1. These three reference under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act'), raise a common question of law. These reference arise out of Reference Applications Nos. 32, 33 and 34 of 1970 respectively. These three reference applications relate to the assessment periods of 1st April, 1962, to 31st March, 1963, 1st April, 1963, to 31st March, 1964, and 1st April, 1964, to 31st March, 1965, respectively. Apart from the fact that the assessment periods are different, the facts in these references, in all material particulars, are the same. Hence, the three reference are being disposed of by us by a common judgment.
2. The facts giving rise to these references are as follows : The applicant carried on the business of manufacturing edible oil. He used to purchased groundnuts from his commission agents. Although the applicant was a registered dealer, he did not hold a recognition certificate and the purchases effected by him were without the issue of declarations in form 15. His vendors were under the impression that the applicant would furnish declarations in form 15 and, as such, they charged tax at 1 per cent. only instead of 2 per cent. It may be mentioned that the groundnuts are covered by entry 6 of Part II of Schedule B to the said Act and attract general sales tax at 2 per cent. The vendors of the applicant were assessed and it was found that the sales by them to the applicant were without declarations in form 15. Therefore, the vendors were charged to tax at 2 per cent. general sales tax on the said sales of the groundnuts to the applicant. The vendors having already recovered 1 per cent. earlier sent a debit note for the additional amount of 1 per cent. general sales tax to the applicant. One of such vendors was Shetkari Sahakari Sangh Ltd., Malegaon, from whom the applicant purchased groundnuts of the taxable amount of Rs. 4,63,949 during the period from 1st July, 1962, to 30th June, 1963, of the taxable amount of Rs. 4,66,654 during the period from 1st July, 1963, to 30th June, 1964, and of the taxable amount of Rs. 4,23,022 during the period from 1st July, 1964, to 30th June, 1965, respectively. As the said Sangh had originally recovered the tax at 1 per cent. as aforestated and had sent a debit note for the additional 1 per cent. general sales tax for equivalent amounts, the applicant requested the Sales Tax Officer to grant him set-off under rule 41-A(a) of the Bombay Sales Tax Rules, 1959 (hereinafter referred to as 'the said Rules'). His submission was that a sum equivalent to 2 per cent. general sales tax had been recovered from him by the said Sangh and he was entitled to the set-off as provided under rule 41-A(1) of the said Rules. This argument of the applicant was rejected by the Sales Tax Officer on the ground that he had failed to produce the proofs showing the payment of additional general sales tax at 1 per cent. The applicant preferred appeals before the Assistant Commissioner of Sales Tax, who confirmed the orders of the Sales Tax Officer and dismissed the said appeals. He went by way of second appeals before the Sales Tax Tribunal, who also dismissed the said appeals. The question, which has been referred to for our consideration, is as follows :
'Whether the word 'recovered' appearing in rule 41-A(a) of the Bombay Sales Tax Rules, 1959, means 'actually recovered in cash' and whether debit entries in the regularly kept account books of the dealer's vendors could not be held to be included in the word 'recovered'.'
3. As the arguments turn on the interpretation of rule 41-A(1) of the said Rules, it may be useful to set out the same here. The material part of rule 41-A(a), as it stood at the relevant time, provided as follows :
'In assessing the amount of tax payable in respect of any period by a registered dealer who manufacturers taxable goods for sale (hereinafter referred to as the 'manufacturing dealer') the Commissioner shall, in respect of the purchases made by such dealer on or after the 15th July, 1962, of any goods specified in schedule B, C, D or E and used by him within the State in the manufacture of taxable goods for sale or in the packing of goods so manufactured for sale or export, grant him a draw-back, set-off or, as the case may be, a refund of the aggregate of the following sums, that is to say, -
(a) a sum recovered from the manufacturing dealer by other registered dealers by way of sales tax, or general sales tax or, as the case may be, both, on the purchase by him from such registered dealers, when the manufacturing dealer did not hold a recognition or when he held a recognition but effected the purchased otherwise than against a certificate under section 11 of the Act.'
4. In the present case, the applicant is a registered dealer and so are the vendors, the said Sangh. The purchases have admittedly been effected by the applicant, who did not hold a recognition certificate under section 11 of the said Act. It is also not in dispute that although the said Sangh sent a debit note to the applicant for additional 1 per cent. general sales tax, this amount has not been actually paid by the applicant either by way of cash payment or by adjustment against the existing liability of the said Sangh to the applicant.
5. The submission of Mr. Surte, the learned counsel for the applicant, was that as the said Sangh had sent a debit note for the additional amount of 1 per cent. general sales tax to the applicant, it must be deemed to have recovered this amount within the meaning of the said expression in rule 41-A(a) of the said rules from the applicant, who was a manufacturing dealer, and hence the applicant was entitled to a set-off in respect of this amount. It was submitted by him that the word 'recovered' used in the said clause merely means, charged separately or payable. We find it difficult to accept this submission. On a plain and literal construction of the word 'recovered', it appears to us that an amount could be said to be recovered from the applicant by the said Sangh only when it was actually paid by the applicant to the said Sangh or adjusted by the applicant against an existing liability owed by the said Sangh or adjusted by the applicant. It appears to us that to accept the submission of Mr. Surte would to be equate the word 'recovered' with the word 'recoverable', for which there seems to be no warrant. An amount, as we have stated, can be said to be recovered by the said Sangh from the applicant when it is paid to the said Sangh by any of the modes set out earlier. To accept the argument of Mr. Surte, therefore, would, in a sense, be equating the word 'paid' with the word 'payable' as far as the vendors of the applicant are concerned. There is no warrant for equating these two words. In fact, in clause (b) of rule 41-A of the said Rules the word 'paid' and the word 'payable' have been used separately, which would suggest that the rule-making authorities had in mind the different meanings of these two word. We, therefore, reject the submission of Mr. Surte regarding the meaning to be given to the word 'recovered' used in rule 41-A(a) of the said Rules.
6. In the result, the question is answered by us as follows : The word 'recovered' used in rule 41-A(a) of the said rules means actually recovered, in the sense of actually paid in cash or paid by way of adjustment against an existing liability of the other registered dealers to whom the payment is to be made in favour of the manufacturing dealer making the payment. In our view, mere making of debit entries in the regularly kept account books of the dealer's vendors could be not said to result in the amounts of these debit entries being considered to be recovered from the dealer.
7. As far as the question of costs is concerned, we would normally have awarded the costs of these references to the respondent on the principle that costs must follow the event. In the present case, however, after stating the facts and advancing some arguments, Mr. Surte stated that he desired to withdraw these references. It was Mr. Dada, the learned counsel for the respondent, who persuaded us to dispose of these reference on merits as the sales tax department was anxious to have a pronouncement of this court on the question raised. In these circumstances, we think that it is fair that the parties should bear and pay their costs of these reference and there will be an order accordingly.
8. Reference answered accordingly.