Onkarlal Nandlal Vs. State of
Rajasthan & ANR [1985] INSC 202 (23 September 1985)
BHAGWATI, P.N. (CJ) BHAGWATI, P.N. (CJ)
PATHAK, R.S.
SEN, AMARENDRA NATH (J)
CITATION: 1986 AIR 2146 1985 SCR Supl.
(2)1075 1985 SCC (4) 404 1985 SCALE (2)1217
ACT:
Rajasthan Sales Tax Act, 1954, s.2(o)
Explanation II - Interpretation of - Effect of incorporating sub-s.(2) of s.4
of Central Sales Tax Act 1956 in the Explanation - Resale of goods in the course
of inter-State trade of commerce - Whether it can still be regarded as resale
within the State.
Interpretation of Statutes - Rule of
incorporation - Explained.
Practice & Procedure - Appeal directly
against an order by an Officer in the hierarchy - When can be entertained -
Art. 136, Constitution of India.
HEADNOTE:
The Rajasthan Sales Tax Act 1954 (State Act)
by Sub- section (o) of section 2 defines "sale" to mean inter alia
"any transfer of property in goods for cash or for deferred payment or for
any other valuable consideration. Explanation (ii) of section 2(o) provides
that "a transfer of property in goods shall be deemed to have been made
within the State if it fulfils the requirements of sub-sec. (2) of s. 4 of the
Central Sales Tax Act, 1956 (Central Act). Sub-s.(s) of sec.2 defines
"taxable turn over" to mean "that part" of turn over which
remains after deducting therefrom the aggregate amount of the proceeds of sale
of goods, which have been sold to persons outside the State for consumption
outside the State. Sub-s.(1) of sec.4 of the Central Act provides that subject
to the provisions contained in sec.3, when a sale or purchase is determined in
accordance with sub-s.2 to take place inside a State, such sale or purchase
shall be deemed to have taken place outside all other States. Sub-s.(2) lays
down that a sale or purchase of goods shall be deemed to take place inside a
State, if the goods are within the State in the case of specified or
ascertained goods, at the time the contract of sale is made.
The appellant-assessee, a registered dealer
both under the provisions of the State Act and the Central Act, purchased poppy
seeds against Declarations in Form No. S.T.17 furnished to the 1076 selling
dealers. In the Declarations in Form No. S.T.17 it was stated that the assessee
was purchasing the poppy seeds for the purpose of "resale within the
State". The assessee, resold the poppy seeds to different buyers under
contracts executed by and between the assessee and the buyers at Bhawani Mandi.
Admittedly, when these contracts were made between the assessee and the buyers,
the poppy seeds forming subject matter of the contracts were specific goods in
deliverable condition situate in Bhawani Mandi and the property in the poppy
seeds accordingly passed to the buyers under the contracts in Bhawani Mandi.
While completing the assessment of the assessee to sales tax for the assessment
years 1975-76 and 1976-77, the Commercial Tax Officer included the purchase
price paid by the assessee for the poppy seeds in his taxable turn over under
the provisions of second proviso to cl.4 of sub-s.(s) of s.2 of the State Act
on the ground that the resales of the poppy seeds effected by the assessee were
sales in the course of inter-State trade and commerce and were therefore not
sales within the State and hence the poppy seeds purchased by the assessee were
used for a purposed other than that mentioned in the Declarations.
Aggrieved by the aforesaid order, the
assessee preferred civil appeals Nos. 207 and 208 of 1983 by special leave
directly to Supreme Court. The facts of these appeals are broadly similar to
the facts of the other appeals comprised in this group. Counsel on behalf of
the appellant contended (i) that thought it was true that the resales effected
by it were sales in course of inter-State trade or commerce as defined in
sub-s.(3) of the Central Act, they were still sales within the State in
accordance with the principles formulated in sub-s.(2) of sec.4 of the Central
Act; (ii) that the resale by it being sales in the course of inter-State trade
or commerce, were not liable to be taxed by the State and could be taxed only
by the Central Government under the Central Act but that did not deprive the
resales of their character of sales within the State which character attached
to them by reason of sub-s.(2) of sec.4 which was incorporated in the State Act
by Explanation II to sub-s.(o) of sec.2 of the State Act and (iii) that what
was incorporated in Explanation II to sub-s.(o) of sec.2 of the State Act was only
sub-s.(o) of sec.2 of the State Act and not sub-s.(1) of sec.4 of the Central
Act and therefore the opening words in sub-s.(1) of sec.4 had no impact on the
provisions enacted in the Explanation. On the other hand, counsel for the
respondent Revenue argued (1) that if on an application of the principles set
out in sec.3 of the Central Act, a sale was a sale in the course of inter-State
trade or Commerce, it could not possibly be regarded as a sale within the 1077
State and (2) that since the resales effected by the appellant-assessee were
admittedly sales in the course of inter-State admittedly sales in the course of
inter-State trade or commerce, they could not be said to be resales within the
State as envisaged in the Declarations in From No.ST 17.
