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The State of Gujarat Vs. Patel Kalidas Naranbhai - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 3 of 1964
Judge
Reported in[1966]17STC245(Guj)
ActsBombay Sales Tax Act, 1953 - Sections 10A and 66(1); Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 - Rule 12(1-A); Income-tax Act
AppellantThe State of Gujarat
RespondentPatel Kalidas Naranbhai
Appellant Advocate B.R. Sompura, Assistant Government Pleader and; M.G. Doshit, Additional Government Pleader
Respondent Advocate S.L. Mody, Adv.
Cases Referred and Master Ladies Tailors v. Minister of Labour
Excerpt:
.....tax (exemptions, set-off and composition) rules, 1954 - whether rule 12 (1-a) entitles dealer to claim remission of purchase tax where both purchase and subsequent sale took place prior to coming into force of rule - rule confers right of remission of purchase tax on fulfilment of conditions - conditions must be fulfilled after coming into force of rule - no express implications or words conferring right on dealer to claim remission even where subsequent sale takes place and conditions fulfilled prior to coming into force of rule - rule to be read prospectively operating in situation where subsequent sale resulting in fulfilment of conditions takes place after coming into force of rule - assessee cannot claim remission as purchase as well as subsequent sales made by assessee were prior..........of the bombay sales tax (exemptions, set-off and composition) rules, 1954, entitles a dealer to claim remission or refund of purchase tax paid by him on purchase of goods where both the purchase and the subsequent sale took place prior to the coming into force of the rule. the facts giving rise to the reference are few and may be briefly stated as follows. the assessees at all material times fcarried on business as dealers in raw tobacco and were registered under the bombay sales tax act, 1953. the assesses elected to pay sales tax under section 10a of the act. in the assessment year 1955-56 commencing on 1st april, 1955, and ending on 31st march, 1956, the assessees purchased different varieties of raw tobacco from unregistered dealers for the price of rs. 46,932 and these purchases.....
Judgment:

Bhagwati, J.

1. A question of some nicety and importance arises on this reference. The question is whether on a true construction Rule 12(1-A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, entitles a dealer to claim remission or refund of purchase tax paid by him on purchase of goods where both the purchase and the subsequent sale took place prior to the coming into force of the rule. The facts giving rise to the reference are few and may be briefly stated as follows. The assessees at all material times fcarried on business as dealers in raw tobacco and were registered under the Bombay Sales Tax Act, 1953. The assesses elected to pay sales tax under Section 10A of the Act. In the assessment year 1955-56 commencing on 1st April, 1955, and ending on 31st March, 1956, the assessees purchased different varieties of raw tobacco from unregistered dealers for the price of Rs. 46,932 and these purchases being from unregistered dealers, the assessees became liable to pay purchase tax on them under section 10(a) of the Act. The assessee thereafter mixed the different varieties of raw tobacco purchased by them and graded the mixture by passing it through sieves and sold the resultant mixture to various dealers outside the State of Bombay. These sales were also effected in the assessment year 1955-56 and they were within a period of nine months from the dates of the respective purchases. In the assessment of the assessees to sales tax for the assessment year 1955-56, the assessees claimed exemption from payment of purchase tax on the purchases effected by them on the ground that having elected to pay sales tax they were not liable to pay purchase tax by reason of section 10A. The assessees also claimed in the alternative remission of purchase tax under rule 12(1A) on the ground that they had despatched the goods purchased by them to an address outside the State of Bombay within a period of nine months from the date of the respective purchases. The claims under both heads were negatived by the Sales Tax Officer and on appeal, the order of the Sales Tax Officer was confirmed by the Assistant Commissioner of Sales Tax. A revision application was preferred to the Deputy Commissioner or Sales Tax but the revision application also met with the same fate and the assessees thereupon approached the Tribunal in further revision. Now the claim of the assessees based on section 10A could succeed only if it could be shown that raw tobacco purchased by the assessees was sold without being processed or altered in any manner but the Tribunal held that there was processing of raw tobacco when the assessees passed it through sieves for the purpose of grading and the condition requisite for the applicability of section 10A was, therefore, not satisfied. The claim for exemption under section 10A was thus negatived by the Tribunal and since there is no question before us in regard to that claim, the decision of the Tribunal on that point must be regarded as final and binding. So far as the claim based on rule 12(1A) was concerned, the Revenue did not contend before the Tribunal that that rule was not in force during the assessment year 1955-56 and that the assessees were, therefore, not entitled to claim remission under that rule. The only question debated before the Tribunal was whether the terms of the rule were satisfied and the argument of the Revenue was that the terms of the rule were not satisfied because what were sold by the assessees were not the same goods which were purchased but different goods into which the goods purchased had been converted by the assesses. This argument was rejected by the Tribunal which held that though it was undoubtedly true that when the assessees mixed the different varieties of raw tobacco purchased by them and passed the resultant mixture through sieves for the purpose of grading, some process was performed but the resultant mixture was still the same commercial commodity as raw tobacco and the goods sold by the assessees were, therefore, the same as the goods purchased as required by rule 12(1A). The Tribunal accordingly upheld the claim of the assessees to remission under rule 12(1A). This view of the Tribunal is now challenged before us on behalf of the State in the present reference.

