Govind
Saran Ganga Saran Vs. Commissioner of Sales Tax & Ors [1985] INSC 104 (26
April 1985)
PATHAK,
R.S. PATHAK, R.S.
VENKATARAMIAH,
E.S. (J)
CITATION:
1985 AIR 1041 1985 SCR (3) 985 1985 SCC Supl. 205 1985 SCALE (1)986
CITATOR
INFO: F 1986 SC2200 (2)
ACT:
Central
Sales Tax Act, ss. 14 and 15 read with Bengal Finance (Sales Tax) Act 1941, s.5
(2) (a) (ii)-Scope of- Goods declared to be of special importance in
inter-State trade or commerce-Omission to specify the single point at which the
tax may be levied-Effcet of
HEADNOTE:
The
appellant, a registered dealer under the Bengal Finance (Sales Tax) Act 1941 as
applied to the Union Territory of Delhi (for short, the State Act) used to
purchase Cotton yarn and sell it to registered dealers, unregistered dealers
and consumers. He submitted his return of turnover under the State Act for the
assessment year 1968-69 and claimed exemption in respect of the turnover of
sales of cotton thread on the ground that it was an exempted item under Entry
21 of the Second Schedule. The Sales Tax Officer held that the sales were
liable to tax as the same were effected in respect of cotton yarn. The
appellant ultimately went in revision to the Financial Commissioner who
proceeding on the basis that the sales were in respect of cotton yarn, which
was a declared item under s.14 of the Central Sales Tax Act allowed the
revision petition holding that they could not be subjected to sales tax because
one of the conditions prescribed by s.15 of that Act had not been complied with,
that is to say, the law had omitted to prescribe the single point at which the
levy could alone be imposed. Aggrieved by the order of the Financial
Commissioner, the Revenue filed a writ petition in the High Court which,
relying on the construction placed by it on sub-clause (ii) of cl.(a) of s.5 in
Fitwell Engineers v Financial Commissioner Delhi Admn (1975) 35 S.T.C. 66,
allowed the petition holding that the single point in a series of sales is the
sale made by the last registered dealer among successive dealers when he sold
the goods to an unauthorised dealer or consumer. Hence this Appeal. Allowing
the Appeal, ^
HELD:
1. The components which enter into the concept of a tax are well known. The
first is the character of the imposition known by its nature which prescribes
the taxable event attracting the levy, the second is a clear indication of the
person on whom the levy is imposed and who is obliged to pay the tax, the third
is the rate at which the tax is imposed, and the fourth is the measure or value
to which the rate will be applied for computing the tax liability. If 986 these
components are not clearly and definitely ascertainable it is difficult to say
that the levy exists in point of law. Any uncertainty or vagueness in the
legislative scheme defining any of those components of the levy will be fatal
to its validity. [900D-E]
2.
Where the turnover of goods declared to be of special importance in inter-State
trade or commerce under s.
14
of the Central Sales Tax Act is subjected to sales tax law of a State, section
15 prescribes the maximum rate at which such tax may be imposed and requires
that such tax shall not be levied at more than one point. The two conditions
have been imposed in order to ensure that Inter- State trade or commerce in such
goods is not hampered by heavy taxation within the State occasioned by an
excessive rate of tax or by multpoint taxation. Section 15 enacts restrictions
and conditions which are essential to the validity of an impost by the State on
such goods. If either of the two conditions are not satisfied, the impost will
be invaid- Now in order that tax should not be levied at more than one stage it
is imperative that the sales tax law of the State should specify either
expressly or b y necessary implication the single point at which the tax may be
levied Alternatively, it may be empower a statutory authority to prescribe such
single point for the purpose. Where such point is not prescribed, either by the
statute or by the statutory delegate, no compliance is possible with s. 15.
The
single point at which the tax may be imposed must be a definite ascertainable
point so that both the dealer and the sales tax authorities may know clearly
the point at which the tax is to be levied. [989G-H: 900A-C]
3.
