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Polestar Electronic (Pvt.) Ltd. Vs. Addl. Commissioner Sales Tax and anr. (C.A. No. 1290 of 1977). Union of India and anr. V. J. K. Synthetics Ltd. (C.A. No. 111 of 1977). Delhi Cloth and General Mills Co. Ltd. V. Sales Tax Officer (C.A. No. 1352 of 1977). Blue Star Ltd. V. Assessing Authority. (C.A. No. 1110 of 1977). Delhi Cloth and General Mills Co. Ltd. V. Sales Tax Officer. (C.A. No. 1085 of 1977). Deepak Oil Mills V. Sales Tax Officer (C.A. No. 236 and 456 of 1976). Trading Engineers V. Sales Tax of - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtSupreme Court of India
Decided On
Case NumberC.A. Nos. 18 of 1975, 111 of 1977, 236 & 458 of 1976, 816 of 1976 1085 of 1977, 1110 of 1977, 12
Reported in(1978)7CTR(SC)0020B
AppellantPolestar Electronic (Pvt.) Ltd.
RespondentAddl. Commissioner Sales Tax and anr. (C.A. No. 1290 of 1977). Union of India and anr. V. J. K.
Cases ReferredModi Spinning and Weaving Mills Co. Ltd. vs. Commissioner of
Excerpt:
- indian evidence act, 1872.section 9: [dr. arijit pasayat & dr.mukundakam sharma,jj] test identification parade object of held, . the object of conducting t.i. parade is two fold. first is to enable the witnesses to satisfy themselves that the prisoner whom they suspect is really the one who was seen by them in connection with the commission of the crime. second is to satisfy the investigating authorities that the suspect is the real person whom the witnesses meant for the court. they are meant for investigation purpose.indian penal code, 1890.sections 302, 376 (2)(g) & 397: death sentence - rarest of rare case - accused found involved in incident of robbery, rape and murder - five members of a family were brutally murdered in incident and minor girl was dragged in open field, gang.....p. n. bhagwati, j. - these appeals raise a short but interesting question of law relating to the interpretation of s. 5(2)(a)(ii) of the bengal finance (sales tax) act, 1941 as applied it the union territory of delhi (hereinafter, for the sake of convenience referred to as delhi). the act was extended to delhi subject to certain modifications by a notification dated 28th april, 1951 issued by the central government in exercise of the powers conferred by s. 2 of the part c states (laws) act, 1950 and it came into force in delhi on 28th may, 1951 by virtue of a notification issued under s. 1, sub-s. (3) of the act. there have been several amendments made in the act from time to time since the date of its application to delhi but we are concerned in these appeals only with the assessment.....
Judgment:

P. N. Bhagwati, J. - These appeals raise a short but interesting question of law relating to the interpretation of S. 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 as applied it the Union Territory of Delhi (hereinafter, for the sake of convenience referred to as Delhi). The Act was extended to Delhi subject to certain modifications by a Notification dated 28th April, 1951 issued by the Central Government in exercise of the powers conferred by S. 2 of the Part C States (Laws) Act, 1950 and it came into force in Delhi on 28th May, 1951 by virtue of a Notification issued under S. 1, sub-S. (3) of the Act. There have been several amendments made in the Act from time to time since the date of its application to Delhi but we are concerned in these appeals only with the assessment periods 1971-72 and 1972-73 and hence we shall confine ourselves to the relevant provisions of the Act as they stood during these assessment periods.

2. S. 2 enacted the definition provision and clause (c) of the section defined a dealer to mean any person who carries on the business of selling goods in Delhi. Clause (g) of S. 2 contained the definition of sale. It was a definition in general terms and it made no reference to the situs of the sale. It did not limit the definition to a sale inside Delhi. There was an explanation to this clause which laid down as to when a sale or purchase shall be deemed to take place inside Delhi. S. 4, sub-S. (1) provided that every dealer whose gross turnover during the year immediately proceeding the commencement of the Act exceeded the taxable quantum at any time within such year shall be liable to pay tax under the Act on all sales effected after the date notified by the Chief Commissioner and sub-S. (2) of that section said that every dealer to whom sub S. (1) does not apply, shall, if his gross turn over calculated from the commencement of any year exceeds the taxable quantum any time within such year, be liable to pay tax under the Act, on the expiry of two months from the date on which such gross turnover first exceeds the taxable quantum on all sales effected after such expiry. Sub-S. (5) of S. 4 defined taxable quantum to mean in relation to any dealer who imports for sale any goods into Delhi or manufactures or produces any goods for sale, regardless of the value of the goods imported, manufactured or produced, ten thousand rupees, and in relation to any other dealer, thirty thousand rupees. Sub-S. (1) of S. 5 provided different rates of tax, according as the goods fell within one category of another, at which the tax payable by a dealer shall be levied on his taxable turnover. What is taxable turnover was defined in sub-S. (2) of S. 5 to mean :

'that part of a dealers gross turnover during any period which remains after deducting therefrom. -

(a) his turnover during that period on :

(i) the sale of goods declared tax-free under S. 6 :

(ii) sales to a registered dealer of goods of the class of classes specified in the certificate of registration of such dealer, as being intended for re-sale by him or for use by him as raw-materials in the manufacture of goods for sale; and of containers of other materials for the packing of goods of the class or classes so specified for sale :

Provided that in the case of such sales a declaration dully filled up and signed by the registered dealer to whom the goods are sold and obtaining the prescribed form particulars on a prescribed from obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods :

Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for re-sale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilised by him for any other purpose, the price of the goods purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer.

(iii) Sales to a registered dealer engaged in the business of raising coal, of any goods which are shown to the satisfaction of the Commissioner to be required directly for use in connection with the raising of coal;

(iv) 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 (IX of 1910) of goods for use by it in the generation or distribution of such energy;

(v) Sales of goods which are shown to the satisfaction of the Commissioner to have been dispatched by, or on behalf of dealer to an address outside the (Union Territory) of Delhi;

(vi) such other sales as may be prescribed;

This was the definition until 28th May, 1972, when by Finance Act, 1972 the main enactment, in S. 5(2)(a)(ii) was substituted by the following provision :

'(2) In this Act the expressing 'taxable turnover' means that part of a dealers gross turnover during any period which remains after deducting therefrom. -

(a) his turnover during that period on -

(i) x x x

(ii) sales to a registered dealer -

of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or 'for use by him as raw-materials in the manufacture in the Union territory of Delhi (hereinafter in this sub-clause referred to as Delhi), of goods (other than goods declared tax free under S. 6) :-

(A) for sale inside Delhi; or

(B) for sale in the course of inter-State trade or commerce, being a sale occasioning or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or

(C) for sale in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents of title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; and

of containers or other materials for the packing of goods of the class or classes so specified for sale';

