1. In this reference under Section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, the following question has been referred to this court:
Whether, in absence of specific date being mentioned in the certificate of registration from which it is to be considered as valid as provided for in the form of the certificate, a transaction taking place prior to the date of granting its registration can be taken to have been covered by it ?
2. The petitioner in this case is Hind Ceramics Limited. The Commercial Tax Officer, Esplanade Charge, in making the assessment of the petitioner for the period from 12th November, 1957, to 2nd April, 1958, by his order dated 11th December, 1958, allowed the claim for deduction under Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, to the extent of Rs. 1,41,537.71 in respect of sales made to M/s. Sanitary Ware Distributors between 30th November, 1957 and 31st December, 1957, on the basis of certain declaration in form No. XXIV received by the petitioner from the purchasing dealer. The purchasing dealer's, viz., M/s. Sanitary Ware Distributors' registration certificate was issued on the 19th March, 1958, but the date from which the registration certificate was to be valid was not inserted by the officer issuing the certificate. It has been stated in the statement of case that the said date had not been inserted through inadvertence. Prior to form No. IIA which is substituted by the West Bengal Finance Department Notification dated 14th March, 1961, certificate of registration for a dealer having only one place of business in West Bengal under Rule 6 of the Bengal Sales Tax Rules, 1941, contained a sentence to the following effect:
This certificate is valid from...until cancelled.
3. As mentioned hereinbefore, this form was altered by the notification dated 14th March, 1961 and the present form does not contain the sentence "this certificate is valid from...until cancelled". The instant case, however, will have to be governed by the form prevalent prior to 1961. To continue with the narration of events, subsequent to the completion of assessment by the Commercial Tax Officer, the Assistant Commissioner of Commercial Taxes, Chowringhee Circle, revised the assessment on a proposal from a successor-in-office of the said Commercial Tax Officer and disallowed the claim for exemption by his order dated 24th November, 1960. Against the said order of assessment dated 24th November, 1960, the dealer filed an appeal before the Commissioner of Commercial Taxes, West Bengal. The Additional Commissioner of Commercial Taxes, who dealt with the case, rejected the dealer's claim by his order dated 29th July, 1961. It may be mentioned that the Assistant Commissioner of Commercial Taxes in his order had referred to a Finance Department Notification No. 1840-F.T. dated 21st August, 1952, which had imposed an obligation upon the registering authority to state the date from which the registration was valid. The petitioner thereafter filed an application for revision before the Board of Revenue and the Member, Board of Revenue, by his order dated 7th February, 1964, rejected the said revision application. It was contended before the Board that the revision in this case was unjustified. We are not concerned with this aspect of the matter. The second contention that was urged was on the question whether the registration certificate should be deemed to have been granted from the date of the making of the application for registration. Dealing with the contention the Member, Board of Revenue, observed that although there was a lacuna in filling up the registration certificate inasmuch as it had not been specifically mentioned from which date the registration certificate was valid so far as West Bengal law was concerned it had so far been held that the legal validity of the registration certificate would run from the date when it was granted. When the sales in question took place, there was no registration certificate granted to the purchasing dealer and as such the purchasing dealer at that time could not be considered as a registered dealer. Thereafter on an application having been made the aforesaid question has been referred to this court.
