- Bookmark
- Share
- CaseIQ
Commercial Taxes Off... v. The Divisional Super...
Structured Summary of the Opinion
Factual and Procedural Background
For the period 1 April 1956 to 31 March 1957 the Divisional Superintendent, Northern Railway, Jodhpur, was assessed to sales tax on the sale of coal-ash. The Sales Tax Officer held that the Divisional Superintendent came within the definition of "dealer" under the Rajasthan Sales Tax Act, 1954. The assessee appealed to the Deputy Commissioner (Appeals), Sales Tax, Jodhpur, and lost. The assessee then preferred a revision to the Board of Revenue for Rajasthan, which allowed the revision and set aside the decision of the Deputy Commissioner (Appeals), holding that the assessee was not liable to pay sales tax on the sale of coal-ash.
The Commercial Taxes Officer applied to the Board for stating a case and referring the question of law for the opinion of the High Court, but the Board rejected that application. The Commercial Taxes Officer then applied to the High Court under section 15(2) of the Rajasthan Sales Tax Act, 1954; that application was allowed on 11 March 1968 and this reference followed.
Legal Issues Presented
- Whether, in the facts and circumstances of the case, the Divisional Superintendent, Northern Railway, Jodhpur, was a "dealer" within the meaning of section 2(f) of the Rajasthan Sales Tax Act, 1954, for the assessment year 1956–57 and consequently liable to pay sales tax under that Act.
Arguments of the Parties
Learned Counsel for the Northern Railway
- Argued that the Central Government and its departments were not included in the definition of "dealer" as the definition stood at the relevant time; since the State Government was expressly included but the Central Government was not, the legislature intended to exempt the Central Government from the Act's operation.
- Relied on the decision in Chellaram Kishandas v. State of Maharashtra to support the general rule of interpretation that the Union of India or a State will be excluded from charging or penal provisions of a statute unless the intention to include them is clearly shown.
Commercial Taxes Officer / Revenue Position (as reflected in the record)
- The Sales Tax Officer's original position was that the Divisional Superintendent, Northern Railway, was a "dealer" under section 2(f) and therefore liable to sales tax on the sale of coal-ash.
- After the Board of Revenue's revision order in favour of the assessee, the Commercial Taxes Officer sought a stated case and ultimately obtained a reference to the High Court under section 15(2) to resolve the legal question.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer [1976] 37 S.T.C. 423 S.C. | Illustration that sale of unserviceable material and scrap-iron by the railway, though not business in the ordinary sense, falls within the Act's definition of "business" (including trade, commerce or transactions ancillary to commerce). | The Court relied on this authority to support the conclusion that the railway's sale of coal-ash is a "business" activity within the meaning of section 2(cc) of the Act and hence that such activity can bring the railway within the definition of "dealer." |
| Superintendent and Remembrancer of Legal Affairs, West Bengal v. Corporation of Calcutta, A.I.R. 1967 S.C. 997. | Established that modern construction presumes general Acts apply to the State as well as subjects unless the statute expressly or by necessary implication exempts the State; overruled the older "King not bound" rule. | The Court treated this as authoritative, using its principle to reject the argument that the Central Government (and its departments) should be excluded from the Act's operation absent express or necessarily implied exemption. |
| Director of Rationing and Distribution v. Corporation of Calcutta, A.I.R. 1960 S.C. 1355 | Earlier view (overruled) concerning construction of statutes vis-à-vis the Crown / State. | Mentioned as the earlier position which was overruled by the Superintendent & Remembrancer decision; used to explain the evolution in legal principle relied upon by the Court. |
| Chellaram Kishandas v. State of Maharashtra (Maharashtra High Court) | The high court had held, as a rule of interpretation, that the Union or State would normally be excluded from charging or penal provisions of a statute unless legislative intent to the contrary could be inferred; but also noted there may be no reason to exclude the Government of India from the expression "person" in some statutory contexts. | The railway relied on this decision; the Court noted the contention but observed that the Supreme Court's decision in Superintendent & Remembrancer is decisive and leaves no room for the exclusion argument in the present context. |
Court's Reasoning and Analysis
The Court proceeded in a stepwise manner:
- It identified the short question referred under section 15(2) of the Rajasthan Sales Tax Act: whether the Divisional Superintendent, Northern Railway, Jodhpur, was a "dealer" under section 2(f) for the assessment year 1956–57.
- The Court examined the statutory definitions relevant at the time. The pre-amendment section 2(f) defined "dealer" as any person who carries on the business of selling and supplying goods in the State and included the State Government. The Act was later amended (with effect from 1 April 1960) to clarify and expand the definition (explicitly including Central Government and departments in the amended text).
- The Court observed that the Northern Railway is a department of the Central Government and that there was no dispute that it carried on business activities. It therefore considered the statutory definition of "business" in section 2(cc), which includes trade, commerce or any transaction incidental or ancillary thereto, whether or not for profit.
