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Commissioner of Sales Tax, Maharashtra State, Bombay Vs. East Asiatic Commercial Co. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax References Nos. 63 of 1979 and 20 and 21 of 1980 in Reference Applications Nos. 128 of 197
Judge
Reported in[1985]59STC10(Bom)
Acts Bombay Sales Tax Act, 1959 - Sections 7, 7(2), 8, 9, 10, 11, 11(1), 11(2), 12, 12(1), 14, 14(1), 23, 32 and 61(1); Central Sales Tax Act, 1956 - Sections 11
AppellantCommissioner of Sales Tax, Maharashtra State, Bombay;commissioner of Sales Tax
RespondentEast Asiatic Commercial Co.;laljee Poonshi and Co.
Excerpt:
sales tax - purchase tax - sections 7, 12, 14 and 61 of bombay sales tax act, 1959 and section 11 of central sales tax act, 1956 - dispute related to imposition of purchase tax on goods purchased under section 14 for purpose of resale - purchase tax imposed on ground that assessee contravened certificate (in form 16) given by him under section 12 - goods destroyed by fire due to which purchaser unable to resell them - whether purchase tax under section 14 leviable on purchase price of goods - in view of certificate in form 16 furnished by assessee sales tax leviable upon him-since further sales not possible no sales tax imposed and purchase tax leviable as last transaction was of purchase of goods - held, assessee liable to pay purchase tax. - - as far as the new form 16 is.....smt. sujata v. manohar, j.1. in sales tax reference no. 63 of 1979 the respondent m/s. east asiatic commercial company is a licensed dealer under the bombay sales tax act of 1959. the respondent had purchased, inter alia, 1478 bales of cotton for rs. 26,27,367 for resale against form 16 of the bombay sales tax rules, 1959. there was however, a fire on 13th may, 1974 in the compound of the factory where these bales were stored by the respondents. these bales of cotton were destroyed in the fire.2. in the assessment proceedings for the assessment period 1st july, 1973 to 30th june, 1974 the sales tax officer levied purchase tax in respect of the transaction of purchase of these bales under section 14 of the bombay sales tax act, 1959 on the ground that the respondent had contravened the.....
Judgment:

Smt. Sujata V. Manohar, J.

1. In Sales Tax Reference No. 63 of 1979 the respondent M/s. East Asiatic Commercial Company is a licensed dealer under the Bombay Sales Tax Act of 1959. The respondent had purchased, inter alia, 1478 bales of cotton for Rs. 26,27,367 for resale against form 16 of the Bombay Sales Tax Rules, 1959. There was however, a fire on 13th May, 1974 in the compound of the factory where these bales were stored by the respondents. These bales of cotton were destroyed in the fire.

2. In the assessment proceedings for the assessment period 1st July, 1973 to 30th June, 1974 the Sales Tax Officer levied purchase tax in respect of the transaction of purchase of these bales under section 14 of the Bombay Sales Tax Act, 1959 on the ground that the respondent had contravened the certificate given by him under section 12 of the Bombay Sales Tax Act, 1959 (in form 16) by not reselling the said cotton. The matter was taken by the respondent-assessee up to the Tribunal. The Tribunal has ultimately come to the conclusion that there was no contravention of the certificate in form 16 given by the respondent-assessee in the circumstances of the present case. From this decision of the Tribunal the following question has been referred to us under section 61(1) of the Bombay Sales Tax Act, 1959 :

'Whether on the facts and in the circumstances of the case, and on a true and correct interpretation of section 14 of the Bombay Sales Tax Act, 1959 the Tribunal was justified in holding that no purchase tax under the said section was leviable on the purchase price of the cotton purchased on form 16 and which was destroyed in fire ?'

3. In the case of Sales Tax Reference No. 20 of 1980 the respondent M/s. Laljee Poonshi and Company is a licensed dealer in castor oil. For the assessment period 31st October, 1970 to 19th October, 1971 (Samvat Year 2027) the assessee purchased castor oil for resale or export on furnishing certificates, inter alia, in form 16. Most of the oil which was so purchased by the assessee was resold or exported during the year within the period stipulated under form 16. In the course of purchase and sale of castor oil, it was necessary for the assessee to transfer the castor oil supplied in big tankers to barrels. The quantity exported had to be again put in tankers by pumping. The oil was transferred from tankers to shipholds. The quantity of oil resold had also to be transferred from tankers to barrels. As a result, in the course of handling of oil for export or resale a small percentage of castor oil remained at the bottom of the containers and was lost. Similarly a small percentage of castor oil was lost on account of spillage while being poured or transferred from one container to another. During the period in question, in respect of the purchases of castor oil made by the assessee under form 16, approximately 10 tons of castor oil was thus lost and was, therefore, not resold. The percentage of this loss as against the total purchases in form 16 comes to 3% (approximately). In any event the percentage of loss was less than 1/2%.

