Holding

The term "suffered" in the notification mandates actual payment of entry tax, so exemption from payment does not meet the condition for purchase‑tax exemption.

Summary

The State of Madhya Pradesh issued a 1978 notification exempting purchase tax on iron and steel provided the goods had "suffered" entry tax under the State Entry Tax Act before purchase. A 1977 notification later exempted new industries, like Indore Iron and Steel Mills, from paying entry tax. The respondent claimed it was therefore entitled to the purchase‑tax exemption and the High Court allowed its petition, interpreting "suffered" as merely the imposition of tax, not actual payment. The State appealed. The Supreme Court held that the word "suffered" in the 1978 notification requires actual payment of entry tax; a statutory exemption from payment does not satisfy the condition. Consequently, the appeal was allowed and the High Court order set aside.

Issues considered

What is the meaning of the word "suffered" in the 1978 notification under the Madhya Pradesh General Sales Tax Act?
Does exemption from payment of entry tax under the 1977 notification satisfy the condition for exemption from purchase tax under the 1978 notification?
Is the High Court's construction of the notification consistent with prior Supreme Court decisions on similar language?

Legislation cited

Central Sales Tax Act, 1956s. 14(4)
Madhya Pradesh General Sales Tax Act, 1958s. 12, s. 7

Subjects

sales taxpurchase tax exemptionentry taxstatutory interpretation"suffered"notificationMadhya Pradeshiron and steel

Judgment

A STATE OF M.P.
v.
INDORE IRON AND STEEL MILLS PVT. LTD.

AUGUST 12, 1998

B [S.P. BHARUCHA AND V.N. KHARE, JJ.]

Sales Tax:

MP. General Sales Tax Act, 1958: Sections 7 and 12.
c
Sales tax-Purchase tax-Exemption of-State Government notification
dated 8-10-1978 and item 2(b) column (4) of Schedule thereto-Provided for
exemption of purchase tax under S. 7 of the State Act in respect of iron and
steel as specified in S. 14(4) of the Central Sales Tax Act, 1956 subject to
the condition that the said goods suffered entry tax under MP. Sthaniya
D Kshetra Me Mal Kar Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act)
before such purchase-Held: The word "suffered" meant actual payment-
Hence, dealers exempted from payment of entry tax under State Government l'
notification dated 9-2-1977 issued under S.10 of the Entry Tax Act not
entitled to exemption ofpayment ofpurchase tax under the 1978 notification-
E MP. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, S.10-
Centra1 Sales Tax Act, 1956, S.14 (4).

Words and Phrases:

"Suffered"-Meaning of-Jn the context of S.10 of the MP. Sthaniya
F Kshetra Me Mal Kar Ke Pravesh Par Kar Adhiniyam, 1976. y

The appellant-State issued a notification dated 8-10-1978 under Section
12 of the M.P. General Sales Tax Act, 1958 exempting the purchase of iron
and steel as specified in Section 14(4) of the Central Sales Tax Act, 1956
from payment of purchase tax under Section 7 of the State Act subject to the
G condition that the said goods had suffered entry tax under M.P. Sthaniya
Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act),
before such purchase. By virtue of a Notification dated 9-2-1977 issued
under Section IO of the Entry Tax Act, the appellant-State exempted new
industries from payment of entry tax for a certain period. The respondent,
H being a new industry, was accordingly exempted from payment of entry tax.
1140
STATE v. INDORE IRON AND STEEL MILLS PVT. LTD. ll41
The respondent filed a writ petition before the High Court contending A
that it was exempted from payment of purchase tax under item 2(b) column
(4) of the Schedule to thll 1978 notification under the Sales Tax Act since
it was exempted from payment of entry tax under the 1977 notification. The
High Court allowed the petition on the ground that although the respondent
had not actually paid the entry tax by virtue of exemption granted under B .
Section 10 of the Entry Tax Act yet is was exempted from payment of
purchase tax by virtue of the 1978 notification. Hence this appeal.

