Holding

The exemption under Section 4‑AA applies only to the tax levied under Section 4 and does not exempt a dealer from the turnover tax imposed under Section 4‑AAA.

Summary

Sun Oil Company Ltd., a registered dealer and small‑scale industry, obtained a certificate under Section 4‑AA of the West Bengal Sales Tax Act, 1954 exempting it from "tax" for the period 14‑Jan‑1980 to 14‑Jan‑1985. Despite this, the company was assessed a turnover tax under Section 4‑AAA for part of the assessment year 1983‑84 and challenged the assessment. The issue before the Supreme Court was whether the word "tax" in Section 4‑AA also covered the "turnover tax" imposed by Section 4‑AAA. The Court examined the language of the statutes and held that Section 4‑AA authorises exemption only from the tax defined in Section 4, not from the turnover tax in Section 4‑AAA. The notification issued under Section 4‑AA likewise referred only to "no tax" and not to turnover tax. Consequently, the exemption certificate did not shield the assessee from liability for turnover tax. The appeal was dismissed without costs.

Issues considered

Whether the exemption granted under Section 4‑AA of the West Bengal Sales Tax Act, 1954 extends to the turnover tax imposed under Section 4‑AAA.

Legislation cited

Bengal Finance (Sales Tax) Act, 1941
West Bengal Sales Tax Act, 1954s. 4, s. 4-AA, s. 4-AAA

Subjects

tax exemptionturnover taxstatutory interpretationsmall scale industryWest Bengal Sales Tax ActSection 4-AASection 4-AAAnotification

Judgment

A SUN OIL COMPANY (P) LTD. AND ANR.
v.
STATE OF WEST BENGAL AND ORS.

SEPTEMBER 22, 1998

B [S.P. BHARUCHA, D.P. WADHWA AND
SYED SHAH MOHAMMED QUADRI, JJ.]

West Bengal Sales Tax Act, 1954:

C Sections 4, 4-AA and 4-AAA-Assessee a registered dealer under the
Act-Assessee also registered as small scale industry exempted from payment
ofsales tax for a particular period-Revenue issued such certificate exempting
the asse~see from payment of sales tax-However, it sought to levy turnover
tax on assessee-Held, 'tax' referred to tax imposed under Section 4 and not
D to turnover tax imposed under Section 4-AAA-Hence, a small scale industrial
unit exempted from payment of tax under Section 4, does not stand exempted
from payment of turnover tax under Section 4-AAA.

Words and Phrases-Word "tax"-Meaning of-Jn the context of West
Bengal Sales Tax Act, 1954.
E
Assessee was a registered dealer under the West Bengal Sales Tax
Act. The authorities under the Act had granted exemption to the assessee
from payment ofsales tax for a period 14.1.1980 to 14.1.1985 by issuing a
certificate to that effect as the assessee was a registered small scale industry
F enjoying the benefit of tax holidays. In spite of such exemption, for a part of
AY 1983-84, assessee was subjected to turnover tax. As~essee filed an appeal
against the order of assessment before the Assistant Commissioner of
Commercial Taxes who confirmed the order of Commercial Tax Officer on
the ground that exemption certificate did not absolve it from t~e liability to
pay turnover tax under Section 4-AAA of the Act. The order of Assistant
G Commissioner was challe11ged before the Taxation Tribunal and a Full Bene~
of the Tribunal dismissed the appeal of the assessee. Hence this appeal.

It was contended by assessee that exemption granted under Section 4-
AA applied not only to tax under Section 4 but applied also to the turnover
H tax under Section 4-AAA .
18
SUN OIL COMPANY (P) LTD. v. STATE [QUADRI, J.] 19
Dismissing the appeal, this Court A
_. j HELD: 1.1. Section 4 and 4-AAA of the West Bengal Sales Tax Act
shows that the legislature itself has referred to two forms of impost under
the Act differently. In Section 4, it is referred to as "a tax", whereas in
Section 4-AAA, it is referred to as "a turnover tax". The difference in
nomenclature is consistently maintained in the said sections as well as other B
sections of the Act. [22-D-E]

1.2. Section 4-AA opens with a non-obstante clause but the empowerment
under this Section to notify that no tax shall be payable relates to "tax" levied
)
under Section 4. The expression used in Notification No. 1809/F-T dated C
1.6.1976 issued under Section 4-AA, is, that the Governor is pleased to
direct that "no tax" shall be payable by a dealer under the said Act which
obviously refers to the tax under Section 4 but not to "turnover tax" imposed
under Section 4-AAA. Therefore, a small-scale industrial unit is not entitled
to exemption from payment of turnover tax during the period of the validity
of the eligibility certificate by virtue of notification issued under Section 4- D
AA of the Act. [22-F-H; 23-D-F]

Kejriwal Electronics Private Ltd. v. Commercial Tax Officer and Ors.,
81 STC 20, approved.