4. In the course of assessment proceedings the Sales Tax Officer levied purchase tax in respect of the quantity of castor oil thus lost under section 14 of the Bombay Sales Tax Act, 1959 on the ground that in respect of this quantity of castor oil, the assessee had contravened the declaration given in form 16 since he had not resold this quantity of castor oil. The matter ultimately went up to the Tribunal which held that the assessee had not contravened the declaration given by him in form 16. Hence no purchase tax was payable by him.

5. Sales Tax Reference No. 21 of 1980 relates to the same assessee M/s. Laljee Poonshi & Co. The period covered by Sales Tax Reference No. 21 of 1980 is the period 21st October, 1971 to 5th November, 1972 (Samvat Year 2028). Apart from the difference in the assessment period, the facts are the same as in Sales Tax Reference No. 20 of 1980. During this assessment period the assessee lost about 17 tons of castor oil in the course of resale and/or export. The quantity so lost amounts to about 3% of the quantity of castor oil purchased by the assessee against declaration in form 16. In any case the quantity so lost amounts to less than 1/2%. The Sales Tax Officer in the course of assessment proceedings levied purchase tax under section 14 of the Bombay Sales Tax Act, 1959 in respect of the castor oil so lost on the ground of contravention of the declaration given by the assessee in form 16. This matter was also taken by the assessee ultimately up to the Tribunal. The Tribunal came to the conclusion that in respect of this quantity of castor oil the assessee had not contravened the declaration given in form 16. From this decision of the Tribunal the present reference has come before us under the provisions of section 61(1) of the Bombay Sales Tax Act, 1959. The question referred to us in Sales Tax Reference No. 20 of 1980 and Sales Tax Reference No. 21 of 1980 is a common question to the following effect :

'Whether on the facts and in the circumstances of the case, and on a true interpretation of section 14 of the Bombay Sales Tax Act, 1959 the Tribunal was justified in holding that no purchase tax under the said section was leviable on that part of purchase price of castor oil purchased on form 16 but not resold as it was lost by sticking to the containers or falling out in drops during the process of resale or export ?'

6. We have therefore to consider whether purchase tax under section 14 of the Bombay Sales Tax Act, 1959 is attracted in the circumstances set out above. For the sake of convenience we will consider the provisions of section 14 of the Bombay Sales Tax Act, 1959 with reference to the facts of Sales Tax Reference No. 63 of 1979 which was a case where the cotton could not be resold because it was destroyed by fire.

7. Section 14, sub-section (1) of the Bombay Sales Tax Act, 1959 provides as follows :

'14. Liability to purchase tax for contravention of terms of certificate. - (1) Whether any dealer or commission agent has purchased any taxable goods under a certificate given by him under section 11 or 12 and contrary to such certificate, the goods are used for another purpose, or are not resold or despatched in the manner and within the period certified, then such dealer or commission agent shall be liable to pay purchase tax on the purchase price of the goods purchased under such certificate; and accordingly he shall include the purchase price thereof, in his turnover of purchases in his return under section 32 which he is furnish next thereafter :

Provided that, where purchase tax is payable by reason of the goods not being used or despatched in accordance with a certificate given under section 11, an amount equal to the tax levied under that section shall be set-off against the purchase tax so payable.'

8. In the present case, cotton had been purchased by the assessee on a certificate in form 16 to the effect that it was intended for resale. Cotton was however destroyed and so could not be resold. Has the assessee contravened the certificate And are the provisions of section 14 attracted in such a case ?

9. In order to arrive at a cotton interpretation of the provisions of section 14 it is necessary to examine very briefly and in general terms the scheme under the Bombay Sales Tax Act, 1959. Bearing in mind the various economic factors, the State Legislature has chosen to levy under the Bombay Sales Tax Act, 1959 a tax only on those person who carry on the business of buying or selling goods, who are designated as 'dealers' under the Act. Such dealers are divided into various category such as registered dealers, recognised dealers, dealers holding a licence, authorization and so on. For the purpose of the present reference, we are concerned with licensed dealers holding a licence under section 23 of the Bombay Sales Tax Act, 1959. Under section 23, where during the previous or current year, the turnover of sales by a registered dealer to other registered dealers exceeds fifty thousand rupees, he may apply for a licence under the Bombay Sales Tax Act, 1959. A licensed dealer therefore carries on the activity of reselling on a large scale. In order to avoid incidence of tax on all transactions of sale and resale of the same goods, a provision is made for giving of various declarations, certificates, etc., by the dealer in order to avoid repeated taxation of the same goods.

