TMI Blog1982 (3) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... ious places outside the State of Gujarat, namely, Calcutta, Bombay, Delhi, Coimbatore, Bangalore, Hyderabad and Madras. It is also an admitted position that the assessee-company sold its products partly in the State and partly in the course of inter-State trade and commerce as well as through its selling depots outside the State. The assessee-company was required to purchaseraw materials for its use in the manufacture of its products. These raw materials were purchased partly on the strength of declaration in Z form and partly on payment of tax from the Gujarat State during the assessment period commencing from 1st April, 1971, to 31st March, 1972. The aggregate value of the products manufactured by the assessee-company in the said assessment period was to the tune of Rs. 34,08,847.00. It is also not in dispute that out of the aforesaid goods, the goods of the value of Rs. 28,70,274.00 were sold outside the State through its sales depots at the aforesaid places while goods worth Rs. 5,38,273.00 were sold either in the State or in the course 6f inter-State trade and commerce. It should be also noted that out of the raw materials purchased on the strength of Z form the materials of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions of the declaration in Z form, namely, that it purchased the raw materials for the use in the manufacture of the goods for sale which should not be restricted to sale inside the State or in the course of inter-State trade or commerce or export since otherwise the legislative intent of granting concessional incentives to the new industries would be defeated. The Tribunal, therefore, held that the assessee-company was entitled to set-off of the amount of tax paid on the raw materials purchased for the use in the manufacture of its products and was also not liable to pay any purchase tax since there was no breach of any conditions with the result that there was no difference in the tax assessed and the tax paid which would expose it to the liability of penalty. The Tribunal therefore allowed the set-off and set aside the order of purchase tax and penalty. The State, being aggrieved with this order of the Tribunal, sought the reference which was granted and the following three questions have been referred to us for our opinion at the instance of the State Government under section 69 of the Gujarat Act: "(1) Whether, on the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turer who established a new industry after 13th March, 1973, shall be entitled to any drawback, set-off or refund of tax under this rule so long as he has not availed of the benefit under the Government scheme under which interest-free loans are given to new industries. ................. ............ Extent of drawback, set-off, etc., shall be the aggregate of the amounts calculated in accordance with clauses (A), (B) and (C) hereunder.-(A) In respect of the purchases made from a registered dealer without giving any certificate under section 12 or 13 of the Act or any certificate under section 49 of the Act, (i) The amount of sales tax or general sales tax or, as the case may be, both recovered separately under the Act; (ii) The amount calculated in accordance with the formula hereunder where the amount of sales tax or general sales tax or, as the case may be, both has not been recovered separately: FORMULA 9P R -------Multiplied by -------10 100 + R [Where 'P' means the purchase price of the goods and 'R' means the rate of sales tax or of general sales tax or of both (whichever has not been recovered separately) applicable to the respective goods under the Act at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s warranted, as to mean "for manufacture of goods intended for sale ". (5) The Tribunal committed an error of law in holding that the assesseecompany had not committed any breach of the declaration in form Z to the effect that the raw materials were required for use in the manufacture of the goods for sale though the substantial portion of the sales was outside the State. The Tribunal ought to have appreciated that the words used in the Rules of which the forms are integral part must bear the same meaning as given in the Act in view of section 20 of the Bombay General Clauses Act. (6) In any case, the Tribunal was not justified in allowing the entire claim of set-off and setting aside the order levying purchase tax in its entirety. These contentions have been sought to be repelled by Mr. K. H. Kaji, the learned counsel for the assessee-company, by urging that since the court is called upon to construe the rule where the words defined in the Act are employed, the entire context of the scheme of set-off contained in the Rules should be looked into for finding out whether the context required to depart from the meaning ascribed to the word in the legislative dictionary in a give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of this clause, sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in sub-section (2) of section 4 of the Central Sales Tax Act, 1956." The crux of the problem therefore is whether the context of rule 42-A requires that this meaning of the word "sale" as given in the legislative dictionary of the Gujarat Act is not appropriate for purposes of determining