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The Commercial Tax Officer, Hyderabad-2 and ors. Vs. M.M. Sadi - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Appeal No. 103 of 1959
Judge
Reported inAIR1960AP246
ActsMadras Sales of Motor Spirit Taxation Act, 1939 - Sections 4(4), 26, 26(1) and 26(2); Madras Sales of Motor Spirit Taxation Rules - Rule 13; Constitution of India - Articles 19, 226 and 265
AppellantThe Commercial Tax Officer, Hyderabad-2 and ors.
RespondentM.M. Sadi
Appellant AdvocateP. Ramachandra Reddy, 3rd Govt. Pleader
Respondent AdvocateS. Suryaprakasam, Adv.
DispositionAppeal allowed
Excerpt:
(i) constitution - registration - sections 4 (4) and 26 of madras sales of motor spirit taxation act, 1939 and articles 19 and 265 of constitution of india - application to register as retail dealer under rule 7 rejected - rejection challenged - no absolute right conferred under section 4 (4) to get registered - discretion to reject application needs to be exercised according to dictates of justice and good conscience - held, rejection valid. (ii) levy of tax - articles 19 and 265 of constitution of india - taxing measure to be tested by provisions of article 265 and not by touchstone of article 19 - measures are valid if they are not in violation of article 265. - - an appeal preferred before the deputy commissioner of commercial taxes was unsuccessful and the revision to the board.....p. chandra reddy, c.j.1. this appeal is against the judgment of our learned brother, bhimasankaram j. directing the commercial tax officer, hyderabad-2, to register the respondent as a dealer in petrol and diesel oil.2. the respondent made an application before the commercial tax officer, hyderabad -2, to be registered as a retail dealer under rule 7 of the rules framed under the madras sales of motor spirit taxation act (vi of 1939) (hereinafter referred to as the act and the rules) which act and the rules have been extended to the state of andhra pradesh by state act v of 1958. the commercial tax officer, after conducting an enquiry rejected the application for registration on the ground that the respondent was a mere name-lender for the previous registration certificate holder for the.....
Judgment:

P. Chandra Reddy, C.J.

1. This appeal is against the judgment of our learned brother, Bhimasankaram J. directing the Commercial Tax Officer, Hyderabad-2, to register the respondent as a dealer in petrol and diesel oil.

2. The respondent made an application before the Commercial Tax Officer, Hyderabad -2, to be registered as a retail dealer under Rule 7 of the Rules framed under the Madras Sales of Motor Spirit Taxation Act (VI of 1939) (hereinafter referred to as the Act and the Rules) which Act and the rules have been extended to the State of Andhra Pradesh by State Act V of 1958. The Commercial Tax Officer, after conducting an enquiry rejected the application for registration on the ground that the respondent was a mere name-lender for the previous registration certificate holder for the sale of petrol by name Messrs. Honesty Automobiles, who have defaulted in the payment of sales tax to the tune of Rs. 12,816-55 np.

He also found that it was Messrs. Honesty Automobiles that was behind these proceedings and that the respondent was not a bona fide applicant. An appeal preferred before the Deputy Commissioner of Commercial Taxes was unsuccessful and the revision to the Board of Revenue by the aggrieved party was also rejected. Thereupon, the respondent moved this Court under Article 226 of the Constitution for the issuance of a writ of mandamus to direct the department to grant him his prayer.

3. Bhimasankaram J., who heard the writ petition, accepted the contentions urged in support of the respondent and directed the Revenue to register the respondent as a dealer in the sale of motor spirit and diesel oil. The department has preferred this appeal.

4. Before we launch upon a discussion as to the ambit of the relevant provisions of the aforesaid Act and rules framed thereunder, it is useful to refer to the background against which the writ petition out of which the present appeal has arisen came to be filed. In the year 1957, a number of dealers in motor spirit and diesel oil in the State of Andhra Pradesh including Messrs. Honesty Automobiles Ltd., filed petitions under Article 226 of the Constitution for the issuing of a writ of mandamus directing the State of Andhra Pradesh to refrain from imposing and collecting tax on the sales of motor spirit under the provisions of the Hyderabad Sales of Motor Spirit Taxation Regulation (XXIV of 1358-F), questioning the validity of this legislative measure on grounds which need not be set out here.

5. Pending the disposal of these petitions, the dealers obtained a stay of the imposition and collection of tax on the sales of motor spirit and diesel oil. The result was that while they could collect taxes from the consumers, they did not make it over to the Government and allowed large sums of money by way of sales tax to fall into arrears. Ultimately, these petitions were dismissed in August 1958 in the view that the constitutionality of the legislation under which the taxes were levied could not be challenged.