4. In this case, as mentioned hereinbefore, the question is whether in a case where the registration certificate does not specify the date from which the registration certificate is effective, it should be deemed to have been granted on the date of the application for certificate. It was contended by counsel for the petitioner that in view of the provisions of the sales tax law a dealer who was subsequently granted the registration certificate should be deemed to be a registered dealer from the date of the application for registration. It was contended that otherwise it would lead to hardship and complication in the transactions of sale. In this connection, reliance was placed on several decisions to which reference would be made later in this judgment. Counsel for the petitioner also drew our attention to the general scheme of the Act. It was contended mainly that under the scheme of the Bengal Finance (Sales Tax) Act, 1941, a dealer whose turnover was beyond a certain limit was obliged under the provisions of the statute to apply for registration and if he did not so apply the dealer would be exposed to certain liabilities of criminal nature. Our attention was drawn to the provision of Section 11(2) as well as the provision of Section 22 of the Bengal Finance (Sales Tax) Act, 1941. It was contended that in most cases under Section 4(2) registration was not granted within the period of two months from the making of the application. Therefore, it was urged that unless the date of the application was treated as the date of registration, the consequence would be very grave to the dealer; either he would have to close down his business or would expose himself to criminal liability. In order to obviate the aforesaid difficulty it was contended that such an interpretation should be given that could make the scheme workable and cause less hardship. It was further contended that the form prevalent at the relevant time indicated that the registration could be made retrospective from the date of the application, otherwise there was no point in providing for the sentence that the registration was valid from a particular date if the presumption of law or the consequence of law was the transaction wars to be effected from the date of the signing of the registration certificate. Therefore, it was argued that the rule postulated the grant of registration certificate from an anterior date, viz., the date of making of the application and the fact that in the instant case, the date had not been filled in was only the fault of the administration for which neither the purchasing nor the selling dealer should be made to suffer. It was also contended that at the time of the assessment, in the instant case, the declaration form had been supplied by the dealer whose registration had been made and as such the said declaration form should have been accepted as valid and proper. As a part of the argument in support of his contention counsel for the petitioner drew our attention to certain observations of the Board of Revenue in certain decision wherein it was observed that there were distinguishing features between the Central Sales Tax Act and the corresponding State Act relating to the issue of registration certificate and when these features were considered, one was led to the conclusion that there was no bar in law in giving retrospective effect to the registration certificate. It was pointed out that in the said decision, in fact, it was intended that normally registration certificate should be given retrospective effect. It is necessary at the very outset to mention that we are not concerned with the question whether under the section or under the scheme of the Act retrospective operation could be given to a registration certificate or not. We are concerned, in the instant case, with the question whether when in a registration certificate there is no specific mention of the period from which it would be effective it should be deemed as a matter of law to be effective or operative from the date of the making of the application.
5. In this connection reliance was placed, as mentioned hereinbefore, on several decisions. It is necessary now to deal with these cases. In the case of Ramdhari Ram Chander [1955] 6 S.T.C. 430, the assessee had claimed to deduct from its turnover for the year 1949-50, under Section 5(2)(a)(ii) of the Pepsu General Sales Tax Ordinance, certain sales to dealers. But the sales tax authorities disallowed their claim on the ground that they had failed to furnish any evidence whatsoever to show that the purchasing dealers got their registration certificate or they had applied for the same after depositing the necessary fee into the Government treasury before purchasing the goods from the assessee. The learned Financial Commissioner held that in cases where the purchasing dealers had applied for registration certificates before the date of sale, the date of application should be taken into consideration. Except for stating that for the purpose of determining whether the sales were made to the registered dealers, it was the date of application for a registration certificate which should be taken into account and not the date of issue of the registration certificate, inasmuch as the responsibility for delay lay on the shoulders of the sales tax authorities for which the dealers should not be made to suffer. The learned Financial Commissioner has not stated further reason in support of that conclusion. The question was again considered by the Madhya Pradesh High Court in the case of Orient Paper Mills Ltd. v. Commissioner of Sales Tax, Madhya Pradesh [1969] 23 S.T.C. 308. It was observed that there was no provision under the Central Sales Tax Act, 1956, or the rules made thereunder giving to the authority issuing a certificate of registration to a dealer power to restrict the number of goods that the dealer could purchase for the purpose of Section 8(1) of the said Act. The expression "goods of the class or classes" in Sections 7(3) and 8(3) did not carry the implication of specification of goods in the certificate of registration by the number of goods. The possible misuse of the certificate could not afford any justification for putting a restriction on the number of goods a dealer could purchase. As regards the date of the effectiveness of an amendment in the registration certificate, it was observed that the Central Sales Tax Act, 1956, or the Central Sales Tax (Registration and Turnover) rules did not contain any provision indicating the date from which any amendment in the certificate would be effective. The amendment could be effective either from the date on which it was made or from the date on which the purchasing dealer applied for amendment of the registration certificate. It was held that it would be, however, equitable and reasonable to hold in case of an amendment of a registration certificate, it