1. This is a petition under Article 226 of the Constitution for the issue of writs of certiorari and prohibition against Sales Tax Officer, Indore, and the State of Madhya Bharat submitted by the petitioner Mahabirprasad Durgaprasad Tamoli, Proprietor of Mahavir Cycle Stores, Mahatma Gandhi Road, Indore.
2. The petitioner owned a shop dealing in bicycle spare parts which he imports from outside the State for the purpose of sale within the State. The Sales Tax authorities found that the petitioner owns a 'pan shop' in Mhow. The petitioner's case in the petition with respect to this pan shop is that the said shop is 'looked after' by his son Babulal who is separate from him for the last 10 years and that the entire income of the said shop which is situated at Mhow, is received by Babulal who lived and messed separately from him. The Sales Tax authorities held the petitioner liable for Sales Tax in respect of his turnover of imported bicycle spare parts for the assessment years 1951-52, 1952-53, 1953-54.
The best judgment assessment was made by the said authority rejecting the contention of the petitioner that he was not liable to Sales Tax as his turnover did not exceed Rs. 5,000 during the periods of assessment referred to above. According to the Sales Tax Officer the turnover in each of these assessment years exceeded Rs. 5,000 by taking into account the total turnover in respect of the cycle shop and pan shop which both belonged to the petitioner and that he was liable under Section 3 (1) of the Madhya Bharat Sales Tax Act.
3. The Sales Tax Officer further levied penalty of Rs. 5 in respect of the assessment year 1951-52 and Rs. 10 in respect of each of the subsequent years under Section 14 (1) (a) for his failure to take a licence as required by Section 6 of the Act and also charged Rs. 5 as licence fee for each of these years. The petitioner contends:--
(i) that in as much as his turnover of imported goods did not exceed Rs. 5,000 during each of the three years for which the tax is levied (and that is the common ground) he is not liable at all for the payment of Sales Tax for these years and the order of Sales Tax Officer is 'illegal, ultra vires and arbitrary.'
(ii) That Section 2, (p), 2 (q) and Section 3 (1) of Madhya Bharat Sales Tax Act are ultra vires the Madhya Bharat Legislature and are therefore void as the said provisions offend against Article 14 of the Constitution by discriminating one importer from another and one dealer from another though they be similarly situated; and that the classification sought to be made on the basis of 'turnover' and 'taxable turnover' as, defined under the Act is wholly arbitrary without there being any 'nexus between the classification so made and the subject-matter or the object of the Act.'
4. Besides these three assessment years the petitioner was also served with a notice for the subsequent year 1954-55 in respect of the proposed assessment when the turnover of the imported goods did not exceed Rs. 5,000,
5. The petitioner says that inasmuch as Sales Tax Officer, Indore, is authorised to issue coercive processes against the petitioner for realisation of the Tax thus assessed and that inasmuch as the petitioner is being compelled on pain of prosecution and penalty to take a licence and to make returns of his turnover the petitioner is under constant threat and apprehension of illegal levy and demand of Sales Tax as well as penalty thus imposed and likely to be imposed and that there is no other efficacious and speedy remedy by which he could save himself except by 'means of the present petition.
6. The petitioner also complains that the petitioner's fundamental right to carry on trade guaranteed by Article 19(1)(g) of the Constitution is also violated.
7. The petitioner therefore prays for the issue of writs of certiorari in respect of the assessment years 1951-52, 1952-53 and 1953-54 for quashing the orders of assessment, penalty and licence fees and a writ of prohibition in respect of the year 1954-55, so long as his turnover of imported goods does not exceed Rs. 5,000.
8. In the return submitted on behalf of the opponent No. 1, the Sales Tax Officer, Irdore, raisted four preliminary objections which are as follows:--
(1) The petitioner has an equally efficacious remedy under Section 13 of the Act. He therefore cannot be allowed to short-circuit the procedure prescribed by law.
(2) Assessment proceedings for each of the year under consideration are separate, and a composite petition for all these years is not maintainable in law.
(3) Challenge under Article 19(1)(g) is not open to the petitioner in view of the decision of Supreme Court that a law imposing a tax cannot be called in question on the ground that it interferes with his right guaranteed under Article 19(1)(g).