2. When the hearing of the reference opened before us, Mr. B. R. Sompura, learned Assistant Government Pleader appearing on behalf of the Revenue raised a new contention which had not been urged before any of the authorities below and that contention was that rule 12(1A) which constituted the very foundation of the claim for remission was not in force during the assessment year 1955-56 and the assessee were, therefore, not entitled to claim remission under that rule. Now there can be no doubt that rule 12(1A) was not in force during the assessment year 1955-56 and it came into force only from 1st March, 1957, and consequently unless the rule in construed as conferring a right to claim remission or refund of purchase tax even in cases where purchase and subsequent sale were effected prior to 1st March, 1957, the claim of the assessees to remission would be liable to be rejected. But a preliminary objection to our entertaining this connection was raised by Mr. S. L. Mody, learned Advocate appearing on behalf of the assessees. He urged that the case was argued before the Tribunal on the basis that the claim for remission made by the assessees was governed by rule 12(1A) and the only ground on which the claim was sought to be negatived was that the requirements of rule 12(1A) were not fulfilled. He pointed out that at no stage was it contended on behalf of the Revenue that rule 12(1A) did not govern the determination of the claim of the assessees and that the claim was liable to fall on the ground that the rule was not in force during the assessment year 1955-56 nor was any question raising such contention submitted for the opinion of the Court. He contended that under these circumstances it was not competent to the Revenue to raise the plea that rule 12(1A) was not in force during any part of the assessment year 1955-56 and that the claim of the assessees was, therefore, unsustainable. This contention thought at first blush attractive since it has an emotive appeal, namely, why should the Revenue be allowed to challenge the applicability of rule 12(1A) for the first time at the hearing of the Reference before the High Court when it permitted the assessees to proceed throughout on the basis that rule 12(1A) applied and the validity of the claim made by the assessees fell to be governed by the terms of rule 12(1A) is in our opinion entirely devoid of merit. The question referred to us for our opinion is in following terms :-

'Where on the facts and in the circumstances of the case, the opponents were entitled to a remission under rule 12(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, of the purchase tax paid under section 10(a) of the Bombay Sales Tax Act, 1953, in respect of the purchases by the opponents of raw tobacco at the price of Rs. 46,932 ?'

