JUDGMENT
Viney Mittal, J.
1. The Excise and Taxation Commissioner, Haryana made an application under Section 42 of the Haryana General Sales Tax Act, 1973 before the Sales Tax Tribunal for referring the following questions of law for the opinion of this Court.
1] Whether any effect could be given to Rule 29(v) of the Punjab Rules, for the purpose of allowing deductions from the gross turn over of the dealer in respect of goods exported out of the territory of India through Bombay dealers in view of the interpretation of Section 5(1) of the Central Sales Tax Act, 1956 by the Hon’ble Supreme Court in the case of Mohd. Serajuddin v. The State of Orissa, (1975) 36 S.T.C. 136 prior to insertion of Sub-section (3) of Section 5, with effect from 1.4.1976?
2] Whether the scope of Rule 29 (v) of the Punjab Sales Tax Rules, 1949, is restricted to inter-State sales in view of the fact that the State Legislature can legislate only in respect of transactions of sales and purchase within the State and that it does not apply to sale of goods in the course of export outside India?
2. The respondent/assessee-firm was registered as a dealer under the provisions of Punjab General Sales Tax Act, 1948 (hereinafter referred to as the “Punjab Act“) (as applicable to the State of Haryana) and also under the Central Tax Act, 1956 (hereinafter referred to as the “Central Act“). The assessee-firm was engaged in the manufacture and sales of shoes.
3. In the year 1971-72, the assessee-firm while filing its return under the Punjab Act claimed a deduction of Rs. 50,01,618.10. The aforesaid deduction was claimed under Section 5(2)(a)(v) being export sales. The assessee-firm claimed that it had entered into a contract on January 25, 1971 with the State Trading Corporation for the supply of shoes manufactured by it. The State Trading Corporation had earlier entered into a contract dated November 23, 1970 with Rezno Export. The assessee-firm entered into a contract dated January 25, 1971 to fulfil the aforesaid contractual obligations of the State Trading Corporation. Accordingly, the assessee-firm sold shoes worth Rs. 49,97,220/- during the year 1971-72. Vide an order dated March 12, 1974, the assessing authority allowed the deduction of Rs. 49,97,220/- holding that “he was satisfied that the goods (of this value) were actually exported outside India….” This deduction was permitted to the assessee under Rule 29(v) of the Punjab General Sales Tax Rules, 1949 (hereinafter referred to as the “Rules”.)
4. Exercising its suo-moto power under Section 40 of the Haryana General Sales Act, the Deputy Excise and Taxation Commissioner, exercising the power of revisional authority proceeded for revising the aforesaid order of the Assessing Authority. Vide order dated September 23, 1977, the Deputy Excise and Taxation Commissioner held that the aforesaid transaction of the assessee-firm amounting to Rs. 49,97,220/- could not be treated as export sales and did not qualify for the exemption and accordingly, levied an additional tax amount of Rs. 49,97,722/-. The revisional authority relied upon the decision of the Supreme Court of India in the case of Mohd. Serajuddin v. The State of Orissa, (1975)36 S.T.C. 136, (Supra). Accordingly, the revisional authority held that the aforesaid deduction from the gross turnover for the year 1971-72 was not permissible under Rule 29(v) of the Rules.
5. The aforesaid order of the revisional authority was challenged by the assessee by filing an appeal before the Sales Tax Tribunal. The Sales Tax Tribunal vide order dated November 21, 1977 set aside the order of the Deputy Excise and Taxation Commissioner. Accordingly, the order of the assessing authority dated March 12, 1974 was restored. The Tribunal held that although there were points of similarity between the contract in the present case and the contract entered into by the State Trading Corporation but because of the operation of Rules 27 and 29 of the Rules, the aforesaid sales claimed by the assessee being export sales were covered under the aforesaid rules and, as such, the value of the goods sold by the assessee under the aforesaid contract were liable to be deducted. The Excise and Taxation Commissioner, Haryana, as noticed above, has claimed the present reference on the questions of law already noticed above.
