Assessing Authority-Cum-Excise &
Taxation Officer, Gurgaon Vs. M/S. East India Cotton Mfg. Co. Ltd. Faridabad
[1981] INSC 124 (23 July 1981)
BHAGWATI, P.N.
BHAGWATI, P.N.
SEN, A.P. (J) VENKATARAMIAH, E.S. (J)
CITATION: 1981 AIR 1610 1982 SCR (1) 55 1981
SCC (3) 531 1981 SCALE (3)1067
ACT:
Central Sales Tax Act 1956, (74 of 1956) Ss.
8(1), (2), (3)(b), 10, 10-A,& Central Sales Tax (Registration and Turnover)
Rules 1957, Rules 12, 13- Registered Dealer- Certificates of
Registration-Manufacture and sale of textiles-Purchase of dyeing colours and
other chemicals after issuing 'C' Forms-User of such goods for third parties on
job contract basis-Whether such use amounts to manufacture.
Interpretation of Statutes-Taxing
Statute-Statute to be construed according to plain language-Judicial paraphrase
impermissible to Court.
Words & Phrases- "For use by him in
the manufacture or processing of goods for sale "-Meaning of-Central Sales
Tax Act, 1956,S. 8(3) (b).
HEADNOTE:
The Central Sales Tax Act 1956 and the
Central Sales Tax (Registration, and Turnover) Rules 1957, provide that when a
manufacturer who holds a Certificate of Registration under the Act buys goods
for use by him in the manufacture of goods for sale he would be charged tax at
the lower rate of 3% on his furnishing a declaration in Form C to the Seller.
The assessee carried on business of
manufacturing and processing textiles. It was registered under the Punjab
General Sales Tax Act, 1948 and held a Certificate of Registration under
section 7 of the Central Sales Tax Act, 1956. The business mentioned in the
Certificate of Registration was textile manufacturing, sale. purchase,
wholesale distribution, sales and purchase of yarn waste and textile machinery;
and also specified for the purpose of sub-section(l) of section 8, dyeing
colours and other chemicals for use in manufacture. The assessee purchased
these goods in the course of inter-state trade and commerce on the basis of its
Certificate of Registration and furnished to the selling dealers declarations
in Form C stating that these goods were purchased for use by the assessee in
the manufacturing of goods for sale. On the strength of these declarations the
selling dealers were taxed in respect of the sales effected by them to the
assessee at the rate of 3 per cent under section 8(1) (b) of the Act.
The Excise and Taxation Officer-appellant
issued a notice calling upon the assessee to show cause why action should not
be taken under section 10 of the 56 Central Act on the ground that the assessee
had been misusing the Certificates of Registration by doing sizing, bleaching
and dyeing for third parties on job basis. The assessee contended in reply that
neither the term and conditions of the Certificate of Registration nor the
provisions of section 8 (3) (b) of the Central Act required that the goods
purchased by the assessee must be used by it in manufacture or processing of
its own goods intended for sale by itself and that it would be sufficient
compliance with the requirement of section 8 (3) (b) read with the Certificate
of Registration even if the goods purchased were used by the assessee in
manufacture or processing of goods for a third party under a job contract so
long as the manufactured or processed goods were intended for sale by such
third party. This contention was not accepted by the appellant who imposed the
penalty under section 10A of the Act.
The assessee's writ petition to the High
Court was dismissed holding that the goods purchased by the assessee against
its Certificate of Registration could be used by it only in manufacture of
textiles intended for sale by itself and if the goods purchased were used in
manufacture of textiles for a third party on the basis of a job contract, it
would amount to user of the goods purchased for a purpose different from that
specified in section 8 (3) (b) and the assessee would be liable to be proceeded
against under section 10 and 10A.
