TMI Blog1960 (10) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed to do so, the Court cannot resort to a fiction which is not prescribed by the Legislature and seek to effectuate that alteration by devising machinery not found in the statute. We are therefore of the view that the conclusion of the High Court is correct. - Civil Appeal No. 443 of 1957 - - - Dated:- 31-10-1960 - DAS S.K., HIDAYATULLAH M. AND DAS GUPTA K.C. AND SHAH AND RAJAGOPALA AYYANGAR N. JJ. S.K. Kapur and Mohan Behari Lal, Advocates, for the respondent. C.B. Aggarwala, Senior Advocate (C.P. Lal, Advocate, for G.N. Dikshit, Advocate, with him), for the appellant. ----------------------------------------------- The Judgment of HIDAYATULLAH, DAS GUPTA and SHAH, JJ., was delivered by SHAH, J.The Judgment of DAS and RAJAGOPALA AYYANGAR, JJ., was delivered by RAJAGOPALA AYYANGAR, J. SHAH, J.- Judge (Revisions) exercising authority under section 11 of the United Provinces Sales Tax Act (XV of 1948) drew up a statement of case and referred to the High Court of Judicature at Allahabad the following question: "Whether the assessee, who is a manufacturer and a dealer of non- edible oils and who elected the previous year as the basis of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year exceeded Rs.12,000 or such larger amount as may be prescribed; the Provincial Government was however authorised to reduce the rate of tax on any dealer or class of dealers on the turnover in respect of any goods or class of goods. By section 3-A, the Government of U.P. was autho rised to introduce instead of the multiple point scheme of taxation pro vided by section 3, a single point system of taxation and by notification to declare that the proceeds of sale of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the series of sales by successive dealers as may be prescribed; and if the Government made such a declaration, the turnover of the dealer in whose turnover the sale of such goods was included was in respect of such sale to be taxed at such rate as may be specified not exceeding one anna per rupee. By section 7, every dealer whose turnover in the previous year was Rs.12,000 or more was directed to submit such return or returns of his turnover of the previous year within sixty days of the commencement of the assessment year in such form and verified in such manner as may be prescribed. By the proviso, the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover of any dealer except at the point in the series of sales by successive dealers mentioned in column 4 thereof under the circumstances shown in column 3 thereof. (2) The Governor is further pleased to order that as from June 9, 1948, the rate of tax in respect of the turnover of the aforesaid goods shall be as entered in column 5 of the schedule hereto. (3) Every dealer by or on whose behalf goods mentioned in the schedule aforesaid are held at the close of the 8th day of June, 1948, shall submit a statement showing the quantity and price of such stock and of the stock of such goods held on the 24th day of May, 1948, to the appropriate assessing authority by the 30th day of June, 1948." To this notification was appended a schedule which set out the descriptions of diverse commodities, the "circumstances under which the turnover was to be calculated" the point of tax and the rate of tax. Item 14 of the schedule was "oils of all kinds excluding edible oils but including Vanaspati" and sales thereof by manufacturers in the U.P. were liable to tax at the rate of 6 pies per rupee. By virtue of this notification, non-edible oils became liable to a single point tax as from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 3 and 3-A. But the taxable turnover for the year of assessment may, except in certain cases not material for the purpose of this appeal, at the option of the tax- payer be either the turnover of the previous year or of the year of assessment. If the assessee adopts the turnover of the previous year, by the provisions contained in section 3 and section 7 and rules 39 and 40, the liability to pay tax arises on the 1st of April and the rate appli- cable is the rate in force on that date. The liability of the assessee adopting the turnover of the year of assessment arises by virtue of sections 3 and 7 and rule 41 at the end of each quarter. When the taxable turnover is based on the turnover of the previous year, the tax is assessed on an artificial turnover not related to the actual sales of the year of assessment: whereas the levy of tax on a return made on the turnover of the year of assessment is made on actual sales of that year. The tax paid on the turnover of the previous year is not related to the actual sales of the year of assessment, and there is, in the Act, no pro vision for making adjustments in the liability to tax on ascertainment of the actual turnover at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of a dealer who adopts the turnover of the year of assessment for purposes of taxation, the application of the notification altering the rate of tax and the incidence of tax does not present any difficulty. The notification enjoins levy of the tax at the altered rate only in respect of sales taking place after the fixed date, and all sales which preceded that date are to be taxed at the original rate. In the face of the language employed sales anterior to the date specified could not be affected. The question next arises: Is any machinery provided in the Act or the rules for projecting this division of the year of assessment into the previous year, and for apportioning the turnover of that year? Express provision in that behalf there is none: and it is difficult to imply such a provision in the Act. The dates of commencement and closure of the previous year of a taxpayer may vary according to the system of accounting adopted by the assessee. The year may commence from any day of any recognised calendar year, and the year may not consist of 365 days. The method of antedating by one year the date on which the alteration is made in the rate or incidence will be manifestly inapp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency. Section 18, clause (c), of the Act which provides for proportionate reduction of tax when in the case of a change or discontinuance taking place in the course of the assessment year of a firm which has been assessed for such year on the turnover of the previous year does not support the contention that an artificial division of the turnover of the previous year is intended in cases of alteration of circumstances during the course of the assessment year. It may be noticed that the provision is limited to changes in or discontinuance of the business of a firm, in terms it does not apply to individuals. It is not for us to consider why the Legislature has not chosen to make a similar provision in respect of individuals. But the fact that the Legislature has made an ex press provision dealing with changes or discontinuance of business of firms in the course of the assessment year enabling a reduction proportionately to the tax already paid would be a ground indicating that in cases not governed by that provision, no alteration in the liability was permissible when the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant words, as it stood at the material time, enacted: "Section 3. Liability to tax under the Act.