{"id":182289,"date":"1981-04-07T00:00:00","date_gmt":"1981-04-06T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/hindustan-brown-boveri-ltd-etc-vs-state-of-gujarat-on-7-april-1981"},"modified":"2015-03-15T08:46:57","modified_gmt":"2015-03-15T03:16:57","slug":"hindustan-brown-boveri-ltd-etc-vs-state-of-gujarat-on-7-april-1981","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/hindustan-brown-boveri-ltd-etc-vs-state-of-gujarat-on-7-april-1981","title":{"rendered":"Hindustan Brown Boveri Ltd. Etc vs State Of Gujarat on 7 April, 1981"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Hindustan Brown Boveri Ltd. Etc vs State Of Gujarat on 7 April, 1981<\/div>\n
Equivalent citations: 1981 AIR 1055, \t\t 1981 SCR (3) 435<\/div>\n
Author: E Venkataramiah<\/div>\n
Bench: Venkataramiah, E.S. (J)<\/div>\n
           PETITIONER:\nHINDUSTAN BROWN BOVERI LTD. ETC.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF GUJARAT\n\nDATE OF JUDGMENT07\/04\/1981\n\nBENCH:\nVENKATARAMIAH, E.S. (J)\nBENCH:\nVENKATARAMIAH, E.S. (J)\nPATHAK, R.S.\n\nCITATION:\n 1981 AIR 1055\t\t  1981 SCR  (3) 435\n 1981 SCC  (2) 743\t  1981 SCALE  (1)607\n\n\nACT:\n     Gujarat Sales Tax Act, 1969-Sections 16 and 49(2)-Scope\nof.\n\n\n\nHEADNOTE:\n     Exercising power  under section  49(2) of\tthe  Gujarat\nSales Tax  Act, 1969,  the  State  Government  exempted\t the\nentire tax  payable on\tsale of goods (other than prohibited\ngoods) by  a registered dealer to an electrical undertaking,\ncertified for  the purposes  by\t the  Commissioner;  if\t the\nelectrical undertaking,\t furnished to  the selling  dealer a\ncertificate in\tthe requisite  form that the goods purchased\nwere  required\t for  the   generation\tor  distribution  of\nelectricity by\tthe undertaking. But according to section 16\nor the\tAct where  a dealer  has purchased any taxable goods\nunder a\t certificate given  by him  under section 13 and has\nused the  goods for  a purpose contrary to such certificate,\nsuch dealer  becomes liable to pay tax on the purchase price\nof the goods.\n     The appellants  who were  recognised dealers  purchased\nraw materials  of taxable  goods from  registered dealers by\nfurnishing a  certificate in  Form 19  by reason of which no\nsales tax  had been  paid by  them. After  manufacturing the\ngoods  with   raw  materials,,\t they  sold   part  of\t the\nmanufactured goods to an electrical undertaking in the State\nagainst 'C'  forms to  claim exemption\tfrom tax  on them by\nvirtue of  a notification  issued under section 49(2) of the\nAct. No\t tax had  been paid  on sales  effected by  them  in\nfavour of the electrical undertaking.\n     On the ground that the undertaking furnished in form 19\nhad been violated, the Sales Tax officer levied purchase tax\nunder section  16 on  the  raw-materials  purchased  by\t the\nappellants.\n     The  appellants  were  unsuccessful  in  their  appeals\nbefore the  Assistant Commissioner  as well  as\t before\t the\nSales Tax  Tribunal. The  High Court answered the references\nagainst the assessees and in favour of the Revenue.\n     It was  contended on  behalf of the appellants (1) that\nthe goods  manufactured by  them not  having been  goods the\nsale or\t purchase of  which had\t been exempted\tfrom tax  by\ninclusion in  Schedule I they could not be treated as having\ninfringed the  terms of Form No. 19 notwithstanding the fact\nthat  particular  sales\t made  by  them\t to  the  electrical\nundertaking were  exempted  from  payment  of  tax  (2)\t the\ncondition in form 19 became satisfied immediately on the\n436\ngoods being  manufactured by the appellants as at that stage\nthe goods were really taxable and that a subsequent event of\nsale to\t the electrical\t undertaking could not be considered\nas  a\tviolation  of  the  said  condition  and  (3)  in  a\ntransaction of\tsale if\t the sale  was exempted\t from tax it\ncould not be said that the purchase was also exempted.\n     Dismissing the appeal,\n^\n     HELD: (1)\tThe expression\t\"taxable goods'.  