JUDGMENT
I.A. Ansari, J.
1. Is the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, subject to levy of sales tax under the Tripura Sales Tax Act, 1976 (in short, ‘the TST Act’) and if so, who is liable to pay such a tax, are two important questions raised in this series of appeals.
2. Yet another question, raised in the present set of appeals, is as to whether Sub-rule (2) of Rule 3 A of the Tripura Sales Tax Rules, 1976 (in short, the ‘TST Rules’), can be treated to be a valid piece of delegated legislation, when it mandates every person, responsible for making payment to the transfer of the right to use any goods for any purpose (whether or not for a specified period), to deduct an amount equal to 4 percentum of the dues of such a transfer towards part or full satisfaction of the sales tax payable, under the TST Act, on account of such transfer of the right.
3. Before we make endeavour to answer the questions posed above, it is imperative that some material facts, which have given rise to the present appeals, are taken note of. These facts are, in brief, set out as under:
(i) Being in need of hiring a large number of vehicles of different types for the purpose of smooth running of their work, the Oil and Natural Gas Commission (in short, ‘the ONGC) and the Gas Authority of India Ltd. (in short “the GAIL”) issued notices inviting tender asking interested parties/transporters to submit tenders for lending vehicles, on hire, for a specified period, to be used by the ONGC and the GAIL for their officers and staffs. Pursuant to the tender, so floated, some persons submitted their tenders and their offers having been accepted, the ONGC and the GAIL entered into agreements with the selected tenders for hiring different types of vehicles at different rates and accordingly issued work orders. Relevant extracts of the work orders, so issued by the ONGC and the GAIL, are reproduced hereinbelow as specimen:
To
M/s Swapan Kr Paul.
B.K. Road, Agartala
Tripura West
Sub: Work Order for supply one diesel driven Tourist Ambassador Car.
Dear Sir,
Subject to the terms & conditions contained in tender/contract No. AGT/1BG/TPT/CARS/7/97- 98 and in continuation to the L.O.I, dated 23.03.98 you are requested to supply a Diesel driven tourist Ambassador car of model not earlier than 1996 for 12 hours duty on the following rates:
FOR 12 HOURS DUTY
Fixed ChargeRs. 410.00 per day
(Rupees four hundred ten only).
Running chargeRs. 3.90 per K.M.
(Rupees three and paisa ninety only).
Over time charge beyond – Rs. 35.00 per hr.
12 hours duty (Rupees thirty five only) outstation charge - Rs. 125/- per day (Rupees one hundred twenty-five only) *** *** *** *** *** *** Yours faithfully. Sd/- Chief Manager (Logistics) ONGC, Agartala. To, M/s. Chandan Deb Near Circuit House: Kunjaban, P.O. Abhoynagar: Agartala - 799005, Tripura West. Sub: Providing 05 nos Commander jeep on 12 hrs. Basis Against Tender No. GAIL/AGT/VEH/98-99/01. Dear Sir,
With reference to your offer against our NIT No. GAIL/AGT/VEH/98-99/01 published in Various dailies of Agartala & Calcutta dated 13.01.99 & 14.01.99 and subsequently your letter dated 27.05.99, we are pleased to award the work to you at your quoted rates and laid down terms & conditions mentioned in the tender document for 05 Nos. of Commander jeep (Model 1998 onwards) on 12 hrs. basis immediately.
You are, therefore, requested to provide 05 nos Commander jeep on 12 hrs. basis immediately.
Failure to provide the vehicles requisitioned above within 15 days from the receive of this letter as mentioned in your letter dt. 27.05.99, would amount to not acceptance of the offer by you and this letter will stand cancelled.
An amount of Rs. 18,000/- (Rupees one eight zero zero zero only) for each vehicle is to be deposited with GAIL, Agartala, in the form of Bank Draft/Bank Guarantee/Cheque of any Nationalised Bank in favour of Gas Authority of India Limited, Agartala, towards Security within 10 days of receipt of this letter.
You are requested to execute an agreement on Non-Judicial stamp paper of Rs. 50/- (Rupees fifty).
You are, therefore, requested to confirm the date of deployment of above vehicles in advance so that we may cancel the arrangement of existing Commander jeeps.
