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Subhag Singh Gurcharan Singh Vs. the Sales Tax Commissioner and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtDelhi High Court
Decided On
Case NumberLetter Patent Appeal Nos. 175 and 274 of 1972 and Civil Writ Appeal No. 431 and 433 of 1973
Judge
Reported inILR1975Delhi7b; [1976]37STC49(Delhi)
ActsBengal Finance (Sales Tax) Act, 1941 - Sections 11; Constitution of India - Article 14
AppellantSubhag Singh Gurcharan Singh
RespondentThe Sales Tax Commissioner and ors.
Advocates: A.K. Sen,; K.B. Rohtagi,; R.C. Chawla,;
Cases ReferredFitwal Engineers v. Financial Commissioner and
Excerpt:
a notification was issued under section 5-a under sales tax act by the delhi administration fixing the liability of tax on sales by importer if imported from outside the union territory of delhi and sales by manufacturer if manufactured in union territory of delhi - the proviso made them liable to tax in respect of sales of separated motor tyres and tubes which had not suffered any tax - it was questioned whether the proviso applied to the sales of stock of tyres and tubes which existed with the registered dealers as on 30th june 1965 - it was held that the proviso applied to the sales of stock of tyres and tubes which existed with the registered dealers - the notification obviously showed that it was intended to operate prospectively and was not intended to apply on sales of the stock of.....t.v.r. tatachari, j. (1) these are two letters patent appeals and nine civil writ petitions. some writ petitions in which similar points arose for determination were dismissed by dalip kapur j. on september 27, 1972, the main judgment being in civil writ petition no. 1324 of 1969. the two letters patent appeals mentioned above, namely, l. p. as nos. 274 and 275 of 1972, have been filed against the said judgment in civil writ petitions nos. 1289 and 1324 of 1969, respectively. the nine writ petitions mentioned above, namely. civil writ petitions nos. 431 to 433 and 1435 of 1973, and civil writ petitions nos. 803, 809, 849, 850 and 891 of 1974, involve similar points and, thereforee, the said writ petitions and the two letters patent appeals nos. 274 and 275 of 1972 have been heard together.....
Judgment:

T.V.R. Tatachari, J.

(1) These are two Letters Patent Appeals and nine Civil Writ Petitions. Some Writ Petitions in which similar points arose for determination were dismissed by Dalip Kapur J. on September 27, 1972, the main judgment being in Civil Writ Petition No. 1324 of 1969. The two Letters Patent Appeals mentioned above, namely, L. P. As Nos. 274 and 275 of 1972, have been filed against the said judgment in Civil Writ Petitions Nos. 1289 and 1324 of 1969, respectively. The nine Writ Petitions mentioned above, namely. Civil Writ Petitions Nos. 431 to 433 and 1435 of 1973, and Civil Writ Petitions Nos. 803, 809, 849, 850 and 891 of 1974, involve similar points and, thereforee, the said Writ Petitions and the two Letters Patent Appeals Nos. 274 and 275 of 1972 have been heard together by us.

(2) The petitioners in the two Writ Petitions, out of which the two Letters Patent Appeals have arisen, and in all the other nine Writ Petitions (hereinafter referred to as the 'petitioners'), are all dealers registered as such under the Bengal Finance (Sales Tax) Act, 1941, as in force in the Union Territory of Delhi (hereinafter referred to as the 'Sales Tax Act'). The challenge in the various Writ Petitions is against assessment orders passed against the respective parties in different years by the concerned Sales Tax Officers, and against a notification No F. 4(33)/64-Fin. (B) dated June 30, 1965, issued by the Under Secretary, Finance (Expenditure), Delhi Administration, Delhi.

(3) The various petitioners, as registered dealers, have been issued registeration certificates as provided in the Act. They have been dealing, inter alia, in disposal goods viz., old motor vehicles, and old motor parts. They have been purchasing old motor vehicles which belong to and have been condemned by the defense Ministry in public auction conducted by Government auctioneers under instructions from the Director General, Supplies and Disposals, New Delhi. After purchase, the petitioners have been dismantling the old motor vehicles and re-selling the various parts, particularly the separated motor tyres and tubes, either to registered dealers or to unregistered dealers or to consumers.

(4) It is necessary, at this stage, to refer to certain relevant provisions of the Sales Tax Act and the Rules made there under, namely, the Delhi Sales Tax Rules, 1951. Section 2(c) of the Sales Tax Act defines a 'dealer' as meaning any person who carries on the business of selling goods in the Union Territory of Delhi and includes the Government. Section 2(d) defines 'goods' as including all materials, commodities and articles. Section 2(i) defines 'turnover' used in relation to any period as meaning the aggregate of the saleprices receiveable, or if a dealer so elects, actually received by him during such period.

(5) Section 4 of the Sales Tax Act provides for the incidence of taxation. Under sub-section (2) of the said Section, every dealer shall, if his gross turnover calculated from the commencement of any year exceeds the taxable quantum at 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-section (3) of the same section provides that every dealer who has become liable to pay tax under the Act shall continue to be so liable until the expiry of three consecutive years, during each of which his gross turnover has failed to exceed the taxable quantum and such further period after the date of such expiry as may be prescribed, and on the expiry of this latter period his liability to pay tax shall cease.