The assessee's appeal before the Division
Bench of the High Court was allowed which held that all that section 8(3) (b)
provided was that the goods purchased must be used by assessee in manufacture
of goods for sale and did not require that the sale must be by the assessee
himself. The prescription of section 8 (3) (b) was that the goods manufactured
must be for sale, without any qualifying expression that the sale must be by
the assessee manufacturing the goods and therefore even if the goods were
manufactured for a third party, so long as they were intended for sale by such
third party, the case would be covered by the terms of the section.
Dismissing the appeal,
HELD : 1 (i) The Division Bench of the High
Court was right in holding that even if the assessee carried out the work of
sizing, bleaching and dyeing of textiles for a third party on job contract
basis, its case would be covered by the terms of the second sub-clause of
section 8 (3) (b), provided that the textiles so sized, bleached and dyed by
the assessee were intended for sale by such third party. [67 C] (ii) If it is
proved in any proceeding initiated under section 10(d) or section 10A that the
textiles sized, bleached or dyed by the assessee for sale by such third party
on job contract basis were not intended for sale by such third party as would
be evident if such textiles were in fact not sold by the third party but were
used for its own purposes, the assessee would incur the penalty prescribed in
those sections. [67 D] Commissioner of Sales Tax v. S.R. Sharma, 31 S.T.C, 480
: Navsari Cotton Mills Ltd. v. State of Gujarat 37 S.T.C.
104 & O. Parmasivan v. State of Kerala
1971 Tax L.R. 1241 overruled.
2. It is a well-settled rule of
interpretation that a statute must be construed according to its plain language
and neither should anything be added nor subtracted unless there are adequate
grounds to justify the inference that the legislature clearly so intended.
[64E] Thompson v. Gold and Co. [1910] A.C. 409: Vickers Sons and Maxim Ltd. v.
Evans [1910] A.C. 444 referred to.
3(i) The legislature as also the rule making
authority used the expression "for use.....in the manufacture.....of goods
for sale" without indicating that the sale must be by any particular
individual. The legislature has designedly abstained from using any words of
limitation indicating that the sale should be by the registered dealer
manufacturing the goods. Where the legislature wanted to restrict the sale to
one by the registered dealer himself. the legislature used the qualifying words
"by him" after the words "for resale" in the first
sub-clause of section 8 (3) (b) indicating that the resale contemplated by that
provision is resale by the registered dealer purchasing the goods and by no one
else. While enacting the second sub-clause of section 8 (3) (b) the legislature
did not qualify the words "for sale" by adding the words "by
him". This deliberate omission of the words "by him" after the
words "for sale" indicates that the legislature did not intend that
the sale of the manufactured goods should be restricted to the registered
dealer manufacturing the goods. [64 H-65 C] (ii) The Court must construe the
language of section 8 (3) (b) according to its plain words and it cannot write
in the section words which are not there. To read the words "by him"
after the words "for sale" in section 8 (3) (b) would not be
construction but judicial paraphrase which is impermissible to the Court. [65
E]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 756 (NT) of 1973.
From the judgment and order dated the 28th
March, 1972 of the Punjab & Haryana High Court in L.P.A. No. 581 of 1970
R.N. Sachdev and Miss A. Subhashini, for the Appellant.
A.K. Sen, K.K. Jain, S.K. Gupta, Bishambar
Lal and P. Dayal, for the Respondents.
The Judgment of the Court was delivered by
BHAGWATI, J. This appeal by special leave raises a short but interesting
question of construction of section 8 (3) (b) of the Central Sales Tax Act,
1956. The determination of this question has given rise to divergence of
opinion amongst different High Courts but if we have regard to the well
recognised canons of construc- 58 tion of taxing statues and also focus our
attention on the object and intendment of the section, we do not think it
presents much difficulty of solution. The facts giving rise to the appeal are
few and may be briefly stated as follows.
The assessee is a limited company registered
under the Companies Act, 1956 and having its registered office at Calcutta. The
assessee owns a factory in Faridabad where it carries on business of
manufacturing and processing textiles. The assessee is registered under the
Punjab General Sales Tax Act, 1948 as in force in the State of Haryana and at
material times it also held a Certificate of Registration under section 7 of
the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act).