Allowing the appeals, ^
HELD : 1. It cannot be said that the assessee
used the goods for a purpose other than that mentioned in the Declarations. The
assessee resold the goods within the State as mentioned in the Declarations in
Form No. ST.17 furnished by him to be selling dealers. The assessments made on
each assessee to the extent that the assessments sought to include in the
taxable turnover the purchase price paid by the assessee in respect of the
goods purchased against Declarations in Form No. ST.17 furnished to the selling
dealers are set aside. [1090 D-E]
2. There is, no antithesis between a sale in
the course of inter-State trade or commerce and a sale inside the State. Even
an inter-State sale must have a situs and the situs may be in one State or
another. It does not involve any contradiction in saying that an inter-state
sale or purchase is inside a State or outside it. The situs of a sale may fall
for consideration from more than one point of view. It may require to be
considered for the purpose of determining its exigibility to tax as also for
other purposes such as the one arising in the present cases. Of course, a sale
which is in the course of inter-State trade or commerce cannot be taxed by a
State Legislature even if its situs is within the State, because the State
Legislature has no legislative competence to impose tax on sale in the course
of inter-State trade or commerce. That can be done only by Parliament. If
therefore a question arises whether a sale is exigible to tax by the State Legislature,
it may have to be considered whether it is a sale in the course of inter-State
trade or commerce. The same sale in another context may have to be examined
from a different point of view for determining where its situs lies and whether
it is a sale inside the State or outside the State. There is therefore no
incompatibility in the same sale being both a sale in the course of inter-State
trade or commerce within the meaning of sec.3 of the Central Act as also a sale
inside the State in accordance with the principles laid down in sub-s. 2 of
sec.4 of the Central Act. [1086 D-H; 1087 A]
3. It is a recognised cannon of construction
that an expression used in a rule, bye law or form issued in exercise of 1078
power conferred by a statute must, unless there is anything repugnant in the
subject or context, have the same meaning as is assigned to it under the
statute. The expression "resale within the State" in Form No. ST17
must therefore be read in the light of Explanation II to sub-s. (o) of sec.2 of
the State Act which lays down as to when a sale shall be deemed to have been
made within the State and this provision in the Explanation must govern the
determination of what is "resalw within the State" within the meaning
of that expression as used in Forom No. ST17. [1087 C-E] 3.(ii) Explanation II
to sub-s.(o) of sec.2 of the State Act, enacts as to when a sale shall be
deemed to be a sale within the State by reference to sub-s.(2) of sec.4 of the
Central Act. It is only sub-s.(o) of sec.2 which is incorporated in Explanation
II to sub-s.(o) of sec.2 of the State Act and the Court is called upon to
consider as to what is the effect of such incorporation. The Court is not
concerned with the interpretation of sub-s.(1) or sub-s.(2) of s.4 in the
context of s.3 of the Central Act. The State Legislature could have very well
reproduced the entire language of sub-s.(2) of sec.4 bodily in Explanation II
to sub-s.(o) of sec.2 but it preferred to employ a simplar device by
incorporating by reference the provisions of sub- s.(2) of sec.4 in Explanation
II to sub-s.(o) of sec.2. The rule of incorporation is that when a subsequent
Act amends an earlier one in such a way as to incorporate itself, or a part of
itself, into the earlier, then the earlier Act must thereafter be read and
construed (except where that would lead to a repugnancy, inconsistency or
absurdity) as if the altered words had been written into the earlier Act with
pen and ink and the old words scored out so that thereafter there is no need to
refer to the amending Act at all.