You are also requested to sign the duplicate copy of this letter and return back to us as token of acceptance immediately.
Thanking You.
Yours truly,
For and on behalf of
Gas Authority of India Limited.
Sd/-
(Barun Biswas)
Dy. Manager (HRM)
(ii) In terms of the contracts entered into by the parties concerned, the selected tenders placed their vehicles at the disposal of the ONGC and the GAIL. While the parties to the contracts aforementioned were performing their contracts, the Revenue Department, Government of Tripura, issued, pursuant to the provisions of Section 3 A of the Tripura Sales Tax Act (In short, kthe TST Act’), read with Rule 3 A of the Tripura Sales Tax Rule (in short, ‘the TST Rules), Memorandum, bearing No. F. 1-7 (6), dated nil, requesting the hirers, namely, the ONGC and the GAIL, to deduct an amount equivalent to 4% out of the respective bills of the suppliers of the vehicles. The relevant portion of the memorandum read as under:
NO. F. 1-7(6)-TAX’92
GOVERNMENT OF TRIPURA
REVENUE DEPARTMENT
Dated Agartala, the 1992
MEMORANDUM
Sub: Deduction of tax at source in respect of works contract.
The tax on transfer of property in goods involved in execution of works contract was introduced by Section 3 A of the Tripura Sales Tax (3rd Amendment) Act, 1984. It provides for tax on taxable goods used in execution of works contract Subsequently, it was made obligatory (vide Rule 3A of the Tripura Sales Tax (9th Amendment) Rules, 1989) that every person responsible for making any payment to any contractor in respect of works contract, shall deduct the tax payable under Section 3A of the Act on account of such works contract. However, it has come to the notice that compliance of these legal provisions has been far below the desired level so far, which appears to be partly due to some communication gap regarding the legal provisions.
2. In order to clarify the legal position, consolidated instructions on the subject have been prepared and are enclosed herewith. Clarifications on certain points in respect of which some confusion has been prevailing is given in Annexure-‘I’ and extracts of the relevant provisions of Tripura Sales Tax Act and Rules are given in Annexure-‘III’.
3. All the officers concerned are instructed to comply with the legal provisions relating to deduction of tax at source in respect of works contract, as failure to do so may render an officer personally liable to legal consequences like penalty, etc. as per Sub-rule 10 to 12 of Rule 3A (copy enclosed).
4.These provisions are applicable to all Departments and Undertakings of the State Government as well as the Central Government officers in Tripura.
Enclo: As Stated
Sd/-
(M. Damodaran)
Chief Secretary.
Government of Tripura.
(iii) By making applications under Article 226 of the Constitution of India, the suppliers of the vehicles aforementioned put to challenge, inter alia, the vires of Rule 3A on the ground that there is no charging provision under the TST ACT for levy of sales tax on transfer of the right to use goods and, hence, Rule 3 A of the TST Rules, which makes it mandatory for persons, responsible for making payment of the dues of transfer of the right to use goods, to deduct, at source, sales tax at a flat rate of 4% is ultra vires the TST Act. Yet another ground of challenge to Rule 3A was that Rule 3A suffers from absence of delegation of power and, hence, the impugned memorandum is invalid and cannot be enforced.
(iv) The sales tax authorities resisted the writ petitions, contending, inter alia, that the transactions, involved in all the present cases, amounted to ‘sale’ within the meaning of Section 2(g)(ii) of the TST Act and that under the Second Proviso to Section 3(1) of the TST Act, tax, @ 4% of the valuable consideration, is payable on transfer of the right to use any goods for any purpose and, hence, Rule 3 A(2), in question, prescribes merely a mode of recovery of sales tax, which is, otherwise, due and payable and, thus, Rule 3A(2) is valid and the impugned memorandum, which is based on Rule 3 A(2), falls within the ambit of law.
