Full Judgment Text
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PETITIONER:
KEDARNATH JUTE MANUFACTURING CO.
Vs.
RESPONDENT:
COMMERCIAL TAX OFFICER, CALCUTTA AND ORS.
DATE OF JUDGMENT:
02/04/1965
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
SHAH, J.C.
SIKRI, S.M.
CITATION:
1966 AIR 12 1965 SCR (3) 626
CITATOR INFO :
E&R 1978 SC 897 (4)
F 1988 SC1775 (6)
F 1992 SC 53 (6)
ACT:
Bengal Finance (Sales Tax) Act, 1941 (Bengal Act 6
of1941)--S. 5(2)(a) (ii) proviso. Effect of--Production of
declaration forms required under proviso whether mandatory
or directory--Exemption under substantive clause whether
can be claimed on the basis of other evidence.
HEADNOTE:
The appellant a public limited company sought exemption
under s. 5(2)(a)(ii) of the Bengal Finance (S.ales Tax) Act,
1941 in respect of certain sales. However, it could not
produce before the commercial tax officer the
declaration forms from the purchasing dealers required to
be produced under the proviso to that sub-clause
because the said forms were lost. The appellant tried to set
duplicate forms from the purchasing dealers but without
success. His application under s. 21A to summon the dealers
with the relevant documents was rejected by the Commercial
Tax Officer and the higher authorities also refused to
issue directions for the issue of duplicate declaration
forms. The Commercial Tax Officer thereafter passed an
assessment order without allowing. the said exemption.
Against that order the appellant filed a writ petition under
Art. 226 and thereafter a Letters Patent appeal but failed
to get redress. It then appealed to this Court with
certificate.
It was contended on behalf of the appellant that the
exemption granted under the substantive sub-clause (ii)
could be claimed by the production of other relevant
evidence if the declaration forms could not be produced; the
proviso to that sub-clause requiring the production of the
said forms was only directory as was also proved by the use
of the words "on demand" in s. 27A.
HELD: The exemption could be claimed only by the production
the declaration forms as laid down in the proviso.
(i) The effect of an excepting proviso is to except from
the main clause something. which but for the proviso would
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be within it.
Craies on Statute Law quoted:
If the intention of the Legislature was to give exemption
if the terms of the substantive part of sub-clause (ii)
above are complied with, the proviso. becomes redundant and
otiose. If the proviso is treated as merely directory it
will lead to the position that if the declaration form is
furnished well and good; but if not furnished other evidence
can be produced. That is to rewrite the clause and to omit
the proviso. That will defeat the express intention of the
legislature. [622H-630A]
There is an understandable reason for the stringency of the
provisions. The object of s. 5(2)(a)(ii) of the Act and the
rules made thereunder is self-evident. While they are
obviously intended to give exemption to a dealer in
respect of sales to registered dealers of specified classes
of goods, it seeks also to prevent fraud and collusion in an
attempt to evade tax. [630G]
627
State of Orissa v.M.A. Tulloch & Co. Ltd. (1964) 15
S.T.C. 641, distinguished.
(ii) The words "on demand" in r. 27A only fix the time when
the declaration forms are to be produced; they do not mean
that their production is not obligatory. [630A-B]
(iii) Section 21A only empowers the Commissioner or any
person appointed by him to take evidence on oath etc. It can
be invoked only in a case where the authority concerned is
empowered to take evidence in respect of a particular
matter, but that does not enable him to ignore a statutory
condition to claim exemption. [630C-D]
(iv) Sub-rules (3) and (4) of s. 27A do not enable the
selling dealer to either directly apply or to compel the
purchasing dealers to apply for duplicate forms nor do they
enjoin on the appropriate authority to give the selling
dealer a duplicate form to replace the lost one. This may
cause hardship but the remedy lies with the Legislature
only. [630E, F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 94 of 1954.
Appeal from the judgment and order dated August 17, 1951 of
the Calcutta High Court in Appeal from Original Order No. 81
of 1959.
A.V. Viswanatha Sastri and P.K. Ghosh, for the appellant.
P.K. Chatterjee and P.K. Bose, for the respondents.
The Judgment of the Court was delivered by
Subba Rao, J. This appeal on a certificate granted by
the High Court of Calcutta raises the question of the
interpretation of s. 5(2)(a) (ii) of the Bengal Finance
(Sales Tax) Act, 1941 (Bengal Act VI of 1941), hereinafter
called the Act.
The material facts are as follows: The appellant is a
public limited’ company registered as a dealer under the
Act, having its registered place of business at Calcutta. In
respect of the accounting year ending with 31st December
1954, in the return for the year the assessee had shown its
gross turnover at Rs. 70,99,928-10-0 and claimed exemption
under two heads, namely, (i) under s. 5(2)(a)(i) of the Act
Rs. 1,33,730-6-6; and (ii) under s. 5(2)(a)(ii) thereof
Rs. 69,65,979-9-6. After deducting the said amounts from the
gross turnover the assessee showed its taxable turnover at
Rs. 218-9-0 and deposited the tax of Rs. 9-12-6 on the said
amount in the treasury. The Commercial Tax Officer by notice
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dated April 22, 1955, fixed August 4, 1955, for hearing the
assessee in respect of its return. Under s. 5(2)(a)(ii),
the appellant in order to claim exemption thereunder had
to furnish declaration forms duly filled in and’ signed
by registered dealers to whom the goods were sold by it.
