CHEMINOVA INDIA LIMITED Vs. SALES TAX OFFICER

JUDGEMENT

(1.) In this petition under Article 226 of the Constitution, the petitioner, a Public Limited Company engaged in the manufacture of pesticides, challenges the notices dated 2.8.2001 issued by the Sales-tax Officer, Surat under Section 41B of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Act" for brevity) for making provisional assessment for the financial years 1997-98 to 2000-01 for levy of additional purchase tax under Section 15B of the Act. The petitioner has also prayed for a writ to permanently restrain the respondent from levying any additional purchase tax under Section 15B.

(2.) The facts leading to filing of the petition, briefly stated and as averred by the petitioner, are as under :- The petitioner is a manufacturing unit which is eligible to sales-tax incentive scheme under which the purchases made by it of raw materials etc. are nominally taxed in the hands of selling dealer who would recover the same from the manufacturer and the sales made by the manufacturer of the manufactured goods would be exempted wholly. To give effect to the said incentive scheme, the State Government exercising its powers under Section 49(2) of the Act issued various notifications from time to time incorporating various entries under which various units were entitled to exemptions as per the terms and conditions of the said entries. The present petition is concerned with Entry 255 for earlier period and Entry 69 for the subsequent period. Under Entry 255(2) sales of raw materials etc. by a registered dealer to an eligible unit like the petitioner is subjected to nominal sales-tax only being 1/4th of 1%, provided that eligible unit gives a certificate in Form No. 26 which contains the declaration that the goods are required by him for use within the State of Gujarat as raw materials. in the manufacture of goods for sale within the State or outside the State. Thus, only nominal sales-tax is levied on the registered dealer selling to the manufacturer which nominal sales-tax he will recover from the manufacturer against Form No. 26. It may be noted that Form No. 26 permits the manufacturer not only to sell the goods within the State but also outside the State. Entry 255(3) dealing with the sales of the manufactured goods by the eligible unit provides for total exemption of sales-tax on the condition that the manufacturer does not give From 40 prescribed by the Rules and also incorporates a declaration in the bill, invoice or cash memo in respect of the said goods that the sale is exempt from tax under Entry 255(3) and that the buyer shall not be entitled to claim any draw back, set off etc. under the rules and further that the buyer shall not give any certificate in Form 40 of the Rules to any subsequent purchaser. Subsequent Entry 69 provides for similar exemption to eligible units. Reference may be made to clause (2) with regard to sales by a registered dealer to the eligible unit where the tax payable would be only 1/4th of 1%, if the eligible unit furnishes a certificate in Form No. 40 prescribed by the notification declaring that the raw materials purchased shall be used within the State of Gujarat in the manufacture of goods for sale within the State. Entry 69(3) wholly exempts the sales made by an eligible unit and it has to give declaration on the bill, invoice or cash memo that the sale is exempt under Section 69(3) and that it shall not give Form 40 prescribed by the Rules to the buyer.

(3.) When the matter was taken up for admission hearing, submissions were made on behalf of the petitioner contending that provisional assessment under Section 41B could be resorted to only where the Commissioner has reason to believe that the dealer has evaded the tax, but in the instant case leave alone any evasion of tax, in the first place there is no liability to pay tax under Section 15B since the petitioner is granted exemption under Section 49(2) of the Act in respect of the finished goods which are being manufactured by it and, therefore, since the petitioner is not manufacturing taxable goods as defined by Section 2(33) of the Act, the question of levy of additional purchase tax under Section 15B does not arise at all. On the other hand, on behalf of the revenue Mr UR Bhatt, learned AGP submitted that since the liability to pay additional purchase tax under Section 15B was very much there, the respondents were prepared to pass orders of regular assessment. In view of the aforesaid controversy centering round the basic question whether the petitioner is liable to pay additional purchase tax under Section 15B of the Act when the taxable raw materials purchased by it are used in manufacture of goods which are ultimately exempted from sales-tax as per notifications under Section 49(2) of the Act and in view of the fact that this controversy has arisen in case of all the industrial units exempted under Section 49(2) of the Act pursuant to various notifications issued by the State Government, at the joint request of the learned counsel for the parties, the Court proceeded to hear the elaborate submissions of the learned counsel on the merits of the controversy about applicability of Section 15B, that is, the very basic question about liability of the petitioner to pay additional purchase tax under Section 15B of the Act when the taxable raw materials purchased by it are used in manufacturing finished goods which are ultimately exempted from sales-tax pursuant to the notifications under Section 49(2) of the Act.