(v) By the judgment and order, dated 03.08.2001, passed in Civil Rule Nos. 546/96, 497/98 and WP(C) Nos. 487/99, 488/99 and 320/2000, the learned Single Judge held that Rule 3A(2) is ultra vires the TST Act; hence, the impugned memorandum was accordingly struck down. Though the impugned memorandum was struck down, the suppliers of vehicles were held, nevertheless, liable to pay sales tax inasmuch as Section 3 AA of the TST Act, according to the learned Single Judge, was constitutional and permitted levy of sales tax on the transferor of the right to use goods for any purpose. The learned Single Judge held that, while the writ petitioners were liable to pay sales tax for providing, on hire, vehicles to the ONGC and the GAIL, the deduction, at source, at the rate, as indicated hereinabove, could not have been directed, by the impugned memorandum, to be made from the bills of the suppliers of the vehicles. Aggrieved by the conclusion reached by the learned Single Judge that Section 3AA imposes liability on the suppliers, such as, the writ petitioners, to pay sales tax for vehicles supplied by them, on hire, to the ONGC and the GAIL, the writ petitioners have impugned this finding in various appeals filed by them, namely, Writ Appeal Nos. 127/2001, 146/2001, 147/2001,149/2001 and 150/2001, which have arisen out of Cr Nos. 546/1996,497/1998, 487/1999, 320/2000 and 488/1999 respectively. At the same time, the State Government too, being aggrieved by the finding, that Rule 3 A(2) has been held ultra vires the TST Act and that the impugned memorandum has been strucked down, has preferred the appeals, namely Writ Appeal Nos. 41/2002,42/2002,43/2002,44/2002 and 45/2002 which have arisen out of CR Nos. 546/1996 WP(C) Nos. 238/1999,489/1999,497/1998 and 487/1999 respectively.
4. We have heard Mr. A.K. Bhowmik, learned Senior Counsel, appearing on behalf of the writ petitioners-appellants, and Mr. S. Chakraborty; learned Government Advocate, appearing on behalf of the State. We have also heard Mr. S. Deb, learned Senior Counsel appearing for the ONGC and the GAIL.
5. Before we answer the questions, posed above, it is necessary to take note of the bare minimum facts, which led to the making of transfer of the right to use any goods a subject of the State’s power to impose sales tax. Before introduction of the 46th amendment of the constitution of India, composite contracts, such as, works contract, hire-purchase contract and catering contracts, etc, were not assessable as contracts for ‘sale’ of goods inasmuch as the contracts, which were indivisible, could not have become subject to levy sales tax.
6. Before the Constitution (46th Amendment) Act, 1982, the word ‘sale’, which occurred in the expression ‘sale of goods’, in the Seventh Schedule to the Constitution of India, had carried the same meaning as a ‘sale’ denied in Section 4 of the Sale of Goods Act. 1930. Hence, prior to the 46th Amendment, ‘sales tax’ could be imposed only upon transfer of property in goods from one person to the other. Thus, ‘sales tax’ could not be imposed upon transactions, which might have resembled ‘sale’, but did not involve transfer of property in goods.
7. Prior to the 46th amendment of the Constitution, because of various judicial decisions, States were losing revenue on account of ‘sales tax’ in respect of transactions like transfer of the right to use goods, transfer of property in goods involved in execution of works contract, supply of food by a hotelier, etc. As back as in 1967, the Madras High Court, in A.V. Meiyappan v. Commissioner of Commercial Tax (1967) 20 STC 115, turned down the contention of the sales tax authorities by holding that even if copy-right is regarded as species of movable property, the transaction did not connote a sale at all and it was, therefore, not liable to payment of sales tax. In A.V. Meiyappan (supra), the Court was examining an agreement entered into by an assessee, called lessor, with a limited company, called lessee, whereunder the assessee made over to the lessee the outright lease of the world negative rights of the film for a period of 49 years for a consideration. The sales tax authorities were of the view that though the transaction was termed as lease for 49 years, the assessee had affected a sale of the negative print of the picture for a consideration and, therefore, the transaction was liable to sales tax under the Madras General Sales Tax Act, 1959. The decision, therefore, of the Madrass High Court, in A.V. Meiyappan (supra) created immense difficulty for the States for quite a long time, because the novel device of leasing of films resulted into avoidance of huge amounts of sales tax. This apart, in State of Madras v. Gannon Dunkerley. (1958) 9 STC 353, the Supreme Court gave a new approach to the definition of sale by prohibiting States from taxing transfer of property in goods involved in the execution of indivisible works contracts. This decision also affected the revenue of the States. The State’s revenue was further reduced to a great extent in view of the decision of K.L. Johar & Co. v. Deputy Commercial Tax Officer (1965) 16 STC 213, wherein the Apex Court decided that the State can tax only the depreciated value of the goods. Another decision of the Apex Court, in State of Himachal Pradesh v. Associated Hotels of India (1972) 29 STC 474, closed the door of a big revenue earning area by the States, when the Apex Court held that supply of food by the hotelier was essentially one of services by the hotelier and as a part of the amenities incidental to the service, the hotelier served meals at specified hours.
