Holding

Goods sold under the exemption of section 49 are not “taxable goods,” and therefore the dealers are liable to pay purchase tax under section 16 for using raw materials in contravention of Form 19.

Summary

The appellants, Hindustan Brown Boveri Ltd. and Elecon Engineering Co. Ltd., were recognised dealers under the Gujarat Sales Tax Act who purchased raw materials using Form 19 certificates stating the materials would be used to manufacture taxable goods for sale within Gujarat. They later sold part of the manufactured goods to an electrical undertaking, claiming exemption under a notification issued under section 49(2) of the Act. The Sales Tax Officer levied purchase tax under section 16, alleging that the appellants violated the terms of Form 19 because the goods sold were not “taxable goods.” The Supreme Court examined the definition of “taxable goods” in section 2(33) and held that goods sold under the exemption of section 49 are excluded from that definition, making the sale non‑taxable and the raw materials used for such goods subject to liability under section 16. Accordingly, the Court dismissed the appeals, affirming the appellants’ liability to pay purchase tax, and clarified that exemption under section 49 removes the goods from the scope of “taxable goods.”

Issues considered

The applicability of section 16 of the Gujarat Sales Tax Act when raw materials purchased under Form 19 are used to manufacture goods sold under the exemption of section 49(2).
Whether goods sold to an electrical undertaking under a section 49(2) notification are “taxable goods” within the meaning of section 2(33).
The effect of a breach of the conditions of Form 19 on liability for purchase tax.

Legislation cited

Bombay Sales Tax Act, 1959s. 2(33), s. 41
Central Sales Tax Act, 1956
Gujarat Sales Tax Act, 1969s. 13, s. 16, s. 2(33), s. 49, s. 5, s. 50, s. 69
Gujarat Sales Tax Rules, 1970s. Rule 24(4)

Subjects

sales taxpurchase taxtaxable goodssection 49 exemptionsection 16 liabilityForm 19 certificateGujarat Sales Tax Actrecognised dealerelectrical undertaking

Judgment

A

435
y
HINDUSTAN BROWN BOVERI LTD. ETC.
v. B
STATE OF GUJARAT

April 7, 1981

[R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.]

Gujarat Sales Tax Act, 1969-Sections 16 and 49(2)-Scope of.
c
Exercising power under section 49(2) of the Gujarat Sales Tax Act, 1969,
the State Government exempted the entire tax payable on sale of goods (other
than prohibited goods) by a registered dealer to an electrical undertaking, certi-
fied for the purposes by the Commissioner; if the electrical undertaking, furnished
to the selling dealer a certificate in the requisite form that the goods purchased
were required for the generation or distribution of electricity by the undertaking. D
But according to section 16 or the Act where a dealer has purchased any taxable
goods under a certificate given by him under section 13 and has used the goods
for a purpose contrary to such certificate, such dealer becomes liable to pay tax
on the purchase price of the goods.

The appellants who were recognised dealers purchased raw materials of E
taxable goods from registered dealers by furnishing a certificate in Form 19 by
reason of which no sales tax had been paid by them. After manufacturing
the goods with raw materials, they sold part of the manufactured goods to
an electrical undertaking in the State against 'C' forms to claim exemption
from tax on them by virtue of a notification issued under section 49(2) of
the Act. No tax had been paid on sales effected by them in favour of the
electrical undertaking.
F
On the ground that the undertaking furnished in Form 19 had been violated,
the Sales Tax Officer levied purchase tax under section 16 on the raw-materials
purchased by the appeilants.

The appellants were unsuccessful in their appeals before the Assistant Com-
missioner as well as before the Sales Tax Tribunal. The High Court answered
the references against the assessees and in favour of the Revenue.
G

It was contended on behall of the appellants · (1) that the goods manufac-
tured by them not having been goods the sale or purchase of which had been
exempted from tax by inclusion in Schedule I they could not be treated as
having infringed the terms of Form No. 19 notwithstanding the fact that parti- ff
cular sales made by them to the electrical undertaking were exempted from
payment of tax (2) the condition in Form 19 became satisfied immediately on the
436 SUPREME COURT REPORTS [1981] 3 s.c.R.