ABN Food and Beverage Private ltd. v. Assistant Commissioner of E
Commercial Taxes, South Circle, Calcutta and Ors., 77 STC 339, overruled.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2056 of
1996.

From the Judgment and Order dated 25.6.93 of the West Bengal Taxation F
Tribunal in Case No. R.N. I92of1991.

• Bhaskar Gupta, Ms. Radha Rangaswamy and Ms. Renuka Sharma, (Ms.
Mridula Ray Bhardwaj) (NP) for the Appellants.

B. Sen. D.K. Sinha, J.R. Das and l'ills. Manju Mishra for the Respondents. G
The Judgment of the Court was delivered by

QUADRI, J. The short question that arises in this appeal is : whether
the word "tax" in Section 4-AA includes "turn over tax" levied under Section
4-AAA of The West Bengal Sales Tax Act, 1954? H
20 SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A The facts giving rise to this question, lie in a short compass and are
not in dispute. The appellant-company is carrying on "business of the
manufacture of lubricating oil and grease. It was granted certificate of ~ ._
registration under the West Bengal Sales Tax Act, 1954 (for short, the Act).
A certificate for permanent registration as small scale industry was granted
by the Directorate of Cottage and Small Scale Industries, Government of West
B Bengal. Under the Act, the authorities granted exemption from payment of
sales tax for the period comqiencing from January 14,1980 to January 14, 1985
by Certificate dated April 1, 1980. Notwithstanding the said certificate of
exemption, for the period of four quarters ending on March 31, 1984, the
appellant was assessed to turnover tax in a sum of Rs. 1,18,357.66p. and a
C penalty of Rs. 2,000 was also imposed under Bengal Finance (Sales Tax) Act, i.
1941. The appellant filed appeal against the order of assessment before the
Assistant Commissioner of Commercial taxes who confirmed the order of the
Commercial Tax Officer that the eligibility certificate does not absolve it of the
liability to pay turnover tax under Section 4-AAA of the Act. The appellant
then assailed the order of the Assistant Commissioner in the West Bengal
D Taxation Tribunal. By its order dated June 25, 1993, the Full Bench of the
Tribunal dismissed the appeal. From the said order of the Tribunal, this appeal
is filed by special leave.

Mr. Bhaskar Gupta, the learned senior counsel appearing for the
E appellants, has contended that Section 4 is the only charging section under
which the liability assumes two forms-one by way of tax at the rate prescribed
)

under Section 4(3) and the other by way of additional tax at the rate prescribed
under Section 4-AAA-and that the only difference between the two is while
the burden of 'tax' under Section 4 can be passed on to the purchaser, the
burden of additional tax under Section 4-AAA cannot be so passed on,
F therefore, it would be anomalous to think that the exemption granted under
Section 4-AA applies to 'tax' but not to 'additional tax'. Such an interpretation
of Section 4-AA, submits the learned counsel, would set at naught the very
policy of the Government to grant tax holiday to small scale industrial units.

The submissions of the learned counsel though appealing, have to be
G rejected on a plain reading and literal interpretation of Sections 4(1) and 4-
AAA(J). We quote the said provisions here in so far as they are relevant for
our purpose :

"4. Liability to payment of tax.

H (I) There shall be paid by every dealer a tax on his turnover, at such
SUNOILCOMPANY(P)LTD. v. STATE [QUADRI, J.) 21
rate not exceeding twenty percent as the State Government may, by A
notification in the Official Gazette, fix in this behalf, and different rates
may be fixed for different classes of notified commodities."

_, J "S. 4AAA. Liability to payment of turnover tax and rate thereof ·

(!) Notwithstanding anything contained elsewhere in this Act.,--- B
(a) every dealer, whose aggregate of the gross turnover under this Act
and the gross turnover under the Bengal Finance (Sales Tax) Act, 1941
(Ben. Act VI of 1941) during the last year ending on or before the 31st
day of May, 1987, exceeds rupees twenty-five lakhs shall, in addition
to the tax payable by him under section 4, be liable to pay from the C
!st. day of June, 1987, a turnover tax at the rate specified in sub-
) section (3) of such part of his turnover as specified in sub-section (2);

(b) every dealer, other than those referred to in clause (a), whose
aggregate of the gross turnover under this Act and gross turnover
under the Bengal Finance (Sales Tax), Act, 1941 (Ben. Act VI of 1941) D
during any year ending on or after the 1st day of June, 1987, exceeds
rupees twenty-five lakhs shall, in addition to the tax payable by him
under section 4, be liable to pay from the first day of the year
immediately following such year a turnover tax at the rate specified in
sub-section (3) of such part of his turnover as specified in sub-
section (2); E
(c) every dealer who has become liable to pay the turnover tax under
clause (a) or clause (b) shall continue to be so liable until the expiry
of three consecutive years during each of which the aggregate of his
gross turnover under this Act and gross turnover under the Bengal F
Finance (Sales Tax) Act, 1941, does not exceed rupees twenty-five
lakhs and on the expiry of such three years his liability to pay the
turnover tax shall cease;

(cc) every dealer who has become liable to pay the turnover tax before
the commencement of clause (a) of sub-section (3) of section 4 of the G
West Bengal Taxation Laws (Amendment) Act, 1987 shall,
notwithstanding anything contained in clause (a) or clause (b), continue
to be so liable until the expiry of three consecutive years commencing
from any year before the commencement of clause (a) of sub-section
(3) of section of 4 of the West Bengal Taxation Laws (Amendment)
Act, 1987 during each of which his aggregate of the gross turnover H
22 SUPREME COURT REPORTS [1998] SUPP. 2 S.C.R.

