TaxTMI 
TaxTMI 
1967 (4) TMI 110
X X X X Extracts X X X X
X X X X Extracts X X X X
....g judgment on 23rd November, 1965: GROVER and JINDRA LAL, JJ.-This judgment will dispose of Civil Writs Nos. 1913 and 1914 of 1962, 1591 of 1963, 344 of 1964, 191 of 1964, 291 of 1964, 1397 of 1963, 2342 and 2343 of 1963, 2341 of 1963, and 2576 of 1964. In the group of petitions filed by the Bhawani Cotton Mills, Limited (Civil Writs Nos. 1913 and 1914 of 1962 and 1591 of 1963), the facts in the third petition may be stated. The petitioner is a company registered under the Indian Companies Act. Its business consists of manufacturing cotton yarn and sale of surplus ginned cotton. For that purpose it purchases either ginned cotton or unginned cotton. In the case of unginned cotton it gets it ginned from the ginners. The ginned cotton is used for the manufacture of yarn. The petitioner is registered as a dealer under the Punjab General Sales Tax Act, 1948 (hereinafter called the principal Act). The petitioner filed its returns for the year 1962-63 under the principal Act and also deposited the tax due in accordance there- with. The case of the petitioner came up for assessment for that year before the Assessing Authority and several contentions were raised before it. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 2 of the principal Act. According to this definition: "2. (ff) 'Purchase', with all its grammatical or cognate expressions, means the acquisition of goods other than sugarcane, foodgrains and pulses for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge: * * *" By Punjab Act 13 of 1959 the words "other than sugarcane, foodgrains and pulses" were omitted. After the amendment made by Punjab Act 24 of 1959, clause (ff) stood as follows: "(ff) 'Purchase', with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge." The rate of tax as provided by Punjab Act 7 of 1958 was 4 per cent. on the sales or purchases of the commodities. The Central Sales Tax Act, 1956, was enacted in December, 1956. Section 14 of that Act declared a number of goods to be of special importance in inter-State trade or commerce. One of those was "cotton", that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e than under a mortgage, hypothecation, charge or pledge." By the same Act, the second proviso to section 5(1) of the principal Act was inserted to the effect that "the rate of tax shall not exceed two naye paise in a rupee in respect of any declared goods as defined in clause (c) of section 2 of the Central Sales Tax Act, 1956, and such tax shall not be levied on the purchase or sale of such goods at more than one stage." Sub-clause (vi) of section 5(2)(a) of the principal Act, as substituted by Punjab Act 18 of 1960, stands thus: "(vi) the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the territory of India: Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction." The first point which calls for determination and which has been canvassed, relates to the validity and legality of the second proviso to section 5(1) and sub-clause (vi) of sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the purchase, but the tax liability is attracted to it only when that purchase also satisfies the test of being at the stage of last purchase as mentioned in item 2 of the Second Sche- dule to that Act. It has been observed in that case that section 15 of the Central Act of 1956 contains an absolute direction that the State law in respect of declared goods shall make provisions for levy of sales tax at one stage only. The stage thus indicated must refer to a succession of sales to which a commodity will be subjected in the normal course of trade or commerce. Declared goods by definition are goods of special importance in inter-State trade or commerce. The object of single point levy for them, together with the fixation of a particular upper limit to the rate of tax, is to ensure that the price of such goods to the manufacturer or consumer is not unduly enhanced by the multi-point levy of tax at different stages, and also at variable and high rates of assessment by different States. The successive sales of goods mark, therefore, successive stages in a chain. The stage of last purchase or last sale in a State will be reached just before the goods are caught up in the stream of export....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le C and the meaning of "turnover" as defined by section 2(i), which is stated to include the aggregate of the amount of sales and purchases and parts of sales and purchases actually made by any dealer during the given period. According to section 5(1), the tax has to be levied on the taxable turnover every year of a dealer. Section 5(2) defines the expression "taxable turnover". It means that part of a dealer's gross turnover during any period which remains after deducting therefrom his turnover during that period on the various transactions specified therein. By reference to sub-clause (vi), taxable turnover would mean the dealer's gross turnover less his turnover on the purchase of goods which are sold not later than six months after the close of a year to a registered dealer. Each purchaser, therefore, will have to include in his quarterly return the turnover on the goods purchased