A goods being manufactured by the appellants as at that stage the goods were
really taxable and that a subsequent event of sale to the electrical undertaking
could not be considered as a violation of the said condition and (3) in a trans-
action of sale if the sale was exempted from lax it could not be said that the
purchase was also exempted.

Dismissing the appeal,
B
HELD : (I) The expression "taxable goods'" defined in section 2(3~) of
the Act means goods other than those on the sales or purchase of which no tax
is payable under section 5 and section 49 or a notification issued thereunder.
By this definition the dichotomy that existed between "taxable goods" and "lax.
able events" in the now repealed Act (The Bombay Sales Tax Act, 1959 which was
in force in the State before the present Act) had been given a go by. It may be
c that section 5 and Schedule I refer 10 goods only but section 49 deals with only
taxable events which result in the exemption from payment of tax on the happen-
ing of the conditions mentioned ther~in or in the notification even though the
goods in ·question do not come under Schedule 1. [446 F-H]

(2) To find out whether the goods are taxable goods or not one has to
wait till the disposal of the goods by the dealer in view of the definition of the
D said expression which takes away goods sold under circumstances attracting
section 49 from the scope of the meaning of that expression. [447 A]

(3) If the sale is exempt from tax under section 49 the goods sold would
not be taxable goods. [447 BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1185 of
E 1979,

Appeal by Special Leave from the Judgment and Order dated
15.12.1978 of the Gujarat High Court in Sales Tax Reference No. 24
of 1978.

F AND

Civil Appeal No. 1187 of 1979.

Appeal by Special Leave from the Judgment and Order dated
27.11.1978 of the Gujarat High Court in Sales Tax Reference No.
I I of 1977.
G
K. H. Kaji, T. Sridharan, R. D. Pathak, Miss C. K. Sucharita
and Mrs. S. Bhandue for the Appellant in both the Appeals.

S. T. Desai and M. N. Shroff for the Respondent in both the
H
Appeals.
HINDUSTAN BROWN BOYER! v. GUJARAT. (Venkataramiah, J.) 437

The Judgment of the Court was delivered by A
VENKATARAMIAH, J. Since a common question of law is
involved in these two appeals by special leave, they are disposed of
by this common judgment.

The appellant in Civil Appeal No. 1185 of 1979 is M/s. Hindus- B
tan Brown Boveri Ltd., a company engaged in the business of
manufacturing certain goods which are used in electrical under-
takings for the purpose of generating and distributing electrical
energy. It is registered as dealer under the provisions of the Gujarat
Sales Tax Act, 1969 (Gujarat Act No. I of 1970) (hereinafter referred
to as 'the Act'). For the purpose of manufacturing the goods, the
appellant which was also a recognised dealer under the Act purchased
c
raw materials during the period between May 6, 1970 and March
31, 1971 after furnishing a certificate in Form No. 19 as provided
under section 13(l)(B) of the Act read with Rule 24(4) of the
Gujarat Sales Tax Rules, 1970 (hereinafter referred to as 'the Rules')
framed under the Act stating that the raw materials purchased by it D
would be used in manufacturing taxable goods which would be sold
by it in the State of Gujarat. Some part of the goods manufactured
by the appellant were sold to a certain electrical undertaking in the
State of Gujarat against 'C' forms in order to claim exemption from
payment of tax on the said sales under the Act by virtue of a noti-
fication issued under section 49(2) of the Act exempting the goods E
sold to electrical undertakings for being used in generation and
distribution of electrical energy. On coming to know of the said
sales, the Sales Tax Officer, who was the assessing authority under
the Act levied purchase tax under section 16 of the Act on the raw
materials purchased by the appellant on the ground that the under-
taking given in Form No. 19 had been violated. The appeals filed F
by the appellant before the Assistant Commissioner of Sales Tax
'· and the Gujarat Sales Tax Tribunal against the said levy were un-
successful. Thereafter at the instance of the appellant the Tribunal
referred the following question of law to the High Court of Gujarat
under section 69 of the Act :-
G
"Whether on the facts and in the circumstances of the
case, a11 j Jn a correct interpretation of sub-section (33) of
section 2 of the Gujarat Sales Tax Act, 1969 the Tribunal
was right in deciding that the applicant was liable to pay
purchase tax under section 16 of the Gujarat Sales Tax Act, H
1969 on the ground that certain electric goods manufactured
438 SUPREME COURT REPORTS (1981} 3 S.C.R.