The business mentioned in the Certificate of Registration was Textile
manufacturing, sale, purchase, wholesale distribution; sales and purchase of
yarn and waste and textile machinery and the Certificate of Registration also
specified inter alia the following classes of goods for the purpose of
sub-section (l) of section 8, namely, "dyeing colours, and other chemicals
for use in manufacture." The assessee purchased these goods in the course
of inter-state trade and commerce on the basis of its Certificate of
Registration and furnished to the selling dealers declarations in Form C
stating that these goods were purchased for use by the assessee in the
manufacturing of goods for sale. On the strength of these declarations the
selling dealers were taxed in respect of the sales effected by them to the
assessee at the rate of 3 per cent under section 8 (1) (b) of the Central Act.
The goods purchased by the assessee were used partly for sizing, bleaching and dyeing
of textiles belonging to the assessee and partly for sizing, bleaching and
dyeing of textiles belonging to third parties on job basis.
On 17th September 1966, the Excise and
Taxation Officer, Gurgaon issued a notice calling upon the assessee to show cause
why action should not be taken against it under section 10 of the Central Act
on the ground that the assessee had been misusing the certificate of
registration by doing sizing, bleaching and dyeing for third parties on job
basis. This was followed by another notice dated 13th July 1967 in the same
terms by the Excise and Taxation Officer in regard to the assessment years
1962-63 to 1966-
67. The assessee replied to the notices by
its letter dated 21st July 1967 asking for details and circumstances in which,
according to the Excise and Taxation Officer, the assessee had misused the
certificate of registration so that the assessee could 59 satisfy the Excise
and Taxation Officer that no such misuse had, in fact, taken place. In response
to this query made by the assessee, the Excise and Taxation Officer formulated
the case against the assessee in the following words.
"The company purchased goods from
outside the State of Punjab (now Haryana) on submission of 'C' Forms for the
purpose of use in manufacture of goods for sale. But instead of doing so, the
company used those purchases partly in manufacturing its own goods for sale and
partly for doing job work for other parties. The Company could not use the
material concessionally purchased, for the job work as that does not constitute
'sale'." The assessee contended in reply that neither the terms and
conditions of the certificate of registration nor the provisions of section 8
(3) (b) of the Central Act required that the goods purchased by the assessee
must be used by it in manufacture or processing of its own goods intended for
sale by itself and that it would be sufficient compliance with the requirement
of section 8 (3) (b) read with the Certificate of Registration even if the
goods purchased were used by assessee in manufacture or processing of goods for
a third party under a job contract, so long as the manufactured or processed
goods were intended for sale by such third party. This contention was however
not accepted by the Excise and Taxation Officer and he consequently issued
notices to the assessee for the assessment year 1962- 63 to 1966-67 proposing
to impose penalty under section 10A of the Central Act on the ground that the
assessee had "contravened the provisions of section 10 of the Act ibid by
purchasing goods for the purpose specified in clause (b) of subsection (3) of
section 8" but had failed "without reasonable excuse to make use of
the goods for any such purpose." The assessee thereupon filed a writ
petition in the High Court of Punjab and Haryana for quashing and setting aside
the various notices issued by the Excise and Taxation Officer seeking to
proceed against the assessee under sections 10 and 10A of the Central Act.
