TMI Blog1995 (7) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... and commerce. In order to avail the benefit of provisions of section 8(1) for procuring such material at a concessional rate purchaser is required to make declaration in form "C". The petitioner who is a dealer under the Central Sales Tax Act as well as the Gujarat Sales Tax Act, applied for the book containing "C" forms on August 25, 1992. The petitioner issued reminders on April 16, 1993 and April 20, 1993, but of no avail. By letter dated April 20, 1993, the respondent No. 1 invited petitioners' attention to a public circular issued by the Commissioner on December 3, 1985, which is annexure A3 to the petition stating that in view of the existing legal position such purchases (purchases of goods which have been used in the execution of works contract) cannot be made against form "C". Whether against form "C" in pursuance of the Central Sales Tax Act are applicable to purchasers for use of goods in works contract has been made to contractor (sic). The petitioner, thereafter, again made an application on May 3, 1985, for issuing requisite forms. However, the petitioner did not receive any response thereafter. Hence this application for the following reliefs: To issue appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the (i) respondent No. 1 quashing and setting aside his order annexure A3 against the petitioner and directing him to amend the registration certificate annexure A1 in terms of the application of the petitioner annexure A2; (ii) respondent No. 2 quashing and setting aside the public circular dated December 3, 1985 annexure A4 issued by him; and (iii) respondent No. 3 directing it to clarify its position in connection with the representation made to it as set out in annexure A4. 4.. Special Civil Application No. 158 of 1995: The petitioner is engaged in the business of executing works contract of tyre retreading of its customers. For the purpose of executing the work of retreading the petitioner is required to purchase various materials to be used in the execution of works contract. The materials are required to be purchased from outside the State of Gujarat in the course of inter-State trade and commerce. The petitioner is a registered dealer under the Central Sales Tax Act as well as the Gujarat Sales Tax Act. The petitioner purchased the requisite materials which were entered in the list of goods specified in the certificate of registration under the Central A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner purchased materials specified in his certificate of registration under the Central Sales Tax Act in the course of inter-State trade and commerce from outside the State for using such materials in the execution of works contract. In the like circumstances, the petitioner has received show cause notices for levy of penalty under section 10-A of the Central Sales Tax Act for the assessment years 1988-89, 1989-90, 1990-91 annexures B1 to B3 and for the assessment year 1992-93 marked as annexure C. Petitioners have challenged the validity of notices annexures B1 to B3 and annexure C along with circular dated December 3, 1985 annexure A. A common reply has been made to the Special Civil Applications Nos. 7294 of 1993 and 7864 of 1993. The respondents in addition to adopting returns filed in Special Civil Applications Nos. 7294 of 1993 and 7864 of 1993 have further submitted an additional affidavit in Special Civil Applications Nos. 158 of 1995 and 188 of 1995, stating that "if a dealer purchases goods in the course of interState trade or commerce and furnishes 'C' form that is to say a declaration in form 'C' appended to the Central Sales Tax (Registration and Turnover) Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of making purchasing under declaration in form "C". It was contended by learned Advocate-General that any provision of Constitution itself does not result in levy of tax, it requires legislative will to impose a tax. Therefore, by amending the Constitution, the definition given in the Constitution for this purpose does not become part of the existing taxing statute unless the respective taxing statutes are accordingly amended. As the Central Sales Tax Act has not been amended, the definition of "sale" given in the Central Sales Tax Act cannot be read to include transfer of property in the goods involved in execution of works as envisaged under article 366(29A) unless the Parliament chooses to amend the Central Act, for any purposes under the Central Sales Tax Act. As the declaration for the purpose of granting benefit of concessional rate of tax under section 8(1) is required to be furnished in terms of section 8(3)(b) and 8(4) under the provisions of the Central Sales Tax Act, the subsequent sale must be a sale within the meaning of section 2(g) of the Central Act without reading article 366(29A) of the Constitution, as in view of the decision of the Supreme Court in Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the levy of tax on the sale or purchase by the State Legislature under item 54 of List II of the Seventh Schedule under the Constitution, until by the 46th Amendment clause (29-A) in article 366 was inserted defining "tax on sale or purchase of goods". By the aforesaid amendment various transactions, which under different decisions of the Supreme Court were not being treated as sales for the purpose of levy of tax, were brought within the scope of "tax on sale or purchase of goods" by defining the expression "tax on sale or purchase of goods", the relevant part for the purposes read as under: Article 366: "In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to sayclause (29A) "tax on the sale or purchase of goods" includes- (a)........ (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract: (c) to (f)........ and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract in the same way in which the sales tax was leviable on the price of the goods and materials supplied in a building contract which had been entered into in two distinct and separate parts as stated above." Referring to the issue about such deemed sale being subject to discipline of article 286 of the Constitution, the court further said, "when the law creates a legal fiction, such fiction should be carried to its logical end. There should not be any hesitation in giving full effect to it. If the power to tax a sale in an ordinary sense is subject to certain conditions and restrictions imposed by the Constitution, the power to tax a transaction which is deemed to be a sale under article 366(29A) of the Constitution should also be subject to the same restrictions and conditions". It may also be noticed that initially under entry 54 of the State List, State had the exclusive power to levy tax on sale and purchase of goods other than newspapers. Article 286 placed prohibition on the States' power to levy tax on transaction of sale or purchase of goods which had taken place outside the State or in the course of the import of goods into or export of the goods out of the territor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-State trade or commerce. Article 269(3) had provided that the Parliament may by law formulate principles for determining tax when a sale or purchase takes place in the course of interState trade and commerce. It is with this scenario the Central Sales Tax Act, 1956, came to be enacted by the Parliament which received the assent of the President on December 5, 1956. Thus, the Central Sales Tax Act came into force for the purpose of laying down the test when the sale or purchase of goods takes place outside or inside a State, to levy tax on sale or purchase of goods that had taken place in the course of inter-State trade and commerce; to lay down the principles for determining when a transaction can be said to have taken place in the course of inter-State trade and commerce and also for laying down restrictions and conditions in regard to the levy of tax and other incidence of tax on sale and purchase of goods which have been declared by Parliament by law to be of special importance in inter-State trade and commerce in terms of clause (3) of article 286. By 46th Amendment, the transactions which have been deemed to be the sales for the purposes of tax on sale and purchase of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may be, shall be calculated at the lower rate. Explanation.-For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods. (3) The goods referred to in clause (b) of sub-section (1)- ............. (b)...........are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power; (c).............. (d).............. (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of sub-section (1) to an inter-State sale or purchase, such goods must be sold to a registered dealer, secondly such goods must be specified in the certificate of the purchaser as goods being intended for resale or for use by him in the manufacture or processing of goods for sale and the second condition is that the purchaser must submit a declaration in the prescribed form to that effect to the seller which could be furnished by the seller to the prescribed authority. Rules 3 to 8 of the Central Sales Tax (Registration and Turnover) Rules, 1957, govern the question of registration, rules 9 and 10 govern its amendment and cancellation. Rule 12 prescribes the form of declaration required under section 8(4). At the time of purchase of the goods in the course of inter-State trade and commerce what exactly shall be done by the purchaser on a future date, is not relevant. What is relevant at the time of purchase is that such purchase is intended for resale of the goods or to be used in manufacture of goods for sale by the purchaser. Such intention should be manifested in a declaration by him in the prescribed form "C". It is also not required that such subsequent sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two contingencies. Firstly if the dealer sells any goods to Government and secondly if he sells goods described under section 8(3) to a registered dealer. In this connection, section 7 is illuminating which deals with requirement of registration. Relevant part of section 7 reads as under: "Registration of dealers.-(1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed. (2) Any dealer liable to pay tax under the sales tax law of the appropriate State, or where there is no such law in force in the appropriate State or any part thereof, any dealer having a place of business in that State or part, as the case may be, may, notwithstanding that he is not liable to pay tax under this Act, apply for registration under this Act to the authority referred to in sub-section (1), and every such application shall contain such particulars as may be prescribed. Explanation.