(4) Article 14 of the Constitution cannot help the petitioner because the impugned law is equal as between equals.
9. In reply to the merits of the contention, it is contended that both the shops, viz., 'bicycle shop' and 'pan shop' belong to the petitioner and that his plea that it belonged to his separated son has no force. It is said that no such plea was ever raised by the petitioner during the proceedings of assessment. It was further contended that the best judgment assessment made in these proceedings were lawful and were not in any way arbitrary.
10. It was further submitted in the return that Section 2 (p), 2 (q) and 3 (1) of the Sales Tax Act in question are not void or ultra vires the Madhya Bharat Legislature on the ground of their alleged inconsistency with Article 14 of the Constitution. The classification made is said to be rational and that proper justification existed for the classification made by the Legislature having regard to the object sought to be achieved by the Act.
11. The opponent therefore prayed for the dismissal of the petition.
12. It is not disputed on behalf of the opponents that the petitioner was required to obtain a licence on payment of prescribed fee and was further required to obtain a registration certificate on payment of prescribed fee as provided in Section 6 of the Madhya Bharat Sales Tax Act. It is also not disputed that the Sales Tax Officer has levied penalty of Rs. 5 for the assessment year 1951-52 and Rs. 10 for two subsequent years under Section 14 (1) (a) of the Act.
13. In case the petitioner is not liable to tax as contended by him then the action of the Sales Tax Officer in requiring him to obtain a licence and registration certificate and in imposing penalty amounted to unreasonable restriction on his fundamental right to carry on trade as held in Mohammad Yasin v. Town Area Committee, Jalalabad, 1952 SCR 572; (AIR 1952 SC 115) (A), wherein Das, J., observed as follows;--
'This argument overlooks the difference between a tax like the income-tax and a licence fee for carrying on a business. A licence fee on a business not only takes away the property of the licencee but also operates as a restrictian on his right to carry on his business, for without payment of such fee the business 'cannot be carried on at all. This aspect of the matter was not raised or considered in the case relied on by the learned counsel, and that case, therefore, has no application to the facts of this case. Under Article 19(1)(g) the citizen has the right to carry on any occupation, trade or business which right under that clause is apparently to be unfettered.
The only restriction to this unfettered right is the authority of the State to make a law relating to the carrying on of such occupation, trade or business as mentioned in Clause (6) of that article as amended by the Constitution (First Amendment) Act, 1951. If therefore, the licence fee cannot be justified on the basis of any valid law no question of its reasonableness can arise, for an illegal impost must at all times be an unreasonable restriction and will necessarily infringe the right of the citizen to carry on his occupation, trade or business under Article 19(1)(g) and such infringement can properly be made the 'subject-matter of a challenge under Article 32 of the Constitution.'
The same view is reiterated in Bengal Immunity Co. Ltd. v. State of Bihar, (S) AIR 1955 SC 661 (B).
14. This also disposes of the other ground of the opponent that another remedy under the Act is open to the petitioner. The objection regarding an-other remedy under the Act cannot prevail where the complaint of the petitioner is as regards his fundamental right. Vide Himmatlal Harilal v. State off Madhya Pradesh, AIR 1954 SC 403 (C), which reiterated the view of the Supreme Court in. State of Bombay v. United Motors (India) Ltd., AIR 1953 SC 252 (D).
15. As regards the third objection, in its nature preliminary, that a composite petition in respect of different assessment years is not maintainable. The contention, to my mind is untenable. There is no reason why a composite petition of this nature is not maintainable where grounds of attack for all the years are the same, common questions arise for consideration and the orders in question are practically simultaneous. Reference is made by the opponent to the decision in Inder Singh v. State of Rajasthan, AIR 1954 Raj 185 (E). But even there the procedure was not held illegal.
16. On behalf of the petitioner Mr. Chaphekar raised only two contentions in his argument which are as follows:--
First:-- On a correct interpretation of provisions of Sections 2 (p), 2 (q) and 3 (1) read with other material provisions the petitioner is not liable to tax as his turnover of imported goods does not exceed Rs. 5,000.
Second:-- Assuming that, on a correct interpretation of the aforesaid provisions, he is so liable the same are void being contrary to Article 14 of the Constitution.