A out of raw materials etc. purchased against declaration in
Form 19 were sold to Gujarat State Electricity Board
against declarations in Form C prescribed in Entry 5 of
the Government Notification issued under section 49 of
the Gujarat Sales Tax Act, 1969 ?"

B . The appellant in Civil Appeal No. 1187 of 1979 is M/s.
Elecon Engineering Co. Ltd. which is engaged in manufacturing
heavy machinery and gear conveyers. It is also a recogni~ed dealer
under the Act. Like the appellant in Civil Appeal 118 5 of 1979,
this appellant also purchased raw materials by furnishing certificates
in Form No. 19 and later on sold a part of the goods manufactured
C by it to a certain electrical undertaking against Form No. 'C' and ..,
claimed exemption under the notification issued under section 49(2) I
of the Act. In this case also the Sales Tax Officer levied purchase ~
tax under section 16 of the Act for violation of the undertaking
given in Form No. 19. The appeals to the Assistant Commissioner
of Sales Tax and the Gujarat Sales Tax Tribunal failed. Thereafter
D at the instance of the appellant, the Gujarat Sales Tax Tribunal
referred the following question for the opinion of the High Court of
Gujarat:-

. Whether on the facts and in the circumstances of the
case, the Tribunal is justified in holding that the sales of
E machineries and conveyers manufactured by the applicant
to an electrical undertaking against Form 'C' under Entry
5 of the Government Notification issued under section 49
of the Gujarat Sales Tax Act, 1969 resulted in the breach
of the declarations in Form 19 as the goods so nianufac-
F tured and sold did not amount to manufacture of taxable
·goods?"

It is seen from the two questions referred to above that they
are substantially the same. The High Court answered the said
questions in favour of the Revenue and against the assessees by two
G separate orders following its earlier decision in M/s. Nciwroji N.
Vakil & Co. v. State of Gujarat(1). The appellants have filed these
appeals against the decision of the High Court by special leave under
Article 136 of the Constitution.

We shall now briefly refer to the relevant provisions of the
ff Act. Section 2(10) of the Act defines a 'dealer' as any person who

(I) Sales Tax Reference No. 1 of 1977 decided on November 24/27, 1978.
HINDUSTAN llROWN BOVERI v. GUJARAT (Venkataramiah, J.) 439

buys or sells goods in connection with his business and when he A
obtains a certificate of registration he becomes a registered dealer.
Section 32 of the Act provides for the recognition of a registered
dealer. It says that where during the previous or current year, the
value of all taxable goods manufactured for sale by "a dealer regis-
tered under section 29 or by a dealer registered under section 30,
whose turnover of sales or purchases has subsequently, exceeded the B
limits specified in sub-section (4) of section 3, exceeds Rs. 3,000/-
such dealer on application by him may be granted recognition by
the Commissioner and on such recognition being granted, he becomes
a recognised dealer. Section 5 of the Act says that subject to the
conditions or exceptions (if any) set out against each of the goods
specified in column 3 of the Schedule I to the Act, no tax shall be
payable on the sales or purchases of any goods specified in that c
Schedule. Section 6 of the Act provides that subject to the pro-
visions of the Act and to any rules made thereunder there shall be
paid by every dealer who is liable to pay tax under the Act, the tax
or taxes leviable in accordance with the provisions of Chapter II of
the Act. In order to en sure that as far as possible the incidence
of tax under the Act is not felt at more than one' point in the series D
of transactions of sales and purchases of goods other than declared
good in the State of Gujarat, sections 7, 8 and 10 of the Act are
enacted as follows :

"7. Levy of sales tax on goods in Schedule II, Part
A.-There shall be levied a sales tax on the turnover of E
sales of goods specified in Part A of Schedule II at the rate
set out against each of them in column 3 thereof, but after
deducting from such turnover,-

(i) resale of goods on the purchase of which the
dealer is liable to pay purchase tax under sec. 16. F
(ii) resales of goods purchased by him from a Regis-
tered dealer.

