1. The Tribunal has referred the following question in this reference to this Court :
"Whether on the facts and in the circumstances of the case and on the construction of
section 24 of the Bombay Sales Tax Act, 1959, read with Explanation to
clause (28) of section 2 of the Bombay Sales Tax Act, 1959, and sections 3, 4 and 5 of the Central Sales Tax Act, 1956, the opponent can be said to have fulfilled the conditions for the grant of authorization under the Bombay Sales Tax Act, 1959?"
2. The short facts which have given rise to this reference are as under :
The opponent-assessee, namely M/s. Godrej Soap Private Ltd., has its principal place of business in Bombay. It has also a place of business in Ahmedabad, in the State of Gujarat. It holds Registration Certificate No. N. 10-K 1714, dated 16th June, 1960, as a registered dealer for its business in the State of Gujarat. The opponent had applied under section 24 of the Bombay Sales Tax Act, 1959, hereinafter referred to as "the Act", for the grant of authorization on the ground that the turnover of sales of goods exported by it during the year 1962-63 outside the territories of India from the State of Gujarat exceeded the limit of Rs. 30,000. The opponent supported the application by the invoice dated 7th March, 1963, showing that crude groundnut oil of the value of & 48,008-15-0 was exported by sea under c.i.f contract from Bhavnagar to Malaga in Spain. The invoice was issued by the Bombay office of the opponent-firm. The opponent-firm also filed a revised return for the quarter ending 31st March, 1969, in which the sale of this oil was included. By the order, dated 31st March, 1964, the Sales Tax Officer filed the application. In appeal the Assistant Commissioner of Sales Tax came to the conclusion that there was no evidence from which it could be proved that the transaction was of sale by the registered dealer under the Act with the place of business in the State of Gujarat and he accordingly dismissed the appeal In second appeal the Tribunal observed that the real question to be decided was whether the sale was made in the State of Gujarat within the extended definition of section 2(28) read with the Explanation. In view of this fiction introduced by the Explanation, the Tribunal held the sale of the goods which were exported by the opponent-assessee during the relevant period, was a sale in the State. Therefore according to the Tribunal, subject to the fulfilment of other conditions, the opponent was entitled to an authorization certificate. The Tribunal according]y reversed the decision of the authorities and remanded the matter for disposal of the opponent's application in accordance with law and for compliance by the opponent with the remaining conditions laid down in section 24 of the Act. The Tribunal has thereafter referred the aforesaid question to this Court at the instance of the State of Gujarat.
3. Relevant section 24 of the Act reads as under :
"Where, during the previous or current year; the turnover of sales of a registered dealer of goods -
(a) which are exported by him from the State outside the territory of India, or despatched by him from the State to any place in India outside the State, and
(b) which are sold by him to an authorised dealer and exported or despatched by that dealer to any destination referred to in clause (a), exceeds thirty thousand rupees, he may apply for an Authorization to the Commissioner. Subject to the provisions of section 2 the Commissioner shall, if the registered dealer satisfies such further requirements (including the furnishing of adequate security) as may be prescribed, issue to him an Authorization in such form, and subject to such conditions, as may be prescribed,"
4. Such an authorization results in various benefits. Under sections 7, 8, 9 and 10 when sale of goods or resale of goods is made to an authorised dealer, deduction is made from the turnover of the vendor, if certificate is furnished by the authorised dealer as provided in section 12. Under section 11, tax at a reduced rate is payable in case of certain sales. Under section 12, the certificate which is to be given by the authorised dealer in order that the sales to him may be deducted from the turnover of the vendor, has to be to the effect that the goods purchased were intended for resale in the course of inter-State trade or commerce, or in the course of export out of the territory of India, and that such goods will be so resold within nine months from the date of such purchase or such further period as may be prescribed, by himself or by another authorised dealer to whom he resells the goods. Under section 12(2) where an authorised dealer gives such a certificate and the goods specified in such certificate are sold to another authorised dealer, he shall, when he resells the goods, send to the first mentioned authorised dealer a certificate in the prescribed form, stating inter alia whether goods were resold in the course of inter-State trade or commerce or in the courts of export out of the territory of India and the date on which the goods were sold. From this scheme it is clear that this authorization certificate gives important privileges and, therefore, the opponent-assessee had appeal for this authorization certificate under section 24 of the Act. The relevant conditions, in so far as the present case is concerned for getting authorization by a dealer under section 24, are : (1) he must be a registered dealer, (2) turnover of his sales during the previous year or the current year must exceed Rs. 30,000, and (3) the turnover of sales must be of those goods which are exported by him from the State outside the territory of India, as the subsequent part of this clause (a) is not applicable in the present case and as clause (b) has also not been relied upon. There is no dispute that the opponent was a registered dealer. The learned Advocate-General has, therefore, confined his argument only as to the two conditions : (I) that the goods in question must have been exported by the opponent- assessee from the State outside the territory of India, and (2) that his turnover of sales of those goods must exceed Rs. 30,000 in the relevant, previous or current year. As regards the first condition, it is clear that before the authorities or before the Tribunal, this question has not been specifically raised and as this Question does not arise in the present reference, it cannot be answered by us.
