Kedarnath Jute Manufacturing Co. Vs.
Commercial Tax Officer, Calcutta & Ors [1965] INSC 92 (2 April 1965)
02/04/1965 SUBBARAO, K.
SUBBARAO, K.
SHAH, J.C.
SIKRI, S.M.
CITATION: 1966 AIR 12 1965 SCR (3) 626
CITATOR INFO:
E&R 1978 SC 897 (4) F 1988 SC1775 (6) F
1992 SC 53 (6)
ACT:
Bengal Finance (Sales Tax) Act, 1941 (Bengal
Act 6 of1941)--S. 5(2)(a) (ii) proviso. Effect of--Production of declaration
forms required under proviso whether mandatory or directory--Exemption under
substantive clause whether can be claimed on the basis of other evidence.
HEADNOTE:
The appellant a public limited company sought
exemption under s. 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 in
respect of certain sales. However, it could not produce before the commercial
tax officer the declaration forms from the purchasing dealers required to be
produced under the proviso to that sub-clause because the said forms were lost.
The appellant tried to set duplicate forms from the purchasing dealers but
without success. His application under s. 21A to summon the dealers with the
relevant documents was rejected by the Commercial Tax Officer and the higher
authorities also refused to issue directions for the issue of duplicate
declaration forms. The Commercial Tax Officer thereafter passed an assessment
order without allowing. the said exemption.
Against that order the appellant filed a writ
petition under Art. 226 and thereafter a Letters Patent appeal but failed to
get redress. It then appealed to this Court with certificate.
It was contended on behalf of the appellant
that the exemption granted under the substantive sub-clause (ii) could be
claimed by the production of other relevant evidence if the declaration forms
could not be produced; the proviso to that sub-clause requiring the production
of the said forms was only directory as was also proved by the use of the words
"on demand" in s. 27A.
HELD: The exemption could be claimed only by
the production the declaration forms as laid down in the proviso.
(i) The effect of an excepting proviso is to
except from the main clause something. which but for the proviso would be
within it.
Craies on Statute Law quoted:
If the intention of the Legislature was to
give exemption if the terms of the substantive part of sub-clause (ii) above
are complied with, the proviso. becomes redundant and otiose. If the proviso is
treated as merely directory it will lead to the position that if the
declaration form is furnished well and good; but if not furnished other
evidence can be produced. That is to rewrite the clause and to omit the
proviso. That will defeat the express intention of the legislature. [622H-630A]
There is an understandable reason for the stringency of the provisions. The
object of s. 5(2)(a)(ii) of the Act and the rules made there under is
self-evident. While they are obviously intended to give exemption to a dealer
in respect of sales to registered dealers of specified classes of goods, it
seeks also to prevent fraud and collusion in an attempt to evade tax. [630G]
627 State of Orissa v.M.A. Tulloch & Co. Ltd. (1964) 15 S.T.C. 641,
distinguished.
(ii) The words "on demand" in r.
27A only fix the time when the declaration forms are to be produced; they do
not mean that their production is not obligatory. [630A-B] (iii) Section 21A
only empowers the Commissioner or any person appointed by him to take evidence
on oath etc. It can be invoked only in a case where the authority concerned is
empowered to take evidence in respect of a particular matter, but that does not
enable him to ignore a statutory condition to claim exemption. [630C-D] (iv)
Sub-rules (3) and (4) of s. 27A do not enable the selling dealer to either
directly apply or to compel the purchasing dealers to apply for duplicate forms
nor do they enjoin on the appropriate authority to give the selling dealer a
duplicate form to replace the lost one. This may cause hardship but the remedy
lies with the Legislature only. [630E, F]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 94 of 1954.
Appeal from the judgment and order dated
August 17, 1951 of the Calcutta High Court in Appeal from Original Order No. 81
of 1959.
A.V. Viswanatha Sastri and P.K. Ghosh, for
the appellant.
P.K. Chatterjee and P.K. Bose, for the
respondents.
The Judgment of the Court was delivered by Subba
Rao, J. This appeal on a certificate granted by the High Court of Calcutta
raises the question of the interpretation of s. 5(2)(a) (ii) of the Bengal
Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), hereinafter called the
Act.
The material facts are as follows: The
appellant is a public limited' company registered as a dealer under the Act,
having its registered place of business at Calcutta. In respect of the
accounting year ending with 31st December 1954, in the return for the year the
assessee had shown its gross turnover at Rs. 70,99,928-10-0 and claimed
exemption under two heads, namely, (i) under s. 5(2)(a)(i) of the Act Rs.
1,33,730-6-6; and (ii) under s. 5(2)(a)(ii) thereof Rs. 69,65,979-9-6. After
deducting the said amounts from the gross turnover the assessee showed its
taxable turnover at Rs. 218-9-0 and deposited the tax of Rs. 9-12-6 on the said
amount in the treasury. The Commercial Tax Officer by notice dated April 22,
1955, fixed August 4, 1955, for hearing the assessee in respect of its return.
