M/S. Kanpur Vanaspati Stores, Kanpur Vs.
The Commissioner of Sales Tax, U.P. Lucknow  INSC 15 (22 January 1973)
REDDY, P. JAGANMOHAN KHANNA, HANS RAJ
CITATION: 1973 AIR 2373 1973 SCR (3) 424 1973
SCC (4) 110
U.P. Sales Tax Act, Sec. 3A :
"Successive Dealer". whether includes an importer who is the first
dealer. U.P. Sales Tax Act, Sec. 9(1) proviso; "tax admitted"-Whether
restricted to admission in memorandum of appeal only.
The assessee, among other things, imports and
distributes vanaspati as agent of certain companies.. For the year 195758, he
filed a return on a turnover of Rs. 1,66,387.3 P and paid tax of Rs. 1060.30.
Before the assessing authority, he accepted the liability of Rs. 10,339.19p. On
independent enquiries, the Sales Tax Officer came to the conclusion that the turnover
was Rs. 58,06,132.30 and the tax liability was to the extent of Rs.
3,62,691.62P. The tax authority had to resort to best assessment, as the
assessee failed to appear, although 30 adjournments were given. The assessee
filed an appeal to the appellate authority without depositing the tax, as
required by proviso to Sec. 9 of the Act. The appeal was dismissed for
non-compliance of Sec. 9. At the instance of the assessee, the question of
maintainability of appeal was referred to the High Court. During the pendency
of the reference, the assessee 'filed writ petitions challenging the validity
of the Notification issued under section 3A and the legality of the
proceedings. The High Court held that the appeal was properly dismissed. Before
this Court, the following questions were raised : (i) that the
assessee-appellant being an 'importer cannot be considered as one of the
successive dealers in the series of sales as contemplated by Section 3A and,
therefore, the Notification under section 3(A) was ultra vires, and (ii) that
the dismissal ,of appeal, for want of payment of the admitted tax under section
9(1) of the Act was illegal.
Dismissing the appeal,
HELD : (i) An importer is one of the dealers.
He is the first dealer in the State. Chain of successive dealers begins from
the first dealer and it goes to the last dealer. In view of this, dealer in
this chain can be considered as a "successive dealer". The series
does not begin in the middle. The notification under section 3 is a
Commissioner of Sales Tax (19 S.T.C. 241.) approved. [4266 C-D) (ii) The
assessee had accepted the liability of Rs. 10,339/before the tax authorities.
Under Rules 41(2) read with 12 he was bound lo submit the quarterly return and
also deposit the tax due in, accordance with the return. The expression
"tax,' admitted" in proviso to Section 9(1) means tax admitted before
the assessing authority and not before the appellate authority. As payment of
the admitted tax is one ,,of the conditions for the maintainability of the
appeal, Section 9(1) would be rendered wholly useless, if it is interpreted to
mean tax ,admitted in the memorandum of appeal. Ordinarily, no interpretation
should be placed on a provision which would have the effect of making The
provision either otiose or a dead letter. [426G-H; 427A-D] 425 Chanshyam Dass
Balmukand v. The State of U.P. & Ors. (23 S.T.C. 282) and United Timber
& Cashew Products (P) Ltd. v.Sales Tax Officer. Cannanore (28 S.T.C. 526),
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 2300 to 2302 of 1969 and 14 & 15 of 1970.
Appeal by a special leave from the judgment
dated August 7, 1968 and 18th August 1969 in Sales Tax Reference No. 574 of
1963, and Special appeal No. 330 of 1963, Misc. Application No. 177 of 1963 and
S.A. Nos. 423 and 424 of 1968 respectively.
S. V. Gupte, K. L. Arora, S. K. Bagga and S.
Bagga, for the appellant.
N. D. Karkhanis and O. P. Rana, for the
The Judgment of the Court was delivered by
HEGDE, J. These are appeals by special leave. They are filed by the same
assessee. They arise from the decision of a Division Bench of the Allahabad
High Court. The judgment under appeal not only deals with references made under
the U.P. Sales Tax Act 1948 (hereinafter referred to as the Act) but also the
two Writ Petitions filed by the assessee.
The assessee who is a registered dealer under
the Act is having his business at Kanpur. It carries on business in
hydrogenated oil and washing soap. It also imports and distributes vanaspati as
an agent of Malwa Vanaspati and Chemical Company Ltd., Indore.
In these appeals we are concerned with the
assessee's assessment of sales tax for the assessment year 1957-58.