(6) 'GROSS turnover' which has been mentioned in Section 4(2) of the Act has not been defined in the Sales Tax Act. But, 'taxable quantum' mentioned in Section 4(2) has been defined in sub-section (5) of Section 4 as meaning-

'(A)in relation to any dealer who imports for sale any goods into the Union territory of Delhi or manufactures or produces any goods for sale, regardless of the value of the goods imported, manufactured or produced, ten thousand rupees;

(B)in relation to any other dealer, thirty thousand rupees;'

(7) Section 5 prescribes the 'rate of tax'. Sub-section (2) thereof defines 'taxable turnover' as meaning 'that part of a dealer's gross turnover during any period which remains after deducting there from- (a) his turnover during that period on- (i) the sales of goods declared tax-free under section 6;

(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; and for use by him as raw materials in the manufacture in the Union territory of Delhi (hereinafter in this subclause referred to as Delhi), of goods (other than goods declared tax-free under Section 6)-

(A) for sale inside Delhi; or (B)........... (C) .............

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

Provided ............'

(8) Section 5A confers power on the Chief Commissioner to prescribe points at which goods may be taxed. It provides that-

'NOTWITHSTANDINGanything to the contrary in this Act. the Chief Commissioner may, by notification in the Official Gazette, specify the point in the series of sales by successive dealers at which any goods or class of goods may be taxed.'

(9) Section 6 deals with tax-free goods and provides that no tax shall be payable under the Act on the sale of goods specified in the Second Scheduled to the Sales Tax Act.

(10) Section 7 deals with registration of dealers. The relevant provisions therein arc as under :-

'(1)No dealer shall, while being liable to pay tax under Section 4 of this Act, carry on business as a dealer unless he has been registered and possesses a registration certificate.

(2)Every dealer required by sub-section (1) to be registered shall make application in such behalf in the prescribed manner to the prescribed authority.

(3)If the said authority is satisfied that an application for registration is in order, he shall, in accordance with such rules as may be prescribed, register the applicant and grant him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of Section 5.

(4)The Commissioner may from time to time amend any certificate of registration in accordance with information furnished under Section 16 or otherwise received.

(5) (6)

(7)The Commissioner may at any time for reasons to be recorded in writing and after giving the dealer an opportunity of being heard, cancel, any certificate of registration.'

(11) Section 8 deals with voluntary registration. It provides, inter alia, that any dealer other than a dealer who deals exclusively in one or more tax free goods and whose gross turnover during a year exceeds 10,000 rupees may, notwithstanding that he may not be liable to pay tax under Section 4, apply in the prescribed manner to the prescribed authority for registration under this Act.

(12) Section 10A prohibits collection of tax by dealers other than registered dealers. It provides that no person who is not a registered dealer shall collect in respect of any sales by him of goods in the Union territory of Delhi any amount by way of tax under the Act. and no registered dealer shall make any such collection except in accordance with the Act and the rules made there under.

(13) Sections 22 and 22A contain provisions regarding offences punishable under the Act and the penalties thereforee. Section 26 provides for the making of rules by the Chief Commissioner for carrying out the purposes of the Act.

(14) In exercise of the powers conferred by Section 26 of the Sales Tax Act. the Chief Commissioner made 'the Delhi Sales Tax Rules, 1951' (hereinafter referred to as the 'Rules'). The rules relevant lor the purposes of the present cases are Rules 3, 4, 5 and 6 of the Rules. We shall refer to them in the proper context.

(15) As already stated, the petitioners in the various Writ Petitions including the Writ Petitions out of which the two Letters Patent Appeals have arisen) arc all dealers registered as such under the Sales Tax Act, and they were issued registration certificates as provided in Section 7 of the Sales Tax Act. Rule 5 of the Rules prescribed that the certificate of registration should be in the form S.T. Iii or S.T. Iv according as the dealer has one or more than one place of business in the State of Delhi. Rule 6 provided that the registration certificate shall specify, inter alia, the class or classes of goods, which may be sold to the dealer free of tax as being required either- (i) for resale, or

(II)for use as raw materials in the manufacture in the Union Territory of Delhi of goods (other than goods declared tax-free under section 6) for sale in the manner specified in section 5(2) (a) (ii) of the Act.

It is common ground that in the certificates issued to the petitioners there were entries as under :- '2. The business is : Wholly Retail Old Motor Parts. 13 mainly partly partly partly 3. The sales of the following goods to this dealer will be free of tax (a) for purposes of manufacture (b) for resale Kabari Goods 1. Motor parts 3. Motor vehicles and accessories. 5. Machinery.' Tyre and tube deleted 1-7-65 sd/-

(16) As the defense Ministry docs not carry on any business of selling goods, it is not a dealer and consequently the petitioners have not been paying any sales tax on their purchases of old military motor vehicles in the sales by public auction. Till June 30, 1965, when, after dismantling the old vehicles, they re-sold the separate motor tyres and tubes to registered dealers in whose registration certificates sales of motor parts were mentioned as free of tax, no sales tax was being charged and collected from the said purchasers, and the petitioners were being allowed to deduct the sale prices of the said motor tyres and tubes from their gross turnover by virtue of the aforesaid provision in Section 5(2)(a)(ii).

(17) On June 30, 1965, the concerned Department of the Delhi Administration issued a notification, No. F., 4(33)/64-Fin. (E), under Section 5A of the Sales Tax Act. The notification reads as under :- 'No. F. 4(33)/64-Fin. (E) Dated the 30th June, 1965.

INexercise of the powers conferred by Section 5A of the Bengal Finance (Sales Tax) Act, 1941, as in force in the Union Territory of Delhi, the Chief Commissioner, Delhi, is pleased to specify that with effect from the 1st July, 1965, the turnover in respect of all kinds of Tyres and Tubes including those of Motor Vehicles, Motor Cycles, Motor Scooters, Motorcttes, Cycles and Animal driven vehicles shall be liable to tax only at the point of :-

(a) Sales by importer if imported from outside the Union. Territory of Delhi, or (b) Sale by manufacturer if manufactured in the said Territory : PROVIDED that the turnover in respect of sales within the Union Territory of Delhi by any registered dealer of any quantity of all kinds of Tyres and Tubes including those of Motor Vehicles. Motor Cycles, Motor Scooters, Motorettes, Cycles and animal driven, vehicles which has not suffered any tax under the said Act shall be liable lo tax as if the dealer was a manufacturer or importer in terms of this Notification.'

