GOVIND SARAN GANGA SARAN versus COMMISSIONER OF SALES TAX AND ORS.

P;~T,HAKi J : · This appeal by special leave is .direct~d against the judgment and order of the High Court of Delhi dismissing the appell~nt's writ petition questioning the liability .imposed in him on - a sales taxassessment. · ·

p. 987, margin E

The ·appellant carries on business· as a dealer in the re-sale of cotton yarn. As a dealer he has been registered nnder the Bengal Finance (Sales Tax) Act, 1941 as applied.10 the Union Territory •of Delhi (hereinafter referred to as.the 'State Act'). The appellant says that he purchases cotton yarn and sells it to registered dealers, unregistered dealers aud consumers. For "ihe assessment year 1968-69 the appellant submitted his return of turnovet under the state Act and claimed exemption in respect. of the turnover of sales of cotton thread on the ground that it was an exempted item under Entry No. 21 of the-Second Schedule. The Sales Tax Officer, by his order dated October 29,1970, held that the sale's were effected in respect of' '~ ···:;'if

pp. 987–988, margin F

'~ 988 ,, \.1%51 ·~ s.c.P.. cotton yarn and, therefore,,they. were liabi~'r. to.tax at one per cent; On appeai/ the.Assistant Coininissioner ·of Sales Tax took a contrary view'and on his finding that the transacttolis 'weie in respect' of cotton thread h'e allowed the( 'i\:pp~al and :'~imck ihe. assessinenf down .. Acting suo motu in the exercise of his;~~visional jurisdiction, . the Deputy Commissioner of Sales Tax made ·an order under Sub-s. (3) of s: 20 of the Staie Act reversin-i{the .order. of the Assistant . Commissioner and restoring that of tbe Saies Tax Officer on the · ground that what was sold was cotton yarn. The appellant now applied' in 'revision to the Firiancial'Commissio'ller, belhi Administrn-, tion~ and t\le Financial Conimissi~ner, proceeding on ;the basis that. the sales were in respect of cotton Y.arn, which was a declared item under s. 14 of the Central Sales. Tax Act, held that- they could· not be subj~cted to sales tax because one 'o(the conditions prescribed·,by,·!o' s. 15 of that Act had not been complied with, that is to say, the law had otµitted to prescribe the ,single point at ,which the levy could alone'ifo"imposed. Accordingly, the. Fif1anciaf(ccimmissioner allowed . the revision petition and quashe1f"\hh' assessment. The. Commfs-" · sioner of Sales Tax thereupon ~led Civil Writ Petition No. 460 of 1973'iii the'High Court' of Delhi praying· for·'the quashing of th(: order of the Financial Commissioner. The writ petition was allowed by the High Court by its judgment and order .d.ated. September 10, 1974. Against'thAt judgment arid'order, the ·appellant has filed the present appeal. : • S. 14 of the Central Sales Tax Act enumerates the commodities•declared to be lgO<lds' of special importance i~ ·inter-State 'lraile or commerce.I' Among the goods ·so deciared is' cotton ·y'arn. S. fS'ilr the Clentrat•Sales'.lf.ax ·Act1 ·1956 provides :-

p. 988

"15. Every sales tax law of a State shall, in so far as it imp.oses or authorises the jmposition of aitax .on the.sale or~ I ;Pl!rchase of declared goods,: be subject to the· following res•;y · \rictio~s and conditions, :namely :- · · (a) the tax payable under that law in respect of.. any sale or ·purchase of such goods inside,the .S.tate shall not exceed. • three per cent ~f ·the sale .or." purchase price thereof, and'" , .. suc):i tax shall not be levied at more than one stage." , , m1.'.

p. 988, margin F

The tax is payable by a dealer.under the State Act·· on taxable turnover, and sub-s. (2),of s. 5 provides : ·· · . ·" ' ·'

p. 988, margin G

"(2) In this Act, the expression "taxable turnover" means that part of a dealer's gross turnover during any period, which· remains after deducting thereform- (a) his turnover during that period on- (i) the sale of goods declared tax free under section 6; (ii) sale to a registered dealer-of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or for us.e by him as raw-materials in the manufacture of . goods for sale; and of containers or other materials for the packing of goods of the class or classes so . specified for sale : Provided th~t in the ca•e of such . sales, a· declar:ition, . (.) duly filled up and signed by the .registered dealer .to . whom the goods. are sold and containing the pr~scribed particulars on a prescribed form obtainable from. , 'the prescribed authority is furnished in the . prescribed . manner by the dealer who sells the good; Provided further that where any goods specified in the certificate of registration are purchased by ·a registered '• .dealer as being intended for re-sale by him or for ·Use by him as raw-materials in the manufacture of goods·" for sale, but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed ~ to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of.

p. 989, margin A

the 'purchasing dealer."

