TMI Blog1999 (8) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to Government hospitals and institutions as approved by the Central Medical Stores of the Directorate of Health Services, Government of West Bengal at 141, Acharya Jagadish Ch. Bose Road, Calcutta-14. Respondent No. 5 in the present application is the Deputy Director of Health Services (E S) of Central Medical Stores in the Directorate of Health Services, Government of West Bengal. Applicant No. 1 was appointed as distributor of drugs and medicines. Annexure "C" at page 19 is the notice issued to the applicants on June 3, 1998 by respondent No. 1 asking them to appear before him on June 26, 1998 to produce before him books of account and other documents relating to their business since inception as listed in the said notice, and also to show cause why penal action under the law should not be taken against them for collection of sales tax from their customers and failure on their part to deposit the collected tax in favour of the State Government in the Reserve Bank of India or a Government treasury in contravention of section 8G of 1954 Act (since repealed) and of section 37 read with section 107 of the West Bengal Sales Tax Act, 1994 (in short, "the 1994 Act"). After the said n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied on them under section 8G(3) of 1954 Act for contravention of section 8G(1) and (2). On receipt of that notice, applicants made a written submission on November 6, 1998 to respondent No. 1 taking a plea similar to the one taken in respect of the notice under section 37 of 1994 Act. It was further stated therein that under 1954 Act only the manufacturers were liable to pay sales tax, obviously indicating that the drugs and medicines sold by the manufacturers to applicants were liable to sales tax at the single and first point of sale. Thereafter, on December 4, 1998 the respondent No. 1 passed an order imposing a penalty of Rs. 19 lakhs on the applicants under section 8G(3) of 1954 Act, and on December 17, 1998 he issued a demand notice to the applicants for payment of the said amount of penalty. The above facts are undisputed. The case of the applicants is that drugs and medicines which they purchased and sold within the State of West Bengal were exigible to sales tax at the single point, namely, at the first point under 1954 Act. They purchased the said goods from manufacturers in West Bengal by payment of sales tax. They admittedly collected sales tax and charged sales tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The contention is that the purchaser of applicant No. 1 might be entitled to recover the amount of tax, if collected illegally by applicant No. 1, but the State could not claim that amount. 5.. In the affidavit-in-opposition, the case of the respondents is that sales tax payable under 1954 Act could be collected only by dealers within the meaning of section 2(1)(b) of 1954 Act who were liable to pay tax under that statute. The object behind enactment of section 8G was that no sales tax should be collected by any one from any customer, except by dealers who were liable to pay tax under 1954 Act. As the applicants were not a dealer within the meaning of section 2(1)(b), they were, according to the respondents, prohibited from collecting any sales tax in respect of sales of notified commodities. Therefore, the applicants had collected sales tax in contravention of section 8G(1) and they were under a statutory obligation in terms of section 8G(2) to deposit the collected amount of tax in favour of the State Government. As the applicants had failed to do so, respondent No. 1, it is claimed, rightly imposed a penalty of Rs. 19 lakhs under section 8G(3). Another contention of respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by way of tax in excess of the amount payable under this Act, as the case may be, into a Government treasury or the Reserve Bank of India within thirty days from the date of such collection and intimate the prescribed authority of such deposit along with a receipt from such Treasury or Bank showing payment of such amount. The prescribed authority shall, on application made by the buyer of goods referred to in sub-section (1) and on such terms and conditions as he may deem fit and proper, refund the tax or the excess tax, as the case may be, collected from such buyer and deposited by the dealer in the manner as aforesaid: Provided that no application from any buyer shall be entertained unless the same is made within three months from the date on which the tax or excess tax, as the case may be, is paid and supported by relevant cash memo issued by the dealer. (3) If a dealer is in default to deposit in accordance with the provision of sub-section (2) the amount collected in contravention of the provision of sub-section (1), the prescribed authority may, after giving such dealer a reasonable opportunity of being heard, by an order in writing direct that he shall pay by