Therefore, Explanation II to sub-s.(o) of
sec.2 must be interpreted as if sub-s.(2) of sec.4 were written out verbatim in
the Explanation and once sub-s.(2) of sec.4 is written out in the Explanation,
there is no occasion or need to refer to the Central Act from which this
incorporation is made or to its purpose or context. [1087 E-F; 1088 H; 1089
A-C; 1089 C-D] In re Wood's Estate (1886) 31 Ch. D. 607 & Shamrao v. Parulekar,
District Magistrate, Thana A.I.R. 1952 S.C. 324, relied upon.
Craies on Statute Law, 5th Edition, page 207,
Crawford on Statutory Construction page 110, referred to.
Commissioner of Sales tax v. Godrej Soap
Private Ltd.
23 S.T.C. 489, State of Orissa v. Johri Mal
37 S.T.C. 157 and Georgopoulos v. State of Maharashtra 37 S.T.C. 187, approved.
1079 M/s. Polestar Electronic (Pvt.) Ltd. v.
Addl.
Commissioner Sales Tax and Anr. [1978] 1
S.C.C. 636, referred to.
In the instant case, at the time when the
contracts of resale were made by the assessee, the goods were specific
ascertained goods lying at Bhawani Mandi inside the State and if that be so,
the resales affected by the assessee must be deemed to have taken place inside
the State on the principles laid down in sub-s.(2) of sec.4 of the Central Act
as incorporated in Explanation II to sub-s.(o) of sec.2 of the State Act. It
did not make any difference to this position that the resales were sales in the
course of inter- State trade or commerce. The only consequence of the resales
being sales in the course of inter-State trade or commerce was that they were
not taxable under the State Legislation.
[1089 F-G] Ordinarily the Supreme Court does
not entertain an appeal directly against an order made by an officer in the
hierarchy, when there are other remedies by way of appeal or revision provided
to an assessee under the statute. However, it would be futile to drive the
assessee to the procedure of appeal and revision and then a Writ Petition to
the High Court when the High Court in another case has already taken the view
that when a resale is made by an assessee which is in the course of inter-State
trade or commerce, it cannot be regarded as a resale within the State and hence
such resale would constitute a breach of the Declaration given by the assessee
to the selling dealer so as to attract of the applicability and the purchase
price paid by the assessee would consequently be liable to be included in the
taxable turnover of the assessee. [1081 C-G]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 207-08 of 1983 etc.
From the Judgment and Order dated 22.9.1982
of the Commercial Taxes Officer, Jhalawar for Tax Assessment Year (1) 1982-83.
Soli J. Sorabjee, F.S. Nariman, R.L. Ghieya
and S.K.
Jain for the Appellant.
Dr. L.M. Singhvi and B.D. Sharma for the
Respondents.
The Judgment of the Court was delivered by
1080 BHAGWATI, C.J. These appeals by special leave raise a short question of
construction of certain provisions of the Rajasthan Sales Tax Act 1954
(hereinafter referred to as the State Act). It is a pure question of law and
does not depend for its determination on the distinctive facts of any
particular case out of this group of appeals but in order to arrive at a proper
determination, it is necessary to consider this question in its proper
perspective and therefore the broad constellation of facts in which the
question arises may be briefly stated.
We will confine ourselves only to the facts
of Civil Appeal Nos. 207-208 of 1983 for the facts of this appeal are broadly
similar to the facts of the other appeals comprised in this group. The assessee
is a partnership firm which carries on business in grains, oil seeds, poppy
seeds etc., in Bhawani Mandi in District Jhalawar in the State of Rajasthan.
The assessee is a registered dealer under the provisions of the State Act and
is also registered as a dealer under the provisions of the Central Sales Tax
Act 1956 (hereinafter referred to Central Act). The assessment year with which
we are concerned in this appeal are assessment years 1975-76 and 1976-77.