by him during that quarter and deposit tax on it in accordance with the provisions contained in section 10 of the principal Act. In this manner tax will be levied at more than one stage. In this connection, the provisions of section 12 of the principal Act and rule 48 of the Punjab General Sales Tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Central Act of 1956 where the word "levy" has been used in the sense of "collect" as in the context it can admit of no other interpretation. In Hazari Mal Kuthiala v. Income-tax Officer [1956] 30 I.T.R. 500., Bhandari, C.J., delivering the judgment of the Bench examined the meaning of the expressions "levy" "assessment" and "collection" in section 13 of the Finance Act. His discussion may be reproduced in his own words: "To 'levy' a tax means 'to impose or assess' or 'to impose, assess or collect under the authority of law'. It is a unilateral act of superior legislative power to declare the subjects and rates of taxation and to authorise the Collector to proceed to collect the tax. 'Assessment' is the official determination of liability of a person to pay a particular tax. 'Collection' is the power to gather in money for taxes, by enforced payment if necessary. The levy of taxes is generally a legislative function; assessment is a quasi-judicial function and collection an executive function. These three expressions 'levy', 'assessment' and 'collection' are of the widest significance and embrace in their broad sweep all the proceedings which can possibly be imagined for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... after the close of the year it would not be possible for the dealer to file a return and deposit the tax in accordance with the impugned rules quarterly before the expiry of the above period of six months. After referring to sections 10 and 12 of the principal Act and the other relevant provisions, the submissions made were repelled by the Bench and it was held that the rules were perfectly valid. It was further observed that "in modern taxation laws, it is not unusual to find a provision the effect of which is to make imperative the initial deposit of tax which may in certain contingencies have ultimately to be refunded on the ground that it was not due". Counsel for the State has emphasised the coercive aspect of levy when its meaning is considered in connection with the process of collection. He also says that even if the word "levy" is to be taken to mean to impose, assess or collect under the authority of law it can only mean collection after assessment and not a deposit which a dealer has to make in accordance with his quarterly return under section 10 of the principal Act. There is a good deal of substance in this submission and we are not inclined to agree with the counsel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be observed quite emphatically that it is highly desirable in the interest of the dealers as also the department that appropriate legislation should be enacted for making the stage of levy of tax more clear and precise and that a single point be fixed at which the tax can be levied as has been done in most of the other States in the country. The next point which arises for decision relates to the effect of issuing a notification under section 5 of the principal Act specifying the rate of tax on Schedule C goods on 26th September, 1961. That notification (No. 6164-E & T (III)-61/5453) was as follows: "In exercise of the powers conferred by sub-section (1) of section 5 of the Punjab General Sales Tax Act, 1948, and all other powers enabling him in this behalf, the Governor of Punjab is pleased to make the following amendment in the Punjab Government Notification No. 1864-E & T-58/1012, dated the 19th April, 1958: AMENDMENT For proviso (ii) to the said notification, the following shall be substituted, namely: '(ii) the rate of tax on the purchase of goods specified in Schedule 'C' appended to the said Act shall be two naye paise in a rupee.'" The contention raised on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Act may be referred to briefly with advantage. It was by Punjab Act 13 of 1959 that Schedule C was inserted by section 19 of that Act after Schedule B. It stood as follows: "SCHEDULE C (See Section 6) 1. 2. 1. All goods which are or which may from time to time be specified in the first column of Schedule B Subject to the conditions and exception if any, set up against each in the second column of Schedule B." 2. Sugarcane 3. Foodgrains 4. Pulses 5. Cane (Baint) 6. Mulberry wood Section 6 provided for tax-free goods and, therefore, Schedule C at that time had reference only to those goods. Schedule C with reference to the definition of "purchase" in section 2(ff) was first sub- stituted by Punjab Act 24 of 1959. It finally took the following shape after enactment of Punjab Act 18 of 1960. "SCHEDULE C [See section 2(ff)] 1.. Cotton, that is to say, all kinds of cotton (indigenous or Imported) in its unmanufactur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therein, "a factor, a broker, a commission agent, a dealer's agent, an auctioneer or any other mercantile * * * * * who carries on the business of selling, supplying or purchasing goods and who has in the customary course