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Commissioner of Sales Tax Vs. Punjab National Hotel - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 17 of 1979 in Reference Application No. 47 of 1974
Judge
Reported in[1985]58STC68(Bom)
Acts Bombay Sales Tax Act, 1959 - Sections 2, 20 and 41
AppellantCommissioner of Sales Tax
RespondentPunjab National Hotel
Excerpt:
sales tax - exemption - sections 2, 20 and 41 of bombay sales tax act, 1959 and section 20 of general clauses act, 1904 - interpretation of expression 'turnover of sales' appeared in notification - notification issued under section 41 - classes of sales or purchases referred in notification must be classes of sales or purchases which would have been liable to tax under act - in view of context in which expression 'turnover of sales' used its meaning to be limited - nothing in sections 2 and 20 which goes against interpreting expression in such manner - 'turnover of sales' meant turnover of taxable sales. - - and(b) sweets and (2) if during thesweet-meats course of(including shri assessment ofkhand, basundi the dealer,and doodhpak) the sales taxfalling under officer isentry 31 in..........j.1. this is a reference on the case stated by the sales tax tribunal under section 6(1) of the bombay sales tax act, 1959 (referred to hereinafter as 'the bombay sales tax act'). the two questions which have been referred to us for our determination in this reference are as follows :'(i) whether the tribunal was justified in law in holding that the expression 'turnover of sales' as appearing in entry 9 of the notification issued under section 41 of the bombay sales tax act, 1959, and as operative in the period from 29th september, 1963, to 12th october, 1972, meant the turnover of taxable sales and not the turnover of all sales of all commodities effected by the dealer during the year under assessment ?(ii) whether on a true and proper interpretation of the concluding part of entry 9.....
Judgment:

Kania, J.

1. This is a reference on the case stated by the sales Tax Tribunal under section 6(1) of the Bombay Sales Tax Act, 1959 (referred to hereinafter as 'the Bombay Sales Tax Act'). The two questions which have been referred to us for our determination in this reference are as follows :

'(i) Whether the Tribunal was justified in law in holding that the expression 'turnover of sales' as appearing in entry 9 of the notification issued under section 41 of the Bombay Sales Tax Act, 1959, and as operative in the period from 29th September, 1963, to 12th October, 1972, meant the turnover of taxable sales and not the turnover of all sales of all commodities effected by the dealer during the year under assessment ?

(ii) Whether on a true and proper interpretation of the concluding part of entry 9 of the notification under section 41 of the Bombay Sales Tax Act, 1959, the Tribunal ought to have held that the respondent was not eligible to the benefit of that entry as he was not conducting an establishment primarily for the sales of sweetmeats ?'

2. The facts giving rise to this reference are as follows : The respondent is a registered dealer and conducts a hotel and a restaurant at Barsi, where vegetarian and non-vegetarian food is served to customers. In respect of the period from 18th October, 1963, to 4th November, 1964, the Sales Tax Officer concerned determined and gross turnover of sales of the respondent at Rs. 2,26,943. Out of this amount, sales to the extent of Rs. 2,15,923 were held to be exempt from tax by the Assistant Commissioner as being covered by the exemption granted under entry 14 of Schedule A to the Bombay Sales Tax Act. The taxable sales of cooked food sold by the respondent during the relevant period thus came to the value of Rs. 11,029. In the second appeal preferred by the respondent herein before the Tribunal it was contended on its behalf that as the taxable sales of cooked food effected by the respondent during the relevant period were less than the value of Rs. 30,000 per year such sales should be held as exempt under entry 9 of the notification issued under section 41 of the Bombay Sales Tax Act to which we shall come a little later. This contention of the respondent was accepted by the Tribunal following its earlier decision in the case of Messrs. Jetharam Madhaoram (Second Appeal No. 1168 of 1969 decided on 29th January, 1971). It is the correctness of this decision, which is sought to be tested in the two questions referred to us.

3. Before setting out the submissions canvassed before us, it will be useful to take note of the relevant provisions of the Bombay Sales Tax Act and the aforesaid notification. Clause (36) of section 2 of the Bombay Sales Tax Act runs as follows :

''turnover of sales' means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount of sale price, if any, refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period.'