During these two assessment years, the assessee purchased poppy seeds against
Declarations in Form No. S.T. 17 furnished to the selling dealers. These
Declarations in Form No. S.T. 17 stated that the assessee was purchasing the
poppy seeds for the purpose of resale within the State. The assessee, after
purchasing the poppy seeds against these Declarations, resold the same to
different buyers under contracts executed by and between the assessee and the
buyers at Bhawani Mandi. It was not disputed that at the date when these
contracts were made between the assessee and the buyers, the poppy seeds
forming subject matter of the contracts were specific goods in deliverable
condition situate in Bhawani Mandi and the property in the poppy seeds
accordingly passed to the buyers under the contracts in Bhawani Mandi. The
resale of poppy seeds to the buyers were therefore, according to the assessee,
sales within the State and it could not be said that the poppy seeds purchased
by the assessee were used by it for any purpose other than the one mentioned in
the Declarations furnished by the assessee to the selling dealers. But while
completing the assessment of the assessee to sale tax for the assessment years
1975-76 and 1976-77, the Commercial Tax Officers took the view that the resale
of the poppy seeds effected by assessee were sales in the course of inter-State
trade and commerce and were therefore not sales within the State and hence the
poppy seeds purchased by the assessee were used for a purpose 1081 other than
that mentioned in the Declarations furnished by the assessee to the selling
dealers and consequently the purchase price of the poppy seeds was liable to be
included in the taxable turn over of the assessee. The Commercial Tax Officer
accordingly passed two assessment orders on 22nd September 1982, one for the
assessment year 1975-76 and the other for the assessment year 1976-77 and
included the purchase price paid by the assessee for the poppy seeds in the
taxable turn over of the assessee. The assessee there upon preferred the
present appeal by special leave directly to this Court.
Now at the outset we should like to make it
clear that ordinarily we do not entertain an appeal directly against an order
made by an officer in the hierarchy, when there are other remedies by way of
appeal or revision provided to an assessee under the statute. Here the assessee
could have preferred an appeal against the order of assessment made by the
Commercial Tax Officer and he could have then gone in revision to the Board of
Revenue and thereafter to the High Court under article 226 or 227 of the
Constitution and then, if he was aggrieved by the order passed by the High
Court, he could come to this Court under Article 136. We would have ordinarily
insisted on the assessee going through this hierarchy of judicial process and
declined to entertain the petition for special leave directly against the order
of assessment made by the Commercial Tax Officer. But we were informed by the
learned Advocate appearing on behalf of the assessee, and this was not
controverted by the learned advocate appearing on behalf of the Department,
that the High Court in another case has already taken the view that when a
resale is made by an assessee which is in the course of inter-State trade or
commerce, it cannot be regarded as a resale within the State and hence such
resale would constitute a breach of the Declaration given by the assessee to
the selling dealer so as to attract of the applicability and the purchase price
paid by the assessee would consequently be liable to be included in the taxable
turnover of the assessee. It would therefore, argued the learned counsel for
the assessee, be futile to drive the assessee to the procedure of appeal and
revision and then a Writ Petition to the High Court. This contention urged on
behalf of the assessee had force and we accordingly granted special leave and
entertained this appeal. Similarly we granted special leave in the other cases
as well and hence those appeals are placed before us alongwith this appeal.
The short but interesting question that
arises for consideration on these facts is : when an assessee Purchases 1082
goods from a selling dealer against a Declaration in Form No. ST 17 starting
that the goods are being purchased by him for resale within the State and he
then proceeds to resell the goods and such resale is in the course of
inter-State trade or commerce, would such resale be liable to be regarded as a
sale not within the State for the purpose of the Declaration in Form No. ST 17,
merely because it is a sale in the course of inter-State trade or commerce.
