Harbans Singh, C.J.
1. The point of law requiring decision in this appeal under Clause 10 of the Letters Patent against an order of the learned single Judge, lies within a very narrow compass. Section 5(1) of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act), provides that subject to the provisions of the Act, tax is to be levied on the 'taxable turnover of a dealer' at the rate specified therein. 'Turnover', according to Clause (i) of Section 2 of the Act, includes the aggregate of the amount of sales...actually made by any dealer.... Certain sales are exempt and, therefore, taxable turnover is that aggregate of the amounts of sales, etc., on which tax is levied.
2. Sub-section (1-A) of Section 5 was inserted by Punjab Act 28 of 1965 and runs as under:
The State Government may by notification direct that in respect of such goods other than declared goods and with effect from such date as may be specified in the notification tax under Sub-section (1) shall be levied at the first stage of sale thereof; and on the issue of such notification the tax on such goods shall be levied accordingly:
Provided that no sale of such goods at a subsequent stage shall be exempt from tax under this Act unless the dealer effecting the sale at such subsequent stage furnishes to the Assessing Authority in the prescribed form and manner a certificate duly filled in and signed by the registered dealer from whom the goods were purchased.
3. A notification, as contemplated under Sub-section (1-A) of Section 5 of the Act (being No. S.O. 76/P.A. 46/48/S. 5/66), was issued on 30th March, 1966, reading as under:
In exercise of the powers conferred by Sub-section (1-A) of Section 5 of the Punjab General Sales Tax Act, 1948, the Governor of Punjab is pleased to direct that, with effect from the 1st April, 1966, the tax under Sub-section (1) of the said Section shall be levied at the first stage of the sale of goods, namely, vegetable ghee, cement, bricks..., which stage shall --
(a) In the case of a dealer who brings into the State of Punjab any such goods from any place outside that State, be the stage of sale when such dealer sells such goods for the first time within the State of Punjab;
(b) In the case of a dealer who manufactures such goods within the State of Punjab, be the stage of sale when such dealer sells such goods for the first time within the State of Punjab; and
(c) In the case of any other dealer who has not purchased such goods from a dealer referred to in the preceding clauses, be the stage at which such dealer sells such goods for the first time in the State of Punjab.
4. Now, in the present case, the item in dispute is vegetable ghee which is covered by the notification and, consequently, on the sale of vegetable ghee sales tax is to be levied, in accordance with the notification, at the first stage of the sale. In this case, admittedly, the first stage of the sale was at the time when the manufacturer, i.e., the Amritsar Sugar Mills Company Limited, Amritsar, sold the goods to Messrs. Rallia Ram Gurbax Rai, a firm of Tarn Taran, and Messrs. Krishan Lal Brij Mohan, a firm of Amritsar, both of whom were unregistered dealers. These firms hereinafter will be referred to as the 'unregistered firms'. Now, these unregistered firms, in turn, sold the same vegetable ghee which they had purchased from the manufacturer to Messrs. Mulakh Raj Nand Lal of Amritsar, a registered dealer and hereinafter referred to as the 'assessee'. The assessee, in due course, sold the goods to the consumers.
5. The question for determination is whether the assessee is liable to pay sales tax on the sale of these goods to the consumers, which goods had been purchased by him from the unregistered firms which, in turn, had purchased the same from the manufacturer. The answer to this question depends on the interpretation of the proviso to Sub-section (1-A) of Section 5 of the Act, reproduced above.
6. One thing is clear that the proviso does not deal with the first stage of sale for the obvious reason, because the person who sells a notified item at the first stage has to pay the sales tax. The proviso deals only with the sale of goods at a subsequent stage. Now, the sale of the goods by the manufacturer to the unregistered firms is a sale at the first stage for which the manufacturer is liable to the levy of sales tax. The sale by the unregistered firms to the assessee is a subsequent sale and so is the sale by the assessee to the consumers. One thing is conceded that the sale by the unregistered firms to the assessee is not liable to sales tax. In other words, the unregistered firms are not to pay any tax for the simple reason that the condition given in the proviso is fulfilled. This condition is that the dealer effecting the sale at a subsequent stage (which in this case would be the unregistered firms) furnishes to the Assessing Authority in the prescribed form and manner 'a certificate duly filled in and signed by the registered dealer from whom the goods were purchased'. The registered dealer in this case would have to be the manufacturer and there is no dispute that the manufacturer is a registered dealer. The manufacturer would, therefore, give a certificate to the unregistered firms that he will be liable to pay the sales tax. Now the form of the certificate is given in form S.T. XXII-A, which is to the following effect:
1. I/We...holder of Registration Certificate No....dealer in...have sold...(quantity) for Rs....to...in my/our sale delivery order No. ..., dated ...
2. I am/We are...in the State and shall be liable to the tax under the Punjab General Sales Tax Act, 1948, and I/we shall pay tax on the above sale.
The above goods have already suffered tax at the hands of M/s....who are registered dealers in the State holding Registration Certificate No....and from whom I purchased them, vide the sale delivery order No....dated...for Rs. ...
Signature of the selling dealer.
7. So far as an unregistered firm is concerned, this certificate would be signed by the manufacturer and to him the first part of paragraph 2 would be applicable, namely, the manufacturer would certify that he is carrying on the business of manufacturing in the State and he 'shall be liable' to pay tax on the above-mentioned sale. The second part of paragraph 2 would be scored out. Thus there is no dispute that, so far as the sale by the unregistered firms to the assessee is concerned, that would not be liable to sales tax.
