Full Judgment Text
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PETITIONER:
STATE OF U.P. & ANOTHER
Vs.
RESPONDENT:
HAJI ISMAIL NOOR MOHAMMAD & CO.
DATE OF JUDGMENT09/05/1988
BENCH:
VENKATACHALLIAH, M.N. (J)
BENCH:
VENKATACHALLIAH, M.N. (J)
PATHAK, R.S. (CJ)
CITATION:
1988 AIR 1409 1988 SCR Supl. (1) 261
1988 SCC (3) 398 JT 1988 (2) 468
1988 SCALE (1)1050
ACT:
U.P. Sales Tax Act, 1948/U.P. Sales Tax Rules, 1948
Sections 3D and 4B/Rule 25A(5)-Tax-Special relief to dealer
holding recognition certificate-Date of actual issue of
certificate immaterial-Dealer to be in possession of
certificate at assessment.
HEADNOTE:
The respondent "dealer" registered under the U.P. Sales
Tax Act, 1948 was carrying on the business of manufacture of
oils from groundnuts and other oil seeds, and was under
section 3-D of the Act, liable to purchase-tax on oil seeds
at 3% ad valorem on the turnover of its purchases from the
cultivators or other unregistered dealers. Section 4-B of
the Act contemplated special reliefs in purchase-tax to
certain manufacturers of ’notified goods’, if the "dealer
holds a recognitioncertificate issued under sub-section (2)
in respect thereof". Sub-rule (5) of Rule 25-A of the U.P.
Sales Tax Rules, 1948, however, stipulated that a
’recognition-certificate’ issued for purposes of Section 4-B
of the Act "shall take effect from the date of its issue."
On 10.2.1969 the State Government notified oils of all
kinds to be "notified goods" for purposes of section 4-B
entitling the dealer to a concessional rate of purchase tax
at 2% on the raw material required for the manufacture of
the "notified goods". On 21.3.1969, respondent applied under
section 4-B(2) for the grant of a recognition certificate,
which was granted only on 5.12.1969. The relief to the
respondent in the form of concessional rate of purchase tax
was accordingly confined and limited to the turnover of such
first-purchases made only after 5.12.1969, the date of issue
of the recognition certificate.
In the writ petition filed by the respondent, the Full
Bench of the Allahabad High Court, by majority, accepted its
contention that the clause in sub-rule (5) of Rule 25-A
regarding the effective date of the recognition certificate
was at cross-purposes with and did not carry out the objects
of Section 4-B and was therefore, ultra-vires section 4-B.
The High Court held that the requirements of section 4-B
were substantially complied with if the dealer, at the time
of assessment, held a recognition certificate, subject to
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the requirement that the turnover was after the date of the
application.
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Before this Court the Revenue contended that the
interpretation placed by the High Court runs in the teeth of
the express statutory language and the clear intendment of
the provision that the dealer should hold the ’recognition
certificate’ at the time of the purchases.
Dismissing the appeal, it was,
^
HELD: (1) There is nothing basically wrong in the
approach of the High Court that the statutory language does
not insist upon the contemporaneity of the holding of the
certificate with the purchases and that it was suffcient if
the dealer, subsequently, came to hold a certificate "in
respect thereof". [267D-E]
(2) To insist upon a contemporaneity would amount to
qualifying the word ’holds’ in section 4-B by adding the
words "at the time of the purchases". [267E]
(3) The words "in respect thereof" are "colourless
words", but in section 4-B they are, in their reference to
the certificate, suffciently, though non-specifically, wide
enough to include a certificate obtained later but
pertaining to the turnover in question. [267F-G]
(4) The rule which compels only its prospective
operation might, not unreasonably, be held to be
inconsistent with the ultra vires of section 4-B. There is
nothing unreasonable in this construction of section 4-B.
Indeed, by the 1978 Amendment, this position has been made
clear in the rule itself, which after the amendment,
expressly provides that the certificate will take effect
from the date of the application made by the dealer and not
merely from the date of the issue. [267G-H; 268A]
Trustees v. IRC., [1946] 174 LT 133, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 768 (NT)
of 1975.
From the Judgment and Order dated 3.1.1973 of the
Allahabad High Court in Writ Petition No. 4225 of 1971.
S.C. Manchanda and A.K. Srivastava for the Appellants.
NEMO for the Respondents.
The Judgment of the Court was delivered by
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VENKATACHALIAH, J. This appeal by certificate,
preferred by the State of U.P. against the Judgment, dated,
3.1.1973 of the Allahabad High Court in W.P. No. 4225/1971,
raises a short question whether the Rule 25-A(5) of the U.P.