Shortly thereafter, Messrs. Honesty Automobiles which, as already pointed out, was in arrears to the extent of more than Rs. 12,000/- renounced their business and intimated this to the Burmah Shell and Co., who are the importers of the motor spirit. Immediately, the respondent applied to the company to give him an agency for the retail sale of this commodity. Accordingly, the Burmah Shell, and Co. decided to comply with his request and entered into an agreement with him for the sale of motor spirit. The respondent next applied to the department for registering him as a dealer for the purpose of the Act.

6. The proper officer refused to grant him his request for reasons which are set out hereunder in extenso.

'As already stated the previous Registration certificate holders have defaulted payment of sales tax of Rs. 12,816-55 np. They have yet to pay the arrears of sales tax. Sri M. M. Sadi had admitted before me that the lease of the site in question is still in the name of M/s Honesty Automobiles, that the Municipal Licence too continues to be in the name of M/s Honesty Automobiles, that he is continuing the business (battery charging, old types etc.,) of M/s Honesty Automobiles and that Masseeullah the servant working in M/s Honesty Automobiles continues to be in his service.

Sri M. M. Sadi has stated that he invested a capital of Rs. 3,000 from his own funds, but he has not produced any accounts or documents in support of his statement. He has produced a document relating to sale of furniture etc., by M/s Honesty Automobiles but peculiarly enough it does not contain a detailed list of the articles sold. He has stated that he has no relationship with the previous Registration Certificate holders, but on enquiry it is found that he is their close relation. He has stated that he did business in petrol in 1933-34 but neither himself nor the company could produce any proof in support of that statement. M/s Burmah Shell normally takes a security deposit of Rs. 1,000 for appointment as a dealer. But peculiarly enough, Sri M. M. Sadi has stated that he did not furnish any security deposit and that no security deposit is necessary. He has admitted that he is a pure and simple agriculturist for the last 25 years. To such a person M/s Burmah Shell have given the dealership for mere asking even without a deposit. This story cannot be so simple and plain as has been related. Unless M/s Honesty Automobiles have put up Sri M. M. Sadi, normally it would not be possible for him, a pure simple agriculturist for the last 25 years, to obtain dealership.

In the above circumstances, I have absolutely no hesitation in holding that Shi M. M. Sadi is only a nominee of the previous Registration Certificate holders Sri Abdul and Smt. Mehrunnisa who have defaulted payment of sales tax of Rs. 12,816-55 nps. that his application is not a bona fide one and that in the interest of State recoveries it is not desirable to grant Registration Certificate to him.

The application is therefore rejected.'

7. On appeal, the Deputy Commissioner of Commercial Taxes. Hyderabad (south) agreed with the findings of the Commercial Tax Officer and dismissed the appeal. We are obliged to extract the order of the Deputy Commissioner in view of the contention of the learned counsel for the respondent that the reasons assigned by the Commercial Tax Officer are fanciful and untenable. It runs as follows :

'This is an appeal against the order of C.T.O. II Circle, Hyderabad rejecting the application of the applicant for the grant of a Registration Certificate under the M. S. M. S. T. Act, for dealing in petrol as a retail dealer.

The appellant who was represented by Sri Suryaprakasam, advocate, was heard today. It was represented that the appellant who had come to know that M/s. Burmah Shell Co., were going to lease their petrol pump in Atjulgunj, entered into a contract with them for the sale of their petrol and oil at the said petrol pump and purchased the stock in trade from the previous owner of the said pump and got himself registered as a dealer under the G. S. T. Act and applied to the G. T. O. for the issue of a registration certificate under the M. S. M. S. T. Act and that the C. T. O. had refused to grant the registration certificate on irrelevant grounds. It was also represented that unlike under Section 12 (2) of the A. P. G. S. T. Act, 1957 where there is a provision for the registering authority to examine the bona fides of an application for registration and its rejection, there is no such provision, under the M. S. M. S. T. Act and the rules framed thereunder and that when once a dealer applied for registration and paid the required security deposit that can be demanded under Rule 8 of the M. S. M. S. T. Rules the Registering authority was bound to issue the registration certificate.

The C. T. O. is seen to have rejected the application of the appellant for registration as retail dealer in petrol for the reason that his application for registration was not bona fide and that he was nominee of the previous registration certificate holder who had defaulted the payment of taxes to the Government. The grounds on which the C. T. O. had come to this conclusion were (1) that the appellant could not adduce any evidence to show that e had invested capital of his own for starting the business; (2) that though he produced documents relating to the purchase of furniture etc. from the previous registration certificate holder, there were peculiarly enough no details of the exact articles purchased; (3) that enquiries showed that the appellant was a relative of the previous registration certificate holder; (4) that previously the appellant had not engaged himself in business; (5) that the servant working under the previous registration certificate holder continued to be in the appellant's service; (6) that no security deposit was taken by M/s Burmah Shell from the appellant; (7) that the lease of the site in which the petrol pump is situated continued to be in the name of the previous registration certificate holder.

