CASE NO.: Appeal (civil) 976-979 of 2001 PETITIONER: ASHOK LELAND LTD. RESPONDENT: STATE OF TAMIL NADU AND ANR. DATE OF JUDGMENT: 07/01/2004 BENCH: V.N. KHARE. CJ & S.B. SINHA & A.R. LAKSHMANAN JUDGMENT:
JUDGMENT
2004(1) SCR 306
S.B. Sinha, J.
1. Leave granted in S.L.P. (Civil) No. 5579 of 2001.
2. Interpretation of Section 6A of the Central Sales Tax Act, 1956 is
involved in these appeals and the writ petition. The appeals arise out of
judgments and orders dated 12.3.1999 passed by the Tamil Nadu Sales Tax
Appellate Tribunal in T.A. Nos. 353, 456 and 457 of 1997 and 47 of 1998;
dated 13.11.2000 in STA No. 459 of 1999; dated 14.11.1997 in Appeal No. 383
of 1996; and dated 2.12.1997 in Tax Case (Revision) No. 1096 of 1990 passed
by the High Court of Madras.
3. The writ petition under Article 32 was filed by the Petitioner inter
alia for declaring that Section 9(2) of the Central Sales Tax Act, 1956
designating the authorities of the movement State to adjudicate upon the
situs of sales and character of a transaction in the course of an inter-
State sale, whether as falling under Section 3 or under Section 4 of the
Central Sales Tax Act, 1956, is arbitrary, unworkable and ultra vires
Articles 14, 19(1)(g) and Chapter XIII of the Constitution of India, in
matters involving elements of transactions taking place in more than one
State.
BACKGROUND FACTS:
Civil Appeal No. 976-979 of 2001
4. The appellants herein are engaged in manufacture of commercial vehicles.
They have their factories at Bhandara in the State of Maharashtra and Alwar
in the State of Rajasthan for manufacture of popular models of passenger
chassis. They are, inter alia, registered under Tamil Nadu General Sales
Tax Act, 1959 (hereinafter called for the sake of brevity as “the State
Act”) as also the Central Sales Tax Act, 1956 (hereinafter referred to as
“the Central Act”. They are registered as dealers in the Office of
Assistant Commissioner (Central Assessment Circle-III), the third
respondent herein, under both the Acts.
5. Indisputably, the appellants have several regional offices throughout
the country wherewith Regional Sales Offices are attached for the purpose
of receiving, warehousing and selling the vehicles produced by the
appellants. The appellants contend that they transfer both goods vehicle
and passenger chassis to their different Regional Sales Offices for
marketing the products which in turn are registered under the Sales Tax
laws governing the State in Question. The stock of vehicles are transferred
to the Regional Sales Offices under the cover of stock transfer invoices,
excise gate pass, and entrusted to the transport contractors for movement
and delivery thereof where upon transfer of such vehicles local sales tax
are collected and paid by the different Regional Sales Offices. The
appellants herein upon transfer of such purported stocks of vehicles filled
up forms in terms of Section 6A of the Central Act, the original whereof
having been filed before the assessing authority of the State of Tamil
Nadu, an enquiry was made and/or caused to be made pursuant whereto and in
furtherance whereof the claim of the appellants to the effect that by
reason of such transactions transfer of stock of goods had taken effect as
contra-distinguished from inter-State sale was accepted. On or about
29.11.1990, the assessing authority upon completion of the order of
original assessment under the Central Act allowed transfer of stocks of the
motor vehicle chassis and other automobile parts to the branches stating:
“The dealers have got 26 branch sales depots in other States. They have
dispatched their, products – chassis, spare parts etc., to their own sales
depots in other States for sales and the goods involved in the stock
transfer have moved from Tamil Nadu to other State as “stock transfer”,
i.e., the movement was occasioned by reason of branch transfer and not by
reason of sale. The dispatches are supported by stock transfer invoices,
transport details and Form F. These records have been verified with the
exemption claimed.”
6. An order of assessment for the year 1987-88 dated 28.8.1991 was passed
finding:
“The dealers have filed detailed statement of stock transfer of vehicles to
their outside State Regional Sales Offices and Spares to their warehouses.
The statement was verified in detail with reference to Form “F” declaration
filed by them and dispatching documents. The dealers have also filed
completed assessment orders of their Regional Sales Offices in other
States. Their claim was examined in length and found to be in order. The
Form “F” filed by them are accepted and the exemption granted.”
[Underlining is mine for emphasis)
7. The assessing authority despite the said findings issued notices
directing the appellants to show cause as to why the order dated 29.11.1990
should not be revised and the stock of vehicles allegedly transferred to
the Regional Sales Offices so far as the same related to the State
Transport Undertakings are concerned should not be taxed as inter-State
sales taxable in Tamil Nadu.
8. The appellants filed their show cause inter alia Questioning the
jurisdiction of the assessing authority to reopen the assessment inter alia
on the ground that the issues stood determined in terms of the provisions
of Sub-section (2) of Section 6A of the Central Act relying or on the basis
of the declarations made by the appellants in terms of Form F. However, the
reassessment proceeding was completed relying upon the provisions contained
in Section 16 of the State Act read with Section 9(2) of the Central Act as
also in terms of the decision of this Court in Sahney Steel & Press Works
Ltd. v. CTO, : AIR1985SC1754 . Consequent to the said order the sales of
the Regional Sales Offices in relation to the deliveries made to the State
Transport Undertakings of other States were reassessed. Penalty for non-
disclosure of the turnover as taxable sales in terms of Section 16(2) of
the State Act read with Section 9(2) of the Central Act was also imposed.
Similar show cause notices were issued in relation to other assessment
years also.
9. A writ petition was filed by the appellants before the Madras High Court
questioning the said orders inter alia contending that having regard to the
provisions contained in Section 6A of the Central Act and further having
regard to the fact that the appellants had paid tax to the other States the
orders impugned therein were illegal. The States wherein the local sales
tax had been paid in terms of the respective State Acts, namely, State of
Kerala, Karnataka, Andhra Pradesh, Maharashtra and Gujarat, were impleaded
as parties therein and they in turn also questioned the jurisdiction of the
authorities of the State of Tamil Nadu to enquire about the transactions
carried out by the appellants. A question was also raised that the Madras
High Court had no jurisdiction to grant any relief touching the orders of
assessment completed under the respective State law. Upholding the
jurisdiction of Tamil Nadu authorities to reopen an assessment completed
despite acceptance of declaration in Form F, the Madras High Court by a
judgment and order dated 13.6.1996 dismissed the said writ application
inter alia holding that they had no jurisdiction to grant any relief.
Thereafter the reassessment was completed and penalty was imposed.
JUDGMENT OF THIS COURT :
10. The matter came up for consideration before this Court in Ashok Leyland
v. Union of India and Ors. since reported in : [1997]2SCR224 at the
instance of the appellant herein; and upon referring to the decisions
rendered in Balabhagas Hulaschand v. State of Orissa : [1976]2SCR939 ,
Izhar Ahmad Khan v. Union of India : AIR1962SC1052 . Sodhi Transport Co.
v. State of U.P. : [1986]1SCR939 and several others, this Court by a
judgment dated 20.2.1997 held:
(a) Section 6A does not create conclusive presumption as contended on
behalf of the assessee.
(b) An order of assessing authority accepting Form F, whether passed during
the assessment or at any point earlier thereto, forms part and parcel of
the order of assessment.
(c) Its amenability to the power of reopening and revision depends upon the
provisions of the concerned sales tax enactments by virtue of the operation
of Section 9(2) of the Central Act.
(d) It is not possible to accept that an order under Section 6A(2) has an
independent existence.
(e) An order refusing to accept Form F may or may not be appealable
independently depending upon the provisions of the State sales tax
enactments, but it is certainly capable of being questioned if an appeal is
preferred against the order of assessment.
(f) If orders accepting Form F are sought to be reopened, it can be done as
part of reopening of assessment or may be done independently, which would
depend upon the language of the relevant provisions of the concerned State
Acts.
(g) It is permissible to reopen an assessment accepting Form F as true
without, even though such a reassessment necessarily leads to revision/
modification of the assessment order.
(h) If the reopening is confined to the order accepting Form F as true, the
enquiry shall be confined to the matters relevant thereto. In that case, it
was noticed that the assessments were sought to be reopened only in respect
of the turnover relating to sales of vehicles to State Transport
Undertakings and not turnover relating to persons other than State
Transport Undertakings.
(i) In the facts of the case, the question as to whether the power had been
exercised validly or not did not call for consideration. If the assessing
authority decided against the appellants, it would foe open to the assessee
to file appeal (s) directly before the Tribunal (in order to shorten the
litigation and in the interest of justice). If and when the Tribunal
decides against the appellants, it shall be open to the appellants to
approach the Supreme Court.
11. Having said so, this Court noticed the anomalous situation created by
reason of the absence of a proper mechanism to adjudicate the question as
to whether a particular transaction is an inter-State sale or a local sale
in the presence of an assessee and the relevant States concerned and the
need for the Parliament to intervene and provide for a suitable mechanism.
12. The Court appreciated the difficulties to be faced by the appellant
having regard to the fact that it had paid tax to the other State
Governments. This Court further noticed the contention of the appellant
that the attitude adopted by the sales tax authorities in Tamil Nadu is not
conducive of judicial conduct as they are pre-determined to treat the
transactions as inter-State sale and levy tax thereon ignoring the fact and
correct legal situation, but did not express any opinion on the correctness
or otherwise of the said submissions. It, however, felt the necessity of
evolving a central mechanism which would decide once for all questions of
this nature. Elucidating certain instances, it was opined that although the
assessment proceedings before certain States had become final, this Court
in exercise of its jurisdiction under Article 32 or 136 or 142 of the
Constitution of India may issue appropriate directions, whereupon the
following directions were issued :
“22…Let the Tamil Nadu assessing authorities first decide the matters
before them. Thereafter, if the order’s are against the appellant, we
permit the appellant to file the appeal(s) directly before the Tribunal. If
the Tribunal decides in favour of the appellant, no further question would
arise. But if it decides against the appellant, to wit, if it holds that
the sale of vehicles to the STUs of various States are inter-State sales
and if it is found that those very transactions have also been taxed as
intra-State sales under the State sales tax enactments of another State,
that would be the stage for considering the advisability of giving
appropriate directions of the nature contemplated above by this Court –
that is, of course, if by that time, no Central mechanism to meet such a
situation comes into existence.
23. In the interest of inter-State trade and commerce, the suggestion for
creation of a Central mechanism to decide such disputes – which are really
in the nature of inter – State disputes – may be well worth considering;
every dealer affected may not be in a position to approach this Court for
appropriate directions. It is for the Government of India to consider this
aspect and take necessary decision in that behalf.”
SUBSEQUENT PROCEEDINGS :
13. Pursuant to or in furtherance of the said directions an order of
reassessment was passed for the years 1988-89 imposing tax on the sales of
the appellants to the State Transport Undertakings at the respective
Regional Sales Offices by an order dated 12.12.1997. It, however, appears
that when companies similarly situated, as for example, Indicarb Limited
approached the State Appellate Tribunal, it refused to entertain an appeal
there against holding that the direction of this Court in Ashok Leyland
(supra) was confined to the fact of that case. The Special Leave Petitions
having been filed by the assesses, this Court in Civil Appeal No.