the claim of set-off under rule 42-A. Is it necessary that in order to find out what should be the meaning of the words "for manufacture of goods for sale" in rule 42-A we should confine ourselves merely to the provision contained in rule 42-A or is it permissible to refer to the different provisions of the Rules and/or the Act containing the scheme of set-off and other relevant provisions in connection therewith? In Dulichand Laxminarayan v. Commissioner of Income-tax, Nagpur [1956] 29 ITR 535 (SC); AIR 1956 SC 354 a question arose whether the definition of the word "person" occurring in section 3(42) of the General Clauses Act, 1897, could be imported into section 4 of the Partnership Act. The Supreme Court, speaking through Das, C. J., held that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances." When the legislative dictionary meaning of a word in a statute can be departed from is succinctly stated in Crawford's Statutory Construction-Interpretation of Laws, para 208, page 361, under the caption "Legislative Definitions and Interpretation Clauses", in the following terms: "208. The legislature has the power to embody in the statute itself a definition of its language as well as rules for its construction. These are usually binding upon the court, since they form a part of the statute, even though in the absence of such a definition or rule of construction, the language would convey a different meaning. But the meaning of the legislature, as revealed by the statute considered in its entirety if contrary to the expression of the interpretation clause or the legislative definitions will prevail over them ........... (Emphasis supplied*) In view of this settled legal position, we do not think that the learned Government Pleader was justified in urging the contentions Nos. (2) and (3) that the Tribunal was not justified in considering the entire context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on the goods specified in Schedule III. Section 9 prescribes the stage of levy on sales tax, general sales tax or purchase tax on declared goods. It should be noted that sections 7, 8 and 10 provide for certain deductions to be made for purposes of ascertaining taxable turnover so as to achieve the purpose of single point levy as envisaged in the aforesaid scheme. Sections 15 and 16 provide for levy of purchase tax. Broadly stated, the liability to purchase tax arises when the goods are purchased from a person who is not a registered dealer or when the goods purchased on certificate are used for the purpose or in a manner contrary to the said certificate. Amongst the various kinds of statutory deductions in respect of the sales effected in favour of the aforesaid three categories of persons, namely, (i) recognised dealer, (ii) licensed dealer and (iii) commission agent, are included. The conditions prescribed for earning the aforesaid statutory deductions are to be found in section 13 of the Gujarat Act which, inter alia, provides that unless a licensed dealer, recognised dealer or a commission agent, as the case may be, does not provide certificate in the prescribed form, he wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of penalty. This is what has been precisely provided for in section 16(1)(a). Section 51 provides for drawback, set-off and refund of the tax paid. It reads as under: "51. The State Government may by rules provide, that (a) in such circumstances and subject to such conditions as may be specified in the rules a drawback, set-off or refund of the whole or any part of the tax- (i) paid or levied or leviable under the Bombay Sales Tax Act, 1959 (Bom. LI of 1959), in respect of any earlier sales or purchases of goods which are held in stock by a dealer on the appointed day, be granted to such dealer, or (ii) paid or levied or leviable in respect of any earlier sale or purchase of goods under this Act or the Bombay Sales Tax Act, 1959 (Bom. LI of 1959), be granted to the purchasing dealer; (b) for the purpose of the levy of tax under any of the provisions of this Act, the sale price or purchase price shall, in the case of any class of sales or purchases, be reduced to such extent, and in such manner, as may be specified in the rules." Chapter VII of the Gujarat Rules prescribes the conditions, the manner and the extent of the grant of drawback, set-off or refund. Shortly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several safeguards. ......... Even these safeguards were, however, not considered sufficient because the legislature could not possibly have contemplated each and every contingency which may arise and the diverse factors which may have their inter-play in the modern complex commercial transactions. Section 51 was, therefore, enacted whereunder power was given to the State Government to frame rules providing for grant of a drawback, set-off or refund in such circumstances and subject to such conditions as may be specified. An illustration based upon the very rule which is under consideration herein will highlight this point. Take the case of a recognised dealer, who purchases from an unregistered dealer goods for use by him as raw or processing materials or consumable stores in the manufacture of taxable goods for sale by him locally. In such a case, the purchasing dealer would have to pay purchase tax to the Government