On the construction which found favour with this Court in Polestar Electronic
(P) Ltd v. Addl. Commissioner, Sales Tax & Anr., (1978) 41 S. T. C. 409 it
is apparent that no support can be found for the proposition that sub- cl. (ii)
of cl. (a) of sub-s. (2) of s.5 of the State Act implies that the single point
of taxation is Fixed by the State, Act at the resale by a registered dealer to
an unregistered dealer or to a consumer. As that is the reasoning on which the
High Court has proceeded in The judgment under appeal, it must be held that the
basis underlying the decision of the High Court cannot be accepted. [992F-G]
Fitwell Engineers v. Financial Commissioner, Delhi Administration, Delhi and
another, (1975) 35 S. T. C. 66 over-ruled.
4.
It is well settled that when the language of the statute is clear and admits of
no ambiguity, recourse to the Statement of Objects and Reasons for the purpose
of construing a statutory provision is not permissible Section SA Of the State
Act clearly empowers the Chief Commissioner to specify the single point in a
series of sales at which single point taxation may be levied. The widest
amplitude of power has been conferred on the Chief Commissioner in the matter
of selecting the point for taxation in a series of sales and, if that is so, clearly
do single point can be spelled out, even by implication, from the provision of
sub- cl. (ii) of cl. (a) of sub-s. (2) of s.5. For to do so would mean either
accepting an inconsistency between the two provisions or narrowing down
correspondingly the scope of s. 5 A. No such notification has been placed
before 987 the Court which could relate to the assessment year under
consideration. There- fore a vital prerequisite of s. 15 of the Central Sales
Tax Act, namely, that the tax shall not be levied at more than one stage, has
not been satisfied in respect of the turnover of cotton yarn, and accordingly
the assessment complained of is liable to be quashed. [993BG] Polestar
Electronic (P) Ltd. v. Additional Commissioner, Sales Tax and Another. (1978)
41 S. T. C. 409. followed.
Bhawani
Cotton Mills Ltd. v. The State of Punjab and Another, (1967) 20 S. T. C. 290
& Rattan Lal and Co. v. The Assessing Authority and Another (1970 25 S. T.
C. 136, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
2083 of 1974.
From
the judgment and order dated 10. 9. 1974 of the Delhi High Court in Civil W. P.
No. 460/1973.
L.M.
Singhavi, Mrs. Anjali Verma, R.C. Chawla, N.K Bhuraria and L. K. Pandey for the
appellant.
S.
C. Manchanda and R. N. Poddar for the Respondents.
The
judgment of the Court was delivered by PATHAK; J: This appeal by special leave
is directed against the judgment and order of the High Court of Delhi
dismissing the appellant's writ petition questioning the liability imposed in
him on a sales taxassessment.
The
appellant carries on business as a dealer in the re-sale of cotton yarn. As a
dealer he has been registered under the Bengal Finance (Sales Tax) Act, 1941 as
applied to the Union Territory of Delhi (hereinafter referred to as the 'State
Act'). The appellant says that he purchases cotton yarn and sells it to
registered dealers, unregistered dealers and consumers. For the assessment year
1968-69 the appellant submitted his return of turnover under the state Act and
claimed exemption in respect of the turnover of sales of cotton thread on the
ground that it was an exempted item under Entry No. 21 of the Second Schedule.
The Sales Tax Officer, by his order dated October 29,1970, held that the sales
were effected in respect of 988 cotton yarn and, therefore, they were liable to
tax at one per cent on appeal, the Assistant (commissioner of Sales Tax took a
contrary view and on his finding that the transactions were in respect of
cotton thread he allowed the appeal and struck the assessment down. Acting suo
motu in the exercise of his revisional jurisdiction, the Deputy Commissioner of
Sales Tax made an order under Sub-s. (3) of S. 20 of the State Act reversing
the order of the Assistant Commissioner and restoring that of the Sales Tax
Officer on the ground that what was sold was cotton yarn. The appellant now
applied in revision to the Financial commissioner, Delhi Administration, and
the Financial Commissioner, proceeding on the basis that the sales were in
respect of cotton yarn, which was a declared item under s. 14 of the Central
Sales Tax Act, held that they could not be subjected to sales tax because one
of the conditions prescribed by s. 15 of that Act had not been complied with,
that is to say, the law had omitted to prescribe the single point at which the
levy could alone be imposed. Accordingly, the Financial Commissioner allowed
the revision petition and quashed the assessment. The Commissioner of Sales Tax
thereupon filed Civil Writ Petition No. 460 of 1973 in the High Court of Delhi
praying for the quashing of the order of the Financial Commissioner. The writ
petition was allowed by the High Court by its judgment and order dated
September 10, 1974.