(iii) · sales of goods, of resales of goods to which clauses
(i) and (ii) do not apply, to a Recognised dealer
G
or to a Commission agent holding a permit who
purchases on behalf of a principal who is a Re-
cognised dealer, upon such dealer or Commission
agent, as the case may be, furnishing in the cir-
H
cumstances and subject to the conditions specified
in sub-clause (B) and item (ii) of sub-clause (C) of
440 SUPREME COURT REPORTS [1981] 3 S.C.R.

A sub-sec. (I) of sec. 13, a certificate as provided
therein, and

(iv) sales of goods or resales of goods to which clauses
(i) and (ii) do not apply, to a Licensed dealer or
to a Commission agent holding a permit who pur-
chases on behalf of a principal who is a Licensed
B
dealer, upon such dealer or Commission agent,
as the case may be; furnishing in the circumstances
and subject to the conditions specified in item (i)
of sub-clause (A) and item (i) (a) of sub-clause (C)
of sub-sec. (1) of sec. 13, a certificate as provided
c therein."

"8. Levy of general sales tax on goods in Schedule II
Part B-There shall be levied a general sales tax on the
turnover of sales of goods specified in Part B of Schedule
II at the rate set out against each of them in column 3
thereof, but after deducting from such turnover,-
D
Al
(i) resales of goods on the purchase of which the
dealer is liable to pay purchase tax under sec. 16;

(ii) resales of goods purchased from a Registered
dealer by a dealer who is not a Licensed dealer
E at the time of such purchase; and

(iii) sales of goods, or resales of goods to which
clauses (i) and (ii) do not apply, to a Licensed
dealer, Recognised dealer or to a Commission
agent holding a permit, who purchases on behalf
F of a principal who is a Licensed dealer or a Re-
cognised dealer, upon such dealer or Commission ,/

agent as the case may be furnishing, in the circum-
stances and subject to the conditions specified in
sec. 13, a certificate as provided therein."

G "IO. Levy of sales tax and general sales tax on goods
specified in Schedule III.-(!) There shall be levied a sales
tax on the turnover of sales of goods specified in Schedule
III at the rate set out against each of such goods in column
3 thereof, but after deducting from such turnover,-
H (i) resales of goods on the purchase of which the
dealer is liable to pay purchase tax under sec. 16,
HINDUSTAN BROWN BOVERI v GUJARAT (Venkataramiah, J.) 441

(ii) resales of goods purchased by him from a Regis- A
tered dealer,
y
(iii) sales of goods, or resales of goods to which clauses
(i) and (ii) do not apply, to a Recognised dealer
or to a Commission agent holding a permit who
purchases on behalf of a principal who is a Re- B
cognised dealer, upon such dealer or Commission
agent, as the case may be, furnishing in the cir-
cumstances and subject to the conditions specified
in sub-clause (B) and item (ii) of sub-clause (C) of
sub-sec. (I) of sec 13, a certificate as provided
therein, and c
(iv) sales of goods or resales of goods to which clauses
(i) and (ii) do not apply, to a Licensed dealer or to
a Commission agent holdinga permit who purcha-
ses on behalf of a principal who is a Licensed
dealer, upon such dealer or Commission agent as 0
the case may be, furnishing in the circumstances
and subject to the conditions specified in item (i)
of sub-clause (A) and item (i) (a) of sub-clause (C)
of sub-sec. (I) of sec. J 3, a certificate a~ provided
therein.

(2) There sl;all be levied a general sales tax on the
turnover of sales of goods specified in Schedule III
at the rate set out against each of such goods in
column 4 thereof, but after deducting from such
turnover-
F
(i) resales. of goods purchased from a Registered
dealer, -by a dealer who 1s not a Licensed dealer
at the time of such purchase; and

(ii) sales of goods, or resales of goods which clause
(i) does not apply to a Licensed dealer, or Recog-
G
nised dealer or a Commission . agent holding a
Permit who purchases on behalf of a principal
who is a Licensed dealer or a Recognised dealer
upon such dealer or Commission agent, as the case
may be, furnishing in the circumstances and sub-
H
ject to the conditions specified in sec. 13 a certi-
ficate as provided therein."
442 SUPREME COURT REPORTS (1981) 3.S.C.R.