8. Let us now go to the second stage, namely, sale by the assessee to the consumers. The admitted facts are that the sale is of an item covered by the abovesaid notification on which, according to the law, sales tax can be levied only at the first stage of the sale. Secondly, the goods sold are those on which admittedly the first seller, i.e., the manufacturer, has undertaken to pay the sales tax. The position taken by the department is that, under the proviso to Sub-section (1-A) of Section 5 of the Act, the assessee will not be exempted from payment of sales tax, because he cannot produce the certificate in form S.T. XXII-A that he had purchased the goods which had suffered tax at the hands of the manufacturer, who is a registered dealer, as is required by the second part of paragraph 2 of the form. The first part of the form would not be applicable to the unregistered firms. This view has been accepted by the learned single Judge and the present appeal has been filed challenging that order.
9. The main argument of the learned counsel for the assessee-appellant is that the very object of Sub-section (1-A) of Section 5 of the Act is that with regard to some important goods, sales tax should be levied only at one stage and the goods of this type have to be notified by the State Government and they have to indicate the stage at which the sales tax would be levied. Reading the notification and Sub-section (1-A) of Section 5 of the Act, it is clear that on vegetable ghee sales tax is to be levied only at the first stage of the sale and at no subsequent stage, provided that a certificate is issued as given in the proviso to Sub-section (1-A).
10. For interpreting the proviso, it is necessary to keep in mind the object of insistence on such a certificate. That object obviously is that before a person at the subsequent stage of sale can get exemption from payment of sales tax, it must be clear that sales tax had been paid or had been undertaken to be paid by a person making the sale at the first stage and inasmuch as the State authorities have control only over the registered dealers, consequently, the certificate to the effect that somebody has paid or has undertaken to pay the sales tax at the first stage of the sale, must be by a registered dealer. Does the proviso mean that all subsequent hands through which the goods have to pass till they go to the consumers must be registered dealers? Apparently, there would be no fun in insisting on this for the simple reason that so long as the identity of the goods is there and the payment of the sales tax at the first stage is ensured, the object of the legislation is satisfied. If we hold otherwise, that would run counter to the very object with which Sub-section (1-A) of Section 5 and the notification were issued, namely, that important goods should not be levied sales tax at more than one stage. Taking all these things into consideration, we are of the view that the words 'registered dealer' when used at the end of the proviso mean a registered dealer 'from whom the goods were (originally) purchased' or 'from whom the goods were purchased (at the first stage)'. The word 'originally' or the words 'at the first stage' can be read into the proviso for clarification of the meaning of the same. It is now well-settled that such words of clarification can be read if they have to be read to bring out the object of the legislation or to prevent the mischief which it was desired to prevent.
11. In the present case, originally the assessee gave the certificate which he had obtained from the unregistered firm. This certificate was not placed on the file but was shown to us by the learned counsel for the department. That was a certificate given by the unregistered dealer certifying that the goods that were the subject-matter of the sale had suffered tax at the hands of Messrs. Amritsar Sugar Mills Co. Limited, Amritsar, who were registered dealers in the State, holding registration certificate and that it was from this firm that the unregistered firm had purchased the goods vide delivery orders detailed therein. When a notice was issued to the assessee why he should not be asked to pay the tax, he also produced the certificate which was originally given by Messrs. Amritsar Sugar Mills Co. Limited, i.e., the manufacturer, to the unregistered firms. One such certificate is annexure A. This details the quantity of the goods, value thereof, voucher numbers and dates of sales to Messrs. Rallia Ram Gurbax Rai of Tarn Taran vide delivery orders mentioned therein. In this certificate it is certified that the manufacturer is carrying on business in the State and shall be liable to pay tax under the Punjab General Sales Tax Act, 1948. This is the real certificate that is required and the other certificate issued by the unregistered firm is meant to connect the first certificate with the sale made by them. The mere fact that in form S.T. XXII-A there is a column indicating that the person certifying has to give his certificate number, would not show that the second certificate must necessarily be by a registered dealer. It has also to be kept in mind that there can be no particular reason why, if the first sale or some intervening sale is in favour of an unregistered dealer, who, for example, is a person whose outturn is such that no registration under the Act is necessary, the notified goods should be subject to payment of sales tax over and over again contrary to the declared policy of the Legislature. As already discussed, the idea of this certificate, as given in the proviso to Sub-section (1-A), seems to be to ensure that the levy of sales tax does not escape at the first stage.
12. Both the learned counsel urged that there are no decisions on the point in dispute and the matter has to be dealt with on the basic principles, and taking into consideration the very object on the basis of which Sub-section (1-A) of Section 5 of the Act has been incorporated, we have no doubt in our mind that the only proper interpretation is that the dealer making the sale at the first stage, who has to furnish a certificate, must be a registered dealer and thereafter the certificates are required only to connect the subsequent sale with the first sale. The words 'registered dealer' in the proviso relate to the registered dealer who has effected the sale at the first stage.
13. For the reasons given above, we accept this appeal, set aside the order of the learned single Judge and quash the impugned order of the departmental authorities levying sales tax on the goods sold by the assessee, which fall under the notified items and on which sales tax has been paid at the first stage. As the point in dispute was not free from difficulty, there would be no order as to costs.