was the date on which the dealer made the application for amendment that should be taken as the date of effectiveness of the amendment that was allowed. We must, however, observe that this case was concerned with the amendment of the registration certificate. We are actually not concerned with that controversy. Amendment very often as amendment to the pleadings relates back and it may not be quite appropriate to draw an analogy between amendment of a certificate or document and the grant or making of an order. The reason, however, why the Madhya Pradesh High Court held, as it did, was on the basis that delay normally in allowing or dealing with the application of this nature of amendment occurred because of the conduct of the administration. In the case of Subhash Chandra Ghosh v. State of Orissa [1970] 26 S,T.C. 211, it was held that, where an application for registration under Section 7 of the Central Sales Tax Act, 1956, made by an assessee was defective in many particulars, but the asseseee rectified these defects when opportunities were given to him under Rule 5(2) of the Central Sales Tax (Registration and Turnover) Rules and the authorities ultimately granted him the certificate of registration, the certificate would be operative from the date of the application. It was not open to the department after the grant of the certificate of registration to say that during the period the application was pending, the assessec was an unregistered dealer. That conclusion was possible only if the application had been rejected for non-removal of defects when it could be said that no application for registration had been made. All these decisions were considered by the Punjab and Haryana High Court in the case of Chandra Industries v. State of Punjab [1972] 29 S.T.C. 558 and counsel for the petitioner placed strong reliance on the said decision. It was held by the Division Bench that the registration certificate obtained under Section 7 of the Punjab General Sales Tax Act, 1948, took effect from the date on which an application for obtaining such certificate was made in the prescribed manner and not from the date of its issue. It was further observed, therefore, that a dealer registered under the Act in the matter of his liability to pay tax was entitled under Section 5(2)(a)(ii) to deduct from his gross turnover proceeds of the sale of goods made to a dealer during the period when the application of the latter for getting himself registered as a dealer under Section 7 of the Act was pending with the department. According to the Division Bench of the Punjab and Haryana High Court, under the Act and the rules, a reciprocal imperative had been imposed on the prescribed authority to register an applicant as a dealer if (a) his application for registration was in order; (b) the prescribed fee had been paid; and (c) the authority was satisfied that the applicant was a bona fide dealer and the informa. tion given by him was correct. If such a dealer honestly and diligently did all that he was required to do by Sub-sections (2) and (3) of 7 and Rule 5, he could not be penalised under Section 23(1) read with Section 7(1) of the Act. The High Court observed that it was a cardinal principle of interpretation of statutes which imposed pecuniary burdens or penalties that these should be construed strictly and when the statute was silent or its language was ambiguous, the doubt was to be resolved by adopting the construction which was beneficial to the taxpayer and which avoided inconsistency and repugnancy among its various provisions or to any constitutional provision. It must be mentioned that in material respect the East Punjab General Sales Tax Act, 1948, was in pan materia with the provisions of the Bengal Finance (Sales Tax) Act, 1941 and like the instant case before us, there the Chandra Industries was a registered firm carrying on business of manufacture of refrigeration and air-conditioning machinery at Jullundur. The firm was also registered under the Punjab General Sales Tax Act, 1948. The mode of payment of sales tax was quarterly. The petitioner submitted four quarterly returns for the year 1966-67 and the gross turnover in the return was Rs. 2,45,456,96. The petitioner-firm claimed deduction and exemption from tax, inter alia, of an amount of Rs. 1,53,475.32 in respect of the first quarter on the ground that it represented the sale proceeds of goods sold to M/s. Refrigeration Products on 31st May, 1966. The question with which the High Court was concerned was whether a dealer in the matter of liability to pay tax was entitled to deduct from his gross turnover proceeds of the sale of goods made to a dealer during the period when the application of the latter for getting himself registered under Section 7 of the Act was pending with the department. The learned Judges of the Punjab and Haryana High Court have dealt with the provisions of the Act, the penal consequences and the obligation of the authority dealing with the application for registration when made. Thereafter, the learned Judges have posed the question whether a dealer who honestly and diligently did all that he was required to do by Sub-sections (2) and (3) of Section 7 and Rule 5 should be penalised under Section 23(1) read with Section 7, Sub-section (1) and the opinion of the learned Judges was that they could not be so penalised. With respect we are in respectful agreement with the aforesaid view of the Punjab and Haryana High Court in so far as it held that a person who had applied for registration and had diligently and honestly made or done what he was required to do, should not be made liable under the provisions of the Act in this case, under section 11(2) or under Section 22 of the Bengal Finance (Sales Tax) Act. It appears that in a judgment of this court this aspect of the matter was also considered, namely, in the case of Wallamji Hirji Parmar and Ors. v. Commercial Tax Officer, Serampore (unreported), where B. N. Banerjee, J., was of the opinion that under section 11(2) of the Act, if a dealer had already applied under Section 7(2) he could not be made liable and could not be made responsible for the delay in the disposal of the application by the authorities concerned. In this connection, Banerjee, J., referred to a decision of Bose, J., as his Lordship then was, in the case of Balharshah Timber Depot v. Commissioner of Commercial Taxes and Anr. A.I.R. 1958 Cal. 246, where it was observed that a person could be said to have failed to get himself registered when he did not take any steps whatsoever to obtain a registration certificate, but when he had applied for registration and had not thereafter done anything to prevent or obstruct registration but the authorities concerned were unable for some reasons or other to complete registration before a certain time, the dealer concerned could not be said to have failed to get himself registered.
