MURLI MANOHAR AND CO. AND ANR. versus STATE OF HARYANA AND ANR. ETC. ETC.

Citation: [1990] SUPP. 2 S.C.R. 343 · Decided: 25-10-1990 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

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MURLI MANOHAR AND CO. AND ANR. 
v. 
STATE OF HARYANA AND ANR. ETC. ETC. 
OCTOBER 25, 1990 
[S. RANGANATHAN, K.N. SAIKIA AND 
K. JAYACHANDRA REDDY, JJ.] 
Haryana Sales Tax Act, 1973: Sections 9( 1) and 24-Assessee-
Purchusing raw materials in state without paying tax-Manufacturing 
goods-Selling them to dealer who exported goods out of India-
Assessability to tax-Whether arises. 
Central Sales Tax Act, 1956: Sections 5(1) & 5(3)-Distinction 
between. 
A 
B 
c 
Each of the appellants/petitioners is a registered dealer in the 
State of Haryana. He purchased certain raw materials in the State D 
without paying purchase tax thereon, in view of the provision contained 
in section 24 of the Haryana Sales Tax Act, 1973. He manufactured 
certain goods in the State with the aid of the said raw materials. He then 
sold the manufactured goods to dealers who, in turn, exported those 
goods out of India. On these facts the assessee claimed that he was not 
liable to pay the purchase tax on the raw materials, imposed under E 
section. 9(1) of the Sales Tax Act. The Department denied the relief on 
the short ground that the sales effected by the appellants were not sales 
in the course of export outside India within the meaning of section 5(1) 
of the Central Sales Tax Act. According to the Department, they were 
only "penultimate" sales, which may be deemed to be 'export sales' 
because of the fiction created under section 5(3) of the C.S. Act 1956, F 
but that was not enough to escape from the clutches of the charge in 
section 9( 1). Accordingly, the claim of the assessee was rejected by the 
taxing authorities. The High Court also rejected the assessee's petition .. 
Before this Court, it was contended on behalf of the assessees that 
the effect of section 5(3) of the C.S.T. Act was to expand the scope of G 
section 5( 1) and include within the concept of sales in the course of 
export outside India also the 'penultimate' sales; that a reference to, 
and the meaning of, section 5(1) could not be understood without a 
reference to section 5(3); and that as a result of section 5(3), such penulti-
mate sales became extiort sales falling beyond the purview and compe-
tence -0f State legislature. It was further submitted that purchases of H 
343 
A 
B 
c 
344 
SUPREME COURT REPORTS 
[ 1990] Supp. 2 S.C.R. 
raw material used in the manufacture of goods inside the State attracted 
the tax under section 9(1) unless those manufactured goods were dealt 
with in one of three ways; (1) disposed of by way of sale inside the State; 
( 2) despatched to a place outside the State but by way of a sale in the 
course of inter-State trade or commerce; or (3) despatched to a place 
outside the State but by way of sale in the course of export outside the 
territory oflndia. 
In the alternative, it was contended that as the assessee had sold 
goods to other parties in India, those sales must be either local sales or 
inter-state sales; and that in any view of the matter, it would be a sale 
covered by the exceptions in section 9(1), and the assessee's purchases 
of raw material wonld not attract tax nnder section 9(1). 
On the other hand, on behalf of the State it was, inter alia con-
tended that there were no facts on re.cord to substantiate the claim on 
behalf of the assessee that the sales in question fulfilled the conditions 
set out in section 5(3) of the C.S.T. Act. It was submitted that the 
D assessees would be entitled to an exemption from the impugned pur-
chase tax only if their sales were export Sales within the meaning of 
section 5(1) of the C.S.T. Act, which they admittedly were not. 
Alttmatively, it was submitted that section 9(1)(b) had been 
declared unconstitutional by this Court in the Goodyear ca&e (1990 2 
E SCC 71) and the assessee could seek no implied exemption from its 
language. Therefore, if section 9 was left out, the langnage Of section 6 
(as amended) which brought to charge all purchases and sales Ill the State 
would be attracted and so the impugned taxation of purchases would be 
in order. 
f 
Allowing the appeals and the petitions, this Court, 
HELD: (1) The language of section 9(1)(a)(ii}-later Sktion 9(1) 
(b)-using the words "within the meaning of sub-section (1) of section 
5 of the Central Sales Tax Act, 1956" have to be given full meaning; 
in other words, the exemption under section 9(1) has to be restricted 
G only to exp(Jrt sal~s falling within the scope of section 5(1). [360F-G] 
Mohammed Sirajuddin v.

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