TMI Blog1950 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Monghyr, by his order dated the 26th July, 1946, made an assessment against the assessee under Section 10(2)(b) of the taxing statute. That assessment order shows that the gross turnover, as shown by the return submitted by the assessee, was Rs. 2,81,83,119-15-8. Making a deduction under Section 5(2)(b) of the taxing statute, the taxable turnover was determined to be Rs. 2,76,19,458. On this taxable turn- over, the amount of tax assessed was Rs. 4,33,116-0-6. Against this order of assessment, there was an appeal to the Commissioner of Bhagalpur Division, such appeal being provided under Section 20 of the taxing statute. By reason of certain revised returns which the assessee was allowed to file during the pendency of the appeal, the gross turn- over was increased to Rs. 3,41,98,134-1-2. Out of this gross turnover the assessee, in his revised return, stated that the taxable turnover was only Rs. 57-5-0. Leaving out certain undisputed items to which the learned Commissioner has referred in his order dated the 15th of Decem- ber, 1947, the amount to which the present reference relates is Rs. 3,40,05,619-12-2 representing the price of sales of tobacco and cigarettes by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nghyr, and despatched to the branches of the said Imperial Tobacco Company Limited outside Bihar, even though these transactions did not pass through any registered branch of the said Imperial Tobacco Company of India Limited in Bihar." The learned Member of the Board of Revenue thought that con- siderations of equity might justify some special treatment, though under the law the assessee was not entitled to any relief, and on that footing directed the reference of a question of equity to this Court for decision. I think that the learned Member was in error in thinking that a ques- tion of equity could be referred to this Court. An examination of the relevant provisions of Section 21 of the taxing statute makes it quite clear that a reference to the High Court is competent only on questions of law which arise out of the order. Sub-section (1) of Section 21 refers to "any question of law arising out of such order"; sub-section (5) states that the High Court, upon the hearing of any such case, shall decide the question of law raised thereby. Thus, it seems clear to me that the learned Member of the Board of Revenue was not justified in referring a question of equity to this Court. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner found that the Company purchasing the goods through their Calcutta office (that is, at a place other than Muzaffarpur where it is a registered dealer) was not a registered dealer within the meaning of Section 7 of the taxing statute; the sale not being to a registered dealer, no deduction could be claimed under Section 5(2)(a)(ii). Mr. P.R. Das, appearing for the assessee, has raised before us certain other questions of law which are not covered by the questions on which the case has been stated and referred to us. Firstly, he has contended that on a true construction of the agreement dated the 28th September, 1943, the assessee is not a "dealer" within the meaning of the definition of that term in Section 2(c) of the taxing statute, nor were the transactions between the assessee and the Company sales within the meaning of the taxing statute. This question was raised specifically for the first time when the Board was moved to refer the case to the High Court (vide questions 6 and 7 mentioned in the appli- cation to the Board). Prior to that, both before the Commissioner and the Board, the assessee proceeded on the footing that he was a dealer liable to assessment of tax; l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1.-lt is necessary to indicate very briefly the scheme of the taxing statute. Section 4 states, inter alia, that every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded Rs. 5,000 shall be liable to pay tax under the Act on sales effected after a notified date, the date being the 1st of October, 1944. The expression "turnover" is defined in Section 2, and means "the aggregate of the amounts of sale-prices received and receivable by a dealer in respect of sale or supply of goods or carrying out of any contract, effected or made during a given period". Section 5, which gives the rate of the tax, states, inter alia that the tax payable by a dealer under the Act shall be levied at the rate of one quarter of an anna in the rupee on his taxable turnover. The expression "taxable turnover" is important for our purpose, and is explained in sub-section (2) of Section 5. It means that part of a dealer's gross turnover which remains after making certain deductions therefrom. These deductions are stated seriatim in six sub-clauses under clause (a) of sub-section (2). The seventh item of deduction is mentioned in clause (b) of sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or on behalf of the dealer. On the findings of the Commissioner and the Board, the first two conditions are clearly fulfilled. The question whether the third condition is fulfilled or not may present some difficulty to which I shall refer in due course. Mr. Das, appearing for the assessee, has very seriously contested the view of the Commissioner that sub-clause (v) applies