(18) According to the aforesaid notification, with effect from July 1, 1965, the turnover in respect of sales of motor tyre's and tubes is liable to tax only at any of the points mentioned in the notification. The points mentioned in the main part of the notification are (a) sales by importer if imported from outside the Union Territory of Delhi and (b) sales by manufacturer, if manufactured in the Union Territory of Delhi. The petitioners do not fall in either of the aforesaid categories and. thereforee, they are not liable to be charged or entitled to charge sales tax on sales of the separated motor tyres and tubes effected by them under the main part of the notification.

(19) However, the proviso in the notification made them liable lo tax in respect of their sales of the separated motor tyres and tubes which had not suffered any tax under the Sales Tax Act as if the petitioners are manufacturers or importers within the meaning of the main part of the notification. It has to be noted that the proviso merely referred to sales by any registered dealer. It did not make any reference to the purchaser. So, the proviso applied to all sales by any registered dealer either to a registered dealer or an unregistered dealer or a consumer. But, in view of the provision in Section 5(2) (a) (ii), if the purchasers i.s a registered dealer and sales of motor tyres and tubes are specified in his certificate of registration as being intended for re-sale by him and as free of tax, the selling registered dealer would not be able to charge and collect sales tax for such sales from the purchasing registered dealer and yet would be liable to pay tax to the authorities by reason of the proviso in the notification.

(20) Apparently, to avoid such a situation, it appears that the sales tax authorities issued orders that the entry regarding motor tyres and tubes in the registration certificates of all registered dealers including the petitioners be deleted with effect from July 1, 1965, and the entry was accordingly deleted. The combined effect of the notification and the deletion is that after July 1, 1965. when registered dealers like the petitioners, after purchasing old motor vehicles from the Government, dismantling them and separating the tyres and tubes from the said vehicles, resell the said tyres and tubes, their turnover in respect of such sales is liable to tax as if they are manufacturers or importers in terms of the notification, as the turnover of the said sales had not suffered any tax under the Sales Tax Act. They arc not entitled to claim deduction in respect of those sales under Section 5(2) (a) (ii) of the Sales Tax Act, and are liable to pay tax to the sales tax authorities, as the entry regarding tyres and tubes has been deleted from their registration certofocates. Also, they, as registered dealers, can charge and collect tax from the purchasers to whom they resell, in view of the provision in Section 10A of the Sales Tax Act.

(21) Further, if a registered dealer A, like any of the petitioners, instead of purchasing the old motor vehicles from the Government and separating the tyres and tubes from the said vehicles, purchases tyres and tubes from another registered dealer B, unless the said goods had already suffered any tax under the Sales Tax Act. he (i.e. A) would be lible to pay sales tax to his seller (i.e. B), because the entry has been deleted from his certificate, and the turnover of the selling registered dealer (i.e. B) in respect of such sales would be liable to tax because he (i.e. B) is to be treated as importer or manufacturer under the proviso to the notification, and he would be liable to pay the tax collected by him from A to the sales tax authorities. But, when the aforesaid registered dealer (i.e. A) who purchased from the registered dealer (i.e. B) resells subsequently the same tyres and tubes to another registered dealer or unregistered dealer or, consumer, such a sale would not be liable to tux, as the tyres and tubes had already suffered tax under the Sales Tax Act in the aforesaid previous sale transaction between B and A. Similar would be the position in further subsequent sales of the same tubes and tyres to another registered dealer or unregistered dealer or consumer.

(22) It appears that, after the issue of the notification, the sales tax authorities visited the shops of the petitioners and all other registered dealers, estimated the cost of the stock of the motor tyres and tubes which were lying with them on June 30, 1965, and collected sales tax from the petitioners on the estimated price of the said tyres and tubes. It is, however, common ground that the said levy and collection is not under challenge before us.

(23) It also appears that, notwithstanding the notification and the deletion of the entry, the petitioners submitted their returns claiming deduction in respect of sales of the separated motor tyres and lubes during the assessment year 1966-67 in some cases and subsequent assessment years in other cases, and the deductions were granted. However, the authorities subsequently issued notices under Section 11 A of the Sales Tax Act for re-assessment in respect of those years. Thereupon, the refugee Old Motor Parts Dealers' Association, of which the petitioners are members, made a representation to the Commissioner of Sales Tax against the aforesaid notices. It is not clear from the record as to what happened to the said representation. The sales tax. authorities, however, assessed the petitioners for the assessment year 1967-68 in some cases and for subsequent assessment years in other cases without allowing the deduction claimed. Aggrieved by the same, the petitioners, filed their respective writ petitions praying that the assessment orders without allowing the deduction claimed by them in respect of sales of motor tyres and tubes. as well as the notification dated June 30. 1965, be quashed.

(24) As already stated, the two writ petitions, out of which the two Letters Patent Appeals have arisen, were dismissed by Dalip Kapur J. on September 27. 1972. That is how the said two Letters Patent Appeals and the other nine Civil Writ Petitions in which similar points are involved have come up before us.

(25) Before us, Mr. R. C. Chawla appeared for the appellant in L.P.A. No. 275 of 1972, while Mr. A. K. Sen, Mr. S. C. Manchanda and Mr. K. B. Rohatgi appeared for the appellants in L.P.A. No. 274 of 1972. Mr. K. B. Rohatgi appeared also for the petitioners in the various Writ Petitions and adopted the contentions urged by Mr. Chawla and Mr. A. K. Sen.