S. 7, sub-S. (1) laid down that no dealer shall, while being liable to pay tax under S. 4, carry on business as a dealer unless he had been registered and possesses a registration certificate and sub-S. (3) of that section provided for grant of a certificate if registration to a dealer on an application being made by him under sub-S. (2) and said that such certificate of registration shall specify the class or classes of goods for the purposes of sub-clauses (ii) of clause (a) of sub-S. (2) of S. 5. S. 26 conferred power on the Chief Commer. to make rules for carrying out the purposes of the Act and in exercise of this power, the Delhi Sales Tax Rules, 1951 were made by the Chief Commissioner. These rules prescribed not only the form of the application for registration but also the from of the certificate of registration. Clause (3) of the form of the certificate of registration provided that the sale of the specified goods to the dealer 'for purposes for manufacture' and 'for re-sale' will be free of tax. This was in conformity with the requirement of S. 5(2)(a)(ii) as it stood prior to its amendment and though S. 5(2)(a)(ii) was substituted by the Finance Act of 1972, no amendment was made in the from of the certificate of registration and it was only on 29th March, 1973 that clause (3) of the from of the certificate of registration was substituted so as to declare that the sales of the specified goods to the dealer will be free of tax when they are 'for use as raw materials in the manufacture in the Union Territory of Delhi of goods for sale in the manner specified in S. 5(2)(a)(ii)' or 'for resale'. Similarly, the from of declaration to be furnished by the purchasing dealer in order to entitle, the dealer who had sold the goods to claim deduction of the amount in respect of such sales under S. 5(2)(a)(ii), which was prescribed by Rule 26 was also not amended until 29th March, 1973 and it continued to be in the following terms :

'Certified that the goods mentioned in the cash memo/Bill No. dated have been purchased by me/us from M/s. and are duly covered by our Registration Certificate No. dated and are required by me/us for re-sale/for was as raw materials in the manufacture of goods for sale/for use in the execution of contract.

Signature

Dealer'

It was only on 29th March, 1973 that the form of the declaration was substituted by amending Rule 26 so as to bring it in line with the amended S. 5(2)(a)(ii) and after the substituted it ran as follows :-

'Certified that the goods mentioned in the Cash Memo/Bill No. dated worth Rs. have been purchased by me/us from M/s. and are duly covered by me our registration certificated No. valid from and are required by me/us for resale/for use as raw material, in the manufacture in Delhi is accordance with the provisions contains in S. 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 as in force in the Union Territory of Delhi, of goods for sale.

Signature ........

Dealer ...........'

The Act as originally enacted ended with S. 26 but by Amending Act of 1959, S. 27 was introduced in the Act with effect form 1st October, 1959 and this section provision that nothing in the Act or under the shall be deemed to impose or authorise imposition of a tax on any sale or purchase of any goods, if such sale or purchase takes place :

(i) in the course of inter-state trade or commerce;

(ii) outside the Union territory of Delhi, or

(iii) in the course of import of the goods into, or export of the goods out of, the territory of India.

This section was obviously introduced with a view to bring the Act into conformity with Article 286 of the Constitution.

3. These are the relevant provisions of the Act in the light of which we have to decide the question of law arising in the appeals. The assesses in all the appeals are registered dealers and during the relevant assessment periods they held certificates of registration specifying the class or classes of goods intended for resale by them or for use by them as raw-materials in the manufacture of goods for sale. The certificates of registration were in the form as it stood prior to its amendment on 29th March, 1973 and they did not specify that the resale of the goods purchased or their use as raw-materials in the manufactured of goods at the sale of manufactured goods should be inside Delhi. There are broadly two groups is which the appeals can be divided for the make of convenience. On group consists of appeals where the assessees purchased goods of the class specified in the certificate of registration as being intended for resale by them and furnished to the dealers selling the goods declarations in the prescribed form, as it stood prior to 29th March, 1973, stating that the goods were intended for resale and thereafter resold the goods, though not within the territory of Delhi, while the other consists of appeals where the assessees purchased goods of the class specified in the certificate of registration as being intended for use by them as raw-materials in the manufacture of goods for sale and furnished to the dealers selling the goods declarations to the prescribed form, as if stood prior to 29th March, 1973, stating that the goods were purchased by them for use as raw-materials in the manufacture of goods for sale and thereafter used the goods purchased as raw-materials in the manufacture of goods, in some cases outside Delhi and in some others inside, but in the latter, sold the goods so manufactured outside Delhi. Civil Appeals Nos. 1110 of 1977, 1111 of 1977 and 1290 of 1977 are representative appeals belonging to the first group while Civil Appeals Nos. 1526 of 1972, 1085 of 1977, and 1352 of 1977 are illustrative of the appeals belonging to the second group. Some of the appeals are brought by special leave directly from the orders of the assessing authority and some others from the appellate or revisional orders. Special leave was granted in these cases without requiring the assessees to exhaust their remedies under the Act and to approach, the High court of Delhi in the first instance, because a decision was already given by the High Court of Delhi on 26th April, 1974 in Fitwell Engineers vs. Financial Commissioner of Delhi, negativing the contentions of the assessees. The view taken in the orders impugned in the appeals and accepted by the High Court of Delhi in Fitwell Engineers, case was that for the purpose of S. 5(2)(a)(ii) and the Second Proviso, resale of the goods purchased was confined to resale inside Delhi and so also, use of the goods purchased as raw-materials in the manufacture of goods and sale of manufactured goods were required to be inside Delhi, and, therefore, if the assessees resold the goods outside Delhi or used them as raw-materials in manufacture outside Delhi, or even if the manufacture was inside Delhi, sold the goods manufactured, outside Delhi, there was utilisation of the goods by assessees for a purpose other, than that for which they were purchased and hence the Second Proviso to S. 5(2)(a)(ii) was attracted and the price of the goods purchased was liable to be included in the taxable turnover of the assessees. The question which arises for determination in the appeals is whether this view taken by the Taxing Authorities and approved by the High Court of Delhi in Fitwell Engineers case is correct and can be sustained.

4. We may first examine the scheme of the relevant provisions of the Act in so far as it bears on the present controversy. Every dealer, whose gross turnover exceeds the taxable quantum is liable to pay tax on sales effected by him after a specified date and while he is liable to pay tax, he cannot carry on business unless he gets himself registered and possesses a registration certificate. Though his liability to tax is determined by reference to his gross turnover, whether it exceeds the taxable quantum or not, tax is leviable on him only in respect of his taxable turnover of a dealer, certain deductions are required to be made from his gross turnover and one of the deductions is that set out in S. 5(2)(a)(ii). What is permitted to be deducted under this provision is turnover on sales to a registered dealer of goods of the class or classes specified in his certificate of registration as being intended for resale by him or for use by him as raw-materials in the manufactures of goods for sale. This deduction is allowed with reference to the intended and use of the goods, namely, that they will be resold or they will be used as raw-materials in the manufacture of goods for sale, according as they are purchased for one purpose or the other. But in view of the innumerable transactions that may be entered into by the dealers, it would be well night impossible for the Taxing Authorities to ascertain in each case whether the goods were purchased as being intended for resale or for use as raw-materials in the manufacture of goods for sale and hence the First Proviso was enacted qualifying the substantive provision by saying that the turnover of sales covered by the terms of S. 5(2)(a)(ii) would be deductible only if 'a declaration duly filled in and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed from - is furnished' by the selling dealer. The result is that a dealer cannot get deduction in respect of the turnover of his sales falling within S. 5(2)(a)(ii) unless he furnishes a declaration containing the prescribed particulars on the prescribed from duly filled in and signed by the purchasing dealer. The form of declaration prescribed under Rule 26 as it stood upon 29th March, 1973 contained an expression of intention of the purchasing dealer to resell the goods purchased or to use them as raw-materials in the manufacture of goods for sale. Such declaration given by the purchasing dealer to the dealer selling the goods would afford evidence that the goods were purchased by the purchasing dealer 'as being intended for resale by him or for use by him as raw-materials in the manufacture of goods for sale.' The dealer selling the goods would be granted deduction in respect of the sales on the strength of such declaration given by the purchasing dealer. The requirement of such declaration as condition of deductions is clearly intended to prevent fraud and promote administrative efficiency (Vide Kedarnath Jute Mfg. Co. Ltd. vs. Commercial Tax Officer).