defined in\nsection 2(33) of the Act means goods other than those on the\nsales or purchase of which no tax is payable under section 5\nand section  49 or a notification issued thereunder. By this\ndefinition  the\t dichotomy  that  existed  between  \"taxable\ngoods\" and  \"taxable events\"  in the  now repealed  Act (The\nBombay Sales  Tax Act,\t1959 which was in force in the State\nbefore the  present Act)  had been  given a go by. It may be\nthat section  5 and  Schedule I\t refer\tto  goods  only\t but\nsection 49  deals with\tonly taxable  events which result in\nthe exemption  from payment  of tax  on the happening of the\nconditions mentioned  therein or  in the  notification\teven\nthough the  good in  question do  not come under Schedule 1.\n[446 F-H]\n     (2) To  find out whether the goods are taxable goods or\nnot one\t has to\t wait till  the disposal of the goods by the\ndealer in  view of  the definition  of the  said  expression\nwhich takes  away goods\t sold under circumstances attracting\nsection 49 from the scope of the meaning of that expression.\n[447 A]\n     (3) If the sale is exempt from tax under section 49 the\ngoods sold would not be taxable good. [447 B]\n\n\n\nJUDGMENT:\n<\/pre>\n
     CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1185 of
\n1979,
\n     Appeal by\tSpecial Leave  from the\t Judgment and  order
\ndated 15.12.1978  of the  Gujarat High\tCourt in  Sales\t Tax
\nReference No. 24 of 1978.\n<\/p>\n
\t\t\t    AND
\n     Civil Appeal No. 1187 of 1979.\n<\/p>\n
     Appeal by\tSpecial Leave  from the\t Judgment and  order
\ndated 27.11.1978  of the  Gujarat High\tCourt in  Sales\t Tax
\nReference No. 11 of 1977.\n<\/p>\n
     K H.  Kaji, T.  Sridharan,\t R.D.  Pathak,\tMiss  C.  K.
\nSucharita and Mrs. S. Bhandare for the Appellant in both the
\nAppeals.\n<\/p>\n
     S.T. Desai\t and M.N.  Shroff for the Respondent in both
\nthe Appeals.\n<\/p>\n
437<\/span><\/p>\n
     The Judgment of the Court was delivered by
\n     VENKATARAMIAH, J.\tSince a\t common question  of law  is
\ninvolved in  these two\tappeals by  special leave,  they are
\ndisposed of by this common judgment.\n<\/p>\n
     The appellant  in Civil Appeal No. 1185 of 1979 is M\/s.
\nHindustan Brown\t Boveri\t Ltd.,\ta  company  engaged  in\t the
\nbusiness of  manufacturing certain  goods which\t are used in
\nelectrical undertakings\t for the  purpose of  generating and
\ndistributing electrical\t energy. It  is registered as dealer
\nunder the  provisions of  the Gujarat  Sales Tax  Act,\t1969
\n(Gujarat Act No. I of 1970) (hereinafter referred to as ‘the
\nAct’). For  the purpose\t of  manufacturing  the\t goods,\t the
\nappellant which\t was also  a recognised dealer under the Act
\npurchased raw  materials during\t the period  between May  6,
\n1970 and  March 31,  1971 after\t furnishing a certificate in
\nForm No.  19 as\t provided under\t section 13(1)(B) of the Act
\nread with  Rule 24(4)  of the  Gujarat Sales Tax Rules, 1970
\n(hereinafter referred  to as  ‘the Rules’)  framed under the
\nAct stating  that the raw materials purchased by it would be
\nused in\t manufacturing taxable\tgoods which would be sold by
\nit  in\tthe  State  of\tGujarat.  Some\tpart  of  the  goods
\nmanufactured  by  the  appellant  were\tsold  to  a  certain
\nelectrical undertaking\tin the\tState of Gujarat against ‘C’
\nforms in order to claim exemption from payment of tax on the
\nsaid sales  under the Act by virtue of a notification issued
\nunder section  49(2) of\t the Act exempting the goods sold to
\nelectrical undertakings\t for being  used in  generation\t and
\ndistribution of\t electrical energy. On coming to know of the
\nsaid sales,  the Sales\tTax officer.,  who was the assessing
\nauthority under the Act levied purchase tax under section 16
\nof the\tAct on\tthe raw materials purchased be the appellant
\non the\tground that the undertaking given in Form No. 19 had
\nbeen violated. The appeals filed by the appellant before the
\nAssistant Commissioner\tof Sales  Tax and  the Gujarat Sales
\nTax  Tribunal  against\tthe  said  levy\t were  unsuccessful.