10. Under the Bombay Sales Tax Act, 1959 a tax is not levied on every transaction of sale. The Act provides, inter alia, for the levy of sales tax and general sales tax. Sales tax is levied normally at the stage of the first sale while general sales tax is levied at the stage of the last sale of goods. Sales tax and general sales tax are levied on goods which are specified under the Act in various schedules. Cotton falls under the second part of Schedule B to the Bombay Sales Tax Act, 1959. Castor oil falls under Part I of Schedule D. Both are liable to general sales tax.

11. Section 7 of the Bombay Sales Tax Act, 1959 deals with a single point levy of sales tax or general sales tax on declared goods. Under section 7(2) : 'There shall be levied a general sales tax on the turnover of sales of declared goods specified in Part II of Schedule B at the rate set out against each of them in column 3 thereof, but after deducting from such turnover, -

(i) * * *(ii) * * * (iii) sales of goods, or resale of goods ............................. to a licensed dealer ................. upon such dealer ............... furnishing a certificate as provided in section 12.'

12. In other words, for the purpose of levy of general sales tax under section 7(2) there will be excluded from the turnover of sales certain sales and resales of goods to licensed dealers.

13. Similarly section 9 of the Bombay Sales Tax Act, 1959 provides for levy of general sales tax on goods in Schedule D. Section 9(1) states, 'there shall be levied a general sales tax on the turnover of sales of goods specified in Part I of Schedule D at the rate set out against each of them in column 3 thereof, but after deducting from such turnover -

(i) * * *(ii) * * * (iii) sales of goods, or resale of goods .................. to a licensed dealer ................. upon such dealer ................ furnishing a certificate as provided in section 12.'

14. Sections 11 and 12 of the Bombay Sales Tax Act, 1959 prescribe the various certificates to be furnished by a dealer in order that the transaction of sale or purchase in question may be excluded from the turnover of sales as laid down in (inter alia) sections 7 and 9; or may attract a reduced rate of tax on such sales.

15. Section 11 deals with certain sales on which tax is payable at reduced rates; while section 12 dealers with furnishing of certain certificates without which the transaction in question cannot be deducted from the turnover of sales. It is necessary to examine the language of section 11 and 12 and the certificates required thereunder since this has a direct bearing on the interpretation of section 14.

16. Under section 11, 'where any dealer liable to pay tax under this Act, sells any taxable goods -

(1) to an authorised dealer, who certificate in the prescribed form, -

(a) that the goods will be despatched in the same form in which they were purchased and without doing anything to them which might amount to or result in a manufacture thereof, within three months from the date of purchase, to his own place of business outside the State, ..... (b) * * *

(1A) to a recognised dealer, who certifies in the prescribed form -

(a) * * *(b) that they (goods) are purchased by him for use by him within the State in the manufacture of taxable goods which will in fact be sold by him .......

(2) to a commission agent holding a permit who certifies in the prescribed form -

(a) * * *(b) that the goods are purchased by him as commission agent for his principal who is,

(i) * * *

(ii) a dealer whose place of business is outside the State and who is registered under the Central Sales Tax Act, 1956 and that the goods will be sold or will be used in the manufacture of goods for sale outside the State by the principal ............ then on such sale of goods, the dealer shall be liable to pay a sales tax at the rate of .........' (a reduce rate).

17. The certificates which are to be given under section 11 of the Bombay Sales Tax Act, 1959 are to be given in the forms which are prescribed in the Bombay Sales Tax Rules, 1959. The certificate to be given under section 11(1) must be in form 14-1. The certificate under section 11(1A) is required to be in form 15 and the certificate under section 11(2) is required to be in form 17. The language of the relevant part of the section is reproduced in the prescribed forms.

Section 12 is as follows :

'12. There shall not be deducted from the turnover of sales, sales of goods to an authorised dealer, or licensed dealer, or to a commission agent holding a permit purchasing on behalf of his principal, or to a registered dealer, as provided in sections 7, 8, 9 and 10, unless -

(a) the authorised dealer certifies in the prescribed form, that the goods are purchased for resale in the course of inter-State trade or commerce, or in the course of export out of the territory of India, and that such goods will be so resold within nine months from the date of such purchase or such further period as may be prescribed, by himself or by another authorised dealer to whom he resells the goods; or

* * * (c) the licensed dealer certificates in the prescribed form that the goods are intended -

(i) for resale by him otherwise than in the course of inter-State trade or commerce or export out of the territory of India, or