The writ petition came up for hearing before
a single Judge of the High Court who rejected it on the ground that on a true
interpretation of section 8 (3) (b), the goods purchased by the assessee
against its certificate of registration could be used by it only in manufacture
of textiles intended for sale by itself and if 60 the goods purchased were used
in manufacture of textiles for a third party on the basis of a job contract, it
would amount to user of the goods purchased for a purpose different from that
specified in section 8 (3) (b) and the assessee would be liable to be proceeded
against under section 10 and 10A and in the circumstances the notices issued
against the assessee must be held to be valid. The assessee preferred an appeal
before a Division Bench of the High Court and before the Division Bench, two
contentions were advanced on behalf of the Revenue in support of the decision
of the learned single Judge. The first contention was that the sizing,
bleaching and dyeing of textiles did not amount to manufacture of textiles and
the goods purchased by the assessee could not therefore be said to have been
used by it in manufacture of textiles as specified in the Certificate of
Registration and hence the assessee had failed to make use of the goods
purchased for the purpose specified in sec. 8 (3) (b) read with the Certificate
of Registration. This contention was negatived by the Division Bench which held
that though sizing bleaching and dyeing of grey cloth did amount to processing,
it had the effect of converting grey cloth into a commercially different
marketable commodity and it therefore amounted also to manufacture of a
commercially new product and the user of the goods purchased in sizing,
bleaching and dyeing grey cloth was consequently within the terms of section 8
(3) (b) read with the Certificate of Registration.
This view taken by the Division Bench was not
challenged on behalf of the Revenue in the appeal before us and hence we need
not say anything more about it. The second contention urged before the Division
Bench was-and that was the only contention pressed upon us on behalf of the
Revenue-that the interpretation placed on section 8 (3) (b) by the learned
single Judge was correct and in order to come within the terms of that section,
the assessee was required to use the goods purchased in manufacture of its own
goods intended for sale by itself and if the assessee used the goods purchased
in manufacture of goods for a third party, the user would be for a purpose
different from that specified in section 8 (3) (b), even though the
manufactured goods were intended for sale by such third party. The Division
Bench did not accept this contention of the Revenue and over-turning the view
taken by the learned single Judge, the Division Bench held that all that
section 8 (3) (b) provided was that the goods purchased must be used by the
assessee in manufacture of goods for sale and did not require that the sale
must be by the assessee himself. The prescription of section 8 (3) (b) was that
the goods manufactured must be 61 for sale, without any qualifying expression that
the sale must be by the assessee manufacturing the goods and therefore even if
the goods were manufactured for a third party, so long as they were intended
for sale by such third party, the case would be covered by the terms of the
section. The Division Bench accordingly allowed the writ petition and quashed
and set aside the notices issued against the assessee. The Revenue thereupon
preferred the present appeal after obtaining certificate of fitness from the
High Court.
It will be seen from the above statement of
facts that the real controversy between the parties in the present appeal
centres round the true interpretation of section 8 (3) (b). We will presently
set out that section but before we do so, it is necessary to refer to some
other provisions of the Central Act as well, for it is a well-settled rule of
interpretation that no one section should be construed in isolation but that
the statute should be read as a whole with each part throwing light on the
meaning of the other.
Section 6 is the charging section and it
levies Sales Tax on every dealer "on all sales effected by him in the
course of interstate trade or commerce during any year." Section 8, as its
marginal note indicates, provides the rates at which Sales Tax shall be
chargeable on inter-state sales effected by a dealer. That section and we are
setting out here the section as it stood at the material time provides inter
alia as follows:
"8(1)Every dealer, who in the course of
Inter-State trade or commerce- (a) sells to the Government any goods; or (b)
sell-to a registered dealer other than the Government goods of the description
referred to in subsection (3), shall be liable to pay tax under this Act, which
shall be three per cent of his turnover.
(2) The tax payable by any dealer on his
turnover in so far as the turnover or any part thereof relates to the sale of
goods in the course of inter-state trade or commerce not falling within
sub-section (1).
(a) In the case of declared goods, shall be
calculated at the rate applicable to the sale or purchase of such goods inside
the appropriate State; and 62 (b) in the case of goods, other than declared
goods shall be calculated at the rate of ten per cent or at the rate applicable
to the sale or purchase of such goods inside the appropriate State whichever is
higher;
and for the purpose of making any such
calculation any such dealer, shall be deemed to be a dealer liable to pay tax
under the sales tax law of the appropriate State, notwithstanding that he, in
fact, may not be so liable under that law.