A It may be noted that in the above provisions that from the
turnover of sales of goods of a dealer which are otherwise taxable,
the turnover of goods sold to a Recognised dealer, upon such Re-
cognised dealer furnishing in the circumstances and subject to the
conditions specified in sub-clause (B) of sub-section(!) of section 13
of the Act a certificate as provided therein becomes deductible and
B no tax is payable on such sales in favour of the Recognised dealer.
The relevant part of section 13 of the Act reads thus :-

"13. No deduction from turnover except on a certi-
ficate.--(!) There shall not be deducted from the turnover
of sales, sales of goods to a Licensed dealer, Recognised
c dealer or to a Commission agent holding a permit pur-
chasing on behalf of his principal, as provided in sections
7, 8 and IO unless-

(A) .......... ..
,.
D (B) The Recognised dealer certifies in the prescribed
form, that the goods other than prohibited goods sold to
him are goods purchased by him for use by him as raw or
processing materials or as consumable stores in the manu-
facture of taxable goods for sale by him; or ...... "

Rule 24(4) of the Rules prescribes that the certificate issued by
E a Recognised dealer shall be in Form No. 19. The relevant part of
Form No. 19 reads :-

" ............ and that the goods purchased by me/the said
.. :........ and specified in bill/cash memo/invoice No ......
dated ......... of M/s .......... address ............ wi// be used by
F me/the said ............ as raw/or processing materials or con·
sumable stores in the manufacture of taxable goods viz.
:....... .for sale by me/the said .. ,._, ..... and that such sale shall
•
not take place outside the State of Gujarat.

· (Emphasis supplied)"
G
The expression 'taxable goods' . is defined by section 3(33) of
the Act thus:-·

. "2(33). "taxable goods" means goods other than
H tho~·e on the sale or purchase of whiCh no tax is payable
under sec. 5 or sec. 49 or a notification issued thereunder."
HINDUSTAN BROWN BOVERI v. GUJABAT (Venkataramiah, J.) 443

Sub-section (I) of section 49 provides that subject to the con-
ditions or exemptions, if any, specified in relation to them, the
classes of sales or purchases referred in clauses (i) to (vii) of section
49(1) shall be exempt from the payment of the whole of tax payable
under the provisions of the Act. Sub-section 2 of section 49 of the
Act authorises the State Government to exempt any other specified
class of sales by a notification published in the Official Gazette. 8
Section 49(2) reads :-

"49. Exemptions-(!) ........... .

(2) Subject to such conditions as it may impose, the
State Government may, if it considers it necessary so to do c
in the public interest, by notification in the Official Ga:i;ette,
exempt any specified class of sales or purchases from pay-
ment of the whole or any tax payable under the provisions
of this Act.'

By a notification dated April 29, 1970 issued under section D
49(2) of the Act the State Government exempted the entire tax pay-
able on sales of goods (other than prohibited goods) by a registered
dealer to an electrical undertaking, certified for the purpose by the
Commissioner, if the electrical undertaking furnished to the selling
dealer a certificate in Form appended to the notification stating
inter alia that the goods purchased were required for the use of the E
generation or distribution of electrical energy by the undertaking.
In view of the above notification the sales made to the electrical
undertaking become exempt from payment of sales tax under the
Act on the undertaking furnishing the required certificate and no
tax was paid by the appellants in these two appeals on sales of goods
effected by them in favour of the electrical undertaking. It is now F
necessary to refer to section 16 of the Act, the relevant part of
which.reads:-

"16. Liability to purchase tax for contravention of
terms of certificate etc.-(1) Where any dealer or Commis-
sion agent has purchased any taxable goods under a certi- G
ficate given by him under section 12 or 13, and

(a) contrary to such certificate, the goods are used for
another purpose, or are not resold or despatched in
the manner: and within t,he period certified, or · H
444 SUPREME COURT REPORTS [1981] 3 S.C.R.

A (b) on the resales in the course of inter-State trade or
commerce, of the goods so purchased, no tax under
the Central Sales Tax Act 1956 (LXXIV of 1956), is
actually payable by him on account of any deduction
admissible under any of the provisions of the said Act.

B then such dealer or Commission agent shall be liable to pay
tax on the purchase price of the goods purchased under
such certificate; and accordingly, he shall include the pur-
chase price thereof in his turnover of purchases in his
declaration or return under section 40 which he is to furnish
next thereafter.
c
(2) ........ .