8. By the 46th Amendment Act of the Constitution, the definition of the word ‘sale’ as given in Article 366, was widened by insertion of Clause (29A), whereunder various transactions, enumerated therein, which were, otherwise, not ‘sales’, have to be deemed, by a legal fiction, as ‘sales’. Such ‘sales’ are commonly called ‘deemed sale’ as against th#%ditional concept of sales, which are popularly called ‘actual sales’. Under Clause (29A)(d), a transfer of the right to use goods for any purpose and for any period, for cash, deferred payment or other valuable consideration shall be deemed to be a sale of goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom transfer, delivery or supply is made. The Constitution (46th Amendment) Act, 1982, also added Sub-clause (b) to Clause (3) of Article 286. Consequent upon this amendment of the Constitution, almost all the States amended their respective definition of the word’ sale’ by incorporating identical language used by the Constitution. Indisputably, the expression ‘transfer of the right to use any goods’ cannot be qeuated with the expression ‘transfer of property in goods’, because the transfer of the ‘right to use any goods’ is not the same thing as the ‘transfer of the goods’ itself. But according to the definition of ‘sale’, as amended by the State legislations, a ‘sale’ means ‘transfer of property in goods; and such sale includes ‘any transfer of the right to use any goods’.
9. Following the 46th amendment of the Constitution of India, the TST Act also underwent changes bringing. Within the ambit of sales tax, the transfer of he right to use any goods for any purpose. Thus, the definition of ‘sale’ was enlarged to include transfer of the right to use any goods for any purpose. In order to levy sales tax on the transfer of the tight to use any goods, changes were introduced in Section 3 of the TST Act. A careful reading of the definition of ‘sale’ and of the charging section, namely, Section 3 is, therefore, imperative. With this object in view, Section 2(g)(ii) of the TST Act is reproduced hereinbelow:
2 (g) – “Sale” means any transfer of property in goods for cash or deferred payment or other valuable consideration, and includes-
(i) any delivery of goods on hire-purchase or any system of payment in installments,
(ii) any 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, and such delivery or transfer of any goods shall be deemed to be a sale of those goods by the person making the delivery or transfer and a purchase of those goods by the person to whom such delivery or transfer is made, but does not include a mortgage, hypothecation, charge or pledge;….
10. From a careful reading of Section 2(g)(ii), it becomes clear that ‘sale’ includes transfer of the right to use any good for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable consideration.
11. Bearing in mind that the transfer of the right to use any goods for any purpose amounts to ‘sale’ within the meaning of Section 2(g)(ii), when we turn to Section 3, we notice that Section 3 reads as follows:
3. Liability to tax and exemption from tax.
(1) Every dealer in taxable goods shall pay a tax on his turnover at the rate specified in column (3) of the schedule attached to this Act: Provided that subject to the provisions of Sections 14 and 15 of the Central Sales Tax Act, 1956 the State Government may, from time to time, by notification in the Official Gazette and subject to such conditions as it may impose, fix a higher rate of tax not exceeding forty percent or any lower rate of tax payable under this Act on account of the sale of any taxable goods or class of taxable goods specified in such notification; and thereupon the Schedule shall be deemed to be amended accordingly.
(2) If the State Government is of opinion that it is necessary or expedient so to do for increasing the production of goods or for protection or encouragement of industry within the State, it may, by notification in the Official Gazette subject to such restrictions and conditions, exempt from payment of tax, either in whole or in part the sale of any taxable goods or class of taxable goods or any dealer or class of dealers for such period as may be specified therein.
