Holding

A dealer registered under either sub‑section (1) or sub‑section (2) of Section 7 of the Central Sales Tax Act is deemed to be "registered under the Central Sales Tax Act" and is therefore eligible for the exemption.

Summary

Madhya Bharat Papers Ltd., a new paper manufacturing unit in Madhya Pradesh, claimed exemption from sales tax on inter‑state sales under a State Government notification issued under Section 8(5) of the Central Sales Tax Act, 1956. The notification required that a dealer be "registered under the Central Sales Tax Act". The company was registered under Section 7(2) of the Act, which is optional and does not necessarily imply liability to pay tax, whereas the revenue authorities insisted that only registration under Section 7(1) qualified. The lower authorities denied the exemption, but the Board of Revenue and the Madhya Pradesh High Court held that the company was eligible. The Supreme Court examined the language of the notification and Section 7, concluding that registration under either sub‑section (1) or (2) satisfies the condition, and that liability to pay tax arises only when production commences. Consequently, the exemption was upheld and the appeal dismissed.

Issues considered

Whether registration under Section 7(2) of the Central Sales Tax Act, 1956 satisfies the condition of being "registered under the Central Sales Tax Act" for the purpose of the exemption notification.
Whether liability to pay sales tax arises at the time of registration or at commencement of production.

Legislation cited

Central Sales Tax Act, 1956s. 7(1), s. 7(2), s. 8(5)
Madhya Pradesh General Sales Tax Act, 1958

Subjects

sales tax exemptionregistration under Central Sales Tax ActSection 7(2)inter‑state tradenotification interpretationliability to pay taxMadhya Pradesh

Judgment

A COMMISSIONER OF SALES TAX, M.P.
v.
MADHYA BHARAT PAPERS LTD.

JANUARY 18, 2000

B [S.P. BHARL'CHA R.C. LAHOTI A'.'ID N. SANTOSH HEGDE, JJ.)

Central Sales Tax Act, 1956:

Sales Tax-Exemption-State CJovernment Notification issued under s.
C 8(5) exempted cenain dealers from sales tax under the Act in respect of sales
in course of inter-State trade of goods produced/manufactured by them
provided they were registered under the Act-Held : It is necessary that a
dealer is registered under the Act-It is immaterial whether registration is
under s. 7(1) or s.7(2}-Liability to pay tax arose on commencement of
D production and business-Hence, a deala registered only under s.7(2) is also
entitled for exemption from sales tax-M.P. Government Notification No.
A3-41-81(3 l)-ST-V dated 29.6.1982.

Sales T~egistration-Nature of-Held: Registration under s. 7(1)
is compulsory whereas registration under s. 7(2) is optional.
E
Words and Phrases :

"Registered under the Central Sales Tax Act, 1956--Meaning of-In the
context of M.P. Government Notification No. A3-41- 81(31)-ST-V dated
29.6.1982.
F
The respondent, a public limited company, was a new industrial unit
engaged in manufacture and sale of paper in the backw-drd tribal area of
the State. The State Government issued a Notification No. A-3-41-81(31)·
ST-V dated 29.6.1982 under Section 8(5) of the Central Sales Tax Act, 1956
G exempting certain dealers from sales tax under the Act in respect of sales
in the course of inter-State of goods produced/manufactured by them
subject to the condition that they were registered under the Act.

The respondent, who was regiskred as a dealer under Section 7(2)
of the Act, was granted a certificate of eligibility for exemption from
H payment of sales tax. However, the Assistant Commissioner of Sale Tax
262
COMMR.OFSALESTAXv. MAOHYABHARATPAf'ERSLID. 263

held that the respondent was not entitled to sales tax exemption since it A
w.ts not a registered dealer under Section 7(1) of the Act. The Appellate
·Deputy Commissioner agreed lrith the Assistant Commissioner. The
Board of Revenue reversed the findings of the authorities below, which was
upheld by the High Court. Hence this appeal.