14406-14408 of 1997 by an order dated 17.3.1998 held:
“As these special leave petitions and writ petitions involve important
questions involving conflict between States’ sales tax assessment
proceedings and the Central sales tax assessment proceedings regarding the
alleged very same sale transactions and as the problem is of a recurring
nature and as a decision of a Bench of two Judges of this Court in Ashok
Leyland Ltd. v. Union of India and Ors. : [1997]2SCR224 , has to be
applied with suitable modifications, if required, it would be appropriate
that these matters are heard by a Bench of three learned Judges. In the
meantime, the Union of India who is one of the respondents in these
proceedings, may have to be heard with a view to suggest a modus operandi
to resolve this conundrum. We, therefore, request the learned Attorney
General to appear for respondent No. 2 Union of India for assisting the
court in these proceedings.
The office may obtain orders from Hon’ble the Chief Justice for placing
these matters before an appropriate Bench of three learned Judges.”
14. Notices, pursuant to the said directions, were issued to the concerned
States. Thereafter, even for the subsequent periods also the Appellate
Tribunal upheld the order passed in Indicarb Limited which are also the
subject matter of challenge before us.
PARLIAMENTARY INTERVENTION :
15. We may notice that having regard to the several orders passed in the
connected matter, the Parliament enacted Central Sales Tax (Amendment) Act,
2001 and Finance Act, 2002. Suggestions, as regards certain provisions of
the said Acts, however, having been mooted at the Bar, the matter is said
to be receiving fresh consideration at the hands of the Central Government.
16. It is also not in dispute that by enacting Central Sales Tax
(Amendment) Act, 2001 by Central Act 20 of 2002, which came into force from
11th May, 2002, Section 2(g) of the Act has been substituted by a new sub-
section by which the definition of sale has been widened to include the
deemed sales defined by Article 366(29-A) of the Constitution to enable the
levy of Central Sales Tax inter alia on the transactions involving transfer
of property in the goods involved in the execution of works contract or
transfer of the right to use the goods so that now even these transactions
are open to levy by two different States either as inter-State transaction,
or intra-State transaction. Section 6A of the Central Act was also amended
insofar as in Sub-section (1) thereof the following words have been
inserted:
“If the dealer fails to furnish such declaration, then, the movement of
such goods shall be deemed, for all purposes of this Act, to have been
occasioned as a result of sale.”
17. The appellants filed applications in these appeals, seeking leave to
raise additional grounds in the light of the said amendment.
SUBMISSIONS:
18. Mr. K. Parasaran, learned senior counsel appearing on behalf of the
appellants would inter alia submit that the ratio arrived at by this Court
in Ashok Leyland (supra) requires a fresh look insofar as by reason of Sub-
section (2) of Section 6A of the Central Act, the statute provided for
conclusive evidence as regards the nature of transaction and as the orders
passed thereunder attained finality, the same could not have been reopened
on any ground whatsoever. Drawing our attention to the history of
legislation as also the case laws leading to incorporation of Article 286,
enactment of the Central Act as also amendments made in Article 269 of the
Constitution of India, the learned counsel would submit that once by reason
of the Central Act in terms of the determination made by the statutory
authorities thereunder, certain transactions by creating a legal fiction
were kept outside the purview of the Central Act, the assessing authorities
cannot exercise their purported jurisdiction of reopening an order of
assessment under Section 16(2) of the State Act or Section 9(2) of the
Central Act. Formulation of principles for determining when a sale or
purchase of consignment of goods takes place in the course of inter-state
trade or commerce being within the exclusive domain of the Parliament
having regard to Clause (3) of Article 269 of the Constitution of India,
Mr. Parasaran, would contend; statutory authorities created under the State
Act could not exercise any jurisdiction contrary to or inconsistent
therewith.
19. The learned counsel would submit that the word “determination”
signifies expression of opinion which ends a controversy or a dispute by
some authority to whom it is submitted under a valid law.
20. Mr. Parasaran would contend that in terms of Section 6A of the Central
Act, as it then stood, the assessee had two options, namely, to file Form F
or subjected himself to an assessment proceeding. If the assessee opts to
file a declaration in terms of Form F, whereupon an order is passed holding
an enquiry by the assessing authority; the same being conclusive in nature,
no proceeding for reopening the same would be permissible in law. Reliance
in this connection has been placed on Izhar Ahmed Khan (supra), Balabhagas
Hulaschand (supra) and Mahant Dharam Das etc. v. The State of Punjab and
Ors. : [1975]3SCR160 .
21. The learned counsel would argue that the expressions “for the purpose
of the Act” would imply “for the purpose of all the provisions of the Act”
and, thus, once an order is passed under Sub-section (2) of Section 6A of
the Central Act, Section 9(2) thereof will have also no application
whatsoever. Reliance in this behalf has been placed by Mr. Parasaran on
M.K. Kochu Devassy v. State of Kerala : 1979CriLJ147 .
22. Mr. Parasaran would urge that while exercising the option, it is
mandatory for the assessee to supply all information(s) which are required
in terms of Form F and once compliance of statutory requirements are made,
the adjudication thereupon shall become final and binding. He in support of
the said contention placed reliance on Shrisht Dhawan v. Shaw Brothers :
AIR1992SC1555 .
23. According to the learned counsel, such a provision has been inserted so
as to emphasise the necessity of expeditious determination as regard a
transaction involving transfer of goods in terms whereof different States
claim themselves to be entitled to levy different rates of taxes under the
respective State Acts. If with a view to give effect thereto, no appeal has
been provided, the same would not invalidate the law. In other words,
argument of Mr. Parasaran is that Section 6A has been granted a higher
status than the proceeding of assessment under the general law.
24. Mr. B. Sen, the learned senior counsel appearing on behalf of the State
of West Bengal while supporting the submission of Mr. Parasaran would
further argue that the Central Act being relatable to Article 286 of the
Constitution of India as also Entry 97 of List I of the Seventh Schedule of
the Constitution, a presumption must be drawn that the purpose thereof was
to take the taxing power of the State taken away and, thus, in relation to
such transactions the State cannot levy any tax. It is evident that order
of such nature passed by the assessing authorities of the State of Tamil
Nadu would not only affect the assesses but also other States as well and
once it is held that the burden of proof has been discharged by the
assessee, such transactions must be held to have taken place outside the
purview of the Central Act.
25. Mr. A.K. Ganguli, the learned senior counsel appearing on behalf of the
respondents, per contra, would contend that the question as regard the
conclusiveness or otherwise of an order under Sub-section (2) of Section 6A
of the Act shall operate as res judicata, keeping in view the fact that the
said issue has already been determined by this Court in Ashok Leyland
(supra) and, thus, binds the parties herein. The learned counsel would
contend that Section 6A of the Act cannot be given a higher status than the
State Act or Section 9(2) of the Central Act inasmuch as an order passed in
terms of Sub-section (2) thereof is passed merely in aid of assessment and
in that view of the matter if an order of assessment can be appealed
against or subjected to a reopening proceeding, the same legal provisions
must be held to be applicable also in relation to an order passed under
Sub-section (2) of Section 6A.
26. Mr. Ganguli has drawn our attention to the findings of the Tribunal to
the effect that raids were conducted by the authorities and that the
appellant herein had escaped proper assessment by taking recourse to
suppressio veri and suggestio falsi. According to the learned counsel, as
fresh materials had been discovered, a reasoned show cause notice was
issued and pursuant thereto and in furtherance thereof, the impugned orders
had been passed, and in that view of the matter no case has been made out
for interference therewith.
STATUTORY PROVISIONS:
27. ‘Sale’ has been defined in Tamil Nadu General Sales Act, 1959 as:
“2(n) “Sale” with all its grammatical variations and cognate expressions
means every transfer of the property in goods (other than by way of a
mortgage, hypothecation, charge or pledge) by one person to another in the
course of business for cash, deferred payment or other valuable
consideration and includes –
(i) a transfer otherwise than in pursuance of a contract, of property in
any goods for “cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract:…”
28. ‘Turnover’ in the said Act has been defined as under:
“2(r) “turnover” means the aggregate amount for which goods are brought or
sold, or delivered or supplied or otherwise disposed of in any of the ways
referred to in Clause (n), by a dealer either directly or through another,
on his own account or on account of others whether for cash or for deferred
payment or other valuation consideration, provided that the proceeds of the
sale by a person of agricultural or horticultural produce, other than tea
and rubber (natural rubber latex and all varieties and grades of raw
rubber), grown within the State by himself or on any land in which he has
an interest whether as owner, usufructuary mortgagee, tenant or otherwise,
shall be excluded from his turnover ;”
29. Section 12 of the said Act provides for the procedure to be followed by
the assessing authority in terms whereof the dealer is required to file the
prescribed return relating to his turnover submitted in the prescribed
manner within the period prescribed therefore. The Act provides for self-
assessment subject of course to the exceptions contained in Clause (b) of
Sub-section (1) of Section 12. The errors contained in the return can,
however, be corrected. A dealer making self-assessment is required to make
true and correct statements of fact. In the event, the dealer does not file
a return within the prescribed period and the return is found to be
incorrect: in addition to the tax assessed, the assessing authority may
direct it to pay the amount of penalty levied in terms of Sub-section (3)
of Section 12.
30. Section 16 provides for assessment of escaped turnover which reads
thus:
“16. Assessment of escaped turnover. –
(1)(a) Where, for any reason, the whole or any part of the turnover of
business of a dealer has escaped assessment to tax, the assessing authority
may, subject to the provisions of Sub-section (2), at any time within a
period of five years from the date of order of the final assessment by the
assessing authority to determine to the best of its judgment the turnover
which has escaped assessment and assess the tax payable on such turnover
after making such enquiry as it may consider necessary and after giving the
dealer a reasonable opportunity to show cause against such assessment.
(b) where, for any reason, the whole or any part of the turnover of
business of a dealer has been assessed at a rate lower than the rate at
which it is assessable, the assessing authority may, at any time within
period of five years from the date of order of the final assessment by the
assessing authority reassess the tax due after making such enquiry as it
may consider necessary and after giving the dealer a reasonable opportunity
to show cause against such re-assessment.”
31. In case of willful non-disclosure of assessable turnover by the dealer
while passing an order of reassessment, penalty can also be imposed. Sub-
section (3) of Section 16 provides for the manner in which limitation is to
be computed. Section 31 of the Act provides for appeal.
32. The relevant provisions of the Central Sales Tax Act, 1956 are as under
:
2(b) “dealer” means any person who carries on (whether regularly or
otherwise) the business of buying, selling, supplying or distributing
goods, directly or indirectly, for cash or for deferred payment, or for
commission remuneration or other valuable consideration, and includes–
(i) a local authority, a body corporate, a company, any co-operative
society or other society, club, firm, Hindu undivided family or other
association of persons which carries on such business;
(ii) a factor, broker, commission agent, del credere agent, or any other
mercantile agent, by whatever name called, and whether of the same
description as hereinbefore mentioned or not, who carries on the business
of buying, selling, supplying or distributing, goods belonging to any
principal whether disclosed or not; and
(iii) an auctioneer who carries on the business of selling or auctioning
goods belonging to any principal, whether disclosed or not and whether the
offer of the intending purchaser is accepted by him or by the principal or
nominee of the principal.