\nThereafter at  the instance  of the  appellant the  Tribunal
\nreferred the  following question of law to the High Court of
\nGujarat under section 69 of the Act:-\n<\/p>\n
\t  “Whether on  the facts and in the circumstances of
\n     the case,\tand on\ta  correct  interpretation  of\tsub-
\n     section (33) of section 2 of the Gujarat Sales Tax Act,
\n     1969 the  Tribunal\t was  right  in\t deciding  that\t the
\n     applicant was  liable to pay purchase tax under section
\n     16 of  the Gujarat\t Sales Tax  Act, 1969  on the ground
\n     that certain electric goods manufactured
\n438<\/span>
\n     out of raw materials etc. purchased against declaration
\n     in Form 19 were sold to Gujarat State Electricity Board
\n     against declarations  in Form  prescribed in Entry 5 of
\n     the Government  Notification issued under section 49 of
\n     the Gujarat Sales Tax Act, 1969 ?”<\/p>\n
     The appellant  in Civil Appeal No. 1187 of 1979 is M\/s.\n<\/p><\/blockquote>\n
Hindustan  Engineering\t Co.  Ltd.   which  is\t engaged  in
\nmanufacturing heavy machinery and gear conveyers. It is also
\na recognised  dealer under  the Act.  Like the\tappellant in
\nCivil Appeal 1185 of ]979, this appellant also purchased raw
\nmaterials by  furnishing certificates  in Form\tNo.  19\t and
\nlater on  sold a  part of  the goods manufactured by it to a
\ncertain electrical  undertaking against\t Form  No.  ‘C’\t and
\nclaimed\t exemption   under  the\t notification  issued  under
\nsection 49(2)  of the  Act. In\tthis case also the Sales Tax
\nofficer levied\tpurchase tax under section 16 of the Act for
\nviolation of  the undertaking  given in\t Form  No.  19.\t The
\nappeals to  the Assistant  Commissioner of Sales Tax and the
\nGujarat\t Sales\t Tax  Tribunal\tfailed.\t Thereafter  at\t the
\ninstance of  the appellant,  the Gujarat  Sales Tax Tribunal
\nreferred the  following question for the opinion of the High
\nCourt of Gujarat:-\n<\/p>\n
\t  Whether on  the facts\t and in the circumstances of
\n     the case, the Tribunal is justified in holding that the
\n     sales of  machineries and conveyers manufactured by the
\n     applicant to an electrical undertaking against Form ‘C’
\n     under Entry  5 of\tthe Government\tNotification  issued
\n     under section  49 of  the Gujarat\tSales Tax  Act, 1969
\n     resulted in  the breach  of the declarations in Form 19
\n     as the goods so manufactured and sold did not amount to
\n     manufacture of taxable goods ?”<\/p><\/blockquote>\n
     It is  seen from  the two\tquestions referred  to above
\nthat  they  are\t substantially\tthe  same.  The\t High  Court
\nanswered the  said questions  in favour\t of the\t Revenue and
\nagainst the  assessees by  two separate orders following its
\nearlier decision  in M\/s. Nawroji N. Vakil & Co. v. State of
\nGujarat. The appellants have filed these appeals against the
\ndecision of  the High  Court by\t special leave under Article
\n136 of the Constitution.\n<\/p>\n
     We shall  now briefly  refer to the relevant provisions
\nof the\tAct. Section  2(10) of the Act defines a ‘dealer’ as
\nany person who
\n439<\/span>
\nbuys or sells goods in connection with his business and when
\nhe obtains  a  certificate  of\tregistration  he  becomes  a
\nregistered dealer.  Section 32\tof the\tAct provides for the
\nrecognition of\ta registered  dealer.  It  says\t that  where
\nduring the  previous or\t current  year,\t the  value  of\t all
\ntaxable goods  manufactured for\t sale by a dealer registered
\nunder section 29 or by a dealer registered under section 30,
\nwhose turnover\tof  sales  or  purchases  has  subsequently,
\nexceeded the  limits specified in sub-section (4) of section
\n3, exceeds Rs. 3,000\/- such dealer on application by him may
\nbe granted  recognition by  the\t Commissioner  and  on\tsuch
\nrecognition being  granted, he\tbecomes a recognised dealer.
\nSection S  of the Act says that subject to the conditions or
\nexceptions (if\tany) set  out  against\teach  of  the  goods
\nspecified in  column 3\tof the Schedule I to the Act, no tax
\nshall be  payable on  the sales\t or purchases  of any  goods
\nspecified in  that Schedule.  Section 6\t of the Act provides
\nthat subject  to the  provisions of the Act and to any rules
\nmade thereunder\t there shall  be paid by every dealer who is
\nliable to  pay tax  under the Act, the tax or taxes leviable
\nin accordance  with the provisions of Chapter II of the Act.