(26) Mr. Chawla urged three contentions and formulated the same as under :

(1)The proviso to the notification is applicable only to the sates of the stock of tyres and tubes which existed with the petitioners on June 30, 1965, and not to sales of lyres and tubes purchased subsequently, because the notification taxed only sales by an importer or a manufacturer, the petitioners arc neither importers nor manufacturers, and Section 5A is an exception to Section 4 and destroys the liability qua all points except those mentioned in the notification under Section 5A.

(2)If held otherwise, the proviso would be hit by the doctrine of discrimination between registered dealers and unregistered dealers, and

(3)In any case, the petitioners arc not covered by the proviso to the notification, as they ceased to be registered dealers on the deletion of the items from their registration certificates, and the proviso mentions only sales by registered dealers.

(27) The first two contentions mentioned above were argued by Mr. A. K. Sen and Mr. Manchanda also. All the three aforesaid contentions were urged before the learned single Judge, but were not accepted.

(28) The first contention is as regards the scope and effect of the proviso to the notification. We have already set out the notification earlier in this judgment. There is nothing in the proviso to the notification to suggest that it is to apply only to the sales of the stock of tyres and tubes which existed with the petitioners, registered dealers. as on June 30, 1965, and is not intended to operate prospectively and apply to sales of tyres and tubes purchased subsequent to that date. On the other hand, the purpose of the notification and the language used in it indicate, in our opinion, that it is to apply to all sales of tyres and tubes purchased subsequent to June 30. 1965. as explained below.

(29) The purpose of the notification would be clear from the following. Prior to the issuance of the notification, the position was that under Section 4(2), every dealer was liable to pay tax under the Act if his gross turnover calculated from the commencement of any year exceeded the taxable quantum, as defined in Section 5, at any time within such year, and he was liable to pay the said tax on the expiry of two months from the date on which such gross turnover first exceeded the taxable quantum on all sales effected after such expiry. Under Section 5(2), a dealer's taxable quantum of turnover was that part of his gross turnover during the period in question which remains after deducting there from, inter alia, his turnover during that period on (i) the sale of goods declared tax free under Section 6, and (ii) sales to a registered dealer of goods of the class or classes specified in the certificate of such registered dealer as being intended for re-sale by him, or/and for use by him as raw materials in the manufacture in the Union Territory of Delhi, of goods for sale inside Delhi, or for sale in the course of inter-State trade or commerce or for sale in the course of export outside India. As already stated, at that time motor parts, like tyres and tubes, were being specified in the certificate of registration of registered dealers as for re-sale or for use as raw materials in manufacture. So, turnover on the sales of tyres and tubes by registered dealers like the petitioners to other registered dealers in whose certificates of registration the said goods were specified, could be deducted from their gross turnover for arriving at their taxable turnover. Thus, if the purchaser was a registered dealer in whose certificate tyres and tubes were specified, then the turnover of the sale of the tyres and tubes could be deducted from the gross turnover of the registered dealer selling them. If there were a series of sales successively by one registered dealer to another registered dealer in whose certificates tyres and tubes were specified as for resale or for use as raw materials in manufacture, sales tax was not payable, and it is only when a sale was eventually made either to an unregistered dealer or a consumer, the tax was payable, and the same was to be collected by the last registered selling dealer from the purchasing unregistered dealer or consumer and passed on to the sales tax authorities. In other words, the tax was livable at the point of the last sale in the series.

(30) Section 5A empowers the Chief Commissioner to specify the point in the series of sales by successive dealers at which any goods or class of goods may be taxed. The said provision was added by the Bengal Finance (Sales Tax) Delhi Amendment Act No. 20 of 1959, and the object of the amendment was stated in the objects and reasons for the amendment to be-

'TOprovide for the levy of tax at any point other than the point of last sale so that sales tax may be levied at the first point on certain items which are manufactured in factories.'

ITwas in exercise of that power under Section 5A that the impugned notification was issued making tyres and tubes liable to tax only at the point of (a) sale by importer if imported from outside the Union Territory of Delhi, or (b) sale by manufacturer if manufactured in the said Territory. Thus, the purpose of the notification was only to shift the levy from the point of last sale to the point of first sale by an importer or manufacturer.

(31) Coming now to the language used in the notification, it has to be noticed that the notification clearly states that 'the turnover in respect of all kinds of tyres and tubes ........ shall be liable to tax only at the point' mentioned above, 'with effect from 1st July, 1965'. The said language obviously shows that it was intended to operate prospectively. and was not intended to apply only to sales of the stock of tyres and tubes that existed with registered dealers like the petitioners as on June 30, 1965. Thus, the first contention is without any substance, and cannot, thereforee, be accepted.

(32) The second contention urged by the learned counsel was that if the first contention is not accepted and the proviso is held to be operative prospectively, it would be hit by the doctrine of discrimination between registered dealers and unregistered dealers. The argument was that if the proviso is applicable to sales of tyres and tubes purchased subsequent to June 30. 1965, the result would be that the turnover in respect of sales by any registered dealer of any quantity of tyres and tubes which has not suffered any tax under the Sales Tax Act would be liable to lax by virtue of the proviso, while the turnover in respect of such sales by any unregistered dealer would not be liable to tax as the proviso refers and is applicable only to a registered dealer, and admittedly he is not an importer or a manufacturer and as such the main part of the notification is not applicable to him.