Would the character of such resale, namely, that it is a sale in the course of
inter-State trade or commerce be inconsistent with its being also a sale within
the State as contemplated in the Declaration in Form No. ST 17. The
determination of this question depends on the true interpretation of a few
relevant provisions of the State Act. Section 2 is the definition Section and
it defines various terms used in the State Act. Sub-section (o) of Section 2 defines
sale to mean inter alia "any transfer of property in goods for cash or for
deferred payment or for any other valuable consideration". There are two
Explanations to Section 2 sub- section (o). We need not refer to the first
Explanation since it has no bearing on the issues arising in these appeals but
the second Explanation is material and it may be reproduced as follows :
"A transfer of property in goods shall
be deemed to have been made within the State if it fulfils the requirements of
sub-section (2) of Section 4 of the Central Sales Tax Act, 1956 (Central Act 74
of 1956.)" "Sale Price" is defined in Section 2 sub-section (p)
to mean inter alia "the amount payable to a dealer as consideration for
the sale of any goods, less any sum allowed as cash discount". Then there
is the definition of "turn over" in sub-section (t) of Section 2 and
according to this definition, "turn over" means "the aggregate
of the amount of sale price received or receivable by a dealer in respect of
the sale or supply of goods in the carrying out of any contract." The
expression "taxable turn over" is defined in sub-section (s) of
Section 2 and it provides inter alia that "taxable turn over" means
"that part of turn over which remains after deducting therefrom the
aggregate amount of the proceeds of sale of goods, which have been sold to
persons outside the State for consumption outside the State". It is clear
on a combined reading of these definitions that "taxable turn over"
means the aggregate amount of sale price received or receivable by a dealer in
respect of sales of goods within the State. It is only sales of goods within
the State which can be taxed by the State Legislature Clause (i) of Article 286
of the 1083 Constitution provides inter alia that no law of a State shall
impose or authorise the imposition of a tax on the sale or purchase of goods
where such sale or purchase takes place outside the State and Clause (ii) of
that Article empowers Parliament to formulate principles for determining when a
sale or purchase of goods can be said to have taken place outside the State.
These principles have been formulated by Parliament in Section 4 of the Central
Act which reads :
"4. When is a sale or purchase of goods
said to take place outside a State - (1) Subject to the provisions contained in
Section 3, when a sale or purchase is determined in accordance with sub-
section (2) to take place inside a State, such sale or purchase shall be deemed
to have taken place outside all other States.
(2) A sale or purchase of goods shall be
deemed to take place inside a State, if the goods are within the State (a) in
the case of specific or ascertained goods, at the time the contract of sale is
made; and (b) in the case of unascertained or future goods, at the time of
their appropriation to the contract of sale by the seller or by the buyer,
whether assent of the other party is prior or subsequent to such
appropriation." Sub-section (2) of Section 4 lays down the principles for
determining when a sale or purchase of goods shall be deemed to take place
inside the State. Once on the application of these principles set out in
sub-section (2) of Section 4, it is determined that a sale or purchase of goods
has taken place inside a particular State, both according to general principles
as also by the express words of sub-section (1) of Section 4 it must be deemed
to have taken place outside all other States. Such sale or purchase can then be
fixed only by the State in which it must be deemed to have taken place on the
application of the principles set out in sub- section (2) of Section 4 and no
other State can impose tax on such sale or purchase by reason of Clause (i) of
Article 286. Parliament has also in Section 3 of the Central Act formulated
principles for determining when a sale or purchase of goods can be said to take
place in the course of inter-State trade or commerce and in Section 5 of the
Central Act 1084 principles have been formulated for determining when a sale or
purchase of goods can be said to take place in the course of import or export.
These principles were necessary to be formulated because a sale or purchase of
goods in the course of inter-State trade or commerce cannot be taxed by a State
on account of Entry 92A in List I of the Seventh Schedule of the Constitution
which sets out the topic of tax on sale or purchase of goods in the course of
inter-State trade or commerce within the exclusive legislative competence of
Parliament and so far as sale or purchase of goods in the course of import or
export is concerned it is also not taxable by a State by reason of Clause (i)
of Article 286.
It is necessary to mention here that
sub-section (1) of Section 4 opens with the words "Subject to the
provisions contained in Section 3", but when we turn to Explanation II to
sub-section (o) of Section 2 of the State Act we find that what is incorporated
in that sub-section is only sub- section (2) of Section 4 and not sub-section
(1) of Section 4 nor Section 3 or Section 5 of the Central Act.