5. But what would be the position if the purchasing dealer does not act according to the intention expressed by him in the declaration given to the selling dealer and in the one case, does not resell the goods and in the other, does not use them as raw-materials in the manufacture of goods for sale. The selling dealer is granted deduction in respect of the sales made by him because the goods are purchased for resale or for use as raw-materials in the manufacture of goods for sale and this intended end-use of the goods purchased is sought to be ensured by taking a declaration in the prescribed form from the purchasing dealer. But if the goods are utilised by the purchasing dealer for some other purpose contrary to the intention expressed by him in the declaration, the object and purpose of giving deduction to the selling dealer would be defeated. Even so, it would not be right to withdraw the deduction granted to the selling dealer because that would be penalising the selling dealer for a breach of faith committed by the purchasing dealer. The legislative wrath should in all fairness fall on the purchasing dealer and that is why the Second Proviso has been introduced in the Act by Delhi Amendment Act 20 of 1959. The object of the Second Proviso is to ensure that the intention expressed by the purchasing dealer in the declaration given by him is carried out and he acts in conformity with that intention. Where the purchasing dealer gives a declaration of intention to resell the goods purchased or to use them as raw-materials in the manufacture of goods for sale, he must act in accordance with that intention, because it is on the basis of that intention that deduction is allowed to the selling dealer, and if he does not carry out that intention and utilises the goods for any other purpose, it stands to reason that the tax which is lost to the Revenue by reason of deduction granted to the selling dealer should be recoverable from him, that is the purchasing dealer. If no deduction were granted to the selling dealer, he would be liable to pay tax on the sale made by him and ultimately the incidence of that tax would be passed on the to purchasing dealer, but by reason of deduction allowed to the selling dealer, the purchasing dealer escapes this incidence of tax and, therefore, the Second Proviso enacts that where the purchasing dealer acts contrary to the intention declared by him, the selling dealer shall not be penalised for the sin of the purchasing dealer and he shall continue to have his deduction, but the price of the goods purchased shall be included in the taxable turnover of the purchasing dealer. The Second Proviso is thus intended to provide the consequence of the purchasing dealer not complying with the statement of intention expressed in the declaration given by him to the selling dealer under the First Proviso. This is broadly the scheme and intendment of S. 5(2)(a)(ii) and its two Provisos read in the context of the other provisions of the Act.

6. Now, the first question that arises for consideration is whether resale in S. 5(2)(a)(ii) and the Second Proviso means resale any where without any geographical limitation or it is confined only to resale inside Delhi. The contention of the Revenue was that though the words 'inside the Union Territory of Delhi' are not to be found in S. 5(2)(a)(ii) and the Second Proviso, they must be read in these provisions as a matter of construction and three reasons were given in support of this contention. The first reason was that if resale outside Delhi were held to be within the terms of S. (2)(a)(ii) and the Second Proviso, the Union Territory of Delhi would lose tax altogether in cases where the goods were resold outside Delhi, because in that event the first sale would escape tax by reason of the deduction granted under S. 5(2)(a)(ii) and the resale would also be free from tax since it is outside Delhi and hence covered by the exempting provision contained in S. 27. The Legislature could never have intended to bring about such a result where the Union Territory of Delhi would be deprived altogether of tax. The intention of the Legislature was to recover tax at only one point whilst the goods were in the stream of trade and the Legislature, therefore, granted deduction in respect of the first sale on the basis that it would be levying tax when the goods were resold and that postulated the requirement that the resale should be inside Delhi. Secondly, it was urged that the Legislature had no legislative competence to tax sale outside Delhi and moreover, by reason of S. 27 sale outside Delhi was taken out of the purview of the Act and resale within the meaning of S. 5(2)(a)(ii) and the Second Proviso could not, therefore, possibly include resale outside Delhi. The last argument was that the words by him following upon the word resale in S. 5(2)(a)(ii) and the Second Proviso clearly indicated that the resale contemplated under these provisions was resale by the purchasing dealer as registered dealer and since the concept of registered dealer has relation only to sale inside Delhi, the resale must be within the territory of Delhi. We do not think there is any substance or validity in these arguments and we see no cogent or compelling reasons to add the words 'inside the Union Territory of Delhi to qualify resale in S. 5(2)(a)(ii) and the Second Proviso.

7. Now, if there is one principle of interpretation more well settled than any other it is that a statutory enactment must ordinarily be construed according to the plain natural meaning of its language and that no words should be added altered or modified unless it is plainly necessary to do so in order to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with rest of the statute. This rule of literal construction is firmly established and it has received judicial recognition in numerous cases. Crawford in his book on 'Construction the Statutes' (1940 ed.) at page 269 explains the rule in the following terms :

'where the statutes meaning is clear and explicit, words cannot be interpolated. In the first place, in such a case they are not needed. If they should be interpolated, the statute would more than likely fail to express the legislative intent, as the thought intended to be conveyed might be altered by the addition of new words. They should not be interpolated even though the remedy of the statute would thereby be advanced, or a more desirable or just result would occur. Even where the meaning of the statute is clear and sensible, either with or without the omitted word, interpolation is improper, since the primary source of the legislation intent is in the language of the statute.'

Lord Parker applied the rule in R. V. Dakes to construe 'and', as 'or' in S. 7 of the Official Secrets Act, 1920 and stated :

'It seems to this Court that where the literal reading of a statute, and a penal statue, produces an intelligible result, clearly there is no ground for reading in words or changing words according to what may be the supposed intention of Parliament. But here we venture to think that the result is unintelligible.'

Lord Reid also with great clarity and precision which always characterise his judgments enunciated the rule as follows in Federal Steam Navigation Co. Ltd. vs. Department of Trade and Industry :

'Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as for as I am aware be grouped under three heads where without such substitution the provision is unintelligible or absurd or totally unreasonable; where it is unworkable; and where it is totally irreconcilable with the plain intention shown by the rest of the deed or statute.'

This rule in regard to reading words into a statute was also affirmed by this Court in several decisions of which we may refer only, to one namely, Narayanaswami vs. Pannerselvam & Ors. Where the Court pointed out that :

'.... addition to, or modification of word used in statutory provision is generally not permissible ...', but 'courts may depart from this rule to avoid a patent absurdity.'

Here, the word used in S. 5(2)(a)(ii) and the second Proviso is resale simpliciter without any geographical limitation and according to its plain natural meaning it would mean resale any where and not necessarily inside Delhi. Even where the purchasing dealer resells the goods outside Delhi, he would satisfy the requirement of the statutory provision according to its plain grammatical meaning. There are no words such as inside the Union Territory of Delhi qualifying resale so as to limit it to resale within the territory of Delhi. The argument urged on behalf of the Revenue requires us to reading such limitative words in S. 5(2)(a)(ii) and the Second Proviso. The question is whether there is any necessity or justification for doing so It resale is construed as not confined to the territory of Delhi, but it may take place any where, does S. 5(2)(a)(ii) or the Second Proviso lead to a result manifestly unintelligible, absurd, unreasonable, unworkable or irreconcilable with the rest of the Act It there any compulsive necessity to depart from the rule of plain and natural construction and read words of limitation in S. 5(2)(a)(ii) and the Second Proviso when such words have been omitted by the law-giver We do not think so.