way of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 8G which is repugnant to the definition in section 2(b). In other words, the learned Advocate for respondents failed to point out why, for what particular reason, the definition in section 2(b) should not be applied to section 8G. No repugnancy in the subject or context could be pointed out. On the other hand, it will appear from section 8D of 1954 Act that a re-seller has been described as a re-seller and not as a dealer. There is no dispute that the applicants are re-sellers of drugs and medicines which they purchase from manufacturers within West Bengal. Moreover, section 8G itself does not prohibit a nondealer from collecting tax. It prohibits only a dealer who is not liable to pay tax, from collecting tax in respect of sales made by him. Similarly, section 8G(1) prohibits a dealer who is liable to pay tax, from collecting any tax otherwise than in accordance with the provisions of 1954 Act, or in excess of the amount of tax payable by him under 1954 Act. The 1954 Act deals with taxing the commodities which are notified under section 25 of the same Act, and not in respect of any other commodity. The scheme of levy of sales tax in West Bengal is that the Bengal Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 6A and 6B. It was argued by Mr. K.K. Saha, learned Advocate for the respondents, that the object of section 8G was to prohibit anyone other than a dealer liable to pay tax under the 1954 Act from collecting sales tax in respect of his sales, and from collecting tax in excess of what a dealer is to pay to the State Government as sales tax. But the language of section 8G and the context in which the prohibition has been laid down do not at all indicate that the prohibition against collection of tax or excess tax, as the case may be, was intended to apply to even re-sellers like the present applicants. A re-seller has by no means any nexus with collection of excess tax, because he is not required to pay sales tax for his sales (the sales tax under 1954 Act being a single point tax levied on the first sale). 11.. In the circumstances, in our opinion, there is no repugnancy in the subject or context in section 8G so as to exclude the operation of the definition of "dealer" in section 2(b) from section 8G. Therefore, the legislative intent was that section 8G had a restricted application to the case of dealers as defined in section 2(b) of 1954 Act and it did not apply either to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. Our view being that operation of section 8G is restricted to dealers as defined in section 2(b) of the 1954 Act, the impugned order of penalty dated December 4, 1998 passed under section 8G(3) of the 1954 Act is liable to be quashed. 14.. That being the position, there is no necessity to enter into other questions raised in the present application, including the question whether section 8G is ultra vires the Constitution of India for lack of legislative competence of the State Legislature. 15.. Accordingly, the application is allowed. The impugned order of penalty under section 8G(3) of the 1954 Act dated December 4, 1998 and the consequential notice of demand dated December 17, 1998 in respect of the penalty of Rs. 19 lakhs are quashed. No order is made for costs. D. BHATTACHARYYA (Technical Member).-I agree. 17.. J. GUPTA (Judicial Member).-The first leg of contention of Mr. Bose, is that the provision contained in section 8G is not within the legislative competence of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution. According to him the said entry only enables the State Legislature to make law for levy of sales or purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy and collection of the tax. A provision to check illegal collection of such tax, by any agency or person in the pretence acting under the statute, comes under the matter incidental and ancillary to the object of such legislation. Section 8G does not confer any power on the State to appropriate to itself any illegally collected tax but only vests it with the power to reimburse the amounts to the appropriate purchasers to whom the amounts really belong, and to penalise the seller disinclined to deposit the amounts in the treasury for reimbursement to the rightful owners. An identical issue came up for consideration of the Supreme Court in the case of State of Orissa v. Orissa Cement Ltd. [1986] 61 STC 79. The Supreme Court following its own decision in R.S. Joshi, Sales Tax Officer v. Ajit Mills Limited [1977] 40 STC 497 has observed as follows: "In the instant case, before us, there is not merely a provision for making over such collections by the trader to the State but also a provision for refunding it by the State to the persons from whom such collections have been made. The impugned provisions will have, therefore, to be upheld as falling within the doctrine of ancillary or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the tax payable. Sub-section (1) of section 4 is the charging section in the 1954 Act and runs thus: "(1) There shall be paid by every dealer a tax on his turnover, at such rate not exceeding 20 per cent as the State Government may, by notification in the official gazette, fix in this behalf, and different rates may be fixed for different classes of notified commodities." (Underscorings have been done by me to lay emphasis). 