TMI Blog1979 (10) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... of crushing oil from oil-seeds and the manufacture of oilcakes. The finished products are sold in the State of Punjab and also sent out of this State for sale on consignment basis. The petitioners in C.W. Nos. 1941 and 3297 of 1978 and C.W. Nos. 304, 1374 and 1376 of 1979 purchase pig-iron, manufacture agricultural implements and other steel articles out of it which are in turn partly sent for sale out of the State of Punjab on consignment basis. The petitioners in General Sales Tax References Nos. 14 and 15 of 1977 also purchase pig-iron and use it for the manufacture of articles of steel which in turn are partly sent for sale outside the State of Punjab on consignment basis. The following question of law has been referred to us for opinion: "Whether section 4-B of the Punjab General Sales Tax Act, 1948, is ultra vires section 15 of the Central Sales Tax Act, 1956, and of section 5(3) of the Punjab General Sales Tax Act, 1948?" For the sake of clarity, this general question has been split into the following three questions: (1) Whether section 4-B of the Act is applicable to declared goods? (2) Whether section 5(3) of the Act excludes the applicability of section 4-B or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for in various sections of the Act to which it is not necessary to make any reference. In substance, the Act provided that a "dealer" was under an obligation to collect and to pay to the Government tax on all the transactions of sale made by him. This tax is determinable by the Assessing Authority on the basis of the taxable turnover submitted by the dealer. The sales made to the registered dealers are not to be added to this turnover because the burden of tax was intended to fall on the consumer and not on the intermediary dealers who handled these goods in the course of trade. The imposition of this tax was, however, subject to the restrictions laid down in article 286 of the Constitution of India. That article reads: "286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h paddy shall be reduced by the amount of tax levied on such paddy; (d) each of the pulses referred to in clause (via) of section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law." In other words, the Central Act firstly specified the declared goods and, secondly, imposed conditions and restrictions subject to which the State Governments could impose tax on the internal trade in these goods. The main condition was that no State Government would have a system of levy other than a single point levy on the last sale or purchase of such goods. The tax might either be on sale or purchase but it was recoverable only at the stage of the last sale or purchase by the registered dealer. The concept of purchase tax was introduced in the State of Punjab for the first time in 1958. The East Punjab General Sales Tax (Amendment) Act, 1958, received the assent of the Governor on 18th April, 1958. Section 2 of the Act was amended to enlarge the scope of the term "dealer" to include therein a purchaser of goods also. Section 2(ff) was introduced for the first time to define the expression "pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the then existing provisions was that apart from sugarcane, foodgrains and pulses purchased and used for the manufacture of goods, the other goods similarly utilised for the same process were not exigible to purchase tax. When Act No. 7 of 1958 was brought on the statute book, the State perhaps intended to give impetus to manufacture of goods in its territories. Later on, it appears to have realised that vast quantities of raw materials purchased in the State of Punjab and put through the process of manufacture could become a great source of revenue to the State. Consequently, the Act was once again amended and Punjab Act No. 18 of 1960 was brought on the statute book with effect from 1st April, 1960. Section 2(ff) of the Act was amended and it was provided that all the goods mentioned in Schedule C when purchased shall be exigible to purchase tax. Thus, the concession given to the manufacturers was straightway withdrawn. In Schedule C, cotton of all kinds, scrap iron and oil-seeds, etc., were mentioned which implied that whenever such goods were purchased the purchaser had to pay purchase tax subject to the other provisions of the Act. One such provision was that if the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed.' The above observations clearly lay down that the provisions contained in a statute, with respect to exemptions of tax or refund or rebate, on the one hand, must be distinguished from the total non-liability or non-imposition of tax, on the other. These observations also, in our opinion, effectively provide an answer to the stand taken by the State, in this case, that section 12 of the Act provides an adequate relief, by way of refund, even if tax is collected at an earlier stage. Having due regard to the various matters mentioned above, we are satisfied that the decision of the High Court, upholding the orders of assessment passed by the officer in question, cannot be sustained." In order to bring the statute in line with the observations made by the Supreme Court of India, the law was once again amended. Section 5(3) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of tax leviable on the sale of such goods, as the State