(ii) for resale by him in the course of inter-State trade or commerce or export out of the territory of India, within nine months from the date of such purchase; or

(d) the commission agent certifies in the prescribed form that the goods are purchased on behalf of his principal who -

(i) is an authorised dealer and the goods will be sold either by the principal himself or by another authorised dealer to whom that principal will sell the goods, in the course of inter-State trade or commerce, or in the course of export out of the territory of India, within nine months (or such further period as may be prescribed) from the date of their purchase by the commission agent, or

* * * (iii) is a licensed dealer who will resell the goods -

(1) otherwise than in the course of inter-State trade or commerce or export out of the territory of India, or

(2) in the course of inter-State trade or commerce or export out of the territory of India, within nine months from the date of such purchase,

and that the commission agent will despatch the goods to his principal or to the principal's order within three months from the date of their purchase, by the commission agent; or

(e) the registered dealer certifies in the prescribed form that the goods specified in Part II of Schedule D prescribed by him are intended for resale by him.'

Thus, a deduction from the turnover of sales as prescribed inter alia in sections 7 and 9 will not be granted unless a certificate as set out in section 12 is produced by the dealer concerned. The certificate required to be submitted under section 12(a) is in form 14, a certificate under section 12(c) is required to be in form 16, a certificate under section 12(d) is required to be in form 17 and a certificate under section 12(e) is required to be in form 16A. We are concerned in the present case with the provisions of section 12(c) and the certificate in form 16 given by the assessee.

18. As a result, on the requisite certificate being furnished under section 12 by the dealer concerned, he is not required to pay tax on the sale in respect of which such a certificate is furnished. If however, the purchaser who has furnished the certificate commits a breach of the certificate, then under section 14 of the Bombay Sales Tax Act, 1959 a purchase tax is payable by the purchaser who contravenes the certificate so given.

19. In the light of this background if we examine the provisions of section 14, it is clear that section 14 is a charging section for the levy of purchase tax. This section deals with contravention of various certificates required to be furnished under section 11 or section 12. The certificates are of different types. For example, the certificate in form 14-1 is given by an authorised dealer who certifies that he has purchased goods for the purpose of despatching them in the same form in which they are purchased, to his place of business outside the State without doing anything to the goods which may amount to manufacture. A certificate in form 14 is given by an authorised dealer to certify that the goods purchased will be resold by him in the course of inter-State trade or commerce or in the course of export within 9 months from the date of purchase. The contravention of the certificates therefore, can be of different types. Thus, there would be a contravention of the certificate given in form 14 when the goods are either not resold by the authorised dealer giving the certificate within nine months or if there are not resold in the course of inter-State trade or commerce or in the course of export. While there would be a contravention of a certificate given in form 14-1 if the goods are not despatched in the same form or if they are not despatched within the period prescribed etc. These various contraventions are covered by section 14 when it states that 'contrary to such certificate the goods are used for another purpose or are not resold or despatched in the manner and within the period certified'. This is an omnibus clause which covers various contraventions of various certificates given under sections 11 and 12. What is the meaning to be given to the phrase 'contrary to such certificates' In all certificates given under section 11 and 12, save and except for the certificates which are required to be given under section 12(c) and 12(e), the dealer concerned states that he will either use the goods in a certain manner or will resell the goods or export them, etc. In the case of some certificates the period within which the goods have to be so dealt with, is also prescribed. There is therefore a contravention of such a certificate when the goods are used for another purpose or when the goods are not resold or are not despatched in the manner specified or within the time specified, as the case may be. The phrase therefore in section 14 that 'contrary to such certificates the goods are used for another purpose' etc., do not convey anything more than the fact that the certificate is contravened by reasons of the goods being used for another purpose, etc. Since the certificates are of different types, the various contraventions are set out in section 14. In case of these certificates, therefore there is no difficulty in interpreting the phrase 'contrary to such certificate', as merely denoting a contravention, e.g., goods being used for another purpose, goods not being resold, goods not being despatched as per the certificate, or within the prescribed period.

20. In the case, however, of a certificate given by a licensed dealer under section 12(c) which is in form 16, the language used in the certificate is somewhat different. Under section 12(c) the licensed dealer has to certify in the prescribed form that the goods are intended for resale by him otherwise than in the course of inter-State trade or commerce or export out of the territory of India. In the alternative a licensed dealer is entitled to a deduction, if he certifies in the prescribed form that the goods are intended for resale by him in the course of inter-State trade or commerce or export out of the territory of India within 9 months from the date of such purchase. Similar language is used in section 12(e) also where a registered dealer certifies in the prescribed form that the goods specified in Part II of Schedule D purchased by him are intended for resale by him. The same language is repeated in form 16 which is the form in which the certificate has to be given by a licensed dealer under section 12(c) and in form 16A which is the form in which a certificate has to be given by a registered dealer under section 12(c).