6. The Punjab and Haryana High Court in the above-mentioned case [1972] 29 S.T.C. 558 further went on to say that Sub-section (1) of Section 7 should not be considered in isolation. It was to be read together with sub-sections (2) and (3) of the same section and the expressions "registered" and "possesses a registration certificate" in Section 7(1) should therefore take their colours from the succeeding Sub-sections (2) and (3). In the instant case, in order to decide this controversy it is necessary to refer to certain provisions of the Act. sub-section (2) of section 4 provides that if the gross turnover of any dealer calculated from the commencement of any year exceeded the taxable quantum at any time within such year, he should be liable to pay tax under the Act on the expiry of two months from the date his gross turnover first exceeded the taxable quantum, on the sales effected after such period and every person whose gross turnover exceeded the taxable quantum was liable under the Act to apply for registration. Section 5(1) imposes the obligation that tax shall be payable by a dealer on his taxable turnover at the rate mentioned in the said Section. Sub-section (1) and Sub-section (2) of Section 5 define taxable turnover by excluding or deducting therefrom certain items. section 5(2) is in the following terms :
(2) In this Act the expression 'taxable turnover' means (in the case of a dealer who is liable to pay tax under Section 4, that part of his gross turnover) during any period which remains after deducting therefrom....
(ii) sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for resale by him in West Bengal or for use by him directly in the manufacture in West Bengal of goods for sale and of containers and other materials for the packing of goods of the class or classes so specified....
Provided that deduction on account of sales referred to in Sub-clause (ii), Sub-clause (iii) or Sub-clause (iv) shall be allowed to the dealer who sells the goods only when he can furnish in the prescribed manner a declaration containing prescribed particulars in the prescribed form obtainable (in such manner and subject to such conditions and restrictions as may be prescribed) from the prescribed authority duly filled up and signed by the registered dealer to whom, or by the owner or representative of the undertaking to which, the goods are sold.
7. Therefore, in order to be entitled to deduct from the gross turnover it must be "sale to a registered dealer" and it must be "after obtaining a declaration from a registered dealer" to whom "the goods" are sold. Section 7(1) provides that no dealer shall, while being liable to pay tax carry on business as a dealer unless he has been registered and possesses a registration certificate. Sub-section (2) provides that every dealer required to be registered should make an application in such manner to the prescribed authority and in the prescribed form duly filled in and signed by the dealer. Sub-section (3) of Section 7 states that if the registering authority is satisfied that an application for registration is in order, he shall in accordance with such rules and on payment of such fees as may be prescribed register the applicant and grant him a certificate of registration in the prescribed form which may specify the class or classes of goods for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of section 5. It has to be noted, so far as the statute is concerned, that it does not enjoin that a, certificate of registration should specify the date from which it should be effective but it should be done in accordance with the rules and Rule 6 authorises making or introduction of the form and the form at the relevant time as mentioned hereinbefore included a sentence that the registration was valid from a particular date. Section 8 deals with voluntary registration and Section 11 deals with assessment. section 11(2) states that if upon information which has come into the possession of the Commissioner, the Commissioner is satisfied that any dealer, who has been liable to pay tax under this Act in respect of any period but has failed to get himself registered or to obtain a special certificate, as the case may be, the Commissioner shall proceed in such manner as may be prescribed to assess to the best of his judgment. It is true that the statute imposing penal consequences should be strictly construed but fiscal provisions should also receive strict construction. There is no presumption of law that a certificate of registration or a grant becomes operative from the date of either the application for the grant or application for the certificate. In order to have that consequence, it must be either an imperative consequence flowing from the scheme of the Act or must be expressly provided in the statute or in the rules framed under the statute. The Legislature has not provided that the registration certificate should contain any particular date. The rule prevalent at that time so provided. At one stage of the argument it was suggested that such an authority to the rule-making body was bad. We are, however, not