Its return for that year disclosed a gross as
well as net turnover of Rs. 1,66,387.03 P. Along with its return the assessee
paid Rs. 1,060.30P. towards the tax due. Before the assessing authority the
assessee admitted that its tax liability was Rs. 10,339.19P. It is admitted as
well as proved that the assessee had collected from its purchasers the said
amount of Rs. 10,339.19P. The Sales Tax Officer after making certain enquiries
came to the conclusion that the total turnover of the assessee during the
assessment year in question was Rs. 58,06,132.30P. The assessee was given
opportunity, to show that the estimate made by the Sales Tax Officer was not
correct. From the records of the case we find that as many as 30 adjournments
were given to the assessee to establish its case but the assessee did not take
advantage of those opportunities. The case was finally posted for bearing on
24th March, 1962. That day the assessee was absent; but it made an application
for adjournment of the case by 15 days. That adjournment was not granted and it
could not have been granted because the assessment would have been barred by
the end of the financial year 1961-62. Hence the 426 assessing authority, on
the basis of its best judgment determined the turn-over of the assessee at Rs. 58,06,132.30P.
and determined its tax liability at Rs. 3,62,691.62P. under section 3A of the
Against the order of assessment the assessee
filed an appeal within 30 days from the date of the order of assessment. At the
time of filing the appeal the assessee deposited only a sum of Rs. 1,600. It
appears that the office of the Appellate Judge raised some objections as to the
maintainability of the appeal. After receiving some explanation from the
assessee the appeal was entertained and notice issued to the assessing
authority. When the Sales Tax Officer put in his appearance in the appeal he
objected to the maintainability of the appeal on the ground that the Priviso to
Section 9 of the Act had not been complied with.
That objection was accepted and the appeal
was dismissed as not maintainable. Thereafter at the instance of the assessee
certain questions were referred to the High Court for ascertaining its opinion.
During the pendency of that reference the assessee filed a Writ Petition under
Article 226 of the Constitution challenging the validity of the Notification
issued under Section 3A. Thereafter another application was made under Article
227 of the Constitution challenging 'the recovery proceedings. Both the Writ
Petitions were dismissed. In the reference made by the Appellate Judge the High
Court came to the conclusion that the appeal was properly dismissed.
Mr. Gupte, the learned counsel for the
assessee-appellant advanced the following contentions before us;(1) That the
appeal was illegally dismissed;
(2) That the assessee-appellant being an
importer cannot be considered as one of the successive dealers in the series of
sales as contemplated by Section 3A; and (3) That the Notification issued under
Section 3A was ultra vires the power granted on the government.
In order to appreciate the contentions
advanced, it is necessary to refer to certain provisions of the Act.
Section 3(1) of the Act provides :
"Subject to the provisions of this Act
every dealer shall, for each assessment year, pay a tax at the rate of three
pies per rupee on his turnover of such year, which shall be determined in such
manner as may be prescribed." (Remaining portion of the provision is not
relevant for our purpose).
42 7 Section 3A(1) reads thus :
"Notwithstanding anything contained in
Section 3, the State Government may, by notification in the, official Gazette,
declare that the turnover in respect of any goods or class of goods shall not
be liable to tax except at such single point in the series of sales by
successive dealers as the State Government may specify." (Remaining
portion of Section 3A is not relevant for our purpose).
Now we come to Section 9(1) and this section
provides "Any dealer objecting to an order allowing or refusing an
application for exemption certificate under clause (b) of sub-section (1) of
Section 4 or to an order refusing an application under Sec. 30 or to an order
imposing a penalty under Section 15-A or an assessment made under Section 7,
7-A, 7-B 18 or 21, may within 30 days from the date of service of the copy of
the order or notice of assessment, as the case may be, appeal to such authority
as may be prescribed Provided that no appeal against an assessment shall be
entertained unless it is accompanied by satisfactory proof of the payment of
the, amount of tax admitted by the appellant to be due, or of such instalments
thereof as may have become payment : (emphasis supplied)" (Second proviso
is not relevant for, our present purpose).
We may now turn to, rules 12 and 41(2). Rule
12 provides for the submission of: the quarterly returns by an importer.
Rule 41 prescribes the, mode of submission of
returns and assessment. Sub2 of Rule 41 prescribes "Before submitting the
return under subrule (1), the dealer shall deposit in the treasury the amount
of tax calculated by him on the turnover shown.in such return and shall submit
the treasury challan with the return or submit with the return a cheque for the
amount, so calculated." (Proviso is not relevant for our present purpose).
Having referred to the material provisions in
the Act and the Rule, let us now turn back to the contentions advanced before
us. We shall take up the last two contentions first, namely, that the assessee
who is an importer, not being one of the "successive dealers" could
not have been brought to tax under section 3A and as such the notification
issued by the Government under section 3A bringing to tax the import of
vanaspati made by the assessee from Indore under Section 3-A, is ultra vires.