only to cases where the property in the goods is still retained by the despatching dealer at the time of the despatch. On this point, the Commissioner expressed himself as follows: "That clause obviously contemplates despatch of goods which at the time of despatch still is the property of the despatching dealer. In my opinion, Section 5(2)(a)(v) of the Act only exempts, from the operation of the Sales Tax Act, those transactions in which property in the goods exported passes to the vendee outside Bihar, by the very act of despatch on the part of the despatching dealers. The Advocate- General has supported the view of the Commissioner. In my opinion, the contention of Mr. Das is correct. The terms of sub-clause (v) do not warrant the view expressed by the Commissioner. The sub-clause itself mentions "sales of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property. Under Section 4 of the Indian Sale of Goods Act, 1930, to which we were referred, a contract of sale of goods is a contract whereby the seller either transfers or agrees to transfer the property in goods to the buyer for a price. The expression "contract of sale" thus includes (i) a sale, as well as (ii) an agreement to sell. Sub-clause (2) of Sec- tion 4 of the Sale of Goods Act says that a contract of sale may be absolute or conditional. Then, sub-section (3) states that where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. The argument of the learned Advocate- General is that sub-clause (v) of Section 5(2)(a) of the taxing statute is confined to cases where the transfer of the property in the goods is to take place at a future time or subject to some cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endments with the term 'provided', so as to declare that, notwithstanding existing provisions, the one thus expressed is to prevail, thus having no greater signification than would be attached to the conjunction 'but' or 'and' in the same place, and simply serving to separate or distinguish the different paragraphs or sentences". It may be conceded that the purpose and meaning of a proviso will depend on the construction to be put on the words used in the pro- viso. The question is really one of construction of the terms of a proviso, and not of legislative theory or practice. The second proviso to the definition clause of the term "sale" in the taxing statute, no doubt, mentions the expression "contract of sale"; but does the pro- viso, in any way, enlarge the meaning of the word "sale" as given in the definition clause? In my opinion, it does not. The proviso itself says that there must be a sale of goods; but if the goods are actually in Bihar at the time when the contract of sale as defined in Section 4 of the Sale of Goods Act is made, the sale shall be deemed to be a sale in Bihar irrespective of the question where the contract for sale (which may be either an agreement to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing dealer before despatch. The argument that sub-clause (v) applies to those transactions only where property in the goods passes outside Bihar is open to these objections: (i) it gives the word "sales" in the first line of the sub-clause a meaning against the definition clause; (ii) the sub-clause loses its grammatical sense, and the relative pronoun "which" carries no meaning; (iii) the despatch of goods to an address outside Bihar becomes meaningless, because the crucial test then be- comes not where the goods are despatched but where the sale takes place; and (iv) it becomes difficult to reconcile the sub-clause with what is "deemed to be a sale in Bihar" under the second proviso to the definition clause. Take this case, for example. A contract for sale is made outside Bihar, but the goods are in Bihar. Under the second proviso, the sale shall be deemed to be in Bihar. If the goods are not despatched outside Bihar, the assessee will be liable for tax. If the goods are despatched outside Bihar by the dealer, can he claim a deduc- tion? By a fiction of law the sale is deemed to be in Bihar; therefore it cannot be said that the sale is outside Bihar. How can then such a dealer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer or on his behalf, presents some difficulty. The word "despatch" in its ordinary dictionary sense means "to send away hastily", "to perform speedily". The despatcher need not necessarily be the owner of the goods. It is not unusual that the property in the goods is with one person, but the despatch is made by another. Mr. Das gave the ordinary example of a person who goes into a shop, buys certain things, pays the price and asks the shop-keeper to send the goods by post or rail; in such a case, the property in the goods has passed to the buyer, and if there is a loss in transit, the loss will fall on the buyer. But the despatch is being made by the seller, even though he has no more any property in the goods. If the intention of the Legislature in enacting sub-clause (v) was to exclude such transac- tions of despatch, then the words they have used in sub-clause (v) are inapt to give effect to that intention. In the Bihar Sales Tax Act, 1947, the position has been made clear in Section 4 by stating that the liability to pay tax under the Act will arise on sales which have taken place in Bihar, and there is no sub-clause like sub-clause (v). It may be unfortunate that a loopho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given us a copy of the certificate of registration under Section 7 of the Bihar Sales Tax Act, 1944, which was issued to the Company by the Sales Tax Officer of Muzaffarpur. At the relevant date the Company had only one place of business in Bihar in the town of Muzaffarpur, though it had warehouses at other places. The certificate shows that the Imperial Tobacco Company of India, Limited, with only one place of business in the town of Muzaffarpur is a registered dealer for the re-sale of cigarettes and smoking tobacco. It is not in dispute that the sales in question were not transactions through its place of business at Muzaffarpur. The sales were made to the Imperial Tobacco Company of India, Limited, through its place of business in Calcutta. The learned Commissioner has referred to Section 7 of the taxing statute of 1944 and the rules made under the taxing statute. One of the rules, rule 6, requires that a dealer having places of business in the jurisdic- tion of different Sales Tax Officers shall make one separate application to each such officer in respect of the place or places of business within the jurisdiction of that officer. Another relevant rule is Rule 36 which relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit, and the registration certifi- cate issued to the Company with its place of business at Muzaffarpur should be taken as a registration certificate to the Company with all its places of business inside and outside Bihar. That would render nuga- tory the provisions of Section 7 and the rules made under the taxing statute. I would, therefore, answer the second question against the assessee. Question No. 3.-The answer to the third question must follow the answer to the second question, and the learned Commissioner was right in directing that an enquiry should be made whether the sales to the extent of Rs. 46,90,246-0-10 were made to a registered dealer within the meaning of Section 5(2)(a)(ii) of the taxing statute of 1944, namely, the Imperial Tobacco Company of India, Limited, with its place of business at Muzaffarpur. SARJOO PRASAD, J.-The facts giving rise to this reference have been very lucidly stated in the judgment of my learned brother Das as I find from the draft prepared by him and sent for my perusal. It is, therefore, unnecessary to reiterate those facts. I am in complete agreement with him in regard to his answers to questions 2 and 3 on which a statement of case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. P.R. Das appearing for the assessee, however, contends that on the strength of this very finding, if the goods in question were found to the satisfaction of the Commis- sioner to have been despatched outside Bihar, by or on behalf of the dealer, the assessee should be held entitled to a deduction of the sale prices in respect of those goods. According to his contention, the sale- price of such goods, even though the goods were sold in Bihar should be exempted from taxation. This contention, as I shall presently show, runs counter to the fundamental purpose of the "Taxing Statute" which is an Act "to impose a tax on the sale of goods in Bihar". I have come to this conclusion both on an examination of the scheme of the Act as also of the language of Section 5(2)(a)(v) itself on which reliance is placed by the assessee. The scheme of the Act shows that it was brought into existence for the purpose of levying sales tax in respect of goods sold in Bihar, and the acid test, therefore, in interpreting the provisions of the Act is to see where the sale has taken place. If the sale has taken place in Bihar, then to fulfil the purpose of the statute a tax has to be imposed upon such a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny cases the effect thereof may be to add to the terms of the section and enlarge its connotation. The construction to be put on the words of a proviso would depend upon the context in which it is used; and so far as the definition of "sale" is concerned, it seems quite obvious to me that it was intended to include transactions of all the three characters which I have indicated above. Now, these sales, as I said, may take place in Bihar or may take place outside the province because the dealer in the ramification of his business is at liberty to sell his goods either in this province or outside it. Cases of such a dealer are not uncommon. His "turnover", therefore, means "the aggregate of the amounts of sale prices received and receivable by a dealer in respect of sale or supply of goods during the period of assessment". I have, of course, again broadly referred to this definition only in so far as the words are material. The above definitions are embodied in Section 2, clauses (c), (g) and (i) of the taxing statute. The definition of "turnover" is material because it relates to the aggregate of sale prices obtained by the dealer and may include not only sale-prices in respect of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the sale price relates to (i) sale of goods which are tax-free and have been declared to be so under Section 6 of the Act by the Provincial Government; (ii) sale of goods to a registered dealer of the goods specified in the purchasing dealer's certificate of registration; (iii) sale