> On behalf of the respondent it was contended that the word "suffered"
referred to the charge of tax under the Entry Tax Act and not to the actual
payment of that tax. C
Allowing the appeal, this Court

HELD : 1. The words of the notification dated 8-10-1978 issued under
Section 12 the M.P. General Sales Tax Act, 1958 are so clear that they leave
no doubt whatsoever and cannot be subjected to any construction but one, D
namely, that only goods upon which entry tax under the M.P Sthaniya Kshetra
Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act) has been paid
are entitled to the exemption thereunder. There has to be actual payment.
The impact of the entry tax upon the goods for which the exemption is sought
has to be felt; only then is the exemption available. The use of the word E
'suffered' makes this plain. [1143-H; 1144-A)

Gannon Dunkerley and Co. v. State of Rajasthan, (1993) l SCC 364,
followed.

CCEv. Usha Martin Industries, (1997) 94 ELT 460, held inapplicable. F
Tata Yodogawa Ltd. v. Union ofIndia, (1987) (32) ELT 521, referred
to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1987 of
1995 Etc. G
From the Judgment and Order dated 18.1.93 of the Madhya Pradesh
High Court in M.P. No. 695 of 1985.

Anup Choudhary, A.K. Singh and S.K Agnihotri, with him for the
Appellants. H
1142 SUPREME COURT REPORTS [1998) 3 S.C.R.

A J. Vellapally, V.B. Joshi, Alok Singh, Umesh Bhagwat, S. Ganesh, Ravinder
Narain, Ms. Punita Singh and M.S. Chaudhari for the Respondents.

The Judgment of the Court was delivered by

BHARUCHA, J. The order under appeal, of the High Court of Madhya
B Pradesh, allowed the writ petitions filed by the respondents, following the
High Court's earlier judgment in the case of Mis. New Shakti Iron & Steel
Re- rolling Mills v. State of MP. The State is in appeal by special leave. The
State had preferred a petition for special leave to appeal against the judgment
in the case of New Shakti Iron & Steel Re-rolling Mills but this Court had
C declined to interfere in view of the comparatively small am.ounts involved in
the assessments. It left it open to the State to urge its contentions in an
appropriate case

By aNotification dated 8th October, 1978 issued in exercise of powers
conferred by Section 12 of the M.P. General Sales Tax Act, 1958, the State
D exempted "in whole or in part the purchases of the class of goods specified
in column ( 1) of the Schedule ... from the payment of tax under Section 7 of
the State Act so as to reduce it to the total rate of tax specified in column
(2) for the periods specified in column (3) of the said Schedule subject to the
restrictions and conditions specified in column (4) thereof'. What were are
· concerned with is item 2(b) of the Schedule. It relates to the purchase of iron
E and steel as specified in clause (4) of Section 14 of the Central Sales Tax
Act, 1956. Under column 2, relating to the reduced total rate of tax, it is
said "Zero per cent (exemption.from tax under Section 7 in whole)." Column
{4) in relation to item 2(b) reads:

"Subject to the same conditions specified against serial No. 2(a)
F and subject to the further condition that the goods referred to in
column I had suffered entry tax under the Madhya Pradeh Sthaniya
Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976, before they
were purchased by the registered dealer." (Emphasis supplied).