of business, authority to sell goods belonging to principals or to purchase goods on their behalf is a dealer". In the above petition the assessee made an attempt to summon certain parties from whom the purchases had been made for the purpose of showing that they were registered dealers who had supplied cotton seeds to the petitioners by purchasing the same from third parties. It was alleged there was no privity of contract between the petitioners and the third parties and the latter never knew that the commission agents were making purchases for the petitioners. The commission agents despatched the goods to the petitioners and transferred title in them not in pursuance of any contract of sale but on account of a contract of agency. The relationship between the commission agents and the petitioners was that of agents and principal and not that of seller and purchaser. It was urged before the Assessing Authority that when the goods were purchased by the petitioners....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh a commission agent, is qua the persons entering into forward contracts in the position of a principal. He is liable to both parties for the performance of the contract. The position of a pakka arhtia is analogous to that of a del credere agent who incurs only a secondary liability towards the principal, and whose legal position is partly that of an insurer and partly that of a surety for the parties with whom he deals to the extent of any default by reason of insolvency or something equivalent. He is himself vitally interested in the performance of the contract that has been entered into through him [see Indian Contract Act by A.C. Dutt, Third Edition (1951) at page 806]. It has been necessary to advert to the various situations that can arise as a result of the contract entered into between the commission agents and their principals because without a complete investigation of the entire terms of the contract and the course of dealings between the parties the Assessing Authority would not be in a position to determine on whom the purchase tax should be levied. In these, of the cases which are being decided by us where this matter was specifically raised before the Assessing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....May, 1955, by the Punjab Government Notification No. 2183-E. & T. (CH)-54/533, entry No. 54-"fodder of every type (dry or green)" was added. Entry No. 43-"oil-cakes" and entry No. 44-"fertilisers" continued to remain and were not deleted. The result was that as from 1955 three entries, i.e., entry No. 43 "oil-cakes", entry No. 44-"fertilisers" and entry No. 54--fodder of every type (dry or green)" continued to exist up till 1958. By Punjab Act 7 of 1958, entry No. 43-"oil-cakes" was deleted. The contention on behalf of the petitioners is that "oil-cakes" are included in entry No. 54-"fodder of every type (dry or green)" and the deletion of entry No. 43-"oil-cakes" does not make any difference and, consequently, "oil-cakes" as such are still exempt from the payment of sales tax under the principal Act. Learned counsel for the petitioners say that the word "fodder" includes "oil-cakes" and have relied on the meaning given in various dictionaries. In Roland Burrows' Words and Phrases judicially Defined, Volume 2, at page 312, a reference is made to the case of Clements v. Smith [1860] 3 E. & E. 238. and certain observations from the judgment are quoted from which it is sought to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of exemption entry No. 9 is "cattle feeds" and from this it is urged that anything which forms cattle feeds is exempt from sales tax there. It is contended on behalf of the petitioners that by deleting entry No. 43-"oil-cakes" by Punjab Act 7 of 1958 the Legislature did not intend to take away the exemption from the payment of tax on the sale of oil-cakes and this entry was not considered necessary and was deleted because oil-cakes are included in entry No. 54-"fodder of every type (dry or green)". The essential question, therefore, is whether by the deletion of the entry relating to oil-cakes in 1958 the exemption from payment of sales tax in respect of oil-cakes was with- drawn or whether the entry was deleted merely because oil-cakes were also included in the entry relating to fodder. It is urged that the object behind a taxing statute cannot be looked at and even if the object was to tax oil-cakes the language employed shows clearly that fodder and fertilisers were exempted and, consequently, if oil-cakes are included in the word "fodder" then they are clearly exempted and further that if there is any ambiguity in the taxing statute the benefit of that ambiguity must be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nical sense or from the botanical point of view but as understood in common parlance. In that case under the C.P. and Berar Sales Tax Act (21 of 1947) all articles contained in the Schedule were exempt from sales tax and articles not so specified were taxable, as in the principal Act before us. In the Schedule, there were originally two items, i.e., item No. 6-"vegetables-except when sold in sealed containers" and item No. 36-"betel leaves". The Schedule was amended by the C.P. and Berar Sales Tax (Amendment) Act (16 of 1948) by which item No. 36 was omitted and it was con- tended that in spite of the omission, "betel leaves" were exempt from the payment of sales tax as they were covered by item No. 6 "vegetables-except when sold in sealed containers". Reliance was placed on the dictionary meaning of the word "vegetable" as given in the Shorter Oxford Dictionary where the word is defined as "of or pertaining to, comprised or consisting of or derived, or obtained from plants or their parts". It was held by the Supreme Court that the word "vegetable" must be construed not in any technical sense nor from the botanical point of view, but as understood in common parlance. The words "bet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained in Littman v. Barron [1951] Ch. 993; [1951] 2 All. E.R. 393.: "The principle that in case of ambiguity a taxing statute should be construed in favour of the taxpayer does not apply to a provision giving a taxpayer relief in certain cases from a section clearly imposing liability." Crawford on Statutory Construction, 1940 Edition, in para. 258, at page 506, says- "Provisions providing for an exemption may be properly con- strued strictly against the person who makes the claim of an exemption. In other words, before an exemption can be recognised the person or property claimed to be exempt must come clearly within the language apparently granting the exemption." The reason for this rule of strict construction in the case of immunity or exemption from tax is that all property receives protection from the State and this security and protection carry with them the corresponding obligation to support. Since this is a responsibility which rests equally upon all, an exemption from tax is a release from this obligation and being an exception to the rule those who claim an exemption must show themselves within its terms. The respondents also relied upon the latest autho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntended that in any case the Tribunal having held as a fact that the word "oil-cakes" is not included in the word "fodder" this Court cannot interfere exercising its jurisdiction under Article 226 of the Constitution. It is further urged that assuming that the finding as to the interpretation of the entries amounts to a finding in law, there is no error apparent on the face of the record and if there are two interpretations possible and the department has accepted one of them, then this Court will not interfere under Article 226. There appears to be considerable force in the contention pressed on behalf of the respondents. From a careful reading of Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola [1961] 12 S.T.C. 286; A.I.R. 1961 S.C. 1325., Commissioner of Income-tax, Bombay City v. M/s. Chugandas and Co., Bombay [1965] 55 I.T.R. 17; A.I.R. 1965 S.C. 568., K.G. Rangaswami Chettiar and Co. v. Government of Madras [1957] 8 S.T.C. 222; A.I.R. 1957 Mad. 301., Crawford's Statutory Construction, Interpretation of Laws and Court of Appeal case reported in Littman v. Barron [1951] 2 All. E.R. 393., it is quite clear that where a taxpayer claims a relief from a section impos....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., edible oils were added as item No. 57 of the Schedule relating to tax-free goods. That entry stood as follows: "57. Edible oils produced from sarson, toria and til in ghanis, but not in hydrogenated form, e.g., vegetable ghee, vanaspati, etc." By a later notification dated 5th August, 1954, this entry was replaced by the following entry: "57. Edible oils produced from sarson, toria and til in indigenous kohlus worked by animal or human agency when sold by the owners of such kohlus only." The result was that edible oils produced in tel ghanis driven by mechanical power were excluded from the Schedule of tax-free goods. Thus there was reimposition of tax on sales of edible oils produced in the above manner. Such reimposition would be bad In view of the Bench decision in Ganga Ram Suraj Parkash's case [1963] 14 S.T.C. 476. The natural result would be that the former entry of 30th May, 1951, would be revived and thus the petitioners would be fully justified in saying that exemption should have been granted in accordance with entry No. 57 as it was originally inserted by the notification dated 30th May, 1951, which would cover the case of edible oils produced in tel ghanis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onths of the close of the year mentioned in clause (vi) of section 5(2)(a) of the principal Act. It has been submitted on behalf of the petitioners that on 30th July, 1963, the taxable turnover was not capable of determination and, therefore, the order of the Assessing Authority deserved to be set aside on that ground. This point does not appear to have been raised in the petition (original or amended) nor was it raised before the Assessing Authority. It is not open, therefore, to the petitioners to agitate that question now. At any rate, if the petitioners became entitled to claim any exemption under section 5(2)(a)(ii) of the principal Act, that exemption could be claimed under the relevant provisions. It may, however, be observed that the Assessing Authority should in all such cases make the