(2-A) (3) The goods referred to in clause (b)
of sub-section (1)- (a) ... ... ...
(b) are goods of class or classes specified
in the certificate of the registration of the registered dealer purchasing the
goods as being intended for resale by him or subject to any rules made by the
Central Government in this behalf for use by him in the manufacture or
processing of goods for sale or in mining or in the generation or distribution
of electricity or any other form of power;
(4) The provisions of sub-section (1) shall
not apply to any sale in the course of inter-State trade or commerce unless the
dealer selling the goods furnishes to the prescribed authority in the
prescribed manner- (a) a declaration duly filled and signed by the registered
dealer to whom the goods are sold containing the prescribed particulars in a
prescribed form obtained from the prescribed authority;
or (b) if the goods are sold to the
Government not being a registered dealer, a certificate in the prescribed form
duly filled and signed by a duly authorised officer of the Government.
63 (5) ... ... ...
This section provides for three different
rates of tax, one in subsection (1) clauses (a) and (b), another in sub-
section (2) clause (a) and the third in sub-section (2) clause (b). The rate of
tax provided in sub-section (1) clauses (a) and (b) is lower than that provided
in clause (a) or clause (b) of sub-section (2). We are concerned here with
clause (b) of sub-section (1) since it is under that provision that the sales
of dyeing colours and chemicals made to the assessee were charged to tax by the
Sales Tax Authorities under the Central Act. Sub-section (1) clause (b) applies
to sales to a registered dealer other than the Government of "goods of the
description referred to in sub- section (3)". Sub-section (3) specifies
the goods referred to in sub-section (1) clause (b) and clause (b) of sub-
section (3) describes these goods as being "goods of the class or classes
specified in the Certificate of Registration of the registered dealer
purchasing the goods as being intended......for use by him in the
manufacture............of goods for sale.....'.Now the class of goods specified
in the Certificate of Registration of the assessee in the present case was
"dyeing colours and other chemicals intended for use in the manufacture of
textiles for sale" and therefore on the assessee purchasing dyeing colour
and other chemicals against its Certificate of Registration for use by it in
manufacture of textiles for sale, the selling dealers were liable to pay tax on
the sales at the lower rate of three per cent under clause (b) of sub-section
(1), provided the assessee furnished declaration Form C to the selling dealers
and the selling dealers submitted the same to the Prescribed Authority as required
by sub-section (4) clause (a) and plainly and unquestionably the benefit of
this lower rate of tax would enure to the assessee, since it is common
knowledge that the incidence of Sales Tax is always passed on by the selling
dealer to the purchaser. Rule 12 of the Central Sales Tax (Registration and
Turnover) Rules 1957 made by the Central Government in exercise of the power
conferred under section 13 sub-section (1) provides that the declaration
referred to in sub-section (4) clause (a) shall be in Form C and accordingly,
declarations in Form C duly filled in and signed were supplied by the assessee
to the selling dealers against the purchases of dyeing colours and chemicals
and these declaration contained a certificate by the assessee that the goods
purchased were for use in manufacture of goods for sale. Rule 13 also provides
"that the goods referred to in clause (b) of sub-section (3) which a
registered dealer may purchase shall be goods intended for use by him as raw
materials, processing materials....stores.......in the manufacture.........of
goods for sale." The assessee was therefore 64 clearly bound to use the
dyeing colours and other chemical purchased by it against its Certificate of
Registration and the declarations in Form C in manufacture of textiles for
sale. If the assessee failed without reasonable cause to do so and used the
dyeing colours and other chemicals purchased by it for a different purpose,
then under section 10 clause (d) the assessee would be liable to punishment
with imprisonment or fine or both and under section 10 A subsection (1), the
assessee would also incur liability to penalty in a sum not exceeding one-and-a
half times, the tax which have been levied under sub-section (2) in respect of
the sale to him of the goods, if the sale had been a sale falling within that
sub-section.