Explanation 1.–Every person who acts as an agent, in any State, of a
dealer residing outside that State and buys, sells, supplies, or
distributes, goods in the State or acts on behalf of such dealer as –
(i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of
1930), or
(ii) an agent for handling of goods or documents of title relating to
goods, or
(iii) an agent for the collection or the payment of the sale price of goods
or as a guarantor for such collection or payment and every local branch or
office in a State of a firm registered outside that State or a company or
other body corporate, the principal office or headquarters whereof is
outside that State, shall be deemed to be a dealer for the purposes of this
Act.
Explanation 2.– A Government which, whether or not in the course of
business, buy, sells, supplies or distributes, goods, directly or
otherwise, for cash or for deferred payment or for commission, remuneration
or other valuable consideration, shall except in relation to any sale,
supply or distribution of surplus, unserviceable or old stores or materials
or waste products or obsolete or discarded machinery or parts or
accessories thereof, be deemed to be a dealer for the purposes of this Act;
(g) “sale”, with its grammatical variations and cognate expressions, means
any transfer of property in goods by one person to another for cash or for
deferred payment or for any other valuable consideration, and includes,-
(i) a transfer, otherwise than in pursuance of a contract, of property in
any goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract;
(iii) a delivery of goods on hire-purchase or any system of payment by
instalments;
(iv) a 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;
(v) a supply of goods by any unincorporated association or body of persons
to a member thereof for cash, deferred payment or other valuable
consideration;
(vi) a supply, by way of or as part of any service or in any other manner
whatsoever, of goods, being food or any other article for human consumption
or any drink (whether or not intoxicating), where such supply or service,
is for cash, deferred payment or other valuable consideration, but does not
include a mortgage or hypothecation of or a charge or pledge on goods;
(j) “turnover” used in relation to any dealer liable to tax under this Act
means the aggregate of the sale prices received and receivable by him in
respect of sales of any goods in the course of inter-State trade or
commerce made during any prescribed period and determined in accordance
with the provisions of this Act and the rules made thereunder;
6. Liability to tax on inter-State sales.-(1) Subject to the other
provisions contained in this Act, every dealer shall, with effect from such
date as the Central Government may, by notification in the Official
Gazette, appoint, not being earlier than thirty days from the date of such
notification, be liable to pay tax under this Act on all sales of goods
other than electrical energy effected by him in the course of inter-State
trade or commerce during any year on and from the date so notified:
Provided that a dealer shall not be liable to pay tax under this Act on any
sale of goods which, in accordance with the provisions of Sub-section (3)
of Section 5 is a sale in the course of export of those goods out of the
territory of India.
(1A) A dealer shall be liable to pay tax under this Act on a sale of any
goods effected by him in the course of inter-State trade or commerce
notwithstanding that no tax would have been leviable (whether on the seller
or the purchaser) under the sales tax law of the appropriate State if that
sale had taken place inside that State.
(2) Notwithstanding anything contained in Sub-section (1) or Sub-section
(1A), where a sale of any goods in the course of inter-State trade or
commerce has either occasioned the movement of such goods form one State to
another or has been effected by a transfer of documents of title to such
goods during their movement from one State to another, any subsequent sale
during such movement effected by a transfer of documents of title to such
goods,–
(a) to the Government, or
(b) to a registered dealer other than the Government, if the goods are of
the description referred to in Sub-section (3) of Section 8, shall be
exempt from tax under this Act.
6A. Burden of proof, etc., in case of transfer of goods claimed otherwise
than by way of sale. – (1) Where any dealer claims that he is not liable to
pay tax under this Act, in respect of any goods, on the ground that the
movement of such goods from one State of another was occasioned by reason
of transfer of such goods by him to any other place of his business or to
his agent or principal, as the case may be, and not by reason of sale, the
burden of proving that the movement of those goods was so occasioned shall
be on that dealer and for this purpose he may furnish to the assessing
authority, within the prescribed time or within such further time as that
authority may, for sufficient cause, permit, a declaration, duly filled and
signed by the principal officer of the other place of business, or his
agent or principal, as the case may be, containing the prescribed
particulars in the prescribed form obtained from the prescribed authority,
along with the evidence of dispatch of such goods.
(2) If the assessing authority is satisfied after making such inquiry as he
may deem necessary that the particulars contained in the declaration
furnished by a dealer under Sub-section (1) are true he may, at the time
of, or at any time before, the assessment of the tax payable by the dealer
under this Act, make an order to that effect and thereupon the movement of
goods to which the declaration relates shall be deemed for the purpose of
this Act to have been occasioned otherwise than as a result of sale.
Explanation.–In this section, “assessing authority”, in relation to
dealer, means the authority for the time being competent to assess the tax
payable by the dealer under this Act. ”
33. It may be noticed that by reason of Section 151 by Act No. 20 of 2002
the following has been added in Sub-section (1) of Section 6A after the
words “dispatch of such goods”:
“and if the dealer fails to furnish such declaration, then, the movement of
such goods shall be deemed for all purposes of this Act to have been
occasioned as a result of sale.”
Section 9 of the said Act reads as under:
“9. Levy and collection of tax and penalties.–(1) The tax payable by any
dealer under this Act on sales of goods effected by him in the course of
inter-State trade or commerce, whether such sales fall within Clause (a) or
Clause (b) of Section 3, shall be levied by the Government of India and the
tax so levied shall be collected by that Government in accordance with the
provision of Sub-section (2), in the State from which the movement of the
goods commenced:
Provided that, in the case of a sale of goods during their movement from
one State to another, being a sale subsequent to the first sale in respect
of the same goods and being also a sale which does not fall within Sub-
section (2) of Section 6, the tax shall be levied and collected–
(a) where such subsequent sale has been effected by a registered dealer, in
the State from which the registered dealer obtained or, as the case may be,
could have obtained, the form prescribed for the purposes of Clause (a) of
Sub-section (4) of Section 8 in connection with the purchase of such goods;
and
(b) where such subsequent sale has been effected by an unregistered dealer
in the State from which such subsequent sale has been effected.]
(2) Subject to the other provisions of this Act and the rules made
thereunder, the authorities for the time being empowered to assess, re-
assess, collect and enforce payment of any tax under the general sales tax
law of the appropriate State shall, on behalf of the Government of India,
assess re-assess, collect and enforce payment of tax, including any
interest or penalty, payable by a dealer under this Act as if the tax or
interest or penalty payable by such a dealer under this Act is a tax or
interest or penalty payable under the general sales tax law of the State;
and for this purpose they may exercise all or any of the powers they have
under the general sales tax law of the State; and the provisions of such
law, including provisions relating to returns. provisional assessment,
advance payment of tax, registration of the transferee of any business,
imposition of the tax liability of a person carrying on business on the
transferee of or successor to, such business, transfer of liability of any
firm of Hindu undivided family to pay tax in the event of the dissolution
of such firm or partition of such family, recovery of tax from third
parties, appeals, reviews, revisions, references, refunds, rebates,
penalties, charging or payment of interest, compounding of offences and
treatment of documents furnished by a dealer as confidential, shall apply
accordingly.
34. Form ‘F’ which is relevant for the purpose of the case reads thus :
“ORIGINAL
THE CENTRAL SALES TAX (REGISTRATION AND TURNOVER) RULES, 1957
FORM F
[Form of declaration to be issued by the transferee]
[See Rule 12(5)]
Serial No……………………………..
Name of the issuing State …………….
Office of issue………………………
Date of issue………………………..
Name and address of the person to whom issued along with his Registration
Certificate No………………………………… Date from which
registration is valid………………………………
Seal of Issuing
Authority
To……………………………(Transferor) Registration Certificate
No. of the Transferor……………………. Certified that the goods
transferred to me/us as per details below have been received and duly
account for.
Description of the goods sent. ………………… Quantity or
weight………………………….. Value of the goods
………………………. Number and date of invoice [or challan or any
other documents under which goods were sent.] Name of Railway Steamer or
Ferry Station or Air Port or Post Office or Road Transport Company’s Office
from where the goods were dispatched………………………….. No.
and Date of Railway Receipt or Postal Receipt or Goods Receipt with trip
sheet of lorry or any other documents indicating the means of transport.
……………
Date on which delivery was taken by the transferee…………
The above statements are true to the best of my knowledge and belief.
(Signature)
(Name of the person signing the declaration)
*(Status of the person signing the declaration in relation to the
transferee)
*(Status of the person signing the declaration in relation to the
transferor)
Date……….
*Strike out whichever is not applicable (Note – To be furnished to the
assessing authority in accordance with the rules framed under Section 13(4)
(e).)”
35. Having noticed the relevant provisions of the statute, we may notice
the following constitutional provisions:
“245. Extent of laws made by Parliament and by the Legislatures of States.
— (1)
Subject to the provisions of this Constitution, Parliament may make laws
for the whole or any part of the territory of India, and the Legislature of
a State may make laws for the whole or any part of the State.
(2) No law made by Parliament shall be deemed to be invalid on the ground
that it would have extra-territorial operation
268. Duties levied by the Union but States. — (1) Such stamp duties and
such duties of excise on medicinal and toilet preparations as are mentioned
in the Union List shall be levied by the Government of India but shall be
collected–
(a) in the case where such duties are leviable within any Union territory,
by the Government of India, and
(b) in other cases, by the States within which such duties are respectively
leviable.
(2) The proceeds in any financial year of any such duty leviable within any
State shall not form part of the Consolidated Fund of India, but shall be
assigned to that State.
269. Taxes levied and collected by the Union but assigned to the
States.-(1)
Taxes on the sale or purchase of goods and taxes on the consignment of
goods shall be levied and collected by the Government of India but shall be
assigned and shall be deemed to have been assigned to the States on or
after the 1st day of April, 1996 in the manner provided in Clause (2).
Explanation.–For the purposes of this clause,-
(a) the expression “taxes on the sale or purchase of goods” shall mean
taxes on sale or purchase of goods other than newspapers, where such sale
or purchase takes place in the course of inter-State trade or commerce;
(b) the expression “taxes on the consignment of goods” shall mean taxes on
the consignment of goods (whether the consignment is to the person making
it or to any other person), where such consignment takes place in the
course of inter-State trade or commerce.
(2) The net proceeds in any financial year of any such tax, except in so
far as those proceeds represent proceeds attributable to Union territories,
shall not form part of the Consolidated Fund of India, but shall be
assigned to the States within which that tax is leviable in that year, and
shall be distributed among those States in accordance with such principles
of distribution as may be formulated by Parliament by law.
(3) Parliament may by law formulate principles for determining when a sale
or purchase of, or consignment of, goods takes place in the course of
inter-State trade or commerce.”