concerned in the instant reference with that controversy. As mentioned hereinbefore, whether retrospective effect could be given in a particular case or not, is not the question with which we are concerned. We are concerned with a question where no date is mentioned as a matter of law under the scheme of the Act, it should be presumed that the dealer who becomes subsequently registered should be deemed to have become a registered dealer from the date when he applied for registration. We find neither in the scheme of the Act nor in the language used such a presumption. It must be, as mentioned hereinbefore, a sale to a registered dealer and the nature of the sale must be determined at the time of the sale. It is true that assessment or return takes place subsequently, but the liability or the obligation that a fiscal statute normally imposes must be determined from the nature of transaction at the time of the transaction in question. In the instant case, the statute has allowed a dealer to deduct from his gross turnover the sales made to a registered dealer. So, at the time of the sale it must be a sale to a registered dealer. Otherwise, it might result in anomalies. The character of the sale cannot depend on subsequent event. Under the provisions of Section 7(2), the authority concerned has the right to be satisfied about the grant of a certificate of registration. If, in a particular case, the authority is not so satisfied and a sale in question takes place, could it be said that the sale would become a sale to a registered dealer or not depending upon the future determination by the authorities concerned. It would be wrong to take the subsequent events to clarify ipso facto a past transaction. If such was the intention of the Legislature then it was for the Legislature to provide a deeming provision to that effect. By process of judicial interpetation such a deeming provision cannot be made applicable in a fiscal statute.
8. Counsel for the petitioner drew our attention to the observations appearing in Halsbury's Laws of England, 3rd Edition, Volume 16, page 3, Article 205. Those observations, in our opinion, were made in a different context. A court administering an estate and a court interpreting a fiscal statute entirely proceeds on different lines. It was common case of both counsel for the petitioner as well as for the respondent that the scheme of the Sales Tax Act is that goods should suffer taxation at one stage only and one should not be made liable to double taxation. At the same time counsel for the petitioner contended that in a case where a dealer applied for registration and his application had been kept pending for a long time, as it normally happens in most of the cases and, in the meantime, the dealer accumulates his goods by purchases by paying sales tax and thereafter, he becomes a registered dealer and on the sales becomes liable to sales tax on those accumulated goods which could not normally be sold immediately. It is true that there may be such cases of hardship. At the same time, it was equally pointed out that under the scheme there was a period of two months as mentioned in sub-section (2) of section 4. If it was held that the retrospective effect could be given from the date of the making of the application, then the whole scheme of the Act would become out of gear and it was also contended that under the provisions of the Act when quarterly returns had to be filed and assessment had to be made it was not possible to know the character of the transaction which was dependent on subsequent grant of the certificate. It is, however, not necessary, as mentioned hereinbefore, for our purposes to determine whether in law such a retrospective certificate could be granted under the rules. It is not also necessary for us to determine whether the rules in so far as it authorised, if these did, granting of retrospective certificates were valid or not. We are concerned in this case, where the grant being silent on this point, whether it should, as a matter of presumption, make it operative from the date of the application. We find in the scheme of the Act and the language of the provision used, specially the language used in Section 5(2)(a)(ii) and the proviso thereto, no warrant for such a consequence. We are in respectful agreement with the Punjab and Haryana High Court that a person or dealer who had applied for registration should not be criminally made liable or should not be proceeded against under the Sales Tax Act because he could not be expected to do anything more, but that would not make him a registered dealer and the person dealing with him in such circumstances could not be said to be dealing with a registered dealer and in so far as the Punjab and Haryana High Court held to that effect, with great respect, we are unable to accept that conclusion.
9. In the aforesaid view of the matter the question referred to this court must be answered in the negative and in favour of the sales tax authorities.
10. In the facts and circumstances of the case, there will be no order as to costs.
S.K. Hazra, J.
11. I agree.