5. The whole controversy has, therefore, centred round the other condition, namely, as to the turnover of sales of goods exported having exceeded Rs. 30,000. The present authorization was sought on the ground of the export of crude groundnut oil which was made under the c.i.f. contract from Bhavnagar to Malaga in Spain, as evidenced by the invoice in question and the bill of & 48,008-15-0 for the sale of these exported goods would necessarily exceed the prescribed limit of Rs. 90,000. As these goods were admittedly exported from Bhavnagar to Malaga in Spain, the relevant condition in this connection would be satisfied if this particular sale can be included in the opponent's turnover of sales. If, on the other hand, this sale cannot be included in the turnover of sales of the opponent, this condition would not be satisfied. We would, therefore, reframe the present wide question referred to us so as to bring out the real controversy between the parties :
"Whether on the facts and in the circumstances of the case the opponent-assessee can be said to have fulfilled the requisite condition as to turnover of sales exceeding the limit of Rs. 30,000 in respect of the goods exported in the relevant year for the grant of authorization under section 24 of the Act ?"
6. The expression "turnover of sales" has been defined in section 2(56) to mean the aggregate of amounts of sale prices received and receivable by a dealer in respect of any sale of goods made during a given period. In section 2(28) the expression "sale" is defined to mean a sale of goods made within the State, for cash or deferred payment or other valuable consideration. The Explanation which is material for our purpose, runs as under :
"For the purposes of this clause, a sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in
sub-section (2) of section 4 of the Central Sales Tax Act, 1956."
7. It is clear on a combined reading of these two definitions in section 2(36) and 2(28) that the "turnover of sales" means the aggregate amount of the sale price in respect of any sale of goods, provided such sale of goods is made within the State. For the purpose of this Act the Explanation has given an extended meaning to the words "sale within the State", by including in that concept any sale which is determined to be inside the State in accordance with the principles formulated under section 4(2) of the Central Sales Tax Act, 1956, hereinafter referred to as "the Central Act". In the Central Act section 3 defines a sale in the course of inter-State trade or commerce. Section 5 defines a sale which takes place in the course of export. Section 4(1) provides that subject to the provisions contained in section 3, when a sale or purchase of goods 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 section 4(2) which is material for our purpose runs as under :
"(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."
8. The Explanation is not material for our purpose. It should be borne in mind that under section 2(28) of the Act while giving an extended meaning to the expression "sale of goods within the State" the Legislature has incorporated by specific reference of only section 4(2) of the Central Act. The purpose of the entire section 4 of the Central Act is twofold : (1) to define and achieve what is an outside sale, and (ii) to fox the situs of sale. The principles for fixing the situs of sale are in section 4(2) and these are the only principles which are to be applied in determining situs of any sale under the Act, for the purpose of the definition in section 2(28) or section 2(36) to find out a "turnover of sales" within the State. In view of the notional inclusion by fiction, provided in the Explanation, it is clear that every sale which is held to be a sale inside the State or an inter State sale on application of the principles of section 4(2) of the Central Act would have to by included in the turnover of salts under section 2(36) of the Act. The learned Advocate-General is no doubt right in drawing our attention to the opening words of section 2 that this wide interpretation is to be subject to the context and this statutory definition can be departed from, if the context otherwise requires. If the principles of section 4(2) of the Central Act were to be applied in the present case, there can be no doubt that the situs of sale was at Bhavnagar. If the goods were specific or ascertained goods, their location at the time of contract was at Bhavnagar, while if they were unascertained or future goods, their location at the time of appropriation by delivery to the shipping company was at Bhavnagar. Therefore, the situs of the sale under either of the clauses of section 4(2), (a) or (b) would be within the State. If, therefore, this Explanation is to apply to the sale of the goods shipped as per the invoice in question, the sale would be within the State of Gujarat and it can be included within the turnover of the sales of the opponent under section 2(36) of the Act.