36. Article 286 as it stood prior to 6th Amendment Act, 1956 reads thus:
“286. Restrictions as to imposition of tax on the sate or purchase of
goods. —
(1) No law of a State shall impose, or authorise imposition of a tax on the
sale or purchase of goods where such sale or purchase takes place —
(a) outside the State; or
(b) in the course of import of goods into, or export of goods out of, the
territory of India.
Explanation: For the purposes of Sub-clause (a) a sale or purchase shall be
deemed to have taken place in the State in which the goods have actually
been delivered as a direct result of such sale or purchase for the purpose
of consumption in that State, notwithstanding the fact that under the
general law relating to sale of goods the property in the goods has by
reason of such sale or purchase passed in another State.
(2) Except in so far as Parliament may by law otherwise provide, no law of
a State shall impose, or authorize the imposition of, a tax on sale or
purchase of any goods where such sale or purchase takes place in the course
of inter-State trade or commerce:
Provided that the President may by order direct that any tax on the sale or
purchase of goods which was being lawfully levied by the Government of any
State immediately before the commencement of this Constitution shall,
notwithstanding that the imposition of such tax is contrary to the
provisions of this clause continue to be levied until thirty first day of
March, 1951.
(3) No law made by the Legislature of a State imposing, or authorizing the
imposition of a tax on the sale or purchase of any such goods as have been
declared by Parliament by law to be essential for life of the community
shall have effect unless it has been reserved for the consideration of the
President and has received his assent.”
37. Paragraph 16 of Second Report of the Law Commission of India states:
“16. The question whether on the analogy of the principles adopted in
connection with sales or purchase in the source of import or export, a sale
effected by the transfer of documents during the movement of goods from one
State to another should be regarded as an inter-State sale or purchase has
received our careful consideration. We are of the view that such sales or
purchases should be regarded as inter-State transactions. It was suggested
that if the rate of inter-State tax happened to be lower than the rate of
tax levied by the State on intra-State transaction the adoption of this
principle might lead to attempts by dealers to evade the higher tax of the
State by giving intra-State transactions the appearance of inter-State
transactions by the creation of fictitious records showing the movement of
the goods from one State into another. We are not inclined to attach much
importance to this suggestion as in any case the sale or purchase will not
escape taxation altogether and it is unlikely that dealers would resort to
such attempts in order to save the difference between the inter-State and
the intra-State tax. Moreover, if this principle is not applied
considerable administrative and other difficulties will arise. We are,
therefore, of the view that sales and purchases effected by a transfer of
documents during the movements of goods from one State to another should be
regarded as inter-State transactions.”
38. Thereafter the following Bill was introduced pursuant thereto:
“In Clause 2, it is proposed to add a new entry 92A in the Union List
placing taxes on inter-State sales and purchases within the exclusive
legislative and executive power of the Union, and to make entry 54 of the
State List “subject to the provisions” of this new entry.
In Clause 3, it is proposed to add these taxes to the list given in Clause
(1) of Article 269, so that, although they will be levied and collected in
accordance with an Act of Parliament, they will not form part of the
Consolidated Fund of India, but will accrue to the States themselves in
accordance with such principles of distribution as may be formulated by
Parliament by law. A further provision is proposed in Article 269 expressly
empowering Parliament to formulate by law principles for determining when a
sale or purchase of goods takes place in the course of inter-State trade or
commerce.
It is proposed in Clause 4 to omit from Clause (1) of Article 286 the
explanation which has given rise to a great deal of legal controversy and
practical difficulty. In view of the centralization of inter-State sales
tax proposed in Clause 2 of this Bill, Clause (2) of Article 286 in its
present form will cease to be appropriate. In its place it is proposed to
insert a provision empowering Parliament to formulate principles for
determining when a sale or purchase of goods takes place (a) outside a
State, or (b) in the course of import of the goods into the territory of
India, or (c) in the course of export of the goods out of the territory of
India.
It is further proposed to replace Clause (3) of Article 286 by a new clause
on the lines recommended by the Taxation Enquiry Commission. Under this
revised clause Parliament will have the power to declare by law the goods
which are of special importance in inter-State trade or commerce and also
to specify the restrictions and conditions to which any State law (whether
made before or after the Parliamentary law) will be subject in regard to
the system of levy, rates and other incidents of the tax on the sales or
purchase of those goods.”
39. Pursuant to or in furtherance of the Report of the Law Commission of
India, Article 286 was amended. Article 286(3) now reads as under:
“(3) Any law of a State shall, in so far as it imposes, or authorises the
imposition of,–
(a) a tax on the sale or purchase of goods declared by Parliament by law to
be of special importance in inter-State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature
referred to in Sub-clause (b), Sub-clause (c) or Sub-clause (d) of Clause
(29A) of Article 366, be subject to such restrictions and conditions in
regard to the system of levy, rates and other incidents of the tax as
Parliament may by law specify.”
40. The history of legislation as also constitutional amendments in
relation to inter-State movement of goods has been noticed in State of A.P.
etc. v. National Thermal Power Corporation Ltd. and Others etc. : [2002]
3SCR278 and as such it may not be necessary to reiterate the same once over
again.
SECTION 6A OF THE CENTRAL ACT:
41. Prior to amendment of Section 6A of the Central Act, filing of Form F
was optional. The dealer was, thus, entitled either to file such form or
not to file the same. Only because such form is not filed, the same would
not mean that the dealer was prohibited from raising a plea that no stock
of transfer from his Head Office to Regional Offices or Regional Sales
Offices has taken place. It was entitled to plead that by reason of such
transactions which are intra-organisation, sale was not occasioned by
movement of goods. The question which was required to be posed and answered
by the assessing authority was, thus, required to be confined only to the
fact as to whether any sale has (SIC) by movement of goods or not. In other
words, an (SIC) to the concept of inter-State sale invoking the provisions
of the Central Act would be when such movement of goods was by way of
transfer of stock in terms whereof no tax under the Central Act was
payable. Indisputably determination of such a question at the hands of the
assessing authority was required for arriving at a finding of fact as to
whether the Central Sales Tax or the local sales tax would become payable.
The States, where manufacturing of goods takes place in case involving such
nature of transaction, presumably would like to invoke the provisions of
the Central Sales Tax as in terms of Article 270 of the Constitution of
India despite the fact that the Central Sales Tax is payable to the Central
Government, the amount is invariably passed on to the State concerned. On
the other hand, the purchaser when it is a public sector undertaking, would
like to see that the purchase and sale takes place within the State so as
to entitle the concerned State to collect the local sales tax, a rate
therefore would normally be higher. There, thus, exists conflict in
interest of the States particularly having regard to the financial crunches
faced by them.
42. Having regard to the Statement of Objects and Reasons of the Central
Sales Tax Act vis-a-vis the recommendations made by the Law Commission, as
referred to hereinbefore, it would appear that the Parliament with a view
to bring in expediency in such a matter so that the dispute can be
determined as expeditiously as possible amended Section 6A. Section 6 of
the Act provides for liability to tax on inter-State sales in terms whereof
every dealer is liable to pay tax thereunder on sales effected by him in
the course of inter-State trade or commerce subject to the exception
contained in the proviso appended thereto. Such tax would be leviable
notwithstanding the fact that no tax is leviable either on seller or the
purchaser under the State tax laws of the appropriate State if that sale
had taken place inside the State.
43. The liability to tax on inter-State sale as contained in Section 6 is
expressly made subject to the other provisions contained in the Act. Sub-
Section (2) of Section 9, on the other hand, which is a procedural
provision starts with the words “subject to the other provisions of this
Act and the rules made thereunder”. Section 6A provides for exception as
regard the burden of proof in the event a claim is made that transfer of
goods had taken place otherwise than by way of sale. Indisputably, the
burden would be on the dealer to show that the movement of goods had
occasioned not by reason of any transaction involving sale of goods but by
reason of transfer of such goods to any other place of his business or to
his agent or principal, as the case may be. For the purpose of discharge of
such burden of proof, the dealer is required to furnish to the assessing
authority within the prescribed time a declaration duly filled and signed
by the principal officer of the other place of business or his agent or
principal. Such declaration would contain the prescribed particulars in the
prescribed form obtained from the prescribed authority. Along with such
declaration, the dealer is required to furnish the evidence of such
dispatch of goods by reason of Act 20 of 2002. In the event, if it fails to
furnish such declaration, by reason of legal fiction, such movement of
goods would be deemed for all purposes of the said Act to have occasioned
as a result of sale. Such declaration indisputably is to be filed in Form
F. The said form is to be filled in triplicate. The prescribed authority of
the transferee State supplies the said form. The original of the said form
is to be filed with the transferor State and the duplicate thereof is to be
filed before the authorities of the transferee State whereas the
counterfoil is to be preserved by the person where the agent or principal
of the place of business of the company is situated.
44. When the dealer furnishes the original of Form F to its assessing
authority, an enquiry is required to be held. Such enquiry is held by the
assessing authority himself. He may pass an order on such declaration
before the assessment or along with the assessment. Once an order in terms
of Sub-Section 2 of Section 6A of Central Act is passed, the transactions
involved therein would go out of the purview of the Central Act. In other
words, in relation to such transactions, a finding is arrived at that they
are not subjected to the provisions of the Central Sales Tax. It is not in
dispute thereunder no appeal is provided there against.
45. In Chunni Lal Parshadi Lal v. Commissioner of Sales Tax. UP : [1986]
1SCR891 :
“23. It means that a sale of any of the goods specified in Sub-section (1)
to a registered dealer who has purchased them or to any unregistered
dealer, shall for the purpose of this section, be deemed to be a sale to
the consumer unless the purchasing dealer purchases the said goods for
resale in the same condition. It merely strengthens the provisions of Sub-
section (2) of Section 3-AA i.e. unless the dealer proves otherwise, every
sale shall, for the purpose of Sub-section (1), be presumed to be to a
consumer. The combined effect of Sub-sections (1), (2) and (3), of Section
3-AA of the Act is that tax would be payable if the goods in question i.e.
cotton yarn, in this case, are sold to a dealer for consumption. Unless the
dealer proves otherwise every sale by a dealer shall for the purpose of
Sub-section (1) be presumed to be a sale to a consumer. A sale of any of
the goods mentioned in Sub-section (1) to a registered dealer who does not
purchase them for resale in the same condition, without processing or sale
to unregistered dealer shall be deemed to be a sale to the consumer.
Therefore, a registered dealer has to prove that a sale to another
registered dealer or an unregistered dealer is not for consumption. In
order to facilitate the working of the Act, by Rule 12-A a method of
proving has been provided that the sale is not a sale to the consumer. The
reading of the rule along with relevant provisions of the Act leads to the
conclusion that Rule 12-A method, -furnishing of certificate in the form
and with the particulars – is one of- the methods of proving that sale by a
registered dealer is not for consumption. Neither the rule nor the
provision of the section suggests that this is the only method. If a dealer
can prove by any other way than the way contemplated by Rule 12-A then he
is not so precluded. For the rule to say otherwise would be exceeding the
provision of the section. The purpose for the making of the rule would
however, be frustrated if after the dealer proves in the manner indicated
in Rule 12-A he has to prove again how the purchasing dealer has dealt with
the goods after he obtains the certificate from a registered dealer. That
would make the working of the Act and Rule unworkable.