17. Other contentions which involve disputes as to fact are not pressed in these proceedings.
18. It will therefore be assumed for the purpose of these proceedings that the petitioner is the proprietor of the pan shop as well as a dealer in cycle spare parts. It is also clear from the figures of turnover that in ease the petitioner's taxable goods alone arc taken into consideration he will not be liable to tax while if both imported taxable goods and as well as other kind of goods such as betel leaves are taken into consideration, he reached the taxable limit so as to expose him to tax on his taxable turnover.
19. As regards the first contention the following provisions of the Madhya Bharat Act are material.
'Subject to the provisions of this Act, every dealer whose turnover in the previous year in respect of sales or supplies of goods exceeds:--
(a) in the case of a dealer who imports goods into Madhya Bharat, Rs. 5,000 (Rupees Five Thousand);
(b) in the case of a manufacturer, Rs. 5,000 (Rupees Five Thousand); and
(e) in the case of any other, Rs. 12,000 (Rupees Twelve Thousand);
shall be liable to pay tax under tin's Act on his taxable turnover in respect of sales or supplies of goods, effected in Madhya Bharat from the Ist day of May 1950:
''Provided that a dealer who comes from outside Madhya Bharat and carries on business during a Mela shall be liable to pay tax under this Act if his average sales during the course of the Mela exceed Rupees 450 per month.''
20. This is the charging provision. Section 4 provides for exemption from tax and Section 5 defines maximum and minimum limits of tax within which Government may determine tax payable from time to time by publication in the official Gazette.
21. Section 2 (p) defines the term taxable turnover thus:
'Taxable turnover' for a specified period means that part of a dealer's turnover for such period which remains after deducting therefrom --
(i) the sale of goods declared tax-free under Section 4 without payment of fees;
(ii) the sale of goods declared tax-free under Section 4 (3) with payment of fees;
(iii) turnover of goods for which no rate of tax has been notified or which have already been subjected to sales tax under this Act;
(iv) all such other deductions as may be prescribed in the rules made under this Act;
(v) 2 per centum of balance remaining after making all the above deductions.'
Section 2 (q) defines 'turnover':
'Turnover'' means the aggregate amount for which goods are either sold or supplied for the payment received in respect of a contract by a dealer:
Provided that the proceeds of the sales by a person of agricultural or horticultural produce, grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, or poultry or dairy products from fowls or animals kept by him shall be excluded from his turnover.
22. Mr. Chaphekar's contention is that 'turnover' in Section 3 with reference to the present case means turnover of imported taxable goods. What he contends, in other words, is that the charging provision classifies dealers into three categories. Namely, (i) Dealers who import goods, (ii) dealers who manufacture goods, (iii) any other kind of dealers and lays down the limit beyond which their liability to tax arises. According to him, therefore, in order that a dealer falling within a particular class should be held liable his turnover referable to that class should exceed the limit set down in the charging provision. The mere use of the word 'turnover' instead of any clearer and more precise words will not have the effect of changing the clear intention of the Legislature as can be deduced by reading the provision as a whole. He illustrated his submission by taking the case of a person who imported goods subject to tax amounting to Rs. 4,999 and sold non-imported goods worth Rs. 6,999.
Then according to Mr. Chaphekar he should not be liable to tax as his total quantum has not exceeded Rs. 12,000 and his import did not exceed Rs. 5,000. According to him it would practically lead to absurdity if a person who imports goods worth Rs. 10 and sold other kinds of goods worth Rs. 5,000 he would be liable to pay tax on Rs. 10. The word 'turnover' according to him in the context means turnover of imported taxable goods and unless the limit of Rs. 5,000 is reached in respect of such a turnover a dealer is not liable to tax at all. He re-hcs for this contention upon the decision in Ayodhyaprasad Suklal v. The Crown, 1951-2 STC 44: (AIR 1951 Nag 24) (F).
23. In that case one Ayodhyaprasad was prosecuted under Section 24 (1) of the C. P. and Rerar Sales Tax Act, 1947, in the Court of the Magistrate, First Class, Durg, on the allegation that he had carried an business as a dealer without a registration certificate as required by Section 8 of that Act, and the rules framed under Section 28.