9. The learned Advocate-General, however, raised a very ingenious contention. He pointed out that the case had proceeded on the footing that this was a sale in the course of export. Section 24, no doubt, uses the expression of the widest amplitude, by providing in this connection the consideration of turnover of sales, in the previous or current year, of all the goods which were exported by the registered dealer from the State outside the territory of India, irrespective of export or otherwise. In fact, if we consider the provisions dealing with the authorised dealer, which we have already mentioned, and particularly the certificate in section 12, which enables the deductions to be made of the sales or resales to the authorised dealer from the vendor's gross turnover, it is clear that it is only when the authorised dealer complies with the requisite conditions by giving the prescribed certificate, that the goods were purchased for sale in the course of inter-State sale or in the course of export outside the territory of India and that such goods would be resold within 9 months by himself or by another authorised dealer to whom he resold the goods, that the relevant exemption would be given to the vendor of this authorised dealer. If these conditions are not satisfied, such deductions would not be made. That itself indicates that for being eligible to become an authorised dealer the turnover of sales of the registered dealer in respect of all goods exported by him in the relevant year have to be taken into account, whether in the course of export or otherwise. The learned Advocate-General, however, concentrated his attack in this particular case because the case had proceeded on the assumption that present sale was in the course of export. The learned Advocate-General, therefore, argued that the non obstante clause in section 75 of the Act would be immediately attracted and it must be given an overriding effect by modifying the definition of "sale" or "turnover of sales" in section 2(28) and section 2(56) of the Act. Section 75 of the Act which has been relied upon by the learned Advocate-General reads as under :
"75. Nothing in this Act or the rules made thereunder shall be deemed to impose or authorise the imposition of a tax on any sale or purchase of any goods, where such sale or purchase takes place -
(a) (i) outside the State; or
(ii) in the course of the import of the goods into the territory of India, or the export of the goods out of such territory; or
(b) in the course of inter-State trade or commerce, and the provisions of this Act and the said rules, shall be read and construed accordingly.
Explanation. - For the purpose of this section whether a sale or purchase takes place -
(i) outside the State, or
(ii) in the course of the import of the goods into the territory of India or export of the goods out of such territory, or
(iii) in the course of inter-State trade or commerce, shall be determined in accordance with the principles specified in sections 9, 4 and 5 of the Central Sales Tax Act, 1956."