under section 15 and he would not be able to get the advantage of purchasing goods without payment of tax upon furnishing the relevant certificate and the result, therefore, would be that his manufacturing cost would, to that extent, rise. This might, in conceivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first part pertains to the legislative mandate of set-off to the new industries and is contained in the main enactment. The second part consists of definition of "new industry" prescribing what would be the industries which could qualify themselves as new industries and what industries are not within the ambit of the term "new industry". The third part consists of the conditions under which the drawback, set-off or refund is available to the new industries and the 4th part consists of the extent of such drawback, set-off or refund. The main enactment comprising the first part of the rule enjoins the Commissioner that he shall, subject to general conditions of rule 47 and special conditions specified in the rule itself, grant a drawback, set-off or refund of the whole of the tax, or any part thereof in respect of the tax paid on the purchases of raw materials, processing materials, packing materials and machinery used by a certified manufacturer establishing a new industry for the manufacture of the goods for sale. The second part which comprises of the definition of "new industry " provides that new industry would mean and include an industry which has been commissioned at any time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State". In other words, is there any justification for the view which the Tribunal has taken in the matter of set-off under rule 42-A that a claimant-dealer is entitled to set-off the amount of tax paid in respect of purchases of raw materials used by him in the manufacturing of goods which have been sold actually outside the State. As stated above, we are of the opinion that in construing the expression used by the legislature "in manufacture of the goods for sale" employed in the main enactment of rule 42-A, we have to look at the context, the collocation and the object of the rule, and interpret the meaning intended to be conveyed by the use of the said expression, having overall consideration of the entire subject of set-off, and particularly setoff to a dealer establishing a new industry. For the reasons, which are obvious, we are of the opinion that in interpreting the expression "used in manufacture of goods for sale", there is complete justification and warrant for our departure from the legislative dictionary meaning of the term "sale" as defined in section 2(28) of the Gujarat Act. The justifying reasons which warrant such a departure are as under: (1) In the first pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years in the course of the first year of which a claimant-dealer would be entitled to set-off of such tax paid only if all its manufactured goods are sold in that particular year in the State and would not be entitled to set-off of such tax if a substantial part of the manufactured goods is sold outside the State. Even if partial set-off is allowed which is relatable to the quantum of goods sold in the State in the first year, what will happen to the rest of the claim; whether it is disallowed or allowed to be carried forward to the next year in the course of which the machinery is used for manufacture of the goods. It cannot be said that the rest of the claim has exhausted itself since the machinery continues for being used in manufacture in the next year and the case cannot be compared with the one where tax-paid goods are consumed in manufacturing. The rule on that interpretation will be unworkable in the absence of the provision of carry forward of unabsorbed part of the claim of set-off. (b) Special condition No. (6) prescribed in the rule itself provides that new materials, processing materials or machinery, on which tax has been paid must have been used in the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of whole of the tax, or purchase tax, on the sales of the raw materials, processing materials, machinery or packing materials by a registered dealer or unregistered dealer, respectively, to a certified new manufacturer, who either does not hold recognition or surrenders it within the stipulated time provided he furnishes certificate in form Z. (e) Special condition No. (6) indicates that what the legislature has thought important in the present scheme of set-off provided in rule 42-A is the intra-State use of the raw materials and not intra-State use of the finished goods as urged by the State Government. (3) In the third place, since each provision of set-off is a scheme by itself some of which do provide for situs of sale by necessary implication, it must be inferred that the legislative intent where it is not specified, which is the case so far as rule 42-A is concerned, that the legislature did not intend to provide a situs of sale within the State as a condition precedent for qualifying for set-off. (4) In the fourth place, having regard to rule 42-A, as well as to entry 53 to the aforesaid Government notification providing for exemption of tax on sale or purchase of raw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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