CYNIDES CHEMICALS CO Vs. STATE OF GUJARAT

JUDGEMENT

(1.) AT the instance of dealer-assessee, Gujarat Sales Tax Tribunal has referred the following question of law arising out of its decision in Revision Applications Nos. 88 and 89 of 1990 decided on September 5, 1992 along with group of cases : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that as the sales in the case of the applicant are tax-free, the question of invoking the provisions of rule 50 of the Gujarat Sales Tax Rules, 1970 and section 8a of the Central Sales Tax Act, 1956 would not arise ?"

(2.) THE petitioner is a limited company doing business of manufacture of chemicals and is a registered dealer under the Gujarat Sales Tax Act, 1969 as well under the Central Sales Tax Act, 1956. THE unit is holding exemption certificate under entry 118 of notification issued under section 49 of the Act. THE limit of exemption of tax up to which he is entitled to avail benefit of the incentive scheme is Rs. 90 lakhs as pioneer industry. THE exemption under the scheme envisages that an eligible unit is entitled to be exempted from payment of sales tax on sales of goods manufactured by it subject to a quantum limit determined under the scheme with relation to fixed capital investment. THE further condition is that such exemption limit is to be availed within the limit fixed during which the exemption operates. Entry 118 has been notified under section 49, to give effect to incentive scheme. It also provides for finding out exemption limit availed by the dealer during the period of exemption. General condition envisaged that as soon as aggregate of amount of tax which should have become leviable from the specified manufacturer but for exemption under this entry or under Government notification issued under sub-section (5) of section 8 of the Central Sales Tax Act for this purpose or any drawback, set-off or refund, the purchase and sale of a specified manufacturer shall cease to be exempt and he shall cease to purchase goods from a registers dealer against a declaration under this entry. For the dealer eligible to incentive under the scheme has two options; either to opt for sales tax exemption incentive or sales tax deferment incentives. THE unit opting for exemption incentive is exempted from payment of tax altogether up to the limit within the period of exemption and at the same time he is not entitled to charge or collect tax on the sales made by it. That is to say, no part of sale price charged by it constitute any element of tax payable on such sales. On the other hand, the industrial unit which opts for deferment incentives is liable to pay tax and is entitled to collect tax on sales made by it, but, he is entitled to retain the amount leviable on him and collected by him as such, during the period of operation of deferment and only thereafter he is liable to make payment of such tax to the public exchequer without liability to pay interest thereon. Thus from the scheme it is clear that the industrial unit availing exemption incentive is not liable to pay tax and is also not entitled to collect tax on his turnover.

(3.) ON the other hand it has been contended by learned counsel for the revenue that as no part of sales during the continuance of the exemption period, until full exemption is availed of could include any tax in respect of such sales, the question of treating the sale price collected by the assessee as gross turnover to he reduced to a net turnover by separating element of tax therefrom does not arise. If the contention of the assessee is to be accepted according to the counsel for the revenue, it would result in increase in the total exemption limit from the payment of tax which is otherwise, leviable. We have given our anxious consideration to the contention raised before us.