10. Section 75 has been introduced in the Act to make the constitutional position clear by way of abundant caution by reiterating the embargo under Article 286 of the Constitution. That is why section 75 in terms provides that nothing in the Act or the rules shall be deemed to impose or authorise the imposition of a tax on any sale or purchase of any goods, in so far as such sales or purchases take place outside the State or are in the course of import into or export outside the territory of India or in the course of inter-State trade under clauses (a) and (b). There being a constitutional embargo and as the State Legislature lacked the taxing power, it is in terms provided in section 75 that for creating liability to taxation those sales or purchases outside the State or in the course of import into or export out of the territory of India or in the course of inter-State trade cannot be included; they would not be within the purview of the Act, because any other construction would entitle the State Legislature to impose or authorise imposition of sales tax on the sale or purchase of the said goods outside the State or in the course of import into or export out of the territory of India, or in the course of inter-State trade, ignoring the embargo created by the Constitution. The Explanation to section 75 only provides that the principles in sections 3, 4 and 5 of the Central Act would be applied to determine when a sale or purchase outside the State or during the course of import or such export Or an inter-State sale or purchase takes place, which has got to be excluded for the purpose of considering the liability for tax under the Act. Therefore, the non obstinate clause in section 75 would have a very limited effect in so far as it must override any provision of the State law which seeks to impose a tax on such sales, notwithstanding the constitutional embargo. Except for that limited purpose such outside sales or sales in the course of inter-State transport or in the course of import or export would not be excluded from the operation of the Act for all other purposes, especially when the Legislature includes all the sales in the definition of "turnover of sales" and gives an artificial definition for finding out what are the "sales within the State" on the basis of the principles mentioned in section 4(2) of the Central Act which are incorporated by the Explanation to section 2(28) of the Act. There would be nothing inconsistent in such a provision in the Act which would necessitate any departure from the statutory definition, when the purpose of inclusion is not to create a liability in respect of such sales, but only to take them into account for the purpose of registration of a dealer or issuing authorization to him, so that in the case of sales to such a dealer; the relevant exemption could be given. As we have already discussed, the scheme of the authorization under the Act confers various privileges so that the vendor of the authorised dealer gets exemption when he complies with its conditions. In such a context the non obstinate clause in section 75 of the Act would not have the effect of taking those sales falling within its ambit out of the purview of the definition of "sales", which has been given an artificial extension under the Explanation, in so far as the "sales within the State" are concerned on the application of the principles mentioned in section 4(2) of the Central Act. section 4(2) substitutes the test of location instead of actual delivery and consumption, which was adopted in Explanation to Article 286(1). We must consider in the case of ascertained goods the location at the time of making of the contract; while in the case of unascertained goods, the location at the time of their appropriation to the contract of sale by the seller or buyer, whether assent of the other party was prior or subsequent to such appropriation. The learned Advocate- General in this connection relied upon the decision of the Supreme Court in A. Y. Fernandez v. The State of Kerala [[1957] 8 S.T.C. 561] In that case the question had arisen whether the inter-State sales should be taken into account for the purpose of finding out the net taxable turnover. In the Travancore-Cochin General Sales Tax Act, 1125, the non obstinate clause in section 26 as amended by the amendment in 1951 was as under : "Notwithstanding anything contained in this Act, -
(a) a tax on the sale or purchase of goods shall not be imposed under this Act,
(i) where such sale or purchase takes place outside the State of Travancore-Cochin; or
(ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India ......"
11. Their Lordships in terms pointed out at page 572 that they were not called upon to express any opinion as to whether the incorporation of the provisions of Article 286 of the Constitution in the charging section, as it was done in the Assam Sales Tax Act, 1947, or in the definition of "sale" as it was done in the Hyderabad General Salts Tax Act, 1950, or even in the Rules in regard to the calculation of taxable turnover as it was done in the Bombay Sales Tax Rules, 1952, had the effect of taking the sales falling within the categories specified in Article 286 out of the purview of the respective Sales Tax Acts, so that they would not be included at all within the calculation of the net turnover on which only the sales tax could be levied. Their Lordships also pointed out that the definition of "sale" was not amended nor was the charging section. But that effect was sought to be achieved by incorporating the non obstinate provision by the addition of section 26 in the act. The effect of a non obstante provision was stated in Aswini Kumar Ghosh v. Arabinda Bose [[1953] S.C.R. 1] as under :
"It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be under stood as operating to set aside as on longer valid anything contained in relevant existing laws which is inconsistent with the new enactment."
12. Applying this ratio, their Lordships held in A. V. Fernandez v. State of Kerala [[1957] 8 S.T.C. 561] that in case falling within the categories specified under Article 286 of the Constitution such a non obstante clause had the effect of setting at naught and of obliterating in regard thereto the provision contained in the Act relating to be imposition of tax on the sale or purchase of such goods and in particular, the provisions contained in the charging section and the provisions contained in rule 20(2) and other provisions which art incidental to the process of levying such tax. Thereafter the material observations of their Lordships are as under :
"So far as sales falling within the categories specified in
Article 286 of the Constitution and the corresponding section 26 of the Act are concerned, they are, as it were, taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if section 26 had not been added to the Act."