Now the Declarations in Form No. ST 17
furnished by the assessee to the selling dealers uniformally stated that the
goods were purchased by the assessee for the purpose of resale within the
State. The advantage of furnishing a Declaration in Form No. ST 17 is that the
selling dealer would not be liable to pay sales-tax on the sale effected by him
against the Declaration and the assessee would not therefore have to pay to the
selling dealer sales-tax as part of the purchase price nor would the assessee
be liable to pay any purchase tax on the purchase made by him on account of the
saving enacted in Section 5A of the State Act. But the second proviso to clause
(iv) of sub-section (s) of Section 2 of the State Act provides as to what would
be the consequence if an assessee purchases goods without paying any tax on the
strength of a Declaration furnished by him and the goods are then used by him
for a purpose other than the one mentioned in the Declaration. It enacts the
following provision with a view to penalising an assessee who commits a breach
of the statement made by him in the Declaration:
"Provided further that when any dealer
has purchased any goods without paying any tax on the strength of any
declaration furnished by him and the said goods are used by him for any purpose
other than the one mentioned in the declaration, the purchase price of such
goods shall be included in his taxable turn over." 1085 It was on the
basis of this proviso that the Commercial Tax Officer sought to tax the
assessee on the purchase price paid by it to the selling dealers on the ground
that the assessee had not resold the goods within the State but had resold them
in the course of inter-State trade or commerce and thus use the goods for a
purpose other than that mentioned in the, Declarations in Form No. ST 17. The
question is whether this view taken by the Commercial Tax Officer is right.
The principal argument advanced on behalf of
the Department was that since the resales effected by the assessee were
admittedly sales in the course of inter-State trade or commerce they could not
be said to be resales within the State as envisaged in the Declarations in Form
No. ST 17 and the goods were therefore used by the assessee for a purpose other
than that mentioned in the Declarations.
The Department contended that if on an application
of the principles set out in Section 3 of the Central Act, a sale was a sale in
the course of inter-State trade or commerce, it could not possibly be regarded
as a sale within the State and in support of this conention the Department
relied on the opening words "Subject to the provisions contained in
Section 3" in sub-section (1) of Section 4 of the Central Act. The
assessee on the other hand contended that though it was true that the resales
effected by it were sales in the course of inter-State trade or commerce as
defined in sub- section (3) of the Central Act, they were still sales within
the State in accordance with the principles formulated in sub-section (2) of
section 4 of the Central Act. The argument of the asessee was that the resales
effected by it being sales in the course of inter-State trade or commerce were
not liable to be taxed by the State and could be taxed only by the Central
Government under the Central Act but that did not deprive the resales of their
character of sales within the State which character attached to them by reason
of sub-section (2) of Section 4 which was incorporated in the State Act by
Explanation II to sub-section (o) of Section 2 of the State Act. The answer
given by the assessee to the argument of the Department based on the opening
words of sub-section (1) of Section 4 of the Central Act was that what was
incorporated in Explanation II to sub-section (o) of Section 2 of the State Act
was only sub-section (2) of Section 4 and not sub-section (1) of Section 4 of the
Central Act and therefore the opening words in sub-section (1) of Section 4 had
no impact on the provisions enacted in Explanation. These rival arguments
raised an interesting question of interpretation and though it is res integra
so far as this Court is concerned we find that there 1086 are a large number of
decisions of various High Courts which have accepted the construction contended
for on behalf of the assessee. We may refer only to a few of these decisions
namely, Commissioner of Sales Tax v. Godrej Soap Private Limited 23 S.T.C 489,
State of Orissa v. Johri Mal 37 S.T.C 157 and Georgopoulos v. State of
Maharashtra 37 S.T.C 187.
We may first clear the ground by stating
facts which were not in dispute between the parties. There were two basic facts
on which there was no dispute. One was that the resales effected by the
assessee were sales in the course of inter-State trade or commerce within the
meaning of section 3 of the Central Act. The assessee did not dispute the
correctness of this position. The second was that at the time when the
contracts of resale were made by the assessee, the goods were specific
ascertained goods situate in Bhawani Mandi, that is, within the State and on
the principles formulated in sub-section (2) of section 4 of the Central Act,
the resale effected by the assessee were deemed to take place inside the State.
The only question is whether by reason of the resale being sales in the course
of inter- State trade or commerce, they ceased to be sales inside the State. We
do not think the answer to this question admits to any serious doubt. There is,
in our opinion, no antithesis between a sale in the course of inter-State trade
or commerce and a sale inside the State. Even an inter-State sale must have a
situs and the situs may be in one State or another. It does not involve any
contradiction in saying that an inter-State sale or purchase is inside a State
or outside it. The situs of a sale may fall for consideration from more than
point of view. It may require to be considered for the purpose of determining
its exigibility to tax as also for other purposes such as the one arising in
the present case. Of course a sale which is in the course of inter-state trade
or commerce cannot be taxed by a State Legislature even if its situs is within
the State, because the State Legislature has no legislative competence to
impose tax on sale in the course of inter-State trade or commerce. That can be
done only by Parliament. If therefore a question arises whether a sale is
exigible to tax by the State Legislature, it may have to be considered whether
it is a sale in the course of inter-State trade or comemerce.