\nTn order  to ensure that as far as possible the incidence of
\ntax under  the Act is not felt at more than one point in the
\nseries of transactions of sales and purchases of goods other
\nthan declared  good in\tthe State  of Gujarat, sections 7, 8
\nand 10 of the Act are enacted as follows:\n<\/p>\n
\t  “7. Levy  of sales  tax on  goods in\tSchedule II,
\n     Part A.-There  shall be  levied  a\t sales\ttax  on\t the
\n     turnover of  sales of  goods specified  in\t Part  A  of
\n     Schedule II at the rate set out against each of them in
\n     column  3\t thereof,  but\tafter  deducting  from\tsuch
\n     turnover,-\n<\/p><\/blockquote>\n
\t  (i)  resale of  goods on the purchase of which the
\n\t       dealer is  liable to  pay purchase  tax under
\n\t       sec. 16.\n<\/p><\/blockquote>\n
\t  (ii) resales\tof goods  purchased by\thim  from  a
\n\t       Registered dealer\n<\/p><\/blockquote>\n
\t  (iii) sales of goods, of resales of goods to which
\n\t       clauses (i)  and (ii)  do  not  apply,  to  a
\n\t       Recognised dealer  or to\t a Commission  agent
\n\t       holding a permit who purchases on behalf of a
\n\t       principal who  is a  Recognised dealer,\tupon
\n\t       such dealer  or Commission agent, as the case
\n\t       may be,\tfurnishing in  the circumstances and
\n\t       subject to  the conditions  specified in sub-
\n\t       clause (B) and item (ii) of sub-clause (C) of
\n440<\/span>
\n\t       sub-see. (1)  of sec.  13, a  certificate  as
\n\t       provided therein, and\n<\/p><\/blockquote>\n
\t  (iv) sales  of goods\tor resales of goods to which
\n\t       clauses (i)  and (ii)  do  not  apply,  to  a
\n\t       Licensed dealer\tor  to\ta  Commission  agent
\n\t       holding a permit who purchases on behalf of a
\n\t       principal who is a Licensed dealer, upon such
\n\t       dealer or  Commission agent,  as the ease may
\n\t       be;  furnishing\t in  the  circumstances\t and
\n\t       subject to  the conditions  specified in item\n<\/p><\/blockquote>\n
\t       (i) of  sub-clause (A)  and item\t (i) (a)  of
\n\t       sub-clause (C)  of sub-sec. (I) of sec. 13, a
\n\t       certificate as provided therein.\n<\/p><\/blockquote>\n
\t  “8. Levy of general sales tax on goods in Schedule
\n     II Part  B-There shall be levied a general sales tax on
\n     the turnover  of sales  of goods  specified in  Part of
\n     Schedule II at the rate set out against each of them in
\n     column  3\t thereof,  but\tafter  deducting  from\tsuch
\n     turnover,-\n<\/p><\/blockquote>\n
\t  (i)  resales of goods on the purchase of which the
\n\t       dealer is  liable to  pay purchase  tax under
\n\t       see. 16;\n<\/p><\/blockquote>\n
\t  (ii) resales\tof goods purchased from a Registered
\n\t       dealer by  a dealer  who is  not\t a  Licensed
\n\t       dealer at the time of such purchase, and\n<\/p><\/blockquote>\n
\t  (iii) sales of goods, or resales of goods to which
\n\t       clauses (i)  and (ii)  do  not  apply,  to  a
\n\t       Licensed dealer,\t Recognised dealer  or to  a
\n\t       Commission  agent   holding  a\tpermit,\t who
\n\t       purchases on  behalf of\ta principal who is a
\n\t       Licensed dealer\tor a Recognised dealer, upon
\n\t       such dealer  or Commission  agent as the ease
\n\t       may be  furnishing, in  the circumstances and
\n\t       subject to  the conditions  specified in see.
\n\t       13, a certificate as provided therein.”
\n\t  ” 10.\t Levy of  sales tax and general sales tax on
\n     goods specified  in Schedule  III.-(I) There  shall  be
\n     levied a  sales tax  on the  turnover of sales of goods
\n     specified in  Schedule III\t at the rate set out against
\n     each of  such goods  in column  3\tthereof,  but  after
\n     deducting from such turnover,-\n<\/p><\/blockquote>\n
\t  (i)  resales of goods on the purchase of which the
\n\t       dealer is  liable to  pay purchase  tax under
\n\t       see. 16,
\n441<\/span>\n<\/p><\/blockquote>\n
\t  (ii) resales of  goods purchased  by\thim  from  a
\n\t       Registered dealer,\n<\/p><\/blockquote>\n
\t  (iii)sales of\t goods. Or resales of goods to which
\n\t       clauses (i)  and (ii)  do  not  apply,  to  a
\n\t       Recognised dealer  or to\t a Commission  agent
\n\t       holding a permit who purchases on behalf of a
\n\t       principal who  is a  Recognised dealer,\tupon
\n\t       such dealer  or Commission agent, as the case
\n\t       may be,\tfurnishing in  the circumstances and
\n\t       subject to  the conditions  specified in sub-
\n\t       clause (B) and item (ii) of sub-clause (C) of
\n\t       sub-sec. (1)  of sec  13,  a  certificate  as
\n\t       provided therein, and C\n<\/p><\/blockquote>\n
\t  (iv) sales of\t goods or  resales of goods to which
\n\t       clauses (i)  and (ii)  do  not  apply,  to  a