The correctness of the objections taken under grounds Nos. 1 to 5 have not been disputed. In respect of ground No. 6 it was represented that the matter of taking security is purely one of confidence between M/s Burmah Shell Co., and the appellant. In regard to ground No. 7 it was represented that the appellant had taken a lease of the site in question from the Municipal Authorities several years ago and had sub-let it to the previous registration certificate holder and that as he now proposed to do business in petrol, he had taken over the use of the site.

The contention of the appellant that the issue of a registration certificate, under the M. S. M. S. T. Act cannot be refused and that where a dealer applies for the issue of registration certificate paying the required security deposit the Registering Authority has to issue a registration certificate automatically, is not acceptable. The power to grant thing carries with it inherently the power to refuse it.

The facts that the appellant is related to the previous registration certificate holder, that the appellant who in the past had never done business suddenly decided to step into the shoes of the previous registration certificate holder and that he could not adduce any evidence to show that he had put up the required capital for running the business ate all very significant, and the conclusion that the appellant is only a nominee of the previous registration certificate holder and that the application for registration is not bona fide is very legitimately drawn therefrom. I see no valid reason to interfere with the order of the C. T. O. The appeal petition is rejected.'

8. We have already stated that the Board Revenue had rejected the revision petition of the respondent. It is in this set up that our learned brother, Bhimasankaram J., has quashed the order of the concerned authorities and issued a mandate to them for the purpose mentioned above.

9. The first question that was debated before us was whether the departmental authorities had discretion to refuse to register the applicant as a dealer irrespective of considerations that might enter the grant of the request. It is urged by Sri Suryaprakasam, the learned counsel for the respondent, that the officers have no jurisdiction to refuse to register any applicant as a dealer. As the dispute in this enquiry has to be resolved with reference to certain sections of the Act and some of the rules framed thereunder it is convenient to refer to them in this contest.

10. The object of the 'Act, as stated in the preamble, is 'to provide for the levy of a tax on retail sales of motor spirit in the Province of Madras.' Section 3 is the charging section. In order to subserve the purpose of this Act, Section 4 (1) calls upon every dealer -- either a wholesale or a retail dealer--after the commencement of this Act, to get himself registered as such under the Act. Under Clause (b) of Sub-section (2) of Section 4, a retail dealer is prohibited from using or transferring for consumption any motor spirit stocked by him without its being included in his accounts and in the next return of retail sales submitted by him under Section 5 (b). Subsection (3) provides for an application for registration as an importer or a wholesale dealer or a retail dealer being made in the form prescribed by the rules. Sub-sections (4) and (6) are in these words :

(4) Registration may be made subject to such conditions, if any, as may be prescribed, including in the case of any applicant for registration as a retail dealer, the making of such deposit or the furnishing of such security as the registering authority may consider necessary to ensure the due payment of the tax which may from time to time be payable by him.

(6) Any registration under Sub-section (1) may be suspended or cancelled by such authority, for such reasons, and in such manner, as may be prescribed.

11. Section 3 requires every dealer to do certain, things, namely to keep books of account in the prescribed form and to submit a return every month in the prescribed form and before the prescribed date to such officer as may be prescribed giving details mentioned in that section. Section 7 empowers the Commercial Tax Officer to determine the tax payable by dealers. The aim of Section 8 is the same as Section 5 except that the former relates to wholesale dealers. Section 9 confers powers on officers authorised by the State Government to inspect accounts etc. Section 10 provides for penalties for disobedience of the provisions of the sections or the lawful directions issued by the authorities concerned. Section 11 provides for confiscation of motor spirit in certain contingencies. Under Section 26, power is vested in the State Government to make rules for the purpose of carrying out the intendment of the Act.

12. Thus, it is seen that the scheme of the Act is the levy and the prompt recovery of tax on the sale of motor spirit. The several provisions are conceived to enable the department to keep a check on the sales of the motor spirit and to get correct information regaining the sales to facilitate due assessment and collection of tax. The rules framed, under the Act are also designed to serve the same purpose.

13. We will now revert to Sub-section (4) of Section 4 of the Act which deals with the registration of dealers. We have already read that sub-section and the answer to the question we are called upon to decide in this enquiry depends upon the meaning to be given to the language used, namely, 'Registration may be made'. The question is whether these words vest a discretion in the officers concerned to register or whether they have no power to refuse to register, as contended by the learned counsel for the respondent and which contention prevailed with the learned Judge. In other words, is every applicant for registration entitled, as a matter of course, to get himself registered as a dealer without any option for the officers to register or refuse to register such an applicant

14. This has to be adjudged with reference to the meaning of the word 'may' employed in that sub-section. 'May' generally imports a discretion. Prima facie, it means 'permissible. Normally, every word', must be understood in its natural and grammatical sense -- and this expression is no exception to it --unless the context warrants the construction that it is used in an imperative sense.

