TMI Blog2007 (8) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... ers the right to use any goods for any purpose, can be held liable to pay sales tax under the TST Act. What also crystallizes from the above discussion is that rule 3A(2) is, in the light of the discussion held above, ultra vires the TST Act. Appeals, preferred by the writ petitioners, are hereby allowed. - Writ Appeal Nos. 127, 146,147,149,150 of 2001 & 41, 42, 43,44, 45 of 2002 - - - Dated:- 29-8-2007 - ANSARI I.A. AND PAL A.B. , JJ. JUDGMENT:- Is the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, subject to levy of sales tax under the Tripura Sales Tax Act, 1976 (in short, the TST Act ) and if so, who is liable to pay such a tax, are two important questions raised in this series of appeals. Yet another question, raised in the present set of appeals, is as to whether sub-rule (2) of rule 3A of the Tripura Sales Tax Rules, 1976 (in short, the TST Rules ), can be treated to be a valid piece of delegated (1)Oral legislation, when it mandates every person, responsible for making payment to the transferor of the right to use any goods for any purpose (whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Chandan Deb, Near Circuit House: Kunjaban, P.O. Abhoynagar: Agartala799005, Tripura West. Sub.: Providing 05 Nos. Commander jeep on 12 hours basis Against Tender No. GAIL/AGT/VEH/9899/01. Dear Sir, With reference to your offer against our NIT No. GAL/AGT/VEH/ 98-99/01 published in various dailies of Agartala and Calcutta dated January 13, 1999 and January 14, 1999 and subsequently your letter dated May 27, 1999, we are pleased to award the work to you at your quoted rates and laid down terms and conditions mentioned in the tender document for 05 Nos. of Commander jeep (Model 1998 onwards) on 12 hours basis immediately. You are, therefore, requested to provide 05 Nos. Commander Jeep on 12 hours basis immediately. Failure to provide the vehicles requisitioned above within 15 days from the receipt of this letter as mentioned in your letter dated May 27, 1999, would amount to not acceptance of the offer by you and this letter will stand cancelled. An amount of Rs. 18,000 (Rupees one eight zero zero zero only) for each vehicle is to be deposited with GAIL, Agartala, in the form of Bank Draft/Bank Guarantee/Cheque of any Nationalised Bank in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepared and are enclosed herewith. Clarifications on certain points in respect of which some confusion has been prevailing is given in annexure 'I' and extracts of the relevant provisions of the Tripura Sales Tax Act and Rules are given in annexure 'III'. 3. All the officers concerned are instructed to comply with the legal provisions relating to deduction of tax at source in respect of works contract, as failure to do so may render an officer personally liable to legal consequences like penalty, etc., as per sub-rules (10) to (12) of rule 3A (copy enclosed). 4. These provisions are applicable to all departments and undertakings of the State Government as well as the Central Government offices in Tripura. Sd/(M. DAMODARAN) Chief Secretary, Encl.: As stated. Government of Tripura. (iii) By making applications under article 226 of the Constitution of India, the suppliers of the vehicles aforementioned put to challenge, inter alia, the vires of rule 3A on the ground that there is no charging provision under the TST Act for levy of sales tax on transfer of the right to use goods and, hence, rule 3A of the TST Rules, which makes it mandatory for pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 546 of 1996, 497 of 1998, 487 of 1999, 320 of 2000 and 488 of 1999 respectively. At the same time, the State Government too, being aggrieved by the finding, that rule 3A(2) has been held ultra vires the TST Act and that the impugned memorandum has been struck down, has preferred the appeals, namely, Writ Appeal Nos. 41 of 2002, 42 of 2002, 43 of 2002, 44 of 2002 and 45 of 2002, which have arisen out of CR Nos. 546 of 1996, W.P. (C) Nos. 238 of 1999, 489 of 1999, 497 of 1998 and 487 of 1999 respectively. We have heard Mr. A.K. Bhowmik, learned Senior Counsel, appearing on behalf of the writ petitioners-appellants, and Mr. S. Chakraborty, learned Government Advocate, appearing on behalf of the State. We have also heard Mr. S. Deb, learned Senior Counsel, appearing for the ONGC and the GAIL. Before we answer the questions, posed above, it is necessary to take note of the bare minimum facts, which led to the making of transfer of the right to use any goods a subject of the State's power to impose sales tax. Before introduction of the 46th amendment of the Constitution of India, composite contracts, such as, works contract, hire-purchase contract and catering contracts, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 9 STC 353, the Supreme Court