assessment after the expiry of six months from the close of the assessment year so that the dealer may be in a position to avail of the benefit confer- red by the aforesaid provision. No other point was raised in the petition nor was it raised before the Assessing Authority. In the arguments, however, the question of the effect of issuance of the notification on 26th September, 1961, was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the petitioners to ask for any other relief in the light of our decision on the other points. Parties will bear their own costs. Civil Writ No. 191 of 1964. In this petition which relates to the assessment for the year 1960-61, apart from the points which have been raised in Civil Writ No. 344 of 1964, an additional matter has been agitated. That relates to tax levied in respect of purchase of machinery. It appears from the order of the Assessing Authority that machinery worth Rs. 39,600 had been purchased from different firms on the strength of the assessee's registration certificate without making any payment of sales tax and this very machinery bad been sold during the year under assessment for Rs. 42,534-6-0. The assessees claimed that the machinery had been purchased for use in the manufacture of goods for sale but it was not put to any use in manufacturing them. According to the entries in the registration certificate, the assessees could not purchase machinery for manufacturing purposes on the strength of that certificate. The Assessing Authority held that purchase of machinery fell within the ambit of the second proviso to section 5(2)(a)(ii) of the principal Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en able to point out any infirmity in the above reasoning and we would accordingly hold that the order of the Assessing Authority suffers from an apparent error inasmuch as the petitioners were subjected to payment of purchase tax on a sum of Rs. 39,600 on account of the machinery which could not be done under the law. This petition, therefore, succeeds on the above point as also on the question of determination of the liability of the com- mission agents or the petitioners inter se with regard to payment of purchase tax and fails on all the other points. The order of the Assessing Authority, therefore, is quashed but a direction is issued to it under Article 227 of the Constitution to make a fresh assessment in the light of our decision on the various points. There will be no order as to costs. Civil Writ No. 291 of 1964. This petition relates to the assessment year 1961-62. The only points which have been pressed by the learned counsel for the petitioners relate to sales tax on oil-cakes which has been decided against the petitioners and the levy of purchase tax prior to the notification dated 26th September, 1961, specifying the rate of tax on Schedule "C" goods. The secon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....give any relief to the petitioners on that point. If, however, in the light of our decision on that point the petitioners are entitled to any relief the Assessing Authority is hereby directed to give it to them if they ask for it. These petitions, therefore, stand disposed of accordingly. There will be no order as to costs. Civil Writ No. 2341 of 1963. In this petition, which relates to the assessment year 1962-63, the only point agitated is with regard to the levy of sales tax on oil- cakes. The petition is dismissed owing to our decision on that point. There will be no order as to costs. Civil Writ No. 2576 of 1964. This petition relates to the assessment made for the year 1961-62. The following points have been raised in this petition. 1.. The levy of purchase tax on oil-seeds was invalid. 2. Purchases made through commission agents did not constitute purchases of the petitioners and ought to have been exempted from their gross turnover. 3.. Since the notification under section 5 of the principal Act specifying the rate of tax on Schedule "C" goods was issued on 26th September, 1961, tax could not be levied for the period prior to that date which was covered by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the appellant in C.A. No. 2386 of 1966. H.L. Shibal, Senior Advocate (A.N. Sinha, C.D. Garg and B.P. Jha, with him), for the appellant in C.As. Nos. 2387 and 2388 of 1966. Bishan Narain, Senior Advocate (O.P. Malhotra and R.N. Sachthey with him), for the respondents in all the appeals. JUDGMENT The judgment of SUBBA RAO, C.J., SHAH and VAIDIALINGAM, JJ., was delivered by VAIDIALINGAM, J. SIKRI, J., delivered a separate judgment and RAMASWAMI, J., agreed with SIKRI, J. VAIDIALINGAM, J.