(3) Subject to such restrictions and conditions as may be prescribed, the State Government may make an exemption, or reduction in rate, in respect of any tax payable under this Act on the sales of any taxable goods to such person or class of persons as may be prescribed.
(4) where exemption from the levy of tax under this Act on any sale of taxable goods is claimed by a dealer under the provisions of this section the burden of proof shall lie on such dealer and the Commissioner may require the dealer to substantiate the claim in the manner prescribed.
(5) If any dispute or question regarding payment of tax arises, the matter shall be referred to the Commissioner whose decision thereon shall be final.
12. From a bare reading of Section 3, it becomes clear that Section 3 provides that every ‘dealer’, in taxable goods, shall pay tax @ 4% for transfer of the right to use any goods for any purpose (whether or not for a specified period).
13. In the face of the definition of ‘sale’ given in Section 2(g)(ii) and the Second Proviso to Section 3, there can be no doubt that the transfer of the right to use any goods for any purpose is taxable @ 4% under the TST Act. What is, however, of utmost importance to note is that the liability to pay sales tax is of a ‘dealer’. What, therefore, a ‘dealer’ means, under the TST Act is equally important to bear in mind. For this purpose, the definition of ‘dealer’, as given under Section 2(b), is reproduced hereinbelow:
Section 2(b) – ‘dealer’ means any person who sells taxable goods manufactured, made or processed by him in Tripura or brought by him into Tripura from any place outside Tripura for the purpose of sale in Tripura and includes government and any person making a sale under Section 3A.
14. From a carefull reading of the definition of the word ‘dealer’, what clearly emerges is that every person, who sells taxable goods in the State of Tripura is not a ‘dealer’, for, he becomes a ‘dealer’ only when he sells taxable goods manufactured, made and processed by him in Tripura or brought by him into Tripun from any place outside Tripura for the purpose of sale in Tripura, This, in turn, shows that if a person purchases taxable goods in the State of Tripura and sells the same within the State of Tripura, he does not become a ‘dealer’ and on such a sale, no sales tax can be imposed by invoking provisions of Section 3. By amendment, which Tripura Sales Tax (Third Amendment) Act, 1984, has introduced, a person, making a sale under Section 3A, has been included within the meaning of the expression ‘dealer’. Section 3 A, is meant for a person, who executes a works contract, for, in the execution of works contract, whatever goods are used by him either as goods or in some other form, such utilization of goods would, by legal fiction, be deemed to be a sale of those goods used in execution of the works contract.
15. What clearly surfaces from the above discussion is that unless a person is a ‘dealer’, he cannot be made liable to pay sales tax on the transfer of the right to use any goods for any purpose.
16. A minute scrutiny of Clause (b) of Section 2 of the TST Act reveals that, by fiction of law, while a person, who executes a works contract, has been made, and shall be treated as, a ‘dealer’ under the TST Act, a person, who transfers the right to use any goods for any purpose, has not been included within the definition of ‘dealer’. Considered thus, it is clear that without broadening the definition of the word ‘dealer’ and without including, within the expression ‘dealer’, a person, who transfers the right to use any goods for any purpose, in the present cases, could not have been subjected to levy of sales tax.
17. To put it a little differently, no one, who transfers the right to use any goods for any purpose, can be treated as a ‘dealer’ and made liable to pay sales tax. In short, thus, Section 3 has not created any charge or liability on a person, to pay sales tax, who transfers the right to use any goods for any purpose. As Section 2(b) makes an executor of a works contract a ‘dealer’, it is possible to treat an executor of a works contract as a ‘dealer’, within the scope of the charging Section, i.e. Section 3. Logically, therefore, when a transferor of the right to use goods has not been included within the definition of ‘dealer’ he does not fall within the ambit of the charging provision, i.e. Section 3.
18. Let us, now, turn to the question as to whether Rule 3 A(2) is ultra vires the TST Act? For this purpose, a careful reading of Section 3, 3A and 3AA is necessary. Section 3 already stands quoted above. As far as Sections 3A and 3AA are concerned, these two Sections read as under:
3A. Tax on the transfer of property in goods involved in the execution of works contract.