24. There is no dispute that in this case certificates as mentioned in Rule
12-A were furnished.
25. The questions involved in this case are whether by furnishing
certificate in Form III-A and the details of such certificate given in Form
IV, the selling dealer got exemption and Rule 12-A created an irrebuttable
presumption i.e. that no further evidence is required in this matter to
prove that the goods were sold to a dealer for resale in the same condition
and not to be consumed by the purchasing dealer.”
46. By reason of Sub-Section (2) of Section 6A, a legal fiction has been
created for the purpose of the said Act to the effect that transaction has
occasioned otherwise than as a result of sale.
47. On an analysis of the aforementioned provisions, therefore, the
following propositions of law emerge:
(i) The initial burden of proof is on the dealer to show that the movement
has occasioned by reason of transfer of such goods which is otherwise than
by reason of sale. The assessee may file a declaration. On a declaration so
filed an inquiry is to be made by the assessing authority for the purpose
of passing an order on arriving at a satisfaction that movement of goods
has occasioned otherwise than as a result of sale.
(ii) Whenever such an order is passed, a legal fiction is created.
48. Legal fiction, as is well-known, must be given its full effect.
49. In the rules of evidence, there exist several presumptions. These
presumptions may be rebuttable or irrebuttable. Irrebuttable presumptions
are referred to as conclusive presumptions as they stand as conclusive
proof of certain facts and are open to challenge only on very meagre
grounds. Under the Indian Evidence Act, Sections 41, 112 and 133 deal with
conclusive presumptions. Even in other enactments, like the Indian
Companies Act, 1956, such provisions exist.
50. In the case at hand it is necessary to determine whether Section 6A of
the Central Sales Tax Act sets up a conclusive presumption.
“Presumptions may be looked upon as the bats of law, flitting in the
twilight, but disappearing in the sunshine of facts.”
51. This metaphor used by Cochran, J. in Stumpf v. Mantgomery (1924) 101
OKL 256. pithily states the law.
52. However, the rule of conclusive proof stands on a different footing.
Once it is held, as we do, that Section 6A of the Central Act provides for
a conclusive proof, except on a limited ground, reopening of assessment
would not be permissible.
RULE OF CONCLUSIVE PRESUMPTION : SOME CASE LAWS:
53. In several cases validity of rules of conclusive presumptions have been
upheld.
54. However, in Ashok Leyland (supra), it was held:
“Section 6A does not create a conclusive presumption and that an order
accepting Form F, whether passed during the assessment or at any point
earlier thereto, is ultimately a part and parcel of the order of
assessment. Its amenity to power of re-opening and revision depends upon
the provisions of the concerned State sales tax enactment by virtue of
Section 9(2).”
55. We do not think that the aforesaid view is correct.
56. In Re Eric Holmes Ltd. (1965) 2 All ER 333, it was held,
“that the giving of the certificate by the Registrar is conclusive that the
document creating the charge was properly registered, even if in fact it
was not properly registered.”
57. A discussion may also ensue as to whether a conclusive presumption is
one of substantive or of procedural law. This was discussed in Izhar Ahmad
Khan (supra) and was held to be part of the latter and not the former as it
found place in the Indian Evidence Act (among other reasons). The decision
runs as follows:
“It was not correct to say that Rule 3 of Schedule III of the Citizenship
Rules, 1956, which made it obligatory on the authority to infer the
acquisition of foreign citizenship from the fact of obtaining a passport
from a foreign country was not a rule of evidence but a rule of substantive
law.
Like the rules of rebuttable presumption, which was undoubtedly a rule of
evidence. The function of an irrebuttable presumption was also to help the
judicial mind in appreciating the existence of facts with this difference
that while the former was open to rebuttal, the latter was placed beyond
rebuttal. So considered a rule of irrebuttable presumption could not be
said to fall to fall outside the law of. evidence.
That such a rule might in some cases lead to hardship and injustice was not
a relevant consideration in judging its constitutional validity.
The real test whether a rule of irrebuttable presumption was one of
evidence was inherent relevancy. If the fact from the proof of which the
presumption was required to be drawn was inherently relevant in proving it,
the rule was one of evidence, no matter whether the presumption prescribed
was rebuttable or irrebuttable.
The expression ‘rules of evidence’ in Section 9(2) must be construed in the
light of its legislative history. Ever since the passing of the Evidence
Act a conclusive presumption has been a part of the law of evidence. It is
well settled that the scope of power to legislate on a topic had to be
determined by the denotation of that topic obtaining in legislative
practice.”
58. However, in the minority opinion it was observed,
“A rule of conclusive presumption made with a view to affect specified
substantive right was a rule of substantive law and did not cease to be so
because it rested on a fact which was relevant to it. The test was not one
of relevancy but whether it was intended to affect a specified substantive
right or provide a method of proof.”
59. The said principle has been reiterated by this Court in M. Venugopal v.
Divisional Manager, Life Insurance Corporation of India, Machilipatnam,
A.P. and Another : (1994)ILLJ597SC stating:
“In the case at hand, a statutory authority that had jurisdiction to pass
such an order has passed the order. In addition there is no provision for
appeal, which goes to show that this is part of the substantive law and not
procedural law. This order is conclusive for all purposes, as the above two
stated elements clearly go out to show. No appeal has been provided for
depicting the will of the legislature to make the order of such authority
final.”
60. In The Municipal Board, Hapur v. Raghuvendra Kripal and Ors. : [1966]
1SCR650 this Court stated:
“…The provision making the notification conclusive evidence of the proper
imposition of the tax is conceived in the best interest of compliance of
the provisions of the Boards and not to facilitate their breach. It cannot,
therefore, be said that there is excessive delegation.”
61. In State of Madras v. Radio and Electricals Ltd. : AIR1967SC234 , it
has been held that satisfaction once reached in absence of any provision,
review of such an order is not permissible.
62. In Balabhagas Hulaschand (supra) : [1976]2SCR939 , this Court has given
an example.
“Case No. II – A who is a dealer in State X agrees to sell goods to B but
he books the goods from State X to State Y in his own name, and his agent
in State Y receives the goods on behalf of A, Thereafter the goods are
delivered to B in State Y and if B accepts them a sale takes place. It will
be seen that in this case the movement of goods is neither in pursuance of
the agreement to sell nor is the movement occasioned by the sale. The
seller himself takes the goods to State Y and sells the goods there. This
is, therefore, purely an internal sale which takes place in State Y and
falls beyond the purview of Section 3(a) of the Central Sales Tax Act not
being an inter-State sale.
63. In C.P.K. Trading Co. v. Additional Sales Tax officer, III Circle
Mattancherry , the law is stated in the following terms:
“…A plain reading of Section 6A(2) of the Central Sales Tax Act points
out that in cases where the dealer exercises the option of furnishing the
declaration (F forms), the only further requirement is that the assessing
authority should be satisfied, after making such enquiry, as he may deem
necessary, that the particulars contained in the declaration furnished by
the dealer are “true”. The scope or frontiers of enquiry, by the assessing
authority under Section 6A(2) of the Central Sales Tax Act is limited to
this extent, namely, to verify whether the particulars contained in the
declaration (F forms) furnished by the dealer are “true”. It means, the
assessing authority can conduct an enquiry to find out whether the
particulars in the declaration furnished are correct, or dependable, or in
accord with facts or accurate or genuine. That alone is the scope of the
enquiry contemplated by Section 6A(2) of the Act. On the conclusion of such
an enquiry, he should record a definite finding, one way or the other. As
to what should be the nature of the enquiry, that can be conducted by the
assessing authority under Section 6A(2) of the Act, is certainly for him to
decide. It is his duty to verify and satisfy himself that the particulars
contained in the declaration furnished by the dealer are “true”. As a
quasi-judicial authority, the assessing authority should act fairly, and
reasonably in the matter. During the course of the enquiry, under Section
6A(2) of the Act, it is open to him to require the dealer to produce
relevant documents or other papers or materials which are germane or
relevant, to find whether the particulars contained in the declaration (F
forms) are “true”. It is not possible to specify the documents or other
materials or papers that may be required, to be furnished in all situations
and in all cases. It depends upon the facts and circumstances of each case.
The power vested in the officer is a wide discretionary power, to find,
whether the particulars contained in the declaration (F forms) are “true”.
It is not possible or practicable to lay down the exact documents or
materials that may be required in all the cases, by the assessing
authority, to come to a proper and just finding as required by Section
6A(2) of the Act.”
64. Thus from the above, we can conclude that the order of an authority
under Section 6A is conclusive for all practical purposes.
LEGAL FICTION :
65. The question that arises is whether a legal fiction can be applied to
determine whether a particular interstate transaction amounted to an
interstate sale or a mere transfer of stock. Legal fictions have been
applied in a number of cases.
66. In Gannon Dunkerley and Co. v. State of Rajasthan, : (1993)1SCC364 ,
it was held that, “Sections 3, 4, and 5 (of the Central Sales Tax Act) were
applicable to such contracts containing two separate agreements, these
provisions would apply to a contract which, though single and indivisible,
by legal fiction introduced by the 46th Amendment has been altered into a
contract which is divisible into one for sale of goods and other for labour
and services. Such a deemed sale has all the incidents of a sale of goods
involved in the execution of a works contract where the contract is
divisible into one for sale of goods and the other for supply of labour and
services. Sections 14 and 15 of the Central Sales Tax Act would also be
applicable to the deemed sales resulting from transfer of property in goods
involved in the execution of a works contract. The absence of any amendment
in the definition of sale contained in Section 2(g) of the Central Sales
Tax Act, 1956 so as to include transfer of property in goods involved in
execution of a works contract, therefore, does not in any way affect the
applicability of Sections 3, 4, and 5 and Sections 14 and 15 of the Central
Sales Tax to such transfers.
67. In State of Bombay v. Pandurang : 1953CriLJ1049 it was held,
“When a statute enacts that something shall be deemed to have been done,
which in fact and truth was not done, the court is entitled and bound to
ascertain for what purposes and between what persons the statutory fiction
is to be resorted to and full effect must be given to the statutory fiction
and it should be carried, to its logical conclusion. ”
68. A legal fiction can be utilised in several ways wherein the word
‘deemed’ is used. However, the mere use of the word ‘deemed’ is not in
itself sufficient to set up a legal fiction as was held in Consolidated
Coffee Ltd. v. Coffee Board, : (1995)1SCC312 , stating that, “the word
‘deemed’ is used a great deal in modern legislation in different senses and
it is not that a deeming provision is every time made for the purposes of
creating a fiction. A deeming provision might be made to include what is
obvious or what is uncertain or to impose for the purpose of a statute an
artificial construction of a word of phrase that would not otherwise
prevail, but in each case it would be a question as to with what object the
legislature has made such a deeming provision.”