Dismissing the appeal, this Court
B

HELD : 1.1. The language of the notification is plain and simple. It
admits of no ambiguity. The requirement of the notification is satisfied if
the dealer is registered under the Central Sales Tax Act, 1956; it is
immaterial whether the registration under the Central Act is under sub- C
section (1) or sub-section (2) of Section 7. A registration under sub-sec-
tion (2) of Sectim1 7 is certainly a registration under the Central Sales Tax
Act. [268-G-H]

1.2.Liability to pay tax arose on commencement of production and D
business whereafler exemption from payment of sales tax was claimed
under the notification. Therefore, the entitlement of the respondent for
exemption from payment of tax under the notification was clearly made
out as the requirements of the notification were also satisfied. (269-C-D]

2. Registmtion under Section 7(1) of the Act is compulsory, registra- E
tion under Section 7(2) of the Act is optional. For the purpose of securing
a registration under Section 7(2) the dealer need not necessarily be liable
to pay any amount of tax. [268-E]

C:IVIL APPELLATE JURISDICTION: Civil Appeal No. 2954 of F
1997.

From the Judgment and Order dated 15.3.96 of the Madhya Prade~h
High Court in M.C.C. No. 315 of 1990.

S.K. Agnihotri for the Appellant. G

AK. Chitale, Niraj Sharma, Krishnanand Pandey for the Respon-
dent.

The Judgment of the Court was delivered by H
264 SUPREME COURT REPORTS (2000] l S.C.R.
A R.C. LAHOTI, J. In exercise of the powers conferred by sub- Section
(5) of Section 8 of the Central Sales Tax Act, 1956, the Government of
Madhya Prade&h issued a notification No. F. No. A3- 41-81(31)-ST-V
Dated the 29th June, 1982 allowing exemption from payment of tax to
certain dealers subject to satisfying the requirements of the notification.
B The relevant part of the notification reads as under :

NOTIFICATION

F. No. A3-41-81(31)-ST-V Dated the 29th June, 1982.

c
Wher cas, the State Government is satisfied that it is necessary
so to do in the public interest;

Now, therefore, in exercise of the powers conferred by sub-sec-
D tion (5) of Section 8 of the Central Sales Tax Act, 1956 (No. 74 of
1956), the State Government hereby directs that no tax under the
said Act iliall be payable with eftect from the Ist July, 1982, by the
dealers specified in column (1) of the Schedule below, who have
set up industry in any of the districts of Madhya Pradesh specified
in the annexure to this notification (.......... ) in respect of sales in
E the course of inter-state trade or commerce of goods
produced/manufactured by them, for the period specified in
column (2), subject to the restrictions and conditions specified in
column (3) of the said Schedule :

F SCHEDULE

Class of dealers
~---
Period
- -I Restrictions
r - - - -and-
conditions subject to
1

G
(1)
-
----- -
(2)
-- - - - --
J
-
i
___J__ - -
which exemption has
been granted.
- - -- - -
(3)
--

xxx xxx xxx xxx

2. Dealers who -
H
COMMR OFSALFSTAX v. MADHYA BHARAIPAPERSLTD. [RC. LAHUTl,J.) 265

(a) are registered in the case of an The dealer specified in
Ii
A
under the Madhya industry located in a column (1) shall
Pradesh General Sales district. specified in continue to furnish the
Tax Act, 1958 (No. 2 category 'A' of Part-II pre1>cribed returns
1

