TMI Blog1955 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... the mills) to the Government of India, Ministry of Industry and Supplies, are to be deducted from the taxable turnover of the mills so as to be exempt from sales tax demanded by the Commercial Tax Officer of the State of West Bengal. The relevant facts are stated below. On the first of September, 1948, the Government of India, Ministry of Industry and Supplies, in Calcutta, placed with the mills a confir- matory order in writing bearing No. Cal/J-1/2001/103 for the supply to the Government of India of a large quantity of hessian cloth of different descriptions at different prices therein mentioned. It was stipulated that the contract would be governed by the conditions of contract specified in Form WSB 133 as amended up-to-date. It was specifically mentioned that the goods ordered were required to meet an international obligation of the Government of India and as such the execution of the contract in accordance with the programme of deliveries as given in the schedule at- tached thereto was essential. The agreed prices were stated to be exclusive of the Bengal sales tax and it was stipulated that the Government of India would arrange direct payment of sales tax to the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of the records and proceedings before the Commercial Tax Officer and for quashing the same and for other incidental reliefs. On the same day a rule was issued on the res- pondents to show cause why the orders prayed for should not be made. The Commercial Tax Officer filed an affidavit in opposition disput- ing the contentions put forward by the mills in support of their claim for exemption and maintaining that sales tax was due and had been legitimately assessed and demanded. On behalf of the Union of India was filed an affidavit affirmed by one M.P. Pai, the then Joint Secretary in the Ministry of Works, Production and Supply. It was therein stated that a department of the Government of India named the Department of Supply came into existence in the month of September, 1939, imme- diately on the commencement of World War II and before the enact- ment of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941). It was averred that before the 7th January, 1946, the said Department of Supply was charged with the procurement of Stores from all places in India including Bengal and that it also directed the work of Indian Stores Department in the United Kingdom and of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Stores Department or the Supply Department of the Government of India. The old departments ceased to exist and a new department combining some of the functions of these departments and some new functions was created and that, therefore, sales to the newly created department could not be deducted from the taxable turnover under section 5 (2)(a)(iii). In the result, the Appeal Court allowed the appeal with costs, set aside the order of Bose, J., and dismissed the application of the mills under Article 226. The mills as well as the Union of India have now come up on appeal before us with a certificate of fitness granted by the High Court. In view of the decision of this Court in National Sewing Thread Co. Ltd. v. James Chadwick Bros. Ltd.(1), the question of maintainability of the appeal before the High Court has not been raised before us. The appeals have been fought out on the merits only. The appeals came up before this Court for hearing on the 22nd and 23rd September, 1955. After going through the records it was felt that the materials on record were not sufficient to enable the Court to deter- mine the real point of controversy between the parties. The appeals were acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust, 1940 (Annexure X, Clause 4) and Office Memorandum dated the 2nd December, 1941 (Annexure XI, Clause 1(a) and Clause 4). It is thus clear that up to the end of the year 1940 purchases used to be made for and on account of the Government of India by the Contracts Directorate, the Indian Stores Department and the Department of Supply and that purchases were also made locally by other departments. It was then that on the 1st July, 1941, the Bengal Legislature passed the Bengal Finance (Sales Tax) Act, 1941, which by section 5(2)(a)(iii) exempted sales to the Indian Stores Department, the Supply Department of the Government of India and any railway or water transport administration from sales tax. Sales to other departments of the Government of India were not so exempted. By a press note dated the 2nd September, 1941, issued by the Government of India in the Supply Department (Annexure XIII to Iyer's affidavit) a purchase branch of the Supply Department for the duration of the war was created with effect from the 1st August, 1941, and it shows that the Contracts Directorate and the Indian Stores Department had then ceased to exist as separate entities for the duration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution the Indian Stores Department and the Contracts Directorate which during the war had been brought under the Supply Department, were incorporated in the newly created department. It will be noticed that this newly created department had assigned to it the work of the procurement of stores for the Government of India which was formerly assigned to the Department of Supply and the Depart- ment of Industries and Civil Supplies. In addition to these duties this department was authorised also to deal with other things, namely, deve- lopment of industries, administration of Government factories not allo- cated to specialised departments, Disposals of Surplus and Civil Supplies. The nature and volume of the purchases made by this newly created department became obviously different from and larger than