Chiranjilal Ghhaganlal And Ors. vs Deputy Commissioner Of … on 27 July, 1988

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Patna High Court
Chiranjilal Ghhaganlal And Ors. vs Deputy Commissioner Of … on 27 July, 1988
Equivalent citations: 1989 72 STC 124 Pat
Author: S Sanyal
Bench: S Sanyal, B Singh

JUDGMENT

S.B. Sanyal, J.

1. These four writ petitions are directed against the assessment orders under the Bihar Sales Tax Act, 1959, for the periods 1973-74, 1974-75, 1975-76 and 1976-77, wherein the common question involved is, whether outside the State, purchase of declared goods, which have not borne purchase tax in the State of Bihar, sale of such declared goods within the State of Bihar, are liable to the payment of sales tax.

2. The petitioners are dealers in kirana, gur, oil-seeds, chillies, etc. Petitioner No. 1 is a firm of which the other two petitioners are partners. Petitioner No. 1 is a registered dealer both under the Bihar Sales Tax Act, 1959, as well as under the Central Sales Tax Act, 1956, having certificate of registration under the State Act, bearing No. S.G. 468(1)(R) and under the Central Act bearing No. S.G. 253(C). They have also applied for registration under the Bihar Sales Tax Ordinance, 1976. In order to carry on their trade and business, they purchase goods, both within the State of Bihar as also outside the State of Bihar. In this writ petition, we are concerned with the purchases of declared goods made from outside the State of Bihar. In the impugned assessment orders, the petitioners have been charged to pay sales tax on the sale of those declared goods which have been purchased outside the State of Bihar, to registered dealers within the State of Bihar. The amount of purchase of the declared goods from outside the State of Bihar is not in dispute. What is being disputed is that no sales tax is at all leviable on its sale in the State of Bihar, they being declared goods under Section 3A of the Bihar Sales Tax Act, 1959, irrespective of the purchase of those declared goods from outside the State of Bihar or within the State of Bihar. In short, the declared goods under Section 3A are immune from the payment of sales tax.

3. Section 3A of the Bihar Sales Tax Act, 1959 was introduced with effect from 1st May, 1966, by Section 11 of the Bihar Finance Act, 1966. This section was amended on 1st November, 1970, by the Bihar Sales Tax (Amendment) Ordinances of 1970 and 1971. Section 3A has further been amended by the Bihar Finance Act, 1981, with which provision we are not concerned in the present cases. Section 3A at the relevant time read as follows :

3A. Goods liable to purchase tax.-Subject to such rules as may be prescribed, the State Government may, by notification, declare any goods or class or description of goods to be liable to tax on purchase and where tax on purchase has been levied in the State on any such goods, class or description of goods, no general sales tax or special sales tax shall be payable on sales thereof.

Section 5 of the Act indicates the point in the series of sales or purchases at which the special sales tax or purchase tax shall be levied. Section 5(2) reads as hereunder :

5. (2) The purchase tax on goods or class or description of goods declared under Section 3A shall be levied at the point of purchase made from a person other than a registered dealer; or where the tax is levied on the sales thereof, then at the point of sale by the first registered dealer.

4. Section 6 deals with rate of tax and admittedly the rate of purchase tax and sales tax on the goods in question is one and the same. It may be stated here that tax under the State Act is not payable on sales or purchases of goods which have taken place in the course of inter-State trade or commerce outside the State; in the course of import of the goods into or export of the goods out of the territory of India. This is provided under Section 4 of the Act in view of Article 286 of the Constitution of India. The State Legislature derives its right to impose tax on the sale or purchase of goods in view of entry 54 of the State List under the Seventh Schedule to the Constitution which reads as follows :

54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I.

5. Dr. Debi Pal, appearing on behalf of the petitioners, submits that once the State Government declared the goods under Section 3A liable for purchase tax, such declared goods constitute a class of goods which cannot be subjected to the levy of sales tax on the same commodity under any circumstance in view of entry 54 of the State List. In short, the same commodity cannot be subjected to both sales tax and purchase tax, one of such taxes can be levied on the same commodity. Learned counsel further contended that column 6 of form XII in which the returns are required to be filed, prescribes under Rule 10(1) of the Bihar Sales Tax Rules, 1959, only purchase price of the gross turnover on the sale value of the goods declared under Section 3A is to be excluded from the gross turnover. It is said that only when purchase tax has been levied on any particular commodity under Section 3A of the Bihar Sales Tax Act, 1959, purchase price of such commodity is only to be included in the gross turnover for the purpose of assessment and the sale value of such goods is not specifically required to be included in the gross turnover. The other submission of the learned counsel is that if a purchase is made on a declared goods from outside the State of Bihar and then made liable for sales tax on sale of such declared goods within the State, it would be violative of Article 14 of the Constitution of India, inasmuch as tax burden is bound to increase as the sale price will be higher as it would have to include transportation charges, insurance, profit, etc., which will be more than the purchase price of the said goods. This will lead to the practice of levying discriminatory rate of local sales tax.