gave a new approach to the definition of sale by prohibiting States from taxing transfer of property in goods involved in the execution of indivisible works contracts. This decision also affected the revenue of the States. The State's revenue was further reduced to a great extent in view of the decision of K.L. Johar and Co. v. Deputy Commercial Tax Officer [1965] 16 STC 213, wherein the apex court decided that the State can tax only the depreciated value of the goods. Another decision of the apex court, in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474, closed the door of a big revenue earning area by the States, when the apex court held that supply of food by the hotelier was essentially one of services by the hotelier and as a part of the amenities incidental to the service, the hotelier served meals at specified hours. By the 46th Amendment Act of the Constitution, the definition of the word sale , as given in article 366, was widened by insertion of clause (29A), whereunder various transactions, enumerated therein, which were, otherwise, not sales , have to be deemed, by a legal fiction, as sales . Suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of those goods by the person to whom such delivery or transfer is made, but does not include a mortgage, hypothecation, charge or pledge;... From a careful reading of section 2(g)(ii), it becomes clear that sale includes transfer of the right to use any goods for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable consideration. Bearing in mind that the transfer of the right to use any goods for any purpose amounts to sale within the meaning of section 2(g)(ii), when we turn to section 3, we notice that section 3 reads as follows: 3. Liability to tax and exemption from tax. (1) Every dealer in taxable goods shall pay a tax on his turnover at the rate specified in column (3) of the schedule attached to this Act: Provided that subject to the provisions of sections 14 and 15 of the Central Sales Tax Act, 1956 the State Government may, from time to time by notification in the official gazette and subject to such conditions as it may impose, fix a higher rate of tax not exceeding forty per cent or any lower rate of tax payable under this Act on account of the sale of any taxable goods or class of taxable goods specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of the word dealer , what clearly emerges is that every person, who sells taxable goods in the State of Tripura is not a dealer , for, he becomes a dealer only when he sells taxable goods manufactured, made and processed by him in Tripura or brought by him into Tripura from any place outside Tripura for the purpose of sale in Tripura. This, in turn, shows that if a person purchases taxable goods in the State of Tripura and sells the same within the State of Tripura, he does not become a dealer and on such a sale, no sales tax can be imposed by invoking the provisions of section 3. By amendment, which Tripura Sales Tax (Third Amendment) Act, 1984, has introduced, a person, making a sale under section 3A, has been included within the meaning of the expression dealer . Section 3A is meant for a person, who executes a works contract, for, in the execution of works contract, whatever goods are used by him either as goods or in some other form, such utilisation of goods would, by legal fiction, be deemed to be a sale of those goods used in execution of the works contract. What clearly surfaces from the above discussion is that unless a person is a dealer , he canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3AA. Deduction of tax at the time of payments. Any person responsible for paying any sum to any person liable to pay tax under section 3A of the Act, shall at the time of credit of such sum to the account of the person or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, deduct such amount towards sales tax as may be prescribed. In the backdrop of the definition of dealer given in section 2(b), when sections 3A and 3AA of the TST Act are carefully analysed, it becomes abundantly clear that a person, who executes a works contract, shall, by a legal fiction, which section 2(b) creates, be treated as a dealer and such a person, for being a dealer , becomes, under section 3A, liable to pay sales tax for transfer of property in goods involved in the execution of works contract, for, such transfer of property in goods would be deemed to be a sale of the goods by the person making the transfer. Section 3AA makes it obligatory for a person, responsible for making payment of any sum to any person, who is liable to pay sales tax under section 3A, to deduct, at the time of credit of such sum, to the account of the person or at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring of these appeals, a faint attempt was made to show that sub-section (1) of section 44 of the