Sales Tax Rules 1948 (Rules) in so far as it stipulates that
a ’recognition-certificate’ issued for purposes of Section
4-B of the U.P. Sales Tax Act 1948 (Act) "shall take effect
from the date of its issue" is inconsistent with does not
carry-out the purposes of and, therefore, is ultra-vires
Section 4-B of the U.P. Sales Tax Act 1948 (Act).
The full bench of the Allahabad High Court, by a
majority, has, by the judgment under appeal, preferred this
view.
2. So far as the declaration on the law on the point is
concerned, the matter loses much of its edge in view of the
relevant amendment brought about by the U.P. Taxation Laws
(Amendment & Validation) Act 1978, which now provides that
such a recognition certificate shall take effect from the
anterior date of the presentation of the application by the
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dealer. By the same amendment, the certificate is rendered
valid, for three successive assessment years at a time and
the renewals shall also be for like periods.
3. The necessary and material facts are in a short
compass and may briefly be stated: Respondent Haji Ismail
Noor Mohammad & Co. a registered firm of partners was a
"Dealer" registered under the Act. It, inter-alia, carried
on the business of manufacture of oils from groundnuts and
other oil seeds. The oil so manufactured was sold by the
Dealer both intra-state; inter-state and by way of export.
Under Section 3-D of the Act, a dealer is liable to
purchase-tax on oil seeds at 3% ad-valorem on the turnover
of the purchases made by the dealer from the cultivators or
other unregistered dealers. Section 4-B of the Act, however,
contemplates special reliefs to certain manufactures of
notified goods, the relief being in the form of concessional
rate of purchase tax or exemption there from, as the case
may be, as notified by the State-Government if the "dealer
holds a recognition-certificate issued under sub-section (2)
in respect thereof."
On 10.2.1969, the State Government notified that oils
of all kinds to be "notified goods" for purposes of Section
4-B and that the purchases by the dealer, liable to tax on
the turnover of the firstpurchases shall be entitled to a
concessional rate of tax at 2% on the
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raw-material required for the manufacture of notified-goods.
The present controversy relates to the Dealer’s
entitlement to the concessional rate of purchase tax
respecting the purchase turn-over of its first-purchases
under the said notification.
4. On 21.3.1969, Respondent applied under Section 4-
B(2) to the prescribed-authority, in the prescribed-form for
the grant of a recognition certificate. The recognition
certificate, for certain reasons, was granted only on
5.2.1969. There appears no dispute that the turn-over of the
first-purchases of the Respondent, respecting which the
claim for reduced-rate of tax was made, constituted raw-
material required for the manufacture of notified goods and,
therefore, satisfied the requirement of the notification.
However, the relief was confined to the turnover of such
first-purchases made only after 5.12.1969, i.e., the date of
issue of the certificate and the relief in respect of the
turnover prior to that date was refused on the basis of the
condition in sub-rule 5 of Rule 25-A which provided that
"such certificate shall take effect from the date of its
issue".
Respondent, in its writ-petition before the High Court
contended that this clause in Sub-Rule (5) of Rule 25-A is
at cross-purposes with and did not carry out the objects of
Section 4-B and is ultra-vires Section 4-B. The High Court,
by majority opinion, has accepted this contention.
5. The provisions of Section 4-B and Rule 25A(5) may
now be noticed:
"4-B. Special relief to certain manufacturers.
(1) Notwithstanding anything contained in sections
3, 3-A, 3-AA and 3-D:-
(a) where any goods liable to tax under section
3-D are purchased by a dealer who is liable
to tax on the turnover of his first purchases
under that section and the dealer" holds a
recognition certificate issued under
subsection (2) in respect thereof," he shall
be liable in respect of those goods to tax at
such concessional rate, or be exempt from
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tax, as may be notified in the Gazette by the
State Government in that behalf;
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(b) where any goods liable to tax under any other
section are sold by a dealer to another
dealer and such other dealer furnishes to the
selling dealer in the prescribed form and
manner a certificate to the effect that he
holds a recognition certificate issued under
sub-section (2) in respect thereof, the
selling dealer shall be liable in respect of
these goods to tax at such concessional
rates, or be exempt from tax as may be
notified in the Gazette by the State
Government in that behalf.
(2) A dealer who requires any goods referred
to in sub-section (1) for use as raw material for
the purposes of manufacture in the State of Uttar
Pradesh of any notified goods, and such notified
goods are intended to be sold by him in the State
or in the course of inter-state trade or commerce
or in the course of export out of India, may apply
within such period, and in such form and manner,
as may be prescribed, to the assessing authority
for the grant of recognition certificate in
respect thereof and if the applicant satisfied
such requirements and conditions as may be
prescribed, the assessing authority shall grant to
the dealer in respect of such goods a recognition
certificate in such form and subject to such
conditions as may be prescribed."
