REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1809 OF 2003
M/S. TECHNOGLOBE -- APPELLANT
VERSUS
STATE OF TAMIL NADU & ORS. -- RESPONDENTS
JUDGMENT
D.K. JAIN, J.:
1. Challenge, in this civil appeal, is to the judgment and order dated 1st
August 2000, delivered by the High Court of Judicature at Madras in
W.P. No. 12798 of 2000, whereby the High Court has affirmed the
levy of sales tax on the appellant on sale of goods made by it to
respondent No.2 herein, in the assessment years 1994-95 and 1995-96.
2. Briefly stated, the facts necessary for the disposal of this appeal, are as
follows :
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In the year 1992, respondent No. 1, the State of Tamil Nadu
sanctioned a “film city” project, for which respondent No. 2 viz. the
Tamil Nadu Film Development Corporation, (for short “the
Corporation”) a public sector undertaking, was designated as the nodal
agency, responsible for administering and implementing the said project.
Pursuant thereto, a tender was floated by the Corporation for supply of
various equipments for the said film city project. After a successful bid,
the appellant was awarded the contract. In furtherance thereof, on 28th
June, 1994, the Corporation issued various purchase orders to the
appellant, accompanied by Certificates of sale which, inter- alia, stated:
“This is to certify that the Sales Tax for the equipments
purchased for the Film City Project at Madras has been
exempted by the Tamil Nadu Government.”
3. Vide assessment order dated 31st January 1996, the Commercial
Tax Officer (for short “CTO”) exempted the sales made by the appellant
to the Corporation in the assessment year 1994-95 from the levy of sales
tax.
4. However, in relation to the assessment year 1995-96, the CTO,
vide his order dated 26th June 1997, rejected the appellant’s claim of
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exemption on similar sales made by them to the Corporation, holding
that:
“There is no exemption granted in the G.O. cited as stated by
the dealers for claiming exemption to the sales turnover made
to the Film Development Corporation. Hence the objection-
filed by the dealers are not accepted.”
5. Accordingly, the CTO included the entire sales turnover made by
the appellant to the Corporation in the taxable turnover for the said year
and subjected the same to sales tax under Tamil Nadu General Sales Tax
Act, 1959 (for short “the Act”), thereby creating an additional tax
demand of `26,57,388/-. In addition the CTO also imposed a penalty of
`39,86,082/- under Section 12(5)(b)(v) of the Act.
6. Additionally, vide order dated 29th August 1997, the CTO revised
the assessment under the Act in respect of the year 1994-95, thereby
disallowing the exemption on the goods sold by the appellant to the
Corporation, which resulted in additional demand of tax of `29,75,983/-.
A penalty of `44,60,901/- was imposed together with a penalty of
`3,127/- under Section 12(3) read with Section 24(3) of the Act.
7. Faced with the threat of recovery of the aforestated tax demands,
the appellant issued a legal notice to the three respondents herein on 1st
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February 1999, requesting, inter alia, the Corporation to furnish the
Government Order granting sales tax exemption, as mentioned in their
purchase orders and, in the alternative to pay the sales tax, penalty and
surcharge levied on the appellant by the CTO. However, there was no
response to the said notice from any of the respondents.
8. On 1st December 1999, the CTO served a legal notice on the
appellant, stating that since the arrears of sales tax had not been paid, the
house property of the proprietress was being attached, and would be
brought to public auction.
9. The appellant, thereafter, approached the Tamil Nadu Taxation
Special Tribunal (for short “the Tribunal”) praying that the Corporation
be directed to pay the arrears of sales tax, surcharge and penalty levied on
them. The Tribunal, vide its order dated 6th July 2000, rejected the
petition of the appellant, observing that:
“As the petitioner themselves are not able to mention that there
is any Government order available granting exemption it
appears that there is no such exemption granted by the
Government. Under those circumstances there is no question of
exemption.”
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10. Being aggrieved by the said order, the appellant preferred a writ
petition before the High Court. As afore-mentioned, the High Court has
rejected the writ petition of the appellant, inter alia, holding that:
“On consideration, we find that admittedly, no notification
under Section 17 of the Tamil Nadu General Sales Tax Act has
been issued. Therefore, in the absence of any such notification
issued, the petitioner-firm being an assessee is liable to pay the
sales tax and it cannot take advantage of the alleged certificate
issued by the 2nd respondent.”
11. Hence the present appeal.
12. Mr. Rajiv Mehta, learned counsel appearing on behalf of the
appellant, while assailing the impugned judgment, strenuously contended
that in view of G.O.M. No. 169 dated 27th June 1994, issued by the
Government of Tamil Nadu, the appellant cannot be made liable for
payment of Tax under the Act in respect of sales to the Corporation.
