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1957 (4) TMI 46

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....horities to assess the same according to law.   The appellant is a registered manufacturer of cocoanut oil and cake who has obtained a certificate of registration in Form VI as per sub- rule (1) of rule 20 of the Travancore-Cochin General Sales Tax Rules, 1950. The business of the appellant for the purposes of this appeal consisted in the purchase of copra, manufacture of cocoanut oil and cake and sale of the same to parties inside the State of Travancore-Cochin and sale of the oil to parties outside the State.   In the year 1951-52, the appellant purchased copra of the value of Rs. 7,16,048-1-4 and after manufacturing oil therefrom in his oil mills he sold the oil partly in the State and partly outside the State and the cake entirely within the State. The total value of the oil sold was Rs. 6,76,719-0-11 out of which the sales outside the State were of the value of Rs. 3,67,816-10-1 and the value of the cake sold in the State was Rs. 67,155-15-5. The total gross turnover of the appellant was thus Rs. 14,59,923-1-8 and he claimed to deduct therefrom the whole of the purchase price of the copra under rule 7(1)(k) read with rule 20. The net turnover according to him was t....

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.... (2)-Notwith- standing anything to the contrary in the Sale of Goods Act for the time being in force, the sale or purchase of any goods shall be deemed for the purpose of this Act, to have taken place in the United State wherever the contract of sale or purchase might have been made.............."   Section 2(k) defined "turnover" as- "the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a per- son of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover." An explanation was added to this definition which is, however, not material for our purpose.   Section 3 was the charging section and it provided for levy of taxes on sales of goods in the terms following:   "(1) Subject to the provisions of this Act-(a) every dealer shall pay for each year a tax on his total turnover for such year; and (b) the tax shall be calculated at the rate of three pies for every Indian rupee in such tu....

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....nbsp; The Travancore-Cochin General Sales Tax Rules, 1950, which were made by the Government under the rule-making power conferred upon it by sub-sections (4) and (5) of section 3 read with section 24 of the Act laid down inter alia the provisions in regard to the determination of the total turnover of a dealer which was liable to be taxed. Rule 4 provided for the determination of the gross turnover:   "(1) Save as provided in sub-rule (2) the gross turnover of a dealer for the purposes of these rules shall be the amount for which goods are sold by him.   (2) In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by him.   (a) Cocoanut, copra, ground-nut and its kernel.   (b) Cashew, and its kernel."   Rule 7 provided that the tax or taxes under section 3 or 5 or the notification or notifications under section 6 shall be levied on the net turnover of a dealer. It further provided that in determining the net turnover, the amounts specified in clauses (a) to (k) were, subject to the conditions specified therein, to be deducted from the gross turnover. Clau....

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....f this mode of calculation is that he claims to deduct from the gross turnover the whole of the purchase price of copra, viz., Rs. 7,16,048-1-4, and not the purchase price of copra which can be allocated to his sales of oil inside the State.   The Sales Tax Authorities, on the other hand, contend that the appellant is not entitled to take into computation at all his sales of oil outside the State and is also not entitled to deduct from his gross turn- over the purchase price of copra allocated to the oil sold to persons outside the State. They claim to lift the whole of these sales of oil outside the State inclusive of the purchase price of the copra which can be allocated to them out of the calculations of the net turnover because of the provisions of section 26 set out above, relying upon the non-obstante provision contained therein, viz., "Notwithstanding any- thing contained in this Act, a tax on the sale or purchase of goods shall not be imposed under this Act where such sale or purchase takes place in the course of inter-State trade or commerce." We have to decide which of these calculations of the net turnover is correct having regard to the relevant provisions of the ....

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....nside the State or outside the State and to deduct from such gross turnover the whole of the value of the copra purchased by him and converted into oil and cake irrespective of the fact whether such oil or cake was sold by him inside the State or outside the State. The only thing which he had to do under rule 20, sub-rule (2), was to include the amount for which the oil is sold in his turnover and he would then under rule 7(1) (k) be entitled to deduct from his gross turnover the whole of the price of the copra purchased and converted by him into oil and cake, again irrespective of the fact whether the same had been sold by him inside the State or outside the State.   This was certainly the position as it obtained prior to the addition of section 26 to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. We have, therefore, to consider what is the impact of section 26 on the other provisions of the Act and the rules made thereunder.   The High Court decided against the appellant observing that the definitions given in section 2(j) and (k) of the Act applied only in the absence of "anything repugnant in the subject or context", and on a perusal of th....

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...., the subject is free, however apparently within the spirit of the law the case might otherwise appear to be."   This passage was quoted with approval by the Privy Council in Bank of Chettinad v. Income-tax Commissioner and the Privy Council registered its protest against the suggestion that in revenue cases "the substance of the matter" may be regarded as distinguished from the strict legal position. [See also F.L. Smidth & Co. v. F. Greenwood (Surveyor of Taxes (1922) 8 Tax Cas. 193, 206.)].   It is no doubt true that in construing fiscal statutes and in deter- mining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to ....

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....edient was adopted in the Assam Sales Tax Act, 1947, and the Hyderabad General Sales Tax Act, 1950. The Assam Sales Tax Act, 1947, had incorporated therein an addition to the charging section (section 3 of the Act), and section 3(1-A) which was inserted by section 3 of the Assam Sales Tax (Amendment) Act, 1951 (Assam Act IV of 1951) was to the following effect:   "Nothing in sub-section (1) shall, except in cases covered by the first proviso to sub-section (12) of section 2 of this Act be deemed to render any dealer liable to tax on the sale of goods where such sale takes place:   (i) outside the State of Assam;   (ii) in the course of the import of the goods into, or export of the goods out of, the territory of India; or   (iii) in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide."   The Hyderabad General Sales Tax Act, 1950, had a similar provision incorporated in its definition of sale given in section 2(k) of the Act. The Explanation (2) which was substituted for the original Ex- planation (2) by section 2 of the Hyderabad General Sales Tax (Amendment) Act, 1950 (Hyderabad Act XXXII of 1950) re....

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....e 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 understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment."   The same ratio applies to the construction of the non-obstante provision contained in section 26 of the Act with reference to all the other provisions of the Act that preceded the same. In our opinion, section 26 of the Act, in cases falling within the categories specified under Article 286 of the Constitution has the effect of setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the 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 are incidental to the process of levying such tax. 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 purvie....

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....determines what persons  in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."   The appellant, however, forgets that the three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same. There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of ....