21. It is submitted by Mr. R. V. Patel, learned counsel for the assessee in these references, that the certificate in form 16 (or 16A) merely describes the intention of the dealer concerned to resell the goods, etc. Hence, under section 14, contravention of the certificate can occur only in those cases where the dealer concerned changes his intention. It was submitted by him that in the case of such certificates the words 'contrary to such certificate' must be read as imposing an additional condition that the dealer has by his own volition changed his intention. In other words, it is submitted on behalf of the assessee, that in the case of a certificate given in form 16, in order to attract the provisions of section 14, it is necessary that there should be a change of intention on the part of the dealer concerned as a result of which the goods are not resold or are dealt with otherwise than in the manner prescribed in the certificate. Obviously, such an interpretation of the phrase 'contrary to such certificate' is neither possible nor required in the case of other certificates whose contravention is covered by the same section 14. If Mr. Patel's contention were to be accepted by us, we would be required to hold that the phrase 'contrary to such certificate' has to be given a special meaning in the case of contravention of certificates which are given in form 16 or 16A. In our view a section cannot be interpreted in manner which requires the same phrase occurring in that section being given different meanings when applied to different certificates which are covered under that section. In our view the types of contraventions are specified in section 14 in the words that succeed the phrase 'contrary to such certificates'. The phrase 'contrary to such certificate' itself, does not connote any specific variety of contravention - whether it is change of intention or anything, etc.

22. There are also other difficulties if we accept the contention of Mr. Patel that a contravention of the certificate in form 16 can occur only in cases where the dealer concerned by his own volition changes his intention. If intention is taken as a subjective desire on the part of the dealer concerned to act in a certain manner, then it becomes extremely difficult to ascertain when a contravention of a certificate in form 16 occurs. At the time when the certificate is given the dealer concurred can always be said to have this subjective desire to carry out the terms of the certificate. If at any subsequent date he acts contrary to the terms of the certificate the dealer may, in a number of cases, be able to prevent a purchase tax being levied by pleading that though he has acted contrary to the certificate his intention or his desire has always been to carry out the terms of the certificate. For example, he may say that although he desired to resell the goods, he could not find any buyer; or he may say that although he desired to resell the goods, such a sale was not commercially viable; or he may say that although he desired to resell the goods, the goods had been spoiled and he had to throw them away. Such an interpretation would make the levy of purchase tax dependent entirely on a subjective state of mind of the giver of the certificate. A taxing statute cannot be interpreted in a manner which requires the event which attracts tax dependent upon the state of mind of the tax-giver.

23. Such an interpretation is also not warranted by the language of section 12(c) or form 16. Under section 12(c) a licensed dealer is required to give a certificate that 'the goods are intended for resale by him'. The phrase 'intended for resale' does not necessarily refer to the subjective state of mind of the seller. The phrase 'intended for' is frequently used to connote 'meant for' or 'for the purpose of'. For example, when one says that a building is intended for a school, what one wants to convey is that the building is designed for the purpose of a school. To take another illustration, when one says that a fountain pen is intended for writing, one means that a fountain pen is meant for the purpose of writing. The words 'intended for' in this context do not refer to any subjective state of mind of the person making the pronouncement. In our view, in section 12(c) also, the words 'intended for' are used in this sense of goods being meant for or goods being purchased for the purpose of resale, etc.

24. Mr. Patel has emphasised the difference in the language used in section 12(c) as contrasted with the language used in other parts of section 12 and in section 11. He has submitted with some justification that the use of the phrase 'intended for' could have been easily avoided if the phrase was not used for conveying a different meaning. The legislature could have easily used phraseology similar to that used in other parts of section 11 and section 12. In this connection he had pointed out that section 12(c), prior to its amendment in the year 1962, was as follows :

'12. (c) the licensed dealer certifies in the prescribed form that the goods are intended -

(i) for resale by him otherwise than in the course of inter-State trade or commerce or export out of the territory of India, or * * *'

Though the material part of the language of old section 12(c) was similar to the language of the present section 12(c), the previous form 16 which was prescribed prior to 1962 used a somewhat different language. Under the old form 16 the licensed dealer giving a certificate under the old section 12(c) had to certify that the goods purchased by his 'will be resold within the State of Maharashtra and otherwise than in the course of inter-State trade or commerce or export out of the territory of India by me .........'. The certificate in the old form 16 made no reference to any intention. After the amendment of section 12(c), however, in 1962 a new form 16 has been prescribed which reproduces the exact language of new section 12(c). The new form 16 therefore requires a licensed dealer to certify that he intends to resale the goods, etc., as prescribed in that certificate.