22.. Since the 1954 Act does not provide for tax-free goods, a dealer within the meaning of section 2(b) shall have the liability to pay sales tax under the 1954 Act whenever there is turnover of sale of notified goods. It follows therefrom that for the purpose of section 4(1) there cannot be a "dealer" within the meaning of section 2(b) who is not liable to pay tax, if there is any sale by him. It may be argued that the "dealer" referred to in the first part of section 8G(1) actually means a "dealer" within the meaning of section 2(b) who does not have taxable outturn because of benefits like, remission, exemption, reduction as available under the Act. It is true that such a dealer may not have to make actual payment eventually, on assessment, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of section 8G(1) cannot be a person under section 2(b) but a person who has turnover of sales of notified goods yet has no liability under section 4(1). A re-seller (i.e., the third category seller) is the person who exactly conforms this position. 24.. If the word "dealer" occurring in the first part of section 8G(1) means a "dealer" in terms of section 2(b) who is not required to pay tax in view of exemption or remission of tax or reduction of turnover, in my opinion the expression "who is not liable to pay tax" in section 8G(1) would have sufficed to identify him. But instead, the expression used there is "who is not liable to pay tax under the Act". It may be argued that since liability to pay or absence of liability to pay, for reasons whatsoever, can occur under the provisions of the Here italicised. Act, the addition of the expression "under this Act" will make no difference. But in my opinion the expression "under this Act" is of much significance. In my opinion, the expression "dealer" who is not liable to pay tax "under this Act" means a dealer who under the provision of this Act can never incur liability to pay tax and hence is out of purview of section 4( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (Sind) Electric Supply Co. Ltd. v. Union of India AIR 1959 Punj 199 has observed: "It is true that ordinarily same meanings to the same words occurring in different parts of the statute or in the rules framed thereunder should be given, but it is well-established that this principle raising this presumption is very slight as the same words or expressions may be used in the same Act or even in the same section in two different senses. Words take their colour from their context." 26.. Before I part with the matter I like to refer to two Supreme Court decisions. In Anand Nivas Private Ltd. v. Anandji Kalyanji's Pedhi AIR 1965 SC 414 the Supreme Court has said that in the event of plurality of meaning of a word, "the sense in which the expression is used in different sections, and even clauses, must be ascertained from the context of the scheme of the Act the language of the provision and the object intended to be served thereby". Again, in the opinion of the Supreme Court, as expressed in Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate AIR 1958 SC 353 at 356, "where there is a doubt about the meaning of the words of a statute, their meaning is to be underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme of the Act would reveal that under no stretch of imagination the dealers included in items (B) and (C) above can come under the purview of section 2(b). 31.. It has been contended on behalf of the applicant that the persons who are engaged in resale of notified commodities in West Bengal cannot be read into the first part of section 8G(1) because the Act has separate provision for such "re-seller" in section 8D. But if we look into the scheme of the Act we would find that "re-seller" referred to in section 8D and defined in section 2(ccc) does not include the whole category of the re-sellers, i.e., the third category sellers, but constitute only an insignificant part of such re-sellers and are dealing in a very limited number of items of notified goods. Thus resellers within the meaning of section 2(ccc) are only those who sell only such notified commodities as specified under section 8E. By notification under section 8E only a very limited number of notified goods have been specified. Some such items are betel-nut, pepper, turmeric, cloves, motor car, omnibuses, scooter, chassis/bodies of motor car and omnibuses, etc. Thus, the dealers under section 2(ccc) constitute on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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