SURUCHI DOORS Vs. COMMISSIONER OF SALES TAX INDORE

JUDGEMENT

(1.) AT the instance of the applicant-assessee, the Tribunal (Board of Revenue, M. P. , Gwalior) has stated the cases and referred the undernoted questions of law under section 44 of the Madhya Pradesh General Sales Tax Act, 1958 (for short, "the Act") arising out of the order dated June 29, 1987 and December 1, 1988 in Appeal Cases No. 416-PBR/85 and 60-III/86 on applications registered as Case No. 2-I/87 and 5-I/87 for our opinion :

(2.) FACTS lie in a narrow compass. The applicant-assessee is a new industrial unit and manufacturers wooden furniture. It acquired eligibility certificate on June 27, 1983 effective from October 20, 1981 to October 1, 1983. For the period from May 3, 1982 to November 15, 1982, the applicant was originally assessed by the Assistant Sales Tax Officer, Indore vide order dated November 27, 1984 passed in Assessment Case No. 95 of 1982 (Provincial) whereby set-off of Rs. 7,803 on purchase price of raw materials purchased form registered dealers after paying tax at full rate was allowed. The assessment was, however, reopened under sub-section (1) of section 19 of the Act on the ground that the applicant's products were declared tax-free under Notification No. A3-41-81 (35)-ST-V dated October 23, 1981 issued under section 12 of the Act and that the applicant's products having been declared tax-free under section 12 of the Act in terms of the provisions of section 8 (1) (a) of the Act, the applicant was not entitled to claim set-off. By the order of re-assessment dated May 29, 1985 passed by the Assistant Sales Tax Officer, under section 19 (1) of the Act, the set-off, allowed previously was withdrawn (annexures "b" and "c" ). For the period from November 16, 1982 to November 4, 1983 also the applicant's claim of set-off was similarly disallowed on the same grounds vide order dated September 30, 1985 passed in Assessment Case No. 327 of 1983 (Provincial) (annexure "d" ). First appeals against the aforesaid orders were dismissed vide appellate order dated August 29, 1985 passed in Appeal No. 64 of 1985 (Provincial) (annexure "e") and vide appellate order dated January 13, 1986, passed in Appeal No. 123 of 1985 (Provincial) (annexure "f"), passed by the Additional Appellate Deputy Commissioner of Sales Tax, Indore. The applicant then filed second appeals and contended that under the aforesaid notification dated October 23, 1981, the goods manufactured by them were not exempt from payment of tax and the exemption was to the "class of dealers" and as such the applicant was entitled to set-off. In Second Appeal No. 416-PBR/85, the Tribunal held that the applicant should have availed of the facility provided under section 6 (2) (a) of the Act and as such the applicant was not eligible to claim set-off under section 8 of the Act. The appeal was, therefore, dismissed on June 29, 1987 (annexure "g" ). In Second Appeal No. 60-III/86, the Tribunal accepted the contentions of the applicant that the said notification dated October 23, 1981 did not exempt the goods manufactured by the applicant and as such the applicant was entitled to set-off under section 8 (1) (a) of the Act. However, the Tribunal maintained the order disallowing the set-off on the ground that the applicant could have purchased the raw materials and incidental goods without paying any tax under Notification No. A-3-41-81 (25)-ST-V dated May 1, 1982. The appeal was, dismissed by order dated December 1, 1988 (annexure "h" ). Aggrieved by the orders dated June 29, 1987 (annexure "g") and December, 1, 1988 (annexure "h") the applicant filed applications registered as 2-I/87 and 5-I/87 for reference of the questions. On these applications, the Tribunal stated the cases and referred the aforesaid questions of law for our opinion.

(3.) THE scheme of section 8 (1) (a) of the Act is that in case a dealer purchases goods in the shape of raw material at full rate of tax and pays the tax to the seller over and above the concessional rate, then he becomes entitled to get set-off equal to the difference between the full rate of tax and concessional rate of tax. The only condition that prohibits such a set-off is that such goods should not be declared tax-free under section 10 or 12 of the Act. In the instant case, it is clear that no exemption was granted in respect of the goods manufactured. Such goods are liable to tax under residuary entry of Part VI of the Second Schedule. The raw material purchased thus is in the nature of goods which are liable to tax and were not declared as tax-free goods. Incontestable position is that it is the dealer who has been declared immune from taxation on the ground that he operated small-scale industry and deserved to be differently treated so far as tax structure was concerned because of the economic encouragement to such industries as a matter of policy of the Government. If the dealer had not operated small-scale industry as such, he would have been required to pay tax on the goods in question.