MUKERIAN PAPERS LIMITED Vs. STATE OF PUNJAB

JUDGEMENT

(1.) The assessee-appellant M/s. Mukerian Papers Ltd., is a company engaged in the manufacture of paper at Mukerian in the State of Punjab and is a registered dealer under the Punjab General Sales Tax Act, 1948 (The Act hereinafter). The assessee despatched some part of the manufactured goods outside the State of Punjab for sale on consignment basis However, the assessee had not paid the taxes on the taxable raw material consumed in the manufacture of such goods. A show cause notice was, therefore, issued by the Assessing Authority under Section 10(6) of the Act for the assessees failure to pay the taxes along with the return as required by Sec. 4B of the Act. Interest on the tax amount which the assessee had failed to pay was also claimed under Section 11D of the Act. The assessee disputed its liability to pay penalty and interest on the amount of tax withheld on the plea that there was no wilful or intentional default on the part of the assessee to pay the taxes due under Section 4B of the Act as the assessee was under a bona fide belief that no tax was to be paid on the raw material purchased for the manufacture of paper which was ultimately sent outside the State on consignment basis. This impression, based on the language of the statute, stood confirmed by the subsequent decisions of the Punjab and Haryana High Court in the case of Goodyear India Ltd., (1983) 53 STC 163 and Bata India Ltd., (1983) 54 STC 226, till those decisions were overruled by the Full Bench decision in Des Raj Pushpak Kumars case, (supra) (Punj and Har). The assessee further contended that it had acted on legal advice that it was not liable to pay any purchase tax and, therefore, in the absence of a clear intention to avoid the payment of tax, there could be no question of imposition of penalty and demand for interest. On the other hand it was contended on behalf of the revenue that the two decisions on which the assessee placed reliance were subsequent to the date on which the liability to pay the tax had arisen and hence the assessee could not take shelter under the said two decisions. The submissions made on behalf of the assessee did not find favour with the Revenue. The assessee thereupon sought a reference under Section 22(1) of the Act but the Presiding Officer of the Tribunal by its order dated 12th August, 1987 rejected the application as he saw no point of law to make a reference to the High Court. Civil Appeals Nos. 936 and 937 of 3988 arise out of the said order of 12th August, 1987. In the other two appeals Nos. 2239 and 2240 of 1988 the appellants have come to this Court directly from the Tribunals order in appeal without going through the formality of seeking a reference under Section 22(1) of the Act in view of the rejection of a similar request by the impugned order of 12th August, 1987. This Court granted special leave to appeal without insisting on the appeallant-assessee approaching the High Court in view of the Full Bench decision of that Court in Des Rajs case. (supra) As the facts are identical and common questions of law arise we have thought it proper to dispose of all the four appeals by this common judgment.

(2.) Counsel for the assessee-appellant contended that the main question of law involved in this case is concluded by the decision of this Court in Messrs Goodyear India Ltd. vs. State of Haryana, AIR 1990 SC 781, which was an appeal arising from the High Courts decision in the case of the same assessee reported in (1983) 53 STC 163 (Punj and Har, to which reference is made hereinabove. He further pointed out that while deciding the true scope of Sec. 9 of the Haryana General Sales Tax Act, 1974, which, says counsel, is in pari materia with Section 4B of our Act, this Court affirmed the High Courts view expressed in Goodyear India Ltd., (1983) 53 STC 163 (Punj and Har) and Bata India Ltd., (1983) 54 STC 226 and disapproved the Full Bench in view in Des Rajs case, (supra) (Punj and Har). Counsel for the Revenue, however, placed strong reliance on this Courts decision in State of Tamil Nadu vs. M. K. Kandaswami, (1976) 1 SCR 38 and submitted that the assessees case (supra) falls within the ratio of the said decision. But counsel for the assessee pointed out that this Court had considered the ratio of Kandaswamis case (supra) in the subsequent decision and had pointed out that in that case this Court was not concerned with the actual argument with which it was concerned in the subsequent case and, therefore, the decision in the former case is not an authority for the question of law involved in the subsequent case. In order to appreciate the rival submissions it would, we think, be appropriate to examine the language of Section 4B of the Act, which reads as under :

(3.) We may first read the plain language of the section bearing in mind the contextual setting and the objective of the law. The section seeks to provide for the levy of purchase tax on certain goods. It seeks to levy a tax on the purchase of goods, other than those specified in Schedule B, which are used in the manufacture of goods specified in Schedule B or in the manufacture of goods, other than those specified in Schedule B and sent outside the State in any manner other than by way of sale in the course of inter-State trade or commerce or in the course of export out of Indian territory provided of course no tax is payable on the purchase of such goods under any provision of the Act. Where a dealer purchases raw material other than the goods referred to in Schedule B and uses the said raw material within the State in the manufacture of goods specified in Schedule B, he becomes liable to purchase tax at the rate specified by the State Government not exceeding the maximum fixed under Section 5(1) provided no tax is paid on such goods under any other provision of the Act. However, when the raw material is used within the State in the manufacture of goods other than the one specified in Schedule B and the manufacturer sends the goods so manufactured outside the State in any manner (other than by way of sale in the course of inter-State trade or commerce or in the course of export out of India) he becomes liable to pay purchase tax at the rate specified. To attract this provision the revenue must show that (i) the manufaturer is a dealer liable to pay tax under the Act, (ii) he has purchased goods other than those specified in Schedule B from any source, (iii) he has used the said goods specified in Schedule B, and (iv) he has sent the goods so manufactured outside the State in any manner other than the one excepted. Before this provision can be invoked the above requirements must be strictly proved. The first requirement identifies the tax-payer, the second and the third requirement identify the goods liable to tax in the event the fourth requirement of the goods so manufactured being sent outside the State takes place. Thus the liability to pay purchase tax does not accrue on the purchase of the raw material within the State or its use in the manufacture of goods other than those specified in Schedule B but falls on the dealer when the goods so manufactured are sent outside the State. To avoid a duplication of the levy the charging clause provides that the purchase tax will be leviable under Section 4B provided it is not leviable on the said goods under any other provision of the Act. Although the purchase tax is levied on the raw material purchased by the manufacturer, the actual levy is postponed till after the said raw material is consumed in the manufacture of another commercially distinct commodity having its own separate identity and character and is actually sent outside the State. The relevant date is the date on which the goods are sent outside the State. The taxable event takes place when the taxable goods are sent outside the State and not before that date notwithstanding the fact that the raw material was purchased and converted into a new commodity long before that date. In the present case since it is not disputed that the demand of purchase tax is based on the fact that the goods manufactured within the State from raw material purchased earlier had been sent outside the State for sale on consignment basis, we are concerned only with clause (ii) of Section 4B where under the tax liability accrues on the date the goods are sent outside the State.