those of the two departments it replaced. It is also noteworthy that the Depart- ment of Supply which was created for the prosecution of war was abolished as soon as the war was over (Annexure XVII to the affidavit of Iyer). The Resolution of the Government of India dated the 2nd Septem- ber, 1947, published in the Gazette of India dated the 6th September, 1947, (Annexure XVIII) ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned with purchase of stores but quite clearly the exemption conferred by the section was not intended to extend to the sales to those departments. Therefore, the reference to these two particular departments in the section cannot possibly be read as a reference to the Government of India generally. It has been urged that the real object of section 5(2)(a)(iii) was to give exemption not to the particular departments but to the sales of such goods as, at the date of the Act, used to be made to those departments and, therefore, sales of those goods made to any department of the Government of India which came to be charged with the duty of pur- chasing those goods should also come within the purview of the section and be entitled to the benefit of the exemption conferred by it. We are unable to accept this line of reasoning. This interpretation will unduly narrow the scope and ambit of the exemption by limiting it to sales of only those goods as, at the date of the Act, used to be sold to those two departments and sales of other goods even to those two departments, however necessary for the prosecution of the war, would not get the benefit of the exemption. Such could not possibly be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional obligations as in the present case, will necessarily widen the scope of the exemption and impose greater loss of revenue on the State of West Bengal than what the Act by its language intends to do. In view of the ever expanding activities of the modern welfare State in different fields including that of trade and commerce, the Government departments are often entrusted with the performance of well defined activities and are authorised to deal with the outside world and to enter into contracts of sale and purchase and other transactions in the same way as an ordinary person or company may do. Such Government departments, therefore, may well be regarded as distinct units or quasi legal entities, at least for the particular purposes for which they are created. At any rate, the Bengal Finance (Sales Tax) Act, 1941, by providing for the deduction of the sales to the two named departments from the taxable turnover certainly treated those two departments as distinct entities. This exemption is the creation of the statute and must be construed strictly and cannot be extended to sales to other departments. The fact that the section was not amended until 1949 does not at all indicate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mills moved the High Court of Calcutta for an appropriate writ under Article 226 of the Constitution against the contesting respondents. The matter was heard by a Single judge of that Court who by his judgment dated the 6th December, 1951, held that the mills were not liable to pay the sales tax demanded and cancelled the notice of demand and directed the respondents 1 and 2 to forbear from enforcing the demand. Respondents 1 and 2 went up in appeal under the Letters Patent. The appeal was heard by a Division Bench which came to the contrary conclusion. The major portion of the judgment of the Letters Patent Bench was devoted to the discussion of the question whether the judgment of the learned Single Judge in the writ matter was amenable to the appellate jurisdiction under the Letters Patent. That question has not been pressed during the arguments and is therefore no more in controversy. The only question that was canvassed before us was the applicability of section 5(2)(a)(iii) of the Act which contains the exemption, the benefit of which is being sought by the appellants in each case. The exemption is in these terms: Sales to the Indian Stores Department, the Supply Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses not only for the needs of the civilian departments of the Government of India but also of all the requirements of the Army. Hessian which had been purchased from the mills in this case was one of the products which the Government of India used to purchase only through the Indian Stores Department whenever needed for Government purposes. A department called the Contracts Directorate had been constituted in 1918 as a purchasing organization for the needs of the Army. But after the constitution of the Indian Stores Department in 1922 the Army authorities also began to utilize the services of the Indian Stores Department for procurement of several categories of stores required by them. By a Resolution of the Home Department dated the 26th August, 1939, apparently to meet the demands of the imminent second world war, the Contracts Directorate and the Indian Stores Department were in 1940 amalgamated with the Department of Supply so that in 1941, when the Act was passed, the position was that the Department of Supply as reorganized on the 3rd August, 1940, included amongst its activities and functions the purchase of stores for the needs of the Government. This branch of its activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Department of Indus- tries and Supplies became responsible for the procurement of stores from all places in India in the same manner as the Department of Supply had been doing previously to its amalgamation with the new depart- ment. The powers and functions of the Department of Industries and Supplies in the matter of procurement of stores continued as before. The department continued to procure and