The same sale in another context may have to
be examined from a different point of view for determining where its situs lies
and whether it is a sale inside the State or outside the State. There is
therefore no incompatibility in the same sale being both a sale in the course
of inter-state trade or commerce within the meaning of Section 3 of the Central
Act as also a sale 1087 inside the State in accordance with the principles laid
down in sub-section (2) of Section 4 of the Central Act.
Now let us turn to consider the purpose
mentioned in the Declarations in Form No. ST 17 furnished by the assessee to
the selling dealers. The purpose for which the goods were purchased by the
assessee was stated in the Declarations to be "resale within the
State". Obviously the expression "resale within the State" in
Form No. ST 17 must bear the same meaning it has in the State Act. Form No. ST
17 has been prescribed by the State Government in exercise of the power
conferred under Section 26 of the State Act and it is a recognised cannon of
construction that an expression used in a rule, by law or form issued in
exercise of power conferred by a statute must, unless there is anything
repugnant in the subject or context, have the same meaning as is assigned to it
under the statute. The expression "resale within the State" in Form
No. ST 17 must therefore be read in the light of Explanation II to sub-section (o)
of section 2 of the State Act which lays down as to when a sale shall be deemed
to have been made within the State and this provision in the Explanation must
govern the determination of what is "resale within the State" within
the meaning of that expression as used in Form No. ST 17.
That takes us to a consideration of
Explanation II to sub-section (o) of Section 2 of the State Act. This
Explanation enacts as to when a sale shall be deemed to be a sale within the
State by reference to sub-section (2) of Section 4 of the Central Act. If a
sale fulfils the requirements of sub-section (2) of Section 4 of the Central
Act, it shall be deemed to be a sale within the State and it will be so also
for the purpose of the Declaration in Form No. ST 17. It is with reference to
the requirements of sub- section (2) of Section 4 that we shall have to judge
whether the resales effected by the assessee were sales within the State. But
before we do so, it would be convenient at this stage to refer to the argument
of the Department based on the opening words "Subject to the provisions
contained in section 3" in sub-section (1) of Section 4 of the Central
Act. The Department argued that since the enactment in sub- section (1) of
Section 4 is expressly made subject to the provision contained in Section 3,
the latter provision must over-ride the former and therefore, once it is found
on an application of the principles formulated in Section 3 that a sale is in
the course of interstate trade or commerce, the provision enacted in Section 4
would have no application and it cannot be said of such a sale that it 1088 is
a sale inside the State. This argument of the Department suffers from an
obvious fallacy. In the first place, all that the opening words "Subject
to the provisions contained in Section 3" intend to convey is that even
where a sale is determined in accordance with sub-section (2) of Section 4 to
take place inside a State and therefore outside all other States, it would not
exclude the applicability of Section 3 and if it satisfies the requirements of
that section, it would still be a sale in the course of inter-state trade or
commerce taxable under the provisions of the Central Act.