\n\t       Licensed dealer\tor  to\ta  Commission  agent
\n\t       holdings permit\twho purchases on behalf of a
\n\t       principal who is a Licensed dealer, upon such
\n\t       dealer or  Commission agent  as the  case may
\n\t       be,  furnishing\t in  the  circumstances\t and
\n\t       subject to  the conditions  specified in item\n<\/p><\/blockquote>\n
\t       (i) of  sub-clause (A)  and item\t (i) (a)  of
\n\t       sub-clause (C)  of sub-sec. (1) of sec. 13, a
\n\t       certificate as provided therein.\n<\/p><\/blockquote>\n
\t  (2)  There shall  be levied a general sales tax on
\n\t       the turnover  of sales  of goods specified in
\n\t       Schedule III at the rate set out against each
\n\t       of such\tgoods in column 4 thereof, but after
\n\t       deducting from such turnover-\n<\/p><\/blockquote>\n
\t  (i)  resales of  goods purchased from a Registered
\n\t       dealer, by  a dealer  who is  not a  Licensed
\n\t       dealer at the time of such purchase; and\n<\/p><\/blockquote>\n
\t  (ii) sales of\t goods, or  resales of\tgoods  which
\n\t       clause (i)  does\t not  apply  to\t a  Licensed
\n\t       dealer, or  Recognised dealer or a Commission
\n\t       agent  holding  a  Permit  who  purchases  on
\n\t       behalf of  a  principal\twho  is\t a  Licensed
\n\t       dealer  or  a  Recognised  dealer  upon\tsuch
\n\t       dealer or  Commission agent,  as the case may
\n\t       be,  furnishing\t in  the  circumstances\t and
\n\t       subject to  the conditions  specified in sec.
\n\t       13 a certificate as provided therein.”<\/p><\/blockquote>\n
442<\/span><\/p>\n
     It may  be noted that in the above provisions that from
\nthe turnover  of sales\tof  goods  of  a  dealer  which\t are
\notherwise  taxable,   the  turnover   of  goods\t sold  to  a
\nRecognised dealer, upon such Recognised dealer furnishing in
\nthe circumstances and subject to the conditions specified in
\nsub-clause (B) of sub-section (1) of section 13 of the Act a
\ncertificate as\tprovided therein  becomes deductible  and no
\ntax is\tpayable on  such sales\tin favour  of the Recognised
\ndealer. The  relevant part  of section\t13 of  the Act reads
\nthus:-\n<\/p>\n
\t  “13.\tNo  deduction  from  turnover  except  on  a
\n     certificate.-(1) There  shall not\tbe deducted from the
\n     turnover of sales, sales of goods to a Licensed dealer,
\n     Recognised dealer\tor to  a Commission  agent holding a
\n     permit  purchasing\t on  behalf  of\t his  principal,  as
\n     provided in sections 7, 8 and 10 unless-
\n\t  (A)……<\/p><\/blockquote>\n
\t  (B)  The   Recognised\t dealer\t  certifies  in\t the
\n     prescribed form,  that the\t goods other than prohibited
\n     goods sold to him are goods purchased by him for use by
\n     him as  raw or  processing materials  or as  consumable
\n     stores in\tthe manufacture of taxable goods for sale by
\n     him; or
\n     Rule 24(4) of the Rules prescribes that the certificate
\nissued by  a Recognised\t dealer shall be in Form No. 19. The
\nrelevant part of Form No. 19 reads:-\n<\/p>\n
\t  “…. and  that the goods purchased by me\/the said
\n     ………. and  specified in  bill\/cash memo\/invoice No
\n     …. dated…..  of M\/s…..  address…….. …. will
\n     be used  by  me\/the  said……  as  raw\/or  processing
\n     materials or  consumable stores  in the  manufacture of
\n     taxable  goods   viz.  ……..   for  sale  by  me\/the
\n     said….. and  that such  sale  shall  not\t take  place
\n     outside the State of Gujarat.\n<\/p><\/blockquote>\n
\t  (Emphasis supplied)”<\/p><\/blockquote>\n
     The expression  ‘taxable goods’  is defined  by section
\n3(33) of the Act thus:-\n<\/p>\n
\t  “2(33). “taxable  goods” means  goods\t other\tthan
\n     those on  the sale\t or purchase  of  which\t no  tax  is
\n     payable under  sec. 5  or sec.  49\t or  a\tnotification
\n     issued thereunder.”<\/p><\/blockquote>\n
443<\/span><\/p>\n
     Sub-section (1)  of section 49 provides that subject to
\nthe conditions\tor exemptions. if any, specified in relation
\nto them,  the classes  of sales\t or  purchases\treferred  in
\nclauses (i)  to (vii)  of section 49(1) shall be exempt from
\nthe payment of the whole of tax payable under the provisions
\nof  the\t Act.  Sub-section  2  of  section  49\tof  the\t Act
\nauthorises  the\t  State\t Government   to  exempt  any  other
\nspecified class\t of sales by a notification published in the
\nOfficial Gazette. Section 49(2) reads:-\n<\/p>\n
\t  “49. Exemptions (1)
\n\t  (2) Subject  to such\tconditions as it may impose,
\n     the State\tGovernment may, if it considers it necessary
\n     so to do in the public interest, by notification in the
\n     Official Gazette,\texempt any  specified class of sales
\n     or purchases  from payment\t of the\t whole\tor  any\t tax
\n     payable under the provisions of this Act.’