Against
that judgment and order the appellant has filed the present appeal.
S.
14 of the Central S-ales Tax Act enumerates the commodities declared to be
goods of special importance in inter-State trade or commerce. Among the goods
so declared is cotton yarn. S. 15 of the Central Sales Tax Act, 1956 provides
:-
15.
Every sales tax law of a State shall, in so far as it imposes or authorises the
imposition of a tax on the sale or purchase of declared goods, be subject to
the following restrictions and conditions, namely :- (a) the tax payable under
that law in respect of any sale or purchase of such goods inside the State
shall not exceed three per cent of the sale or purchase price thereof, and such
tax shall not be levied at more than one stage." The tax is payable by a dealer
under the State Act on taxable turnover, and sub-s. (2) of s. 5 provides;
989
"(2) In this Act, the expression "taxable turnover" means that
part of a dealer's gross turnover during any period, which remains after
deducting there form- (a) his turnover during that period on- (i) the sale of
goods declared tax free under section 6, (ii) sale to a registered dealer-of
goods of the class or classes specified in the certificate of registration of
such dealer, as being intended for re-sale by him, or for use by him as
raw-materials in the manufacture of goods for sale; and of containers or other
materials for the packing of goods of the class or classes so specified for
sale:
Provided
that in the case of such sales, a declaration 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 is
furnished in the prescribed manner by the dealer who sells the good;
Provided
further that where any goods specified in the certificate of registration are
purchased by a registered dealer as being intended for re-sale by him or for
use by him as raw-materials in the manufacture of goods for sale, but are
utilised by him for any other purpose, the price of the goods so purchased
shall be allowed to be deducted from the gross turnover of the selling dealer
but shall be included in the taxable turnover of the purchasing dealer."
In the instant case, we are concerned with the taxation of goods which under s.
14 of the Central Sales Tax Act have been declared to be of special importance
in inter-State trade or commerce. Where the turnover of such goods is subjected
to tax under the sales tax law of a State, s. 15 prescribes the maximum rate at
which such tax may be imposed and requires that such tax shall not be levied at
more than one point. The two conditions have been imposed in order to ensure
that inter-State trade or commerce in such goods is not hampered by heavy
taxation within the State occasioned by an excessive rate of tax or bymulti
point taxation. S.
990
15 enacts restrictions and conditions which are essential to the validity of an
impost by the State on such goods. If either of the two conditions are not
satisfied, the impost will be invalid. Now in order that tax should not be
levied at more than ond stage it is imperative that the sales tax law of the
State should specify either expressly or be, necessary implication the single
point at which the tax may be levied. Alternatively, it may empower a statutory
authority to prescribe such single point for the purpose.
Where
such point is not prescribed, either by the statute or by the statutory
delegate, no compliance is possible with s 15. the single point at which the
tax may be imposed must be a definite ascertainable point so that both the
dealer and the sales tax authorities may know clearly the point at which the
tax is to be levied.
The
components which enter into the concept of a tax are well known. The first is
the character of the imposition known by its nature which prescribes the
taxable event attracting the levy, the second is a clear indication of the
person on whom the levy is imposed and who is obliged to pay the tax, the third
is the rate at which the tax is imposed, and the fourth is the measure or value
to which the rate will be applied for computing the tax liability. If those
components are not clearly and definitely ascertainable, it is difficult to say
that the levy exists in point of law. Any uncertainty or vagueness ill the
legislative scheme defining any of those components of the levy will be fatal
to its validity.
