Commissioner Of Sales Tax v. Cooper & Co.

Vimadalal, J.:— This is a reference under section 9(3) of the Central Sales Tax Act, 1956, read with section 34(1) of the Bombay Sales Tax Act, 1953, whereby the following questions have been referred to this Court for determination:

“(1) Whether on a true and proper construction of the provisions of the Central Sales Tax Act, 1956, and those under the Bombay Sales Tax Act, 1953, relating to the levy of tax, the conclusion of the Tribunal that the levy of tax is yearly is correct in law?

(2) Whether on a true and proper construction of the provisions of the Central Sales Tax Act, 1956, the Tribunal erred in holding that Central sales tax is levied for the financial year and not for any other year?

(3) Whether on a true and proper construction of the provisions of sub-rule (2) of rule 11 of the Central Sales Tax (Registration and Turnover) Rules, 1957, inserted under the Government notification dated the 6th November, 1957 (published on the 16th November, 1957), the Tribunal was justified in law in holding that the said rule had retrospective operation from the 1st July, 1957, and in deleting the tax levied by the lower authorities on taxes collected for the period from 1st July, 1957, to 15th November, 1957?

(4) Whether on a true and proper construction of section 9(1) of the Central Sales Tax Act, 1956, tax on tax is leviable?

(5) Whether on a true and proper construction of section 8(2) of the Central Sales Tax Act, 1956, tax on tax is leviable?”

2. The relevant period for the purpose of the present reference is from the 1st of July, 1957, to the 31st of March, 1958, but the dispute between the parties centres round a part of that period, viz., the period from the 1st of July, 1957, to the 15th of November, 1957, it being the case of the respondents, who are the assessees, that they are entitled as from 1st July, 1957, to certain deductions granted by a notification dated the 6th of November, 1957, which was published and came into force on the 16th of November, 1957.

3. It is, on the other hand, contended on behalf of the taxing authorities that the said notification cannot be given retrospective operation and that the deductions to which it refers could be availed of by the respondents only as from the date of the coming into force of the said notification, viz., the 16th of November, 1957. The Sales Tax Officer, by his order dated the 24th of March, 1961, held in favour of the taxing authorities and came to the conclusion that the deductions in question could be availed of only after the 15th of November, 1957. On appeal to the Assistant Commissioner of Sales Tax, that decision was confirmed on 1st September, 1961, and in revision to the Deputy Commissioner of Sales Tax, the same was also confirmed by his order dated the 30th of August, 1963. The assessees applied in revision to the Sales Tax Tribunal which, however, by its order dated 31st August, 1965, set aside the order of the Deputy Commissioner of Sales Tax and allowed the deduction in respect of tax as from the 1st of July, 1957. At the instance of the Commissioner of Sales Tax the above five questions have thereafter been referred to this Court for determination.

4. Before discussing the arguments advanced by the learned counsel on either side, it would be convenient to set out the relevant statutory provisions with which we are concerned in the present case. It may be mentioned that the charging section which is section 6 of the Central Sales Tax Act, 1956, came into force on the 1st of July, 1957. The material portion of the said section provides that, subject to the other provisions of the said Act, every dealer shall, with effect from the date when the said section came into force, be liable to pay tax under the said Act “on all sales effected by him in the course of inter-State trade or commerce during any year on and from the date so notified”. Section 9(1) of the said Act, as it stood at the time material for the purpose of this reference, enacted that the tax payable by a dealer under the said Act was to be levied and collected in the appropriate State by the Government of India in the manner provided in sub-section (2) of that section. Sub-section (2) then proceeded to lay down that the authorities for the time being empowered to assess, collect and enforce payment of tax under the general sales tax law of the appropriate State should, on behalf of the Government of India and subject to any rules made under the said Act, assess, collect and enforce payment of any tax under the said Central Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State was assessed, paid and collected. Section 13(1) of the said Central Act empowers the Central Government by notification in the Official Gazette to make rules providing inter alia [clause (b)] for the period of turnover, the manner in which the turnover in relation to the sale of any goods under the said Act was to be determined, “and the deductions which may be made in the process of such determination”. In exercise of the powers conferred upon it by the said sub-section (1) of section 13 of the Central Sales Tax Act, 1956, the Central Government has added to rule 11 of the Rules framed under the Central Sales Tax Act, 1956, a new sub-rule, the material portion of which is as follows:

“(2) In determining the turnover of a dealer for the purposes of section 8 there shall be deducted the following amounts from the aggregate of sale prices, viz.:—

(a) the amount arrived at by applying the following formula—

(b)…………………………………”

5. It may be mentioned that the material portion of rule 11, as it originally stood, which was by virtue of the said section to be renumbered as sub-rule (1) of rule 11, provided that the period of turnover in relation to any dealer liable to pay tax under the said Act was to be the same as the period in respect of which he was liable to submit returns under the general sales tax law of the appropriate State. Section 2(j) of the said Central Act defines the term “turnover” as meaning the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce “made during any prescribed period and determined in the prescribed manner”; and section 2(k) of the same Act defined the term “year” as meaning the year applicable in relation to him under the general sales tax law of the appropriate State. As far as the machinery of levy, assessment and collection of tax is concerned, the Central Sales Tax Act, in effect, incorporates the provisions of the general sales tax law of the appropriate State and makes the same applicable to the levy, assessment and collection of tax under the Central Sales Tax Act, 1956. We must, therefore, turn to the appropriate provision of the Bombay Sales Tax Act, 1953, which was in force at the material time and to the relevant rules framed thereunder. Section 2(20) defines the expression “turnover of sales” as meaning the aggregate of the amounts of sale price received and receivable by a dealer in respect of “any sale” of goods made “during a given period” after making certain deductions specified therein; and section 2(21) defines the term “year” as meaning the financial year, though an option is given to a registered dealer to adopt any other year which may be ordinarily observed by him in regard to his own books of account. The charging section under the Bombay Sales Tax Act, 1953, is section 5, and though Mr. Banaji has referred to the same in the course of his arguments, we do not think it necessary to refer to it for the simple reason that the Central Act provides its own charging section, viz., section 6, and adopts the machinery of the State Act only in regard to the levy, assessment and collection of tax under the Central Act. Section 13 of the Bombay Sales Tax Act, 1953, imposes an obligation on every dealer to furnish returns by such dates as may be prescribed, and section 14 of the said Act provides that the amount of tax due from a registered dealer “shall be assessed separately for each year during which he is liable to pay the tax”. Rule 4(1)(a) of the Bombay Sales Tax (Procedure) Rules, 1954, prescribes for the purpose of section 13 the dates by which returns are to be submitted by every registered dealer. The said rule provides for quarterly returns which rule 4 lays down are to be submitted within one month from the expiry of each quarter to which the return relates. When read with the definition of the term “year” in section 2(21) of the Act, to which I have already referred, the returns would, therefore, have to be furnished for each financial year commencing from 1st April of that year in respect of each quarter.

6. Having set out the statutory provisions which are relevant for the purpose of this reference, we must now proceed to deal with the arguments advanced by the learned counsel for the Commissioner of Sales Tax. It is the contention of Mr. Banaji that the Central Act contains no machinery for the levy, assessment and collection of taxes and that, therefore, the machinery of the State Act which is incorporated thereby would have to be resorted to, and the relevant provisions of the said Acts and Rules show that liability for tax attaches the moment a sale is effected, and the obligation to furnish returns arises one month after the expiry of each quarter under rule 4 to which I have already referred. It is the contention of Mr. Banaji that the liability for tax under the Central Act is not yearly liability, and in that connection he has relied on the provisions of sections 7A to 10 of the Bombay Sales Tax Act, 1953, which must be deemed to be incorporated in the provisions of the Central Act by reason of section 9(2) of the Central Act to which I have already referred. We are afraid, however, sections 7A to 10 of the Bombay Sales Tax Act, 1953, lay down only the rates at which tax is to be levied in different cases, and even under the Bombay Sales Tax Act, 1953, it is not these sections that are the charging sections, but the charging section would be section 5 of that Act. In the present case we are not even concerned with the said section 5 of the Bombay Sales Tax Act, 1953, as the Central Sales Tax Act, 1956, provides its own charging section, viz., section 6, as already stated above. It is to that section that we must, therefore, turn for the purpose of this reference, and if one scrutinises the terms of section 6 of the Central Sales Tax Act, 1956, there can be no doubt whatsoever that the liability or charge which it imposes in respect of inter-State sales tax is yearly liability, for it provides in terms that every dealer shall be liable to pay tax on all sales “during any year”. We have, therefore, no hesitation in rejecting the contention of Mr. Banaji that the liability to tax under the Central Act is not yearly liability. It may be mentioned that, even as far as the procedure of assessment is concerned, the assessment under the Central Act which would have to follow the pattern laid down in section 14 of the Bombay Sales Tax Act, 1953, would be yearly assessment for that section clearly provides that every registered dealer is to be assessed separately for “each year”. The position, therefore, is that both the liability to tax, as well as the assessment under the Central Act, would be yearly. The year being the unit, both for the purpose of chargeability as well as for the purpose of assessment proceedings, if any notification comes into force during that year, it must be given effect to as from the beginning of that assessment year.