8. It may be pointed out in the first place that the Legislature could have easily used some such words as inside the Union Territory of Delhi to qualify the word resale, if its intention was to confine resale within the territory of Delhi, but it omitted to do what was obvious and used the word resale without any limitation or qualification, knowing fully well that unless restriction were imposed as to sit us, resale would mean resale any where and not merely inside the territory of Delhi. The Legislature was enacting a piece of legislation intended to levy tax on dealers who were layman and we have no doubt that if the legislative intent was that resale should be within the territory of Delhi and not outside, the Legislature would have said so in plain unambiguous language which no layman could possibly misunderstand. It is a well settled rule of interpretation that when there are two expressions which might have been used to convey a certain intention but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the legislature used that one of the two expression which would convey the intention less clearly does not intend it convey that intentional all. We may repeat what Pollack C. B. in Attorney-General vs. Sille, that 'If this has been accomplished be the simplest possible piece of legislation; it might have been expressed in language so clear that human being could entertain doubt about it'. We think that in a taxing statute like the present which is intended to tax is dealings of ordinary traders, if the intent of the legislature were that in order qualify a sale of goods for deductions resale of it must necessarily be inside Delhi, the Legislature would have express itself clearly and not left its intention be gathered by doubtful implication from other provision of the Act. The absence of specific words limiting resale inside the territory of Delhi is not without significance and it cannot be made good by process of judicial construction, for to do so would be to attribute to the legislature an intention which it has chose not to express and to usurp the legislative function.

9. It is true that the Legislature has no legislative competence to tax sale outside the territory of Delhi and S. 27 also in clear and explicit terms exempts sales outside the territory of Delhi from liability to tax under the Act, but we fail to see how this circumstance can require us to construe resale in S. 5(2)(a)(ii) and the Second Proviso as excluding resale outside the territory of Delhi. It is obvious that resale is subsequent sale after the first and it must, therefore, have the same meaning as sale defined in S. 2(g). The definition of sales in S. 2(g) is a general definition which does not limit it to a sale inside the territory of Delhi. Even a sale outside territory of Delhi is within the coverage of the definition. That is why S. 27 provides that nothing in the Act or the rules made thereunder shall be deemed to impose or authorities imposition of a tax on any sale outside the territory of Delhi. This provision was introduced to bring the Act into conformity with Article 286 of the Constitution. Therefore, for the purpose of taxability only, sale outside the territory of Delhi would be excluded from the scope and purview of the Act. But S. 5(2)(a)(ii) does not seek to impose any tax on resale. What it does is to provide deduction in respect of sale to a registered dealer provided the condition in satisfied that the goods purchased are of the class are classes specified in the certificate of registration of the purchasing dealer as being intended for resale by him and a declaration is given by the purchasing dealer that he has purchased the same for resale. Undoubtedly, where the purchasing dealer does not act in conformity with the intention expressed by him and utilises the goods for any other purpose, he becomes liable to tax under the Second Proviso, but even there, what is taxed in his hands is the price of the goods purchased by him that is, the turnover exempted in the hands of the selling dealer and not the turnover of resale made him. It is still the first sale made by the selling dealer which is taxed and not the resale made by the purchasing dealer. Thus there is no tax sought to he imposed on the resale under S. 5(2)(a)(ii) or the Second Proviso, but resale is made a condition of granting deduction in respect of the first sale. It is, therefore, difficult to see how lack of legislative competence on the part of the Legislature to tax sale outside Delhi or exemption from tax provided to sale outside Delhi under S. 27 can operate to cut down the plain meaning of resale so as to exclude resale outside Delhi.

10. The Revenue placed same reliance on the words by him following upon resale in S. 5(2)(a)(ii) and the Second Proviso for the purpose of contending that the resale contemplated there is resale by the purchasing dealer as a registered dealer and since a registered dealer is a dealer who carries on business in Delhi and whose liability to tax is determined by reference to his gross turnover in Delhi, resale by him must be resale within the territory of Delhi. But this contention has no merit and the utmost that can be said about it is that it raises a point that has position, but no magnitude. The words by him are merely descriptive of the purchasing dealer and they are introduced merely with a view to emphasising that the goods must be resold by the same person who has purchased them. It is clear from the scheme of the Act that a dealer who caries on business of selling goods in the territory of Delhi and who is liable to pay tax under S. 4 of the Act is required to be registered and he must possess a registration certificate. If such a dealer purchases goods of the class or classes specified in his certificate of registration on furnishing a declaration that the same are intended for resale 'by him', the sale to him would be exempt from tax and hence he would not have to pay any amount by way of tax to the selling dealer. But then the goods must be resold by the purchasing dealer himself and in case of such resale the requirement of the statutory provision as well as the declaration would be satisfied and there well be no breach of the statement of intention contained in the declaration. The emphasis which is sought to be added by the words by him is that the goods must be resold by the same person who has purchased them, namely, the purchasing dealer. It would be straining the language of the enactment too much to say that the words by him are intended to mean by him as a registered dealer. Moreover, it may be noted that though a registered dealer has to be person who carried on business of selling goods in the territory of Delhi, there is no requirement of law that a registered dealer must effect sales only in Delhi and not outside. There is nothing in the Act which prohibits a registered dealer from selling goods outside Delhi. If a registered dealer can effect sales outside Delhi it is impossible to see how; by any stretch of reasoning, the words by him can be pressed into service for the purpose of restricting resale to the inside Delhi.

11. We fail to see any reason why the word resale in S. 5(2)(a)(ii) and the Second Proviso should not be construed according to its plain natural meaning to comprehend resale taking place any where without any limitation as to situs and it should be read as referring only to resale inside Delhi as if the words inside the Union Territory of Delhi were added by way of limitation or registration. Even without such words and reading the statutory provision according to its plain natural sense as referring to resale, irrespective whether it is inside or outside Delhi. S. 5(2)(a)(ii) and the Second Proviso do not become absurd, unintelligible, unworkable or unreasonable nor it is to say that they come into conflict with any other provision of the Act. We have already explained the scheme of S. 5(2)(a)(ii) and its two provisions and, even on the view that resale any where and not necessarily inside Delhi, they enact a statutory provision which is quite is quite intelligible, reasonable and workable. The selling dealer is granted deduction in respect of sale to a registered where the goods purchased are of the classes specified in the certificate of registration of the purchasing dealer in being intended for resale by him and the purchasing dealer gives a declaration that the goods are purchased by him for resale. So long as the goods are required by the purchasing dealer for resale, whether inside, outside Delhi, the sale to the purchasing dealer is exempted from tax. It is true that if the purchasing dealer resells the goods outside Delhi, the Union territory of Delhi would not be able to recover any tax since the sale to the purchasing dealer would be exempt from tax under & (2)(a)(ii) and the resale by the purchasing dealer would also be free from tax be reason of S. 27. But that is no such consequences as would compel us to real intended that the Union territory of Delhi. The argument of the Revenue was that the Legislature could never have intended that the Union territory of Delhi should be altogether deprived of tax in cases of this kind. The Legislature intent could only be to exempt the sale to the purchasing dealer in those cause where the Union Territory of Delhi was be able to recover tax on resale of is goods by the purchasing dealer. The goods must be taxed at least at one point and it could not have been intended that they should not be taxable at all at any point by the Union territory of Delhi. The Revenue urged that it was for the purpose of taxing the goods at least at least point that the Second Proviso was enact by the Legislature. We do not think is contention based on the presumed intention of the Legislature is well founded. It is now settled that when the court construing a statutory enactment, it intention of the Legislature should be gathered from the language used by and it is not permissible to the court speculate about the legislative inter. Some eighty years ago, as far back as 1897, Lord Watson said in an oft quoted passage in Saloman vs. Saloman & Co. Ltd. :

'The intention of the legislature is a common but very slippery phrase which, popularly understood, may signify anything from intention embodied positive enactment to speculative opinion as to what the legislature probably would have meant, although there has an omission to enact it. In a court of law or equity, what the legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication.'