-In all these three appeals on certificate, the common judgment of the High Court of Punjab, dismissing the three writ petitions filed by the appellant, is under attack, by Mr. S.T. Desai, learned counsel for the appellant. The appellant, who is the same in all these appeals, is the Bhawani Cotton Mills Ltd., running a cotton ginning factory, and engaged in the business of manufacturing yarn from cotton. It is a dealer, registered under the Punjab General Sales Tax Act, 1948 (Punjab Act No. 46 of 1948), hereinafter called the Act. The appellant filed returns for the assessment years 1960-61, 1961-62 and 1962-63. It had paid a certain amount of tax which, according to it, was alo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....It is only necessary to refer to the provisions of the Act, as they stood on April 1, 1960. The Act of 1948 has been amended from time to time, and it may not be necessary to refer to those amendments, excepting on one aspect, when we deal with the validity of the notification referred to earlier. Coming to the Act, according to its preamble, it is an Act to provide for the levy of a general tax on the sale or purchase of goods in Punjab. The expressions "dealer", "goods", "prescribed", "pur- chase", "sale", "turnover" and "year" are defined in clauses (d), (e), (f), (ff), (h), (i) and (j) of section 2. Particularly section 2(ff) defining "purchase" is as follows: "2. (ff) In this Act, unless there is anything repugnant in the subject or context,- 'Purchase' with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge." In Schedule C to the Act, the item with which we are concerned, relates to cotton, and it is as follows: "Cotton, that is to say, all kinds of cotton (indigenous or Imported) In Its un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 5(2)(a), which mentions one of the items which is deductible in arriving at the taxable turnover, is as follows: "......turnover during that period on the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the territory of India: Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction. " Section 7 deals with the registration of dealers. Section 10 relates to payment of tax and the filing of returns. Its sub-section (1) pro- vides that the tax payable, under the Act, shall be paid in the manner provided, at such intervals as may be prescribed. It may be mentioned here that there is no dispute that the appellant Is one of those types of dealers who has to send quarterly returns, within the time specified. Sub-section (5) of section 10 makes it obligatory on the registered dealer to pay the full amount of tax due from him, under the Act, according to his return....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed goods" means goods declared under section 14 to be of special importance in inter-State trade or commerce. Section 14 enumerates the various goods which are declared to be of special importance in inter-State trade or commerce. One of the items so declared is "cotton", under item (ii), which is described as follows: "Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." Section 15, imposing restrictions and conditions in regard to tax on sale or purchase of declared goods within a State, is as follows: "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; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to the provisions of section 15(a) of the Central Act. Even otherwise, it is pointed out that if a person has purchased cotton and sells it after the period provided for in section 5(2)(a)(vi), that party is liable to pay sales tax and would have also paid the same. Another purchaser from the said party will also be liable to pay tax on the same commodity, if he sells the goods after the period mentioned in clause (vi). That is, two persons are made liable for payment of tax in respect of the same commodity. In other words, the purchases of the same item of declared goods, by the persons indicated above, are made liable for tax, whereas, under the Central Act, there can be only one levy and collection of tax at one stage, either on sale or on purchase. Further, it is argued that the second proviso to section 5(1) of the Act is contrary to section 15(a) of the Central Act, inasmuch as the main section, which levies the rate of tax, viz., section 5(1), as well as the notification issued under it, clearly show that the Act levies tax at a far higher rate than the maximum provided under section 15(a) of the Central Act. Under these circumstances, it Is pointed out that both the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vendor, the former will clearly know that the latter is exempt from taxation, and the liability to pay tax is his, unless he is able to pass it on to others, There is no uncertainty, in the matter of fixing the stage, regarding the levy of sale or purchase tax. Therefore, that provision also is not violative of the Central Act. Counsel also urges that in case a party is eligible for refund on the ground that he is not liable to pay, in respect of any particular purchase, ample provision Is made for obtaining refund, under section 12 of the Act. Therefore, under those circumstances, the State presses for the decision of the Punjab High Court, being upheld. We are not impressed with the contentions of the learned counsel for the State. A perusal of the judgment, under attack, shows that the learned Judges themselves were very much impressed by the various aspects presented before them, on behalf of the appellant. In fact, the learned Judges observe that the various difficulties pointed out by the petitioner before them did exist in the actual working of the Act, but the view of the High Court was that section 12 of the Act provided for obtaining a refund and, therefore, though the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, as again mentioned in the Central Act, will be of no