TMI Blog1974 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods: Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for resale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer." All the petitioners are registered dealers. Those in C.Ws. 590 of 1973, 1549 of 1973 and 894 of 1973 purchased goods specified in their registration certificates as being intended for resale by them. The others in C.Ws. 147 of 1974, 111 of 1974, 947 of 1973 and 1426 of 1973 purchased goods specified in their registration certificates for use by them in the manufacture of goods for sale. But the actual resales and the post-manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g under section 5(2)(a)(ii) had allowed registered dealers to sell goods purchased by them tax-free even outside Delhi without attracting the consequences provided for in the second proviso thereto. The construction of section 5(2)(a)(ii) by the court should not be contrary to this usage unless the language of section 5(2) (a) (ii) is clear beyond doubt to show that the usage was wrong. The respondents met the grounds urged by the petitioners as follows: (1) The general words such as "for resale" and "for sale" used in section 5(2)(a)(ii) have to be limited in their operation to Delhi because the legislature enacting the Act was competent to make it operate only within the State. (2) Though the definitions of "sale" and "turnover " in sections 2(g) and 2(i) do not require that a sale and the aggregate price of goods sold by a dealer have to be confined to sales taking place in Delhi, in view of section 27 of the Act, the "sale" under the Act means only a sale in Delhi and "turnover" would include only prices of goods sold inside Delhi. Inter-State, export and outside sales are excluded from the definitions of "sale" and "turnover" by section 27 of the Act. (3) Under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it unconstitutional as stated in meeting ground No. (3) above. Having heard the counsel for the petitioners led by Shri N.A. Palkhiwala and the counsel for the respondents led by Shri Lal Narain Sinha, SolicitorGeneral, the legal position regarding the opposing contentions of the parties appears to us to be as follows: Under the Government of India Act, 1935, the power to levy sales tax was within the exclusive competence of a Provincial Legislature. The Bengal Finance (Sales Tax) Act, 1941, was enacted by a Provincial Legislature. The law made by it could operate only within the State. Even if the goods sold ultimately went out of the State, the transaction of sale could be analysed into various components and at least one of these components was required to have a territorial nexus with the State. Otherwise such a sale could not be taxed under the State law. Therefore, though outside sales could not be taxed, all other sales could be taxed even if a part of the sale transaction was connected with the State. This was why clause (v) of section 5(2)(a) exempted not only export and outside sales but even inter-State sales. This exemption was confirmed by the enactment of arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andez v. The State of Kerala[1957] 8 S.T.C. 561 (S.C.); [1957] S.C.R. 837. As a rule the meaning of the same word used in the same statute would be the same wherever that word occurs in the statute unless the context requires otherwise. The word "sale" in the Act has to be restricted to a sale in Delhi because that is the only sale which was taxable under the Act and the only object of the Act is to impose a tax on sales. It was argued for the petitioners, however, that the reason for thus limiting the word "sale" applies only when the word is used to denote a sale which is taxable. It does not apply when that word is used to denote a sale which is not taxable. It is argued that under section 5(2)(a)(ii) only the first sale by the selling dealer to a purchasing dealer is taxable and, therefore, that has to be a sale in Delhi. It is argued further that the second sale by the registered dealer is not taxable and it could, therefore, be outside Delhi. The argument appears to be plausible but when intensively considered it is seen to be untenable. Firstly, the rule of construction of a State Sales Tax Law laid down by the Supreme Court in M.P.V. Sundararamier Co. v. State of Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a single point sales tax and (2) levying multi-point sales tax. Our Act like the Orissa and Punjab Acts provides for a single point levy of sales tax. The meaning of single point levy is that within this State sales tax is levied on the sale of the same goods only once even if the same goods are actually sold within the State more than once. It is important to remember that the single point levy system is meant to work within one State only. It does not mean that sales tax may be imposed only once on the same goods anywhere in India, i.e., in any of the States. The observation of the Supreme Court in State of Assam v. Ramesh Chandra Dey[1961] 12 S.T.C. 441 at 445 (S.C.); [1962] 1 S.C.R. 986 at 991-992. brings out the working of a single point levy of sales tax in the following words: "What section 15 does, is to grant an additional exemption in respect of sales in which the goods, though sold to a registered dealer, are meant for resale in the State itself. It is quite easy to see that unless this exemption was granted, it was possible that there would have been sales tax at more than one point, namely, at the point at which the first registered dealer sold to the second register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be