Learned counsel contended that if at all sales tax is leviable under the
Act, it is the Corporation which is liable to pay the same as in the
purchase order issued by them to the appellant it was clearly stated that
“Film City project has been exempted from the payment of Sales Tax by
issuing a separate G.O. (copy will be sent separately). The particulars to
that effect is enclosed with this purchase order.” Relying on the said
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representation which had been made by a public sector undertaking of the
State Government, the supplies were made by the appellant without
charging any sales tax. It was also urged that in light of Section 26(1) of
the Act, the CTO was competent to recover sales tax from the
Corporation, notwithstanding the fact that it is a public sector
undertaking.
13. Per contra, Mr. TLV Iyer, learned senior counsel appearing for the
respondents contended that G.O.M. No. 169 Information and Tourism
Department, dated 27th June, 1994 was not issued by the Commercial
Taxes Department, and therefore, the dealer-appellant cannot claim
exemption on the basis of the said G.O.M. Learned counsel contended
that under the Act, it is the dealer who is liable to pay the sales tax, and
if there is any contract or understanding between the dealer and the
purchaser regarding payment of tax dues, the Commercial Taxes
Department is not bound by it. If the appellant, so desires, it may recover
the amount so paid by them from the Corporation. Commending us to the
decision of this Court in American Remedies Pvt. Ltd. & Anr. Vs.
Government of Andhra Pradesh & Anr.1, learned counsel contended that
it is a settled proposition of law that the dealer is liable to pay sales tax,
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[1999] 113 STC 400 (SC))
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and it is immaterial whether or not, he has collected the same from the
consumer. Learned counsel, however, submitted that the Commercial
Taxes Department will have no objection if this Court, in exercise of its
jurisdiction under Article 142 of the Constitution, is inclined to pass an
order, directing the Corporation to discharge the sales tax liability under
the Act on the purchases made from the appellant during the years
1994-95 and 1995-96.
14. Before we advert to the rival submissions, it would be expedient to
extract relevant portions of G.O.M. No. 169 Information and Tourism
Department dated 27th June 1994, filed before us by learned Counsel for
the Corporation. The G.O.M. issued under the order of the Governor of
Tamil Nadu, declares the “Film City Project” as a Tourism project and
grants certain “incentives, concessions and subsidies for Tourism
promotion projects and activities.” It reads:
“3. The Government after careful consideration of the
proposal submitted by Special Officer, Film City, declare
the `Film City Project’ as `tourism project’ for purpose of
extending various concessions, incentives and subsidies as
applicable to other industries. The Government also direct
that the following concessions, incentives and subsidies
shall be made available to Film City Project :-
………………………………………………………………
iii) Deferral of sales Tax for a period of 5 years wherever
Sales Tax levy is applicable.
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……………………………………………………………..
6. This order issues with the concurrence of Industries
Commerical Taxes and Religious Endowments, Energy and
Finance Departments vide their U.O. Nos.
12959A/MIG2/94-1 dt.2.5.94, 26/Secy/Per/94-1 dt.3.5.94,
4554/A2/94-1 dt.9.5.94 and 2677/FS/P/94 dt. 2.6.94.”
(Emphasis supplied by us)
15. It is manifest that the said G.O.M. defers payment of sales tax by
the proposed “Film City Project” for a period of five years. It is also plain
that the Government of Tamil Nadu had acceded to the request of the
“Film City” for granting it various concessions, incentives etc. with the
concurrence of different departments, which included the Department of
Commercial Taxes as well.
16. At this juncture itself, it will be useful to refer to Section 17-A of
the Act, which empowers the State Government to notify deferred
payment of tax for new industries etc. The Section reads as under:
“17-A. Power of Government to notify deferred
payment of tax for new industries, etc: (1) The
Government may, in such circumstances and subject to
such conditions as may be prescribed, by notification
issued whether prospectively or retrospectively, defer the
payment by any new industrial unit or sick unit or sick
textile mill of the whole or any part of the tax payable in
respect of any period:
Provided that such retrospective effect shall not be
earlier than the 9th May, 1988.
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(1-A) The Government may, by general or special
order, authorize the Territorial Assistant Commissioner
to exercise such of their powers specified in sub-section
(1).
(2) Notwithstanding anything contained in this
Act, the deferred payment of tax under sub-section (1) or
sub-section (1-A) shall not attract interest under sub-
section (3) of section 24 provided the conditions laid
down for payment of the tax deferred are satisfied.”
Thus, it is clear that under certain circumstances the State
Government has the power to issue notification for deferment of
payment of the whole or any part of the tax payable in respect of any
period. It bears repetition that the State Government in exercise of its
jurisdiction under Section 17-A of the Act was competent to issue
G.O.M. No.169 dated 27th June, 1994. It is also evident from the
notification that it was issued with the “concurrence” of Commercial
Taxes and Finance Departments, besides others.