The same view was echoed by Lord Reid in Black-Clawson International Ltd. vs. Papiarwerke Waldhof-Aschaffenburg :

'We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used. We are seeking not what Parliament meant but the true meaning of what they said.'

If the language of a statute is clear and explicit, effect must be given to it, for in such a case the words best declare the intention of the law giver. It would not be right to refuse to place on the language of the statute the plain and natural meaning which it must bear on the ground that it produces a consequence which could not have been intended by the legislature. It is only from the language of the statute that the intention of the Legislature must be gathered for the legislature means no more and so less than what is says. It is not permissible to the Court to speculate as to what the Legislature must have intended and then to twist or bend the language of the statute to make it accord with the presumed intention of the legislature. Here the language employed in s. 5(2)(a)(ii) and the second Proviso is capable of bearing one and only one meaning there is nothing in the Act to show that the legislature exempted the sale to the purchasing dealer from tax on the hypothesis that the Union Territory of Delhi would be entitled to tax the resale by the purchasing dealer. The intention of the legislature was clearly not that the Union territory of Delhi should be entitled to tax the goods at least at one point so that if the sale to the purchasing dealer is exempt be resale by the purchasing dealer should be taxable. We do not find evidence of each legislative intent in any provision of the Act. On the contrary, it is very clear has there are certain of resales by the purchasing dealer which are admittedly free from tax. If, for example, the purchasing dealer resells the goods within the territory of Delhi, but such resale is in the course of inter-State trade or commerce, or in the course of export out of the territory of India, it would be exempt from tax and yet even on the construction suggested on behalf of the Revenue, the sale to the purchasing dealer would not be liable to tax. Both the sales as well as the resale would be free of tax even if the word resale were read as limited to resale inside the territory of Delhi. Then again, take a case where the resale by the purchasing dealer, though inside the territory of Delhi, fall within S. 5(2)(a)(v). The resale in such a case would be exempt from tax and equally so would be the sale. So also the resale would not be taxable if it falls within R. 29 and in that case too, the sale as well as the resale would both be exempt from tax. It will, therefore, be seen that it is not possible to discover any legislative intent to tax the goods at least at one point and to exempt the sale to the purchasing dealer only if the resale by the purchasing dealer is liable to tax. The Second Proviso too does not support any such legislative intent, for in the even there contemplated, namely, where the purchasing dealer utilises the goods for any purpose other than resale, what is taxed in the hands of the purchasing dealer is not the resale by him but the sale to him and that is done not with a view to ensuring that the goods must suffer tax at least at one point, but because the purchasing dealer having committed a breach of the intention expressed by him in the declaration, on the basis of which exemption is granted to the selling dealer, he should not be allowed to profit from his own wrong and to escape the amount of tax on the sale. We do not, in the circumstances see any cogent or compelling reason for reading the words inside the Union Territory of Delhi after resale in S. 5(2)(a) (ii) and the Second Proviso.

12. It must also be remembered that S. 5(2)(a)(ii) and the Second Proviso occur in a taxing statute and it is a well settled rule of interpretation that in construing a taxing statute 'one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law.' The oft quoted words of Rowlett, J., in Cape Brandy Syndicate vs. Inland Revenue Commissioner lay down the correct rule of interpretation in case of a fiscal statute : 'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' It is a rule firmly established that 'the words of a taxing Act must never be stretched against a tax-payer.' If the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax-payer. Even if there is any doubt as to interpretation, it must be resolved in favour of the subject. We would, therefore, be extremely loathe to add in S. 5(2)(a)(ii) and the Second Proviso words which are not there and which, if added, would have the effect of imposing tax liability on the purchasing dealer. Moreover, it may be noted that if the purchasing dealer resells the goods outside Delhi, then, on the construction contended for on behalf of the Revenue, he would be liable to include the price of the goods paid by him in his return on taxable turnover and pay tax on basis of such return and if he fails to do so, he would expose himself to penalty, though he has complied literally with the declaration made by him. We find that in fact a penalty of Rs. 2 lacs has been imposed on the assessees in Civil Appeal No. 1085 of 1977 for not including the price of the goods purchased by them in their return of taxable turnover and paying tax on the basis of such return. It would be flying in the face of well settled rules of construction of a taxing statute to read the words inside the Union Territory of Delhi in S. 5(2)(a)(ii) and the Second proviso, when the plain and undoubted effect of the addition of such words would be to expose a purchasing dealer to penalty.

13. It is also significant to note that if the words inside the Union Territory of Delhi are to be read after resale in S. 5(2)(a)(ii) and the Second Proviso, they would also have to be read in the prescribed from of the declaration to be given by the purchasing dealer. But we fail to see how any such words can be read in a declaration of intention which refers to resale simpliciter without are restriction as to place. When a declaration of intention in the prescribed from without the words inside the Union Territory of Delhi is given by the purchasing dealer at the time of purchase, how can these words be read in the declaration when they are not there. It might he permissible to read such words in a statutory provision like S. 5(2)(a)(ii) and the second provision but we fail to see how such words can be read in a declaration of intention furnished by a purchasing dealer.

14. It may also be pointed out that the Act in the present case was original enacted by the Bengal Legislature in 1941 and it was applied in Delhi with certain modification by the Central Government on 28th April, 1951. The Act was thus in operation prior to 15th August, 1947 in Bengal and thereafter in West Bengal an aggregate period of about ten year before it was made applicable to Delhi. It was not disputed on behalf of the Revenue that during this period the Department administered the Provided of S. 5(2)(a)(ii) on the basis that resale was not confined to resale inside The State of Bengal or West Bengal, as the case may be, but it also included outside State resale. When the Central Government applied the Act to the territory Delhi, it must be presumed to be awares this interpretation which had been place on S. 5(2)(a)(ii) by the Revenue in State of West Bengal. Even so, the Central Government, Whilst it several other modifications in the while applying it to the territory of Delhi, did not add the words inside the Union Territory of Delhi to qualify. Then again it was common ground at least for a few years after the Act made applicable to the territory of Delhi, the Revenue interpreted resale in S. 5(2)(a)(ii) to mean resale any which not necessarily inside the territory of Delhi and administered the law on the basis of such interpretation. It is, no doubt that the view of the Department as to the meaning of a statute which is administered by them is not admissible as an aid to construction because wrong practice. not make the law, but as pointed out by Maxwell in his well-known work on The Interpretation of Statutes (12th Ed.) at page 264 : 'the long acquiescence of the legislature in the interpretation put upon its enactment by notorious practice may, perhaps be regarded as some sanction and approval of it'. The circumstance that for long years the Legislature did not intervene to amend the law by adding the words inside the Union Territory of Delhi in 5(2)(a)(ii) even though the Revenue was continually administering the law on the basis that resale in S. 5(2)(a)(ii) means resale any where and not necessarily inside the territory of Delhi and acquiescenced in this interpretation placed by the Revenue is a circumstance which does throw some little light on the intention of the Legislature and indicates that the Legislature did not intend to restrict resale to the territory of Delhi.