6. We have heard Shri Jaswant Singh, the learned Counsel appearing for the revenue and Shri R.P. Sawhney, the learned Senior Counsel appearing for the assessee and with their assistance have also gone through the record of the case.
7. Shri Jaswant Singh, the learned Counsel appearing for the Revenue has primarily canvassed the reasoning adopted by the Deputy Excise and Taxation Commissioner, Ambala in his order dated September 23, 1977. On that basis, it has been argued by the learned Counsel that the assessee could not have claimed deduction under Rule 29(v) of the Rules, as the aforesaid sales could not be termed to be the export sales, inasmuch as the export in question has taken place by the State Trading Corporation for meeting its obligations with Rezno Export. Accordingly, it has been contended that the supply of goods by the assessee-firm was distinct and separate from the transactions of export which had actually been executed by the State Trading Company. To support the aforesaid contention, the learned Counsel has vehemently relied upon the law laid down by the Apex Court in Mohd. Serajuddin’s case (supra). Additionally it has been argued by the learned Counsel for the revenue that Rule 29(v) of the Rules was to be read in conjunction with the provisions of Section 5 of the Central Act and since the provisions of the aforesaid rule were repugnant to the Central Act, therefore, the same had to give way to the provisions of the Central Act. The learned Counsel also relied upon Section 5(v) of the Punjab Act to claim that only such sales or purchases which were covered under Section 29 of the Punjab Act were liable to be excluded from the taxable turnover of a dealer.
8. On the other hand Shri R.P. Sawhney, the learned senior counsel appearing for the assessee had contested the aforesaid arguments raised on behalf of the revenue. It has been contended by Shri Sawhney that Section 5 of the Punjab Act had no application to the case in question, in as much as Section 5 merely dealt with incidence of taxation and not with the permissible deductions. Similarly, Shri Sawhney has argued that Section 5 of the Central Act was also not applicable to the case in hand since the aforesaid provisions merely provided for computing of sale or purchase of goods for the export from the territory of India under the Central Act. According to the learned senior counsel the case in hand was squarely covered by the provisions of Rule 29(v) of the Rules which according to the learned Counsel was an independent and distinct provisions, which provided for permissible deductions. On that basis, it has further been maintained by the learned senior counsel that Rule 29(v) was operative with effect from April 1, 1949 which provided for deductions whereas Section 5 of the Central Act had been enacted only in the year 1956 and since there is no repugnancy between the provisions of the Central Act and the Rules, therefore, there was no question of the aforesaid rules being not operative. The learned senior counsel has also maintained that Rule 29(v) of the Rules provided for additional deductions and could not be treated, in any manner, to be inconsistent or repugnant to the provisions of either the Central Act or the State Act. The learned Senior counsel has also argued that the law laid down in Mohd. Serajudin’s case (supra) was not applicable to the facts and circumstances of the present case.
9. We have given our thoughtful consideration to the rival contentions raised by the learned Counsel for the parties.
10. For duly appreciating the controversy in question, it may be relevant to notice some of the relevant provisions of the Central Act, the Punjab Act and the rules.
Section 5 of the Central Sales Tax Act, 1956
“When is a sale or purchase of goods said to take place in the course of import or export:
1. A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
2. A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.”
Section 5 of the Punjab General Sales Tax Act
“Rule of Tax
(1) Subject to the provisions of this Act, there shall be levied on the taxable turnover of the dealer a tax at such rates, not exceeding (eight paise) in a rupee as the State Government may by notification direct:
Provided that a tax at such rate, not exceeding (twelve paise) in a rupee as may be so notified, may be levied on the sale of goods specified in Schedule ‘A’ appended to this Act from such date as the Government may by notification direct. The State Government after giving by notification not less than twenty days’ notice of its intention so to do may by like notification add to or delete from this schedule, and there upon this Schedule shall be deemed to have been amended accordingly:
Provided further that the rate of tax shall not exceed four paise in a rupee in respect of any declared goods.”
Sub-section (2): In this Act expression “taxable turnover” means that part of a dealer’s gross turnover during any period which remains after deducting therefrom.
