1997 Loose tea and papers of all kinds
In exercise of the powers conferred by section 17 of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 (No. 5 of 1995), the State Government hereby exempts the class of goods specified in column (2) of the Schedule below from payment of tax under the said Adhiniyam, for the period from 1st April, 1997 to 31st March, 2000 to the extent specified in column (3) of the said Schedule :
Schedule
S. No.
Class of goods
Extent of exemption
(1)
(2)
(3)
1.
Loose tea
Explanation.-''loose tea'' means in bulk in packages of 20 kilograms and above, i.e., not in smaller packets within the package of 20 kilograms or more
Partly so as to reduce the rate of tax u/s 9 to four per cent."
By the subsequent notification dated May 14, 1997, issued u/s 17 of the Act, the rate of tax on tea u/s 9 was reduced to eight per cent. The relevant extract of notification dated May 14, 1997, is reproduced below:
21 Notification No. A-3-21-97-ST-V(24), dated 14th May, 1991
In exercise of the powers conferred by section 17 of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 (No. 5 of 1995), the State Government hereby exempts the goods/class of goods specified in column (2) of the Schedule below from payment of tax under the said Adhiniyam, for the period from 1st April, 1997 to 31st March, 2000, to the extent specified in column (3) of the said Schedule.
Schedule
S. No.
Goods/Class of goods
Extent of exemption
(1)
(2)
(3)
(SI. No. 1 and 2 omitted with effect from May 14, 1997)
3.
4.
Tea
Partly so as to reduce the rate tax u/s 9 to eight per cent.
It is settled position in law that an exemption notification is to be read literally- A person claiming benefit of exemption must show that he satisfies the eligibility criteria and for that purpose the exemption notification is to be strictly construed. For the purpose of satisfying the eligibility criteria nothing can be read into the exemption notification which is not-provided therein. This view is supported by the judgment of the Supreme Court in the matter of CC (Preventive) Amritsar Vs. Malwa Industries Ltd., and in the matter of G.P. Ceramics Pvt. Ltd. Vs. Commissioner, Trade Tax, U.P.,
The Supreme Court in the matter of Union of India and others Vs. M/s. Wood Papers Ltd. and another, has held that the exemption notification is to be strictly construed to determine whether subject is covered by the exemption notification.
In the matter of Tata Iron and Steel Co. Ltd. Vs. State of Jharkhand and Others, the Supreme Court has reiterated that (page 304 in 140 STC) :
Eligibility clause, it is well-settled, in relation to exemption notification must be given a strict meaning.
In Collector of Customs, Bangalore and Another Vs. Maestro Motors Ltd. and Another, this court held :
It is settled law that to avail of the benefit of a notification a party must comply with all the conditions of the notification. Further, a notification has to be interpreted in terms of its language.
The principle that in the event of a provision of a fiscal statute is obscure such construction which favours the assessee may be adopted, but it would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption. (See Novopan India Ltd., Hyderabad Vs. Collector of Central Excise and Customs, Hyderabad,
In State Level Committee and another Vs. M/s. Morgardshammar India Ltd., , referring to a large number of decisions, this court held (page 9 in 101 STC) :
... It must be remembered that no unit has a right to claim exemption from tax as a matter of right. His right is only insofar as it is provided by section 4A. While providing for exemption, the Legislature has hedged it with certain conditions. It is not open to the court to ignore those conditions and extend the exemption...
The Supreme Court in the matter of State of Jharkhand and Others Vs. Tata Cummins Ltd. and Another, held that (page 347 in 145 STC) :
Before analysing the above policy read with the notifications, it is important to bear in mind the connotation of the word ''tax''. A tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the industrial policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the industrial policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute.
Present is not a case of the tax exemption for setting up industry in backward area, therefore, the principle of strict construction of the exemption notification will apply.
The Supreme Court in the matter of Orient Traders v. Commercial Tax Officer, Tirupati reported in (2008) 13 VST 530 : (2008) 12 SCC 440 while considering the question of extending the exemption benefit to an item not expressly covered by exemption notification held (page 537 in 13 VST) :
It is a well-established principle that exemption notifications are to be construed strictly. Reference may be made to State of Jharkhand and Others Vs. Tata Cummins Ltd. and Another, and Kartar Rolling Mills v. Commissioner of Central Excise, New Delhi (2006) 4 SCC 772. If the intention of the Legislature is clear and unambiguous, then it is not open to the courts to add words in the exemption notification to extend the benefit to other items which do not find mention in the notification. In the present case, there is no ambiguity in the expression used in the G. O. The intention of the State Government is clear that only gold bullion and specie is entitled to the concessional rate of tax. Under the circumstances, the same cannot be extended to silver as claimed by the assessee.
In the present case the exemption notifications dated May 9, 1997 and May 14, 1997, while reducing the rate of tax on tea and "loose tea", expressly state "so as to reduce the rate of tax u/s 9". The exemption notifications do not mention that the reduction of tax was u/s 9B also. Section 16 of the Act gives power to the State Government to amend Schedule II but this power was not exercised by the State and the rate of tax prescribed in column (3) of Schedule II of the Act was not reduced. u/s 9B, the tax is leviable, at the same rate, as prescribed in column (3) of Schedule II. Since the column (3) of Schedule II was not amended and by the exemption notifications in consideration the rate of tax u/s 9B was not reduced, the rate of tax, as prescribed in column (3) of Schedule II continued to apply for the purposes of levy of tax u/s 9B of the Act. The object and purpose of these notifications appear to be to give tax exemption to the class of dealers covered by section 9 only and not to the class of dealers covered by section 9B.
The exemption notifications in question expressly provide for reduction of tax u/s 9 of the Act and they do not provide for reduction of tax u/s 9B of the Act, nor the reduction of tax is for all the purposes of the Act, therefore, reduction of rate of tax for the purpose of levy of tax u/s 9B cannot be read in these notifications which will amount to reading something which is not mentioned in the notification. Thus, reading the exemption notification, as it is the reduction of tax is in respect of the levy of tax u/s 9 of the Act only and not for the levy of tax u/s 9B of the Act.
In view of the aforesaid analysis, the contention of the petitioner that the benefit of the exemption notification should also be available to the petitioner for the purpose of levy of tax u/s 9B cannot be accepted. No error has been committed by the assessing authority and the revisional authority in this regard.
Writ petition is accordingly dismissed. No costs.