1. This is a Reference under section 34(1) read with section 50(2) of the Bombay Sales Tax Act, 1953, made at the instance of the Commissioner of Sales Tax. The facts giving rise to this reference are as follows :
2. The relevant assessment period is from 1-4-1949 to 31-10-1952 but the period to which the dispute in the reference is from 1-1-1950 to 31-3-1951, which we propose to refer to as 'the disputed period'. In respect of the disputed period, the assessees, who are the respondents before us, included in their total turnover a sum of Rs. 21,19,216-13-3 as representing sales effected by them in the course of the interstate trade and commerce and paid, along with their returns, tax at the reduced rate prescribed in respect of that amount. We propose to refer to this amount paid as tax at the reduced rate as 'the disputed amount' and the turnover to which it relates as 'the disputed turnover'. The assessees subsequently filed revised returns and claimed exemption from payment of any tax under the Bombay Sales Tax Act, 1946, in respect of this disputed turnover on the ground that this disputed turnover was in respect of sales outside the then State of Bombay and that under the provisions of article 286(1)(a) of the Constitution of India, as it then stood, the State was not entitled to levy any tax on such sales. The assessees were assessed by the Sales Tax Officer, C-Ward, Bombay who by his order dated 10th August 1953 calculated the taxable turnover of the assessees including therein the disputed turnover and levy tax on that footing. The Sales Tax Officer also levied tax in respect of a certain sale made by the assessees to one M/s. Bhogilal Gulabchand and two sales to M/s. K. R. Kapur & Co. The assessees preferred an appeal against the assessment order passed by the Sales Tax Officer raising disputes only about the aforesaid three questions. The Assistant Collector of Sales Tax, who heard the appeal, held that the point made by the assessees about Sales to persons out side the State had been taken by the assessees before the sales Tax Officer, but the Sales Tax Officer had failed to consider the same and accordingly directed that the Sales Tax Officer should re-examine the accounts so far as the assessee's claim for deductions in respect of sales made to persons outside the State were concerned. He also directed the Sales Tax Officer to re-examine the claim of the assessees about the sales to M/s. Bhogilal Gulabchand. The Assistant Collector remanded the case to the Sales Tax Officer with a direction to re-examine the account and re-assess the assessees in the light of his remarks. On remand, the matter came before the Sales Tax Officer, D-Ward, Unit I, Bombay, who, by his order dated 23rd July 1962, inter alia, rejected the claim made by the assessees in respect of the sale to M/s. Bhogilal Gulabchand. As far as the claim made by the assessees in respect of outside-State sales were concerned, the Sales Tax Officer held that as the assessees had made the purchases involved in these transactions from the local dealers without payment of tax and on the strength of his registration certificate, the proviso to clause (ii) of Rule I to section 6(3) of the Bombay Sales Tax Act, 1946, was attracted and the purchase price was liable to be added to the assessee's taxable turnover as the assessees had not sold these goods outside the State at all as contended by them. The Sales Tax Officer held that the despatches of those goods outside the State were merely made by the assessees to their agents with the result that the assessees had not resold these goods at stated in the certificates issued by them to the dealers from whom they purchased the goods in question. The assessees appealed against this decision to the Assistant Commissioner of Sales Tax. The Assistant Commissioner accepted the claim of the assessees regarding the sale to M/s. Bhogilal Gulabchand but rejected the claim of the assessees. The question that has been referred to us for our determination is as follows :
'Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the Sales Tax Officer, to whom the respondent's case was remanded by the Assistant Commissioner of Sales Tax, Range I, Bombay Circle, Bombay to re-examine, among others a claim for exemption of sales under Article 286 of the Constitution of India in respect of the period 1-4-1949 to 31-10-1952, had no jurisdiction to add to the turnover the purchase price of the goods in respect of which the said claim for exemption was set up ?'
Although the question has been framed as aforesaid and relates to the period from 1-4-1949 to 31-10-1952, it is quite clear and not disputed by either of the parties before us, that the question really relates only to the period from 1-1-1951 to 31-3-1951.