avail, unless the Act, or the rules framed under it, make it very clear that there will be no levy or collection of tax, except from the persons who are bound to pay, as per the Central Act. It is here that there is considerable difficulty caused by the absence of any provision, either in the Act or in the rules or the forms, indicating the stage at which the tax is to be levied. In the case of commodities, like cotton, which come under the category of "declared goods", tax can be levied only at a single point, as is made clear by section 15(a) of the Central Act, and, in our opinion, there can be no legal liability for payment of tax accruing, until and unless the Act or the rules framed thereunder, prescribe a single point for taxation. For the matter of that, even In the final return to be sent by a dealer under the Act, the dealer will have to show in the taxable turnover all purchases of cotton effected by him during the accounting year. We have already referred to the fact that, along with the returns, the tax payable on the basis of those returns will have to be paid. At that stage, the question naturally arises, as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lared goods is to levy the tax on the first purchaser. Mr. Bishan Narain, counsel for the State, faced with these difficulties, no doubt, referred us to the provisions contained in section 12 of the Act relating to refunds. Counsel pointed out that the manner in which a purchaser can claim refunds is also elaborately indicated in rules 48 to 55 of the Rules. If persons, like the appellants, satisfied the authorities concerned that they had paid amounts, by way of tax, which they were not legally bound to pay, it was open for them to ask for refunds of such excess amounts paid. Therefore, even assuming that, in the first instance, the appellant has paid the purchase tax and, later on, it is found that it is not liable for the same, section 12 of the Act would afford adequate relief. We are not impressed with this argument. The position is not so simple. Even in the matter of obtaining refunds, there can be no controversy, that the appellant will have to place, before the officer concerned, particulars of transactions connected with the commodity in question, and also the basis on which it claims the relief. It will be absolutely difficult, if not impossible, for persons like the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he statute in regard to the exemption of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non- imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are Prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon as they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed." The above observations clearly lay down that the provisions cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the rate of tax that is to be levied, is to be contained in the notification that is to be issued under section 5(1). Accordingly, on April 19, 1958, the State Government issued under section 5(1), as amended by Punjab Act 7 of 1958, a notification regarding the rate of tax. In that notification, the rate of tax on the purchase of goods by a dealer for use in the manufacture of goods for sale, was fixed at 2 naye paise in the rupee. Section 2(ff) was later on amended in 1960 by Punjab Act 18 of 1960, and the definition of "purchase", as contained in this provision, has already been referred to by us. The State Government issued a notification under section 5(1) of the Act on September 26, 1961. Under this notification it was provided that the rate of tax on the purchase of goods specified in Schedule C, appended to the Act, would be 2 naye paise in the rupee. The contention that was taken by the appellant was that, not- withstanding the fact that the definition of the expression "purchase" was changed with effect from April 1, 1960, the notification fixing the rate of tax, under that amended definition, was not issued until September 21, 1961, and it was further urged that, in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppeal No. 2386 of 1966. SIKRI, J.-I have read the judgment prepared by my brother, Vaidialingam, J. I agree with him that assessments for the years 1960- 61 and 1961-62 on the basis of notification issued cannot be sustained and Civil Appeals Nos. 2387 and 2388 of 1966 have to be allowed. But, with respect, I regret I cannot agree with him that the assessments in question have to be quashed on the ground that they violate section 15 of the Central Sales Tax Act. My brother has set out the relevant statutory provisions and it is not necessary to extract them here. In my opinion the Punjab Act does in effect comply with the requirements of section 15 of the Central Sales Tax Act because it Is possible to find out the stage at which purchase tax becomes leviable on goods mentioned in Schedule C. This stage is the first purchase by a dealer, which is not exempted from taxation or which is not deductible from the taxable turnover of a dealer under section 5(2) of the Punjab Act. In my view, this follows from sections 4 and 5 of the Punjab Act. Subject to the provisions of sections 5 and 6, section 4 makes a dealer liable in respect of all purchases, first purchases, second purchases ....