TaxTMI 
TaxTMI 
1977 (3) TMI 140
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....ons given by them to their vendors, stating that the goods so purchased were intended for use by them in the manufacture or processing of goods for sale. Under the provisions of the Central Act in force when such declarations were given, the rate of tax applicable was 2 per cent. During the course of assessment proceedings for the periods 1st January, 1964, to 31st December, 1964 (hereinafter for the sake of brevity referred to as "the first period"), 1st January, 1965, to 31st December, 1965 (hereinafter for the sake of brevity referred to as "the second period") and 1st January, 1966, to 31st December, 1966 (hereinafter for the sake of brevity referred to as "the third period"), the Sales Tax Officer found that a part of the caustic soda purchased on such declarations by the applicants from their outside-State vendors was used by them for processing goods belonging to others and not their own goods. According to him, this constituted a breach of the declarations given by the applicants, and he issued a notice to the applicants to show cause why penalty should not be levied against them. The contraventions alleged to have been committed by the applicants were to the extent of Rs. ....
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.... applied to the Tribunal to state a case and refer the following five questions of law to the High Court for determination: "(1) Whether, on the facts and in the circumstances of the case and on a true and correct reading of section 10A read with section 10(d) of the Central Sales Tax Act, 1956, the Tribunal was justified in upholding the levy of penalty of Rs. 150? (2) Whether, on a true and correct reading of section 8(3)(b) read with section 10(d) of the Central Sales Tax Act, 1956, the Tribunal was justified in upholding the levy of penalty of Rs. 150? (3) Whether, on the facts and in the circumstances of the case, utilising materials purchased on form C to the Central Sales Tax (Registration and Turnover) Rules, 1957, for processing of cotton fabrics belonging to others who ultimately sold such cotton fabrics would amount to failure to make use of the goods for any purposes mentioned in section 8(3)(b) of the Central Sales Tax Act, 1956? (4) Whether, on a true and correct construction of section 8(3)(b) of the Central Sales Tax Act, 1956, the Tribunal was justified in adding words 'by him' after the words 'for use in the manufacture or processing of goods for sale' and thu....
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.... the circumstances of the case, utilising materials purchased on form C to the Central Sales Tax (Registration and Turnover) Rules, 1957, for processing cotton fabrics belonging to others and not the purchasers would amount to a failure to make use of the goods for the purpose mentioned in the said form C, even though the goods so processed were sold by their owners? (2) If the answer to question No. (1) is in the affirmative, whether, on the facts and in the circumstances of this case, the applicants had any reasonable excuse for their failure to make use of the goods for the purpose specified in the declarations in the said form C given by them to their vendors?" In order to appreciate the real controversy between the parties it is necessary briefly to see the scheme of the Central Act and the provisions of the relevant sections thereof. The object of the Central Act is inter alia to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the....
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....tration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power; (c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale; (d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c). (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form o....
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....fence falling under clause (e) of section 10 was to be collected in the State in which the person purchasing the goods obtained the prescribed form. The real controversy between the parties revolves round the interpretation to be placed upon the phrase "for use by him in the manufacture or processing of goods for sale" in the said clause (b) of subsection (3) of section 8 of the Central Act. In order to ascertain the correct interpretation to be given to this phrase we must first try to understand what the scheme of section 8 is. Section 8 prescribes different rates of tax in respect of various categories of sales made in the course of interState trade or commerce. When we analyse that section we find that these sales are divided in that section into four categories, namely, (1) sales to the Government of any goods, (2) sales to a registered dealer other than the Government of goods of the description referred to in sub-section (3) of section 8, (3) sales of declared goods not falling under the first and the second categories mentioned above, and (4) sales of goods other than the declared goods not falling under the first and the second categories. At the relevant time the rate of ....
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....hased in the case of resale and the end-product in the case of a processing, manufacture, mining or generation of power would attract sales tax if sold in its turn, the real intention of the Parliament in providing a lower rate of tax in respect of sales falling under clause (b) of sub-section (3) of section 8 was to prevent the price of the end-product from being unduly increased when such product comes into the hands of the ultimate consumer. A seller of goods, though he is liable to pay the tax, would normally reimburse himself by recovering the amount thereof from his purchaser. In the case of raw materials the manufacturer would so fix the selling price of the manufactured product as to provide for the amount of tax on raw materials which the vendor of such raw materials has collected from him. Thus, to provide for the same rate of tax on the sale of raw materials as on the sale of finished product to an ultimate consumer would be to cause a manufacturer unduly to raise his price, thus increasing the burden on the ultimate consumer. In order, however, to ensure that the goods so purchased are utilised for the purposes mentioned in the purchasing dealer's certificate of registr....
