JUDGMENT
Chagla, C.J.
1. This is a reference made to us by the Civil Judge, Senior Division, Sangli, and the suit out of which this reference arises came to be filed under the following circumstances. The plaintiff company went into liquidation on the 26th March, 1933, and a liquidator was appointed. The company was dealing in manufacture and sale of cement articles and it was registered as a dealer under the Bombay Sales Tax Act. On the 20th June, 1952, the company intimated to the Sales Tax Authority that it had stopped its business and requesting the authority to cancel the certificate of registration. Pursuant to this letter the certificate was cancelled on the 21st June, 1952. At the date when the company stopped its business it had assets consisting of first, plant, machinery and other equipment worth Rs. 61,308-2-3, there was laboratory apparatus worth Rs. 1,287-13-6, there were finished goods worth Rs. 5,595-8-0, and there were raw materials worth Rs. 3,548-3-6, and the Sales Tax Authority assessed the company to sales tax on all these assets aggregating to Rs. 71,839-11-3 and they proceeded to levy tax which amounted to Rs. 2,526-11-3, and the plaintiff company filed the suit for a declaration that the levy of tax on these assets was ultra vires.
2. One of the issues that arose in the suit was whether section 18A of the Bombay Sales Tax Act, under which the assessment to tax was made, was ultra vires of the State Legislature, and the learned Judge has made this reference with regard to the vires of this section. Section 18A is in the following terms :-
“When a certificate of registration is cancelled under sub-section (6) of section 8 or sub-section (5) of section 8A in any case other than that of a dissolution of a firm or entire transfer of the business of a dealer the dealer shall be liable to pay tax on his stock of goods remaining unsold at the time of cancellation of the certificate.”
3. The contention put forward by the Taxing authority is that they are proceeding to assess tax on the stock of goods belonging to the dealer which remained unsold at the time of cancellation of the certificate. What is argued by Mr. Sukthankar on behalf of the plaintiff company is that the State Legislature can only impose sales tax on a sale; it cannot levy a tax on the assets of a person. The tax imposed upon the company is really a tax on its assets and not a tax on any sales effected by the company. What is pointed out is that the Sales Tax Authority has valued the assets of the company and although no sale was effected with regard to these assets it has imposed sales tax and in doing so it has given effect to the interpretation of section 18A which would permit the Sales Tax Authority to levy tax even though there is no sale. Mr. Sukthankar’s contention is that the Bombay Sales Tax Act, as its very description connotes, is intended only for the purpose of taxing sales which have been effected in the State of Bombay. If any provision of the law goes beyond the ambit of the Act, then unless it is shown that the State Legislature had the competency to enact that particular provision, that provision must be held to ultra vires. It is not suggested that the Bombay Legislature had the competency to impose a tax on assets. Therefore, if we find that section 18A purports to tax assets, then section 18A must be ultra vires of the Legislature.
4. It is pointed out by the Advocate-General that under section 6 exemption is given to a vendor who sells goods to another if that other buys the goods intending them for resale or if those goods are intended for use by him in the manufacture or processing of any goods for sale or supply, and it is said that the goods purchased by the company were purchased under a certificate issued by the company that these goods were either intended for resale or were to be used in the manufacture or processing of any goods for sale or supply. Therefore, what is urged is that a sale had already been effected when the vendor sold these goods to the company and by reason of the certificate given by the company the goods were not taxed at the point of time when the sale by him to the company was effected. But the scheme of the Act is that when the dealer who had purchased these goods stops his business then the tax on sale which has so far not been levied should be levied upon the dealer.
5. Now, we must consider this argument first in respect of goods purchased by the company which were intended for resale or which were raw materials out of which finished goods intended for sale were turned out by the company, and also in connection with plant, machinery and other equipment and laboratory apparatus which formed part of the assets of the company. With regard to the first, it seems to us that in levying tax under section 18A the taxing authority was within its rights and in imposing a tax on these goods section 11A is intra vires of the Legislature, because these goods were actually sold by the vendor to the company, no tax was levied at the date of the sale, and these were goods which formed part of the stock of goods remaining unsold at the time of the cancellation of the certificate. Therefore, in effect, what the Legislature has done is to postpone taxing the sale till a particular contingency arises and that contingency is the contingency contemplated by section 18A when the purchaser suspends his business and the stock of goods which he had purchased and which is intended to sell remains on his hands.
6. With regard to the other aspect of the matter which concerns plant, machinery and other equipment and laboratory apparatus, the matter stands differently. It is true that with regard to these also the vendor has paid no sales tax. It is equally true that with regard to these also the company has given a certificate and on the strength of this certificate the vendor has been exempted tax and the Advocate-General’s argument is that the plant, machinery etc. should stand on the same footing as the other goods because this plant, machinery etc. have escaped sales tax and it should now pay sales tax in view of the contingency contemplated by section 18A taking place. In our opinion, that argument is not sound because we must construe section 18A, which is the charging section, strictly, and unless there is a clear liability imposed upon the subject we cannot increase that liability by reference to any other provisions of the Act or by taking into consideration what the intention of the Legislature might be. It is a well established cannon of construction that every taxing statute must be construed strictly in favour of the subject, and when we look at the language of section 18A in our opinion it is perfectly patent that the language used is not adequate to make the section applicable to plant, machinery etc. The tax is levied on stock of goods remaining unsold at the time of the cancellation of the certificate. Can it be said that the plant, machinery etc., which the company used in order to manufacture its goods and sell them could be considered to be stock of goods remaining unsold ? In the first place, in the case of a dealer his stock of goods are the goods are the goods in which he deals. This dealer does not deal in machinery, plant etc. The Legislature has made this even clearer by stating “stock of goods remaining unsold”, which means that but for the suspension of business and the cancellation of the certificate the goods would have been sold in the ordinary course. Could it possibly be said of plant, machinery etc., they they were goods which would have been sold in the ordinary course and could not be sold because of the contingency that arose ? In our opinion, it is impossible to take the view that the language used by the Legislature “stock of goods remaining unsold” could possibly be made applicable to plant, machinery etc. It is not as if this plant, machinery etc. escaped sales tax if the company in the course of its winding up sells this plant, machinery etc. But what is sought to be taxed is not the sale of this plant, machinery etc., by the company, but the sale by the vendor to the company at the price paid by the company to its vendor. The Advocate-General very likely is right that in view of the exemption given to the vendor under section 6(3)(ii) the intention was that the tax should be levied on these articles under section 18A if the dealer who purchased these articles from the vendor suspended business. Even though that might have been the intention of the Legislature, this is one of those not infrequent cases in taxation law where the intention of the Legislature misfires and unless the Legislature uses appropriate language and brings home the tax to the subject, we cannot held the Legislature by importing into section 18A words and intentions which are no clearly expressed by the Legislature itself. As the matter stands now, whatever might have been the position when the vendor sold this plant, machinery etc. to the company, the attempt is to tax the assets of the company represented by plant, machinery etc. If the intention of the Legislature was to tax all these assets proper language could have been used to convey that intention, or if the intention of the Legislature was that the goods exempted from tax under section 6(3)(ii) should be taxed in the hands of the dealer when he suspends business, again there was no difficulty in giving clearly expression to that intention. But as the matter stands we cannot agree with the Advocate-General that there is any liability upon the company to pay sales tax on plant, machinery and other equipment and laboratory apparatus.
7. We will therefore send this matter back to the Civil Judge, Senior Division, Sangli, with a direction that he should dispose of the suit in the light of this judgment.
8. Costs to be costs in the cause.
9. Ordered accordingly.
