1. Purchase of raw materials using Form ST-15 — manufacture of handicrafts — sale to dealers for export — levy of purchase tax under Section 9, Haryana General Sales Tax Act. (Para 1 , 2 )
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1993 Supreme(SC) 453
SUPREME COURT OF INDIA
B. P. JEEVAN REDDY AND N. VENKATACHALA, JJ.
M/s. K.B. Handicrafts Emporium and others, Petitioners
Versus
State of Haryana and others, Respondents.
Writ Petn. (C) Nos. 9835-38 of 1983 with 7468-7469 of 1981, 3838-39 of 1983, 5398
Advocates:
Ayesha Khatri, B.B.Sahni, D.P.GUPTA, Indu Malhotra, Lakshmi Chandra Goyal, NISHA BAGCHI, SARVA M.MITTER, V.MOHANA
Ayesha Khatri, B.B.Sahni, D.P.GUPTA, Indu Malhotra, Lakshmi Chandra Goyal, NISHA BAGCHI, SARVA M.MITTER, V.MOHANA
Purchase tax under Section 9 of the Haryana General Sales Tax Act is leviable on raw materials used for goods that are not intra-state, inter-state, or export sales under Section 5(1) of the CST Act, specifically including penultimate sales under Section 5(3) of the CST Act.
Headnote:
Constitution of India, 1950 - Article 32 - Haryana General Sales Tax Act, 1973 - Section 9 - Central Sales Tax Act - Section 3(3) - Haryana Act - Section 9 - Haryana General Sales- tax Rules - Rule 21 - Manufacture and sale of handi- crafts items - Purchase tax - Petitioners are firms engaged in manufacture and sale of handi- crafts items - They are registered Sales Tax Dealers in State - They purchased raw material within State against declaration forms ST-15, prescribed under Rule 21 of Haryana General Sales- tax Rules read with S. 24 of Act - By issuing Form S.T.15, petitioners under- took that goods manufactured by them out of said raw material would be sold by them either within the state or in course of inter- state trade and commerce or in course of export within meaning of S. 5(1)of Central Sales Tax Act - A dealer issuing said Form need not pay purchase tax on such raw material - After manufacturing items of handicrafts, petitioners say, they sold them to dealers who in turn, exported them out of India - Assessment years in question Sales Tax Authorities of Haryana levied purchase tax on purchase of raw material made by petitioner – Held, An illustration would serve to highlight what we say: a Haryana manufacturer takes his goods to Delhi without effecting a sale - In if he finds it more profitable, he will sell it to a dealer in - Or if he finds it more profitable to sell it to an exporter he will sell same to such exporter - These two sales are neither intra-state sales nor interstate sales, nor export sales within meaning of S. 5(1) of Central Sales Tax Act - In one case, it is a sale and in other, it is a penultimate sale within meaning of S. 5(3) of Central Sales Tax Act - According to S. 9 of Haryana Act - It clear that in a petition under Art. 32 of Constitution, it is not our province to go into facts - As repeatedly emphasised by this Court, question whether a particular sale is an intra-state sale, an inter-state sale, an export sale within meaning of S. 5(1) or a penultimate sale within meaning of S. 5(3), or otherwise, is always a question of fact to be decided by appropriate authority in light of principles enunciated by Courts - In these circumstances, Court content ourselves by declaring law and leave it to be applied by appropriate authorities - Counsel for petitioners says that all sales effected by all petitioners are inter-State sales - Writ petitions are disposed of with aforementioned clarification and observations - Order accordingly.
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2. Petitioners contend that sales to exporters are either intra-state or inter-state sales exempting purchase tax — State disputes the applicability of previous judicial precedents. (Para 4 )
3. The court analyzed the categories of sales and the impact of Hotel Balaji on the interpretation of purchase tax exemptions for goods moved without a sale. (Para 5 , 6 , 7 )
4. Purchase tax is leviable under Section 9 of the Haryana Act if goods are moved out of state without a sale and subsequently sold as penultimate sales. (Para 7 )
5. Writ petitions disposed of with directions to authorities to decide the matter based on the clarified legal principles. (Para 8 , 9 )