\n     By a  notification dated  April 29,  1970 issued  under
\nsection 49(2)  of the  Act the State Government exempted the
\nentire tax  payable on sales of goods (other than prohibited
\ngoods) by  a registered dealer to an electrical undertaking,
\ncertified for  the  purpose  by\t the  Commissioner,  if\t the
\nelectrical undertaking\tfurnished to  the selling  dealer  a
\ncertificate in\tForm appended  to the  notification  stating
\ninter alia  that the  goods purchased  were required for the
\nuse of\tthe generation\tor distribution of electrical energy
\nby the\tundertaking. In\t view of  the above notification the
\nsales made  to the electrical undertaking become exempt from
\npayment of  sales tax  under  the  Act\ton  the\t undertaking
\nfurnishing the\trequired certificate  and no tax was paid by
\nthe appellants\tin these  two  appeals\ton  sales  of  goods
\neffected by them in favour of the electrical undertaking. It
\nis now\tnecessary to  refer to\tsection 16  of the  Act, the
\nrelevant part of which reads :-\n<\/p><\/blockquote>\n
\t  “16. Liability  to purchase  tax for contravention
\n     of terms  of certificate  etc.-(1) Where  any dealer or
\n     Commission agent  has purchased any taxable goods under
\n     a certificate given by him under section 12 or 13, and\n<\/p><\/blockquote>\n
     (a)  contrary to  such certificate,  the goods are used
\n\t  for  another\t purpose,  or\tare  not  resold  or
\n\t  despatched in\t the manner  and within\t the  period
\n\t  certified, or
\n444<\/span>\n<\/p><\/blockquote>\n
     (b)  on the  resales in the course of inter-State trade
\n\t  or commerce,\tof the\tgoods so  purchased, no\t tax
\n\t  under the  Central Sales  Tax Act  1956 (LXXIV  of
\n\t  1956), is  actually payable  by him  on account of
\n\t  any  deduction   admissible  under   any  of\t the
\n\t  Provisions of the said Act.\n<\/p><\/blockquote>\n
     then such dealer or Commission agent shall be liable to
\n     pay tax  on the  purchase price  of the goods purchased
\n     under  such  certificate;\tand  accordingly,  he  shall
\n     include the  purchase price  thereof in his turnover of
\n     purchases in his declaration or return under section 40
\n     which he is to furnish next thereafter.
\n\t  (2) …….\n<\/p><\/blockquote>\n
\t  (3) the  purchase tax\t leviable under this section
\n     in respect of any goods specified in Schedule II or III
\n     shall be  the aggregate  of all  taxes which would have
\n     been leviable  thereon but\t for the  certificate  given
\n     under section 12 or 13.\n<\/p><\/blockquote>\n
\t  (4) If  any question\tarises whether\tthe purchase
\n     price of  goods purchased\tunder  a  certificate  given
\n     under section  12 or 13 is not liable to be included in
\n     the turnover  of purchases\t of a  dealer or  Commission
\n     agent under  this section,\t the burden  of\t so  proving
\n     shall be  upon such  dealer, or as the case may be, the
\n     Commission agent.”<\/p><\/blockquote>\n<\/blockquote>\n
     Section 16\t of the Act provides that where a dealer has
\npurchased any taxable goods under a certificate given by him
\nunder section  13 and  has used\t the goods  for a  different
\npurpose contrary to such certificate, then such dealer shall
\nbe liable  to pay  tax on  the purchase\t price of  the goods
\npurchased under such certificate and his liability has to be
\ncomputed in  the manner\t stated in  that section. It is this
\nliability of  the appellants  that is  in dispute  in  these
\nappeals.<\/p><\/blockquote>\n
     It is  not disputed  that the appellants are recognised
\ndealers; that  they had\t purchased raw\tmaterials which were
\ntaxable goods  (other than prohibited goods) from registered
\ndealers against\t certificates issued by them in Form No. 19;
\nthat no\t sales tax  had been  paid on sales in their favour;
\nthat they  had manufactured  goods by  using  the  said\t raw
\nmaterials that\tthey had  sold a  part of  the goods  to  an
\nelectrical undertaking\tnotified under\tsection 49(2) of the