15. The meaning of this word has been the subject of constant and conflicting interpretation by Courts. It would be a stupendous and fruitless task to undertake an examination of the various decisions to know the views of the several Judges dealing with, the subject and to reconcile them. The principles governing the interpretation of the expressions like may' or 'shall' etc. are clearly set out in Maxwell on the Interpretation of Statutes (Tenth edition) at page 239, and it may be usefully read here :

'Statutes which authorise persons to do acts for the benefit of others, or, as it is sometimes said for the public good or the advancement of justice, have often given rise to controversy when conferring the authority in terms simply enabling and not mandatory. In enacting1 that they 'may or 'shall' if they think fit or, 'shall have power,' or that 'it shall be lawful' for them to do such acts, a statute appears to use the language of mere permission, but it has been so often decided as to have become an axiom that in such cases such expression may have '--to say the least -- a compulsory force and so would seem to be modified by judicial exposition. On the other hand in some cases, the authorised person is invested with a discretion, and then these expressions seem divested of that compulsory force, and probably that is the prima facie meaning.'

Much to the same effect is a passage in 'Craies on Statute Law.' This is what the learned author says at page 251 :

'Sometimes, a statute, passed for the purpose of enabling something to be done, gives a discretionary power to the persons who are to carry out the purpose of the statute. Thus by Section 1 of the Sunday and Ragged Schools (Exemption from Rating) Act, 1869, 'every authority having power to levy rates upon the occupier of any building used exclusively as a Sunday-school or ragged school may exempt such building from any rate.' It was held in Bell v. Crane, (1873) 8 QB 481, that 'it was not the intention that the exemption under the Act should be absolute.' and that it was clear 'that the use of the phrase 'may exempt' was intended to give a discretion.'

16. We may also refer to a decision of a Bench of this Court in Sreeramamurthy v. Income-tax Officer. Vizianagram, 1956 Andh WR 752: (AIR 1957 Andh Era 114) on which counsel on either side placed much reliance. That case dealt with the scope of Section 45 of the Indian Income-lax Act. It was laid down (here inter alia that the discretionary power conferred by that section on the concerned authority was for public good. Therefore, a duty was cast on that officer to perform it under the relevant circumstances and the performance or the non-performance was not left to his option.

He was hound to consider the request and give a decision on the merits. The discretion should be exercised honestly and objectively and according to dictates of justice and reason. Both the learned Judges Subba Rao C. J. (as he then was) and Viswanatha Sastry, J., made copious extracts from the judgments of eminent Judges of English Courts and of the Supreme Court. The learned Judges referred to the dictum of Lord Cairns, L. C in well-known and oft-quoted case of Julius v. Bishop of Oxford, (1880) 5 AC 214, who stated the law in these terms:

'The words it shall be lawful' are not equivocal. They are plain and unambiguous. They confer a faculty or power, and they do not of themselves do more than confer a faculty or power. But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to he done,......... something in the of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so. Whether the power is one coupled with a duty such as I have described is a question which, according to our system of law, speaking generally, it falls to the Court of Queen's Bench to decide, on an application for a mandamus. And the words 'it shall be lawful' being according to their natural meaning permissive or enabling words only, it lies upon those, as it seems to me who contend that an obligation exists to exercise this power, to show in the circumstances of the case something which, according to the principles I have mentioned, creates this obligation.'

This passage states the circumstances under which power entrusted to a public authority shall be regarded as a power coupled with duty.

17. Viswanalha Sastry J., has also relied upon the observations of the Privy Council in Delhi and London Bank Ltd. v. Orchard, 4 Ind App 127 (PC), which runs as follows :

'There is no doubt that in some cases the word 'must' or the word 'shall' may be substituted for the word 'may' but that can be done only for the purpose of giving effect to the intention, of the Legislature; but in. the absence of proof of such intention, the word 'may' must be taken to be used in its natural, and therefore in a permissive and not in an obligatory sense.'

The learned Judge, in addition, had also referred to the principle contained in In re Baker, Nichols v. Baker, (1890) 44 Ch. D. 2C2, at p. 270 wherein Cotton L. J. remarked thus:

'I think that great misconception is caused by saying that in some cases 'may' means 'must'. It never can mean 'must' so long as the English language retains its meaning; but it gives a power, and then it may be a question in what cases, where a Judge has a power given to him by the word 'may' it becomes his duty to exercise it.