6. What are the categories of sales relevant to purchase tax under the Haryana General Sales Tax Act?
There are four categories: intra-state sales, inter-state sales, export sales under Section 5(1) of the Central Sales Tax Act, and cases where goods are moved out of state without a sale. (Para 6 , 7 )
7. Is purchase tax leviable when goods are moved out of state without a sale and then sold as penultimate sales?
Yes, according to the clarification of Section 9 of the Haryana Act, purchase tax can be levied on raw materials used for goods moved out of state and subsequently sold as local or penultimate sales. (Para 7 )
8. How is the nature of a sale (intra-state, inter-state, export, or penultimate) determined?
The determination of whether a sale falls into any of these categories is a question of fact to be decided by the appropriate authority based on established legal principles. (Para 8 )
Judgment
B. P. JEEVAN REDDY, J.: - A common against the decision of the question arises in this batch of writ petitions. We may take the facts in writ petition (C) No. 9835 of 1983, filed by M/ s. K. B. Handi-crafts Emporium as representative of the facts in all the cases. The petitioners are firms engaged in the manufacture and sale of handi- crafts items.They are registered Sales Tax Dealers in the State of Haryana. They purchased raw material within the State against declaration forms ST-15, prescribed under Rule 21 of the Haryana General Sales- tax Rules read with S. 24 of the Act. By issuing Form S.T.15, the petitioners under- took that the goods manufactured by them out of the said raw material would be sold by them either within the state or in the course of inter- state trade and commerce or in the course of export within the meaning of S. 5(1)of the Central Sales Tax Act. A dealer issuing the said Form need not pay the purchase tax on such raw material. After manufacturing the items of handicrafts, the petitioners say, they sold them to dealers in Delhi who, in turn, exported them out of India. At the time of sale of handicrafts to Delhi dealers, the Delhi dealers issued Form-H, prescribed under the Central Sales Tax Rules which means that the goods purchased were meant for export. Neither party paid tax on the said sale/purchase.
2. For the assessment years in question the Sales Tax Authorities of Haryana levied purchase tax on the purchase of raw material made by the petitioner, following the decision of the Panjab and Haryana High Court in M/ s. Murli Manohar and Company, Panipat v. State of Haryana (Civil Writ Petition No. 1227 of 980), under S. 9 of the Haryana General Sales Tax Act, 1973. However, the assessing authority computed the tax with reference to the purchase value of the goods exported against Form H. The petitioners did not choose to file an appeal but directly approached this Court by way of this writ petition on the ground that in view of the decision of the Punjab and Haryana High Court in Murli Manohar there was no point in their pursuing the remedies under the Act in that State.
3. Appeals were preferred in this court against the decision of the Punjab and Haryana High Court in Murli Moanohar which have been desposed of by this Court on October 25, 1990 (reported in (1991) 1 SCC 377). This Court allowed the appeal and set aside the judgement of the High Court .
4. When these writ petitions came up for hearing, it was urged by the learned counsel for the petitioners that in view of the decision of this Court in Murli Manohar the writ petitions must be allowed straightway. This was demurred to by the learned Solicitor General appearing for the respondent-State.
5. We are of the opinion that the decision of this Court in Murli Manohar (1991 (1)SCC 377) does cover the point raised in these appeals but it is necessary to add a clarification. Before we do that, it is necessary to state a little background. Earlier to the rendering of the decision in Murli Manohar, a Bench of this Court comprising Sabyasachi Mukarji and Ranganathan, JJ. held in Goodyear India Ltd. v. State of Haryana, (1990) 2 SCC 71: (AIR 1990 SC 781), that where the goods manufactured are taken out of Haryana (without effecting a sale) to the branch office or depot of the Manufacturer or to the office or depot of his agent, no purchase tax can be levied under S. 9 of the Act on the raw material purchased within the State and used in the manufacture of such goods. It was held the Sales Tax Authorities of Haryana levied that imposing such tax would amount to purchase tax on the purchase of raw material levying tax on consignment, which the State Legislature was not competent to do. Section ; as it then stood, stated expressly that no such purchase tax on raw material was leviable , if the goods manufactured out of such raw material were sold either within the State or were sold in the course of inter-state Trade and Commer or were sold in t