It may be noted that Section 3 is the general provision. It provides for multipoint
2-L796Sup. CI/73 428 To this general Rule
cartain exceptions are, provided. One of the ,exceptions is that provided under
Section 3A. That Section permits the Government to Select certain items of
goods for a single point levy. Vanaspati is one of the items of goods for a
single point levy. The appellant_does not contest the competence of the
legislature to enact Section 3A. It also does not contest the validity ,of the
power conferred on the Government to select sale of certain ,goods for single-point
taxation. What is contended on its behalf to that section 3A provides that
single-point levy can be imposed only on the "successive dealers" in
the series of dealers; an importer is not one such dealer; he being the very
first dealer in the State. Undoubtedly, an importer is one of the, dealers. He
is the first dealer in the State. The chain of successive dealers begins from
the first dealer and it goes upto the last dealer. Any one of the dealers in
this chain can be considered as a "successive dealer". The series do
not being in the middle. It must necessarily begin at the very beginning. This
is also the view taken by the Allahabad High Court in Ram Kumar Rajendra
Swaroop vs. Commissioner of Sales Tax (1). It is an obvious conclusion. If an
importer is one ,of the successive dealers, which undoubtedly he is,
necessarily the notification issued by the Government must be considered to be
a valid notification. In this view we reject the last two contentions :advanced
by Mr. Gupte.
Now turning our attention to the first
contention advanced by Mr. Gupte, we find there are several difficulties in the
way of accepting the same. As mentioned earlier the assessee in his return has
shown what its turnover was and at what rate the tax is pay,able by it. It had
admitted before the assessing authority what its turnover was.
Further it had also admitted before that
authority ,that it was liable to pay tax at the rate of one anna per rupee on
its turnover which comes to Rs. 10.339.19p. It had also admitted before the same
authority that it had collected that amount from its purchasers. It did not
dispute before the assessing authority the validity of the notification issued
under section 3A. Under Rule 41(2) read with Rule 12 it was bound to submit
quarterly returns. We take it that it must have submitted its, quarterly
returns. Under ,subrule 2 of Rule 41 the assessee was bound to deposit the tax
,due from it according to its returns. In other words even according to the
assessee it was bound to deposit into the Treasury or pay cheque to the
assessing authority of Rs. 10,339.19p. Admittedly, it had not done so. What is
urged by the learned counsel is that whatever might be the facts admitted in
the return and whatever might be the admissions made before the assessing authority
it was open to the assessee to take a different stand in its memorandum ,of
appeal and what is relevant for the purpose of Section 9 is the (1) 19 S.T.C.
429 stand taken by the assessee in the
memorandum of appeal. In support of that contention two decisions; One of the
Allahabad High Court in Ghanshyam Dass Balmukund vs. The State of Uttar Pradesh
& Ors. (1) and the other of the Kerala High Court in United Timber &
Cashew Products (P) Ltd. vs. Sales Tax Officer, Cannanore, (2) were cited.
Those decisions undoubtedly support the
contention of the, Appellant but we find it difficult to accept the conclusions
reached by the Allahabad High Court and the Kerala High Court. In his decision
the learned single Judge of the, Kerala High Court has merely followed the
Allahabad High Court's decision. If we come to the conclusion that the
expression "tax admitted" in the proviso to Section 9 (1) means that
admitted in the memorandum of appeal, section 9 can be made wholly use less.
All that an assessee has to do is not to admit his liability in the memorandum
of appeal, whatever his stand might have been before the assessing authority.
Ordinarily no interpretation should be placed on a provision which would have
the effect of making the provision either otiose or a dead letter. Further, to
find out the true meaning of the expression "tax admitted" we must
take into consideration the remaining words of the proviso namely "or such
installments thereof as may become payable". Those words furnish a key to
If one of the conditions for maintainability
of the appeal is payment of the installments which have become payable under
Rule 41 (2). It means that the admission that has got to be taken into
consideration is that made before the assessing authority and not before the
appellate authority That apart we do not think that the stand taken by the
Appellant before the appellate authority can be considered as a bona fide
stand. We are of the opinion that the contention taken by the appellant, before
the appellate authority that it cannot be brought within the scope of section
3A of the Act was an afterthought. No such contention was taken before the
assessing authority. If the assessee believed that contention to be true it
would not have collected from its purchasers the tax @ 1 anna per Rupee Further
it is now well settled by the decision of this court t` at no one can challenge
the validity of a provision of an Act or Rule made there under or even a
notification issued either under the Act or under the Rules made before the
authorities constituted under the Act. It is true as contended by Mr. Gupte
that. these decisions were rendered long after 1962 but the fact remains that
the decisions in question merely interpret what the law is.
We find neither merit nor equity in these
appeals. Hence these appeals are dismissed with costs; hearing fee one set.
SBW Appeals dismissed.
(1) 23 S.T.C. 282. (2) 28 S.T.C. 526.