Government may by notification direct in respect of a class of dealers specified in such notification, notwithstanding that such purchase is not covered by clause (ff) of section 2." Now, sub-clause (ii) of clause (a) of this section clearly provided that only those purchases of goods could be excluded from the gross turnover as were used for the manufacture of tax-yielding goods as against those which were declared tax-free under section 6 of the Act. The policy underlying this provision appeared to be that the State Government granted exemption from tax in respect of only those goods which when put through the process of manufacture gave rise to the production of costlier finished goods on which the State Government stood to gain by imposing tax on their sale or purchase. But where raw material had been consumed for the production of tax-free goods the State Government insisted upon the levy of tax upon the raw material. However, the contention raised by the assessee-firm that since it was entitled to purchase goods without payment of tax on the basis of the registration certificate granted to it, it should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts weaving mills in Uttar Pradesh for the manufacture of cloth. In computing its taxable turnover, the assessee claimed that the purchases of cotton were free of tax under section 5(2)(a)(ii) of the Act as there was no condition in the certificate of registration granted to it that the cotton purchased under the certificate should be subjected to manufacture in the State of Punjab. After the grant of the certificate, section 5(2)(a)(ii) of the Act and rule 26 of the Punjab General Sales Tax Rules, 1949, had been amended to provide for that condition. On those facts, it was held that the registration certificate was only evidence that the assessee was a registered dealer for purposes of certain commodities to be used in manufacture, one of them being cotton. The old registration certificate, even though it did not contain the words 'in the State of Punjab', would stand impliedly modified by the sections, the rule and the form operating together. The assessee had to comply with the Act and the Rules and could not take shelter behind the unamended certificate." Thereafter, the Full Bench observed: "In the present case, the petitioner is not claiming any deductions under section 5(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld become impossible. There is indeed something to be said in favour of the submissions made on behalf of the State but the view taken by the Full Bench has become final and even otherwise it is not open to a Bench of co-ordinate jurisdiction to take a contrary view. The fact remains that the Full Bench absolved the purchasing dealer of the liability to pay tax even when he did not use the goods in accordance with the conditions laid down in his registration certificate on the ground that there was no express provision in the charging section to impose liability on him. In the resultant situation, the dealers who were entitled to purchase goods for the manufacture of finished materials under the provisions of their respective registration certificates started purchasing goods in the State of Punjab without payment of tax and then exporting them with impunity. The revenue evidently suffered quite a substantial loss of tax. The Act was consequently once again amended by Act No. 3 of 1973, which came on the statute book with effect from 15th November, 1972. The relevant provisions after amendment read as under: "4. (1) Subject to the provisions of sections 5 and 6, every dealer exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such date as may be specified in the notification the tax under sub-section (1) shall be levied at the first stage of sale thereof and on the issue of such notification the tax on such goods shall be levied accordingly:............. (2) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom- (a) ................. (i) ................. (ii) sales to a registered dealer of goods other than sales of goods liable to tax at the first stage under subsection (1-A) declared by him in a prescribed form as being intended for resale in the State of Punjab or sale in the course of inter-State trade or commerce or sale in the course of export of goods out of the territory of India, or of goods specified in his certificate of registration for use by him in the manufacture in Punjab of any goods, other than goods declared tax-free under section 6, for sale in Punjab and on sales to a registered dealer of containers or other materials for the packing of such goods:.............. (3) Notwithstanding anything contained in this Act,(a) in respect of declared goods, tax shall be levied at one stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricted to the extent of the matters contained in the proviso. The proviso and the main section have to be read together. The same conclusion is arrived at if we consider the circumstances in which the necessity of the insertion of section 4-B of the Act was felt by the legislature. As observed earlier, this section was inserted to overcome the situation created by the interpretation of law given in the Punjab Khandsari Udyog's case[1972] 30 S.T.C. 414 (F.B.). This section in a way clarified the law and laid down that where the raw materials are consumed for manufacture of tax-free goods, or where such goods