Union of India and another vs Southern Distributors

Bakthavatsalam, J.—Both the revisions are filed by the Revenue, directed against orders of the Sales Tax Appellate Tribunal, Pondicherry,

passed under the Pondicherry General Sales Tax Act, 1967 and also under the Central Sales Tax Act, 1956. The facts leading to the filing of these

revisions are : The respondents are dealers in B.H.C. (Technical) pesticide at Pondicherry. They reported a total and taxable turnover of Rs.

2,61,896.75 under the local Act and claimed exemption from tax liability for the entire turnover, under a notification issued by the Government of

Pondicherry in G.O.Ms. No. 37/70/Fin. (ST), dated August 21, 1970. So also, they reported a total and taxable turnover of Rs. 41,75,997.75

and claimed exemption on the same footing. The assessing authority found that the respondents were not entitled to exemption and brought the

disputed turnover into taxation by levying tax at the rate of 3 per cent, apart from levying a penalty at Rs. 1,000. On appeal, the first appellate

authority deleted the penalty with regard to the local Act and affirmed the penalty with regard to the assessment under the Central Sales Tax Act.

Against these orders, the respondent-assessee filed second appeal to the Sales Tax Appellate Tribunal, Pondicherry. The Sales Tax Appellate

Tribunal considered the question whether the goods sold by the petitioners, B.H.C. (Technical) is a pesticide, meant for agricultural use and

whether the respondent-assessee is entitled to exemption under both the enactments. The Tribunal, as a fact, found based upon certain materials

produced before it to establish that B.H.C. (Technical) is a pesticide and after coming to the conclusion that the documents emanating from expert

bodies also reveal the same position, held that B.H.C. (Technical) is a pesticide meant for agricultural purposes. However, having held it as

agricultural pesticide, allowed the appeal under the local Act on the ground that B.H.C. (Technical) is a pesticide meant for agricultural purposes,

coming within the notification and entitled to exemption. However, with regard to the assessment under the Central Sales Tax Act, the Tribunal

held that the respondent-assessee is entitled to exemption under the Central Sales Tax Act, on the ground that once exemption is granted under the

local Act, it is also applicable to the respondent''s case. The Revenue is before us against these orders. The learned Government Pleader,

Pondicherry, contends that the conclusion of the Tribunal that B.H.C. (Technical) is a pesticide is erroneous, since the goods sold by the

respondent-assessee is only raw material for making of the pesticides and B.H.C. (Technical) itself cannot be termed as a pesticide to claim

exemption under the notification, made u/s 19 of the Pondicherry General Sales Tax Act, 1967. Learned counsel for the Revenue also contends

that the purchasers from the petitioners are industrialists and the pesticides are sold inter-State also and as such there cannot be any ground for

granting exemption on the sales of pesticides made by the respondent-assessee. Per contra, learned counsel for the respondent-assessee Mr. C.

Venkataraman, draws our attention to the notification issued u/s 19(1) of the Pondicherry General Sales Tax Act, 1967, and contends that the

assessee is entitled to claim exemption, both under the local Act and on the Central Act. Learned counsel points out that the notification cannot be

said to be with any condition and as such it has to be held that the notification will apply to an assessment made under the Central Sales Tax Act

also.

We have considered the arguments of Mr. K. S. Ahmed, Senior Government Pleader, Pondicherry, for the Revenue and Mr. C.

Venkataraman, learned counsel for the assessee. The notification relied upon by the assessee-respondent is to the following effect :

In exercise of the powers conferred by sub-section (1) of section 19 of the Pondicherry General Sales Tax Act, 1967 (Act No. 6 of 1967), the

Lieutenant Governor, Pondicherry, being satisfied that it is necessary so to do in the public interest, is pleased to exempt with immediate effect, the

tax payable under the said Act on the sales of pesticides meant for agricultural use in the whole of the Union Territory of Pondicherry.

It is not in dispute that so far as the sales are made locally, the sales of pesticide meant for agricultural use in the whole of the Union Territory of

Pondicherry are exempt. The notification exempts sales of pesticides meant for agricultural use in the whole of the Union Territory of Pondicherry.

It is not the case of the Revenue that the commodity in question will not answer the description of ""pesticide"", but the contention is that for the

agricultural use, the rigour or power of the product should be reduced by mixing it with other material. So long as notification itself does not

prescribe the pesticide of any percentage or power it is to be exempt. There is no scope for reading into the notification in question of any such

limitation, as contended by the learned counsel for the Revenue. The Tribunal has chosen to place reliance on the certificates of the competent

authorities concerned and other materials and has come to the conclusion that the product sold by the petitioner satisfied the requirements of the

term ""pesticide"" and comes under the notification issued u/s 19 of the Pondicherry General Sales Tax Act, 1967. We are in agreement with the

finding of the Tribunal in this regard and we do not see any reason to differ from the finding of the Tribunal, which the Tribunal has arrived at, after

considering various and other materials and has given a finding on fact. So, the question is whether the respondent-assessee is entitled to the

exemption so far the assessment is made under the local Act. In view of the fact that we have accepted the view of the Tribunal that the goods sold

by the assessee B.H.C. (Technical) is a pesticide, we do not see any reason to set aside the order of the Tribunal in so far as the exemption

granted by the Tribunal is concerned. So, the Tax Case No. 978 of 1983 shall stand dismissed.

Coming to the assessment under the Central Sales Tax Act, we are not able to agree with the contention of Mr. C. Venkataraman, that the

respondent-assessee is entitled to the exemption under the Central Sales Tax Act, when once the exemption notification is issued u/s 19(1) of the

Pondicherry Act. The question no more exists. The apex Court of the land in Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC

108, while considering as to what is meant by ""general exemption"", has laid down the principle under the following terms :

General exemption means that the goods should be totally exempt from tax before similar exemption from the levy of Central sales tax can

become available. Where the exemption from taxation is conferred by conditions or in certain circumstances, there is no exemption from tax

generally.

If the notification before us is read with this principle laid down by the apex Court in the land in mind, we have no hesitation to hold that the

notification has been issued only with the condition. This version of the apex Court in the land has been reiterated in another case reported in

Industrial Cables (I.) Ltd. v. Assessing Authority [1987] 64 STC 349 by the apex Court itself. In view of the well-settled principle whether the

respondent-assessee is entitled to exemption or not, in such circumstances, we have to set aside the order of the Tribunal on this aspect. We are

not able to understand when the Tribunal says that if the wording is different, the intention of the Government can be read in the other way,

especially the following finding of the Tribunal, namely :

If the intention of the Government was that it should qualify the word ''use'' the phrase should have been ''in the Union Territory of Pondicherry''

instead of ''in the whole Union Territory of Pondicherry''.

cannot be sustained in the view we take. So also the conclusion arrived at by the Tribunal on the construction of explanation to section 8(2A) of

the Central Sales Tax Act, 1956, is against the law laid down by the apex Court in the land. In view of that, Tax Case No. 977 of 1983 shall stand

allowed. No costs.

T.C. No. 977 of 1983 allowed.

T.C. No. 978 of 1983 dismissed.