\nAct and\t that no tax had been paid on sales effected by them
\nin
\n445<\/span>
\nfavour\tof  the\t electrical  undertaking.  It  is  also\t not
\ndisputed that  in Form No. 19 the appellants had stated that
\nthe raw\t materials  purchased  by  them\t would\tbe  used  to
\nmanufacture taxable  goods which  would be  sold inside\t the
\nState of  Gujarat. The question for consideration is whether
\nthe appellants\thad  used  the\traw  materials\tfor  another
\npurpose contrary to the terms of Form No. 19. The contention
\nof the\tDepartment is  that the\t appellants had\t contravened
\nForm No.  19 by\t manufacturing goods which were not ‘taxable
\ngoods’ and  hence were\tliable to  pay purchase\t tax on\t the
\npurchase of  raw materials  under section  16 of the Act and
\nthe  contention\t  of  the   appellants\tis  that  the  goods
\nmanufactured and sold by them to the electrical undertakings
\nwere ‘taxable goods’ and merely because they were sold to an
\nelectrical  undertaking\t  under\t transactions\texempted  by
\nsection 49(2)  of the  Act, the\t goods did  not cease  to be
\ntaxable goods. The solution to the question, therefore, lies
\non the true meaning of the expression ‘taxable goods’.\n<\/p>\n
     Relying upon the decision of this Court in the Stale of
\nTamil Nadu v. M.K. Kandaswami and Ors.<\/a> it is urged on behalf
\nof the\tappellants that\t the expressions  ‘taxable persons’,
\n‘taxable goods’\t and ‘taxable events’ are entirely different
\nconcepts in  sales tax\tlaw; that the goods in question were
\ntaxable goods  as any  sale of\tthose goods  not covered  by
\nsection 49(1)  and (2) would make such sale taxable and that
\nsection 49(1)  and (2)\tof the\tAct referred  to only events
\nwhich resulted\tin the\texemption from payment of sales tax.
\nIt is  further argued that all goods the sale or purchase of
\nwhich is  liable to  tax under the Act are taxable goods and
\nthat goods  would not be taxable goods only when their sales
\nare exempted  generally from  payment of  tax as provided in
\nsection 5  of the  Act. It is, therefore, contended that the
\ngoods manufactured  by the appellants not having been goods,
\nthe sale  or purchase of which had been exempted from tax by
\ninclusion in Schedule I to the Act, the appellants could not
\nbe treated  as having  infringed the  terms of\tForm No. 19,
\nnotwithstanding the  existence of  the circumstance that the
\nparticular sales made by them to the electrical undertakings
\nwere exempt  from payment of tax. The second ground urged on
\nbehalf of  the appellants  is that  the condition under Form
\nNo. 19\tbecame satisfied  immediately  on  the\tgoods  being
\nmanufactured by\t the appellants\t as at\tthat stage the goods
\nwere really  taxable and  that a subsequent event of sale to
\nthe electrical\tundertaking cannot  be considered  as having
\nviolated the  said condition.  The third ground urged by the
\nappel-\n<\/p>\n
446<\/span><\/p>\n
lants is  that a  transaction of  sale involved two facets-a
\nsale and  a purchase  and if a sale is exempted from tax, it
\ncannot be  said the  purchase is also exempted. On the above
\nfooting it  is contended that since under section 49(2) only
\nthe tax\t on sale  is exempted  and nothing is said about the
\nliability of  the purchaser  to tax,  it cannot be said that
\nthe goods  which were  otherwise  taxable  had\tbecome\tnon-
\ntaxable on  being sold\tunder a\t transaction which attracted
\nsection 49(2) of the Act.\n<\/p>\n
     We find  no substance in any of the three grounds urged
\non behalf  of the appellants for the reason that the present
\ncase  is  governed  by\tthe  definition\t of  the  expression
\n‘taxable  goods’   in  section\t2(33)  of  the\tAct.  It  is
\ninteresting to\tnote that  the Bombay  Sales Tax  Act,\t1959
\n(Bombay Act  No. 1  of 1959) which was in force in the State
\nof Gujarat  before the\tAct came  into force  and which\t was
\nrepealed by  section 88\t of the Act contained the definition
\nof the\texpression ‘taxable goods’ in section 2(33) thereof.