7. This view which we have taken of the scheme of the relevant provisions of the Acts and the rules is supported by high authority, in so far as there is a decision of the Supreme Court which fortifies the same. In the case of Mathra Parshad & Sons v. The Stats of Punjab [1962] 13 S.T.C 180., the Supreme Court, in construing the parallel provisions of the East Punjab General Sales Tax Act, 1948, took the same view. The facts of that case were that the appellant in that case used to sell manufactured tobacco and was registered as a dealer under section 7 of the East Punjab General Sales Tax Act, 1948, and was paying sales tax on manufactured tobacco. On 1st April, 1954, the Punjab Tobacco Vend Fees Act, 1954, came into force, and on 27th of September, 1954, the Government issued a notification exempting manufactured tobacco from the levy of sales tax by including item 51 in the Schedule of exemptions, but the said notification did not mention the date from which the exemption would operate. The question which arose, therefore, was whether the notification took effect only from the 27th of September, 1954, when it was issued, or from the beginning of the financial year. The Supreme Court by a majority held (at page 188) that as the tax under the Act was yearly and was to be paid on the taxable turnover of a dealer, the exemption whenever it came in, in the year for which the tax is payable, would exempt sales of those goods throughout the year, unless the Act said that the notification was not to have that effect, or the notification itself fixed the date for the commencement of the exemption. Mr. Banaji has made valiant attempts to distinguish this decision of the Supreme Court, but we are afraid, with respect to the learned counsel, that the distinctions which he has sought to point out were all distinctions without a difference. He has contended that under the feast Punjab General Sales Tax Act, 1948, the charge as well as the levy were both included in section 5 and were both annual and, therefore, the tax which was collected could not but be yearly, whereas under the Central Sales Tax Act, 1956, the moment there is an inter-State sale the liability for tax fastens under section 6 of that Act, and that on a proper interpretation of that Act read with the Bombay Sales Tax Act, 1953, the liability to tax is, therefore, not yearly in the present case. For reasons already stated by us earlier in the judgment, we must reject that contention of Mr. Banaji. As both the charging section 6 of the Central Sales Tax Act, 1956, as well as section 14 of the Bombay Sales Tax Act, 1953, which lays down the mode of assessment that would have to be followed in view of the provisions of section 9(2) as it stood at the material time, the chargeability or liability to tax, as well as the assessment, are both yearly, and, under the circumstances, there is no difference at all between the material provisions of the East Punjab General Sales Tax Act, 1948, and the relevant provisions of the Central Sales Tax Act, 1956, read with the Bombay Sales Tax Act, 1953.

8. In the result, we must reject the contentions of Mr. Banaji, both as a matter of construction as well as on the authority of the decision of the Supreme Court in Mathra Parshad's case, by which we are bound.

9. In the result, we answer the questions referred to us as follows: Nos. (1) and (3) in the affirmative. Mr. Banaji has not pressed questions Nos. (2), (4) and (5) on which no argument has been addressed to us. It is, therefore, not necessary for us to answer the same.

10. The applicant having failed in the reference, must pay the respondents' costs of the reference fixed at Rs. 250.

11. Reference answered accordingly.