(33) To appreciate the aforesaid argument, it is necessary to point out the position of a registered dealer and an unregistered dealer under the Sales Tax Act. Under Section 4(2), every dealer, whether registered or unregistered, is liable to tax only if his gross turnover calculated from the commencement of any year exceeds the taxable quantum prescribed by Section 4(5). If the gross turnover does not exceed the taxable quantum, neither a registered dealer nor an unregistered dealer is liable to tax, although the Former has to file returns under Section 10(2),

(34) Now, in the case of a registered dealer whose gross turnover exceeds the taxable quantum in any year. as pointed out earlier and it cannot be and is not disputed, his turnover on sales of tyres and tubes which had not suffered any tax under the Sales Tax Act is liable to tax under the proviso to the notification as if he is an importer or manufacturer in tes of the notification. Even where the aforesaid registered dealer, instead of purchasing vehicles from the defense Ministry and separating the tyres and tubes, purchases tyres and tubes from another registered dealer, unless the said goods had already suffered any tax under the Sales Tax Act, he would be liable to pay sales tax to his seller as the goods were deleted from his certificate of registration, and the turnover of the said seller in respect of such sales would be liable to tax because, being a registered dealer, he is deemed to be an importer or manufacturer under the proviso to the notification. When the said purchasing registered dealer resells subsequently the same tyres and tubes to another registered dealer or unregistered dealer or consumer, such a sale would not be liable to tax. as the tyres and tubes had already suffered tax under the Sales Tax Act in title previous transaction of sale.

(35) We shall now consider the position of an unregistered dealer whose gross turnover exceeds the taxable quantum in any year. As his gross turnover exceeds the taxable quantum, he is liable to pay tax by virtue of the provision in Section 4(2) of the Sales Tax Act. Being so liable to pay tax under Section 4(2), he cannot carry on and is indeed prohibited from carrying on the business of selling goods as a dealer by virtue of the provision in Section 7(1) of the Sales Tax Act unless he has been registered and possesses a registration certificate. If he purchases old motor vehicles at the public auction, he does not pay any tax on that purchase, because, only a sale by a 'dealer' is liable to tax under Section 4(2) of the Sales Tax Act and the seller, viz., the defense Ministry, is not a 'dealer' within the meaning of Section 2(e) of the Sales Tax Act as it docs not carry on any business of selling goods. When he separates the tyres and tubes from the old vehicles, he cannot sell the said tyres and tubes in view of the prohibition contained in Section 7(1). If he surreptitiously sells the tyres and tubes in violation of the said prohibition either to a registered dealer or an unregistered dealer or a consumer, he would normally in law [i.e. under Section 4(2)] be liable to pay tax. although he might successfully avoid the actual payment until he is caught and proceeded against under sub-sections (2), (2a). (3), (4) and (5) of Section 11 of the Sales Tax Act. So far as liability to pay tax in law is concerned, he would normally be one who is so liable like any registered dealer.

(36) BUT- the learned counsel for the petitioners contends that although he would normally be so liable to pay tax under the Sales Tax Act, the notification has changed the position. According to the learned counsel, since in accordance with the provision in Section 5A of the Sales Tax Act, the main part of the notification made the turnover in respect of the tyres and tubes liable to tax only at the point of a sale by an importer or (b) a sale by a manufacturer, and since the unregistered dealer is not an importer or a manufacturer, the turnover of any sale of the separated tyres or tubes by him would not be liable to tax under the Sale Tax Act. The learned counsel submitted that the provision in Seciion 5A is an exception to the provision in Section 4(2). and destroys the liability to tax qua all points except the point mentioned in the notification under Section 5A. and that in the present case the words 'only at the point of' used in the notification make it quite clear that the turnover in respect of tyres and tubes is liable to tax only at the point of sale by an importer or by a manufacturer and is not liable to tax at the point of any subsequent sale.

(37) In answer to the said contentions, the learned Solicitor General contended that it is not correct to say that Section 5A destroys the liability to tax at all points other than the point mentioned in a notification under that Section, and that in the present case the notification issued under Section 5A fixes the point only with respect to the three classes or categories of dealers viz. importer, manufacturer and registered dealer, and not with respect to others like unregistered dealers. According to him, the turnover of a sale of tyres and tubes by unregistered dealers would, thereforee, be liable to tax. Alternatively, he contended that even if it is held that the sale by an unregistered dealer is not liable to tax, while the sale by a registered dealer is liable to tax. the doctrine of discrimination would not be attracted as the unregistered dealer and the registered dealer arc not similarly situated. Since, in our opinion, the aforesaid alternative contention of the learned Solicitor General has considerable force, and has to be accepted, we consider that it is not necessary to decide whether an unregistered dealer is not liable to tax by reason of the main part of the notification as contended by the learned counsel for the petitioners.