18. This doctrine is summed up by Das J. (as he then was) in the Province of Bombay v. K. S. Advani, : [1950]1SCR621 , after reviewing the case law on the subject, in these terms: 'The authorities show that in construing a power the Court will read the word 'may' as 'must' when the exercise of the power will be in furtherance of the interest of a third person for securing which the power was given. Enabling words are always potential and never in themselves significant of any obligation. They are read as compulsory where they are words to effectuate a legal right.'

19. It is thus clear that normally the word 'may' is regarded as language of permission and if is not significant of any obligation, it being understood as an enabling word. Though in its primary sense it is susceptible of permissive meaning, in certain circumstances, it is treated as obligatory. It may be construed as having compulsory force where ft is used to effectuate a legal right. Where the power is coupled with duty, it is not open to the public authority on whom the power is conferred to decline to consider the application for the relief It is the duty of the officer with whom the power is deposited for a public purpose to exercise it.

20. For the purpose of this enquiry, we may assume that authority is conferred on the department for the public good and, therefore, it is mandatory upon the officers concerned to exercise that power, that they have not got unfettered freedom to refuse to perform the duty; and being within the statute and entrusted with the power, they are obliged to exercise it when required to do so. But how far does this doctrine help the respondent? In our opinion it does not carry the respondent very far.

21. There is a well-marked distinction between declining to exercise a discretion and not exercising it in favour of a particular party on a consideration of the relevant matters. The principle adumbrated above is that when a statute vests power in an authority for a particular purpose, it calls for exercise of that power and it does not require the officer to exercise it in a particular manner. Of course, it the exercise is not according to justice and reason, that could be rectified, for, a capricious and arbitrary exercise of the discretion is no exercise at all and it is open to this Court to quash it or to call upon the officer to exercise it on sound lines and in accordance with common sense and justice.

22. In this view of ours, we are supported by the following passage in Maxwell on the Interpretation of Statutes (Tenth Edition) at page 249:

'It is important here to notice the distinction between a discretion to exercise a power and a discretion to determine only whether the occasion for it has arisen. This is illustrated by the construction of the enactment that justices may, if they think fit, issue a summons upon an information laid before them. Here the power is so far discretionary that they may grant or refuse the summons according as they judge, in the honest exercise of their discretion, that a prima facie credible case is shown for it, but its exercise is imperative, in the sense that they are bound to form an opinion, and, if their opinion is that such a case is shown, it is not competent to them to refuse to exercise it on extraneous grounds, such as that the prosecution is inadvisable. An arbitrary or capricious exercise of a discretion would be no exercise at all. Again, as regards the power to order the examination of witnesses abroad, 'the power was discretionary, not because the language was merely enabling, but because the legislature did not intend that the power should be exercised where injustice would result and the decision of the Court that no such consequence was likely to ensure was a fact essential to make the exercise of the power a duty.'

The rule is stated to the same effect in (1956) 2 Andh W.R. 752: (AIR 1957 Andh Pra 114) cited above. Thus, the obligation cast upon the authority is to exercise that jurisdiction when the demands of justice or public good require it and not to exercise it always in favour of the person invoking it irrespective of the merits of the application. It is not incumbent on the Commercial Tax Officer to exercise the jurisdiction in favour of a dealer who is not entitled to a registration on the consideration of the merits.

23. Sri Suryaprakasam next urged that as there are no indications either in the Act or in the rules as to the grounds upon which the discretion should be exercised, the proper inference is that there is no discretion at all left to the authorities concerned to refuse registration. If the intention of the legislature was to vest discretion in the officer concerned, rules for the guidance of the registering officer would have been laid down in the statute itself, argued the learned counsel. We are not impressed with this contention also. In the absence of such guidance, discretion should be exercised according to the dictates of justice and good conscience and on sound lines. The mere fact that guidance is not afforded for the exercise of discretion in the enactment cannot lead to the result that is attributed to it by the learned counsel.

24. The very case, which Sri Suryaprakasam has relied upon in support of his contention, viz. 1958 Andh WR 752 at p. 763: (AIR 1957 Andh Pra 114 at pp. 122-123) furnishes an answer to this submission. The above decision deals with Section 45 of the Indian Income-tax Act which empowers the proper officers to slay collection of tax. That section docs not contain indication as to the grounds on which the discretion has to be exercised. Discussing that aspect oi the matter, this is what Viswanatha Sastri J. observed:

'The public officer is, of course, not a judge exercising judicial functions and duties but he is to bear a judicial mind, that is a mind to determine what is fair and just in respect of the matter under consideration, when he is required to exercise his power by those for whose protection the power is conferred upon him. He must act in a judicial spirit and not capriciously or arbitrarily. His discretion must be exercised according to common sense and according to justice. As there is no indication in Section 45 of the Income-tax Act of the grounds upon which the discretion has to be exercised, it is not desirable to lay out any rules indicating the particular grooves in which the discretion should run. It is not proper to limit the operation of a rule expressed in such general terms by stating the circumstances or all the circumstances under which the Income-tax Officer should exercise his discretion to treat the assessee as not being in default.'