-For the purposes of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale attracting the provisions of the Central Sales Tax Act does not remain germane while considering the application under section 7 either for the grant of registration certificate or for seeking amendment of it for including certain goods to be specified in the certificate of registration as purchasing goods intended to be resold or used in the manufacture or process of the goods for sale. In that view of the matter, in our opinion the issuance of circular by the Commissioner refusing to entertain such application or prohibiting the use of "C" form by the purchasers of the goods in the course of inter-State sale which is intended to be used by him in the execution of works contract on the anvil of there being no amendment under section 2(g) pursuant to 46th constitutional amendment is not founded on any sound rationale, and cannot be sustained. It is noticed, and there is no dispute between the parties, that since the commencement of 46th Amendment by which the aforesaid definition of tax on sale of goods was inserted, the State of Gujarat has amended the Gujarat Sales Tax Act, and as per the amended definition under the Gujarat Sales Tax Act, a transfer of property in the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officer [1991] 83 STC 207 reached the same conclusion when it said: "........the question whether a particular 'C' form has been issued rightly or wrongly is not a question which is relevant at this stage." In Beekay Engineering Corporation v. State of Bihar [1992] 87 STC 509, a Bench of the Patna High Court held that a works contractor is a dealer entitled to the benefit of purchasing goods on payment of tax at concessional rates as prescribed under section 8(1)(b) of the Central Sales Tax Act, 1956, on furnishing a declaration form "C". The aforesaid decisions fortify the conclusion to which we have reached. In Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204 question that arose before their Lordships of the Supreme Court was whether the provisions of sections 3, 4 and 5 of the Central Act were applicable to transfer of property in goods involved in execution of works as such. The contention raised was similar to one which is raised before us that without amending the definition of "sale" under section 2(g) of the Central Act in accordance with clause (29A) of article 366, the transfer of property in goods involved in execution of works, does not come with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in which it has been used, the court held that for the applicability of provisions of sections 3, 4 and 5 of the Central Act, it was not dependent on the amendment in the Central Sales Tax Act but it was applicable in view of the amended provisions of the Constitution as interpreted by the Supreme Court in Builders Association case [1989] 73 STC 370. It may be noticed that the court made it clear that since the question of inter-State levy of tax under section 6 of the Central Act is not an issue in the cases before it, it did not propose to go into that question. In Printers (Mysore) Ltd. v. Assistant Commercial Tax Officer [1994] 93 STC 95, the court was called upon to interpret the meaning of word "goods" as used in section 8(3)(b) read with the definition of "goods" given in the Central Act. The court was to consider whether publishers of the newspapers registered under Sales Tax Act are entitled to benefit of section 8(1) read with section 8(3)(b) of that Act after the amendment in 1958 of the definition of "goods" in clause (d) of section 2 of the Central Sales Tax Act, which excluded the newspaper from the scope of that expression. It was argued that newspapers having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the expression'goods' occurring in the second half of section 8(3)(b) cannot be taken to exclude newspapers from its purview. The context does not permit it." Thus, keeping in view the object and purpose, the court read the very same expression in the very sub-section the word "goods" to mean differently. As we have discussed above, the context in which the term "resale " has been used in section 8(3)(b) makes it obvious that the term sale or resale under section 8(3)(b) has not been used as sale or resale within the meaning of the Central Sales Tax Act to attract levy thereunder but it has been used in general sense vis-a-vis their dealing by a registered dealer at a later date. A registered dealer under the Central Act as we have seen, is not necessarily a person to whom levy under the Central Act applies. Central Act has not been legislated merely to levy sales tax in exercise of entry 92-A of List I of Schedule VII but also to give effect to provisions of articles 286 and 269. Even if there is no sales tax law in the State, where a dealer has place of business and he is registered under section 7(2) of the Central Sales Tax Act, sales by a registered dealer to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy on further intended transaction under the Central Sales Tax Act at the moment of considering levy of tax on inter-State sale under section 8(1). There is no doubt that such transaction is an inter-State sale within the meaning of that Act and is subject to levy. Now what the purchaser would intend to do in future with those goods has relevance on the rate of tax to be levied on such transactions. That intended dealing with the goods is to find place on record by way of declaration in the prescribed form "C" by the purchaser. It is only declaration of an intention of dealing with the goods in future in a particular manner. There is no inhibition that such declaration should be such as to bring it within the ambit and scope of levy