(38) Even if it is assumed that the turnover on a sale of the tyres and tubes by an unregistered dealer is not liable to tax by reason of the main part of the notification, while the turnover of a registered dealer is liable to tax by reason of the proviso to the notification, the question of any discrimination does not arise as the unregistered dealer cannot be said to be similarly situated as the registered dealer. It is now well settled by the decisions of the Supreme Court that equality before law or the equal protection of law envisaged by Article 14 of the Constitution applies only to persons similarly situated and not to persons who arc nor so situated. Under the provisions of the Sales Tax Act, a dealer whose turnover exceeds the taxable quantum is required to be registered and to possess a registration certificate, vide Section 7(1).] On such registration, he can carry on the business of selling goods and can also apply for specification of certain goods in his registration certificate so as to enable him to purchase the goods free of tax or claim a deduction of the turnover on the sales of such goods by him in terms of Section 5(2) (a) (ii) of the Sales Tax Act. On the other hand, an unregistered dealer, whose turnover exceeds the taxable quantum, is prohibited from carrying on the business of selling goods. He is also denied the benefit envisaged by Section 5(2) (a) (ii) of the Scales Tax Act. Even if he makes the sale surreptitiously, he is prohibited from collecting any tax from his purchaser by reason of the provision in Section 10A, and is also liable to be prosecuted for the offence mentioned in Section 22(1) (a) of the Sales Tax Act. Thus, there is a basic distinction between the position of a registered dealer and that of an unregistered dealer under the scheme of the Sales Tax Act. The two are, thereforee, dealt with differently. The registered detaler is enabled to collect tax and pay to the authorities, while the unregistered dealer is prohibited from carrying on the business of selling goods and collecting tax; and if he surreptitiously carrying on business he is subjected to penalty. The learned counsel for the petitioners sought to point out that a dealer whose turnover exceeds the taxable quantum acts in accordance with law and gets himself registered is made liable to pay tax under the proviso to the notification, while a dealer who does not act in accordance with law and get himself registered even though his turnover exceeds the taxable quantum, is not made liable to pay tax in respect of the sales of tyres and tubes. As pointed out already, the registered dealer, who is made liable to pay tax on the turnover of his sales of tyres and tubes which had not already suffered tax under the Act, can realise the same from the person who purchases from him and is not. thereforee, a loser. On the other hand, an unregistered dealer, whose turnover exceeds taxable quantum cannot sell tyres and tubes at: all, and even if he sells them surreptitiously, he cannot collect any sales tax from his purchaser and would even be liable to be prosecuted for the offence mentioned in Section 22(1) (a). Thus, he is not in any better position than a registered dealer, and he is not similarly situated as the registered dealer. The doctrine of discrimination is not, thereforee, attracted. There is thus no force in the second contention urged on behalf of the petitioners.

(39) The third contention was that in any case the petitioner are not covered by the proviso to the notification, as they ceased to be registered dealers on the deletion of the items from their registration certificates, and the proviso mentions only sales by registered dealers. The learned counsel argued that after the deletion of the items from their registration certificates, the petitioners can no longer be regarded as registered dealers qua the Said ITEMS. For a proper appreciation of this contention, reference has to be made to the provision's in the Sales Tax Act and the Rules regarding registration and the inclusion or deletion of items of goods in the registration certificate.

(40) The expression 'registered dealer' has not been defined in the Act. Section 2(f) defines 'registered' as meaning 'registered under the Act.' Section 7 deals with the registration of dealers. Sub-section (1) of Section 7 prohibits any dealer who is liable to pay tax under Section 4 from carrying on business as a dealer unless he has been registered and possesses a registration certificate. Sub-section (2) provides that every dealer required by sub-section (1) to be registered should make application for registration in the prescribed manner to the prescribed authority. Sub-section (3) provides that if the concerned authority is satisfied that the application is in order, he should grant a certificate of registration in the prescribed form which should specify 'the class or classes of goods' for the purposes of Section 5(2)(a)(ii). Sub-section (4) empowers the Commissioner to amend any certificate of registration in the circumstance's mentioned in the sub-section. Similarly, sub-section (7) provides for cancellation of a certificate of registration in the circumstances mentioned therein.

(41) Rule 3 provides that an application for registration of a dealer under Section 7 shall be made to the appropriate Assessing Authority, and that it shall be in Form S. T. I. if made by a dealer having only one place of business in the State of Delhi, and in Form S.T. Ii if made by a dealer having more than one place of business in the State. The relevant columns in the said two Forms are practically the same. They are columns 2 and Ii in Form S. T. I. and columns 2 and 10 in Form S.T. II. It is sufficient to set out columns 2 and Ii in Form S.T.I. They are as follows :- '2. The business is : wholly mainly partly partly partly 24 11. The following classes of goods arc ordinarily purchased by the business :

(A)for purposes of manufacture in the Union Territory of Delhi of goods (other than goods declared tax-free under Section 6) for sale in the manner specified in Section 5(2)(a)(ii) of the Act.

(b) for re-sale. (c) for containers for other packing material.'

(42) It has to be noted that the dealer has to state in column 2 the goods in respect of which he desires to carry on the business of selling, and that in column 11 he has to mention the class or classes of goods in respect of which he desires to get the advantage of purchasing the same free of tax or claiming a deduction from his gross turnover according as he is a purchaser or a seller as provided in Section 5(2)(a)(ii) of the Sales Tax Act.

(43) Rule 4 of the Rules made under the Act requires that the application for registration should contain particulars, inter alia,- '(iii) what class or classes of goods the dealer ordinarily purchases- (a) for resale (in or outside the State of Delhi),

(B)for use as raw materials in the manufecture in the Union Territory of Delhi of goods (other than goods declared tax-free under section 6) for sale in the manner specified in Section 5(2)(a)(ii) of the Act:

(c) for containers or other packing materials:'

ITcan be seen that the aforesaid particulars are the same as those mentioned in Column 11 in the form of application for registration and relate to the advantage which a dealer can get under Section 5(2)(a)(ii).

(44) Rule 5 provides that the Certificate of Registration should be in Form S.T. Iii or Form S.T. Iv according as the dealer has one or more than one place of business in the State of Delhi. The relevant columns in the two forms are practically the same, and they are columns 2 and 3. They read as follows :- '2. The business is :- wholly 25 mainly partly partly partly. 3. The sales of the following goods to this dealer will be free of tax :-

(A)for use as raw materials in the manufacture in the Union Territory of Delhi goods (other than goods declared taxfree under section 6) for sale in the manner specified in section 5(2)(a)(ii) of the Act.

(b) for re-sale.'

IThas to be noted that column 2 in Form S.T. Iii corresponds to column 2 in Form S.T.I.. and column 3 in Form S.T.III correspondends to column 11 in Form S.T.I.