Notwithstanding anything contained elsewhere in this Act, any transfer of property in goods (whether as goods or in some other form) involved in the execution of a works-contract shall be deemed to be a sale of those goods by the person making the transfer and shall liable to be taxed at the rate specified in column 3 of the Schedule:
Provided that in respect of any such transfer only so much value of the goods involved in the works-contract which has actually been paid to the dealer during the period, shall be taken into account for determining the turnover for that period:
3AA. Deduction of tax at the time of payments.
Any person responsible for paying any sum to any person liable to pay tax under Section 3 A of the Act, shall at the time of credit of such sum to the account of the person or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, deduct such amount towards sales tax as may be prescribed.
19. In the backdrop of the definition of ‘dealer’ given in Section 2(b), when Section 3A and 3AA of the TST Act are carefully analyzed, it becomes abundantly clear that a person, who executes a works contract, shall, by a legal fiction, which Section 2(b) creates, be treated as a ‘dealer’ and such a person, for being a ‘dealer’, becomes, under Section 3A, liable to pay sales tax for transfer of property in goods involved in the execution of works contract, for, such transfer of property in goods would be deemed to be a ‘sale’ of the goods by the person making the transfer. Section 3AA makes it obligatory for a person, responsible for making payment of any sum to any person, who is liable to pay sales tax under Section 3A, to deduct, at the time of credit of such sum, to the account of the person or at the time of payment thereof in cash or by issue of a cheque or draft or any other mode, such amount towards sales tax as may be prescribed.
20. Thus, Section 3AA permits deduction, at source, only in respect of transfer of property in goods involved in the execution of works contract and not in respect of transfer of the right to use any goods for any purpose. This apart, from the fact that the TST Act does not create charge, on any person, who transfers his right to use any goods for any purpose, Section 3AA cannot be invoked for the purpose of deducting, at source, any amount as sales tax. Otherwise also, it would be impossible to hold that deduction, at source, as sales tax, is permissible out of the bills of a person, who gives, on hire, vehicle(s) for any purpose, when no liability to pay sales tax has been imposed on such a person by Section 3, which is, admittedly, the charging Section.
21. We, now, turn to Rule 3A(2), which we find reads as under:
Section 3A(2). Every person responsible for making payment to any person for discharge of any liability on account of valuable consideration payable for any transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash or in any manner, shall at the time of making such payment, deduct an amount equal to four percent of such towards part or, as the case may be, full satisfaction of the tax payable under the Act, on account of such transfer of right:
Provided no such deduction shall be made from the bill(s) or invoice(s) of the transferor.
(a) On account of such transfer where the transfer of right to use goods was agreed to before first day of January, 1989;
(b) The amounts received as penalty for defaults in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made; and
(c) The amount representing the valuable consideration received for such transfer in respect of goods exempt from tax under Sub-section (2) and (3) of Section 3 of the Act.
22. While considering the validity of Rule 3A(2), what needs to be noted is that when the statute itself, in the present case, has not imposed any liability to pay tax on a person, who transfers the right to use any goods for any purpose, the rule-making authorities, by taking recourse to the rule-making power in the statute, could not have made such a Rule 23. At the time of hearing of these appeals, a faint attempt was made to show that Sub-section (1) of Section 44 of the TST Act empowers the State Government to make rules for carrying out the purposes of the TST Act and Rule 3A(2) is within the ambit of Sub-section (1) of Section 44. Because of the submissions, so made, a careful analysis of Section 44 of the TST Act is imperative. Section 44 reads as follows:
44. Power to make rules:
(1) The State Government may, make rules for carrying out the purposes of this Act.
(2) Without prejudice to the generality of the foregoing power, such rules may, in particular, prescribe-
(a) all matters required by this Act to be prescribed
(b) the classes and duties of officers appointed for the purpose of enforcing the provisions of this Act.
(c) the procedure to be followed and the forms to be adopted in proceedings under this Act;
(d) the intervals at which, and the manner in which, the tax under this Act shall be payable;
(e) the dates by which and the authority to which returns shall be furnished;
(f) the manner in which refunds shall be made;
(g) the fees if any, for petitions, certificates and other matters;
(h) the nature of accounts to be maintained by a dealer; and
(i) for any other matter necessary for giving effect to the purpose of this Act.