25. Discussing a similar question in Govindjl Vithaldas and Co v. Municipal Corporation, Ahmedabad : AIR1959Bom26 this is what Chagla C. J. observed:

'Even though the Legislature may not indicate the nature of that discretion and how it should be exercised, the principles of law which are well settled must be imported into the consideration of the question as to what discretion the Legislature has conferred upon the authority.'

Thus, the omission to set out the grounds on which the discretion is to be exercised does not mean that the statute has not vested a discretion in the concerned officer.

26. Sri Suryaprakasam next calls in aid Rules 7 to 10 in support of his submission that the Registering officer has no option but to register every applicant as a dealer. Rule 1 is in these words;

'A person who desires to be registered as an importer or wholesale dealer or as a retail dealer shall apply in Form A or Form B as the case may be to the registering authority of the district in which his place of business is situated. Separate applications shall be necessary for the registration of the same person in more than one of the above capacities.'

Rule 8 runs thus:

'(1) The Registering Authority may require an applicant for registration as a retail dealer to deposit in a Government treasury on amount which in the opinion of the registering authority will be equivalent to the tax payable by the retail dealer on the estimated average quantity of motor spirit expected to be sold by him in a month and the applicant shall thereupon deposit the amount and forward to the registering authority the receipt granted by the Government treasury.

(2) If at any time it is found that the actual average quantity of motor spirit sold by the retail dealer exceeds the estimated average, it shall be open to the registering authority by notice to require the retail dealer to make within the time specified therein an additional deposit so as to make the total deposit equivalent to the tax payable on such actual average.

(3) If at any time it is found that the actual average quantity of motor spirit sold by the retail dealer is below the estimated average, the registering authority shall refund so much of the deposit as is in excess of the tax payable on such actual average. * * * * *

Rule 9 reads:

'The registering authority may, in lieu of the deposit referred to in Rule 8, accept a mortgage of the applicant's immovable properly, if sufficient and suitable, to ensure the due realisation of the tax which may from time to time be payable by him. If a mortgage of immovable property is accepted as security, the mortgage-deed shall be executed in favour of the Crown and shall expressly confer on the Crown a power of sale without the intervention of the Court. Rule 10 says:

'The registering authority shall grant a registration certificate in Form C to every person who is registered as an importer or wholesale dealer and in Form D to every person who is registered as a retail dealer. Such certificate shall be held subject to the provisions of the Act and the rules made thereunder and to the restrictions and conditions specified in the certificate.'

27. We are unable to see how these rules can lend themselves to that interpretation. They only prescribe the procedure to be followed by an applicant and also lay down the conditions under which the registration may be made and the certificate issued. On the other hand, Rule 13 clearly establishes that the power to register or refuse to register is vested in the registering officer. That rule is in these words :

'Every order of the registering authority refusing to grant or amend a registration certificate shall be in writing and shall state the reasons for such refusal. A copy of such order shall be communicated to the applicant.'

In our considered opinion, Section 4(4) of the Act read with the relevant rules authorises the registering officer to refuse registration on the grounds germane to the purpose of the legislation. They contemplate refusal subject to the safeguard of reasons being given. The power of refusal is only incidental to the enforcement of taxation measures. There is nothing in the language of Section 4(4) of the Act which can compel us to come to the conclusion that it is compulsory for the authorised officers to register an applicant. There is also no scope for argument that arbitrary and capricious power is vested in the departmental officers, because they are required to give reasons for refusal under Rule 13. Further, right of appeal and revision is provided in the Act against such orders. Therefore, the discretion cannot be described as an unregulated or an unbriddled one.

28. The same result can be reached by comparing the wording of Sub-section (4) with that in cognate legislations. Section 12 of the Andhra Pradesh General Sales Tax Act, 1957, which deals with the registration of a dealer whose turnover is not less than Rs. 7,500, employs the word 'shall' and not 'may.' Explanation (c) under Section 2 of that Act reads thus:

'The prescribed authority shall register the applicant and issue to him a certificate in the prescribed form, if the prescribed authority is satisfied that the application is bona fide and is in order.' Again, Clause (f) of the same Explanation says;

'No application for registration under this subsection shall be refused, and no order under Clause (e) shall be made, unless the dealer concerned has been given an opportunity of being heard.' Turning to the General Sales Tax Act, 1956, Section 7 which provides for registration of dealers employs the word 'shall'. Sub-section (3) of Section 7 recites:

'If the authority to whom an application under Sub-section (1) or Sub-section (2) is made is satisfied that the application is in conformity with the provisions of tilts Act and the rules made thereunder, he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of Sub-section (1) of Section 8'.

