TMI Blog1981 (7) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty prescribed in those sections. Thus quash and set aside the notices which have been issued against the assessee on the basis that merely by using dyeing colours and other chemicals purchased by it in sizing, bleaching and dyeing textiles for third parties on job-contract basis, the assessee contravened the provisions of section 10, clause (d), and rendered itself liable to penalty under section 10A. - Civil Appeal No. 756 (NT) of 1973, - - - Dated:- 23-7-1981 - BHAGWATI P.N., SEN A.P. AND VENKATARAMIAH E.S. JJ. A.K. Sen, Senior Advocate (K.K. Jain, S.K. Gupta, Bishambar Lal and P.Dayal, Advocates, with him), for the respondent. R.N. Sachthey and Miss A. Subhashini, Advocates, for the appellants. -------------------------------------------------- The judgment of the Court was delivered by BHAGWATI, J.- This appeal by certificate raises a short but interesting question of construction of section 8(3)(b) of the Central Sales Tax Act, 1956. The determination of this question has given rise to divergence of opinion amongst different High Courts but if we have regard to the well-recognised canons of construction of taxing statutes and also fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 21st July, 1967, asking for details and circumstances in which, according to the Excise and Taxation Officer, the assessee had misused the certificate of registration so that the assessee could satisfy the Excise and Taxation Officer that no such misuse had, in fact, taken place. In response to this query made by the assessee, the Excise and Taxation Officer formulated the case against the assessee in the following words: "The company purchased goods from outside the State of Punjab (now Haryana) on submission of C forms for the purpose of use in manufacture of goods for sale. But instead of doing so, the company used those purchases partly in manufacturing its own goods for sale and partly for doing job-work for other parties. The company could not use the material concessionally purchased, for the job-work as that does not constitute 'sale'." The assessee contended in reply that neither the terms and conditions of the Certificate of registration nor the provisions of section 8(3)(b) of the Central Act required that the goods purchased by the assessee must be used by it in manufacture or processing of its own goods intended for sale by itself and that it would be sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in section 8(3)(b) read with the certificate of registration. This contention was negatived by the Division Bench which held that though sizing, bleaching and dyeing of grey cloth did amount to processing, it had the effect of converting grey cloth into a commercially different marketable commodity and it therefore amounted also to manufacture of a commercially new product and the user of the goods purchased in sizing, bleaching and dyeing grey cloth was consequently within the terms of section 8(3)(b) read with the certificate of registration. This view taken by the Division Bench was not challenged on behalf of the revenue in the appeal before us and hence we need not say anything more about it. The second contention urged before the Division Bench was-and that was the only contention pressed upon us on behalf of the revenue-that the interpretation placed on section 8(3)(b) by the learned single Judge was correct and in order to come within the terms of that section, the assessee was required to use the goods purchased in manufacture of its own goods intended for sale by itself and if the assessee used the goods purchased in the manufacture of goods for a third party, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1)- (a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State; and (b) in the case of goods other than declared goods, shall be calculated at the rate of 10 per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law. (2A)..................................... (3) The goods referred to in clause (b) of sub-section (1)- (a)....................................... (b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les at the lower rate of three percent under clause (b) of sub-section (1), provided the assessee furnished declaration in form C to the selling dealers and the selling dealers submitted the same to the prescribed authority as required by sub-section (4), clause (a), and plainly and unquestionably the benefit of this lower rate of tax would enure to the assessee, since it is common knowledge that the incidence of sales tax is always passed on by the selling dealer to the purchaser. Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957, made by the Central Government in exercise of the power conferred under section 13, sub-section (1), provides that the declaration referred to in sub-section (4), clause (a), shall be in form C and, accordingly, declarations in form C duly filled in and signed were supplied by the assessee to the selling dealers against the purchases of dyeing colours and chemicals and these declarations contained a certificate by the assessee that the goods purchased were for use in manufacture of goods for sale. Rule 13 also provides that "the goods referred to in clause (b) of sub-section (3) of section 8 which a registered dealer may purchase s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking authority is simpliciter "for use........in the manufacture.......of goods for sale" without any addition of words indicating that the sale must be by any particular individual. The legislature has designedly abstained from using any words of limitation indicating that the sale should be by the registered dealer manufacturing the goods. It is significant to note that where the legislature wanted to restrict the sale to one by the registered dealer himself, the legislature used the qualifying words "by him" after the words "for resale" in the first sub-clause of section 8(3)(b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second sub-clause of section 8(3)(b) the legislature did not qualify the words "for sale" by adding the words "by him". This deliberate omission of the words "by him" after the words "for sale" clearly indicates that the legislature did not intend that the sale of the manufactured goods should be restricted to the registered dealer manufacturing the goods. If the legislature intended that the sale of the manufactured goods should be by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) read with section 8(3)(b) it should be immaterial whether the sale of the manufactured or processed goods is by the registered dealer manufacturing or processing goods or by another person for whom the goods are manufactured or processed by the registered dealer. The intendment of the statutory provision being that the cost of the manufactured or processed goods to the consumer should not be unduly enhanced by reason of higher rate of tax on the goods used in the manufacture or processing of the goods sold, it is obvious that if this intendment is to be fully effectuated, the benefit of the statutory provision should be available irrespective of whether the manufactured or processed goods are sold to the consumer by the registered dealer or by some one else who has got the same manufactured by the registered dealer. It was for this reason that the legislature deliberately omitted to add the words "by him" after the words "for sale" so as to make it clear that this sub-clause of section 8(3)(b) would apply even if the goods manufactured or processed by the registered dealer were intended for sale by someone else. The words "for sale" following upon the word "goods" clearly indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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