(45) Rule 6(1) lays down that the Registration Certificate shall specifiy the following amongst other particulars, namely,- '(b) the nature of the business;

(C)the class or classes of goods, which may be sold to the dealer free of tax as being required either

(i) for re-sale, or

(II)for use as raw materials in the manufacture in the Union Territory of Delhi of goods (other than goods declared tax-free under section 6) for sale in the manner specified in Section 5(2)(a)(ii) of the Act.'

Rule 6(2) requires that-

'SUBJECTto the provisions of the Act and these rules, the particulars referred to in clauses (b) and (c) of subrule (1) shall be described in the registration certificate in the same terms as are used by the dealer in his application form.'

(46) The following propositions emerge from the various provisions in the Section, Rules and Forms, set out above-

1.A dealer, whether registered or unregistered, is liable to pay tax if his gross turnover exceeds the taxable quantum [vide Section 4(2)]. The liability to pay tax is thus in no manner connected with registration. The necessity for registration arises by reason of the prohibition in Section 7(1) viz., that no dealer who is liable to pay tax under Section 4 shall carry on the business of selling goods unless he has been registered and possesses a registration certificate. It is thus clear that the liability to pay tax under the Act is independent of registration.

2.On registration, a dealer gets certain benefits and advantages, which it is not necessary to enumerate here, while an unregistered dealer does not so get. When a dealer applies for registration, the application has to specify firstly, the items of goods in respect of which he proposes to carry on the business of selling, and secondly, he has to specify the class or classes of goods for the purposes of Section 5(2) (a) (ii). The registration certificate also, when granted has to specify the said two sets of items in columns 2 and 3 of the certificate respectively.

(47) It is common ground before us that the certificate granted to the petitioners are all alike. It is, thereforee, sufficient to refer to the certificate, Annexure C to Civil Writ Petition No. 1324 of 1969. The relevant portion of the said certificate reads as follows :- 'FORM S. T. Iii 2769 Certificate of Registration for a dealer having only one place of business in Delhi State. No. 2769 Ward Iv

THISis to certify that the firm known as M/s. Harbans Motor Stores, Prop. Sant Ram Oberoi, whose place of business is situated at Motia Khan, Delhi, w.e.f. 3-6-1955, Jhandewalan Road, New Delhi, registered as dealer under the Bengal Finance (Sales Tax) Act, 1941, as extended to the State of Delhi.

2. The business is : Wholly Retail Old Motor Parts mainly partly partly partly. 27 3. The sale of the following goods to this dealer will be free of tax: (a) for purpose of manufacture (b) for sale Old motor Pans Second hand vehicles amended w.e.f. 1.3.59. Tyre & tube deleted Ball-bearing 1.7.65 (4 items) sd/- sd/-

(48) NOW. what the sales tax authorities had done after the issuance of the notification under Section 5A was the deletion of 'tyre and tube' from column 3 with effect from July 1, 1965. The entry in column 2, viz., 'retail old motor parts' was not deleted, but was left to remain. As already stated, the entry in column 2 of the certificate is to indicate the goods in respect of which the registered dealer is to carry on the business of selling, while the entry in column 3 is for the purposes of Section 5(2) (a) (ii). So, when the entry 'tyre and tube' was deleted from column 3, there was no alteration in the status of the petitioners as registered dealers carrying on the business of selling the goods mentioned in column 2 of their registration certificate. They continued to be registered dealers carrying on the business of selling 'retail old motor parts' which would still include 'tyre and tube'. The effect of the deletion of 'tyre and tube' from column 3 of the certificates of all registered dealers including the petitioners was not that they were altogether prevented from selling 'tyres and tubes', but only that they became disentitled to claim the benefit or advantage of the provision in Section 5(2) (a) (ii) in respect of tyres and tubes. After the deletion they continue to be entitled to sell tyres and tubes by virtue of the entry in column 2, but only they cannot purchase tyres and tubes free of tax, nor can another registered dealer who purchases from them cn insist upon non-payment of tax on the goods purchased by him. A registration certificate can be amended or cancelled. More amendment does not amount to cancellation of the entire certificate. The deletion of 'tyre and tube' from column 3 in the certificates of the petitioners was in the nature of a mere amendment of the certificates and not a cancellation thereof. It is thus clear that the said deletion did not amount to cancellation of the registration of the petitioners or their registration certificate. The registration continued to subsist and (he petitioners continued to be registered dealers carrying on the business of selling 'retail old motor parts' (which would include tyres and tubes) mentioned in column 2 of their certificates for the purposes of the Act.

(49) The argument that the petitioners ceased to be registered dealers qua the items deleted from column 3 is also not correct. The items specified in column 2 indicate the goods in respect of which the registered dealer carries on the business of selling either wholly or mainly or partly. On the other hand, the specification of any items of goods or commodities in column 3 of the registration certificate i.s only lor the purpose of the provision of Section 5(2)(a)(ii) of the Act. The effect of deletion of those items of goods from column 3 in the certificate is only to disentitle the registered dealer from claiming the benefit of the provision in Section 5(2)(a)(ii) in respect of the items so deleted, and there is no question of his ceasing to be a registered dealer in respect of those items for other purposes of the Act.