6. Mr. Gaddodia, on the other hand, contended that Section 3A is quite consistent with entry 54 of List II as it does not seek to realise both sales tax and purchase tax on the same commodity. The goods which have been notified to be declared goods under Section 3A are liable to tax on purchase when the said purchase is made from a person other than a registered dealer and where the goods have borne the purchase tax, no sales tax is payable on such goods at the point of sale by the first registered dealer. The section, according to the learned counsel for the State, envisages non-imposition of both purchase tax and sales tax on the same commodity. In short, it bears, either the purchase tax or the sales tax, as the case may be, in circumstances envisaged by Section 3A itself. Mr. Gaddodia further submits that there is no question of any discriminatory treatment between dealers and dealers as the State has not been levying discriminatory rate of sales tax or purchase tax. The provision, according to the learned counsel, therefore, is constitutionally valid.

7. The Bihar Sales Tax Act is a provision which deals with levy of tax on the sale and in certain cases, purchases of goods in Bihar. This is manifest from the preamble of the Act. Section 2(f) defines “dealer”, meaning a person who sells or purchases any goods, whether for commission, remuneration or otherwise, etc., whereas under Section 2(o), a “registered dealer” means a dealer who possesses a valid registration certificate granted to him under Section 9 of the Act. Section 2(q) defines “sale price”, which means the amount payable to a dealer as valuable consideration in respect of the sale of goods. Section 2(qq) defines “purchase price”, meaning the amount payable by a dealer as a valuable consideration in respect of purchase of goods. The word “tax” has been defined under Section 2(s) to mean, general sales tax and special sales tax as also purchase tax.

8. Section 3A of the Bihar Sales Tax Act, 1959, has been held to be constitutionally valid and does not infringe the rights guaranteed under Article 301 of the Constitution of India [see the decision of the Supreme Court in Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4]. On the 14th December, 1970, the State Government in exercise of the powers conferred under Section 6 of the Bihar Sales Tax Act, 1959, directed that where the sale of goods declared under Section 3A is liable to sales tax in accordance with the provision of Sub-section (2) of Section 5, the rate of special sales tax shall be the same as may be applicable for charges of levy of purchase tax on such goods. The rate of purchase tax and/or sales tax on declared goods, therefore, is same. Section 3A exempts the payment of sales tax on sale of declared goods within the State as indicated by Section 5 of the Act, provided purchase tax has been levied on any such goods. It, therefore, shows that mere declaration of certain goods liable to purchase tax under Section 3A does not ipso facto attract exemption from payment of sales tax, unless there has been actual levy of purchase tax on such goods in the State. What does the words appearing in Section 3A “where tax on purchase has been levied on any such goods” mean? Black’s Law Dictionary, Fifth Edition, says, the word “levy” means to assess, exact, raise or collect a tax. In the case of Rayalseema Constructions v. Deputy Commercial Tax Officer [1959] 10 STC 345 (Mad.), the word “levy” meant as hereunder :

The word ‘levy’ is frequently used to include both of the first two stages involved in the process of taxation, viz., the levy properly so-called and the determination of the amount of the tax.

Similar is the view taken by the Chief Justice Chagla in the case of Dialdas Parmanand Kripalani v. P.S. Talwalkar [1956] 7 STC 675 (Bom) and in the context of Article 265, it was held that the levy must mean any step taken or any proceeding initiated for the ultimate purpose of determining the liability of the assessees and finally collecting the tax. In that view of the matter, if the declared goods have not borne the incidence of the purchase tax within the State, such goods are leviable to the payment of sales tax at the point mentioned in Sub-section (2) of Section 5 of the Act. This is a clear meaning of the words of Section 3A of the Act. The argument of Dr. Pal that once the goods are declared under Section 3A, they constitute a class and the character of only being liable to purchase tax, does not seem to be correct from the language of Section 3A. Our attention has not been drawn to any other section wherefrom such a conclusion can be arrived. Section 3A, in my opinion, confers power on the State Government to notify and declare goods liable to purchase tax and where tax on purchase has been levied, then only the goods are exempt from the payment of sales tax. Entry 54 of the State List empowers the State to enact law to impose and collect tax either on purchase or sale of goods, which exactly Section 3A seeks to achieve. Levy of sales tax or purchase tax by other States on the sale and purchase of goods transacted in those States is altogether beside the point unless the transactions constitute inter-State sale.