p. 989, margin F

Ia thdnstant case, we are concerned with the taxation of goods which under s. 14 of the Central Sales Tax Act have bec;n declared to be of special importance in inter-State trade or ·commerce. Where the .turnover of such :goods is subjected to tax· under the sales tax law of a State, s. 15 prescribes the maximum rate at · which such tax inay be imposed and requires that such tax shall not be levied at more than one point. The two conditions 'have been . imposed in order to ensure that inter-State trade or commerce in , such goods is not hampered by ·heavy . taxation within the State occa.sioned by an excessive rate of tax ·or bymulti ·point taxation. S. 15 enacts restrictions and conditions which are essential to the validity of an impost by the State on such goods. If either of the two conditions are not satisfied, the impost will be invalid. Now in' order. that tax should not be tevied at more than ond stage it is imperative that the sales tax law of the State should specify either expressly or be necessary implication the single poin at which the tax may be levied. Alternatively, it may· empower a statutory authority to p'rescribe such single point for the purpose. Where such point is not prescribed, either by the statute or by the statutory delegate, no compliance is possible withs. 15. The single point at which the tax may be imposed must be a definite ascertainable point so that both the dealer and the sales tax authorities may 'know clearly the point' at which the tax is to b·~ levied.

pp. 989–990, margin F

The components which ·ente.r into· the concept of a tax are well known. The first is the character of the imposition known by . its nature which prescribes the taxable event attracting .the levy, .the ·second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difiicult,to say that the levy exists in point of Jaw. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.

p. 990, margin C

The charging provision, s. 4, of the State Act enacts that every dealer whose gross turnover during the year exceeds the tax· able quantum shall be liable to pay tax. The ordinary rule under the State Act appears to be that the scale made by every . dealer in a series of sales by successive dealers is liable to tax. That is multipoint t~xation. fo a scheme of single-point taxation, the levv is confined to a single point in a series of sales by successive deal~rs. According to the Revenue, the present levy falls in the latter category, and sub-cl. (ii) of cl. (a) of sub-s. (2) of s.5 implies the single point at which the turnover of goods may be. taxed. That argument· from favour with the High Court, and it held the single point in a series of sales to be the sale made by the last regisfored dealer among successive dealers when he sold the goods to an unregistered· dealer. or a consumer. In this connection, the High Court. relied on the construction placed by it on sub-cl. (ii) of cl. (a) of sub-s. (2) .~f s.5 in Fitwell Eogineer1 v. Financial Commissioner, . Delhi Adminis-. /ratio.;,, Delhi, and Another' ( In that case, the. High .Court had held that it was for the purpose of taxing the goods at least at one point that sub-cl. (ii) of c!. (a) of sub:s• (2) of s.5 of the State Act had been enacted, that there would be a taxable sale when the registered dealer sold the good; tJ an unregistered dealer or to a consumer, and that in order that such resale by the registered dealer should aitract tax the resale to an unregistered dealer or to. a consumer had to be effected in Delhi, because If the resale ~as effected outside the .Union Territ~ry of Delhi the. Union Territory of Delhi would have no legislative competence to iax the resale. Now .the

pp. 990–991, margin D

question whether the expression "resale" in sub-cl. (ii) of. cl. (a) of ~ ,sub-s. (2) of s.5 of the State Act was ·confined fo a r'esale in the Union Territory of Delhi by the last registered dealer was subsequently considered by this Court in Polestar Electronic (P) Ltd. v. Additional Commissioner, Sales-Tax And Another.!'> Overruling the decision of the High Court in Fitwell · Engineers (supra) this Court . held that the expression "resale" waS' not .confined to a resale in the Union Territory of Delhi and could include a resale outside it. That was the position upto May is, 1972 when sub-cl. (ii) of cl. (a) of sub-s. (2) of s.5 was amended by the Finance Act, 1972. This· Court'observed that the position before the amendment in 1972 was not affected by. the possibiliiy that on the. construction preferred · by the Court the Union Territory of Delhi .would be unable to recover any tax. The Court said :

p. 991, margin C

' "It is true that if the purchasing dealer resells the · goods outside : Delhi, the Union Territory of Delhi would not beable to recover any iax since the sale to the.purchas-: 'ing dealer would be exempt from tax under section 5 (2) (a) (ii) and the resale by the purchasing dealer would also be free from ta'< by reason of section 27. But that is not ·'such a consequence as would compel us to read the word "resale;' as limited ·to resale inside Delhi •. The argument of the revenue was that the legislature could never have intended that the Union Territory of 'Delhi should be al- . together' deprived of tax in· cases of this kind. The legislative

p. 991, margin E

: intenf could only be to exempt the sale to the purchasing (I) (197.l] 35 S. T. C. 66.

p. 991, margin G

(1978} Si T c. 409. il92 SUPREMB COURT REPORTS t1985J 3 S.C.lt.