were sent out of the State of Punjab in any manner other than by way of sale in the course of inter-State trade or where such goods were used for a purpose other than that of sale within the State, or in the course of inter-State trade or commerce, etc., etc., the goods would be exigible to tax. In order to bring this section in line with the principle contained in section 15 of the Central Act, it was expressly provided that the sales tax would be payable only if these goods are not exigible to purchase tax under the other provisions of the Act. It cannot be disputed that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed under the Central Sales Tax (Registration and Turnover) Rules, 1957, to the selling dealer in another State a declaration, certifying that the goods ordered, purchased or supplied are covered by the certificate of registration obtained by the purchasing dealer in form B prescribed under rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, and that the goods are intended for resale, or for use in manufacture of goods for sale, or for use in the execution of contracts, or for packing of goods for resale, and that declaration is produced by the selling dealer, is it open to the sales tax authority under the Central Sales Tax Act to deny to the selling dealer the benefit of concessional rates under section 8(1) of the Central Sales Tax Act, 1956, on the view that the certificate in form C mentions more purposes than one for which the goods are intended to be used, or that the goods are incapable of being used for the purpose for which they are declared to be purchased, or that the goods are applied for some other purpose not mentioned in the certificate in form C?" When the matter came up for decision before the Supreme Court of India, it observed: "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 R.L.R. 208., the revenue sought to impose sales tax on a selling dealer who had sold goods to a registered dealer on the strength of the registration certificate possessed by the latter after obtaining a declaration in form S.T. XXII on the ground that the purchasing dealer had violated the conditions of the registration certificate. Sitting in single Bench, I negatived the claim of the revenue on the ground that the selling dealer did all what the statute required him to do and if the purchasing firm had, violated any of the conditions of the registration certificate issued to it, the revenue could impose sales tax on it. Even otherwise, it does not stand to reason that a dealer who acts in accordance with the provisions of the statute and the rules framed thereunder should be made to suffer in preference to a dealer who obtains a registration certificate on some conditions and then tries to go back on those conditions. The only thing to be seen in such a case is whether the charging section makes an express provision for the levy of the tax on the purchasing dealer or not. In the instant case, section 5(2)(a)(ii) of the Act expressly authorises such an action to be taken agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act was enacted in order to bring the statute in line with the observations made by a Full Bench of this Court in the Punjab Khandsari Udyog's case[1972] 30 S.T.C. 414 (F.B.). This section really carries into effect the mandate contained in section 15 of the Central Act instead of contravening any of its provisions. The third question is also answered in favour of the revenue and against the petitioners. No other point was raised before us. General Sales Tax References Nos. 14 and 15 of 1977 shall now be placed before the learned Tribunal to be decided in the light of the answers given to the aforementioned questions. Civil Writ Petitions Nos. 169 of 1977; 1941 of 1978; 5944, 6465 and 6760 of 1976; 1731 and 3297 of 1978; and 304, 1374 and 1376 of 1979 are consequently dismissed. The petitioners are allowed 15 days' time to comply with the orders passed by the authorities concerned. The parties are left to bear their own costs. SANDHAWALIA, C.J.-I agree. SIDHU, J.-I also agree. Ordered accordingly. Appendix [The judgment of the Division Bench of the Punjab and Haryana High Court consisting of A.D. KOSHAL, C.J., and S.S. DEWAN, J., in Gurdas Ram Subhash Chander and O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than by way of sale in the State; or (c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in section 3, 4 or 5, as the case may be, whatever be the quantum of such turnover in a year: Provided that a dealer (other than a casual trader or agent of a non-resident dealer) purchasing goods [the sale of which is liable to tax under sub-section (1) of section 3] shall not be liable to pay tax under this sub-section, if his total turnover for a year is less than twenty-five thousand rupees.............." The two sections above extracted are pari materia and no ground is made out for treating the impugned section 4-B in a manner different from that in which section 7-A of the Madras Act was treated by their Lordships for the purpose of determining its vires. We hold, therefore, that the impugned section is constitutionally valid. 2.. No other contention is raised in support of the petition which is accordingly dismissed, but without any order as to costs. - - TaxTMI - TMITax - CST, VAT & Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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