G By reason of a notification issued on 9th February, 1977 under Section
10 of the M.P. Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar
Adhiniyam, 1976, the State exempted in whole the class of dealers specified
in column (1) of the Schedule thereto from the payment of entry tax for the .
period and subject to the conditions stated therein. The exemption thereunder
applied to new industries and, by reason thereof, the respondents were
H exempted from the payment of entry tax in respect of the period with which
'
t-
STATE v. INDORE IRON AND STEEL MILLS PVT. LTD. [BHARUCHA, J.] 1143
we are concerned. The petitioner in the earlier matter before the High. Court, A
New Shakti Iron & Steel Re-rolling Mills, stood in the same situation as the
petitioners. In its writ petition it contended that it was, therefore, exempted
also from the payment of purchase tax under item 2(b) of the Schedule to the
notification under the State Sales Tax Act. The High Court took the view that
it was "a matter of no consequence that the petitioner had not actually to pay,
by virtue of the exemption granted under Section I 0 of the Entry Tax Act any B
amount by way of entry tax. That means that although the petitioner wou.ld
otherwise have been liable to pay entry tax under the provisions of that Act
at the rate of 2.5%, it is exempted from doing so by virtue of the special
"' Notification issued by the State Government gran,ting such an exemption to
a class of dealers to which the petitioner belongs for a period of 5 years by c
virtue of incentive. When the provisions of the Sales Tax Act talk of the rate
on which the purchase tax would be payable by a registered dealer as one
which is prescribed under the Notification (Annexure 'C' for our present
purpose) it is a different matter altogether that the petitioner has not actually
had to discharge the liability of payment under the Entry Tax Act." The writ
petition was, accordingly, allowed. D

Learned counsel for the appellant-State contended that the words of the
.,. notification under the State Sales Tax Act were clear. For the purposes of the
exemption thereunder the condition that had to be satisfied was that the
goods had "suffered" entry tax under the Entry Tax Act. Learned counsel
submitted that there was no room, in the circumstances, for the argument
E
that "suffered" meant "deemed sufferance". Our attention was invited by
learned counsel to the judgment of a Constitution Bench of this Court in Ml
s. Gannon Dunkerley and Co. & Ors. v. State of Rajasthan & Ors., [1993]
I SCC 364, to which we shall advert.

Learned counsel for the respondents submitted that the word "suffered"
F
referred to the charge of tax under the Entry Tax Act and not to the actual
payment of that tax. It was also submitted that the goods could be required
to have suffered entry tax under the Entry Tax Act only if they were subjected
to tax by reason of inclusion under the Schedule in the Entry Tax Act. Our
attention was invited to the Judgment of this Court in Collector of Central G
Excise, Patna v. Usha Martin Industries, [1997] 94 ELT 460 and of the Patna
High Court in Tata Yodogawa Limited and Another v. Union of India and
others, [1987] 32 ELT 521.
"" Jn our view, the words of the said notification under the States Sales
Tax Act are so clear that they leave no doubt whatsoever and cannot be H
1144 SUPREME COURT REPORTS [1998] 3 S.C.R.

A subjected to any construction but one, namely, that only goods upon which
entry tax under the Entry Tax Act has been paid are entitled to the exemption
thereunder. There has to actual payment. The impact of the entry tax upon
the goods for which the exemption is sought has to be felt; only then is the
exemption available. The use of the word "suffered" makes this plain.

B This interpretation has found favour with this Court in the case of
Mis Gannon Dunkerley and Co. (ibid). The Rajasthan Sales Tax Rules used
the words "which have already suffered tax at the rate prescribed under
Section 5." This Court said that they referred to "goods which have already
been subject to tax under tr.at Act at the rate specified under Section 5... "
c The judgment in the case of Usha Martin Industries construed an
exemption notification where the words "on which appropriate amount of
duty has already been paid" had been used. This court said that if the
words"already paid" were delinked from the other words employed therein,
they would lend support to the contention of the Revenue as the said
D contention related to an antecedent act of payment; but the word "already"
was not the decisive term because the word "appropriate" had also to be
considered. It is difficult to see that the conclusion in the case of Usha
Martin Industries furthers the case of the respondents before us. Upon a
parity of reasoning it, in fact supports the case of the appellant for the
notification under the State Sales Tax Act does not use the word "appropriate"
E or any other similar word. The judgment of the Patna High Court, dealing with
the words "has already been paid", is no assistance in construing this
notification. The provisions of the Entry Tax Act that learned counsel for the
respondents referred to ar.: of no relevance in the construction of the language
of the notification under the States Sales Tax Act.
F The respondents had raised other objections to their assessments. These
shall now be considered by appropriate authorities.

The appeals are allowed. The order under appeal is set aside. No order
as to costs.
c
G v.s.s. Appeal allowed.