24. This Ayodhyaprasad was a dealer. He imported goods worth Rs. 784 during the period between 25-10-1946 and 12th November 1947. The turnover of his business was Rs. 13,000. He admitted to have committed the offence under the aforesaid section when the particulars of the charge were explained to him and he was convicted by the Magistrate and sentenced to pay fine. He applied in revision to Additional District Magistrate. One of the contentions raised on his behalf was that he was not liable to tax as he had not imported goods above Rs. 5,000.
25. On behalf of the prosecution it was contended that the petitioner was an importer of goods within the definition of the term in Section 2 (k) and since his turnover of Rs. 13,000 exceeded the taxable quantum fixed in the case of an importer of goods, he is liable although the taxable quantum for the residuary category was Rs. 25,000.
26. The trying Magistrate put the petitioner in the category of an importer of goods by reason of his imports worth Rs. 746 and as his turnover was Rs. 13,000, i.e., far in excess of the taxable quantum fixed for an importer he held that he was bound to get himself registered as a dealer. Consequently he convicted him. The learned Additional District Magistrate rejecting his petition for revision, held that all that mattered was that he had dealt in taxable goods in the year under assessment. The turnover, according to him referred to the entire business and not merely the business as an importer of goods.
27. Before the High Court the petitioner raised the correctness of the view of the Courts below. Hemeon, Ag. C. J., and Sen, J., who delivered the judgment of the Division Bench on reference by Mudholkar, J., observed as follows:--
'The effect of Section 2 (i) and Rule 18 is to create three classes of dealers for purposes of taxation. The first class consists of persons who deal mainly in the sale of goods manufactured or produced by them. The turnover for this class is fixed at Rs. 5,000. The second class consists of persons who deal mainly in the sale of imported goods and the turnover of the imported goods is fixed at Rs. 5,000. The last class consists of persons whose turnover ;of goods manufactured or produced by themselves for sale or whose turnover of imported goods does not exceed Rs. 5,000. The applicant imported goods of the value of Rs. 784 only. He cannot therefore be said to be a deal-er whose main business was sale of imported goods. He really comes under the third category of dealers and taxable quantum for him is Rs. 25,000 fixed by Rule 18.
The contention of the prosecution that a dealer whose turnover of imported goods even though of a rupee will be liable to pay tax if the total turnover is in excess of Rs. 5,000 cannot be accepted. It is not based on a reasonable interpretation of Section 2 (i) and Rule 18. There is no reason why a person whose turnover of imported goods is negligible or does not exceed Rs. 5,000 should be liable to pay tax so long as the total turnover does not exceed Rs. 25,000.
It is a well-established rule that the subject is not to be taxed without clear words for that purpose. The Act is a fiscal enactment and has therefore to be construed strictly and any ambiguity or doubt arising out of its interpretation has to be resolved in favour of the subject. We may refer to the observations of the Judicial Committee in Oriental Bank Corporation v. Wright, (1880) 5 AC 842 (G).
28. This case clearly applies in this case. There is some difference in the language of some of the provisions of the Madhya Bharat and C, P. and Berar Sales Tax Act and Rules but the provisions material for consideration of the present controversy are practically the same.
29. The charging provision in the C. P. and Berar Sales Tax Act, 1947, is Section 4 (1) which reads as follows:--
'Every dealer whose turnover during the year preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax in accordance with the provisions of this Act on all sales effected after the commencement of this Act.''
30. Turnover and taxable turnover are defined in Section 2 (i) in C. P. and Berar Sales Tax Act, 1947, as follows:--
' 'Turnover' means the aggregate of the amounts of sale-prices and parts of sale-prices received or receivable by a dealer in respect of the sale or supply of goods or in respect of the sale or supply of goods in the carrying out of any contract, effected or made during the prescribed period; and the expression 'taxable turnover' means that part of a dealer's turnover during such period which remains after deducting therefrom --
(a) his turnover during that period on
(i) the sale of goods declared tax-free under Section 6;
(ii) sales to a registered dealer of goods declared by him in the prescribed form as being intended for re-sale by him, or of goods specified in such dealer's certificate of registration as being intended for use by him in the manufacture of any goods for sale, and of containers and other materials used in the packing of such goods;
(iii) sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910, of goods for use by it in generation or distribution of such energy;
(vi) such other sales as may be prescribed; and
(b) two per centum of the balance remaining after making the deductions allowed by Sub-clause (i) to (iv) of Clause (a).'