69. The Court went further to quote the position taken in St. Aubyn v.
Attorney General (1951) 2 All ER 473 wherein Lord Radcliffe observed thus,
“The word ‘deemed’ is used a great deal in modern legislation. Sometimes it
is used to impose for the purposes of a statute an artificial construction
of a word or phrase that would not otherwise prevail. Sometimes it is used
to put beyond doubt a particular construction that might otherwise be
uncertain. Sometimes it is used to give a comprehensive description that
includes what is obvious, what is uncertain and what is, in the ordinary
sense impossible.”
70. In Bhavnagar University v. Palitana Sugar Mill (P) Ltd. : AIR2003SC511
it was stated that the purpose and object of creating a legal fiction in
the statute is well known. But when a legal fiction is created it must be
given its full effect. It was held in East End Dwellings Co. Ltd. v.
Finsbury Borough Council (1951) 2 All ER 587:
“If you are bidden to treat an imaginary state of affairs as real, you must
surely, unless prohibited from doing so, also imagine as real the
consequences and incidents which, if the putative state of affairs had in
fact existed, must inevitably have flowed from or acco7mpanied it. One of
these in this case is emancipation from the 1939 level of rents. The
statute says that you must imagine a certain state of affairs; it does not
say that having done so, you must cause or permit your imagination to
boggle when it comes to the inevitable corollaries of that state of
affairs. ”
[See also ITW Signode India Ltd. v. Collector of Central Excise – :
2003ECR783(SC)
71. These decisions, therefore, show that whenever a legal fiction is
created by a statute, the same shall be given full effect.
INTERPRETATION OF SECTION 6A OF THE CENTRAL ACT :
72. A statute, as is well-known, must be interpreted having regard to the
text and context thereof. Mischief Rule may also be applied in a given
case.
73. While construing a statute, the object of the Act must be taken into
consideration. (See Killick Nixon Ltd. v. Deputy Commissioner of Income Tax
: [2002]258ITR627(SC)
74. Section 6A of the Act although provides for a burden of proof, the same
has to be read in the context of Section 6 of the said Act. Section 6
provides for liability to pay tax on inter-State sales. Any transaction
which does not fall within the definition of ‘sale’ would not be exigible
to tax, the burden whereof would evidently be on the assessee. We have
noticed hereinbefore that whereas prior to the amendment in Sub-section (1)
of Section 6A the dealer had ah option of filing a declaration in Form-F;
after such amendment, he does not have such option, insofar as in terms of
the amended provision, if the dealer fails and/or neglects to file such a
declaration, the transaction would be deemed to be ah inter-State sale. It
is to be noticed that for the aforementioned purpose also, the Parliament
advisedly used the expression ‘deemed’. If the expression ‘deemed’ is
interpreted differently, an incongruity would ensue.
75. In absence of any indication that the Parliament while enacting Sub-
section (2) of Section 6A did not intend to make the deeming provisions to
be a conclusive fact as regard occasion of the transaction having taken
place otherwise than as a result of sale, it would have dealt with the
matter differently.
76. Section 6A(2) of the Act uses the following expressions which are
important : (1) ‘thereupon’; (2) ‘for the purpose of this Act’; (3) ‘the
movement of goods to which the declaration related shall be deemed for the
purpose of this Act to have been occasioned otherwise than as a result of
sale’.
77. Each of them must be given its proper meaning.
78. A statute for the purpose of its interpretation must be read in its
entirety. It is to be given a purposive construction. Applying Heydon’s
rule, it must be held that the amendment was necessitated not only to make
the dealer to file such a declaration imperatively but also to see that
such movement of goods becomes inter-State sale by raising a legal fiction,
as ‘having been occasioned in course of a inter-State sale’. In other
words, if such a declaration is filed and on an inquiry made pursuant to or
in furtherance of the particulars furnished are found to be correct by the
assessing authority, the result thereof which is evidenced by the
expression ‘thereupon’ shall in view of the legal fiction created would be
a transaction otherwise than as a result of an inter-State sale.
Furthermore, once such a legal fiction is drawn, the same would continue to
have its effect not only while making an order of assessment in terms of
the State Act but also for the purpose of invoking the power of reopening
of assessment contained in Section 9(2) of the Central Act as well as
Section 16 of the State Act.
[See Indian Handicrafts Emporium and Ors. v. Union of India and Ors. :
AIR2003SC3240 , Ameer Trading Corporation Ltd. v. Shapoorji Data Processing
Ltd. : AIR2004SC355 .
OUR ANALYSIS :
79. In the case at hand it has to be determined whether the sale in
question is an interstate one. If through the means of a legal fiction it
is determined that this is not an interstate sale, then it amounts to a
transfer of stock. This finding is made by a statutory authority who has
the jurisdiction to do so and there is no provision for appeal. Therefore,
the order made by such authority is conclusive in that it cannot be
reopened on the basis that there had been a mere error of judgment. It also
cannot be re-opened under another statute, for examples, the Sales Tax Act
of the State concerned, when the order had been made under the Central Act.
Section 9(2) of the Act is subject to the other provisions of the Act which
would include Sub-section (2) of Section 6A of the Act. “Subject to” is an
expression whereby limitation is expressed. The order is conclusive for all
purposes. It can only be re-opened on a small set of grounds such as fraud,
misrepresentation, collusion etc.
80. It is also to be borne in mind that no presumption when movement of
goods has taken place in the course of inter-State sales may be raised in
the case of standard goods but the same is not conclusive. It is only one
the factors which is required to be taken into consideration along with
others. In a case, however, where the purchaser places order on the
manufacturer for manufacturing goods which would be as per his
specifications, a presumption that agreement to sell has been entered into
may be raised.
81. The purport and object of Section 6A of this Act need not detain us for
long as the same has been considered at some details recently in 20th
Century Finance Corporation Ltd. and Anr. v. State of Maharashtra :
AIR2000SC2436 stating:
“While examining the power of State Legislatures under Entry 54 of List II
in the earlier part of this judgment, we have noticed that the situs of the
sale or purchase is wholly immaterial as regards the inter-State trade or
commerce, as held in Bengal Immunity Co. Ltd. case : [1955]2SCR603 .
Further, the State Legislature cannot by law, treat sales outside the State
and sales in the course of import as “sales within the State” by fixing the
situs of sales within its State in the definition of sale, as it is within
the exclusive domain of the appropriate legislature, i.e., Parliament to
fix the location of sale by creating legal fiction or otherwise.”
82. In Mahant Dharam Das (supra), it has been held that the object of the
Act is to get rid of protracted litigation. The same is also required to be
borne in mind while interpreting the relevant provisions of the Central and
the State Acts.
83. There cannot be any doubt or dispute that while defining sale, the
situs of sale can be fixed by the Parliament which having regard to Article
286 is within its exclusive domain and in the context of Article 269(3)
having regard to the following factors:
(i) Place where agreement of sale is concluded;
(ii) Passing of property in the goods;
(iii) Where the parties to the contract reside; and
(iv) Goods are located or manufactured.
84. Once the situs of sale either by way of legal fiction or otherwise is
determined, the State Legislature will be denuded of its power to fix
another situs having regard to the fact that the Parliament alone has the
exclusive jurisdiction therefore. A sale may have several elements and all
of them need not necessarily take place in one State and in that view of
the matter a presumption had to be provided for by a deeming provision as a
logical corollary of the principles laid down by a law of Parliament.
85. It has not been disputed before us that all the requisite particulars
are to be stated in Form F. Once a determination is made that such
statements are correct, the curtain is drawn keeping in view the expression
“thereupon”. The said word is of great significance and must be given its
full effect.
86. In Words and Phrases, Permanent Edition, Volume 41A, ‘thereupon’ is
defined as:
“Thereupon” has at least two meanings and may mean either immediately or
without delay or lapse of time. It has been defined as meaning upon this or
that and is used for the purpose of referring to a cause or, condition
precedent. It is also frequently used to denote a following or consequence
of preceding events and when considered in statutory interpretation it is
often construed to refer to a succession of events in the order or sequence
of their performance rather than as an adverb of time. State ex rel.
Warnick v. Wilson, 178 P. 2d 277, 282, 162 Kan. 507.”
87. The expression “For the purpose of this Act”, unless the context
otherwise requires would mean “all the purposes” thereof.
88. In H.L. Sud, Income Tax Officer, Companies Circle 1 (1), Bombay v. Tata
Engineering and Locomotive Co. Ltd. : [1969]71ITR457(SC) , this Court
held:
“The expression “for all purposes”, used in Section 43 only indicates that
when an appointment is made for a particular assessment year it is stood
for all purposes as far as that assessment is concerned i.e., for all
purposes for imposing tax liability, determining the quantum of the
liability and for recovering it. The expression does not extend the
liability to any other assessment excepting the liability for the
assessment year for which the appointment is made. ”
89. The expression “for the purpose of the said Act” must also be given
effect to. The same would ordinarily mean “for the purpose of all the
provisions of the said Act”.
90. In M.K. Kochu Devassy v. State of Kerala etc. : 1979CriLJ147 , it is
stated:
13. We find ourselves wholly unable to accept any of the contentions. The
terms of Section 2 of the 1947 Act as substituted by Section 3 of the
Kerala Act are absolutely clear and unambiguous and when they lay down that
the expression “public servant” shall have a particular meaning for the
purposes of the Act, that meaning must be given to the expression wherever
it occurs in the Act. “For the purposes of the Act” surely means for the
purposes of all and not only some of the provisions of the Act. If the
intention was to limit the applicability of the definition of the
expression “public servant” as contended, the language sed would not have
been “for the purposes of the Act” but something like “for the purposes of
the Act insofar as they relate to the offences under Sections 161 to 165 of
the Indian Penal Code”.
91. In Shrisht Dhawan (supra), the law is stated in the following terms:
“Thus a tenant cannot wait for the entire period of lease and then raise
objection to execution on fraud or collusion unless he is able to establish
that it was not known to him and he came to know of it, for the first time
only at the time of execution. In other words the Controller shall not be
justified in entertaining an objection in execution unless the tenant
establishes, affirmatively, that he was not aware of fraud before expiry of
the period of lease. To the following extent, therefore, the law on
procedural aspect should be taken as settled.
(1) Any objection to the validity of sanction should be raised prior to,
expiry of the lease.
(2) The objection should be made immediately on becoming aware of fraud,
collusion etc.
(3) A tenant may be permitted to raise objection after expiry of lease in
exceptional circumstances only.
(4) Burden to prove fraud or collusion is on the person alleging it.”
92. It was further observed :
“…An action is mindless when it is thoughtless or without any care or
caution. In law it is passing of an order without any regard to the
provision of law. If the section requires the authority to pass an order on
inquiry or on being satisfied of existence or non-existence of a fact then
the duty cast is higher and an order which is passed without due regard to
duty to investigate then the order may be mindless…”
93. Furthermore, the expression ‘subject to’ must be given effect to.
94. In Black’s Law Dictionary, Fifth Edition at page 1278 the expression
‘Subject to” has been defined as under :
“Liable, subordinate, subservient, inferior, obedient to; governed or
affected by; provided that; provided, answerable for. Homan v. Employers
Reinsurance Corporation, 345 Mo. 650, 136 S.W. 2d 289, 302”
95. The word “Determination” must also be given its full effect to, which
pre-supposes application of mind and expression of the conclusion. It
connotes the official determination and not a mere opinion of finding.