attached to the first sale. Since according to the decision in A.V. Fernandez's case[1957] 8 S.T.C. 561 (S.C.); [1957] S.C.R. 837. by the Supreme Court, the taxable "sale" must be a sale inside Delhi, the words "for resale" and "for sale" referring to the second sales by the registered dealers could only mean resales or sales inside Delhi. The second sale under section 5(2)(a)(ii) could be made taxable by the legislature only by ensuring that it takes place in Delhi. The legislature could have achieved this purpose in either of two ways. It could have either stated that the second sales must be made in Delhi or it could have simply said that the same registered dealers, the first sale in whose favour was exempt from taxation, would be required to make a second sale of the same goods in their capacity as registered dealers. The first alternative could be adopted by the legislature if section 5(2)(a)(ii) had dealt with the first sale to a dealer and a second sale by that dealer as distinguished from a sale to and a second sale by a registered dealer. Had the legislature dealt with a dealer and not with a registered dealer then the circumstances would have been as follows: Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be casual sales. It is significant to note that a commission agent in Delhi acting for an outside seller will be a dealer under explanation 2 to section 2(c) but the outside seller would not be such a dealer in Delhi. Similarly, under explanation 3 to section 2(c) the manager or an agent in Delhi of an outside seller would be the dealer even though the outside seller will not be a dealer in Delhi. The conception of a dealer is therefore bound up with the territory of Delhi. This is why in Commissioner of Sales Tax, U.P. v. D.C. Dhimani Brothers Ltd.[1970] 25 S.T.C. 12 at 14 (S.C.)., the Supreme Court observed as follows: "To be a dealer, it had to be shown that not only the respondents were selling goods in Uttar Pradesh, but they were carrying on the business of selling goods in Uttar Pradesh." This concept of territoriality of a dealer is strengthened by his registration. For, in his application for registration he must mention his place or places of business. The registration certificate which is issued to him is restricted to the sales made by him at his place of business. Sales by him outside his place of business would not be regarded as sales by him as a register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in sub-section (5). It was therefore argued that the liability of the dealer to pay tax was dependent on the totality of transactions in the entire area of Madhya Pradesh and not on the transactions carried on in any particular place or places of business noted in the registration certificate. In other words, the contention was that when a dealer got himself registered under the Act he was getting himself registered as a dealer who carries on the business of selling and supplying goods in Madhya Pradesh and not visa-vis any particular place or places noted in the registration certificate. We are unable to accept the argument of the appellant for we are satisfied that the provisions of the Act and rules do not support such an argument...... It is plain on an examination of the relevant sections and statutory rules that the certificate of registration is granted with reference to the place of business or places of business of the dealer and not with reference to the whole area of the State though for the purpose of determining the liability of the dealer, his turnover in respect of all places of business in the State including those not mentioned in the registration certificate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng propositions advanced by the learned Solicitor-General as to the concept of registration: "(1) Registration is of a person who carries on the business of selling goods in Delhi with reference to his place or places of business, whose total sales in Delhi make him liable to tax under section 4 (vide section 7) or whose gross turnover of sales in Delhi exceeds Rs. 10,000 (vide section 8). Registration certificate must contain (1) the goods or classes of goods in which he deals and (2) the place or places of business. (2) Registrability is thus dependent on the volume of dealer's sales; but only the volume of sales in Delhi is relevant and the sales outside are wholly irrelevant. (3) A dealer is a registered dealer only in respect of articles and places of business entered in his certificate. Beyond those articles and places he is an unregistered dealer: Commissioner of Sales Tax v. Minerva Minerals[1970] 25 S.T.C. 64 at 68, 69 (S.C.). It therefore follows that he is a registered dealer qua sales in Delhi only." As to the construction of the provisions in the Orissa and Punjab Sales Tax Acts in pari materia with our section 5(2) (a) (ii), there is a conflict of decisions. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale by a registered dealer under our Act? The sale to a registered dealer is a definite conception under section 5(2)(a)(ii) regarding the first sales by the selling dealers to registered dealers. The object is to exempt what are called "trading transactions" from sales tax because these very goods were expected to be resold by the registered dealers to persons who were not registered dealers and would then be subject to the levy of sales tax. All sales to registered dealers of goods specified in their registration certificates are exempted under section 5(2)(a)(ii). Therefore, even after the first sales which were exempted from taxation the chain of sales to registered dealers can continue and so long as the chain is not broken by a sale to a person other than a registered dealer no sales tax could be levied. The concept of sale by a registered dealer is also relevant under the Act. Firstly, a sale by a registered dealer is taxable because his taxable turnover has already exceeded the taxable quantum and that was the reason why he had to register himself under section 7(1). The sale by a dealer is to be contrasted with this inasmuch as a dealer is not liable to pay sales tax ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the manufactured goods are sold in Delhi. The object of section 5(2)(a)(ii) did not, therefore, suffer by the manufacture of goods outside Delhi. Thirdly, it would appear that the necessity to add the words "in Delhi" to qualify the situs of manufacture arose not from section 5(2)(a)(ii) but from sub-section (5) of section 4 which distinguishes between the taxable quantum of a manufacturer in Delhi and of other dealers. The former is Rs. 10,000 while the latter is Rs. 30,000. The object of the amendment was perhaps, therefore, to get the advantage of a lower taxable quantum in respect of the manufacturers. The actual amendment of section 5(2)(a)(ii), however, went beyond the statement of objects and reasons in regard to the post-manufacture sales but even now the direct resale of the goods by registered dealers is not qualified by the addition of the words "in Delhi". The post-manufacture sales under section 5(2)(a)(ii) have to be of three kinds after the amendment, namely, (a) inside Delhi; or (b) inter-State sales; or (c) export sales. No inference can therefore be drawn from the actual amendment that the legislature thought that without the addition of the words "in Delhi" th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les could be known to the sales tax authorities because they are compelled to submit returns while ordinary dealers are not compelled to submit returns unless a particular dealer is called upon to do so. The registered dealers have also to maintain accounts which are subject to inspection by the sales tax authorities under section 10 while an ordinary dealer is not required to maintain accounts. These differentia are directly connected with the object of the Act which is to impose a single point levy of sales tax. The sales tax authorities do not have any supervision and control over an ordinary dealer. They cannot, therefore, ensure that if an exemption is granted to an ordinary dealer he would make the second sale in Delhi. Further the presumption is that an ordinary dealer is not liable to pay sales tax at all. Correspondingly he is not given the privilege of collecting sales tax from his purchasers while the registered dealers have such a privilege under section 10A. There was no point therefore in granting exemption to an ordinary dealer inasmuch as a second sale by him would not be taxable at all. The crucial distinction which sustains the constitutionality of section 5(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the post-manufacture sale by the registered dealer outside Delhi and the other requiring that they be inside Delhi then the latter interpretation would have to be accepted inasmuch as it alone makes section 5(2)(a)(ii) constitutional. The former has to be rejected as it would make it unconstitutional: Kedar Nath Singh v. State of Bihar[1962] Supp. 2 S.C.R. 769. It is true that rules 3, 4, 5 and 26 framed under the Act require that in the application for registration the places of business and branches thereof have to be stated and in the registration certificate also they have to be stated. It is argued for the petitioners that the location of branches of the business outside Delhi had to be stated because resales and post-manufacture sales by them outside Delhi would be covered by section 5(2)(a)(ii). Firstly, rules cannot be used to interpret a statute under which they are made. Secondly, the mere mention of a branch outside Delhi either in the application for or in the registration certificate itself does not lead to such an inference. Such information may, for instance, be necessary to know whether a sale has been an inter-State sale. As to the practice of the Delhi sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord Buckmaster's above observation Lord Upjohn stated in Campbell College, Belfast v. Commissioner of Valuation for Northern Ireland[1964] 1 W.L.R. 912 at 942 (H.L.).: "But there is, in my opinion, another principle of great importance, which conflicts to some degree with the dicta of Lord Buckmaster, that where taxes or rates have been illegally demanded and paid upon a clearly wrong construction of a statute, justice demands that the illegal impost, however innocently made, should be terminated unless there is some very good reason to the contrary." The usage can be respected only if the construction of statute is in doubt but not if the contrary construction is clear. In Commissioner of Income-tax, West Bengal III v. Balkrishna Malhotra[1971] 81 I.T.R. 759 at 762 (S.C.)., the Supreme Court observed that the meaning of the word "assessment" was construed by the High Court of Madras in 1953. No other High Court has taken a contrary view. In these circumstances, even if two views were possible, the view long acted upon should not be disturbed. Firstly, this observation applies to the construction of a statute by a High Court and not by a sales tax authority. Secondly, it pos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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