The question which therefore arises for
consideration is as to what is the scope and meaning of the expression
"for use.......in the manufacture..........of goods for sale"
occurring in section 8 (3) (b) and in the declaration in Form C and Rule 13.
Does it mean that the goods manufactured by a registered dealer by using the
goods purchased against his Certificate of Registration and the declaration in
Form C must be intended for sale by him or does it also include a case where
goods are manufactured by a registered dealer for the third party under a job
contract and the manufactured goods are intended for sale by such third party ?
Now it is a well settled rule of interpretation that a statute must be
construed according to its plain language and neither should anything be added
nor substracted unless there are adequate grounds to justify the inference that
the legislature clearly so intended. It was said more than seven decades ago by
Lord Mersey in Thompson v. Goold and Company [1910] A.C. 409;
"It is a strong thing to read into an
Act of Parliament words which are not there and in the absence of clear
necessity, it is a wrong thing to do." Lord Loreborn L.C. also observed in
Vickers, Sons and Maxim Limited v. Evans [1910] A.C. 444;
"We are not entitled to read words into
an Act of Parliament unless clear reason for it is to be found within the four
corners of the Act itself." Now here we find that the expression used by
the legislature as also the rule making authority is simpliciter "for
use-in the manufacture-of goods for sale" without any addition of words
indicating 65 that the sale must be by any particular individual. The
legislature has designedly abstained from using any words of limitation
indicating that the sale should be by the registered dealer manufacturing
goods. It is significant to note that where the legislature wanted to restrict
the sale to one by the registered dealer himself, the legislature used the
qualifying words "by him" after the words "for resale" in
the first sub-clause of section 8 (3) (b) indicating clearly that the resale
contemplated by that provision is resale by the registered dealer purchasing
the goods and by no one else, but while enacting the second sub- clause of
section 8 (3) (b) the legislature did not qualify the words "for
sale" by adding the words "by him". This deliberate omission of
the words "by him" after the words "for sale" clearly
indicates that the legislature did not intend that the sale of the manufactured
goods should be restricted to the registered dealer manufacturing the goods.
If the legislature intended that the sale of
the manufactured goods should be by the registered dealer manufacturing the
goods and by no one else, there is no reason why the words "by him should
have been omitted after the words "for sale" when the legislature
considered it necessary to introduce those words after the words "for
resale" in the first sub-clause of section 8 (3) (b). The omission of the
words "by him" is clearly deliberate and intentional and it cannot be
explained away on any reasonable hypothesis except that the legislature did not
intend that the sale should be limited to that by the registered dealer
manufacturing the goods. The Court must construe the language of section 8 (3)
(b) according to its plain words and it cannot write in the section words which
are not there. To read the words "by him" after the words "for
sale" in section 8 (3) (b) would not be construction but judicial
paraphrase which is impermissible to the Court.
It is also important to note that the word
'use' is followed by the words "by him" clearly indicating that the
use of the goods purchased in the manufacture of goods for sale must be by the
registered dealer himself but these words are significantly absent after the
words "for sale", On a plain grammatical construction, these words
govern and qualify only "use" and cannot be projected into the words
"for sale". The goods purchased by the registered dealer must be used
by him in the manufacture of goods which are intended for sale but such sale
need not be by the registered dealer himself: it may be by any one.