Under s. 5(2)(a)(ii), the appellant in order to claim exemption thereunder had
to furnish declaration forms duly filled in and' signed by registered dealers
to whom the goods were sold by it.
After taking some adjournments of the enquiry
it appears that in the second week 'of January 1957 the assessee found that its
file containing 147 declaration forms received' from its dealers in respect of
the goods received from it was missing. The assessee, it is said, made various
attempts to get duplicate forms of declaration from the dealers, but, on
account of circumstances over which it had no 628 control and because of the
unhelpful and hostile attitude of the Commercial Tax Officer within whose
jurisdiction the said dealers functioned, it was not able to furnish the
duplicate forms for all the declarations that were lost. On August 8, 1957, the
assessee applied to the Commercial Tax Officer under s. 21A of the Act for
summoning the dealers to produce the necessary documents in order to prove that
they had issued the declaration forms to it, but they said' officer did not
issue the requisite summons to the parties concerned. The assessee then flied
an application to the Commissioner of Commercial Taxes, West Bengal, for
directions to issue duplicate declaration forms, but that application was
rejected. The revision filed to the Revenue Board was also dismissed. On
November 21, 1957, the Commercial Tax Officer made an order of assessment
disallowing the assessee's claim for exemption in respect of the said sales
made to the purchasing registered dealers amounting to Rs. 22,46,006-0-6 and
levied on it additional tax of Rs. 1,49,778-4-6. The assessee thereafter flied
a petition under Art. 226 of the Constitution in the High Court of Calcutta for
issuing an order directing the respondents, i.e., the Commercial Tax Officer
and the Commissioner of Commercial Taxes. West Bengal, not to implement the
said assessment order. The said application came up, at the first instance,
before Sinha, J., who dismissed the same. On appeal, a Division Bench of the
said High Court confirmed the order of Sinha, J. Hence the present appeal.
At the outset we must make it clear that in
the view we are taking on the construction of s. 5 of the Act we do not propose
to go into the question whether the department was responsible for preventing
the assessee from furnishing duplicate forms of the declarations alleged to
have been lost or on the question whether the department went wrong in not
summoning the dealers to produce the relevant documents to establish that the
declaration forms alleged to have been lost were in fact issued' by them.
The only question, therefore, that arises is
whether under s. 5(2)(a)(ii) of the Act the furnishing of the declaration forms
issued by the purchasing dealers was a condition for claiming the exemption
there under.
In substance s. 5(2)(a)(ii) exempts from
taxable turnover all sales to a registered dealer of goods of the class or
classes specified in the certificate of registration of the dealer as being
intended for the purposes mentioned, therein. But the said exemption is made
subject to a proviso. Under that proviso, in the case of such sales a
declaration form duly filled up and signed by the registered dealer to whom the
goods are sold and containing the prescribed particulars on a prescribed form
obtainable from the prescribed authority has to be furnished' in the prescribed
manner by the dealer who sells the goods. Under r. 27A of the Bengal Sales Tax
Rules, 1941, hereinafter called the Rules, a dealer who wishes to claim the
said exemption shall on demand produce such a declaration in writing 629 signed
by the purchasing dealer. Sub-r. (2) thereof enjoins on a dealer not to accept
and on the purchasing dealer not to give a declaration except in the form
prescribed. The other rules make stringent provisions to prevent the misuse of
the said forms.
The argument of Mr. A.V. Viswanatha Sastri,
learned counsel for the appellant, may be briefly stated thus: The substantive
part of s. 5(2)(a)(ii) of the Act provides for the exemption in respect of
certain sales to a dealer if the sales are made to a registered dealer for the
purposes mentioned there under. The proviso to the said sub clause prescribes
in effect that the declaration form in the manner prescribed is the best
evidence to prove that the sales were for the said purposes. The proviso cannot
be construed as laying down a condition for giving the exemption, but only as a
directory provision to sub serve the substantive provision in a reasonable way.
If so construed, a dealer is not precluded in a case where the proviso cannot
be strictly complied with from producing other relevant evidence to prove that
the sales to the registered dealers were for the purposes mentioned in the said
sub-clause. This conclusion is sought to be supported on the basis of the
expression "on demand" in r. 27A which, according to the learned
counsel, indicates that the production of the prescribed declaration is not
obligatory but only to be made if a demand is made by the authority concerned.
The learned Solicitor General, on the other
hand, contends on behalf of the respondents that a dealer can claim exemption
under the said sub-clause, but if he seeks exemption he must comply strictly
with the conditions under which the exemption can be granted. He argues that
the clear terms of the clause, read with the proviso, impose a condition on a
dealer for claiming exemption.
Section 5(2)(a)(ii) of the Act in effect
exempts a specified turnover of a dealer from sales tax. The provision
prescribing the exemption shall, therefore, be strictly construed. The
substantive clause gives the exemption and the proviso qualifies the
substantive clause. In effect the proviso says that part of the turnover of the
selling dealer covered by the terms of sub-cl. (ii) will be exempted provided a
declaration in the form prescribed is furnished.