We may also notice Sub-section (4) which obliges the proper authority to cancel a certificate of registration when the dealer to whom it has been granted has ceased to carry on business or has ceased to exist or, in the case of a dealer registered under subsection (2), has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason. It is thus plain that whenever the legislature wanted to indicate an obligation on the part of the officers to register the dealer, it has used the word 'shall'. In dealing with the topic of registration of dealers under the Madras Sales of Motor Spirit Taxation Act, 1939, the word 'may' is used when the legislature intended to confer: a discretion in the officer.

29. Another consideration which is pertinent in this context is that power is bestowed on the officer under Sub-section (6), section 4 to suspend or cancel any registration. Surely, if a dealer has an absolute and undeniable right to be registered in every case, the authority to suspend or cancel such registration would be inconsistent with it. We feel that subsection (6) gives a clue to the principle underlying Sub-section (4). This throws considerable light on the interpretation of Sub-section (4). For these reasons, we are unable to agree with the learned Judge that every dealer has an absolute right to be registered under Section 4(4) of the Act.

30. Nor can we accede to the view of the learned Judge that Rule 13 is ultra vires the rule-making power. In our judgment, that rule is not in any way inconsistent with the scheme of the Act and is intra vires the rule-making power of the Government. Section 26 of the Act, omitting the portions not relevant for the present enquiry, recites;

(1) The State Government may make rules to carry out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for

(b) the regulation of the sale of motor spirit forthe purpose of enforcing the provisions of this Act; xx xx xx (e) any other matter for which there is no provision or no sufficient provision in this Act and for which provision is, in the opinion of the State Government, necessary for giving effect to the purpose of this Act.

We are of opinion that Rule 13 could be framed either under Sub-section (1), since it is designed to carry out the purposes of the Act, or under Section 26(2) (b) or (c). Whatever might be the doubt as to the applicability of Clause (b), we are convinced that both Sub-section (1) and Clause (e) of Sub-section (2) empower the State Government to make a rule of that kind, i.e., of Rule 13. For these reasons we hold that it is discretionary for the Commercial Tax-Officer to effect registration under Sub-section (4) of Section 4 of the Act.

31. In this connection, we cannot ignore the principle that a Court has a duty to construe a statute in such a way as to effectuate the purpose and the object of an enactment and should avoid a construction which would furnish a chance of escape and a means of evasion. A passage occurring at page 114 of Maxwell's Interpretation of Statutes (Tenth Edition) is apposite in this context and may be read:

'The office of the Judge is to make such construction as will suppress the mischief, and advance the remedy, and to suppress all evasions for the continuance of the mischief. To carry out effectually the object of a statute, it must be so construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined.'

The rule stated at page 291 of the same book may also be noticed. It runs thus:

'At the same time, such Act, like penal Acts, are not to be so construed as furnish a chance of escape and a means of evasion..... .Indeed, as in criminal statutes, the widest meaning is given to the language when necessary to effectuate the intention of the legislature.'

Again, this is what the author stated at pages 236-237. 'A statute is designed', observed Lord Dunedin in Whitney v. Commissioners of Inland Revenue 1925-10 Tax Cas 88 at p. 110, 'to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable.' To a like effect is the following passage in Craies on Statute Law at pages 74-75:

'As Abbolt C.J., said in Fox v. Bishop of Chester (1824) 2 B and C. 635 (655) it is a 'well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance: consequently, as Lord Coleridge said in Wright v. Davies (1870) 1 C.P.D. 638 (646), if a contract is 'framed so as entirely to defeat the object of an Act of Parliament', such a contract, 'though not within its express prohibition', might very well he held to be impliedly forbidden by it. We accordingly find that a Court of law will not tolerate such an evasion of an Act of Parliament as amounts to a positive 'fraud upon the Act,' such an evasion being, as Lord Eldon described in (1824) 2B and C 635 (655) ' fraud on the law or an insult to an Act of Parliament,'

32. The principle enunciated by the Supreme Court in Commissioner of Income tax, Delhi v. Teja Singh, AIR 1939, S.C. 352, is in accordance with the principle stated above. Their Lordships of the Supreme Court cited with approval the following remarks of Fry L.J.:

'The only alternative construction offered to us would leave to this result, that the plain intention of the Legislature has entirely failed by reason of a slight inexactitude in the language of the section. If we were to adopt this construction, we should be construing the Act in order to defeat its object rather than with a view to carry its object into effect.'

x x x x x

It is thus abundantly plain that an interpretationwhich carries out the policy underlying a statute andwhich does not provide a means to defeat its objectshould be given by Courts. If we adopt the construction suggested by the counsel for the respondent,it will help effectively the dealers to evade the payment of sales tax and this Court cannot serve as aninstrument of escape.