9. In the instant case, the goods were purchased from outside the State of Bihar, and, therefore, purchase tax under Section 3A could not be levied within the State. Therefore, the Revenue acted within its jurisdiction in imposing sales tax. The said goods were sold for the first time by the first registered dealer. The reason being that purchase and/or, sale of a commodity declared under Section 3A must bear either the incidence of purchase tax or sales tax within the State. If the argument of Dr. Pal is accepted, then any purchase of a declared goods by a registered dealer from outside the State will not bear any incidence of tax within the State, inasmuch as when such a registered dealer sells those goods within the State, will be exempt from the payment of sales tax. Even Section 5(2) of the Act will not permit the second registered dealer to collect sales tax on the sale of those goods, as the incidence of sales tax is at the point of sale by the first registered dealer. There is a further anomaly in the argument of the learned counsel which would be manifest from the fact that registered dealers purchasing declared goods within the State from a person other than a registered dealer, those goods will bear purchase tax in the State, whereas a registered dealer purchasing the said declared goods from outside the State, those goods will be exempt from both purchase tax and sales tax in the State. This will not only frustrate the very object of the levy of tax on sale and purchase of goods in Bihar, but will cause discrimination inter se between registered dealers transacting in deelared goods. Entry 54 of List II empowers the State to collect tax on the sale or purchase of goods. As the State under Section 3A collects in the instant case either purchase tax or sales tax on declared goods, on transactions within the State of Bihar, I think, there is no legislative incompetence of the provisions made under Section 3A of the Act. Reliance by the learned counsel for the petitioner on column 6 of form XII to interpret Section 3A of the Act is not a sound interpretation. The form has been prescribed under the rules which is subordinate legislation. Where the Act makes a plain reading without any ambiguity, the rules must give way to the plain meaning of the Act. The form therefore, has to be read in conjunction with the provision of Section 3A and not in isolated manner and the form has to be interpreted in the light of the provisions of the Act. If the form is repugnant to the provisions of the Act, though made under the power of the Act, it cannot override the enactment. In case of conflict, the leading provision will prevail and not the subordinate provision. If the interpretation sought to be put is allowed, a registered dealer, even though transacting in declared goods, will neither have to pay the purchase tax or the sales tax in cases of declared goods purchased from outside the State, whereas registered dealers purchasing the goods within the State have to pay purchase tax. In my opinion, Section 3A provides incidence of tax for a particular commodity either on purchaser or on seller in a given circumstance on a particular goods acquired or sold in different circumstances.

10. The last submission of the learned counsel, if Section 3A is interpreted in a manner different from the one submitted, this will lead to levying discriminatory rate of local sales tax, as held by the Supreme Court in the case of Weston Electroniks [1988] 70 STC 52, a judgment delivered on 29th April, 1988. This argument is completely misplaced. In that case, the States were levying tax at different rates on electronic articles imported from outside the State and at lower rates on those items manufactured within the State in order to encourage local entrepreneurs. It was held that the practice of levying discriminatory rates of local sales tax by different State Governments on items imported from other States of the country, such provisions are ultra vires Articles 301 and 304 of the Constitution of India.

11. In the instant case, there is no discriminatory rate of local tax on declared goods purchased from outside the State or within the State, inasmuch as the tax rates on both purchase and sale of the same item are the same. If the goods have not borne the levy of purchase tax, it is levied sales tax at the same rate. On the other hand, if the goods have borne the purchase tax within the State, it is exempted from the payment of sales tax.

12. The last submission of the learned counsel for the petitioner that the declared goods purchased from outside the State, when subjected to the payment of sales tax, the tax has to be paid on a higher price since the purchase price and the sale price is bound to vary. In short, what is sought to be contended is that when a registered dealer makes purchase of the same commodity within the State, the purchase tax liability on the value of purchase will be less, whereas when a person imports goods from outside the State, even though he has paid less purchase price, his sale price, however, will be more than the purchase price as it would include other costs and, therefore, according to the learned counsel, the person similarly situated will bear higher incidence of tax even though the rate of tax may be the same. I do not find any substance in this argument as well because persons similarly situated pay the tax at one and the same rate. Therefore, there could be no question of any discrimination. Therefore there is no substance in any of the points raised before us.

13. No other point has been raised.

14. In the result, the writ petitions are dismissed; but there will be no order as to costs.

B.P. Singh, J.

15. I agree.

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