To put it in other words, a dealer cannot get
the exemption unless he furnishes the declaration in the prescribed form.
It is well settled that "the effect of
an excepting or qualifying proviso, according to the ordinary rules of
construction, is to except out of the preceding portion of the enactment, or to
qualify something enacted therein, which but for the proviso would be within
it": see "Craies on Statute Law", 6th Edn., p. 217. If the
intention of the Legislature was to give exemption if the terms of the
substantive part of sub-cl. (ii) alone are complied' with, the proviso becomes
redundant and otiose. To accept the argument of the learned counsel for the
appellant is to ignore the proviso altogether, for if his contention be correct
it will lead to the position that if the declaration form is furnished, well
and good; but, if not furnished, other evidence can be 630 produced. That is to
rewrite the clause and to omit the proviso. That will defeat the express
intention of the Legislature. Nor does r. 27A support the contrary
construction. The expression "on demand"' only fixes the point of
time when the declaration forms are to be produced;
otherwise the rule would be inconsistent with
the section.
Section 5(2)(a)(ii) says that the declaration
form is to be furnished by the dealer and r. 27A says that it shall be
furnished on demand, that is to say it fixes the time when the form is to be
furnished. This reconciles the provisions of r. 27A with those of s. 5
(2)(a)(ii) of the Act, whereas the construction suggested by the learned'
counsel introduces an incongruity which shall be avoided. Section 21A on which
reliance is placed has no bearing on the question to be decided. It only
empowers the Commissioner or any person appointed to assist him under sub-s (1)
of s. 3 to take evidence on oath etc. It can be invoked only in a case where
the authority concerned is empowered to take evidence in respect of any
particular matter; but that does not enable him to ignore a statutory condition
to claim exemption.
Sub-rules (3) and (4) of r. 27A are not
helpful to the appellant. They provide only safeguards against abuse of the
declaration forms by the purchasing dealers; they do not enable the selling
dealer to either directly apply or to compel the purchasing dealers to apply
for duplicate forms;
nor do they enjoin on the appropriate
authority to give the selling dealer a duplicate form to replace lost one. We realise
that the section and the rules as they stand may conceivably cause unmerited
hardship to an honest dealer. He may have lost the declaration forms by a pure
accident, such as fire, theft etc., and yet he will be penalised for something
for which he is not responsible. But it is for the Legislature or for the
rule-making authority to intervene to soften the rigour of the provisions and
it is not for this Court to do so where the provisions are clear and
unambiguous.
There is an understandable reason for the
stringency of the provisions. The object of s. 5(2)(a)(ii) of the Act and the
rules made there under is self-evident. While they are obviously intended to
give exemption to a dealer in respect of sales to registered dealers of
specified classes of goods, it seeks also to prevent fraud and' collusion in an
attempt to evade tax. In the nature of things, in view of innumerable
transactions that may be entered into between dealers. it will well nigh be
impossible for the taxing authorities to ascertain in each case whether a
dealer has sold the specified goods to another for the purposes mentioned in
the section. Therefore, presumably to achieve the twofold object, namely,
prevention of fraud and' facilitating administrative efficiency, the exemption
given is made subject to a condition that the person claiming the exemption
shall furnish a declaration form in the manner prescribed under the section.
The liberal construction suggested will facilitate the commission of fraud and
introduce administrative inconveniences, both of which the provisions of the
said clause seek to avoid.
631 The decision of this Court in The State
of Orissa v. M.A. Tulloch and Co. Ltd.(1) does not help the appellant. That
decision was concerned with s. 5(2)(a)(ii) of the Orissa Sales Tax Act, 1947.
That section was similar in terms to s. 5(2)(a)(ii) of the Act in question, but
there was no proviso to that section in the Orissa Act similar to the one found
in the present section. That makes all the difference, for it is the proviso
that imposes the condition. But under r. 27(2) made under the Orissa Act
"a dealer shall produce a true declaration in writing by the purchasing
dealer or by such responsible person as may be authorized in writing in this
behalf by such dealer that the goods in question are specified in the
purchasing dealer's certificate of registration as being required for resale by
him or in the execution of any contract." This Court held that the said
mandatory provision was inconsistent with s. 5(2) (a)(ii) of the Orissa Sales
Tax Act; and to avoid that conflict it reconciled both the provisions by
holding that the rule was only directory and, therefore, it would be enough and
if it was substantially compiled with. The said provisions may afford a guide
for amending the relevant provisions of the Act and the rules made there under,
but do not furnish any help for construing them.
Before parting with the case we must make it
clear that we are not expressing any opinion on the bona fides of the appellant
or the appropriate sales tax authorities, for we have not scrutinized the
evidence in that regard.
In the result, the appeal fails and is
dismissed with costs.
Appeal dismissed.
[1964] 7S.C.R.810.
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