TST Act empowers the State Government to make rules for carrying out the purposes of the TST Act and rule 3A(2) is within the ambit of sub-section (1) of section 44. Because of the submissions, so made, a careful analysis of section 44 of the TST Act is imperative. Section 44 reads as follows: 44. Power to make rules. (1) The State Government may, make rules for carrying out the purposes of this Act. (2) Without prejudice to the generality of the foregoing power, such rules may, in particular, prescribe (a) all matters required by this Act to be prescribed; (b) the classes and duties of officers appointed for the purpose of enforcing the provisions of this Act; (c) the procedure to be followed and the forms to be adopted in proceedings under this Act; (d) the intervals at which, and the manner in which, the tax under this Act shall be payable; (e) the dates by which and the authority to which returns shall be furnished; (f) the manner in which refunds shall be made; (g) the fees if any, for petitions, certificates and other matters; (h) the nature of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non-production of the accounts or omission to maintain the accounts would amount to contravention of the provisions of the statute, for, the rules, framed under a statute, are also law. In such circumstances, a person, who is directed to make deduction, would expose himself to criminal prosecution if he does not comply with these requirements. When the statute itself has not made a person liable for making deduction, at source, in respect of transfer of the right to use goods, such a liability cannot be imposed by making rules or by issuing executive instructions and thereby expose the person, who is so made liable to make deduction, to criminal prosecution for contravention of the provisions of law. Thus, the effect of making rule 3A(2) would expose a person, who has not been made liable by the Legislature, to criminal prosecution. Rule-making power cannot be exercised in a manner, which would bring, within the penal provisions of a statute, a person, who has not been brought within the scope of the statute by the Legislature. It is very common for the Legislature to provide for a general rule-making power to carry out the purpose of an enactment. When such a power is given, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ambit of the charging section by clear words, he cannot be taxed at all . Since the TST Act is a fiscal legislation, the general rule-making authority, conferred on the State Government by section 44(1), cannot be resorted to for the purpose of bringing in, within the scope of the definition of dealer , a person, who transfers his right to use goods for valuable consideration, when the Legislature has not brought, within the scope of the word dealer , a transferor of the right to use goods. It is well-settled that all financial enactments are to be construed strictly and no tax can be imposed by any law or rules or regulations unless the statute, whereunder the law is made, specifically authorises such an authority. In fact, in the case of State of Kerala v. Madras Rubber Factory Ltd. reported in [1998] 108 STC 583; [1998] 1 SCC 616, the apex court, while dealing with the question of payment of cess under the Kerala General Sales Tax Act, 1963, held that a charge under a taxing statute can only be under the statute and not even under the rules; hence, the deduction, at source, by executive instructions, such as, the impugned memorandum, cannot be treated as a valid piece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of the general power already specified, the particular power is only illustrative and does not in any way restrict the general power. In the instant case also, the general power is in sub-section (1) and sub-section (2) contains illustrations and does not, in any way, restrict the general power under sub-section (1). Thus, even assuming that rule 498A is not covered by clause (i) of sub-section (2), it is quite immaterial inasmuch as such a rule can be framed in exercise of the general power under sub-section (1) for the purpose of carrying into effect Chapter VI relating to control of traffic. There is, therefore, no substance in the contention of the petitioner that rule 498A is ultra vires the provision of the Act. In the case at hand, the decision in Ajay Canu's case [1988] 4 SCC 156 cannot be taken recourse to, when the transferor's right to use goods has not been brought within the net of the sales tax by the charging section, i.e., section 3. What crystallizes from the above discussion is that unless the TST Act is suitably amended by either expanding the definition of dealer or by making appropriate changes in the provisions of section 3, which is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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