of goods to the Indian Stores Department, the Supply Department of the Government of India etc; and (iv) where the sale price relates to sale of goods which have been shown to the satisfaction of the Commissioner to have been des- patched for sale to an address outside Bihar. It is this deduction which is in question here and which I have advisedly put in that form. I need not refer to the other deductions contemplated by the provision. From what I have discussed above, the conclusion appears to follow that under Section 5(2)(a)(v) the deduction contemplated was in respect of that part of the dealer's turnover which related to sales of goods despatch- ed for sale outside the Province of Bihar. In respect of such sales the dealer had to be exempted under the Act and the receipt of such sale prices had to be deducted from his "gross turnover" during the period of assessment in determining his "taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeat the very purpose and object of the legislation, the essential purpose of which was to tax all sales of goods in the province. I quite agree that a taxing statute has got to be strictly construed. It also cannot be doubted that if there is a lacuna or loophole in the statute allowing the assessee to escape taxation, the advantage thereof must be conceded to the assessee. At the same time, however, it cannot be denied that a statute has got to be construed in such a manner as to give effect to the purpose for which it has been enacted and not so as to defeat its purpose. I am afraid, if the argument advanced by Mr. P.R. Das is to be accepted, it would plainly be against the very purpose of the legislation, and in violation of its taxing provisions. Nor is the interpretation, which I have given, inconsistent with the language of the provision itself. It is true that in the new Act of 1947 the position has been absolutely clarified; but even in the Act of 1944, though there may be some amount of circumlocution, the meaning is quite clear. As I have pointed out, the test is where has the sale taken place. If the sale has taken place in Bihar, then the legislature never intende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dealer. But the mere fact that the expression "sales of goods" occurs in the very beginning of the sub- clause does not necessarily signify that the sales must have taken place before the goods were despatched to "an address outside Bihar". Let us reproduce sub-section (2)(a) of Section 5 of the Act along with sub- clause (v) only eliminating the other sub-clauses and see how it reads. It reads thus: " (2) In the Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom,-(a) his turnover during that period on (v) sales of goods which are shown to the satisfaction of the Com- missioner to have been despatched by, or on behalf of, the dealer to an address outside Bihar." The words which follow the conjunction "which" in sub-clause (v) of the section qualify not only the term "goods" but the term "sales of goods" or rather "the turnover during that period on sales of goods". We know the meaning of the expression "turnover" which means the aggregate of sale prices received by the dealer. Therefore the natural rendering of the provision would be: sale prices of such goods as "are shown to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the sales 'have' taken Place in Bihar but the goods were despatched outside. Before the Commissioner the argument proceeded on the assumption that if the sales did take place in Bihar, the assessee could not be entitled to deduction as contemplated by Section 5(2)(a)(v). A similar attitude was taken also before the Board of Revenue. I will refer to the relevant passages in the orders of the Commissioner and the Board of Revenue. The learned Commissioner after an elaborate examination of the terms of an agreement between the assessee company and the Imperial Tobacco Company Ltd. came to the conclusion as follows: "In my opinion Section 5(2)(a)(v) of the Act only exempts from the operation of the Sales Tax Act those transactions in which property in the goods exported passes to the vendee outside Bihar, by the very act of despatch on the part of the despatching dealer. If property has already passed at a point of time antecedent to the time of despatch, this clause will not be operative. In this case at the time of despatch, the property is no longer that of the appellant; it became the property of the Imperial Tobacco Company Ltd., in accordance with the terms of the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent with the natural meaning of the provision and the general tenor of the taxing statute. If it had been found by the Commissioner and the Board of Revenue on the evidence on record that the title to the goods had not passed to the Imperial Tobacco Company and the title remained in the vendor before the goods were despatched outside the province, then, in my opinion, the assessee would have been entitled to a deduction in respect of the sale proceeds of those goods within the meaning of the provision. But on that point there is a definite finding of fact against him, and, in my opinion, the finding is a perfectly correct finding. This finding has not been questioned before us and could not be questioned. That being so, strictly speaking, the point