Mansa Co-Operative Spinning Mills Ltd. vs State of Punjab and Others

On the application of the assessee, seeking direction for reference, the following question had been formulated by this Court for consideration vide order dated December 20, 2005:

Whether concessional rate of tax under Notification No. S. O. 50/PA. 46/48/S. 5/82, dated December 2, 1982 on the purchase of cotton would be available to the assessee-dealer from December 1, 1979 or from the actual date of establishment of the textile mill ?

Briefly, the facts as pleaded in the petition, are that the petitioner is a registered dealer under the provisions of the Punjab General Sales Tax Act, 1948 (for short, "the Act"). During the year 1984-85, which was first year of operation of the mill, the petitioner purchased cotton worth Rs. 56,19,013.36 and while filing the return paid purchase tax thereon at two per cent relying on Notification No. S.O. 50/PA-46/48/S. 5/82 dated December 2, 1982.

The Assessing Authority, during assessment, rejected the claim of the petitioner regarding levy of purchase tax on cotton at two per cent holding that the benefit of Notification dated December 2,1982 was available to the petitioner only till November 30, 1984 and accordingly raised additional demand of tax and interest. Order of the Assessing Authority was upheld in appeal by the Deputy Excise and Taxation Commissioner (Appeals). Further appeal before the Tribunal also failed. This is how the petitioner is before this Court.

As is evident from the question of law to be considered by this Court, the dispute falls in a very narrow compass. To appreciate the pleas raised by the counsel for the parties, it is necessary to extract relevant part of the notification dated December 2, 1982 here, which is as under:

In supersession of Punjab Government, Excise and Taxation Department, Notification No. S. O. 26/PA-46/48/S. 5/72 dated the 10th August, 1972, and in exercise of the powers conferred by Sub-section (1) of the Section 5 of the Punjab General Sales Tax Act, 1948 (Punjab Act No. 46 of 1948), and all other powers enabling him in this behalf, the Governor of Punjab is pleased to direct that there shall be levied on the taxable turnover of a dealer a tax at the rate of seven paise in a rupee:

Provided that,-

(1) the rate of tax on goods specified in Schedule A to the said Act excepting glass bangles and plastic bangles covered by items (23) and (31) of the said Schedule shall be ten paise in a rupee;

(2) the rate of tax on glass bangles and plastic bangles covered by items (23) and (31) of the said Schedule A shall be four paise in a rupee;

(3) the rate of tax on purchase of goods specified in Schedule C to the said Act shall be four paise in a rupee:

Provided further that the rate of tax in the case of bhabhar (buggar), kahi and chillies enumerated as items (10), (11) and (12), respectively, in the said Schedule C shall be seven paise in a rupee:

Provided further that the rate of purchase tax on cotton shall be two paise in a rupee on the purchase made by the textile mills established on or after the first December, 1979, for a period of five years to be reckoned from the aforesaid date subject to the following conditions:

(i) that these mills shall start production by 30th November, 1984; and

(ii) that these mills shall not despatch yarn in the course of inter-State transaction on consignment basis or through ex-State commission agents.

To substantiate his plea, learned Counsel for the assessee referred to and relied upon second proviso to notification.

A perusal of the above proviso shows that the concessional rate of purchase tax is available to textile mills established on or after December 1, 1979 for a period of five years from the said date, i.e., the date of establishment, subject to the conditions specified in the said proviso. There is no dispute that the petitioner is fulfilling all other conditions laid down in the notification.

The authorities have taken the view that the period of five years commences from December 1, 1979. The said view was supported by learned Counsel for the Revenue by submitting that since the notification is dated December 2, 1982 and exemption is available to mills which came into production up to November 30,1984, the intention was to provide for exemption only from December 1, 1979.

This contention has no merit in view of the language used in the notification. The date from which the benefit is available to the dealers is not relatable to December 1, 1979, but to any date which is "on or after the December 1, 1979" when the textile mill is established. The plain language of the notification cannot be read in any other manner.

In the present case, the assessee established the textile mill after December 1, 1979 which came into production during 1984-85 before the cut-off date. The date of establishment will thus be the starting point of availing exemption, which may be available for a period up to five years from the said date, i.e., the date of establishment of textile mill.

In view of above, we answer the question referred in favour of the assessee and against the Revenue.