…
“Sub-section (v): Sales or purchases of goods falling under Section 29;”
The Punjab General Sales Tax Rules:
Rule 27 : A dealer, who wishes to deduct from his turnover the amount in respect of a sale or purchase on the ground that he is entitled to make such deduction under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act, shall append a list in Form ST XXVII or ST XXVII-A as the case may, to his return in form ST VIII and shall prove to the satisfaction of the Assessing Authority that the sale or purchase of goods actually took place outside the State of Punjab or in the course of inter-State trade or commerce or export out of or import into the territory of India as the case may be:”
Rule 29: In calculating his taxable turnover a registered dealer may deduct from his gross turnover:
xxx xxx xxx (v) the sale of goods including minerals and mineral ores proved to be exported out of the territory of India, whether by one transaction or by a series of transactions;" 11. At this stage some of the observations made by the learned Sales Tax Tribunal in his order dated November 21, 1977, while restoring the order of the Assessing Authority and allowing the deductions claimed by the assessee may also be noticed:
“Lastly, the appellant’s counsel has also argued that in Haryana the departmental authorities may not have considered it necessary to issue executive instructions because the Rule 29(v) of the Punjab Sales Tax Rules, (1945 Rules) adequately provides for necessary relief to the parties like the present appellant. He has contended that since according to this rule the appellant is permitted to deduct from his gross turnover “the sale of goods (including minerals and mineral ores) proved to be exported out the territory of India whether by one transaction or by a series of transactions” and since this rule had been in force w.e.f. 1.4.1949, therefore, Haryana had already provided for exemption of tax in regard to a much broader sphere of activity connected with exports than has been provided for in the Central Act by the addition of Sub-section (3) to Section 5. He has pointed out that whereas new Section 5(3) of the Central Sales Tax Act effective from 1.4.1976 exempts from Tax merely goods involved in the last two transactions in the course of export, Rule 29(v) of the 1949 Rules on the other hand exempts not merely goods involved in the last two transactions but the entire series of transactions connected with export and with effect from 1.4.1949. Therefore, he argued, the appellant’s transaction during 1971-72 pertaining to goods of the value of 49.97 lacs, even if considered merely as an inter-State sale to the STC would be exempt from Tax if it is proved that the goods so supplied to STC by the appellant were ultimately exported out of the territory of India.
17. The appellant’s counsel also pointed out that the Supreme Court judgment in the Serajuddin case was given in regard to a transaction pertaining to the State of Orissa where presumably such a rule analogous to Haryana’ Rule 29(v) of 1949 Rules did not exist because no mention of such a rule was made in that case. In all subsequent judgments also be said, whether delivered by the Supreme court or by a High Court there had been no reference whatsoever to this Rule 29(v). Therefore, he argued it could be presumed that the question whether despite the Supreme Court judgment in the Serajuddin case exemption from tax would or would not in view of Rule 29(v) be available in respect of all transactions ultimately leading to export of goods had never been gone into. He also pointed out that the said Rule 29(v) existed on the Statute Book during the year 1971-72 was in existence even at the time of Supreme Court judgment in the Serajuddin case and had ceased to be operative only on 25.11.1975 when the Haryana General Sales Tax Rules, 1975 came into force and that, therefore, so far as the appellant was concerned he was entitled to the benefit of this rule.
