TMI Blog1955 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 3 sale of bullion and specie, of cotton yarn and of any cloth woven on handlooms "subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees." It is the interpretation of this clause and in particular the meaning of the simple words "subject to" which is briefly the point of law for determination in these appeals. 3.. The licence Exhibit-A 1 to the respondents as dealers in cotton yarn issued on 31st March, 1941, and renewed for the following years was "subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder" and to two further following specified conditions which admittedly have not been violated and need not be detailed. The other relevant facts are that on a surprise inspection the Commercial Tax Authorities on 20th September, 1944, discovered two separate sets of accounts in the shop of the respondents, one set intended for the assimilation of the department showing the figures for sales as lawful transactions at controlled prices and the other showing actual black-market prices that is considerably in excess of the price of yarn controlled under other orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Subordinate judge, while it would appear fully alive to this fact, took what appears to us to be an astonishing view that as long as the respondents were in possession of a licence, no matter to what extent they violated conditions and restric- tions imposed by the Act, the Sales Tax Authorities had no power what- soever to collect sales tax on the ground that the licensee had lost his right to exemption and that furthermore the powers of the Sales Tax Authorities were circumscribed and restricted only to cancellation of the licence or to prosecution. The learned District Judge in expressing his agreement with this view, posed and answered the following ques- tion: "The important point is, assuming that there is a contravention, what is the consequence? This is immediately answered by rule 8 previously quoted, and the licence becomes liable to cancellation forth- with by the Deputy Commercial Tax Officer. That implies, necessarily, that the statutory exemption under section 5 ceases, and that all further sales in respect of the exempted commodity (cotton yarn) became per se assessable to sales tax in respect of the turnover." He then took the view that the sales prior to cance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oxford Dictionary and indeed in all dictionaries is of course "liable" but all dictionaries give the first meaning of the words "subject to" as "conditional upon". The Universal Dictionary of the English language edited by Cecil WyId gives in fact only one definition of the words "subject to" and that is "conditional upon some other action or event" or briefly "conditional upon". Sri Raghavachari has argued that the words "liable to" can be easily substituted for the words "subject to" and that the section can only mean that the licensee is only therefore "liable", as we understand his argument, to other penalties for breach of conditions and restrictions which may be prescribed, but in no event to disgorge sales tax for such breach so long as he was in possession of an uncancelled licence. The words "liable to" if substituted for "sub- ject to" not only invest the section with no meaning or sense but would also be thoroughly bad English, most difficult for a court to interpret. It is noteworthy that in a long commentary Sri Raghavachari has com- mitted himself to under rule 5, he has nowhere even adverted to the meaning of the words "subject to". In our opinion, the words are so c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not read the phrase 'subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder' as im- porting any condition which can affect the life, duration or validity of the licence." Then in his criticism of the scope of section 5, which according to him did not empower any sales tax to be levied before the cancellation of the licence, he said this: "Nothing could have been easier than to say that the exemption under section 5 could be available only to dealers who abide by such conditions and restrictions as may be prescribed and who also perform- ed their duties honestly and faithfully under the Act or that might be imposed upon them by the other provisions of the Act or the rules framed thereunder." But this is what is laid down by section 5 in clear, simple and unmistakable language regrettably however beyond the comprehension of the learned judge who fails to see that section 5 merely gives exemp- tion from sales tax only if certain specific conditions stipulated in the licence are complied with. The learned Subordinate judge concluded (1) 29 Bom. 203. (2) [1954] 5 S.T.C. 361; (1954) 2 M.L.J. (Andhra) 37. paragraph 17 with this very remarkable s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould give a licensee protection by his interpretation of section 5, so long as the licence he had so grossly abused was not formally cancelled. There is far too much legal ingenuity concentrated now-a-days on devastating attacks on sections of law and in fact, sometimes, on whole legislative enactments in an attempt to explode them altogether as being ultra vires or to render particular sections of law, as in the present case, not only meaningless but a positive menace to real justice and to public welfare and commercial morality. We must express our surprise that this extraordinary judgment of the Subordinate judge has received confir- mation by the learned District Judge. The two appeals are allowed and the suits will be dismissed with costs throughout. KRISHNASWAMI NAYUDU, J.-These second appeals are coming up before us on a reference to a Bench by the learned Chief justice. I had the advantage of perusing the judgment just now delivered by my learned brother, with which I am in complete agreement and I wish to add the following in support. The respondents claimed to be entitled to the exemption from taxa- tion under section 5 of the Madras General Sales Tax Act, 1939, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 or section 6. This is obviously a wrong interpretation of section 13. The need for the inclusion of every person licensed under section 8 along with dealers generally was on account of the fact that section 8 deals with the licensing of persons other than dealers, such as persons who for an agreed commission or brokerage buys or sells on behalf of known principals, and therefore it was necessary to include that person alone, who could not come under the definition of "dealer" in the Act. There is therefore no scope for the contention that once a dealer obtains a licence under section 5 or 6, he ceases to be a dealer and is absolved from the obligation to maintain true and correct accounts as required under section 13 of the Act. Once it is held that a licensee of cotton or cotton yarn is a dealer within the meaning of the definition in the Act, the obligation to maintain true and correct accounts under section 13 naturally attaches to him as well. But still the further question remains whether by his failure to maintain true and correct accounts as required under section 13, a licensee of cotton and cotton yarn, whose licence continues in force and not cancelled, could forfeit h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requires every person, who deals in cotton or cotton yarn other than handspun yarn, if he desires to avail himself of the exemption provided under section 5, to submit an application for a licence in accordance with the provisions of section 5 and such a licence may be renewed from time to time for which application for renewal has to be made. A licensing fee subject to a maximum sum of Rs. 1,000 is payable. A licence once granted can be cancelled by the licensing authority on grounds mentioned in rule 8 already referred to. So the first requirement to claim an exemption for a dealer in cotton or cotton yarn and the other goods specified in section 5 is to obtain a licence. The licence granted in the present case is issued in Form No. 3 in the forms appended to the Sales Tax Rules. Exhibit A 1 is the licence for the period from 1941 to 1942, which has been renewed from time to time. The licence is as follows: "Messrs. K.R.C. Balakrishna Chetti and Sons and Co., having paid a licence fee of Rs. (in words) is hereby licensed as a dealer in cotton yarn for the year ending 31st March, 1942, at Gugai, Trichi Road (place of business) subject to the provisions of the Madras General Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied therein, and as such it is erroneous to assume that the rule only requires the dealer to obtain a licence and possess it and it is not incumbent upon him to carry on the business in accordance with the conditions of the licence. The licence and its conditions do form an integral part of the rules, especially rule 5, which requires the dealer to obtain a licence to claim the benefit of the exemption. The proper meaning therefore that should be given to the qualifying phrase "subject to such restrictions and conditions as may be prescribed including conditions as to licences and licence fees" would be that the dealer should in the first instance obtain a licence and carry on the business in accordance with the conditions of the licence and would also be liable to observe such other restrictions and conditions as may be prescribed in the rules. The failure to observe, or the contraven- tion of, any of the rules or any of the conditions of the licence would deprive him of the benefit of the section. It therefore follows that the observance of the provisions of the Madras General Sales Tax Act being a condition subject to which the licence was issued and section 13 being a provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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