96. In Law Lexicon by P. Ramanatha Aiyar, Second Edition, it is stated:
“Determination or order. The expression “determination” signifies an
effective expression of opinion which ends a controversy or a dispute by
some authority to whom it is submitted under a valid law for disposal. The
expression “order” must have also a similar meaning, except that it need
not operate to end the dispute, Determination or order must be judicial or
quasi-judicial. Jaswant Sugar Mills v. Lakshmi Chand, : (1963)ILLJ524SC .
[Constitution of India Article 136]”
97. In Black’s Law Dictionary, 6th Edition, it is stated:
“A “determination” is a “final judgment” for purposes of appeal when the
trial court has completed its adjudication of the rights of the parties in
the action. Thomas Van Dyken Joint Venture v. Van Dyken, 90 Wis. 236, 279
N.W. 2d 459, 463″
98. It is not in dispute that the principles for determination as to what
would cause a inter-state sale or intra-state sale is to be laid down in
terms of the provisions of a Parliamentary Act having regard to the express
provisions contained, in Clause (3) of Article 269 and Clause (3) of
Article 286 of the Constitution. What principles can be deduced by reason
of such a legal fiction has been stated by this Court in Consolidated
Coffee Ltd. (supra) in the following terms:
“A ‘principle’ means a general guiding rule, and does not include specific
directions, which vary according to the subject-matter per Shearman, J., in
M’Creagh v. Frearson (1922 WN 37.
Similarly in WORDS AND PHRASES, Permanent Edition, Vol. 33-A at page 327 it
is explained that “principle means a general law or rule adopted or
professed as a guide to action. “In other words, as opposed to any specific
direction governing any particular or specific instance, transaction or
situation a principle, would be a guiding rule applicable generally to
cases or class of cases. Looked at from this angle it will be clear that
Sub-section (3) of Section 5 formulates a principle inasmuch as it lays
down a general guiding rule applicable to all penultimate sales that
satisfy the two conditions specified therein and not any specific direction
governing any particular or specific transaction of a penultimate sale. In
other words the content of the provision shows that it lays down a
principle.”
99. It was opined :
“Two things become clear from this Statement; first, Mohd. Serajuddin
decision : AIR1975SC1564 is specifically referred to as necessitating the
amendment and secondly, penultimate sales made by small and medium scale
manufacturers to an export canalising agency or private export house to
enable the latter to export those goods in compliance with existing
contracts or orders are regarded as inextricably connected with the export
of the goods and hence, earmarked for conferal of the benefit of the
exemption. But here again, ‘existing contract’ with whom is not clarified.
In other words, on this crucial point the Statement is silent and does not
throw light on whether the existing contract should be with a foreign buyer
or will include any agreement with a local party containing a covenant to
export. Therefore, the question will again depend upon proper construction
and as we have said above, in the matter of construction the two aspects as
discussed earlier show that by necessary implication ‘the agreement’ spoken
of by Section 5(3) refers to the agreement with a foreign buyer.”
100. In terms of Clause (3) of Article 269, inter-state sale is contrasted
from local sale.
101. An order passed by the statutory authority who has jurisdiction
therefore, the same would amount to a part of substantive and not
procedural law. In addition to this there is no provision for appeal. Thus,
it is only in the limited cases of fraud, mis-representation etc. that
reassessment can be directed and not if there had been a mere error of
judgment.
102. If it is not an inter-State sale provided through a legal fiction,
then it amounts to transfer of stock and this is a finding which has been
arrived at by a statutory authority where for there does not exist any
provision for appeal. Therefore, it cannot be reopened on the premise that
there was a mere error of judgment or change in opinion.
103. Once it is held that such determination of an issue having regard to
legal fiction created in terms of Sub-section (2) of Section 6A is
conclusive, it must a fortiorari follow that the same is binding.
104. The particulars required to be furnished in Form F clearly manifest
that the proof required is as to whether the goods were factually
transferred to the assessee himself or his branch office or his agent and
not to any third party. Any other enquiry is beyond the realm of the
assessing authority.
105. It is true that this Court in Ashok Leyland (supra) upon consideration
of the matter holding that no statutory conclusiveness had been attached by
reason of a legal fiction in terms of Sub-section (2) of Section 6A. This
Court opined:
“After all Section 6A is also one of the provisions of this Act. There is
no reason to elevate it to a higher status than the rest of the provisions”
.
106. With utmost respect, therein the Court did not take into consideration
that the provisions of Section 6A having been provided by way of
exclusionary clause subject to the satisfaction of the conditions precedent
contained therein, and, thus, the same stand at an elevated stage over
charging Section 6 of the Act. The assessing authority while passing an
order is required to take into consideration the jurisdictional fact. Once
it is found, having been conferred with a plenary power to determine its
own jurisdiction, that he did not have any jurisdiction under the Act, the
opinion of the assessing authority attains finality. What would be a
jurisdictional fact has been noticed by this Court in Shrisht Dhawan
(supra) in the following terms:
“19… A Jurisdictional fact is one on existence or non-existence of which
depends assumption or refusal to assume jurisdiction by a court, tribunal
or an authority. In Back’s Legal Dictionary it is explained as a fact,
which must exist before a court can properly assume jurisdiction of a
particular case. Mistake of fact in relation to jurisdiction is an error of
jurisdictional fact. No statutory authority or tribunal can assume
jurisdiction in respect of subject matter which the statute does not confer
on it and if by deciding erroneously the fact on which jurisdiction depends
the court or tribunal exercises the jurisdiction then the order is
vitiated. Error of jurisdictional fact renders the order ultra vires and
bad… ”
107. In South India Corporation (P) Ltd. v. Secretary. Board of Revenue :
[1964]4SCR280 , this Court has held that special provisions shall prevail
over the general provisions.
108. It is further trite that an administrative authority or a quasi-
judicial authority while adjudicating upon a lis is obligated to pose and
answer a right question so as to enable it to arrive at a conclusion as to
whether he has jurisdiction in the matter or not. By reason of a legal
fiction which becomes attracted in terms of determination made thereunder,
the provisions of the Central Act shall stand excluded..
109. In A.V. Fernandez v. the State of Kerala : [1957]1SCR837 , this Court
observed:
“There is a broad distinction between the provisions contained in the
statute in regard to the exemptions of tax or refund or rebate of tax on
the one hand and in regard to the non-liability to tax or non-imposition of
tax on the other. In the former case, but for the provisions as regards the
exemptions or refund or rebate of tax, the sales or purchases would have to
be included in the gross turnover of the dealer because they are prima
facie liable to tax and the only thing which the dealer is entitled to in
respect thereof is the deduction from the gross turnover in order to arrive
at the net turnover on which the tax can be imposed. In the latter case,
the sales or purchases are exempted from taxation altogether. The
Legislature cannot enact a law imposing or authorising the imposition of a
tax thereupon and they are not liable to any such imposition of tax. If
they are thus not liable to tax, no tax can be levied or imposed on them
and they do not come within the purview of the Act at all. The very fact of
their non-liability to tax is sufficient to exclude them from the
calculation of the gross turnover as well as the net turnover on which
sales tax can be levied or imposed. ”
110. In Sahney Steel (supra) whereupon reliance has placed by the assessing
authority, a contention was raised that the registered office and the
branch office were separately registered as dealers under the sales tax law
and transaction effected by the branch office should not be identified with
transactions effected by the registered office, Pathak, J., as the learned
Chief Justice-then was, observed :
“..We are unable to agree. Even if, as in the present case, the buyer
places an order with the branch office and the branch office communicates
the terms and specifications of the orders to the registered office and the
branch office itself is concerned with the sales dispatching, billing and
receiving of the sale price, the conclusion must be that the order placed
by the buyer is an order placed with the Company and for the purpose of
fulfilling that order the manufactured goods commence their journey from
the registered office within the State of Andhra Pradesh to the branch
office outside the State for delivery of the goods to the buyer…”
111. The Court in the facts of that case held that the movement from the
head office to the branch office was for the purpose of delivery to the
branch office, thereafter to the buyer through the branch office. The
branch office merely acted as a conduit through which the goods passed on
their way to the buyer. It is, however, relevant to note that the Court
noticed :
“…It would have been a different matter if the particular goods had been
dispatched by the registered office at Hyderabad to the branch office
outside the State for sale in the open market and without reference to any
order placed by the buyer. In such a case if the goods are purchased from
the branch office, it is not a sale under which the goods commenced their
movement from Hyderabad. It is a sale where the goods moved merely from the
branch office to the buyer…”
112. The purpose of verification of the declaration made in Form F,
therefore, is as to whether the branch office acted merely as a conduit or
the transaction took place independent to the agreement to sell entered
into by and between the buyer and the registered office or the office of
the company situated outside the State. The said decision therefore, does
not run counter to our reading of the said provision. Furthermore, the
question which has been, raised before us had not been raised therein.
113. We, therefore, are of the opinion that the observations made by this
Court in Ashok leyland (supra) to the effect that an order passed under
Sub-Section (2) of Section 6A can be subject matter of reopening of a
proceeding under Section 16 of the State Act was not correct.
114. However, we may hasten to add that the same would not mean that even
wherein such an order has been obtained by commission of fraud, collusion,
misrepresentation or suppression of material facts or giving or furnishing
false particulars, the order being vitiated in law would not come within
the purview of the aforementioned principle.
115. An order of assessment is albeit passed under the State Act. But once
it is held that the concerned State Act as also the Central Act is not
applicable, as a consequence whereof sales tax would be payable under
another State Act, it is doubtful as to whether the power to reopen the
proceedings under the State Act or the Central Act would be attracted.
There does not exist any power in the statute to rectify a mistake. In that
view of the matter, mere change in the opinion of the assessing authority
or to have a re-look at the matter would not confer any jurisdiction upon
him to get the proceedings reopened. Discovery of a new material although
may be a ground but that itself may not be a ground for reopening the
proceedings unless and until it is found that by reason of such discovery,
a jurisdictional error has been committed. In other words, when an order
passed in terms of Sub-Section (2) of Section 6A is found to be illegal or
void ab initio or otherwise voidable, the assessing authority derives
jurisdiction to direct reopening of the proceedings and not otherwise.