(3) the purchase tax leviable under this section in
respect of any goods specified in Schedule II or III shall be
..
the aggregate of all taxes which would have been leviable
D thereon but for the certificate given under section 12 or 13.

(4) If any question arises whether the purchase price
of goods purchased under a certificate given under section
12 or 13 is not liable to be included in the turnover of pur-
chases of a dealer or Commission agent under this section,
E the burden of so proving shall be upon such dealer, or as
the case may be, the Commission agent."

Section 16 of the Act provides that where a dealer has purchas-
ed any taxable goods under a certificate given by him under
section 13 and has used the goods for a different purpose contrary
to such certificate, then such dealer shall be liable to pay tax
F
on the purchase price of the goods purchased under such certi-
ficate and his liability has to be computed ·in the manner stated
in that sect ion. It is this liability of the appellants that .is in dispute •
in these appeals.

c It is not disputed that the appellants are recognised dealers;
that they had purchased raw materials which were taxable goods
(other than prohibited goods) from registered dealers against certi·
ficates issued by them in Form No. 19; that no sales tax had been
paid on sales in their favour; that they had manufactured goods by
H using the said· raw materials that they had sold a part of the
goods to an electrical undertaking notified under section 49(2) of
the Act and that no tax had been paid Ol) sales effected by them in
HINDUSTAN BROWN ROVERJ v. GUJARAT (Venkataramiah, J.) 445

favour of the electrical undertaking. It is also not disputed that in A
Form No. 19 the appellants had stated that the raw materials pur-
chased by them would be used to manufacture taxable goods which
would be sold inside the State of Gujarat. The question for con-
sideration is whether the appellants had used the raw materials for
another purpose contrary to the terms of Form No. 19. The con-
tention of the Department is that tbe appellants had contravened B
Form No. 19 by manufacturing goods which were not 'taxable goods'
and hence were liable to pay purchase tax on the purchase of raw
materials under section 16 of the Act and the contention of the
appellants is that the goods manufactured and sold by them to the
electrical undertakin_gs were 'taxable goods' and merely because they
were sold to an electrical undertaking under transactions exempted c
by section 49(2) of the Act, the goods did . not cease to be taxable
goods. The solution to the question, therefore, lies on the true
meaning of the expression 'taxable goods'.

Relying upon the decision of this Court in the State tJf Tamil
Nadu v. M. K. Kandaswami and Ors.(1) it is urged on behalf of the
D
appellants thaHhe expressions 'taxable persons', 'taxable goods' and
'taxable events' are entirely different concepts in sales tax law; that
the goods in question were taxable goods as any sale of those goods
not covered by section 49(1) and (2) would make such sale taxable
and that section 49( I) and (2) of the Act referred to only events
which resulted in the exemption from payment of sales tax. It is
E
further argued that all goods the sale or purchase of which is liable
to tax under the Act are taxable goods and that goods would not be
taxable goods only when their sales are exempted generally from
payment of tax as provided in section 5 of the Act. It is, therefore,
contended that the goods manufactured by the appellants not having
been goods, the sale or purchase of which had been exempted from
F
tax by inclusion in Schedule I to the Act, the appellants could not
be treated as having infringed the terms of Form No. 19, notwith-
standing the existence of the circumstance that the particular sales
made by them to the electrical undertakings were exempt from pay-
·ment of tax. The second ground urged on behalf of the appellants G
is that the condition under Form No. 19 became satisfied immedia-
tely on the goods being manufactured by the appellants as at that
stage the goods were really taxable and that a subsequent event of
sale to the electrical undertaking cannot be considered as having
violated the said condition. The third ground urged by the appel- H
(!) 36 STC I 91
446 SUPREME COURT REPORTS [1981] 3 S.C.R,

A !ants is that a transaction of sale involved two facets- a sale and a
. purchase and if a sale is exempted from tax, it cannot be said the
purchase is also exempted. On the above footing 'it is contended
that since under section 49(2) only the tax on sale is exempted and
nothing is said about the liability of the purchaser to tax, it cannot
be said that the goods which were otherwise taxable had become
B non-taxable on being sold under a transaction which attracted sec-
tion 49(2) of the Act. ,