After taking some adjournments of the enquiry it appears
that in the second week ’of January 1957 the assessee found
that its file containing 147 declaration forms received’
from its dealers in respect of the goods received from it
was missing. The assessee, it is said, made various attempts
to get duplicate forms of declaration from the dealers, but,
on account of circumstances over which it had no
628
control and because of the unhelpful and hostile attitude
of the Commercial Tax Officer within whose jurisdiction the
said dealers functioned, it was not able to furnish the
duplicate forms for all the declarations that were lost. On
August 8, 1957, the assessee applied to the Commercial Tax
Officer under s. 21A of the Act for summoning the dealers to
produce the necessary documents in order to prove that
they had issued the declaration forms to it, but the said’
officer did not issue the requisite summons to the parties
concerned. The assessee then flied an application to the
Commissioner of Commercial Taxes, West Bengal, for
directions to issue duplicate declaration forms, but that
application was rejected. The revision filed to the Revenue
Board was also dismissed. On November 21, 1957, the
Commercial Tax Officer made an order of assessment
disallowing the assessee’s claim for exemption in respect
of the said sales made to the purchasing registered dealers
amounting to Rs. 22,46,006-0-6 and levied on it
additional tax of Rs. 1,49,778-4-6. The assessee
thereafter flied a petition under Art. 226 of the
Constitution in the High Court of Calcutta for issuing an
order directing the respondents, i.e., the Commercial Tax
Officer and the Commissioner of Commercial Taxes. West
Bengal, not to implement the said assessment order. The said
application came up, at the first instance, before Sinha,
J., who dismissed the same. On appeal, a Division Bench of
the said High Court confirmed the order of Sinha, J. Hence
the present appeal.
At the outset we must make it clear that in the view we
are taking on the construction of s. 5 of the Act we do not
propose to go into the question whether the department was
responsible for preventing the assessee from furnishing
duplicate forms of the declarations alleged to have been
lost or on the question whether the department went wrong in
not summoning the dealers to produce the relevant documents
to establish that the declaration forms alleged to have been
lost were in fact issued’ by them.
The only question, therefore, that arises is whether
under s. 5(2)(a)(ii) of the Act the furnishing of the
declaration forms issued by the purchasing dealers was a
condition for claiming the exemption thereunder.
In substance s. 5(2)(a)(ii) exempts from taxable
turnover all sales to a registered dealer of goods of the
class or classes specified in the certificate of
registration of the dealer as being intended for the
purposes mentioned, therein. But the said exemption is made
subject to a proviso. Under that proviso, in the case of
such sales a declaration form duly filled up and signed by
the registered dealer to whom the goods are sold and
containing the prescribed particulars on a prescribed form
obtainable from the prescribed authority has to be
furnished’ in the prescribed manner by the dealer who sells
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the goods. Under r. 27A of the Bengal Sales Tax Rules, 1941,
hereinafter called the Rules, a dealer who wishes to claim
the said exemption shall on demand produce such a
declaration in writing
629
signed by the purchasing dealer. Sub-r. (2) thereof enjoins
on a dealer not to accept and on the purchasing dealer not
to give a declaration except in the form prescribed. The
other rules make stringent provisions to prevent the misuse
of the said forms.
The argument of Mr. A.V. Viswanatha Sastri, learned
counsel for the appellant, may be briefly stated thus: The
substantive part of s. 5(2)(a)(ii) of the Act provides for
the exemption in respect of certain sales to a dealer if the
sales are made to a registered dealer for the purposes
mentioned thereunder. The proviso to the said subclause
prescribes in effect that the declaration form in the manner
prescribed is the best evidence to prove that the sales were
for the said purposes. The proviso cannot be construed as
laying down a condition for giving the exemption, but only
as a directory provision to subserve the substantive
provision in a reasonable way. If so construed, a dealer is
not precluded in a case where the proviso cannot be strictly
complied with from producing other relevant evidence to
prove that the sales to the registered dealers were for the
purposes mentioned in the said sub-clause. This conclusion
is sought to be supported on the basis of the expression "on
demand" in r. 27A which, according to the learned counsel,
indicates that the production of the prescribed declaration
is not obligatory but only to be made if a demand is made by
the authority concerned.
The learned Solicitor General, on the other hand,
contends on behalf of the respondents that a dealer can
claim exemption under the said sub-clause, but if he seeks
exemption he must comply strictly with the conditions under
which the exemption can be granted. He argues that the
clear terms of the clause, read with the proviso, impose a
condition on a dealer for claiming exemption.