15. Similarly, for the same reasons which we need not repeat again, manufacture and sale in S. 5(2)(a)(ii) and the Second Proviso mean manufacture and sale any where without any geographical limitation and neither manufacture nor sale is restricted to the territory of Delhi. There are no words like inside the Union Territory of Delhi to qualify manufacture or sale and there is no cogent or compelling reason for reading such words in S. 5(2)(a)(ii) and the Second Proviso. The use of the goods purchased as raw-materials in the manufacture of goods may, therefore, take place any where and not necessarily inside Delhi and equally the sale of the goods so manufactured may be effected any where, whether inside or outside Delhi. The only end-use of the goods purchased required to be made for attracting the applicability of S. 5(2)(a)(ii) is that the goods must be utilised by the purchasing dealer as raw materials in the manufacture of goods and the goods so manufacture must be sold, irrespective whether the manufacture or sale takes place inside Delhi or outside. If the purchasing dealer does not use the goods purchased as raw-materials in the manufacture of goods or having manufactured the goods does not sell them, he would commit a breach of the intention expressed by him in the declaration furnished to the selling dealer and the Second Proviso would immediately be attracted and the price of the goods purchased by him would be liable to be included in his taxable turnover. But so long as he carries out the intention expressed in the declaration and uses the goods purchased as raw-materials in the manufacture of goods, whether inside or outside Delhi, and sells the goods so manufactured in Delhi or outside, he would not fall within the Second Proviso and the sale to him would not be taxable in his hands.

16. The subsequent history of the Act also supports the construction which we are inclined to place on S. 5(2)(a)(ii) and the Second Proviso S. 5(2)(a)(ii) was amended with effect from 28th May 1972 by Finance Act, 1972 and the words in the Union Territory of Delhi were added after the word manufacture so as to provide that manufacture should inside the territory of Delhi. It was also provided by the amendment that the sale of manufactured goods should be inside Delhi or in the course of inter-State trade or commerce or in the course or export outside India. This amendment clearly excluded manufacture of goods as also sale of manufactured goods outside Delhi. It is clear from the statement of objects and reasons that this amendment was not introduced by Parliament ex abundanti cautela, but in order to restrict the applicability of the exemption clause in S. 5(2)(a)(ii). The statement of objects and reasons admitted in clear and explicit terms that :

'At present of raw-materials in Delhi are exempted from tax irrespective of the facts whether the goods manufactured therefrom are sold in Delhi or not. It is therefore, made clear that sale of raw-materials will be tax free only when such sales are made by those who manufacture in Delhi taxable goods for sale.'

It is obvious that under S. 5(2)(a)(ii), as it stood prior to the amendment, the exemption was available to the selling dealer even if the purchasing dealer used the goods purchased as raw-materials in manufacture outside Delhi, or having manufactured the goods, sold them outside Delhi. That is why Parliament amended S. 5(2)(a)(ii) with a view to restricting manufacture as well as sale inside the territory of Delhi. It is of course true that a parliamentary assumption may be unfounded and an amendment may proceed on an erroneous construction of the statue and, therefore, it cannot alter the correct interpretation to be placed upon the statue; but if there is any ambiguity in the statute, the subsequent amendment can certainly be relied upon for fixing the proper interpretation which is to be put upon the statute prior to the amendment. The amendment made in S. 5(2)(a)(ii) read with the statement of objects and reason thus clearly supports the construction that under the unamended section manufacture as well as sale could be any where and not necessarily inside the territory of Delhi. It is also significant to note that though Parliament amended S. 5(2)(a)(ii) for restricting manufactures as well as sale to the territory of Delhi, it did not carry out any amendment in the section with a view to limiting resale in the same manner by the addition of some such words as in the Union Territory of Delhi or inside Delhi. This clearly evinces parliamentary intent not to insist upon resale being restricted to the territory of Delhi. It is a circumstances which lands support to the view that resale in S. 5(2)(a)(ii) and the Second Proviso meant resale outside as well as inside Delhi.

17. We must, therefore, reach the conclusion that during the relevant assessment years, resale within the meaning of S. 5(2)(a)(ii) and the Second Proviso was not confined to the territory of Delhi, but also included resale outside the territory of Delhi and similarly, for the period upto 28th May, 1972 when S. 5(2)(a)(ii) was amended by Finance Act, 1972 manufacture and sale contemplated by the section were not restricted to the territory of Delhi but could also be outside. There was not geographical limitation confining resale, manufacture or sale to the territory of Delhi. On this construction, the Second Proviso would be attracted only if the purchasing dealer, in the former case, did not resell the goods at all and in the later case, did not use them as raw-materials in the manufacture of goods, or even if he manufacture the goods, failed to sell them and thus utilised the goods purchased for a purpose different from that for which they were purchased. Now the burden of proving that the goods purchased were utilised by the purchasing dealer for a different purpose would be on the Revenue if the Revenue wants to include the price of the goods purchased in the taxable turnover of the purchasing dealer, and it would, therefore, be for the Revenue to show in a given case that the goods purchased were utilised by the purchasing dealer for a different purpose, that is, where he purchased the goods for resale, he did not resell them and where he purchased the goods for use by him as raw-materials in the manufacture of goods for sale, he either did not use them as raw-materials in the manufacture of goods, or, even if he did so, the goods for resale, resold them inside Delhi or outside : in either case the Second Proviso would not be applicable and the assessees would not be liable to be taxed on the price of the goods purchased by them. Equally, for the period upto 28th May, 1972, it did not make any difference whether the assessee, in those case where they purchased goods for used as raw-materials in the manufacture of goods for sale, used them as raw-materials in manufacture inside Delhi or outside, or having manufactured the goods, sold them inside or outside Delhi, for in either case the Second Proviso would not be attracted and the price of the goods purchased by them would not be includible in their taxable turnover. The burden of showing that the assessees utilised the goods purchased for any other purpose, that is for purpose different from that for which the goods were purchased as evidenced the declaration, would be on the Revenue and the Revenue may discharge this burden by calling upon the assessees to produce evidence to show, in one case that the goods were resold by them, and in the other, that the goods were used by them as raw-materials in the manufacture of goods and the goods so manufactured were sold. This would be a fact exclusively within the knowledge of the assessees and if the assessees do not produce sufficient evidence to establish this fact, it might be legitimate for the Revenue to raise an inference that the assessee did not utilise the goods for the purpose for which they were purchased, but utilised them for 'any other purpose'.