- Subject to the provisions of this Act, every dealer shall pay on turnover in each assessment year a tax at the rate of 3 pies a rupee: Provided that- (i) the Provincial Government may, by notification in the Official Gazette, reduce the rate of tax on the turnover of any dealer or class of dealers or on the turnover in respect of any goods or class of goods; (ii) a dealer whose turnover in the previous year is less than Rs. 12,000 or such larger amount as may be prescribed shall not be liable to pay the tax under this Act for the assessment year." By the U.P. Sales Tax (Amendment) Act, 1948, (Act XXV of 1948) this proviso was slightly modified and section 3-A was inserted in the Act reading as follows: "Section 3-A. Single point taxation.-(1) Notwithstanding anything contained in section 3, the Provincial Government may, by notification in the Official Gazette, declare that the proceeds of sale of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the series of sales by successive dealers as may be prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty days of the commencement of the assessment year in such form and verified in such manner as may be prescribed: Provided that the Provincial Government may prescribe that any dealer or class of dealers may submit, in lieu of the return or returns specified in this section, a return or returns of his turnover of the assessment year at such intervals, in such form and verified in such manner as may be prescribed, and thereupon all the provisions of this Act shall apply as if such return or returns had been duly submitted under this section. Provided further that the assessing authority may in his discretion extend the date for the submission of the return by any person or class of persons." Rules were framed by Government inter alia under the power confer- red by the 1st proviso just now set out and by rule 39 of the said rules an option was given to dealers to submit returns of their turnover of the assessment year in lieu of the turnover of the previous year. The assessee exercised the option of being assessed on the basis of the turnover of the previous year under section 7(1) of the Act and in respect of the first assessment year after the Act came to force-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed at the flat rate of 3 pies per rupee on the whole of the turnover of the previous year or whether he is liable to be assessed at the rate of 3 pies per rupee and 6 pies per rupee on the turnover of the previous year in pro- portion to the two periods from April 1 to June 8, 1948 and from June 9, 1948 to March 31, 1949." The learned Judges answered the question in favour of the assessee and held that the notification under section 3-A could not apply to determine the rate of tax payable by the assessee on his turnover of the previous year. The present appeal is against this answer by the High Court. As the arguments before us proceeded on practically the same lines as before the High Court, it will be convenient if we set out the reasoning by which the learned Judges upheld the assessee's contention that the notification under section 3-A was inapplicable to determine the rate of tax payable by it. The grounds were mainly five: (1) the assessee could not be charged at the rates prescribed by the notification unless the new rates operated retrospectively; (2) that section 3-A which was introduced into the parent Act (Act XV of 1948) by the Amending Act XXV of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect were contemplated by the Act as applicable to the assessees who had opted for the "previous-year-turnover" basis of assessment. He pointed out that in the case of those assessees who opted for their being assessed in respect of their turnover during the assessment year, quarterly returns were submitted along with the payment provisionally of the tax due on the basis of that return, the final assessment being completed only after the close of the year when the amount due for the year was ascertained and a demand made for the balance due after adjustment of the amounts already paid during the course of the year (rule 41). Obviously in their case no difficulty could arise by reason of any change in the law either in the rate or basis of taxation effected during the year, as these would automatically be given effect to in the final assessment. If, however, changes made in the rate of tax payable during the year were held applicable to those assessees who had opted for the previous-year-turnover basis, necessary adjustments could not be made in their assessment for lack of specific machinery to achieve the same. From this he argued that the scheme of the Act was that in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or where different rates are prescribed on sales of different articles, such rates in respect of such turnover. The best way to appreciate the scheme underlying the Act would be to ascertain the position at the time the Act was enacted. It received the assent of the Governor and was published in the Gazette on June 5, 1948. Section 1(2) of the Act further enacted that "It shall be deemed to have come into force on April 1, 1948". Except to that limited extent, the Act is prospective. The tax is on the "turnover", i.e., on the total of the sale proceeds of taxable sales and therefore unless there were a taxable sale, its proceeds would not enter the pool which goes by the name of "turn- over". As the Act is not retrospective, the taxable turnover would normally be the total of the sales effected after the enactment became operative, i.e., from and after April 1, 1948, but for the sake of convenience of assessment, it enacts by section 7(1), we have extracted earlier, a provision providing an option to dealers who have been in business in the year previous to the taxing enactment, to be assessed either on the turnover of the previous year, when owing to the absence of the Act thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise that the Act does not contemplate any difference in the incidence of the tax and the quantum of tax liability flowing from the choice of either the "previous year" or the "assessment year" as the basis of the determination of the turnover. We should add that learned counsel for the respondent has not been able to point out any provision in the Act or in the rules pointing to any such differentiation. It was, however, submitted that though the statute might not say so in express terms, still by reason of the provisions