Section 5(2)(a)(ii) of the Act in effect exempts a
specified turnover of a dealer from sales tax. The provision
prescribing the exemption shall, therefore, be strictly
construed. The substantive clause gives the exemption and
the proviso qualifies the substantive clause. In effect
the proviso says that part of the turnover of the selling
dealer covered by the terms of sub-cl. (ii) will be exempted
provided a declaration in the form prescribed is furnished.
To put it in other words, a dealer cannot get the exemption
unless he furnishes the declaration in the prescribed form.
It is well settled that "the effect of an excepting or
qualifying proviso, according to the ordinary rules of
construction, is to except out of the preceding portion of
the enactment, or to qualify something enacted therein,
which but for the proviso would be within it": see "Craies
on Statute Law", 6th Edn., p. 217. If the intention of the
Legislature was to give exemption if the terms of the
substantive part of sub-cl. (ii) alone are complied’ with,
the proviso becomes redundant and otiose. To accept the
argument of the learned counsel for the appellant is to
ignore the proviso altogether, for if his contention be
correct it will lead to the position that if the declaration
form is furnished, well and good; but, if not furnished,
other evidence can be
630
produced. That is to rewrite the clause and to omit the
proviso. That will defeat the express intention of the
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Legislature. Nor does r. 27A support the contrary
construction. The expression "on demand"’ only fixes the
point of time when the declaration forms are to be produced;
otherwise the rule would be inconsistent with the section.
Section 5(2)(a)(ii) says that the declaration form is to be
furnished by the dealer and r. 27A says that it shall be
furnished on demand, that is to say it fixes the time when
the form is to be furnished. This reconciles the provisions
of r. 27A with those of s. 5 (2)(a)(ii) of the Act, whereas
the construction suggested by the learned’ counsel
introduces an incongruity which shall be avoided. Section
21A on which reliance is placed has no bearing on the
question to be decided. It only empowers the Commissioner or
any person appointed to assist him under sub-s (1) of s. 3
to take evidence on oath etc. It can be invoked only in a
case where the authority concerned is empowered to take
evidence in respect of any particular matter; but that does
not enable him to ignore a statutory condition to claim
exemption.
Sub-rules (3) and (4) of r. 27A are not helpful to the
appellant. They provide only safeguards against abuse of the
declaration forms by the purchasing dealers; they do not
enable the selling dealer to either directly apply or to
compel the purchasing dealers to apply for duplicate forms;
nor do they enjoin on the appropriate authority to give the
selling dealer a duplicate form to replace lost one. We
realise that the section and the rules as they stand may
conceivably cause unmerited hardship to an honest dealer. He
may have lost the declaration forms by a pure accident,
such as fire, theft etc., and yet he will be penalised for
something for which he is not responsible. But it is for the
Legislature or for the rule-making authority to intervene to
soften the rigour of the provisions and it is not for this
Court to do so where the provisions are clear and
unambiguous.
There is an understandable reason for the stringency of
the provisions. The object of s. 5(2)(a)(ii) of the Act and
the rules made thereunder is self-evident. While they are
obviously intended to give exemption to a dealer in respect
of sales to registered dealers of specified classes of
goods, it seeks also to prevent fraud and’ collusion in an
attempt to evade tax. In the nature of things, in view of
innumerable transactions that may be entered into between
dealers. it will wellnigh be impossible for the taxing
authorities to ascertain in each case whether a dealer has
sold the specified goods to another for the purposes
mentioned in the section. Therefore, presumably to achieve
the twofold object, namely, prevention of fraud and’
facilitating administrative efficiency, the exemption given
is made subject to a condition that the person claiming the
exemption shall furnish a declaration form in the manner
prescribed under the section. The liberal construction
suggested will facilitate the commission of fraud and
introduce administrative inconveniences, both of which the
provisions of the said clause seek to avoid.
631
The decision of this Court in The State of Orissa v. M.A.
Tulloch and Co. Ltd.(1) does not help the appellant. That
decision was concerned with s. 5(2)(a)(ii) of the Orissa
Sales Tax Act, 1947. That section was similar in terms to s.
5(2)(a)(ii) of the Act in question, but there was no proviso
to that section in the Orissa Act similar to the one found
in the present section. That makes all the difference, for
it is the proviso that imposes the condition. But under r.
27(2) made under the Orissa Act "a dealer shall produce a
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true declaration in writing by the purchasing dealer or by
such responsible person as may be authorized in writing in
this behalf by such dealer that the goods in question are
specified in the purchasing dealer’s certificate of
registration as being required for resale by him or in the
execution of any contract." This Court held that the said
mandatory provision was inconsistent with s. 5(2) (a)(ii) of
the Orissa Sales Tax Act; and to avoid that conflict it
reconciled both the provisions by holding that the rule was
only directory and, therefore, it would be enough and if it
was substantially compiled with. The said provisions may
afford a guide for amending the relevant provisions of the
Act and the rules made thereunder, but do not furnish any
help for construing them.
Before parting with the case we must make it clear that we
are not expressing any opinion on the bona fides of the
appellant or the appropriate sales tax authorities, for we
have not scrutinized the evidence in that regard.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
[1964] 7S.C.R.810.
632