31. Taxable quantum is defined in Section 2(i) which is as follows:--
(i) 'Taxable quantum' means:--
(a) in relation to any dealer who himself manufactures or produces any goods for purposes of sale by himself, five thousand rupees; or
(b) in relation to dealers not falling within Clause (a), such sum as may be prescribed;
32. Rule 18 of the C. P. and Berar Sales Tax Act, 1947, prescribed what is referred to in Section 2 (i) (a) as follows:
'Taxable quantum in relation to importers of goods and other dealers, The taxable quantum in relation to dealers not falling within Sub-clause (a) of Clause (1) of Section 2 shall be Rs. 2,500 for importers of goods and Rs. 25,000 for other dealers.'
Section 5 reads as follows:--
(1) The tax payable ,by a dealer under this Act shall be levied on his taxable turnover at the rate of -
(a) twelve pies in the rupee in relation to the classes of goods mentioned in Part I of Scheulde I;
(b) three pies in the rupee in relation to the classes of goods mentioned in Part II of Scheulde 1;
(c) six pies in the rupee in relation to the classes of goods not included in Scheulde I or Scheulde II, (2) .....'
33. It will be clear by studying the charging provisions in the two Acts viz., Madhya Bharat and C. P. and Berar Acts, that in the Madhya Bharat Act the charging section itself makes detailed provision as to taxable quantum in the ease of three categories of importer, and manufacburer of goods and the residuary dealer while in the other Act the charging provision uses a term taxable quantum which in its definition provides for different categories when read along with Rule 18.
34. In my opinion the reasoning of the decision in the aforesaid case based though it be on the provisions of C. P, and Berar Sales Tax Act, 1947, applies in this case due to close similarity of provisions and this decision is a binding authority for this Court being a decision of the Division Bench.
35. If we re-write the Section 3 of the Madhya Bharat Sales Tax Act by dividing the section into three separate parts it may well be put as follows:--Subject to the provisions of this Act;
(1) Every importer of goods whose turnover in the previous year in respect of sales or supplies of goods exceeds Rs. 5,000 shall be liable to pay tax under this Act on his taxable turnover.
(2) Every manufacturer of goods whose turnover in the previous year in respect of sale or supply of goods exceeds Rs. 5,000 shall be liable to pay tax under this Act on his taxable turnover.
(3) Every other kind of dealer whose turnover is the previous year in respect of sale or supply of goods exceeds Rs. 12,000 shall be liable to pay tax under this Act on his taxable turnover.
36. Similar provisions will be worked out under the C. P. and Berar Sales Tax by analysing the provisions quoted above.
37. I am therefore inclined to accept the contention of Mr. Chaphckar regarding the applicability of the aforesaid decision of Nagpur High Court in this case. Following that decision I hold that in order to bring the business of selling cycle parts imported from outside the State, within the limits of taxability the turnover in respect of that business must exceed Rs. 5,000. It is not enough that the turnover in respect of imported cycle parts and other business exceeds Rs. 5,000.
38. Deputy Government Advocate Mr. Pafel's contention as regards the difference in the two Acts is not tenable in view of the aforesaid discussion.
39. As I have held in favour of the petitioner on the first question I do not propose to go into the other question raised by him on the alternative assumption.
40. The result is that the petition is allowed and the petitioner is held not liable to pay tax or to obtain licence and to pay registration fees in respect of the assessment years 1951-52, 1952-53 and 1953-54.
41. Orders passed by the Sales Tax Officer imposing penalty and ordering recovery of tax anil registration fees in respect of the same are hereby quashed.
42. The petitioner is further held not liable to pay Sales Tax in respect of the assessment year 1954-55 so long as his sales of imported cycle parts does not exceed Rs. 5,000 and a writ of prohibition shall issue preventing the Sales Tax Officer from recovering tax and imposing penalty so long as that contingency docs not occur. That under the circumstances of the case the parties to bear their own costs.
43. I agree.