18. The question still remains in regard to the taxability of the assessees under the Second Proviso subsequent to 28th May, 1972 in cases where the goods were purchased for used as raw-materials in the manufacture of goods for sale, because some of the appeals relate to the assessment year 1972-73 which comprises the period from 28th May. 1972 to 31st March, 1973. We have already pointed out that on 28th May, 1972, S. 5(2)(a)(ii) was amended by Finance Act, 1972 and the words in the Union Territory of Delhi were added after the word manufacture and the words inside Delhi after the word sale. It is clear from the amendment that from and after 28th May, 1972, sale of goods was exempted from tax only if the goods were purchased by the purchasing dealer 'as being intended -for use by hims raw-materials in the manufacture in the Union Territory of Delhi - of goods - for sale inside Delhi.' Both manufacture and sale were not required to be in the territory of Delhi and not outside. But the form of the declaration to be given by the purchasing dealer to the selling dealer, as prescribed in Rule 26, was not amended until 29th March, 1973 with a view to bringing it in confirmity with the amended S. 5(2)(a)(ii). The result was that from 28th May, 1972 to 28 the March, 1973 the form of the declaration continued to be the same as before and carried the statement that the goods were purchased by the purchasing dealer 'for use by him as raw-materials in the manufacture of goods for sale' without any restriction as to place of manufacture or sale and this was the form in which declarations were given by the assesses to the selling dealers when they purchased the goods. The declarations given by the assessees did not state that the goods were purchased for use by them as raw-materials in the manufacture in the territory of Delhi of goods for sale inside Delhi since that was not the prescribed form and the First Proviso required that the declaration should be given only on the described form Now, if the declarations given by the assessees stated purpose of purchase of goods to be used as raw-materials in the manufacture of goods for sale and did not specify that the manufacture and sale will be inside the territory of Delhi, it is difficult to see how the assessee could be said to have utilised the goods for 'any other purpose' if they used the goods as raw-materials in manufacture outside Delhi or sold the goods manufactured outside Delhi. Even if they manufactured goods outside Delhi and sold the goods so manufactured outside Delhi the use by them of the goods purchased would be for the purpose stated in the declaration and it would not be right to say that they utilised the goods for any other purpose. The problem can also be looked at from another point of view and that too yields the same conclusion. We may assume for the purpose of argument that since the words in the Union territory of Delhi and inside Delhi were added after manufacture and sale respectively in S. 5(2)(a)(ii), a similar amendment may also be taken to have been effected in the Second Proviso and we may read there the words in the Union Territory of Delhi after the word manufacture and the words inside Delhi after the word sale. What the Second Proviso, on this constructions, postulates is that the goods must be purchased by the purchasing dealer as being intended for use by him as raw materials in the manufacture in the territory of Delhi of goods for sale inside Delhi. But the declaration given by the assessees being in the unamended form, it would not be possible to say that the goods were purchased by the assessees as being intended for use as raw-materials in the manufacture in the territory of Delhi of goods for sale inside Delhi. The condition for the applicability of the second Proviso was, therefore, clearly not satisfied. and the Second proviso could not be invoked for including the price of the goods purchased in the taxable turnover of the assessees. Even if we take the view that by reason of the amendment of S. 5(2)(a)(ii) the form of the declaration also stood amended though in fact no amendment was made in its until 29th March, 1973, it would not help the Revenue, because in that case the declarations given by the assessees to the selling dealers could not be said to be on the prescribed form and in terms of S. 5(2)(a)(ii) and the consequence of that would be that the selling dealers would be disentitled to exemption under section 5(2)(a)(ii) and not that the price of the goods purchased would be includible in the taxable turnover of the assessees. Exemption would be available to the selling dealers under S. 5(2)(a)(ii) only if they could show that they have obtained proper declaration from the assessees and consequently if the declarations are not on the prescribed form or in terms of S. 5(2)(a)(ii), (on the assumption that they are required to be in conformity with that provision), it is the selling dealers who would be ineligible for exemption and there would be no question of the assessees being made liable to tax under the Second Proviso. It would not be competent to the assessing authority to read the words in the territory of Delhi after the word manufacture and the words inside Delhi after the word sale in the declarations given by the assessees when these words are conspicuous by their absence and on that basis to grant exemption to the selling dealers and then to seek to impose liability on the assessees under the Second Proviso. It is indeed difficult to see how the assessees could be saddled with liability to tax under the Second Proviso when they have literally complied with the statement of intention expressed in the declaration given by them to the selling dealers.

19. The Revenue strongly relied on the decision of this Court in Modi Spinning and Weaving Mills Co. Ltd. vs. Commissioner of sales Tax, Punjab & Anr. In support of its contention, but we fail to see how this decision can be of any help to the Revenue. It is necessary to refer briefly to the facts of this case in order to understand the true ratio of its decision. The assessment year for which the appellants were being assessed in this case was the financial year 1959-60 and the assessment was being made under the Punjab General Sales Tax Act, 1948. S. 5(2)(a)(ii) of the Punjab Act as it stood prior to its amendment, was in material respects identical with the unamended S. 5(2)(a)(ii) of the Delhi Act However, it was amended by Punjab Act No. 13 of 1959 by the addition of the words 'in the State of Punjab' after the word manufacture and the amended section applied during the relevant assessment year. When S. 5(2)(a)(ii) was amended, the rule making authority also simultaneously amended Rule 26 and Form S.T. XXII which was the prescribed form of declaration, by the addition of the same words in the State of Punjab. The result was that not only was S. 5(2)(a)(ii) amended to make it clear that the manufacture must be in the State of Punjab but also Rule 26 and the form of declaration were also amended so as to provide that the declaration must set out that intention of the purchasing dealer to use the goods purchased in the manufacture in the State of Punjab of goods for sale. The appellants gave declarations in the amended form with the word in the State of Punjab after the word manufacture against purchases of raw-cotton made by them and they ginned the cotton in their ginning mills and sent the bales to their spinning and weaving mills situate in the State of Uttar Pradesh for the purpose of manufacture of cloth. The question arose whether the price of the raw-cotton was liable to be included in the taxable turnover of the appellants under the second Proviso which was in identical terms with the second proviso in the present case. The principal argument advanced of behalf of the appellant for repelling the applicability of the Second Proviso was that since the certificate of registration held by them was not amended by the addition of the words in the State Punjab and there was no condition in it that the goods must be purchased for us in the manufacture in the State of Punjab of goods for sale, they were not bound it use the cotton purchased in the manufacture of cloth in the State of Punjab an even if they did so outside the state Punjab, the Second Proviso was not attracted. The reason why the appellants continued to have the old certificate of registration in the unamended for was that though S. 5(2)(a)(ii) was amended, no corresponding amendment was made in the form of the certificate of registration until 29th September, 1961 long after the expiration of the relevant assessment year. This argument was, however, rejected by a bench of five Judge of this court on the ground that it was not right to read the certificate of registration by itself but that 'Ss. 5 and 7 have to be read with R. 26 and Form ST XXII, the declaration' and so read, 'the old registration certificate even thought it did not contain the words in the State of Punjab, would stand impliedly modified by the sections and the Rule and Form S.T. XXII operating together.' This Court emphasised that the appellants had to comply with the Act and the Rules and could not take shelter behind the unamended certificate and the only question which the Court had to consider was whether the appellants had complied with the Act and the Rules and since the Act and the Rules rewired that the manufacture must be in the State of Punjab, the appellants, who manufactured cloth, out of the cotton purchased. Outside the State of Punjab could not be said to have complied with the Act and the Rules and hence the Second Proviso was applicable to them. It would be seen that the only question before the Court was as to what was the effect of absence of the words in the State of Punjab in the certificate of registration in a case where R. 26 and Form S.T. XXII were both simultaneously amended along with S. 5(2)(a)(ii) and the declaration given by the purchasing dealer contained the words in the State of Punjab after the word manufacture so that there was a breach of the statement contained in the declaration when the purchasing dealer used the goods purchased in manufacture outside the state of Punjab. The Court was not concerned with a case where R. 26 and Form S.T. XXII, continued to stand unamended and the declaration given by of the goods purchased in manufacture would be in the State of Punjab, but merely contained a general statement that the goods purchased would be used in the manufacture of goods for sale and the purchasing dealer utilised the goods purchased in manufacture outside the State of Punjab without committing a breach of the statement in the declaration. That is the case before us and it is entirely different from the case decided by the Court in Modi Spinning & Weaving Mills case. The decision in Modi Spinning & Weaving Mills case, is therefore, no authority for the proposition that even where the declaration is given on the prescribed form by a purchasing dealer, which does not contain a statement that the manufacture of goods would be in Delhi or the manufactured goods would be sold in Delhi, this conditions should be read into the declaration by the addition of some such words as inside Delhi after manufacture and sale so that if the goods purchased are not used as raw-materials in manufacture in Delhi or the goods manufactured are sold outside Delhi, the purchasing dealer could be said to have committed a breach of the statement made in the declaration so as to attract the applicability of the second Proviso. We are clearly of the view that such is not the correct legal position and the Second proviso is not attracted in such a case.