(3) Every rule made by the State Government/under this Act shall be laid as soon as may be after it is made, before the Legislative Assembly while it is in session for a total period of riot less than fourteen days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session in which it is so laid of the successive session aforesaid the Legislative Assembly agree in making any modification in the rule or the Legislative Assembly agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
23. It is, no doubt, true that Sub-Section 44 of Section 44 gives a general power to the State Government to make rules for carrying out the purposes of the TST Act; but when the statute itself has not brought, within its net, anyone, making it mandatory for him to deduct sales tax, at source, general power of rule-making, contained in Sub-section (1) of Section 44, could not have been invoked to create such a legal obligation on a person, who was, otherwise, not liable under the statute, to make deductions as Rule 3A(2) mandates.
24. In other words, in the present case, there is no provision in the statute making compulsory deduction at the time of making payment for transfer of the right to use goods. Hence, in such circumstances, the rule-making authority could not have, by taking recourse to Sub-section (1) of Section 44, enacted Rule 3A(2) and impose thereby an obligation to make deduction, at source, from the bill of the transferor of the right to use goods.
25. Coupled with the above, it is of immense importance to note that under the TST Act and the TST Rules, a person, who makes deduction at source, has to maintain an account of such deduction and, if required by the Sales Tax authorities, such books of account would have to be produced for inspection in order to ascertain that the deductions, at source, as were required, have been made and also for the purpose of making assessment of the taxable liability of the person from whose bills, deductions have been made. Non-production of the accounts or omission to maintain the accounts would amount to contravention of the provisions of the statute, for, the rules, framed under a statute, are also law. In such circumstances, a person, who is directed to make deduction, would expose himself to criminal prosecution if he does not comply with these requirements. When the Statute itself has not made a person liable for making deduction, at source, in respect of transfer of the right to use goods, such a liability cannot be imposed by making rules or issuing executive instructions and thereby expose the person, who is so made liable to make deduction, to criminal prosecution for contravention of the provisions of law. Thus, the effect of making Rule 3A(2) would expose a person, who has not been made liable by the legislature, to criminal prosecution. Rulemaking power cannot be exercised in a manner, which would bring, within the penal provisions of a statute, a person, who has not been brought within the scope of the statute by the legislature.
26. It is very common for the legislature J to provide for a general rule making power to carry out the purpose of an enactment., When such a power is given, it may be permissible to find out the object of an enactment and, then, ascertain, if the rules framed satisfy the test of having been so framed as to fall within the scope of such general power. In the present case, though the State Government has been vested with the general rule making power to carry out the purpose of the TST Act, the fact remains that such a piece of delegated power cannot be used to bring, within the tax-net, a subject, which the enactment has kept excluded, or to bring into existence any substantive obligation, which the provisions of the enactment do not contemplate. See Kunj Behari Lal Butail and Ors. v. State of H.P. and Ors. reported in (200) 3 SCC 40.
27. It is trite that if, in a fiscal legislation, the person, sought to be taxed, does not fall within the letter of the law, he cannot be taxed even if the spirit of the law may appear to include him. More than a century ago, Lord Cairns, in Partington v. Attorney General reported in (1869) 4 HL 100, observed thus:
As I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however, great the hardship may appear to the judicial mind to be. On the other hand if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be.
The above view, with regard to fiscal legislation, received approval and support by the Privy Council in Bank of Chettinad Ltd. v. Commissioner of Income tax, Madras .
28. In Goodyear India Ltd. v. State of Haryana the Supreme Court has observed that it has been held on numerous occasions that fiscal laws must be strictly construed and the true test must always be the language used by the statute. In Commissioner of Wealth Tax, Gujarat-III, Ahmedabad v. Ellis Bridge Gyakhana, etc. AIR 1998 SC 120, too, the Apex Court has held, in no uncertain, words thus:
The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he n cannot be taxed at all.
