Judgment

KANIA, J. :- These appeals by special leave are directed against the decision of a Division Bench of the High Court of Punjab & Haryana on a reference under Section 22 of the Punjab General Sales Tax Act (hereinafter referred to as the Act). The short facts necessary for the disposal of these appeals are as follows :

The respondent-assessee supplied cement in the years 1964-65 and 1965-66 to the Punjab State Electricity Board (referred to hereinafter as the Board) on the basis of the certificates issued by the Board to the effect that the cement was required for use in the generation or distribution of electrical energy. In the initial assessment proceedings on the basis of these certificates the sales of cement by the assessee to the Board were exempted. The exemption was granted under S. 5(2)(a)(iv) of the Act.

2-3. Section 5(2)(a)(iv) of the Act reads as under :

"5(2). In this Act the expression taxable turnover means that part of the dealers gross turnover during any period which remains after deducting therefrom -

(a) xxx xxx xxx

(i) to (iii) xx xx xx xx xx

(iv) Sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (IX of 1910) of goods for use by it in the generation or distribution of such energy; x x x"

4. There is no dispute that the Board was an undertaking supplying the electrical energy to the public and that it held a licence or a sanction under the Indian Electricity Act, 1910. The assessing authority on the basis of the certificates took the view that the cement was sold by the assessee to the Board for use by it in the generation or distribution of electricity energy.

5. Thereafter on the basis of an audit report, the assessment was re-opened by the Deputy Excise and Taxation Commissioner (Appeals). The Deputy Commissioner started suo motu proceedings under Section 21 of the Act and issued a show cause notice to the assessee; and, after giving a hearing to the assessee, he came to the conclusion that the exemption was not attracted and the deductions which had been granted by the original assessing authority, to the tune of Rs. 1 lac for the year 1964-65 and Rs. 2 lacs for the year 1965-66, had been granted wrongly and issued additional demands aggregating to Rs. 18,000/-.

6. The assessee challenged the additional demands made before the Sales Tax Tribunal, Haryana but the challenge was repelled by the Tribunal and the appeal of the assessee dismissed.

7. Thereafter a reference was made by the Tribunal to the Punjab & Haryana High Court under Section 22 of the Act. The Division Bench of the High Court while disposing of the reference came to the conclusion that on a true construction of the provisions of Section 5(2)(a)(iv) of the Act the assessee, who made sales to the said Board on the basis of the certificates that the cement was required for use in the generation and distribution of electrical energy, is not required to prove further that the cement was actually so used and, on the basis of this conclusion, it decided the reference in favour of the assessee. It is this decision which is challenged before us.

8. The submission of Mr. R. Bana, learned counsel for the appellant is that in order to get the benefit of the exemption it is required that it should be established before the Tax Authorities that the cement supplied by the assessee was actually used by the Board in an activity directly connected with the generation or distribution of electrical energy. In the present case, the inquiry held by the Deputy Commissioner showed that the assessee was not in a position to establish such actual use by the Board and it appeared that a part of the cement supplied was used by the Board in the construction of staff quarters and other constructions which could not be said to be directly connected with the generation or distribution of electrical energy.

9. It was, on the other hand, submitted by the