3. and on a plain reading of the question it is clear that the question can and does cover the contention sought to be urged on behalf of the Revenue. Since the question raises a challenge to the right of the assessees to claim remission under rule 12(1A), it should be open to the Revenue within the framework of the question to contend that the assessees are not entitled to claim remission under rule 12(1A) inasmuch as rule 12(1A) was not in force during the relevant period. If the Revenue can on the question as framed seek to defeat the claim of the assessees to remission under rule 12(1A) on the ground that the terms of rule 12(1A) were not satisfied, we do not see why the Revenue cannot seek to defeat the claim of the assessees on the ground that rule 12(1A) on which the claim of the assessees is based was not in force during any part of the assessment year 1955-56. The latter contention would be merely one more aspect of the question and would be clearly included within the ambit and coverage of the question. It is now well-settled as a result of the decision of the Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. ([1961] 42 I.T.R. 589) - and the principle there laid down in regard to section 66 of the Income-tax Act must apply equally in regard to section 34 of the Bombay Sales Tax Act, 1953 - that once a question is in issue before the Tribunal and is referred to the Court for its opinion, there is no limitation that the reference should be limited to those aspects of the question which have been argued before the Tribunal. As observed by Venkatarama Aiyar, J., '... it will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act'. Where, therefore, a question involves more than one aspect requiring to be tackled from different standpoints, all aspects of the question can be agitated before the Court even though they might not have been argued before the Tribunal. It is, therefore, clear that even though the contention that rule 12(1A) was not in force during any part of the assessment year 1955-56 was not raised before the Tribunal it can still be agitated on the present reference inasmuch as it represents merely one more aspect of the question referred to us for our opinion and is comprised within the question. We cannot, therefore, refuse to allow the Revenue to raise this contention before us and we must accordingly proceed to consider it. Now obviously having regard to the fact that rule 12(1A) came into force only from 1st March, 1957, and was not in force during any part of the assessment year 1955-56, the contention must succeed unless the assessees can show that rule 12(1A) though it came into force only from 1st March, 1957, applied to govern transactions which took place prior to 1st March, 1957, and this Mr. S. L. Mody on behalf of the assessees attempted to do. He contended that on a true construction of the language used by the rule-making authority, rule 12(1A) applied not only where the purchase and subsequent sale were effected subsequent to 1st March, 1957, but also where the purchase and subsequent sale were effected prior to that date and in the latter case even if the assessment was completed the assessee was entitled to claim refund of the purchase tax paid by him on the purchase, provided of course the other requirements of the rules were satisfied. Rule 12(1A), the argument ran, conferred a right on the assessees to claim remission or refund of purchase tax in respect of any purchases of goods if he could show to the satisfaction of the Collector that he had become liable to pay purchase tax on the such purchases and that the goods purchased had been despatched by him to an address outside the State of Bombay within a period of nine months from the date of purchase and the language of the rule, therefore, clearly applied to a case where goods were purchased by the assessee prior to 1st March, 1957, and were also subsequently despatched by him to an address outside the State of Bombay prior to 1st March, 1957, but within a period of nine months from the date of purchase. Mr. S. L. Mody thus attempted to give a retrospective effect to rule 12(1A) so as to make it applicable to transactions where the purchase and subsequent sale were both concluded before 1st March, 1957, prior to the coming into force of the rule. Mr. B. R. Sompura on behalf of the Revenue disputed the validity of this construction and submitted that rule 12(1A) was clearly prospective in operation and applied only where the subsequent sale was effected after the coming into force of the rule though the purchase might have been made prior to that date. He argued that if the construction contended for an behalf of the assessees were accepted, it would amount to giving retrospective operation to rule 12(1A) which was not warranted by the language of the rule on any principle of interpretation. His conclusion was - and that was the conclusion which he pressed upon us for our acceptance - that since the purchases and subsequent sales in the present case were during the assessment year 1955-56, that is, prior to the coming into force of rule 12(1A), the rule was not applicable and no claim for remission of purchase tax paid in respect of the purchases could be made under the rule. These were the rival contentions of the parties and they raised a question of retrospectivity of the operation of rule 12(1A).

4. Now if there is one rule of construction clearer than any other, it is this that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to affect, alter or destroy any right already acquired under the existing law or to create a new obligation or enforce a new duty or attach a new disability in respect to transactions or considerations already passed. It is always presumed in such cases that the Legislature does not intend to impair existing rights or obligations unless of course that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only and not as retrospective so as to operate on transactions already concluded before the enactment came into force. If this rule of interpretation is borne in mind, there is really no difficulty in arriving at a correct determination of the question of construction which has arisen before us.

5. Let us first examine the language of rule 12(1A). That rule as it stood on 1st March, 1957, when it came into force was in the following terms :-

'12. (1A) Where a dealer, who has become liable to pay purchase tax under clause (a) of section 10 on his purchase of goods, shows to the satisfaction of the Collector that the goods so purchased have, within a period of nine months from the date of their purchase by him, been despatched :

(i) by him, or

(ii) by a registered dealer to whom he sold the goods on his furnishing a certificate in Form N prescribed under the Bombay Sales Tax (Registration, Licensing and Authorisation) Rules, 1954, to an address outside the pre-reorganisation State of Bombay, excluding the transferred territories, then the Collector shall by order remit the amount of purchase tax payable by such dealer on his purchase of goods or where such dealer has already paid such amount, the Collector shall, on an application for refund made by such dealer in the manner specified in rule 25 of the Bombay Sales Tax (Procedure) Rules, 1954, refund to such dealer the amount so paid ......'