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....ners'[1921] 1 K.B. 64 at 71.: "...in a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." This passage has been cited with approval by almost every High Court in India and also by the Supreme Court; as, for instance, in Baidyanath Ayurved Bhawan (Pvt.) Ltd., Jhansi v. Excise Commissioner, U.P.(1971) 1 S.C.C. 4 at 7. The principle laid down by Rowlatt, J., has also been time and again approved and applied by the Supreme Court in different cases. To cite but only one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, SuratA.I.R. 1970 S.C. 755 at 759. It was, however, submitted on behalf of the respondents that the same principles as applied to the interpretation of an exemption clause should apply in the present case inasmuch as a concessional rate of tax was provided for by sub-section (1) of section 8 of the Central Act in respect of the sales of the description falling under the said clause (b) of sub-section (3) of section 8. We ar....
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.... and would place the assessees in a very difficult situation inasmuch as it would not be possible for them to prove to the satisfaction of the taxing authorities that the persons for whom they manufactured or processed the goods did in fact sell the manufactured or processed goods. The court pointed out that these difficulties were not relevant considerations in interpreting the plain and unambiguous language of the statute. It further pointed out that there was no real basis in facts for apprehending such difficulties inasmuch as it was for the assessees to show that the goods in the manufacture of which they had used the material purchased by them on the basis of their certificate of registration were actually sold by other registered dealers and that if they failed to prove such facts the assessees could be said to have committed a breach of the declarations given by them. On behalf of the respondents, however, the decision of a Division Bench of the Gujarat High Court in Navsari Cotton Silk Mills Ltd. v. State of Gujarat[1976] 37 S.T.C. 140. , in which a contrary view was taken, was relied upon. While deciding that case the learned Judges relied upon the scheme of the Central A....
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....." With great respect we are not able to equate a sale of goods with a user of goods. To sell goods is not to use them. If the interpretation placed by the learned Judges were correct, the said clause (b) of subsection (3) of section 8 should have read "as being intended for use by him for resale or ... for use by him in the manufacture or processing of goods for sale". Plain grammar would show that the words "for use" cannot govern the words "for sale". The learned Judges of the Gujarat High Court have further held that the interpretation placed by them did not result in reading anything more into the language of the statute. With great respect we are unable to agree with this also. The interpretation placed by them must result in adding the words "by him" after the words "manufacture or processing of goods for sale". The Gujarat High Court has stated that it was not necessary to use the words "by him" at the end of the phrase in question, as had been done with reference to the word "resale", because that would have been a mere repetition in view of the fact that the words connoting the same idea had been already implied by using the words "for use by him" at the beginning of the....
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....gh Court also was impressed with the argument that if the interpretation which appealed to the High Court of Punjab and Haryana were accepted, it would result in a large scale evasion of tax and would frustrate the very object for which the lower rate of tax under sub-section (1) of section 8 of the Central Act, termed by it as "concessional rate", was provided by the legislature. We are not able to share this apprehension. The Gujarat High Court has further pointed out the difficulty for the purchasing dealer who has processed or manufactured goods for others to embark upon inquiries to find out whether those others had in fact sold the goods processed or manufactured. We see no such difficulty as envisaged by the Gujarat High Court. If a question arose and if the purchasing dealer was unable to show that the goods processed or manufactured were sold, he would certainly be said to have committed a contravention of the declaration in the said form C given by him. In conclusion the learned Judges of the Gujarat High Court have stated that they found support in the view which they took from the decisions of the Kerala High Court in O. Paramasivan v. State of Kerala1971 Tax. L.R. 1241....
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....g yarn brought by his customers. The High Court of Karnataka held that under clause (b) of sub-section (3) of section 8 of the Central Act the words "for sale" clearly connoted that the goods so processed must belong to the dealer, as otherwise he could not be said to have the right to sell them. In arriving at this decision the court referred to an earlier decision given by it which does not appear to have been reported and has not been shown to us. None the less, no reason is given in this judgment for giving such a construction to the phrase in question in the said clause (b) of subsection (3) of section 8. Under that clause the question of a right to sell the goods manufactured or processed does not arise, and the sole question is whether manufactured or processed goods are intended to be sold or not. There is no restriction imported into clause (b) so as to restrict the operation of the phrase in question merely to the goods of the assessee himself. In this connection, we may also usefully refer to the decision of the Supreme Court in Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, SuratA.I.R. 1970 S.C. 755., to which a reference has earlie....