29. Since the TST Act is a fiscal legislation, the general rule making authority, conferred on the State Government by Section 44(1), cannot be resorted to for the purpose of bringing in, within the scope of the definition of ‘dealer’, a person, who transfers his right to use goods for valuable consideration, when the legislature has not brought, within the scope of the word ‘dealer’, a transferor of the right to use goods. It is well settled that all financial enactments are to be construed strictly and no tax can be imposed by any law or rules or regulations unless the statute, whereunder the law is made, specifically authorizes such am authority. In fact, in the case of State of Kerala v. Madras Rubber Factory Ltd. reported in (1998) SCC 616, the Apex Court, while dealing with the question of payment of cess under the Kerala General Sales Tax Act, 1963, held that a charge under a taxing statute can only be under the statute and not even under the rules; hence, the deduction, at source, by executive instructions, such as, the impugned memorandum, cannot be treated as a valid piece of executive instruction.
30. An attempt was also made by Mr. S. Deb, learned Senior Counsel, to persuade the Court to hold Rule 3A(2) as intra vires by referring to the decision in Ajay Canu v. Union of India . While considering the case of Ajay Canu (supra), what needs to be pointed out is that the question, which arose for determination in Ajay Canu’s case (supra), was as to whether wearing of crash-helmet by the drivers of two wheelers can be made compulsory by framing rule under Clause (i) of Sub-section (2) of Section 91 of the Motor Vehicles Act, 1939. At the relevant point of time, Sub-section (1) of Section 91 and Clause (i) of Sub-section (2) of Section 91 read as under:
91(1) The State Government may make rules for the puipose of carrying into effect the provisions of this Chapter.
(2) Without prejudice to the generality of the foregoing power, such rules may provide for-
(1) generally, the prevention of danger, injury or annoyance to the public or any person, or of danger or injury, to property or of bstruction to traffic;
31. In view of the fact that Clause (i) did not refer to the driver of a motor cycle or a scooter, it was contended that the State Government could not have framed rules making compulsory wearing of crash helmet by drivers of two wheelers. In view, however, of the fact that the expression ‘any person’, occurring in Clause (i), would have included even a driver of a two wheeler, Rule 498 A, which had made the wearing of crash helmet compulsory, was held to be a valid piece of delegated legislation. It is in this backdrop that the Apex Court’s observations, which proceed as follows, need to be read:
The expression “any person” in Clause (i) also includes within it a driver of a two-wheeler vehicle. We are unable to accept the contention of the learned Counsel for the petitioner that the words “any person” do not include the driver of a two-wheeler vehicle. In our view, Clause (i) is also intended for the prevention of danger, injury or annoyance to the public or any person including the driver of a two-wheeler vehicle. Rule 498-A is, therefore, quite legal and valid, in spite of the absence of any provision like Section 85-A.
…
It is well established proposition of law that where specific power is conferred without prejudice to the generality of the general power already specified, the particular power is only illustrative and does not in any way restrict the general power. In the instant case also, the general power is in Sub-section (1) and Sub-section (2) contains illustrations and does not in any way, restrict the general power under Sub-section (1). Thus, even assuming that Rule 498-A is not covered by Clause (i) of Sub-section (2), it is quite immaterial inasmuch as such a rule can be framed in exercise of the general power under Sub-section (1) for the purpose of carrying into effect Chapter VI relating to control of traffic. There is, therefore, no substance in the contention of the petitioner that Rule 498-A is ultra vires the provisions of the Act.
32. An the case at hand, the decision, in Ajay Canu’s case (supra), cannot be taken recourse to, when the transferor’s right to use goods has not been brought within the net of the sales tax by the charging Section, i.e. Section 3. What crystallizes from the above discussion is that unless the TST Act is suitably amended by either expanding the definition of ‘dealer’ or by making appropriate changes in the provisions of Section 3, which is the charging section, no person, who transfers the right to use any goods for any purpose, can be held liable to pay sales tax under the TST Act. What also crystallizes from the above discussion is that Rule 3-A(2) is, in the light of the discussion held above, ultra vires the TST Act.
33. In the result and for the reasons discussed above, while the appeals, preferred by the State Government, fail and the same shall accordingly stand dismissed, the appeals, preferred by the writ petitioners, are hereby allowed. In view of the fact that Rule 3A(2) has been held to be ultra vires, no authority rests in the Department of Revenue, Government of Tripura, to either direct payment of, or deduction at source for the purpose of payment of, sales tax from the bills of any person, who transfers the right to use any goods for any purpose. With the above observations and directions, this writ appeals shall stand disposed of. No order as to costs.