of the Act and the rules under which the "previous-year-turnover" assessee had to or could submit his return within sixty days from the commencement of the assessment year and have his assessment completed immediately thereafter-as compared to the "assessment-year-assessee" whose assessment was completed after the end of the year-coupled with the absence of any machinery for reassessment or refunds in the event of any change in the law effected after the commencement of the financial year, it had necessarily to be held that the liability of the "previous- year-turnover" assessee got crystallised as on the 1st of April of the assessment year and that the Act di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that little importance could be attached to the two bases on which the "crystallisation" argument was rested, viz.: (1) the obligation or freedom of the previous-year-turnover assessee to submit his return and have his assessment completed within sixty days of the commencement of the assessment year, and (2) the absence of a specific provision for reassessment and refund. Under the proviso (1) to section 3 which reads: "the Provincial Government may, by notification in the Official Gazette, reduce the rate of tax on the turnover of any dealer or class of dealers or on the turnover in respect of any goods or class of goods" the State Government could reduce the rate of tax on the turnover of dealers from the standard rate of 3 pies in the rupee under the main part of section 3. It is also not denied that there is nothing in the terms of the proviso to confine the power to effect reductions only pros- pectively as distinguished from reductions having retrospective effect. If a reduction were effected say in January or February of the year, having effect as and from the 1st April preceding, on the very argument advanced, counsel for the respondent would have to concede, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so designated to meet this contingency here referred to, but that is not the same thing as saying that there is a complete absence of machinery. In the first place, section 22 of the Act empowers authorities including the assessing officer to rectify any mistake apparent on the face of the record and by such rectification even to enhance the tax liability. If on the pre- mises assumed, the variation in the rate of tax would on a proper construction of the Act be applicable to the turnover of the dealer who has opted for the "previous year rule" but the assessment order does not give effect to it, it would certainly be a case of an error apparent on the face of the record, which would bring the case within the power of rectification. On the analogy of the cases under section 35 of the In- come-tax Act, 1922, the assessment officer could order rectification in such cases. Even apart from this, under section 10(2) of the Act the dealer or the department as the case may be may apply to the revising authority for revision of the assessment on the ground that the same is not legal, proper or regular. This section enacts: "The Revising Authority may in its discretion at any time s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include these sales in the return which he submits in Form IV. If by the date of the submission of the return, the exemption has been notified, and has effect for the entire year, of course, he need not include these sale proceeds in his return. The computation, therefore, of the quantum of turnover of the previous year on which tax has to be levied is one which is subject to the law in relation to it in the assessment year, and any change in that law presents the same problems, as the variation in the rate of tax. Up to now the discussion has proceeded on the basis that a change in the law made in the assessment year whether as regards the computation of the turnover or as to the rate of levy, is effective throughout that year, i.e., from the 1st April to the 31st March, and it is found that the fact that the returns of the previous-year-turnover dealers are required to or are submitted within the early part of the year, or the contention based on the absence of specific machinery for reassessment or refund are an insufficient basis for holding that a change in the law affecting the basis of tax liability would not affect the previous-year- turnover assessees and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt was briefly this. The notification expressly states that only sales effected from and after June 9, 1948, were to be charged with the new rates. In terms, therefore, the change in the law is wholly prospective. If so, one cannot by any line of reasoning reach the conclusion that the new rates of levy applied to sales, as by the present respondent, more than a year earlier. So stated the reasoning appears impressive and it is true that a taxing enactment cannot be construed as levying a charge unless the words clearly do so. But the words have always to be understood and more than that applied with reference to the underlying basis of the scheme of taxation. So applied, it does not appear to us to support the contention of the respondent. The change in the rate of tax was no doubt prospective. The phraseology employed merely means that in the, case of the "assessment-year-turnover" dealers only the sale proceeds of sales effected after the specified date would be governed by the new rates. In the case of the "previous-year-turnover" dealers, the change operates to determine the amount of tax during their assessment year-just in the same manner as the original charge under the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year, since the turnover of the previous year has to be assessed on the rates prevailing in the assessment year. The next question is how on the terms of the notification which came into operation after the commencement of the assessment year and during the course of it, the proportion of the turnover on the basis of which the tax liability of a previous year's turnover dealer could be computed. Learned counsel for the respondent urged that no intelligible basis could be suggested for distinguishing the two periods in the previous year when the original rates and the altered notified rates would operate. Learned counsel urged that it would be impossible to distinguish these two periods either on any theory of retrospectivity of the notification or on any theory regarding the sales of the previous year being attributed to the corresponding dates of the current year. There is no doubt that this mode of computing the proportion, viz., to treat the sales which were effected on various dates of the previous year, as if they were sales on the corresponding dates of the current year and thus to compute the two totals of turnover which would be subject to different rates of d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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