20. We are conscious that the result of this view which we are taking would be that both the selling dealers as well as the assessees would escape tax even in cases where the assessees have manufactured goods outside Delhi or having manufactured goods sold them outside Delhi. But that is an unfortunate result for which the blame must lie fairly and squarely at the door of the administration. We fail to understand why the administration should not have amended Rule 26 and the form of the declaration until 29th March, 1973, when the amendment in s. 5(2)(a)(ii) was made as far back as 28th May, 1972. The lethargy and inaction on the part of the administration are inapplicable and it is a matter of regret that the Union Territory of Delhi should have lost a large amount of Revenue entirely due to gross negligence and default on the part of the administration.

21. We may refer to one other contention advanced on behalf of the appellants in Civil Appeals Nos. 17 and 18 of 1975 and 236 and 450 of 1976. The contention was that what the Second Proviso sought to do, in effect and substance, was to tax purchases made by the purchasing dealer by including the price of the goods purchased in his taxable turnover but this was impermissible because S. 4 was the only charging section in the Act and under that section, tax was payable only on sales affected by a dealer and purchased effected by him could not be taxed. No tax, it was argued could be levied on purchases effected by a dealer even by resorting to the fiction of deeming them to the sales. This contention we are afraid, is rather difficult to appreciate. We asked the learned counsel appearing on behalf of the appellants in these appeals as to what was the sequester of this contention and whether it was her submission that the second Proviso was void as being out side the legislative competence of the Legislature. But she frankly conceded that it was not possible for her to challenge the vires of the Second Proviso on ground of lack of legislative competence, because it is competent to the Legislature to impose a tax as much on purchase as on sale. She, however, urged that in her submission the second Proviso was inconsistent with S. 4 and, therefore, no effect should be given to it, This contention is, in our opinion wholly unsustainable. We fail to see how the second Proviso can be said to be inconsistent with S. 4 It may be pointed out that even if there were some conflict, which we do not think there is, it would have to be reconciled by a harmonious reading of the two sections and it would not be right to adopt a construction which renders one of the two sections meaningless and ineffectual unless the conflict between the two is so utterly irreconcilable that the Court is driven to that conclusion. Here we find that S. 4 merely imposes liability on a dealer to pay tax if his gross turnover exceeds the taxable quantum. It is really S. 5 which provides for levy of tax and it says that the tax payable be a dealer shall be levied on his taxable turnover. Now, taxable turnover is a concept entirely different from gross turnover and it is arrived at by making certain additions and deduction to the gross turnover S. 5(2)(a)(ii) provides for a deduction while the second proviso speaks of as addition. Where the conditions of the Second Proviso are satisfied the price of the goods purchased is to be added to the taxable turnover of the purchasing dealer and it would then form part is the taxable turnover on which the tax is levied. The provision has been make in order to ensure that the purchasing dealer does not commit a breach of the declaration given by him on the has of which exemption is given to the selling dealer. The sale to the purchasing dealer is exempted from tax in the hands of the selling dealer but it is taxed in the hands of the purchasing dealer on account a breach of faith committed by him. We do not, therefore, see any inconsistency at all between S. 4 and the Second provide and the contention urged on behalf the appellants in these appeal must be rejected.

22. Lastly, it was contended that the resales effected by the branches the assessee outside Delhi could not be regarded as resales by the assessee with the meaning of S. 5(2)(a)(ii) and it Second Proviso and hence the assess must be held to have utilised the gave for a purpose different from that for which the goods were purchased, namely, remove by them and the price of the goods pay chased must be included in their tax turnover under the Second Proviso. But this contention fails to take into account the plain and obvious fact that when it branches of the assessee resell the gave outside Delhi, it is really the assessee who resells the goods, for the branch are not distinct and independent is the assessee but are merely establishment of the assessee. Resales effected by the branches are nothing else than made by the assessee at the branches hence it is not possible to say that is the goods were resold by the branches the resales were not by the assessee as to attract the applicability of the Second Proviso.

23. That leaves only one is point and that relates to the imposed penalty of Rs. two lakhs on the assessee in Civil Appeal No. 1085 of 1977. This penalty was imposed on the assesses on the ground that they failed to include in the return filed by them for the period from 28th May, 1972 to 29th March, 1973 the price of the goods purchased by them for use as raw-materials in the manufacture of goods for sale and to pay tax on the amount of such price along with the submission of the returns. There were several grounds on which the imposition of this penalty was challenged on behalf of the assessees, but it is not necessary to refer to all of them, since there is one ground which is, in our opinion, sufficient to invalidate the order imposing the penalty. We have already pointed out that even where the assessees used the goods purchased as raw-materials in the manufacture of goods outside Delhi or having manufactured the goods, sold them outside Delhi, there was no breach of the intention expressed by them in the declarations given to the selling dealers and they could not be said to have utilised the goods for any purpose other than that for which they were purchased so as to attract the applicability of the Second Proviso. Now, if the Second Proviso was not attracted in the case of the assessees even where they used the goods purchased as raw-materials in manufacture outside Delhi or sold the manufactured goods outside Delhi, there could be no obligation on the assessees to include the price of the goods purchased in their returns or to pay tax on the amount of such price along with the return. The assessee could, if at all, be made liable for penalty only if it could be shown that they did not used goods purchased as raw-materials in manufacture of goods or having manufactured the goods, did not sell them but utilised them for any other purpose. But of this there was no evidence at all before the assessing authority and the order imposing penalty was, therefore, plainly unjustified. It was based on misconstruction of S. 5(2)(a)(ii) and the Second Proviso and it must, therefore, be quashed and set aside.

24. We accordingly allow the appeals and the writ petitions, set aside the orders passed by the High Court in Civil Appeals Nos. 1724 of 1974 and 456 of 1976 as also the orders passed by the assessing authority which are impugned in the appeals and in writ petition and direct the assessing authority whose orders are set aside to pass fresh orders in each case in the light of the above decision given by us. We may make it clear that the assessees shall not be entitled to reagitate before the assessing authority any other point except that relating to the taxability of the price of the goods purchased by the assessee under the Second Proviso. We also set aside the order passed by the Assessing authority imposing penalty of Rs. two lakhs on the assessee in Civil Appeal No. 1085 of 1977. The respondent will pay the costs of the appellant petitioner in each appeal and writ petition.


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