now argued before us did not arise on the orders of the Commissioner or the Board of Revenue. What Mr. P.R. Das now argues is something just contrary to the argument advanced before them. I need hardly point out that, under Section 21(3) read with Section 21(1) of the Act, the Board may require to make a reference to the High Court in respect of any questions of law arising out of such order, which means the order of the Commissioner or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of it, according to the directions of the latter Company which agreed to pay, by way of remuneration, to the assessee full cost of manufacture plus 20 per cent. of such cost. Accordingly the assessee has been manufacturing tobacco and cigarettes for, and on behalf of, the Imperial Tobacco Company Ltd., and despatching the same in their name to destinations outside Bihar. Such despatches during the relevant period, namely, October, 1944, to March, 1945, were of the value of Rs. 2,93,15,373-11-4. In short, it was an agreement between the two companies aforesaid for the manufacture and supply of tobacco and cigarettes in Bihar for a remuneration. When the matter came before the learned Commissioner, he recorded the following findings: "That the property is not his (that is, the assessee's) at the time of despatch is abundantly proved by the other circumstan- tial evidence, such as the certificate in document (h) filed by the appel- lant with his petition dated the 16th day of October, 1947 (filed on 31st October, 1947), where the despatch is mentioned as being made by the appellant on behalf of the Imperial; and by the fact that consignments are always made in the name of the Imper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim deduction of the said sum of Rs. 2,93,15,378-11-4 from the gross turn- over by reason of the provisions of Section 5(2)(a)(v) of the Bihar Sales Tax Act, 1944. On the other hand, my learned brother Sarjoo Prasad, J., answered the question in the negative, in agreement with the Revenue authorities. It is manifest that the answer to the first question, which is the only question before me, must depend upon the true construction of the provisions of sub-clause (v) aforesaid. In terms of sub-section (2) of Section 5, "'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom- (a) his turnover during that period on- (v) sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or on behalf of, the dealer to an address outside Bihar". I have omitted those portions of sub-section (2) which do not enter into the controversy before me. They are the other items of deduction which an assessee may claim under the provisions of sub- section (2) of Section 5. The two learned judges constituting the Division Bench have agreed that, in order to attract the operation of sub-clause (v), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be held, in my opinion, that on the findings of the Commissioner, the assessee has failed to satisfy him that the goods had been despatched by him or on his behalf, and that, therefore, he has failed to satisfy one of the essen- tial conditions to attract those provisions, in order to get the deduction in respect of the amount in question. For these reasons, I do not agree with the following observations of my learned brother Sarjoo Prasad, J.: "The statute is not concerned as to what happens to the goods after the sale is effected. Whether the goods after the sale, in other words, after title in the goods has passed on to the vendee, are des- patched by the vendor himself or by the vendee to any place outside Bihar is hardly of any moment. The despatch of the goods after their sale has nothing to do with the imposition of sales tax under the statute which is to be levied on the sale of goods in Bihar." These observations of my learned brother are, in my opinion, in teeth of the express words of the very sub-clause (v) which has to be construed. One of the cardinal principles of construction of a statute is that each and every word used in a particular provision of the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose behalf, the goods had been despatched outside Bihar. Naturally, the Commissioner has to take into his considera- tion the circumstances of each particular case in order to arrive at his conclusion. In the present case, the Commissioner has recorded the finding that the goods had been despatched not on behalf of the dealer but on behalf of the Imperial Tobacco Company who, in terms of the contract between the parties, must be deemed to have taken delivery of the goods as soon as they were manufactured and packed. I do not also agree with my learned brother Sarjoo Prasad, J., when he makes the following observations on the grammatical construction of sub-clause (v) of clause (a) of sub-section (2) of Section 5: "The words which follow the conjunction 'which' in sub-clause (v) of the section qualify not only the term 'goods' but the term 'sales of goods' or rather 'the turnover during that period on sales of goods'". My learned brother Das, J., has pointed out very elaborately the pitfalls in such a construction. As I entirely agree with the observations of my learned brother Das, J., on the grammatical construction of the sub-clause in question, I need not repeat those reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