18. The District Attorney, however, refuted the above interpretation of Rule 29(v) of the 1949 Rules. He said, the term “series of transactions” as used in that sub-rule could not be interpreted to mean a whole series of consecutive sales but was merely meant to cover any number of transactions resorted to by a party in the course of export in any one year, and tax exemption could be given in respect of all such transactions subject of course to the clarification given in Serajuddin case. He also drew my attention to the fact that Rule 27 of the 1949 Rules clearly laid down that for claiming deductions from his gross turnover on this account a dealer must satisfy the Assessing Authority that “the sale of goods actually took place in the course of export out of the territory of India”, words which were identical to those used in Section 5(1) of the Central Sales Tax Act, 1956 whose interpretation by the Supreme Court in the Serajuddin case precluded the present appellant from tax exemption in respect of sales in question since he had no contract with or obligation to the foreign buyer. He contended that Rule 29(v) being subsequent to and consequently subsequent to Rule 27 must be interpreted to refer to these transactions only which in terms of the latter rule were “In the course of export out of the territory of India” as defined by the Supreme Court in the Serajuddin case. He argued that if Rule 29(v) was thus read in the light of Rule 27 of the 1949 Rules as also in harmony with Section 5(1) as interpreted by the Supreme Court then there could be no question of any meaning being assigned to this rule which was contrary to the interpretation given by the Supreme Court in the Serajuddin case.
19. The District Attorney also pointed out that in any case Article 251 of the Constitution made it clear that in such spheres where both the Parliament and State Legislature had the power to enact laws any law made by the State Legislature shall be inoperative to the extent that it was repugnant to the Central Legislation. Therefore, he argued that even if the words “series of transactions” used in Rule 29(v) of the 1949 Rules were interpreted to mean a series of consecutive sales this rule would in view of Article 251 of the Constitution of India be inoperative since it was repugnant to Section 5(1) of the Central Act as interpreted by the Supreme Court in the Serajuddin case.
20. The appellant’s counsel argued that the relevant Article of the Constitution pertaining to the imposition of tax on such sales which were made in the course of export of goods out of the territory of India was not Article 251 but Article 286. This latter pertinent Article, he said, merely laid down restrictions “as to the imposition of tax on the sale or purchase of goods” which were sold “in the course of export out of the territory of India.” It restricted a State Legislature’s power of taxation with regard to such goods. But it did not prevent any State Legislature from giving mere liberal tax-exemptions in respect of such goods than the Central Government had done. He contended that Article 251 when read in conjunction with Article 286 could mean only this that if a State law gave a less liberal tax-exemptions on goods sold in the course of export out of the “territory of India” than the Central law did, then to that extent the State law shall be inoperative but that if a State law gave a more liberal tax-exemptions to goods sold in the “course of export out of the territory of India” than the Central law did then such a State law would not be ultra wires of the Constitution since the question of the State law being repugnant to the Central law would not arise.
21. I am unable to accept the view of the District Attorney that in fact the words used in Rule 27 of the 1949 Rules are identical with the words used in Section 5(1) of the Central Sales Tax Act, 1956 and that the Supreme Court while giving in the Serjauddin case its interpretation of the aforesaid Rule 27 also to which Rule 29(5) must be considered subservient. Firstly, Rule 27 refers only to sale of goods “in the course of inter-State trade of commerce or export out of the territory of India.” Whereas Section 5 further qualifies this by clarifying that the sale of goods “shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or it is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontier of India.” It is clear, therefore, that Section 5(1) of the 1956 Act contains a substantial qualifying and restrictive clause which no where finds mention in Rule 27 of the 1949 Rules. As a matter of fact it is clear from the Supreme Court judgment in the Serajuddin case that to a considerable extent it has based its restrictive interpretation on the words “occasions such export” which are mentioned only in Section 5(1) of the Central Act and do not find any place in Rule 27 of the State’s 1949 Rules. Thus it appears to me that the intention of the State Government always was to give a more liberal tax exemption with regard to goods designed to be exported out of the territory of India than the Central Government had intended. Rule 27 of the 1949 Rules is certainly more liberal than Section 5(1) of the Central Act and I find Rule 29(v) even more liberal.