The
charging provision, s. 4, of the State Act enacts that every dealer whose gross
turnover during the year exceeds the taxable quantum shall be liable to pay
tax. The ordinary rule under . the State Act appears to be that the scale made
by every dealer in a series of sales by successive dealers is liable to tax.
That is multi point taxation. In a scheme of single-point taxation, the levy is
confined to a single point in a series of sales by successive dealers.
According to the Revenue, the present levy falls in the latter category, and
sub-cl. (ii) of cl.
(a)
of sub-s. (2) of s.5 implies the single point at which the turnover of goods
may be taxed. That argument from favour with the High Court, and it held the
single point in a series of sales to be the sale made by the last registered
dealer among successive dealers when he sold the goods to an unregistered
dealer or a consumer In this connection, the High Court relied on the
construction placed by it on sub-cl. (ii) of cl. (a) of sub-s. (2) of 991 s.5
in Fitwell Engineers v. Financial Commissioner, Delhi Administration, Delhi,
and Another' (1) In that case, the High Court had held that it was for the
purpose of taxing the goods at least at one point that sub-cl. (ii) of c1. (a)
of sub-s. (2) of s.5 of the State Act had been enacted, that there would be a
taxable sale when the registered dealer sold the goods to an unregistered
dealer or to a consumer, and that in order that such resale by the registered
dealer should attract tax the resale to an unregistered dealer or to a consumer
had to be effected in Delhi, because if the resale was effected outside the
Union Territory of Delhi the Union Territory of Delhi would have no legislative
competence to tax the resale. Now the question whether the expression
"resale" in sub-cl. (ii) of cl. (a) of sub-s. (2) of s.5 of the State
Act was confined to a resale in the Union Territory of Delhi by the last
registered dealer was subsequently considered by this Court in Polestar
Electronic (P) Ltd. v. Additional Commissioner, Sales-Tax And Another.(2)
Overruling the decision of the High Court in Fitwell Engineers (supra) this
Court held that the expression "resale" was not confined to a resale
in the Union Territory of Delhi and could include a resale outside it. That was
the position upto May 28, 1972 when sub-cl.
(ii)
of cl. (a) of sub-s. (2) of s.5 was amended by the Finance Act, 1972. This
Court observed that the position before the amendment in 1972 was not affected
by the possibility that on the construction preferred by the Court the Union
Territory of Delhi would be unable to re- cover any tax. The Court said:
"It
is true that if the purchasing dealer resells the goods outside Delhi, the
Union Territory of Delhi would not be able to recover any tax since the sale to
the purchasing dealer would be exempt from tax under section 5 (2) (a) (ii) and
the resale by the purchasing dealer would also be free from tax by reason of
section
27.
But that is not such a consequence as would compel us to read the word
"resale" as limited to resale inside Delhi. The argument of the
revenue was that the legislature could never have intended that the Union
Territory of Delhi should be altogether deprived of tax in cases of this kind.
The legislative intent could only be to exempt the sale to the purchasing (1)
[1975] 35 S. T. C. 66. (2) [1978] 41 S, T. C. 409.
992
dealer in those cases where the Union Territory of Delhi would be able to
recover tax on resale of the goods by the purchasing dealer. The goods must be
taxed at least at one point and it could not have been intended that they
should not be taxable at all at any point by the Union Territory of Delhi. The
revenue urged that it was for the purpose of taxing the goods at least at one
point that the second proviso was enacted by the legislature. We do not think
this contention based on the presumed intention of the legislature is
well-founded." And again, "The intention of the legislature was
clearly not that the Union Territory of Delhi should be entitled to tax the
goods at least at one point so that if the sale to the purchasing dealer is
exempt, the resale by the purchasing dealer should be taxable. We do not find
evidence of such legislative intent in any provision of the Act" (Emphasis
supplied) Further on, in the same passage, the Court reiterated:
"It
will, therefore, be seen that it is not possible to discover any legislative
intent to tax the goods at least at one point and to exempt the sale to the
purchasing dealer only if the resale by the purchasing dealer is liable to
tax." On the construction which found favour with this Court in Polestar
Electronic (P) Ltd, (supra) it is apparent that no support can be found for the
proposition that sub-cl.