\nThe expression ‘taxable goods’ was defined in the Bombay Act
\nas ‘goods  other than those on the sale or purchase of which
\nno tax\tis payable under section 5’. In the Bombay Act there
\nwas also  a provision corresponding to section 49 of the Act
\nin section  41 thereof\twhich empowered the State Government
\nsubject to  such conditions  as it may impose to exempt by a
\nnotification published in the Official Gazette any specified
\nclass of sales or purchases from payment of the whole or any
\npart of\t any tax  payable thereunder if the State Government
\nwas satisfied  that it\twas necessary so to do in the public
\ninterest. Still\t the definition\t of ‘taxable  goods’ in that
\nAct did\t not  refer  to\t sales\texempted  under\t section  41
\nthereof. But  in the  Act which\t repealed and  replaced\t the
\nBombay Act the meaning of the expression ‘taxable goods’ has
\nbeen narrowed  down as\tsection\t 2(33)\tof  the\t Act  reads-
\n‘taxable goods’\t means goods other than those on the sale or
\npurchase of  which no  tax is payable under section 5 (which
\ncorresponds to\tsection 5  of the Bombay Act) and section 49
\nof the\tAct (which  corresponds to  section 41 of the Bombay
\nAct)  or   a  notification   issued  thereunder.   By\tthis
\ndefinition, the\t dichotomy that\t is stated  to exist between
\n‘taxable goods’ and ‘taxable events’ has been given a go by.
\nIt may\tbe that section 5 and Schedule I refer to goods only
\nbut section  49 deals  with only taxable events which result
\nin the\texemption from\tpayment of  tax\t on  the  conditions
\nmentioned therein  or in  the notification issued thereunder
\nbeing satisfied\t even though  the goods\t in question  do not
\ncome under  Schedule I.\t Secondly one  has to  wait till the
\ndisposal of  the goods by the dealer to find out whether the
\ngoods are taxable goods or not in view of the
\n447<\/span>
\ndefinition of  the said\t expression which  takes away  goods
\nsold under  circumstances attracting  section  49  from\t the
\nscope of  the meaning of that expression. Nor does the third
\nground survive\tfor the\t very same  reason. If\tthe sale  is
\nexempt from  tax under section 49 of the Act, the goods sold
\nwould not be taxable goods. We need not go into the question
\nwhether the  purchaser in a sale under section 49 of the Act
\nhas to\tpay tax in these cases. This reason also disposes of
\nan allied argument of the appellants that the possibility of
\nany liability  arising under  section 50  of the  Act on the
\nbreach of  any\tcondition  imposed  by\tsection\t 49  or\t the
\nnotification issued  thereunder would absolve the appellants
\nof their  liability to\tpay the\t tax under section 16 of the
\nAct. Any  such levy made under section 50 has not been shown
\nto have any effect in law on the liability of the appellants
\nunder section 16.\n<\/p>\n
     The scheme\t of the\t Act appears  to be  that sales\t tax
\nshould be levied on goods which are not included in Schedule
\nI at  least once inside the State in the series of sales and
\npurchases even\tthough they  may have  been  converted\tinto
\nmanufactured goods  and that is why Form No. 19 requires the
\npurchaser to state that the goods will be used by him as raw
\nor processing  materials or  as\t consumable  stores  in\t the
\nmanufacture of\ttaxable goods  for sale\t by him\t inside\t the
\nState and  section 16  of the  Act provides  that where\t any
\ndealer has  purchased any  taxable goods under a certificate
\ngiven by  him under  section 12 or section 13 of the Act and
\ncontrary to  such certificate the goods are used for another
\npurpose or  are not  resold or\tdespatched in the manner and
\nwithin the  period certified or on the resales in the course
\nof inter-State\ttrade or commerce, of the goods so purchased
\nno tax\tunder the  Central Sales Tax Act is actually payable
\nby him\ton account of any deductions admissible under any of
\nthe provisions of that Act, then such dealer shall be liable
\nto pay\ttax on\tthe purchase  price of\tthe goods  purchased
\nunder such  certificate. The  deliberate alteration  of\t the
\ndefinition  of\t ‘taxable  goods’   in\tthe   Act  also\t  is
\nattributable to the said intention of the State legislature.\n<\/p>\n
     The appellants  also cannot  derive any assistance from
\nthe decision  of this  Court in\t Polestar Electronic  (Pvt.)
\nLtd. v. Additional Commissioner, Sales Tax and Anr.<\/a> as these
\ncases are governed by
\n448<\/span>
\nthe provisions\tof the\tAct and\t as there  appears to  be no
\nsimilarity between  the facts of these appeals and the facts
\ninvolved in that case.\n<\/p>\n
     For the  foregoing reasons, we do not find any merit in
\nthese appeals. The appeals are dismissed with costs. Hearing
\nfee one set.\n<\/p>\n
P.B.R.\t  Appeals dismissed
\n449<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Hindustan Brown Boveri Ltd. Etc vs State Of Gujarat on 7 April, 1981 Equivalent citations: 1981 AIR 1055, 1981 SCR (3) 435 Author: E Venkataramiah Bench: Venkataramiah, E.S. (J) PETITIONER: HINDUSTAN BROWN BOVERI LTD. ETC. Vs. RESPONDENT: STATE OF GUJARAT DATE OF JUDGMENT07\/04\/1981 BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-182289","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nHindustan Brown Boveri Ltd. 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