Expressions 'sale', 'sale price' and 'goods' have been defined in clauses (28), (29) and (13) respectively of the Bombay Sales Tax Act, but it is not necessary to refer to those clause because, if definition of the expression 'turnover of sales' contained in clause (36) of section 2 is read along with the opening portion of section 2, it is clear that what section 2 provides is that the said expression 'turnover of sales' should be given the same meaning as set out in clause (36) wherever it is used in that Act unless the context otherwise requires. In view of the provisions of section 20 of the Bombay General Clauses Act, 1904, the same meaning must be given to the said expression 'turnover of sales' in any notification issued under the Bombay Sales Tax Act unless the context otherwise requires (see Commissioner of Sales Tax v. Radha Dyeing and Printing Mills [1981] 48 STC 61. Section 41 of the Bombay Sales Tax Act confers powers on the State Government to exempt any specified class of sales or purchases from the payment of the whole or any part of any tax payable under the provisions of the Bombay Sales Tax Act subject to such conditions as it may impose. A notification was issued by the Finance Department of the then Government of Bombay, to which the present Government of Maharashtra is the successor Government, granting certain exemptions under the powers conferred by section 41 of the Bombay Sales Tax Act. Entry 9 of the said notification, as it stood from 29th September, 1963, to 12th October, 1972, read as follows :

----------------------------------------------------------------------Sr. Class of Exemption Conditions G.N.F.D. No. DurationNo. sales or whether of and datepurchases whole orpart of tax----------------------------------------------------------------------9. Sales of :- Whole of (1) If the goods STA 1059- 29-9-63 to(a) non- tax. mentioned in (iii) G-1, date.alcoholic column 2 were dated 28thdrinks or manufactured December,cooked food, by the dealer. 1959.not being (G.N.F.D.drinks or No. STA/cooked food 1071/131-falling under M-1, datedentry 14 in 13-10-1972.)Schedule A, orunder entry 4or 6 in ScheduleE to the Act;and(b) sweets and (2) If during thesweet-meats course of(including shri assessment ofkhand, basundi the dealer,and doodhpak) the Sales Taxfalling under Officer isentry 31 in satisfied thatSchedule C to the turnover ofthe Act, not sales of thebeing foodstuffs dealer duringfalling under the year underentry 6 in assessment wasSchedule E to less thanthe Act, by a Rs. 30,000.dealer who (3), (4) and (5).carried on the (6) The dealer shallbusiness of not be entitledconducting an to claim draw-eating house, back, set-offrestaurant, or refund inhotel, refresh- respect of thement room, or tax recoveredboarding from him orestablishment, payable on hisor a shop or purchases ofor establish- goods requiredment conducted for use inprimarily for the manufacturethe sale of of these goods,sweet meats the sales of(and who does which by himnot hold a are exemptedrecognition). from payment oftax under thisentry.----------------------------------------------------------------------

(Note : It is agreed that this is the correct entry as it stood from 29th September, 1963, to 12th October, 1972, although some publications contain errors in the printing of the said entry).

The submission of Mr. Jetly, the learned counsel for the Commissioner, who is the applicant before us, is that expression 'turnover of sales' used in condition No. 2 in column 4 of entry 9 of the said notification must be given the same meaning as is given to it under the definition of the said expression in clause (36) of section 2 of the Bombay Sales Tax Act. It is submitted by him that in condition No. 2 the expression 'turnover of sales' means the turnover of all sales, whether such sales are taxable or entitled to exemption and that if this meaning is given to the said expression, the respondent is not entitled to the exemption given under entry 9 because its turnover of all sales in the relevant period was found to be of Rs. 2,26,943 and in any event, was grossly in excess of the limit of Rs. 30,000 prescribed under condition No. 2 in column 4 of the said entry. It is urged by him that the meaning of that expression cannot be artificially curtailed as suggested by the respondent merely on the ground that in entry 9 of the said notification as it stood prior to September 29, 1963, the words used were 'turnover of all sales' and the word 'all' had been deleted from the said entry 9 as from September 29, 1963. It was further submitted by him that to limit the meaning of the said expression as aforesaid would amount to holding that after the said expression 'turnover of sales' the words 'of goods referred to in column 2 of the said entry' should be read into condition No. 2 and this was not permissible. According to Mr. Jetly the entire idea behind condition No. 2 was to limit the exemption to small dealers whose total turnover of sales did not exceed Rs. 30,000. It is the correctness of these submissions that we have to examine.

4. It is true that in the expression 'turnover of sales' in condition No. 2 of entry 9 of the said notification would normally be interpreted as 'the total turnover of sales' or 'turnover of all sales' in view of the definition given to the said expression in clause (36) of section 2 of the Bombay Sales Tax Act. The question, however, really is whether the context in which the said expression is used in the said entry requires that a more limited meaning should be given to the said expression, and in view of the language employed in the opening portion of section 2 of the Bombay Sales Tax Act and in section 20 of the said General Clauses Act, we shall have to examine whether a more limited meaning is required to be given to the said expression as used in the said entry. In this regard we find that the opening part of the notification itself furnishes considerable guidance. The said opening part runs thus :

'In exercise of the powers conferred by section 41 of the Bombay Sales Tax Act, 1959 (Bom. LI of 1959), the Government of Bombay hereby exempts from the payment of tax, to the extent specified in column 3 of the Schedule hereto appended, the classes of sales or purchases specified in column 2 thereof, on the conditions, if any, specified against each of such classes of sales in column 4 of the said Schedule.'