A under this Act and the gross turnover under the Bengal Finance
(Sales Tax) Act, 194 l (Ben. Act VI of 1941) does not exceed rupees
fifty lakhs and on the expiry of such three years after the
commencement of clause (a) of sub-section (3) of section 4 of the
West Bengal Taxation Laws (Amendment) Act, 1987, his liability to
pay the turnover tax shall cease unless he becomes again liable to pay
B the turnover tax under clause (a) or ciause (b);

(d) every dealer whose liability to pay the turnover tax has ceased
under the provisions of clause (c) or clause (cc) shall, ifthe aggregate
of his gross turnover under this Act and the gross turnover under the
Bengal Finance (Sales Tax) Act, 1941, during any year again exceeds
c rupees twenty-five lakhs, be liable to pay from the first day of the
years immediately following such year the turnover tax at the rate
specified in sub-section (3) of such part of his turnover as specified
in sub-section (2)."

D A ~erusal of t:1e provisions, extracted above, which are clear and
unambiguous, shows that the legislature itself has referred to two forms of
impost under the Act differently. In Section 4, it is referred to as 'a tax',
whereas in Section 4-AAA it is referred to as 'a turnover tax'. The difference
in nomenclature is consistently maintained in the said sections as well as
other sections of the Act. Now it will be apt to refer to Section 4-AA, as it
E stood at the relevant time, which read thus :

"4AA. Exemption from payment of tax--- Notwithstanding anything
contained in Section 4, the State Government may if it is satisfied that
it is necessary so to do in the public interest, by a notification in the
official gazette and subject to such condition as may be specified
F therein, direct that no tax shall be payable by such a dealer or category
of dealers as may be specified in the notification."

This section opens with a non-obstante clause and provides that despite
the provisions of charging Section 4 if the State Government is satisfied that
it is in the public interest so to do, it may issue notification in the official •
G gazette directing that no tax shall be payable by the dealer or category of
dealers specified therein. Here it may be noticed that the empowerment under
this section to notify that no tax shall be payable relates to 'tax', levied under
Section 4. Pertinent portion of the notification No. 1809/F-T dated 1-6-1976
issued under Section 4-AA is in the following terms :

H "(3) No. 1809-F.T.-lst April, 1976.-Whereas the Governor is of
SUN OIL COMPANY (P)LTD. v. STATE[QUADRI,J.) 23
opinion that it is necessary in the public interest so to do; A
Now, therefore, in exercise of the power conferred by section 4AA
of the West Bengal Sales Tax Act, 1954 (West Ben. Act IV of 1954)
(hereinafter referred to .as the said Act), the Governor is pleased
hereby to direct that no tax shall be payable by a dealer under the said
Act on sales of notified commodity or commodities manufactured, B
made or processed by him in a newly set up small-scale industrial unit
for five years, if the said industrial unit is situated within the area of
the Calcutta Metropolitan District as described in the Schedule to the
Calcutta Metropolitan Planning Area (Use and Development of Land)
Control Act, 1965, or for seven years ifit is situated elsewhere in West C
Benga~ years from the date of commencement of his first sale subject

)
to the conditions noted below :
(Conditions are omitted)."

From a perusal of the notification, it is evident that expression used here
is, the Governor is pleased to direct that "no tax" shall be payable by a dealer D
under the said Act which obviously refers to the tax under Section 4 but not
to "turnover tax" imposed under Section 4-AAA. Jn this view of the matter,
we over-rule the judgment of the learned Single Judge of the Calcutta High
Court to the contra in ABN Food and Beverage Private Ltd. v. Assistant.
Commissioner of Commercial Taxes, South Circle, Calcutta and Ors., (77
STC 339) and approve the conclusion in the judgment of the Full Bench of E
the Tribunal in Kerjriwal Electronics Private Limited v. Commercial Tax
Officer, Manicktala Charge and Ors., (81 STC 20) holding that a small scale
industrial unit was not entitled to exemption from payment of turnover tax
during the period of the validity of eligibility certificate by virtue of notification
issued under Section 4AA of the Act.
F
In the result, the appeal is dismissed but in the circumstances of the
case without costs.

R.K.S. Appeal dismissed.