6. Of course from 30th June, 1957, the rule was amended but the claim in the present case was based on the unamended rule which we have set out above and we need not, therefore, concern ourselves with the amendment. Now it is clear on a plain reading of the rule that two conditions must be satisfied before a dealer can claim remission or refund of purchase tax in respect of purchase of goods may by him : (1) the dealer must have become liable to pay purchase tax on the purchase under section 10(a); and (2) the goods purchased must have been despatched by him or by registered dealer to whom he sold the goods on such registered dealer furnishing a certificate in Form N, to an address outside the State of Bombay within a period of nine months from the date of the purchase. The first condition must obviously be satisfied because unless the dealer has become liable to pay purchase tax on his purchase of goods, there can be no question of remission or refund of the purchase tax. The second condition requires that the goods purchased must be despatched by the dealer or by a registered dealer to whom he sold the goods against a certificate in Form N, to an address outside the State of Bombay within a period of nine months from the date of the purchase. When this second condition is satisfied, the dealer acquires the right to claim remission of the purchase tax payable by him on the purchase and if the purchase tax has already been paid by him, he acquires the right to claim refund of the purchase tax so paid. It is on the fulfilment of the second condition that the dealer becomes entitled to remission or refund of the purchase tax in respect of purchase of goods made by him. Of course in order to get such remission or refund, the dealer must below must show to the satisfaction of the Collector that the second condition is satisfied, but that is only for the purpose of obtaining the relief to which he is entitled on the fulfilment of the second condition. The right to obtain remission or refund of the purchase tax comes into being on the fulfilment of the second condition. The existence of the right does not depend on the satisfaction of the Collector; the Collector is merely constituted an authority to adjudicate upon the existence of the right and to grant relief if satisfied judicially that the right does exist. It is, therefore, clear that the rule confers a right of remission or refund of purchase tax on the fulfilment of the second condition and since the rule speaks from the date on which it is made, it is manifest that in order that the right of remission or refund of purchase tax may arise, the second condition must be fulfilled after the coming into force of the rule. To construe the rule as conferring a right of remission or refund of purchase tax even in a case where the second condition is fulfilled prior to the coming into force of the rule would be to give retrospective operation to the rule. The effect of such a construction would be that even though at the date when the second condition was fulfilled, the rule was not in force and the dealer was not entitled to claim remission or refund of purchase tax, the right to claim remission or refund of purchase tax would arise to him on the coming into force of the rule. On such a construction the rule would affect the right acquired by the State under the existing law to charge and retain purchase tax in cases where the subsequent sale complying with the second condition took place prior to the coming into force of the rule and create a new obligation on the State to remit or refund purchase tax in respect of transactions already passed and concluded. Having regard to the principle of construction to which we have referred at the commencement of this discussion it would not be legitimate to place this construction on the rule unless the rule says so in express terms or by necessary implication. It is clear on a plain reading of the rule that there are no express words which confer a right on a dealer to claim remission or refund of purchase tax even in cases where the subsequent sale has taken place and the second condition is fulfilled prior to the coming into force of the rule nor do we find anything in the rule which confers such a right by necessary implication. Some reliance was placed on behalf of the assessees on the circumstance that the rule contemplates refund of purchase tax already paid and this, in the submission of the assessees, showed that the rule was intended to apply even to cases where assessment was completed and such cases would include cases where not only the purchase but also the subsequent sale might have taken place prior to the coming into force of the rule. But this reliance is, in our opinion, misplaced and the argument seeks to read more in the rule than what it contains. Of course the rule contemplates refund of purchase tax which may have been paid by a dealer but it is possible that even in a case where the second condition is fulfilled by the subsequent sale after the coming into force of the rule, the purchase might have been effected prior to the coming into force of the rule and assessment of purchase tax for the assessment year in which the purchase took place might have already been completed before the subsequent sale takes place. It is equally possible that even in a case where both the purchase and subsequent sale take place after the coming into force of the rule, the assessment of the purchase tax for the assessment year in which the purchase took place might be completed before the subsequent sale takes place and in that event also when the subsequent sale takes place, the dealer may have to claim refund of the purchase tax under the rule. There is also a third possibility which must not be overlooked and it is that along with the quarterly returns the amount of tax due has to be paid by the dealer and it would not, therefore, be an infrequent occurrence that the purchase tax due on the purchase may have been paid by the dealer before the subsequent sale takes place and in that event on the subsequent sale taking place, the dealer would have to claim refund of purchase tax under the rule. The provision for refund of purchase tax made in the rule can, therefore, be given full meaning and content by reading the rule as prospectively operating on situations where the subsequent sale resulting in the fulfilment of the second condition takes place after the coming into force of the rule. It is not necessary that the purchase must also take place after the coming into force of the rule for the event which gives rise to the right is not the purchase but the subsequent sale fulfilling the second condition. It is not unknown that even in a prospective statute a part of the requisites for its action may be drawn from a time antecedent to its passing. (Vide R. v. St. Mary, Whitechapel Inhabitants ((1848) 12 Q.B. 120) and Master Ladies Tailors v. Minister of Labour ([1950] 2 All E.R. 525)). We are, therefore, of the view that, on a true construction, the rule applies only where the subsequent sale complying with the second condition takes place after the coming into force of the rule. This being the position, the assessees obviously cannot claim remission under the rule in respect of purchase tax paid by them, since not only the purchase but also the subsequent sales were made by the assessees prior to the coming into force of the rule.

7. Our answer to the question referred to us is, therefore, in the negative. The assessees will pay the costs of the Reference to the State.

8. Reference answered in the negative.


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