purchase only the same kinds of articles as the Department of Supply had been doing before the coming into existence of the Department of Industries and Supplies so that the creation of the Department of Industries and Supplies did not make any difference in its activities relating to purchase of stores. There was no addition to or subtraction from its functions in the matter of purchase of stores. From what has been stated above, it is clear that the purchasing functions of the Government of India with special reference to the pro- curement of textiles including hessian with which we are immediately concerned were discharged by the Indian Stores Department from 1st January, 1922. Those functions were taken over by the Department of Supply in 1940. The Department of Supply its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vit (at p. 18 of the supplementary paper book) were carried on by the Supply Department. That is the reason why the exemption to the Govern- ment of India was worded as it stands in section 5(2)(a)(iii). As stated above, the Supply Department existed as a separate department up to the 6th January, 1946. With effect from the 7th January, the Depart- ment of Industries and Supplies came into existence which later was re- designated as the Ministry of Industry and Supply. The judgment under appeal is based chiefly on the consideration that the exemption clause in question does not in terms refer to the newly created depart- ment which now goes by the name of the Ministry of Industry and Supply. But this department, in so far as it deals with industry, is not concerned with the main purchasing activities of the Government of India. The exemption was granted in respect of the purchasing activity of the Government of India and that function continues to be assigned to the Supply Department which has now become a wing of the newly created department of the Government. The question therefore arises whether in those circumstances the Government of India could claim the benefit of the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of section 5(2)(a)(iii) show that it was an exemption granted to a particular func- tion of the Government of India described by a certain name. And one might feel inclined to exclaim with the great poet Shakespeare What is in a name! It is but a description of the main purchasing acti- vity of the Government of India, as the history of the department above set out shows. Sometimes the language of a statute has to be construed in a modified form in order to give effect to the real intentions of the legislature where, as in the present case, the language is only of a descriptive nature and not a definitive one. An instance of this is furnished by the case of Miller v. Salomons(1). In that case the question arose whether a person of Jewish persuasion who was returned to Parliament as a Member of the House of Commons was entitled to sit without taking the prescribed oath. The form of the oath as given by 6 Geo. 3, c. 53, mentioned the name of King George only. It was argued on behalf of that Member that the oath was confined to the name of a sovereign who bore that name. But it was held by the Court that it was a mere description and that the intention of the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable business communities within the Province of Bengal to compete on favourable terms with others outside Bengal in the matter of sup- plying the needs of the Government. Hence there is no question of liberal construction of the exemption resulting in throwing a greater burden on other citizens. On the other hand, the larger the sales in the Province of Bengal as it used to be, the greater the benefit to the business community doing business within that Province. It was therefore stated at the Bar that though the present case involved taxes amounting to less than ₹ 10,000, the question arising for determination in this case affected much larger amounts because such sales within the Province amounted to several crores. I should have thought that the business community in the Province of Bengal having had the advantage of the transactions of sale, the Government of Bengal in all fairness should have allowed the purchasing agency of the Government of India the benefit of the exemption until that benefit was in terms withdrawn some time in the beginning of 1949. The matter can be looked at from another point of view also. We are concerned here with the sale of hessian. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Stores Department and later through the Supply Department. It was argued that if the legislature meant to grant the exemption to the Government of India, then the easiest thing to do would have been to say that sales to the Government of India were exempt from the tax. But it has not been the contention of the appellant that all sales to the Government of India are within the terms of the exemption. Only the sales transacted through the purchasing department of the Government of India were so exempt. In para. 7 of the affidavit referred to above it has been stated on behalf of the Government that the different departments were entitled to make local purchases of small values, that is to say, not exceeding ₹ 100 and of certain specified commodities like food-stuffs which were not within the purchasing activity of the departments aforesaid of the Government of India. Hence, in my opinion, there is no validity in this argument either. It was also suggested during the argument that if the exemption were to be related to only such commodities and articles as were within the purview of the Stores Department and later of the Supply Depart- ment, then such an interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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