33. There remains the question whether the order of refusal to register would in any way violate Article 19 of the Constitution. It is stated by the learned Counsel for the respondent that it is not the requirement as to registration that is obnoxious to Article 19, but it is the order in a given case refusing to register that would infringe the fundamental right guaranteed to a citizen under Article 19. In considering the submission, we have to hear in mind the finding of the Commercial Tax Officers as confirmed by the Deputy Commissioner and the Board of Revenue.

34. It is in the light of these findings that the controversy centering round Article 19 of the Constitution has to be resolved. The officer found on the material before him that the respondent is only a name-lender. In that situation, we have to proceed on the footing that it is the defaulter that is the real applicant and not the present respondent. That being so, the problem is easy of solution, because no citizen has a right to carry on trade without payment of taxes due by him. Article 19 does not lay down any immunity from taxation (See Ramjilal v. Income Tax Officer Mohindar Garh : [1951]19ITR174(SC) . A taxing measure, like the impugned I legislation, cannot be tested on the touch-stone of (Article 19.

The only test to be satisfied in regard to taxing legislations is that laid down in Article 265 of the Constitution. So long as that is not violated, the taxing statute cannot be challenged. That apart, it is surely open to the legislature to impose certain restrictions on the rights guaranteed to a citizen under Article 19. It cannot be posited that a trader can carry on his trade without payment of the dues. It is also pertinent to remember that dealers do not pay anything from out of their own pockets but make over the taxes which they collect from consumers on behalf of the Government. That being the situation, it is not necessary for us to consider whether a bona fide applicant could be deprived of his fundamental right to carry on trade.

35. We do not think that the decision in Chintamanrao v. State of Madhya Pradesh 1950 S.C.J. 571: (AIR 1951 SC 118) would afford any analogy here. In that case, the legislation which prohibited the manufacture of beedies in agricultural seasons was regarded as unduly interfering with the right of beedi manufacturers to carry on their business enshrined in Article 19. As we have just now observed, a dealer is not prevented from carrying on his trade so long as he parforms his part of the obligation, namely passing on the taxes he had realised from the consumers as an agent of the Government. We think that such a provision is valid and enforceable as incidental to the power to levy and collect tax and that it was not designed to unduly restrict the right of a citizen to carry on his business, (See Guruvaiah Naidu and Bros v. State of Madras, 1957-2 Mad L.J. 469: (AIR 1958 Mad 158)).

36. Lastly, we shall deal with the contention of the learned Counsel for the respondent that the reasons given by the Commercial Tax Officer are invalid and untenable and bear no relation to the real facts. At the outset, it should be remembered that the power of registration is entrusted to the departmental authorities and it is for them to consider an application for registration on its merits. If, the officer concerned does not bring a mind to determine 'what is fair and just in respect of the matter under consideration,' it could be treated as exercise, of no discretion at all and may be interfered with by this Court.

But, so long as the officer acts fairly and squarely and in a judicial spirit, there will be no ground to go behind the finding of fact arrived at by him here is no force in the complaint of the respondent that the finding of the Commercial Tax Officer that the applicant (the respondent herein) is related to the proprietor of M/s Honesty Automobiles, is not supported by any material. This was not canvassed before the Deputy Commissioner of Commercial Taxes as appears from his order.

37. Further, the chief point that was raised before the Deputy Commissioner was as to the jurisdiction of the Commercial Tax Officer to refuse to register the respondent as a dealer. A perusal of the orders of the Commercial Tax Officer and the Deputy Commissioner clearly establishes that there is no room for complaint that the refusal to register the respondent was arbitrary. In our opinion, the order of the Commercial Tax Officer as confirmed by the Deputy Commissioner is a well-reasoned one and the grounds offered in that behalf are quite valid and substantial. Even if it were open to us to go into questions of fact, we do not think there is any justification in disagreeing with the officers concerned in that behalf. On the material on record, we have no hesitation in concurring with them that it was merely a ruse on the part of M/s. Honesty Automobiles to evade the payment of arrears of tax and at the same time continue their business.

38. Even assuming that every person is entitled to be registered as a dealer as a matter of course, we do not think that the prerogative jurisdiction conferred on this Court under Article 226 of the Constitution could be exercised in a case like this were it is found that the respondent is only a name-lender and it was designed to perpetrate fraud on the Government. It should he remembered that jurisdiction is to be exercised only in furtherance of justice. For these reasons, we hold that the application of the respondent for registration was rightly rejected and there arc no grounds to direct the department to comply with the request of the respondent.

39. In the result, the appeal is allowed andthe writ petition is dismissed with costs throughout.Advocate's fee both before us and in the writ petitionbefore the learned Judge is fixed at Rs. 250/-


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