22. Further I find no grounds in support of the District Attorney’s view that Rule 29(v) is not an independent self-contained rule but is subservient to Rule 27 because if that were so, then each of the sub-rules of Rule 29 would be subservient to one or the other preceding rule. But this is not so. For instance, deductions from gross turnover mentioned in Sub-rules (iv), (vii) and (ix) of Rule 29 are not mentioned anywhere else either in the Act or in the Rules. Thus Rule 29 must, therefore, be considered an independent and self-contained rule, which on it own, grants deductions from gross turnover on various counts. In this view of the matter Rule 29(v) which allows deductions from the gross turnover of all goods “proved to be exported out of the territory of India whether by one transaction or by series of transactions” must be deemed to give a substantial relief to all such dealers who can prove that the goods sold by them in any transaction have been exported out of the territory of India. The words “series of transactions” used in this rule can be interpreted in the context of the governing clause which makes it clear that such deductions from the gross turnover are permissible where the goods are exported out of India either by one transaction or by a “series of transactions” which means in effect whether the goods are exported directly by a dealer or indirectly through any other intermediary or through consecutive sales. In this case the goods in question have admittedly been exported out of the territory of India. Therefore, the appellant is entitled to deduct from his gross turnover the goods of the value of around Rs. 49.97 lacs, which have been exported out of India. In consequence the appeal is accepted, the order dated 12.3.1974, of the Assessing Authority, Karnal upheld and the DETCA’s order dated 23.9.1977, set aside.”
12. It is clear from the perusal of Section 5 of the Central Act and Section 5 of the Punjab Act that the aforesaid provisions provide for incidence of taxation on the gross turnover of an assessee. While providing for computing of the aforesaid gross turnover, certain provisions have been made to exclude a part of the turnover. However, in our opinion Rule 29(5) of the Rule operates in an independent field and provides for additional deductions. The aforesaid intention of the said rule can also be inferred from language of Rule 27 of the Rules wherein it has been specifically provided that a dealer who wishes to deduct from his turnover the amount in respect of a sale or purchase on the ground that he is entitled to make such a deduction under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act, shall append a list in form ST XXVII or ST XXVII-A as the case may be, to his return in form ST VIII and shall prove to the satisfaction of the Assessing Authority that the sale or purchase of goods actually took place outside the State of Punjab or in the course of inter-State trade or commerce or export out of or import into the territory of India as the case may be. Similarly the language of Rule 29 also shows that a mode of calculation had been provided for computing the taxable turnover of a dealer and while providing the aforesaid mode certain deductions have been permitted to a registered dealer. One of the deductions which is permissible is the value of sale of goods proved to be exported out of the territory of India, whether by one transaction or by a series of transactions. Thus, if the rules provide for additional deductions for computing the taxable turnover of an assessee, then the aforesaid rules cannot be treated to be repugnant to the Punjab Act or the Central Act. Such a repugnancy could have been claimed by a dealer if the Punjab Act or the Central Act had provided for some reliefs which were restricted by the Rules.
13. Although we have noticed that the Tribunal had itself held that the judgment in. Mohd. Serajuddin’s case (supra) was not materially distinguishable from the facts and circumstances of the case but we are satisfied that the ultimate conclusion drawn by the learned Tribunal while upholding the claim of deductions made by the assessee is wholly in accordance with the rules and no fault can be found with the same. It is not disputed by the learned Counsel appearing for the revenue that goods valued to the extent of Rs. 49,97,220/- were actually exported outside the territory of India. As a matter of fact, the aforesaid finding duly recorded by the Assessing Authority in its order dated March 12, 1974 has not been upset at all by the revisional authority at any stage. As a matter of fact, no challenge has been made to the aforesaid finding whatsoever even before us. We have also taken into consideration the specific language employed by Rule 29(v) of the Rules wherein it has been specifically noticed that the export of goods out of the territory of India could have been in one transaction or by a series of transactions. Therefore, when the assessee firm entered into a contract with the State Trading Corporation and the aforesaid contract duly provided for F.O.B. destination supply of goods and consequently shipping on behalf of the assessee-firm, then for all intents and purposes, it was the assessee-firm who had exported the said goods. As a matter of fact, the goods sold by the assessee were actually proved to be exported outside the territory of India. Thus, we do not find any fault with the order of the learned Tribunal dated November 21, 1977.
As a consequence of the aforesaid discussions, we have no hesitation in answering the questions referred to by the learned Tribunal in favour of the respondents and against the petitioner.
The reference petition is, accordingly, disposed of.