TMI Blog1957 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court was correct; the calculations of the net turnover made by the Sales Tax Authorities were also correct; and this appeal must stand dismissed - Civil Appeal No. 232 of 1955, O.P. No. 53 of 1954 - - - Dated:- 2-4-1957 - BHAGWATI N.H. AND JAGANNADHADAS B. AND SYED JAFER IMAM AND GOVINDA MENON P. AND KAPUR J.L. JJ. T.N. Subramania Iyer and R. Ganapathy Iyer, Advocates, for the appellant. K.S. Krishnaswamy Iyengar, Senior Advocate, (Sardar Bahadur, Advocate, with him, for the respondent. -------------------------------------------------- The Judgment of the Court was delivered by BHAGWATI, J.- This appeal with a certificate of fitness under Article 132(1) of the Constitution is directed against the order of the High Court of Travancore-Cochin dismissing the Original Petition No. 53 of 1954 filed by the appellant under Article 226 for quashing the order of the Sales Tax Officer, 2nd Circle, Quilon, assessing him to sales tax on a net assessable turnover of Rs. 7,54,144-8-4 for the year 1951-52 (1st April, 1951, to 31st March, 1952) and for issuing proper directions to the Sales Tax Authorities to assess the same according to law. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal to the Assistant Sales Tax Commissioner (S.T.A. No. 1480 of 1953-54) who dismissed the same by his order dated 10th May, 1954. A further petition to the Government for redress met with the same fate and the appellant thereupon filed the petition in the High Court of Travancore-Cochin being O.P. No. 53 of 1954 with the result indicated above. The decision of this appeal turns on the construction of the relevant provisions of the United State of Travancore-Cochin General Sales Tax Act of 1125 (Act XI of 1125 M.E.) and the Travancore-Cochin General Sales Tax Rules, 1950, made thereunder which may be conveniently set out here. The preamble to the Act stated that it was enacted to provide for the levy of a general tax on the sale of goods in the United State of Travancore and Cochin. Section 2(j) defined a "sale " as under: " 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration............Explanation (2)-Notwith- standing anything to the contrary in the Sale of Goods Act for the time be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Act as originally enacted received the assent of the Rajpramukh on 5th January, 1950. After the advent of the Constitution, however, the Act was amended by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951, and section 26 was added thereto which ran 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 Travan- core-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; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. (2) The explanation to clause (1) of Article 286 of the Constitution of India shall apply for the interpretation of sub-clause (i) of clause(a) of sub-section (1)." The Travancore-Cochin General Sales Tax Rules, 1950, which were made by the Government under the rule-making power conferred up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact whether these sales were effected inside the State or outside the State and deduct therefrom the total value of copra purchased by him from which the whole quantity of oil sold by him was manufactured, viz., Rs. 7,16,048-1-4. The resultant figure, according to him, represents the net assessable turnover on which the Sales Tax Authorities would be entitled to assess him to sales tax if the position in law was as it stood before the amendment of the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. He next contends that section 26 which was added to the Act by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951, prohibits the levy amongst others of a tax on the sale or purchase of goods where such sale or purchase takes place in the course of inter-State trade or commerce. This is an over- riding provision which, it is contended, entitled him to deduct the value of the oil sold outside the State, viz., Rs. 3,67,816-10-1, from the assessable turnover arrived at as above. The result of 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 pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (a) to (k) thereof and clause (k) provides that a registered manufacturer of cocoanut and/or groundnut oil and cake will be entitled to deduct from his gross turnover such amounts as are mentioned in rule 20 subject to the conditions specified therein. The deduction under rule 20 is avail- able to a dealer who manufactures cocoanut/groundnut oil and cake from cocoanut and/or copra or groundnut and/or kernel purchased by him and he is entitled to deduct the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover. Here also we find no distinction made between sales inside the State or outside the State. On a prima facie reading of these provisions contained in the Act and the rules made thereunder it would appear that a manufacturer of cocoanut or groundnut oil and cake would be entitled to include in his gross turnover the total value of the oil sold by him whether inside 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to the observations of Lord Russell of Killowen in Inland Revenue Commissioners v. Duke of Westminster [1936] A.C. 1, 24. (2) : "I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in Partington v. The Attorney General (1869) 4 H.L. 100, 122.: 'As I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to re- cover the tax, cannot bring the subject within the letter of the law, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6th January, 1950, no State could impose a tax on the sale or purchase of goods falling within these categories. The Sales Tax Acts enacted by the various Provincial Legislatures had, therefore, to be brought in line with this provision of the Constitution and various expedients were devised by the State Legislatures in order to effectuate this object. This object was sought to be achieved in the main bulk of the Sales Tax Acts by adding towards the end of the Acts sections like section 26 of the United State of Travancore and Cochin General Sales Tax Act, 1125, incorporating therein the terms of Article 286 of the Constitution. The non-obstante provision was thus enacted in the main bulk of the Sales Tax Acts which laid down: "Notwithstanding anything contained in this Act a tax on the sale or purchase of goods shall not be imposed under this Act where..................... (and the provisions of Article 286 were in terms incorporated therein)." A different expedient 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), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove noted was the incorporation of those provisions of Article 286 of the Constitution therein by adding a non-obstante provision at the end of the respective Sales Tax Acts in the manner above indicated. The definition of "sale" was not amended nor was the charging section. The rules as to the calculation of the net turnover also remained the same, without any deduction in regard to sales coming within Article 286 of the Constitution being incorporated therein, with the result that the Sales Tax Authorities founded themselves upon the non-obstante provision incorporated in the Act by the addition of section 26 therein by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. What then, is the effect of this non-obstante provision? This Court in Aswani Kumar Ghosh v. Arabinda Bose [1953] S.C.R. 1, 21, 22. , made the following observations in connection with the non-obstante clause: "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 understood as operating to set aside as no longer valid anything contained in rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the resultant turn- over being the net turnover for the purposes of assessment, the value of the oil sold in the course of inter-State trade or commerce being further deducted therefrom by reason of the operation of section 26 of the Act, thus making in effect a distinction between assessable turnover and the taxable turnover. Reliance was placed in support of this position on the observa- tions of this Court in Messrs. Chatturam Horilram Ltd. v. Commissioner of Income-tax, Bihar Orissa [1955] 2 S.C.R. 290, 297; 27 I.T.R. 709, at 715.: "As has been pointed out by the Federal Court in Chatturam v. Commissioner of Income-tax, Bihar [1947] F.C.R. 116 at 126; 15 I.T.R. 302, at 307. (quoting from the judgment of Lord Dunedin in Whitney v. Commissioners of Inland Revenue [1926] A.C. 37. )) 'there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which 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. La ..... X X X X Extracts X X X X X X X X Extracts X X X X
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