pp. 991–992, margin G

dealer in those cases where the Union Territory of Delhi would be able to recover tax on resale of the goods by the purchasing dealer. The goods must be taxed at least at one point and it could not have been intended that they should not be taxable at all at any point by the Union Territory of Delhi. The revenue 'urged that it was for the purpose of taxing the goods at least at one point that the' second proviso was enacted by the legislature. We do not think this contention based on the presumed intention of the legislature is well-founded." And again,

p. 992, margin A

"The intention of the legislature was clearly not that the Union Territory of Delhi should be entitled to tax the goods at least at one point so that if the sale to the purchasing dealer is exempt, the resale l)y the purchasing dealer should be taxable. We do not find evidence of such legislative intent in any provision of the Act." (Emphasis supplied) Further on, in the same passage, the Court reiterated :

p. 992, margin C

"It will, therefore, be seen that it is not possible to discover any legislative intent to tax the goods at least 'at one point and to exempt the sale to the •purchasing dealar only if the resale by the purchasing dealer is liable to tax.~· •

p. 992, margin D

On the construction which found favour with this Court in Polestar Electronic (P) Ltd, (supra) it is apparent that no support can be found for the proposition that sub-cl. (ii) of cl. (a) of sub-s; (Z) of s.5 of the State Act implies that the single point of taxation is fixed by the Siate Act ai the resale by a registered dealer to an unregistered dealer or to a consumer. As that is the reasoning on which the 'High Court has proceeded iu the judgment under appeal, we must hold that the basis underlying the decision of the High Court cannot be accepted ..

p. 992, margin E

It niay be noted that the State Act as applied to the Union Territory of Delhi was amended by Parliament in 1959, and s. 5A, was inserted. S. 5A provides:

p. 992, margin G

"Notwithstanding anything to the contrary in this Act, the Chief Col!l!11issioner may, by notification in the 'official , Ga,zette, specify the' point in the ·series of sales by . successive·,dealers at which any! goods or class of go.ods may ·be , tax~d/'

pp. 992–993, margin G

That provision clear.ly empowers the Chief Commissioner to spedfy the 'single point in a series of sales at which single point taxation may be levied. The widest amplitude of power has been con- . ferr.id on.the Chief Commissioner in the matter of selecting the point for taxation in a series of sales and, if that is so, clearly no single point can be spelled out, even by implication, from the provision of sub,cl, (ii) of cl. (a) of sub-s. (2) of s. 5. For to do so would mea~ eitl;le~ accepting an inc.onsistency between the two provisions or na~rowing down correspondingly the scope of s. 5A. We have already pointe(out that the provision for single point taxation cannot, in the view of this Court expressed in Polestar Electronic ·(P) Ltd. (supra), be discovered in sub-cl. (ii) of cl. (a) of sub-s. (2) of s.5 of the State Act To our mind, provision has been made in that behalf in the statute by the insertion of s.5A. The High Court has referred to the Statement of Objects and Reason.s attached to the Bengal Finance (Sales Ta~) (Delhi Amendment) Act 19.59 in support of its conclusion that s.SA was inserted only to provide for the levy of tax at any point other than the point of last sale so that sales-tax may be levied at the first point on certain items which were manufactured in factories. It is weU seltled that when the language of the statute is clear and admits to no ambiguity, recourse to the Statement of Obje.cts and Reasons for the purpose of construing a statuory provision is not permissible. We are of opinion that there is ample power under s.SA of the State Act enabling the Chief Commissioner to specify the single point at which tax may be levied in a series of sales. This can, however, be done by him only by a notification in the Official Gazette. No such notification has been placed before us which co~ld relate to the assessment year under consideration. We hold therefore that a vital prerequisite of section J 5 of the Central Sales Tax Act, namely, that the tax shall not be levied at more than one stage, has not been satisfied in. respect of tbe turnover of cotton · yarn, and accordingly the assessment complained of is liable to be quashed.

p. 993, margin A

While concluding, we may point out that a somewhat similar question arose before this Court in Bhawani Catton Mills Ltd. v. The State of Punjab and Another,<' )the question being whether the second proviso to s. (i) of s.5 and sub-cl- (vi) of cl. (a) of sub-s. (2) of s. of the Punjab General Sales Tax Act 1948 implied the single point at which goods were taxable. The contention was negatived by this Court. That is how that decision was understood by this Court sub· sequently in Rattan Lal and Co. And Another v. The Assessing Authority And Another.(

pp. 993–994, margin G

Accordingly, we hold that the assessment of the turnover cotton yarn for the assessment ytra 1968-1969 under the Bengal Finance (Sales Tax) Act, 1941 as applied to the Union Territory Delhi cannot be sustained.

p. 994, margin A

In the remit, the appeal is allowed, the judgment and order the High Court of Delhi are set. aside and the assessment of the turnover of cotton yarn is quashed. The appellant is entitled to its costs. M.L.A. Appeal a/lowed. (I). (1967] 20 S. T. C. 290. (2). S, T. C. 136.

p. 994, margin C