(ii)
of cl. (a) of sub-s. (2) of s.5 of the State Act implies that the single point
of taxation is fixed by the State Act at the resale by a registered dealer to
an unregistered dealer or to a consumer. As that is the reasoning on which the
High Court has proceeded in the judgment under appeal, we must hold that the
basis underlying the decision of the High Court cannot be accepted.
It
may be noted that the State Act as applied to the Union Territory of Delhi was
amended by Parliament in 1959, and s. 5A, was inserted. S. SA provides:
"Notwithstanding
anything to the contrary in this Act, the Chief Commissioner may, by
notification in the Official 993 Gazette, specify the point in the series of
sales by successive dealers at which any goods or class of goods may be
taxed." That provision clearly empowers the Chief Commissioner to specify
the single point in a series of sales at which single point taxation may be levied.
The widest amplitude of power has been conferred on the Chief Commissioner in
the matter of selecting the point for taxation in a series of sales and, if
that is so, clearly no single point can be spelled out, even by implication,
from the provision of sub- cl. (ii) of cl. (a) of sub-s. (2) of s. 5. For to do
so would mean either accepting an inconsistency between the two provisions or
narrowing down correspondingly the scope of s. 5A. We have already pointed out
that the provision for single point taxation cannot, in the view of this Court
expressed in Polestar Electronic (P) Ltd. (supra), be discovered in sub-cl.
(ii) of cl. (a) of sub-s (2) of s.5 of the State Act. To our mind, provision
has been made in that behalf in the statute by the insertion of s.5A. The High
Court has referred to the Statement of Objects and Reasons attached to the
Bengal Finance (Sales Tax) (Delhi Amendment) Act 1959 in support of its
conclusion that s.5A was inserted only to provide for the levy of tax at any
point other that the point of last sale so that sales-tax may be levied at the
first point on certain items which were manufactured in factories. It is well
settled that when the language of the statute is clear and admits to no
ambiguity, recourse to the Statement of Objects and Reasons for the purpose of
construing a statuory provision is not permissible. We are of opinion that
there is ample power under s 5A of the State Act enabling the Chief
Commissioner to specify the single point at which tax may be levied in a series
of sales. This can, however, be done by a him only by a notification in the
Official Gazette. No such notification has been placed before us which could
relate to the assessment year under consideration. We hold therefore that a
vital prerequisite of section 15 of the Central Sales Tax Act, namely, that the
tax shall not be levied at more than one stage, has not been satisfied in
respect of the turnover of cotton yarn, and accordingly the assessment
complained of is liable to be quashed.
While
concluding, we may point out that a somewhat similar question arose before this
Court in Bhawani Cotton Mills Ltd. v. The 994 State of Punjab and Another, (1)
the question being whether the second proviso to s. (i) of s.5 and sub-cl (vi)
of cl.
(a)
of sub-s. (2) of s. 5 of the Punjab General Sales Tax Act 1948 implied the
single point at which goods were taxable. The contention was negatived by This
Court. That is how that decision was understood by this Court subsequently in
Rattan Lal and Co. And Another v. The Assessing Authority And Another.(2)
Accordingly, we hold that the assessment of the turnover of cotton yarn for the
assessment ytra 1968-1969 under the Bengal Finance (Sales Tax) Act, 1941 as applied
to the Union Territory of Delhi cannot be sustained.
In
the result, the appeal is allowed, the judgment and order of the High Court of
Delhi are set aside and the assessment of the turnover of cotton yarn is
quashed. The appellant is entitled to its costs.
M.
L. A. Appeal allowed.
(1).
[1967] 20 S. T. C. 290.
(2).
11970] 25 S, T. C. 136.
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