3. Mr. Dada, learned Counsel for the Commissioner, has submitted before us that the order of remand passed by the Assistant Collector of Sales Tax, the substance of which we have set out earlier, clearly shows that the Sales Tax Officer was directed to re-examine the accounts of the assessees in order to determine the claim made by the assessees for deduction or exemption in respect of the sales made to persons outside the State, and the said order states, in terms, that the case was sent back to the Sales Tax Officer with the direction to re-examine the accounts and re-assess the dealer in the light of the remarks of the Assistant Collector of Sales Tax. It has been pointed out by Mr. Dada that the order of the Sales Tax Officer after remand shows that he held that the purchases of the goods which were despatched by the assessees to their agents outside the State, which despatches resulted in the disputed turnover, were made by the assessees from the local dealers without payment of tax and on the strength of certificates given by the assessees under Rule 6(3) of the Bombay Sales Tax Rules, 1946 (hereinafter referred to as 'the said Rules'). Our attention was drawn by Mr. Dada to the proviso to clause (ii) of Rule I to sub-section (3) of section 6 of the Bombay Sales Tax Act, 1946, as it stood at the material time, which provides that where goods purchased by the assessees on certificates as stated therein are utilised by the assessees for purpose other than those specified in the assessees' certificate of registration, the price of goods so utilised is to be included in the assessee's taxable turnover. It was submitted by him that the Sales Tax Officer was perfectly justified in determining whether the despatches of goods by the assessees to parties outside the State represented transfers to agents or sales made to the parties outside Bombay. It appears to us that this contention is well-founded. The material portion of Rule 1 to sub-section (3) of section 6 of the Bombay Sales Tax Act, 1946, at the relevant time, read thus :
'Rule I - From the gross turnover of the dealer in respect on all his sales or supplies of goods including goods specified in Schedule I, during any period of his liability to pay the tax, there shall first be deducted from his turnover during that period in respect of -
** ** **(ii) sales or supplies to a registered dealer of goods certified by him as being intended for resale by him or of goods specified in the purchasing dealer's certificate of registration is being intended for use by him in the manufacture or processing of any goods for sale or supply, or sales or supplied to a registered dealer of containers and other materials for the packing of such goods : Provided that there such goods are utilised by him for purposes other than those specified in this certificate of registration, the price of goods so utilised shall be included in his taxable turnover;'
The Sales Tax Officer, to whom the matter was remanded by the Assistant Collector of Sales Tax a was called upon to determine the claim of the assessees that the disputed turnover was not liable to the included in the assessee's taxable turnover. He had, therefore, to determine the taxable turnover of the assessees. The question as to whether the assessees had committed a breach of the aforesaid proviso in respect of goods involved in the disputed turnover was, therefore, clearly a question which the Sales Tax Officer was entitled to consider and determine. In our view, the remand order does clearly show that this was a question which the Sales Tax Officer was entitled to consider, as he has in fact done. If on such consideration the Sales Tax Officer came to the conclusion that the purchase price of the goods involved in the disputed turnover was liable to be included in the taxable turnover of the assessees, not on the footing or for the reason for which the disputed turnover was included in the taxable turnover in the original returns furnished by the assessees but for a different reason, the assessees would yet not be entitled to any refund, except if the tax originally paid by them in respect of the disputed turnover exceeded the amount of tax which was payable by them on the determination reached by the Sales Tax Officer. We may, however clarify that, in our view the amount due as tax in respect of the disputed turnover was, according to the Sales Tax Officer in excess of the amount originally paid by the assessees in respect of the same, the said excess could not be claimed by the Sales Tax Officer from the assessees or set off against any other claim made by the assessees. In our view, the Tribunal was in error in holding that the Sales Tax Officer had no jurisdiction to re-examine the claim for exemption made by the assessees and to determine the turnover of the assessees from that point of view.
4. Mr. Chandarana, learned counsel for the respondents, points out that the Tribunal has not given any finding at all on the question as to whether the transactions constituting the disputed turnover were sales by the assessees outside the State or merely agency despatches probably in view of the Tribunal having come to the aforesaid conclusion regarding the jurisdiction of the Sales Tax Officer. It was also pointed out by Mr. Chandarana that the determination of this question would be essential as, if the disputed turnover did represent sales outside the State, there would be no contravention by the assessees of the aforesaid proviso and the price of the goods purchased as aforesaid would not be liable to be included in the taxable turnover of the assessees. It has been urged by him that there is nothing in the definition of the terms 'sale' given in the Bombay Sales Tax Act, 1946 which would exclude from its purview a sale outside the State, and a sale outside the then State of Bombay could not be said to contravene the terms of the certificate given by a purchasing dealer under Rule 26(3) of the said Rules. It does appear that there is substance in this contention and the Tribunal will have to determine the said question.
5. Our attention was drawn by Mr. Dada, learned counsel for the Department, to the provisions of section 30 of the Bombay Sales Tax Act, 1946, which shows that no tax could have been levied by the State under the said Act on any sale or purchase of goods where such sale or purchase took place outside the State. This section, however, does not prevent the State from granting an exemption. It cannot be said that by reason of the provisions of this section the term 'resale' in the said certificates under Rule 26(3) must be construed as excluding sales outside the State.
6. There is also one other matter which may be mentioned. The Assistant Commissioner of Sales Tax in his appellate order has stated that the question raised in the appeal by the assessees is academic, because even if the claim of the assessees to the exemption claimed by them is correct, the amount recovered by the assessee from the purchasers in excess of what is payable by them as tax under the Bombay Sales Tax Act, 1946, is liable to be forfeited. This question will also have to be determined by the Tribunal. But, we are not concerned with the same in this reference.
7. In the result, the question raised with the modification mentioned by is earlier is answered in the negative. Looking to all the facts and circumstances of the case, we direct that the parties shall bear and pay their own costs of their reference.