Now ordinarily when the language of a
statutory provision is plain and unambiguous, there is no need to resort to the
object and purpose of the enactment because in such a case, the language 66
best dealers the intention of the law-giver. But, even if we look at the object
and intendment of section 8 (1) (b), read with section 8(3) (b), we reach the
same conclusion. The object of providing a lower rate of tax under 8 (1) (b)
for sales of goods described in section 8 (3) (b) clearly is that when goods
are purchased by a registered dealer for being used by him in the manufacture
or processing of goods which are intended for sale, the goods which are
ultimately sold should not become unduly expensive to the consumer by addition
of a high rate of sales tax on the purchase of goods which are used in the
manufacture or processing of the goods ultimately sold. Now if this be the object
of section 8 (1) (b) read with section 8 (3) (b) it should be immaterial
whether the sale of the manufactured or processed goods is by the registered
dealer manufacturing or processing goods or by another person for whom the
goods are manufactured or processed by the registered dealer. The intendment of
the statutory provision being that the cost of the manufactured or processed
goods to the consumer should not be unduly enhanced by reason of higher rate of
tax on the goods used in the manufactured or processing of the goods sold, it
is obvious that if this intendment is to be fully effectuated, the benefit of
the statutory provision should be available irrespective of whether the
manufactured or processed goods are sold to the consumer by the registered
dealer or by some one else who has got the same manufactured by the registered
dealer. It was for this reason that the legislature deliberately omitted to add
the words "by him" after the words "for sale" so as to make
it clear that this sub clause of section 8 (3) (b) would apply even if the
goods manufactured or processed by the registered dealer were intended for sale
by someone else.
The words "for sale" following upon
the word 'goods' clearly indicate that the goods manufactured or processed by
the registered dealer must be goods for sale or in other words, they must be
goods intended for sale and it is immaterial whether they are intended for sale
by the registered dealer himself or by anyone else. This sub clause of section
8 (3) (b) would therefore clearly cover a case where a registered dealer
manufactures or processes goods for a third party on a job contract and uses in
the manufacture or processing of such goods, materials purchased by him against
his Certificate of Registration and the declarations in Form C, so long as the
manufactured or processed goods are intended for sale by such third party. It
is of course, true that if proceedings are taken against the registered dealer
under section 10 clause (d) or section 10A, the question would arise whether
the goods manufactured or processed by the registered 67 dealer for a third
party were intended for sale by such third party and that would have to be
decided by the Court or the competent Authority according to the appropriate
and relevant rules of evidence, but merely because some difficulty may arise in
the determination of this question by reason of the third party coming into the
picture that would be no ground for refusing to place on the language of
section 8 (3) (b) the only construction which it can reasonably bear.
We are therefore of the view that the
Division Bench of the High Court was right in holding that even if the assessee
carried out the work of sizing, bleaching and dyeing of textiles for a third
party on job contract basis, its case would be covered by the terms of the
second sub- clause of section 8 (3) (b), provided that the textiles so sized,
bleached and dyed by the assessee were intended for sale by such third party.
If it is proved in any proceedings initiated under section 10 (d) or section
10A that the textiles sized, bleached or dyed by the assessee for a third party
on job contract basis were not intended for sale by such third party, as would
be evident if such textiles were in fact not sold by the third party but were
used for its own purposes, the assessee would incur the penalty prescribed in
those sections.
We find that there are three decisions of
three different High Court which have taken a view different from the one taken
by us. One is the decision of the Madhya Pradesh High Court in Commissioner of
Sales Tax v. S. R. Sharma 31 Sales Tax Cases, 480, the other is the decision of
the Gujarat High Court in Navsari Cotton Mills Limited v.
State of Gujarat 37 Sales Tax Cases 104 and
the third is the decision of the Kerala High Court in O. Parmasivan v. State of
Kerala 1971 Taxation Law Reports 1241. These three decisions proceed on an
erroneous interpretation of section 8 (3) (b) and must be deemed to be over
ruled by the present decision.
We accordingly quash and set aside the
notices which have been issued against the assessee on the basis that merely by
using dyeing colours and other chemicals purchased by it in sizing bleaching
and dyeing textiles for third parties on job contract basis, the assessee
contravened the provisions of section 10 clause (d) and 68 rendered itself
liable to penalty udder section 10A. The appeal will in the circumstances stand
dismissed with costs throughout.
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