of 1959) and the [of the Anncxure, up to under the Central
Central Sales Tax Act, : the date on which Sales Tax Act, 1956 B
1956 (No. 1956). period of 3 years, (No. 74 to 1956), and
· beginning from the I shall produce before
I
; date · of the assessing authority
commencement of; at the time of his
I production, expires. assessment a
I
I certificate issued by c
the (Industries
,Commissioner)
Madhya Pradesh, or
' any officer authorised
' by him for the purpose, D
certifying that such
dealer is eligible to
claim the exemption
from payment of tax
and that he has opted
for the scheme of E
exemption from
payment of tax under
the Madhya Pradesh
General Sales Tax Act,
1958 (No. 2 of 1959). F
Under the separate
Revenue Department
Notification No. A3-
I 41-81 (35)-ST-V dated
.l23.10.81.
G
= = = =
The respondent, a public limittd company, is a new industrial unit
engaged in manufacture and sale of paper at Champa in the backward
tribal area of District Bilaspur in the State of Madhya Pradesh. It is nut H
266 SUPREME COURT REPORTS [ 2(,'{)() J 1 s. C.R.
A disputed that the respondent industrial unit satisfit:s the requirements of
Columns (2) and (3) of the notification. It is also not disputed that the
respondent was registered as a dealer under the M.P. General Sales Tax
Act, 1958 as also under Section 7(2) of the Central Sales Tax Act, 1956.
The registration under the Central Sales Tax Act is dakd 12.11.1981.
B Having taken into consideration the !Wo sales tax registrations as 'dealer'
under the two Acts i.e., the State and the Central Acts, the Directorate of
Industries issued a certificate of eligibility dated 19.2.1985 for exemption
from payment of sales tax whereby it was certified that the respondent was
a new unit having gone into production on 10.1.1984 i e. afkr 1.4.1981 and
as such eligibk: for exemption from payment of saks tax. It was also
C certified that the unit being located in District Bilaspur - cakgory Back-
ward 'A' was eligible for exemption for the period upto 9.1.1987.

The Assistant Commissioner of Sales Tax formed an opinion that for
the purpose of claiming benefit of the exemption notification a dealer
D registered under the State Act has also to be registered undt:r sub··section
(1) of Section 7 of the Central Sales Tax Act but the respondent was
registered under sub-section (2) and not sub-Section (1) of Section 7 of
the Central Sales Tax Act and therefore was not entitled to the benefit of
the exemption notification dated 29.6.1982. The Appellate D1;;puty Com-
missioner agreed with the Assistant Commissioner. In an appeal pn:frrred
E by the respondtnt the Board of Rtwnue rev.:rsed the finding of the
authorities below and held that on the basis of the certificate of eligibility
issued by the Directorate of Industries, the respondent was entitled ·to
exemption from payment of sales tax and th1;;refore the assessment and
consequential penalty were unwarrantt:d.
F
At the instance of the Revenue the following question was stated for
the opinion of the High Court under Section 44 of the M.P. General Sales
Tax Act:-

''Whether on the facts and circumstances of the case, the
G Tribunal was justified in holding that the dealer is eligible to avail
of the exemption under Separate Revenue Department Notifica-
tion No. A3-41-81-(31)-ST-V, dated 29.6.82 in respect of the Inter
State sale of goods manufactured by him by virtue of his holding
an eligibility certificate in fulfilment of one of th<: conditions laid
H down in the said notification for eligibility, although he was not
C0!\1\1R. OF SALES TAX v. .'.\[ADHY A BHARA1 PArtRS; I;J. :Re. !AHm·~ J.) 267

holding a Registration Certificate under sub-section (1) of Section A
7 of the Central Sales Tax Act, 1956."

The High Court of Madhya Pradesh has answered the question in
favour of the respondcnt-assessee forming an opinion that the eligibility
certificate issued by the Directorati: of Industries was conclusive and
binding on the assessing authorities and they could not go into the question B
whether the respondcnt-assesset: was digibk for the benefit of exemption
inspitt: of his holding the eligibility certificate by entering into the question
of the respondent's r.:gistration whether it was under sub-Section {1) or {2)
of Section 7 of the Central Sales Tax Act. Feding aggrieved the Revenue
has come up in appeal bdore this Court. c
lt was submitted by the learned counsd for the appellant that on a
full reading of the notification and placing a reasonable construction
then:on the t:xpression" ....... registered under tht: Ct:ntral Sales Tax, 1956",
as employed in the first column of the notification should be undt:rstood
as meaning the registration under sub-Section (1) of Section 7 of the D
Central Sales Tax Act; registration under sub-Section (2) of section 7 of
tht: Central Sales Tax Act is not covered by the expression and is of no
relevance for the purpose of daiming ext:mption under the notification.

Section 7 of the Central Sales Tax Act (relevant part thereof) reads E
as under:

Registration of dealers : -

(1) Ewry dealer liable to pay tax under this Act shall, within such
time as may be prescribt:d for the purpose, makt: an application F
for registration under this Act tu such authority in the appropriate
State as the Central Government may, by general or special order,
specify, and every such application shall contain such particulars
as may be prescribed.