116. In Shrisht Dhawan (supra) this Court has held:
“20. Fraud and collusion vitiate even the most solemn proceedings in any
civilised system of jurisprudence. It is a concept descriptive of human
conduct. Michael Levi likes a fraudster to Milton’s sorcerer, Compus who
exulted in his ability to, ‘wing me into the easy-hearted man and trap him
into snares’. It has been defined as an act of trickery or deceit. In
Webster’s Third New International Dictionary fraud in equity has been
defined as an act or omission to act or concealment by which one person
obtains an advantage against conscience over another or which equity or
public policy forbids as being prejudicial to another. In Black’s Legal
Dictionary, fraud is defined as an intentional perversion of truth for the
purpose of inducing another in reliance upon it to part with some valuable
thing belonging to him or surrender a legal right; a false representation
of a matter of fact whether by words of by conduct, by false or misleading
allegations, or by concealment of that which should have been disclosed,
which deceives and is intended to deceive another so that he shall act upon
it to his legal injury. In Concise Oxford Dictionary, it has been defined
as criminal deception, use of false representation to gain unjust
advantage; dishonest artifice or trick. According to Halsbury’s Laws of
England, a representation is deemed to have been false, and therefore a
misrepresentation, if it was at the material date false in substance and in
fact. Section 17 of the Contract Act defines fraud as act committed by a
party to a contract with intent to deceive another. From dictionary meaning
or even otherwise fraud arises out of deliberate active role of
representator about a fact which he knows to be untrue yet he succeeds in
misleading the represented by making him believe it to be true. The
representation to become fraudulent must be of the fact with knowledge that
it was false. In a leading English Case (Derry v. Peek (1886-90) All ER 1)
what constitutes fraud was described thus: (ARR ER p. 22 B-C):
Fraud is proved when it is shown that a false representation has been made
(i) knowingly, or (ii) without belief in its truth, or (iii) recklessly,
careless whether it be true or false.”
117. This aspect of the matter has been considered recently by this Court
in Roshan Deen v. Preeti Lal : (2002)ILLJ465SC , Smt. Anita v. R. Rambilas
: AIR2003AP32 , Ram Preeti Yadav v. U.P. Board of High School and
Intermediate Education and Ors. : AIR2003SC4268 and Ram Chandra Singh v.
Savitri Devi and Ors. : (2003)8SCC319
118. Suppression of a material document would also amount to a fraud on the
Court. (See Gowrishankar and Anr. v. Joshi Amba Shankar Family Trust and
Ors. : [1996]2SCR949 and S.P. Chengalvaraya Naidu (Dead) By…. .LRs. v.
Jagannath (Dead) by Lrs. and Ors. : AIR1994SC853 .
119. There is no law that only because no appeal is provided the order
would not attain finality. (See Commissioner of Income Tax, Bombay v.
Amritlal Bhogilal & Co. : [1958]34ITR130(SC)
RES-JUDICATA:
120. The principle of res judicata is a procedural provision. A
jurisdictional question if wrongly decided would not attract the principle
of res judicata. When an order is passed without jurisdiction, the same
becomes a nullity. When an order is a nullity, it cannot be supported by
invoking the procedural principles like, estoppel, waiver or res judicata.
This question has since been considered in Sri Ramnik Vallabhdas Madhvani
and Ors. v. Taraben Pravinlal Madhvani : (2004)1SCC497 wherein this Court
observed in the following terms :
“So far as the question of rate of interest is concerned, it may be noticed
that the High Court itself found that the rate of interest should have been
determined at 6%. The principles of res judicata which according to the
High Court would operate in the case, in our opinion, is not applicable.
Principles of res-judicata is a procedural provision. The same has no
application where there is inherent lack of jurisdiction.
In Chief Justice of A.P. and Anr. v. L.V.A. Dikshitulu and Ors. etc. :
[1979]1SCR26 , the law is stated in the following terms:
“23. As against the above, Shri Vepa Sarathy appearing for the respective
first respondent in C.A. 2826 of 1977, and in C.A. 278 of 1978 submitted
that when his client filed a writ petition (No. 58908 of 1976) under
Article 226 of the Constitution in the High Court for impugning the order
of his compulsory retirement passed by the Chief Justice, he had served, in
accordance with Rule 5 of the Andhra Pradesh High Court (Original Side)
Rule, notice on the Chief Justice and the Government Pleader, and, in
consequence, at the preliminary hearing of the writ petition before the
Division Bench, the Government, Pleader appeared on behalf of all the
respondents including the Chief Justice, and raised a preliminary objection
that the writ petition was not maintainable in view of Clause 6 of the
Andhra Pradesh Administrative Tribunal Order made by the President under
Article 371D which had taken away that jurisdiction of the High Court and
vested the same in Administrative Tribunal. This objection was accepted by
the High Court, and as a result, the writ petition was dismissed in limine.
In these circumstances – proceeds the argument – the appellant is now
precluded on principles of res judicata and estoppel from taking up the
position, that the Tribunal’s order is without jurisdiction. But, when Shri
Sarathi’s attention was invited to the fact that no notice was actually
served on the Chief Justice and that the Government Pleader who had raised
this objection, had not been instructed by the Chief Justice or the High
Court to put in appearance on their behalf, the counsel did not pursue this
contention further. Moreover, this is a pure question of law depending upon
the interpretation of Article 371D. If the argument. holds good, it will
make the decision of the Tribunal as having been given by an authority
suffering from inherent lack of jurisdiction. Such a decision cannot be
sustained merely by the doctrine of res judicata or estoppel as urged in
the case.”
In Dwarka Prasad Agarwal (D) By LRs. and Anr. v. B.D. Agarwal and Ors. :
AIR2003SC2686 , it is stated:
“It is now well-settled that an order passed by a court without
jurisdiction is a nullity. Any order passed or action taken pursuant
thereto or in furtherance thereof would also be nullities. In the instant
case, as the High Court did not have any jurisdiction to record the
compromise for the reasons stated hereinbefore and in particular as no writ
was required to be issued having regard to the fact that public law remedy
could not have been resorted to, the impugned orders must be held to be
illegal and without jurisdiction and are liable to be set aside. All orders
and actions taken pursuant to or in furtherance thereof must also be
declared wholly illegal and without jurisdiction and consequently are
liable to be set aside. They are declared as such. ” ”
121. In a case where an ordinance promulgated by the President of India
which had been rendered invalid by a judgment of the High Court, the
question as to whether an enactment of the Parliament would be barred was
negatived in a recent decision of this Court in Dharam Dutt and Ors. v.
Union of India and Ors. : AIR2004SC1295 . Pointing out that the High Court
did not consider the constitutional questions in the right perspective,
this Court observed:
“The doctrine of Separation of Powers and the constitutional convention of
the three organs of the State, having regard and respect for each other, is
enough answer to the plea raised on behalf of the petitioners founded on
the doctrine of Separation of Powers. We cannot strike down a legislation
which we have on an independent scrutiny held to be within the legislative
competence of the enacting legislature merely because the legislature has
re-enacted the same legal provisions into an Act which, ten years before,
were incorporated in an ordinance and were found to be unconstitutional in
an erroneous judgment of the High Court and before the error could be
corrected in appeal the Ordinance itself lapsed.”
CONCLUSION:
122. For the reasons stated hereinbefore, we are of the opinion that the
Appellants would be entitled to move the High Court for ventilating their
grievances, However, if the Central Government creates a new forum, it
would be open to them to approach the same.
123. We may now consider the fact of the connected matters:
124. In W.P. (C) No. 195 of 1999 merely a show cause notice has been issued
in relation to three assessment years beginning from 1989-1990. This writ
petition covers the period 1989-1990, to 1995-1996. In relation to period
1990-1991, 1991-1992 and 1992-1993 reopening proceedings had been
initiated. A fresh cause of action has arisen in relation to the other
assessment years.
125. Having regard to the fact that the question as to whether the finding
arrived at by the STAT would attract the exceptions carved out hereinbefore
mainly would revolve round the question as to whether determination in
terms of Sub-section (2) of Section 6A of the Act has been obtained by
playing fraud or suppression of record or not requires a detailed
examination. Indisputably, the appellant/ writ petitioner would be entitled
to move the High Court in accordance with law.
CIVIL APPEAL @ SLP (C) No. 5579 of 2001
126. The appellant herein had filed his application praying inter alia for
the following reliefs:
“(a) Grant Special Leave to Appeal against the final Judgment and Order
dated 13.11.2000 passed in STA No. 459 of 1999 by the Tamil Nadu Sales Tax
Appellate Tribunal (Additional Bench). Chennai.
(b) Pass such other or further order or orders as this Hon’ble Court may
deem fit and proper in the facts and circumstances of the present case and
in the interest of justice.”
127. In the said case, no order of reopening has been issued and as such it
is not a case where we were required to determine a forum in the light of
the order passed in Ashok Leyland (supra).
C.A. No. 944 of 2001
128. The question as to whether the transaction in question constitute
inter-state sale or intra-state “sale has been decided upto Tribunal. They
have approached this Court without availing the statutory remedies provided
for under the statutes. We, therefore, decline to exercise our discretion
and direct that the parties may avail the remedies under the statute.
129. In view of our aforementioned findings, the parties may approach the
High Court. If necessary, the other States wherein the local sales tax had
been deposited, may be impleaded as parties so that the lis may be
determined in their presence. However, in the event, in the meanwhile any
forum is created by any Parliamentary Act in terms whereof the inter se
disputes between the parties vis-a-vis the claim of the assessee may be
determined, they may approach the said forum.
CA No. 943 of 2001 :
130. The appellant herein manufactures explosives. It has its factory
situated at Onnalwadi, Hosur, Dharmapuri District. It is registered under
the Central Sales Tax Act. It filed return for the assessment year 1986-87
under the Central Sales Tax Act, 1956 claiming exemption in respect of a
sum of Rs. 34,30,302.73 representing transfer of goods to its branch at
Dhanbad in the State of Bihar and a sum of Rs. 13,91,547.18 relating to its
branch at Nagpur in the State of Maharahstra. An inspection held by the
Enforcement Wing of the respondent; certain documents were recovered from a
perusal whereof it transpired that the goods were moved against the prior
orders and as such they are not entitled to exemption. The Department
contended that it a Coal India Limited which had placed orders for supply
of explosives to its various subsidiary companies in North India and its
projects at Asansol, Dhanbad, Ranchi, Nagpur and Bilaspur at specified
rates and in that view of the matter the transactions constituted inter-
State sales. According to the appellant, however, order placed by M/s Coal
India Limited is not an order intending to purchase but merely a standing
offer. The objection of the appellant was overruled upto the appellate
authority. The matter went up to the Tamil Nadu Sales Tax Tribunal,
Coimbatore wherein it was held that the goods being unascertainable ones
must be held to be general and standard goods and tailor made to the
special requirements of any customers. It came to the conclusion that the
transactions were only branch transfers and were not liable to sales tax.
It further held that the transactions having taken place outside the State
of Tamil Nadu and the transactions having been treated as local sales in
other States, the State of Tamil Nadu had no jurisdiction to impose tax in
respect thereof. The Tribunal also accepted the declaration made in terms
of Section 6A. The State of Tamil Nadu being aggrieved and dissatisfied
therewith filed Tax Revision Case and by reason of the impugned judgment
dated 2.12.1997 the judgment of the Tribunal was reversed. It, however, did
not interfere with the order of the Tribunal as regard penalty. Questioning
the said order, the appeal has been filed before us. Keeping in view the
fact that although more than one State is involved, having regard to the
facts and circumstances of the case, it is necessary that the question may
be examined afresh by the High Court in the light of the decision of this
Court. In the writ petition, it will be open to the parties to implead the
other States so that, if necessary, the matter may be heard out and
disposed of in their presence. However, in the event another forum is
created by a Parliamentary Act, it will be open to the parties to approach
the said forum. These appeals and writ petitions are disposed of with the
aforementioned directions and observations. No costs.