The aforesaid opening part of the notification makes it clear that the classes of sales or purchases which are intended to be covered in the said entries are described in column 2. In view of the fact that the said notification is an exemption notification issued under section 41, it is clear that the classes of sales or purchases referred to in the notification must be classes of sales or purchases which would have been liable to tax under the Bombay Sales Tax Act, 1959, but for the exemption granted to them. Column 2 sets out the description of the sales or purchases to which the exemption is granted but subject to the general qualification that all the sales or purchases referred to are sales or purchases which would have been liable to tax under the Bombay Sales Tax Act, but for the exemption given in the said notification. It is thus clear that the sales referred to in column 2 are only such sales which would not have been exempted from the payment of tax under the Bombay Sales Tax Act but for the exemption granted by the said notification. It is also clear that the conditions which have been prescribed only refer to the 'such classes of sales'. It is thus clear that the turnover of sales referred to in column 2 is only the turnover of sales which would have been liable to the levy of tax under the Bombay Sales Tax Act but for the said notification. It only refers to the turnover of taxable sales. In view of the context in which the expression 'turnover of sales' is used its meaning has to be limited as set out earlier and there is nothing in section 2 of the Bombay Sales Tax Act or section 20 of the General Clauses Act which goes against interpreting that phrase in this manner. Bearing in mind the same principle, it would be useful to consider how entry 9 stood prior to 12th September, 1963, because that would, again, indicate the context in which the language used in entry 9 as from 29th September, 1963, is to be interpreted. As pointed out by Maxwell on the Interpretation of Statutes (Twelfth Edition) at page 64, previous legislation may be relevant to the interpretation of later statutes in two ways. It is settled law that 'light may be thrown on the meaning of a phrase in a statute by reference to a specific phrase in an earlier statute dealing with the same subject-matter' (see page 66 of the aforesaid book). Reference may also be made to the Rules in Heydon's case (1584) 3 Co Rep 7a, set out by Craies on Statute Law (Seventh Edition, page 96). It has been observed by Caries that under these Rules one of the things which has to be considered for sure and true interpretation of all statutes in general is as to what was the common law before the making of the Act in question. Further observations show that the Rules in Heydon's case (1984) 3 Co Rep 7a are still in force and effect which the addition that regard must now be had not only to the common law but to the prior legislation and to the judicial interpretation thereof. It has been observed (page 96) by Craies, 'In interpreting an Act of Parliament you are entitled, and in many cases bound, to look to the state of the law at the date of the passing of the Act.' In view of this we cannot lose sight of the fact that in the said entry, as it stood earlier, the phrase employed in condition No. 3, which was corresponding condition to condition No. 2 of entry 9 as from 29th September, 1963, was 'the turnover of the registered dealer of all sales' and the word 'all' has been deleted in condition No. 2. We find it difficult to accept, as suggested by Mr. Jetly, that was done merely because the word 'all' was regarded as redundant. Looking to the language used in the opening part of the notification it appears to us that the word 'all' must have been deleted with a view to make it clear that the turnover of sales referred to was only the turnover of taxable sales, as set out by us earlier.

5. In view of what we have observed earlier, we are of the view that the Tribunal was right in coming to the conclusion that the exemption conferred by entry 9 was not lost merely on the ground that the total turnover of sales of the respondent exceeded Rs. 30,000. That exemption would be lost only where the turnover of taxable sales exceeded Rs. 30,000 during the relevant period.

6. Coming to question No. (2), the submission of Mr. Jetly is that in order to get the exemption conferred under entry 9 it is necessary that the eating house, restaurant, hotel, refreshment room, boarding establishment or the shop or establishment in question must be conducted primarily for the sale of sweetmeats. It was urged by him that since the hotel run by the respondent could not be said to be conducted primarily for the sale of sweetmeats, the respondent was not entitled to the exemption. In our view, this contention has to be stated to be rejected. It is difficult to conceive of a hotel, meaning an establishment providing both boarding and lodging or a refreshment room or an eating house or boarding establishment conducted primarily for the sale of sweetmeats. The primary business of a hotel would necessarily be to provide a boarding and lodging to its customers on payment of its charges. It is difficult to conceive of a hotel, which primarily sells sweetmeats. It is quite clear that the expression 'conducted primarily for the sale of sweetmeats' can apply only to establishments or shops of a like nature. Even from the point of view of grammar it is clear that the said phrase can qualify the noun 'establishment' or at best the noun 'shop' but nothing more. To hold that the said phrase also qualifies the earlier nouns like 'hotel', 'eating house', 'refreshment room' or 'boarding establishment' would result in violating the rules of grammer. In fact, Mr. Jetly fairly did not press his aforesaid contention any further.

7. In the result, the questions referred to us are answered as follows :

Question (1) : In the affirmative.

Question (2) : In the negative.

8. Both the questions are thus answered in favour of the respondent-dealer. The Commissioner to pay costs of the reference.


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