- The Court relied on the District Controller of Stores decision to show that the sale of unserviceable materials by a railway falls within the Act's broad definition of "business," and that sale of such materials can be treated as ancillary to the railway's commerce/transportation activities.
- Addressing the principal argument of the railway — that the Central Government was excluded from the definition because the State Government was expressly included — the Court analyzed statutory language and legislative history. The Court noted that the State Government was not included in the definition prior to 1 April 1958 and that subsequent inclusions served to clarify doubts rather than to indicate that the governments had been excluded by necessary implication earlier.
- The Court relied on the authoritative nine-judge decision in Superintendent & Remembrancer of Legal Affairs, West Bengal v. Corporation of Calcutta to reject the older interpretive rule that the Crown (or State) is not bound by a statute unless expressly named. The Supreme Court's modern approach presumes general Acts apply to the State unless expressly or necessarily impliedly exempted.
- The Court found no express exclusion of the Central Government in the Act nor any circumstances from which an exclusion could be necessarily implied. Consequently, it concluded that the Northern Railway, as a department of the Central Government engaged in selling coal-ash (a business activity as defined), falls within the statutory definition of "dealer."
- The Court noted the railway's reliance on Chellaram Kishandas but held that the Superintendent & Remembrancer decision was authoritative and dispositive on the question whether the State or Central Government can be bound by general legislation.
Holding and Implications
Holding: The reference is answered in the affirmative. The Court held that the Divisional Superintendent, Northern Railway, Jodhpur, was a "dealer" within the meaning of section 2(f) of the Rajasthan Sales Tax Act, 1954, for the assessment year 1956–57, and therefore liable to pay sales tax on the sale of coal-ash.
Implications:
- Direct effect on the parties: The decision supports the view that the Northern Railway's sale of coal-ash is taxable under the Act because the railway qualifies as a "dealer" engaged in "business" as defined by the statute.
- The Court applied existing Supreme Court authorities (notably Superintendent & Remembrancer) and statutory definitions to resolve the reference; the opinion does not purport to create a new principle of law beyond applying those authorities to these facts.
- Costs: The Court directed that there shall be no order as to costs.
Final procedural disposition: The answer to the question referred to the Court was returned in the affirmative. There was no order as to costs.
C.M Lodha, C.J:— The short question, which arises for consideration in this reference under section 15(2) of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as the Act), is whether the Northern Railway is liable to pay sales tax on the sale of coal-ash made by it. The question of law referred to us reads as under:
“Whether, in the facts and circumstances of the case, the Divisional Superintendent, Northern Railway, Jodhpur, was a ‘dealer’ within the meaning of section 2(f) of the Rajasthan Sales Tax Act, 1954, for the assessment year 1956-57 and was consequently liable to pay sales tax under that Act?”
2. For the period from 1st April, 1956, to 31st March, 1957, the Divisional Superintendent, Northern Railway, Jodhpur, was assessed to sales tax on the sale of coal-ash made by him. The Sales Tax Officer held that the Divisional Superintendent, Northern Railway, Jodhpur, came within the definition of “dealer” as defined in the Act. The assessee filed appeal to the Deputy Commissioner (Appeals), Sales Tax, Jodhpur, but was unsuccessful. He preferred a revision before the Board of Revenue for Rajasthan, which allowed the same and set aside the order of the Deputy Commissioner (Appeals) holding that the assessee was not liable to pay sales tax on the sale of coal-ash. The Commercial Taxes Officer then applied to the Board for stating the case and referring the question of law arising out of its order for the opinion of this Court. The Board, however, rejected the application. Thereupon, the Commercial Taxes Officer made an application to this Court under section 15(2) of the Act, which was allowed on 11th March, 1968. It is in pursuance of the order of this Court dated 11th March, 1968, that this reference has been made. For a correct appraisal of the arguments advanced by the learned counsel for the parties, it would be necessary to refer to the definition of the term “dealer” contained in clause (f) of section 2 of the Act at the relevant time:
“‘dealer’ means any person who carries on the business of selling and supplying goods in the State whether on commission or for remuneration or otherwise and includes the State Government in respect of any such business, a Hindu undivided family, and also a society, club or any other association which sells or supplies goods to its members.”
3. The Act was subsequently amended on 1st April, 1960, by Amendment Act No. 18 of 1960, whereby the term “dealer” was defined as below:
“2. (f) ‘dealer’ means any person who carries on the business of buying and selling or supplying goods in the State whether on commission or for remuneration or otherwise and includes the Central Government, a State Government or any of their departments in respect of any such business, a Hindu undivided family and a society, club or any other association which buys goods from, or sells or supplies goods to, its members.”
4. The learned counsel for the Northern Railway has urged that the Central Government and its departments are not included in the definition of the word “dealer”, as it stood at the relevant time. His argument is that since the State Government is expressly included in the term, but the Central Government has been excluded, the intention of the legislature is clear and points to the fact that the Central Government was exempted from the application of the Act.