25. What significance should be attached to this change in the language of form 16 The language of the material part of section 12(c) has remained the same. As far as the new form 16 is concerned, it has merely reproduced the language of the new section 12(c). When the new form simply reproduces the language of the relevant part of the new section in the same manner as other form reproduced the languages of the relevant parts of other sections, nothing more can be read into such change of language in the form other than the desire of the legislature to use the same language in the section as well as in the relevant form. The use of somewhat different language in the old form 16, on the other hand, supports the interpretation we have put. It would indicate that although in the old section 12(c) the words used were 'the goods are intended for resale', the form of the certificate merely required the dealer to state that the goods 'will be resold' by him in the manner stated, thus indicating that the certificate required under the old section 12(c) was nothing more than that the goods were purchased by the dealer for the purpose of resale by him as set out in that section. It is nobody's case that the old form 16 did not in any manner comply with the requirements of old section 12(c). If under old section 12(c) a licensed dealer was required to certify (i) that he would continue to have a desire to resell the goods until such time as the goods were resold and (ii) that he would resell the goods as prescribed, then under old section 12(c) he was required to give a certificate containing both these conditions. Under the old form 16 however, the so-called first condition was not included. If therefore, both these conditions were required to be in the certificate, old form 16 would have been a defective form. It is nobody's contention that the old form was defective. The old form therefore set out all the conditions required to be complied with by the dealer under the old section 12(c). The words 'intended for' in the old section 12(c) therefore did not refer to the subjective state of mind of the dealer. There is no reason why they should now refer to such a state of mind.

26. Our attention was drawn to the provisions of the Bombay Sales Tax Act, 1953 which was the act in force prior to the coming into effect of the Bombay Sales Tax Act, 1959. Under section 8 of the Bombay Sales Tax Act, 1953 a sales tax was levied on the turnover of sales of goods specified in column 1 of Schedule B after deducting from such turnover :

'8. (b) Sales of goods to a dealer who holds an authorisation and furnishes the selling dealer a certificate in the prescribed form declaring inter alia that the goods so sold to him are intended for being despatched by him, or by registered dealers to whom he sells the goods, to an address outside the State of Bombay.'

The form of the certificate was in form J which was prescribed under the Bombay Sales Tax Registration and Turnover Rules of 1954. Form J reproduced the language of section 8. The certificate required to be given by such a dealer had to state that the goods in question 'are intended for being sold by me .......... or registered dealers to whom I sell ............ the goods in the course of inter-State trade or commerce or in the course of export of the goods outside the territory of India ......'.

27. Section 10 of the 1953 Act related to the levy of purchase tax. The relevant parts of section 10 were as follows :

'10. Levy of purchase tax. - Subject of the provisions of section 7, there shall be levied a purchase tax on the turnover of purchases of goods specified in column 1 of Schedule B, at the rates, if any, specified against such goods in column 4 of the said Schedule, -

(a) * * * (b) where a certificate under clause (b) of section 8 has been furnished in respect of such goods and the purchasing dealer does not show to the satisfaction of the Collector that the goods have been despatched by him or by a person to whom he has sold the goods to an address outside the State of Bombay within a period of six months from the date of purchase by the dealer furnishing such certificate.'

Thus under section 10(b), purchase tax was attracted in cases where a certificate had been given under section 8(b) if the dealer did not show to the satisfaction of the Collector that the goods had been despatched by him as set out therein. There was no reference to any change of intention in section 10(b) for the purpose of attracting the levy of purchase tax although section 8(b) used the words 'intended for being despatched'. In the present section 14 of the Bombay Sales Tax Act, 1959 also, there is no reference to any change of intention for the purpose of levy of purpose tax. Such a reference to change of intention is sought to be introduced in section 14 by Mr. Patel through the interpretation of the words 'contrary to such certificate'.

28. In section 10(b) of the Bombay Sales Tax Act, 1953 there was no room for any argument as to whether the certificate given under section 8(b) had been contravened or not with reference to any change of intention on the part of the dealer. Section 10(b) clearly set out the nature of contravention which would attract a levy of purchase tax. In the present section 14, however, purchase tax is attracted by reason of contravention of various types of certificates and not just one certificate. Since section 14 covers various types of contraventions, it could not been in the same language as section 10(b) of the Bombay Sales Tax Act, 1953. In order to co-relate the type of contravention with the type of certificate which was given in a given case, the phraseology used is 'contrary to such certificate the goods are used for another purpose', etc. In our view it is not possible to conclude from the difference in the languages of section 10 of the Bombay Sales Tax Act, 1953 and section 14 of the Bombay Sales Tax Act, 1959 that in section 14 there is any reference to any desire on the part of the giver of the certificate to contravene or not to contravene the provisions of the certificate which he has given.