by the Central Sales Tax Act. Therefore, the question of the exigibility of such transactions under the Central Sales Tax Act by exercise of amending powers is not the question germane for deciding the application of dealer seeking amendment of a registration certificate for inclusion of certain articles which he intends to purchase for resale in future or being used in manufacture or processing of another article for sale in future. Nor such an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e moved from one State to another not by reason of sale, not attracting the liability under the CST Act on the person who claims so. Section 7 deals with registration of dealers under the CST Act. Section 8(1), (2) and (2A) prescribes rates of tax to be levied on sale or purchase of goods attracting charge. Section 8(3) specifies sale and purchase of which goods in the course of inter-State trade or commerce attract provisions of section 8(1)(b). The requirement of section 8(3)(b) above identity of the goods is to be as specified in registration certificate for intended use in future by such registered dealer and intention of purchase have further to be evidenced by a declaration as to fulfilment of criterion in terms of section 8(4). Section 9 provides for machinery to levy and collect tax and penalties. Any tax payable under the CST Act has to be collected by the State from which the movement of goods commenced. Under section 3 a sale or purchase of goods is deemed to take place in the course of inter-State trade or commerce, if the sale or purchase occasions the movement of goods or is effected by transfer of documents of title to the goods during the movement from one State to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax as also for other purposes. A sale which is in the course of inter-State trade or commerce cannot be taxed by a State Legislature even if its situs is within the State, because the State Legislature has no legislative competence to impose tax on a sale in the course of inter-State trade or commerce. That can be done only by Parliament. Therefore, if a question arises whether a sale is exigible to tax by the State Legislature, it may have to be considered whether it is a sale in the course of inter-State trade or commerce. The same sale in another context may have to be examined from a different point of view for determining where its situs lies and whether it is a sale inside a State or outside the State. Therefore, there is no incompatibility in the same sale being both a sale in the course of inter-State trade or commerce within the meaning of section 3 of the Central Sales Tax Act, 1956, as also a sale inside the State in accordance with the principles laid down in sub-section (2) of section 4 of the Central Act. All that the opening words 'Subject to the provisions contained in section 3' in sub-section (1) of section 4 of the Central Act intend to convey is that even wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 (SC), for the purpose of section 8(3)(b) also even in the absence of any amendment having been made in the Central Sales Tax Act (after 46th Amendment) expressly including transfers of property in goods involved in execution of intra-State sale be applicable to such transfers. Else it would lead to very anomalous result that while fixing the situs if such transfer will be a sale within the State of Gujarat and since on such sale having occasioned movement of goods by applying section 3 it will pass into the realm of sale in the course of inter-State trade or commerce taking it outside the purview of State levy yet while considering the provisions of the CST Act. It shall not be a sale at all for any purpose if the argument of Revenue is to be accepted, attracting no provision of the CST Act at all. As we have noticed, law is well-settled now that each provision under article 286 operates independently in separate field and one cannot be projected everywhere, therefore, while entry 92-A gives Central Act exclusive power to levy tax on sale and purchase of goods in the course of inter-State trade and commerce, article 286 has empowered the Parliament to legislate/to enact the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a decision of Punjab Breweries Limited v. State of Punjab [1993] 90 STC 211. We may at the outset state that this was not a case in which provisions of section 8(3)(b) were called upon to be interpreted by their Lordships of the Punjab and Haryana High Court. It was a case in which their Lordships were called upon to decide whether in a case where transfer of a work has resulted in movement of goods, would be exigible to the tax under the Central Sales Tax Act. This was the question which was left open by their Lordships while deciding the question whether sections 3, 4 and 5 of the Central Act are applicable for determining the situs and nature of the sale under sections 3, 4 and 5. The case is, therefore, clearly distinguishable. As in the present case also, we are not concerned with the question, whether the transfer of property in goods involved in execution of retreading the tyres resulting in sale has resulted in sale attracting levy under section 6 of the CST Act. We refrain from expressing any opinion thereon. As a result of the aforesaid discussion, we hold that at the time of considering the registration of a dealer under section 7 or considering for amending the li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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