(50) In support of his contention, the learned counsel referred us to an observation in the judgment of a Division Bench of this Court (of which one of us, T.V.R. Tatachari J., was a member) in M/s. Fitwal Engineers v. Financial Commissioner and another. Civil Writ Petition No. 590 of 1973, pronounced on April 26, 1974(1). In that case, the question considered by the Division Bench was as to whether registered dealers, who purchased free of tax the goods specified in their registration certificates as for resale or for use by them in the manufacture of goods for sale, could effect the actual resales or postmanufacture sales outside Delhi, and if they so sell outside Delhi, whether their conduct in doing so would amount to utilisation of the goods for 'any other purpose' within the meaning of the second proviso to Section 5(2)(a)(ii) of the Sales Tax Act, and whether the price of the goods purchased by them tax free was liable to be included in their taxable turnover as provided in the said second proviso. The contention of the sales tax authorities was that the resales or postmanufacture sales had to be in Delhi, and when they were effected outside Delhi, it would amount to utilisation for 'any other purpose' within the meaning of the second proviso, and the purchase pries was liable to be included in the taxable turnover of the said registered dealers. The Division Bench upheld the contention of the sales-tax authorities. In that context, the Division Bench had to consider the concept of registration under the Sales Tax Act. After considering the said concept, it was observed in the judgment as under :-

'WEare, thereforee, in agreement with the following propositions advanced by the learned Solicitor General as to the concept of registration :-

1.Registration is of a person who carries on the business of selling goods in Delhi with reference to his place or places of business, whose total sales in Delhi make him liable to tax under Section 4 (vide Section 7) or whose gross turnover on sales in Delhi exceeds Rs. 10,00().00 (vide Section 8).

REGISTRATIONcertificate must contain ( 1 ) the goods, or classes of goods in which he deals and (2) the place or places of business.

2.Registrability is thus dependent on the volume of dealer's sales, but only the volumes of sales in Delhi is relevant and the sales outside are wholly irrelevant.

3.A dealer is a registered dealer only in respect of articles and places of business entered in his certificate. Beyond those articles and places he is an unregistered dealer 125 Stc 64, (SC) at 68, 69].

It, thereforee, follows that he is a registered dealer qua sales in Delhi only.'

(51) A perusal of the reasoning in the judgment clearly shows that it was all in relation to the interpretation of the provision in the second proviso to Section 5 (2) (a) (ii). The statement in the third proposition extracted above that a dealer is an unregistered dealer in. respect of places and articles which are not mentioned in the certificate was obviously in the context of the second proviso to Section 5 (2) (a) (ii), and all that was meant by that statement was that a dealer cannot claim to be a registered dealer for the purposes of Section 5(2) (a) (ii) qua articles which are not specified in the certificate for the purpose of the said provision, i.e. qua articles, if any, which are to be specified in column 3 of the Registration Certificate for the purposes of Section 5(2) (a) (ii), but hare not been so specified or which have been so specified originally but deleted subsequently. The said statement cannot, thereforee, be regarded as intended to lay down that a dealer would be an unregistered dealer for all other purposes of the Act in respect of articles or goods which are not mentioned in column 3 of the Certificate. The statement does not mean that he could not continue to be a registered dealer qua the items of goods mentioned in column 2 of the registration certificate. In the case of the certificates of the petitioners, 'tyres and tubes' have been deleted from column 3, but 'retail old motor parts' have been retained in column 2. It cannot be disputed that 'tyres and tubes' would be covered by the said entry in column 2. thereforee, it is clear that the petitioners continued to be registered dealers in respect of tyres and tubes by virtue of the entry in column 2 of their certificates. The contention of the learned counsel for the petitioners that they ceased to be registered dealers qua tyres and tubes on the deletion of the said items from column 3 in their certificates is thus untenable and cannot be accepted. Being thus registered dealers in respect of tyres and tubes, the proviso to the notification applies to the petitioners. The observation of the Division Bench cannot, thereforee, be of any assistance to the petitioners.

(52) Reference was also made to the decision of the Supreme Court in Commissioner of Income-tax v. Minerva Minerals, 25 S.T.C. 64. In that case. one of the contentions was that 'when a dealer got himself registered under the Sales Tax Act he was getting himself registered as a dealer who carries on the business of selling and supplying goods in Madhya Pradesh and not vis-a-vis any particular place or places noted in the registration certificate (vide p. 68)'. In rejecting the said contention Ramaswami J. observed at page 69 that.-

'IT is plain on an examination of the relevant sections (of the C.P. and Berar Sales Tax Act 21 of 1947) and the statutory rules that the certificate of registration is granted with reference to the place of business or places of business of the dealer and not with reference to the whole area of the State though for the purpose of determining the liability of the dealer, his turnover in respect of all places of business in the state including those not mentioned in the registration certificate is to be taken into consideration. It follows, thereforee, that if a registered dealer carries on business in places not disclosed in the registration certificate he will have to be treated as an unregistered dealer vis-a-vis those places.'

(53) It has to be noted that the said observations were made with reference to the place of business mentioned in the Registration Certificate and not with reference to goods specified in column 3 of the registration certificate. In the cases before us, the goods mentioned in column 3 of the registration certificates of the petitioners were specified for the purpose of enabling the petitioners to purchase free of tax the said goods specified in column 3 of the certificate and to claim a deduction from their gross turnover under Section 5 (2) (a) (ii) of the Sales Tax Act if and when they sell the said goods to another registered dealer in column 3 of whose certificate the goods are specified. The specification of the place or places of business in the certificates of the registered dealers in the case before the Supreme Court was to indicate that they were registered dealers with reference to the said place or places of business, while the specification of certain goods in column 3 of the certificates of the petitioners before us was for the purposes of the provision in Section 5(2)(a)(ii) of the Sales Tax Act. The learned counsel cannot, thereforee, derive any support for his contention from the aforesaid observation in Hie decision of the Supreme Court.

(54) Thus, the third contention also cannot be accepted.

(55) As all the contentions have failed, the two Letters Patent Appeals Nos. 274 and 275 of 1972, and the nine Civil Writ Petitions Nos. 431 to 433, 1435 of 1973, and 803, 809, 849, 850 and 891 of 1974, arc dismissed, but in the circumstances without costs.


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