29. Even if we assume that the words 'contrary to such certificate' have a reference to the intention of the giver of the certificate, how can the existence of this intention be ascertained A Sales Tax Officer cannot go into the subjective state of mind of the assessee. The existence or non-existence of the intention will have to be judged from the conduct of the assessee. If the assessee has dealt with the goods, in such a manner that the goods cannot be resold, for example, his conduct will indicate that his intention to resell the goods has been abandoned. Hence Mr. Patel wants to add a further submission that the failure to resell must be on account of some voluntary act on the part of the assessee. If we assume the submission of Mr. Patel to be correct, there can be several instances where the assessee is not able to resell the goods, not because of his own conduct, but on account of extraneous circumstances. For example his inability to find a buyer would be something other than the voluntary act of the assessee. Similarly a change in the market conditions would be something other than the voluntary act of the assessee. In all such contingencies the assessee, although he has not resold the goods, will be able to submit that he has not contravened the certificate because he continues to hold the intention to resell. Such an interpretation would lead to absurd results.

30. The same submission can be examined from a slightly different point of view. We will take a case where the assessee is unable to resell the goods for reasons beyond his control. For example, if the commodity is of a perishable nature, it may be spoiled and the assessee may be unable to resell the goods. In such a situation, can the assessee say that he continues to have the intention of reselling the goods The assessee can say that he had every intention to resell the goods. But it was not possible for him to carry out such an intention. Hence once the goods are destroyed or dealt with otherwise than in accordance with the certificate, it is not open to the assessee to say that he continues to have the intention to comply with the certificate. By dealing with the goods in a manner contrary to the certificate, his original intention comes to an end. From this point of view also, once it is clear that the goods have been dealt with in such a manner that the intention cannot be carried out, the intention has come to an end. Hence there is contravention of the certificate given by the assessee, assuming that the certificate relates to his intention. The only relevant circumstance, therefore, which would indicate whether there is or there is not a contravention of the certificate is the one relating to the disposal of the goods. In other words, depending upon how the goods have been dealt with, the assessing authority has to decide whether the certificate has been contravened or not.

31. In the present case the cotton was purchased by the assessee with an intention to resell it. The cotton has been destroyed by fire. This brings to an end the intention of the assessee to resell the cotton. He cannot urged that he had not contravened the certificate because he continues to have the intention to resell the goods. It would be absurd to say that he wants to resell the cotton when the cotton is no longer in existence. The intention (assuming that such an intention is required) came to an end when the goods were destroyed by fire. There is therefore neither an existing intention to comply with the certificate nor have the goods been resold in accordance with the certificate. As a result to the fire, therefore once the goods are destroyed, they cannot be resold and there is a contravention of the certificate.

32. In this connection our attention was drawn to a decision of the Supreme Court in the case of B. K. Wadeyar, Sales Tax Officer, IV Division Licence Circle, Bombay v. Daulatram Rameshwarlal reported in : [1961]1SCR924 . In the case before the Supreme Court interpretation of section 10(b) of the Bombay Sales Tax Act, 1953 was in dispute. Under section 8(b) a deduction from the turnover of sales is permissible (inter alia) when the goods are sold by an authorised dealer to a registered dealer for being despatched outside the State. In the corresponding provisions of section 10(b) dealing with a contravention of a certificate under section 8(b), purchase tax became leviable on the dealer's failure to show that the person to whom he had sold the goods had not despatched the goods outside the State. The dispute related to the meaning of the word 'person' used in section 10(b). The Supreme Court held that reading section 10(b) in the light of section 8(b), the term 'person' referred to a registered dealer and not to any person. In the case before the Supreme Court the goods were in fact despatched outside the State within the prescribed time but they were not despatched by a registered dealer and hence the question relating to the interpretation of section 10(b) arose. One of the arguments before the Supreme Court was to the effect that the certificate under section 8(b) merely declared an intention. If, ultimately, actual despatch was made by some person who was not a registered dealer, it could not strictly be said that the declaration had not been carried out. In this connection the Supreme Court held that although a dealer may not have made a false declaration of his intention at the time when he gave the certificate, the fact remained that the intention as declared had not been carried out. The Supreme Court said : 'The scheme of the legislature clearly is that where the intention as declared has not been carried out purchase tax should be levied. To hold otherwise would be to make the declaration of the intention useless.' Similarly under section 14 of the present Act purchase tax is levied when the dealers intention is not carried out.