(2) Any dealer liable to pay tax under the sales tax law of the G
appropriate State, or where there is no such law in force in the
appropriate State or any part thereof, any dealer having a place
of business in that Statt: or part, as the case may be, may, not-
withstanding that he is not liable tu pay tax undt:r this Act, apply
for registration under this Act to the authority referred to in H
268 SUPREME COURT REPORTS [2000] 1 S.C.R.

A sub-section (1), and every such application shall contain such
particulars as may be prescribed.

Explanation - For the purpose of this sub- section, a dealer
shall be deemed to be liable to pay tax under the sales tax law of
the appropriate state notwithstanding that under such law a sale
B or purchase made by him is exempt from tax or a refund or a
rebate of tax is admissible in respect thereof.

xxx xxx xxx

A bare perusal of the aboVt: quoted provision goes to show that every
C dealer liable to pay tax under the Central Sales Ta:x Act shall secure a
registration under sub-Section (1) of Section 7. Such dealers as have a
place of business in a State and are not liable to pay tax under the Central
act may still have themselves registered under sub-Section (2) of Section 7
of tbe Central Sales Tax Act if (i) they are dealers liable to pay tax under
D the Salt::s Tax law of the appropriate State (notwithstanding the fact that
the sales or purchases made by them are exempt from tax or a refund or
a rebate of tax is admissible in respect thereof), or (ii) there is no State
Legislation attracting liability to pay tax on such dealers. Such a prayer for
n:gistration shall be made to the same authority who grants registration
E under sub-Section (1). Registration under sub-section (1) is compulsory;
registration under sub-section (2) is optional. For the purpose of securing
a registration under sub-section (2) abovesaid the dealer need not neces-
sarily be liable to pay any amount of tax.

The learned counsel for the appellant submitted that the dealers
F liable to pay tax under the Central Act have betn dealt with only under
sub-section (1) of Section 7; sub-section (2) refers to registration under the
sales-tax law of the appropriate State if there be one in force and in as
much as tht relevant notification dated 29.6.1982 deals with exemption
from payment of tax under the Central Act, it is necessary that the dealer
should have been registered under sub-section (1) of Section 7 of the Act.
G However, we find no merit in the contention. The language of the notifica-
tion is plain and simple. It admits of no ambiguity. The requirement of
Column (1) is satisfied if the dealer is registered under the State Act and
the Central Act-both; it is immaterial whether the registration under the
Central Act is under sub-section ( L) or sub-section (2) of Section 7. A
H registration under sub-section (2) of Section 7 is certainly a registration
COMMROFSALES'!AXv. MADHYABHARATPAPERS:.J:J. )RC:. LAHOTU.J 269

under the Central Sales Tax Act. This is clear from the language of A
sub-section (2) of Section 7 which speaks, inter alia," - ·· ...... may, not-
withstanding that he is not liable to pay tax under this Act, apply for
n:gistration under this Act to the authority referred to in sub-section
(1) ...... .''

The learned counsel for the respondent-assessee has rightly pointed B
out that the certificate of registration 'valid from 12.11.1981 until cancelled'
was secured by the respondt:nt though on the dak of rngistration it was
not liabk to pay tax under the Central Act. Liability to pay tax arose on
commencement of production and business on 10.1.1984 whereaftcr ex-
emption from payment of sales-tax was claimed· under the notification.
Without regard to the fact whether the assessing authority was entitled to
c
go behind the certificate of eligibility issued by the Directorate of In-
dustries, the entitlement of the respondent for exemption from payment of
tax under the notification was clearly made out as the requirements of
Column (1) of the notifications were also satisfo:d.
D
The appeal is held liable to be dismissed though for a reason dif-
ferent from the om: assigned by the High Court The question referred tu
for the opinion of the High Court is answered in favour of the assesst:e and
against the Revenue. Accordingly, the appeal is dismissed. No order as tu
costs.

v.s.s. Appt:al dismissed.