Secondly, we are not concerned here with the
interpretation of sub-section (1) or sub-section (2) of section 4 in the
context of Section 3 of the Central Act. We are concerned only with Explanation
II to sub-section (o) of Section 2 of the State Act and that Explanation refers
only to sub- section (2) of section 4 and not to sub-section (1) of that
section or to section 3. It is only sub-section (2) of Section 4 which is
incorporated in Explanation II to sub- section (o) of section 2 of the State
Act and we are called upon to consider as to what is the effect of such
incorporation. The State Legislature could have very well reproduced the entire
language of sub-section (2) of section 4 bodily in Explanation II to
sub-section (o) of Section 2 but it preferred to employ a simpler device by
incorporating by reference the provisions of sub-section (2) of Section 4 in
Explanation II to sub-section (o) of section 2. The doctrine of incorporation
by reference has been succintly explained by Lord Esher, M.R. in In re Wood's
Estate (1886) 31 Ch. D. 607 in the following words :
"It is to put them into the Act of 1855,
just as if they had been written into it for the first time. If a subsequent
Act brings into itself by reference some of the clauses of a former Act, the
legal effect of that, as has often been held, is to write those sections into
the new Act just as if they had been actually written in it with the pen, or
printed in it, and, the moment you have those clauses in the later Act, you
have no occasion to refer to the former Act at all." This Court also
explained the doctrine of incorporation by reference in similar terms in
Shamrao v. Parulekar, v. District Magistrate, Thana A.I.R. 1952 S,C. 324, when
Court observed :
"The rule is that when a subsequent Act
amends an earlier one in such a way as to incorporate itself, or a part itself,
into the earlier, then the earlier Act 1089 must thereafter be read and
construed (except where that would lead to a repugnancy, inconsistency or
absurdity) as if the altered words had been written into the earlier Act with
pen and ink and the old words scored out so that thereafter there is no need to
refer to the amending Act at all. This is the rule in England :
see Craies on Statute Law, 5th Edition, page
207;
it is the law in America: see Crawford on
Statutory Construction, page 110; and it is the law which the Privy Council
applied to India in Keshors Poddar v. Nandulal Mallick." We must therefore
proceed to interpret Explanation II to sub-section (o) of Section 2 as if
sub-section (2) of section 4 were written out verbatim in the Explanation and
once sub-section (2) of Section 4 is written out in the Explanation, there is
no occasion or need to refer to the Central Act from which this incorporation
is made or to its purpose or context. We need not therefore allow ourselves to
be oppressed by the opening words "Subject to the provisions contained in
Section 3" in sub-section (1) of Section 4 or by the context in which
Section 4 occurs in the Central Act.
We must accordingly read Explanation II to
sub-section (o) of Section 2 of the State Act as if sub-section (2) of section
4 of the Central Act were written into it and then proceed to apply the
Explanation to the facts of the present case in order to determine whether the
resales effected by the assessee were sales inside the State within the meaning
of the Explanation. Now it was not disputed on behalf of the Department that at
the time when the contracts of resale were made by the assessee, the goods were
specific ascertained goods lying at Bhawani Mandi inside the State and if that
be so, the resales effected by the assessee must be deemed to have taken place
inside the State on the principles laid down in sub-section (2) of Section 4 of
the Central Act as incorporated in Explanation II to sub-section (o) of Section
2 of the State Act. It did not make any difference to this position that the
resales were sales in the course of inter-State trade or commerce. The only
consequence of the resales being sales in the course of inter-State trade or
commerce was that they were not taxable under the State Legislation. But there
is no provision in the State Act which requires that in order that an assessee
may be exempt from purchase tax in respect of purchase of goods made by him
against a Declaration in Form No. ST 17, he must resell the goods within the
State in such a manner 1090 that such resale becomes exigible to tax under the
State Legislation. We had occasion to consider a similar question in M/s
Polestar Electronic (Pvt.) Ltd. v. Addl.
Commissioner, Sales Tax and Anr., [1978] 1
S.C.C. 636, where we pointed out in relation to the Bengal Finance (Sales Tax)
Act 1941 as applicable in Delhi that the words "for resale by him"
included not only resale in Delhi but also outside Delhi even if no tax was
exigible under that legislation on sale outside Delhi. But apart from the fact
that it makes no difference that the resales offected by the assessee were not
exigible to tax under the State Legislation, it may be possible to contend that
such resales were taxable under the Central Act and if that be so, a
substantial part of the tax recovered under the Central Act would go to the
State to agument its revenues.
We are therefore of the view that the
assessee resold the goods within the State as mentioned in the Declarations in
Form No. ST 17 furnished by the assessee to the selling dealers and it cannot
be said that the assessee used the goods for a purpose other than that
mentioned in the Declarations. We must therefore allow these appeals and set
aside the assessments made on each assessee to the extent that the assessments
sought to include in the taxable turnover the purchase price paid by the
assessee in respect of the goods purchased against Declarations in Form No. ST
17 furnished to the selling dealers. The respondents will pay to the assessee
in each appeal costs throughout including the costs of the appeal.
M.L.A. Appeals allowed.
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