33. In the case of Hirji Vithaldas v. State of Gujarat, Sales Tax Reference 14 of 1970 decided by a Division Bench of the Gujarat High Court consisting of A. D. Desai and B. K. Mehta, JJ., dated 25th June, 1973, the Gujarat High Court was required to consider the same provisions of the Bombay Sales Tax Act, 1959 in somewhat similar circumstances. The assessee before the Gujarat High Court had also purchased cotton against certificates in form 16. Part of the cotton thus purchased was destroyed in a fire which broke out in the ginning factory of the assessee. The cotton which was destroyed could not be resold. The sales tax authorities levied purchase tax in respect of the cotton so destroyed. The Gujarat High Court, after considering the relevant provisions of the Bombay Sales Tax Act, 1959 came to the conclusion that when the goods have been destroyed by fire it is an act which was beyond the control of the dealer. In such circumstances, it could not be said that the dealer changed his intention in respect of the goods for which he had given an undertaking in the certificate. The Court said : 'The dealer still intends to sell the goods but he cannot carry out his intention because the goods have been destroyed by fire. So far section 12(1)(c) is concerned and reading the said section along with section 14, the fact of the intention of the dealer is all important because of the nature of the undertaking given by the licensed dealer'. With all due respect to the Gujarat High Court, we are unable to agree with the interpretation given by the Gujarat High Court to the language of the undertaking given by the licensed dealer. The certificate does not contain any statement relating to the present desires of the licensed dealer. It contains a statement relating to the manner in which the goods are to be utilised in future by the dealer who has given the certificate. There can therefore be no question of the dealer still intending to sell the goods when he is unable to carry out his intention. We would like to point out that once the goods have been destroyed by fire there can be no question of the dealer still intending to resell the goods. The goods have been destroyed. With the destruction of the goods, such intention as the dealer had in connection with the goods has also come to an end.

34. In our view the phrase 'goods are intended for resale' used in section 12(c) does not refer to any subjective state of mind of the licensed dealer. They refer to the purpose for which the goods are purchased by the licensed dealer. Similarly the words 'contrary to such certificate' in section 14(1) of the Bombay Sales Tax Act, 1959 have to be read along with words which follow describing the manner in which a certificate given under section 11 or 12 is contravened, thus inviting the levy of purchase tax. Therefore, in the case of Reference No. 63 of 1979, although the goods have been destroyed by fire and hence cannot be resold on account of circumstances beyond the control of the assessee, section 14 is attracted.

35. The transaction of sale of cotton by the vendor to the assessee is the last transaction of sale of this cotton. It would have attracted general sales tax. In view of the certificate in form 16 furnished by the assessee, general sales tax was not levied since further sales of this cotton were contemplated. Since further sales are not possible purchase tax is levied on the assessee instead of the general sales tax which would have been payable on the last transaction, had the certificate not been furnished.

36. In the case of Sales Tax Reference Nos. 20 and 21 of 1980 however, the position of the assessee is somewhat different. On the facts found by the Tribunal, it is clear that the there has been a loss of a very small quantity of castor oil purchased by the assessee under form 16 in the course of these goods being resold or being exported. In other words, the loss has occurred while the assessee was carrying out the terms of the certificate which he had given in form 16. The loss in these cases is such that it was an inevitable loss arising while dealing with the goods in the normal manner in the course of export or resale. The goods so lost form less than 1/2% of the goods which were purchased under form 16. If, while carrying out the terms of the certificate, by reselling or exporting the goods, there is some such inevitable loss which arises either because a very small quantity of oil remains at the bottom of the consider or leaks out or spills while the oil is being transferred from one container to another, it cannot be said that the assessee has failed to carry out the terms of the certificate in not reselling or exporting this small quantity of oil which is thus lost. Looking to the nature of the commodity and the manner in which it was required to be transported for the purpose of resale or export, such a loss was inevitable.

37. In such cases the assessee has in fact carried out the terms of the certificate given by him under form 16 in a substantial manner and he cannot be held accountable for every single drop of the commodity which he had purchased under form 16. In such circumstances he has, therefore, not contravened the certificate given by him in form 16. Hence purchase tax under section 14 is not leviable in the case of the assessee in Sales Tax References Nos. 20 and 21 of 1980.

38. In the premises the question referred to us are answered as follows :

The question in Reference No. 63 of 1979 is answered in the negative and against the assessee.

The question in Sales Tax References Nos. 20 and 21 of 1980 is answered in the affirmative and in favour of the assessee.

39. In the circumstances of the case there will be no order as to costs.


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