17. Section 3 of the Act provides for the levy of sales tax on sales or
purchase of goods by a dealer. The relevant part thereof reads as under:
“3. Levy of taxes on sales or purchases of goods.-
(1)(a)(i) Every dealer, other than the dealer, casual trader
or agent of a non-resident dealer referred to in clause (ii),
whose total turnover for a year exceeds three lakhs of
rupees ; and
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(ii) every dealer in bullion, gold, silver and platinum
jewellery including articles thereof and worn-out or beaten
jewellery and precious stones and every casual trader or
agent of a non-resident dealer, whatever be his turnover for
the year, shall pay tax for each year in accordance with the
provisions of this Act ;
(1)(b) Notwithstanding anything contained in clause (a),
every dealer (other than a dealer in bullion, gold, silver,
platinum jewellery including articles thereof and worn-out
or beaten jewellery and precious stones and a casual trader
or agent of a non-resident dealer) whose total turnover for
a year exceeds three lakhs of rupees but does not exceed
ten lakhs of rupees shall not be liable to pay tax on the first
three lakhs of rupees of his total turnover, provided that no
amount by way of tax or purporting to be by way of tax
has been collected by him under this Act in respect of that
first three lakhs of rupees.”
18. It is abundantly clear that under Section 3 of the Act, the liability
to pay sales tax in accordance with the provisions of the Act is cast on the
dealer, irrespective of the fact whether he has collected it from the
consumer or not. Therefore, the plea of the appellant that they had not
charged and collected any sales tax from the Corporation is of no
consequence. However, the issue for consideration in the present case
relates to the effect of the deferral scheme envisaged in G.O.M. No. 169
on the liability of the appellant to pay sales tax on the sales made by them
to the Corporation for the assessment years 1994-95 and 1995-96.
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19. It is evident from the afore-extracted orders that all the authorities
below, particularly the Tribunal, have proceeded on the premise that no
notification under Section 17 of the Act, which clothes the State
Government with the power to notify exemptions and reductions of tax in
respect of any tax payable under the Act, had been issued. Therefore,
according to the Tribunal, in the absence of such a notification, the
appellant could not take advantage of the Certificate allegedly issued by
the Corporation, certifying that sales tax on the equipment purchased for
the film city project had been exempted by the Tamil Nadu Government
and avoid payment of sales tax on the sales made to them in the years
1994 and 1995. It is quite intriguing as to why, in response to the legal
notice issued by the appellant to the three respondents, the Corporation,
in particular, did not furnish a copy of the said notification to them or
produce it before the Tribunal where it was represented by a Government
pleader. At the same time, it is equally surprising as to why the appellant
did not make any effort to produce a copy of the notification, a public
document when they were visited with huge sales tax demands and were
threatened with auction of their immovable property. Be that as it may,
we are of the opinion that notification dated 27th June, 1994, placed on
record by the respondents has a significant bearing on the aforestated
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issue before us. As noticed above, the notification contemplates
deferment of sales tax for a period of 5 years wherever sales tax levy is
applicable on the purchases for the film city project. Prima facie, there is
some force in the stand of the appellant that the notification would cover
the sales made by them to the Corporation in the years 1994-95 and
1995-96 which fall in the stipulated period of five years. We are
conscious that ordinarily this Court would be loathe to examine
contentions of facts based on evidence, advanced for the first time before
this Court without there being any adjudication by the High Court on the
same. (See: Sardar Govindrao Mahadik & Anr. Vs. Devi Sahai &
Ors.2). However, in the present case, the said notification being a public
document, produced by one of the contesting respondents, it would be
travesty of justice if the said document is not taken into consideration for
determining the issue, which admittedly surrounded the same
notification.
20. In light of the aforestated factual scenario, we are of the opinion
that since none of the authorities below had examined the scope and
implication of the said notification, it would be expedient and just to
remand the case back to the Tribunal, to examine all the aspects of levy
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(1982) 1 SCC 237
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of sales tax on the subject sales, in the said two years, keeping in view
the scope and ambit of the said notification as also the fact that the period
for which the payment of sales tax was deferred has also expired.
21. For the foregoing reasons, the appeal is allowed; the impugned
judgment is set aside and the matter is remitted back to the Tribunal for
fresh consideration, particularly in light of the notification dated 27th
June, 1994. The parties are left to bear their respective costs.
………………………………………….
(D.K. JAIN, J.)
………………………………………….
(DR. MUKUNDAKAM SHARMA, J.)
…………………………………………
(R.M. LODHA, J.)
NEW DELHI;
NOVEMBER 16, 2010.
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