5. At this stage, we may observe that there is no doubt that the Northern Railway, even though it is a department of the Central Government, is carrying on business activities. The word “business” has been defined in section 2(cc) as follows:
“2. (cc) ‘business’ includes—
(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit, and whether or not any such profit accrues from such trade, commerce, manufacture, adventure or concern; and
(ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; but does not include activities of sale, supply or distribution of goods carried on without any profit-motive by—
(i) any charitable or religious institution in the performance of its functions for achieving its avowed objects; and
(ii) an educational institution, where such a sale, supply or distribution is made to its students.”
6. The activity of the railway in selling coal-ash must be held to be a business within the definition of the term “business” as the term has been so defined as to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce, adventure or concern carried on with a motive to make gain or profit and whether or not any such profit accrues from such trade, commerce, manufacture, adventure or concern. In District Controller of Stores, Northern Railway, Jodhpur v. Assistant Commercial Taxation Officer [1976] 37 S.T.C 423 S.C, the Supreme Court observed that the fact that though the activity involved in selling unserviceable material and scrap-iron, etc., would not amount to carrying on business in the normal connotation of that term, yet it would be business as defined in the Act. Their Lordships further observed that the railway, since it is concerned in the activity of transportation, is engaged in commerce within the meaning of clause (i) of the definition and the sale of unserviceable materials and scrap-iron, etc., by it is a transaction in connection with or ancillary to such commerce within clause (ii) of that definition.
7. As regards the definition of the term “dealer” reference may be made to Superintendent and Remembrancer of Legal Affairs, West Bengal v. Corporation of Calcutta A.I.R 1967 S.C 997., wherein a Bench of 9 Judges overruled the earlier view taken by that Court in Director of Rationing and Distribution v. Corporation of Calcutta A.I.R 1960 S.C 1355., and held that the rule of construction that the King is not bound by a statute unless he is expressly named or brought in by necessary implication, which was accepted by the Privy Council in interpreting statutes vis-a-vis the Crown is inconsistent with and incongruous in the present set-up. The Supreme Court observed:
“On the other hand, the normal construction, namely, that the general Act applies to citizens as well as to State unless it expressly or by necessary implication exempts the State from its operation, steers clear of all the said anomalies. It prima facie applies to all States and subjects alike, a construction consistent with the philosophy of equality enshrined in our Constitution. This natural approach avoids the archaic rule and moves with the modern trends. This will not cause any hardship to the State. The State can make ah Act, if it chooses, providing for its exemption from its operation. Though the State is not expressly exempted from the operation of an Act, under certain circumstances such an exemption may necessarily be implied. Such an Act, provided it does not infringe fundamental rights, will give the necessary relief to the State.”
8. Admittedly, in the present case, the Central Government is not expressly excepted from the operation of the Act and there do not appear to us any circumstances from which such an exception may necessarily be implied. The argument of the learned counsel for the railway is that since the State Government was included within the definition of the term “dealer” but the Central Government was not so included, it must be inferred by necessary intendment that the intention of the legislature was to exclude the Central Government and its departments from the definition. In this connection, we may point out that the State Government was not included in the definition of the term “dealer” prior to 1st April, 1958. It appears to us that the State Government initially and the Central Government subsequently were explicitly included within the definition of the term “dealer” only by way of clarification, in order to remove doubts, if any. But that does not mean that the State Government and the Central Government were excepted from the operation of the Act by necessary intendment. When a department of the State Government or the Central Government carries on business activity, we fail to understand why it should not be considered as a “dealer”. No such circumstances have been pointed out to us with reference to the provisions of the Act which may lead us to the conclusion that the Central Government and its departments were excepted from the operation of the Act by necessary intendment. We are, therefore, of the opinion that the railway would fall within the definition of the term “dealer” as defined in the Act.
9. The learned counsel for the railway also placed reliance on Chellaram Kishandas v. State of Maharashtra, wherein the Maharashtra High Court had held that the expression “person” normally would include the Union of India or a State, but, as a rule of interpretation, the Union of India or State would be excluded from the charging or penal provisions of the statute unless the intention of the legislature to the contrary could be inferred from the express provisions or by necessary intendment. It is, however, important to note that the learned Judges of the Maharashtra High Court have also observed, while dealing with the definition of the term “person” in section 10(1) of the Bombay Sales Tax Act, 1953, that there is no reason to exclude the Government of India from the expression “person” occurring in sub-section (1) of section 10 of the Act. Be that as it may, in face of the authoritative pronouncement of their Lordships in the Superintendent and Remembrancer of Legal Affairs, West Bengal, there remains no room for argument that the State Government or the Government of India, as the case may be, are not governed by the general law unless there is a specific provision incorporated in the law applying the Act to them. This is clear from the passage we have extracted above from their Lordships' judgment in Superintendent and Remembrancer of Legal Affairs v. Corporation of Calcutta. Our answer to the question, therefore, is in the affirmative. Let the answer be returned to the Board. There will be no order as to costs.
10. Reference answered in the affirmative.
Alert