13. It is, therefore, clear that in the case before their Lordships the question had arisen only in connection with those provisions where the excluded sales under Article 286 of the Constitution were to be added to find out the net taxable turnover for creating the tax liability and, therefore, in that context their Lordships held that the non obstante clause must be given an overriding effect, as the very fact of their non liability to tax was sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax could be levied or imposed. The final ratio of that decision was that the non obstinate provision contained in section 26 of the Act had the effect of taking those transactions out of the purview of the Act with the result that the dealer was not required nor was he entitled to include them in the calculation of his turnover liable to tax thereunder. Their Lordships however, at page 575 observed as under :
"This position is not at all affected by the provisions with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The Legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the
provisions of Article 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer's turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the
provisions of Article 286 of the Constitution and the corresponding provision enacted in the Act."
14. The ratio of this decision, therefore, could not be applied to the facts of the present case and we cannot accept the argument of the learned Advocate-General that even in the context of the limited purpose of registration as a dealer for granting authorization, such sales as fall under Article 286 of the Constitution are to be excluded. Therefore, there is nothing inconsistent in the context of section 24 or the scheme of authorization as found from the Act, which would justify our departure from the statutory definition, which has provided for such wide inclusion, by adding the Explanation to section 2(28), by excluding such sales in the course of export for the purpose of computing "the turnover of sales" to enable the registered dealer to get the requisite authorization.
15. The learned Advocate-General made an alternative submission by pointing out that the scope of section 4(2) of the Central Act was to determine the situs of a sale only in cases where the sale was not in the course of inter-State trade within the meaning of Section 3 or in the course of import or export within the meaning of section 5 of the Central Act, as in the case of such sales in the course of inter-State trade or import or export the question of their situs would be wholly irrelevant. There may be great force in this contention of the learned Advocate-General if we were to interpret the scheme of sections 3, 4 and 5 of the Central Act. The question in the present cast, however, is not one as to what is the true scope of section 4(2) of the Central Act as such in its context. The question before us is totally different, six, as to what is the effect of incorporation of section 4(2) by the Explanation to section 2(28) of our Act. The doctrine of incorporation by reference has been well explained by Lord Esher, M.R, in in In re Wood's Estate : ex parte Her Majesty's Commissioner of Works and Buildings[[1886] 31 Ch. D. 607 at p. 615] 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 classes 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 refer to the former Act at all."
16. In Shamrao V. Parulekar v. District Magistrate, Thana, Bombay, [A.I.R. 1952 S.C. 324.] while explaining this doctrine, their Lordships of the Supreme Court observed as under :
"The rule 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. 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
Keshoram Poddar v. Nandulal Mallick."
[[1927) 54 I.A. 152 at p. 155 (P.C.)
17. On this doctrine of incorporation once we have written this section 4(2) of the Central Act in the Explanation to section 2(28) of our Act, we would have thereafter no occasion to refer to the Central Act from which this incorporation was done and as to its purpose or context. Therefore, so far as our present Act is concerned, if the Legislature did not lack the legislative power to fix situs of the sale as distinguished from the taxing power, which it lacks because of the inclusion of certain sales under Article 286 of the Constitution, it cannot be held that we should construe the Explanation to section 2(28) as being confined to and as applicable only to cases other than those which fell within section 3 or 5 of the Central Act. In fact, so far as the context of the present case is concerned and especially of the relevant provisions regarding the authorization, the "turnover of sales" under section 24 has to be of the goods exported, whether in the coarse of export out of the territory of India or otherwise. The purpose behind authorization is not to create the tax liability on the excluded sales but rather one to give exemption, and for that limited purpose even if a wider and extended meaning is given by the Legislature, we cannot hold that there is anything repugnant in the context, which would justify our departure from the statutory definition.
18. In the result we must hold that the Tribunal was right in its view that the "turnover of sales" of the opponent must include the sale of the goods in question, which were exported by it from the State. We, therefore, answer the aforesaid reframed question in the affirmative and this reference is accordingly disposed of. The State shall pay the costs of this reference to the assessee.
19. Reference answered accordingly.