We find no substance in any of the three grounds urged on
behalf of the appellants for the reason that the present case is
governed by the definition of the expression 'taxable goods' in sec-
c tio11 2(33) of the Act. It is interesting to note that the Bombay
Sales Tax Act, 1959 (Bombay Act No. I of 1959) which was in force
in the State of Gujarat before the Act came into force and which
was repealed by section 88 of the Act contained the definition of the
expression 'taxable goods' in section 2(33) thereof. The expression
'taxable goods' was defined in the Bombay Act as 'goods other than
D . those on the sale or purchase of which no fax is payable under sec-
tion 5'. In the Bombay Act there was also a provision correspond-
ing to section 49 of the Act in section 41 thereof which empowered
the State Government subject to such conditions as it may impose
to exempt by a notification published in the Official Gazette any
specified class of sales or purchases from payment of the whole or
E any part of any tax payable thereunder if the State Government was
satisfied that it was necessary so to do in the public interest. Still
the definition of 'taxable goods' in that Act did not refer to sales
exempted under section 41 thereof. But in the Act which repealed
and replaced the Bombay Act the meaning of the expression 'taxable
goods' has been narrowed down as section 2(33) of the Act reads-
F 'taxable goods' means goods other than those on the sale or pur-
chase o( which no tax is payable under section 5 (which corresponds
to section 5 of the Bombay Act) and section 49 of the Act (which
corresponds to section 41 of the Bombay Act) or a notification
issued thereunder. By this definition, the dichotomy that is stated
to exist between 'taxable goods' and 'taxable events' has been given
G a go by. It may be that section 5 and Schedule I refer to goods
only but section 49 deals with only taxable events which result in
the exemption[from payment of tax on the conditions mentioned
. therein or in the notification issued thereunder being satisfied even
though the goods in question do not come under Schedule I. Secon-
H dly one has to wait till the disposal of the goods by the dealer to
find out whthr tre gcods are taxable goods or not in view of the
HINDUSTAN BROWN! BOYER! v. GUJARAT (Venkataramiah, J.) 447

definition of the said expression which takes away goods sold under A
circumstances attracting section ·49 from the scope of the meaning
y of that expression. Nor does the third ground survive for the very
same reil8on. If the sale is exempt from 'tax under section 49 of the
Act, the goods sold would not be taxable goods. We need not go
into the question whether the purchaser in a sale under section 49 of
the Act has to pay tax in these cases. This reason also disposes of B
an allied argument of the appellants that the possibility of any Iia-
/ bility arising under section 50 of the Act on the breach of any con-
dition imposed by section 49 or the notification issued thereunder
would absolve the appellants of their liability to pay the tax under
section 16 of the Act. Any such levy made under section 501has
not been shown to have any effect in law on the liability of the
appellants under section 16.

The scheme of the Act appears to be that sales tax should be
levied on goods which are not included in Schedule I at least once
inside the State in the series of sales and purchases even though they
may have been converted into manufactured goods and that is why D
Form No. 19 requires the purchaser to state that the goods will be
used by him as raw or processing materials or as consumable
stores in the manufacture of taxable goods for sale by hiin
inside the State and section 16 of the Acf provides that where
any dealer ha~ pu.rchased any taxable goods under a certificate
given by him under section 12 or section 13 of the Act and contrary E
to such certificate the goods are used for another purpose or are
not resold or despatched in the manner and within the period certi-
fied or on the resales in the course of inter-State trade or commerce,
of the goods so purchased no tax under the Central Sales Tax Act
is actually payable by him on account of any deductions admissible
··."'<' under any of the provisions of that Act, then such dealer shall be F
. liable to pay tax on the purchase price of the goods purchased under
such certificate. The deliberate alteration of the definition of 'tax•
able goods' in the Act also is attributable to the said intention of
the State Legislature.
G
The appeliants also cannot derive any assistance from the
decision of this Court in Polestar Electronic (Pvt.) Ltd. v. Additional
Commission°r, Sales Tax and Anr.(1) as these cases are governed by

(1) 41 S.T.C. 409.
H
448 SUPREME COURT REPORTS '- (1981] 3 S.C.R.

A the provisions of the Act and as there appears to be no similarity
between the facts of these appeals and the facts involved in that case.

For the foregoing reasons, we do not find any merit in these
appeals. The appeals are dismissed with costs. Hearing fee one set.

P.B.R. Appeals dismissed
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