Sub-Rule 5 of Rule 25-A provides:
"25-A(5). The recognition certificate shall
ordinarily be issued within 30 days of the
presentation of the application to the Sales Tax
Officer. If, however, it may not be possible to
issue the certificate within the time specified
above, the Sales Tax Officer shall obtain the
approval of the Assistant Commissioner (Executive)
of his range for an extension of time, after
stating the reasons for which it is not possible
to issue the certificate in time. Such certificate
shall take effect from the date of its issue."
(underlining supplied)
In reaching such conclusion on the point as it did the
reasoning that commended itself to the High Court was this:
".... The efficacy of the recognition certificate
under clause (a) aforesaid becomes material and
relevant at the time of the quantification of the
purchase tax, i.e., when
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the assessment order is being drawn up. It is in
the assessment proceedings that the liability to
pay tax at a concessional rate is fructified. A
dealer would be entitled to the concessional rate
if he holds a recognition certificate........."
"........ The language of clause (b) does not make
it a condition precedent or a necessary obligation
that the purchasing dealer must at the time of the
purchase produce the recognition certificate. If
the purchasing dealer, subsequent to the
transaction of purchase, furnishes to the selling
dealer the certificate that he holds a recognition
certificate, the requirements of clause (b) are
fully satisfied."
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The High Court also took into account that sub-Rule 5
of Rule 25-A while rightly recognising the need for the
issue of the certificate with due despatch and within a time
bound schedule, could not, consistently with the scheme and
purpose of Section 4-B, provide that the certificate shall
take effect only from the date of its issue.
6. Shri Manchanda, learned Senior Advocate appearing in
support of the appeal, contended that the interpretation
placed by the High Court runs in the teeth of the express
statutory language which stipulates that "the dealers holds
a recognition certificate" and the interpretation placed on
it by the High Court, if accepted, would have the effect of
adding something to the language of the section which is not
in the Section. Learned Counsel said that the High Court
had, by the judgment, virtually introduced a fiction that
under certain circumstances where there had been a delay in
issuing the certificate, the dealer must be deemed to have
held the certificate.
Shri Manchanda submitted that the clear intendment of
the provision was that the dealer should hold the
’recognition-certificate’ at the time of the purchases and
that it would not be sufficient compliance with the statute
if the dealer comes to hold it subsequently. He accordingly
commended the view that found favour with the learned judge
in the minority in the High Court.
We did not have the benefit of the arguments from the
side of the respondent, which has remained unrepresented.
7. It is really a matter of construction of the
language of Section
267
4-B; whether the dealer should hold a recognition
certificate at the time the purchases were made or whether
the requirements of the ’Section should be held to be
satisfied if the dealer holds such a "recognition
certificate" at the time of the assessment of the turnover
in question. The High Court has held that the requirements
of the Section are substantially complied with if the
certificate is available to the dealer at the time the
liability to tax of the turnover in question is sought to be
determined, subject to the requirement that the turnover is
after the date of the application filed by the dealer for
issue of a certificate. According to the High Court, the
date of actual issue of the certificate should not be held
to be material and that the benefit for the concessional
rate of tax should be available to the dealer if the dealer,
at the time of the assessment, holds a recognition
certificate "in respect thereof’. According to the High
Court the language of Section 4-B does support the extreme
construction that the recognition certificate should be held
at the time of the purchases themselves.
8. On a consideration of the matter we are persuaded to
the view that the construction placed on the provision by
the High Court is an eminently plausible one. There is
nothing basically wrong in the approach of the High Court
that the statutory language does not insist upon the
contemporaneity of the holding of the certificate with the
purchases and that it is sufficient if the dealer,
subsequently, comes to hold certificate "in respect
thereof". It seems possible to say that to insist upon a
contemporaneity of the purchases and the certificate would
also amount to qualifying the word ’holds’ in the section by
adding the words "at the time of the purchases".
It is true, the words "in respect thereof" as Lord
Greene M.R. said are "colourless words", See Trustees v.
IRC, [1946] 174 LT 133 but in Section 4-B, they are in their
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reference to the certificate, sufficiently, though non-
specifically wide enough to include a certificate obtained
later but pertaining to the turnover in question. If this is
the scheme of Section 4-B in that it does not exclude from
its contemplation the efficacy and sufficiency, for its
purpose of a certificate issued subsequently, then, the rule
which compels only its prospective operation might, not
unreasonably, be held to be inconsistent with and ultra-
vires of Section 4-B. We find therefore nothing unreasonable
in this construction of Section 4-B. Indeed by the 1978
Amendment, this position has been made clear in the rule
itself which, after the amendment, expressly provides that
the certificate will take effect from the
268
date of the application made by the dealer and not merely
from the date of the issue.
9. In this view of the matter, the judgment of the High
Court does not call for interference. The appeal is
dismissed. However, there will be no order as to the cost.
R.S.S. Appeal dismissed.
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