Rajagopala Ayyangar, J.
1. The decision in this batch of tax revision cases involves the construction of Rule 18(2) of the Turnover and Assessment Rules framed under the Madras General Sales tax Act. The material portion of Rule 18 of the Turnover and Assessment Rules whose construction we are called upon to decide runs thus:
'18(1):-- Any dealer who manufactures groundnut oil and cake from groundnut and/or kernel purchased by him may, on application to the assessing authority having jurisdiction over the area in which he carries on his business, be registered, as a manufacturer of groundnut oil and cake.
(2) Every such manufacturer shall be entitled to a deduction under Clause (k) of Sub-rule (1) of Rule 5 equal to the value of the groundnut and (or) kernel purchased and converted by him into oil and cake provided that the amount for which the oil is sold is included in his turnover.
Explanation 1 : For the purpose of this sub-rule:
(a) 143 lb. of groundnut shall be taken to be equivalent to 100 lb. of kernel;
(b) 143 lb. of groundnut or 100 lb. of kernel shall, when converted into oil, be taken to yield 40 lb. of oil; and
(c) one candy of oil shall be taken to be equivalent to 500 lbs. of oil.
(3) Every such manufacturer shall submit so as to reach the registering authority not later than the 26th day of every month, a statement in Form A. 9 in respect of the transactions relating to the previous month.
(4) For the purpose of Sub-rule (2), the value of the groundnut and (kernel) shall be calculated on the price for which the manufacturer purchased the groundnut and (or) kernel in the month' to which his application for deduction relates, or if no purchase was made in that month, the last preceding month in which the manufacturer made the purchase,
(6) No deduction under Clause (R) of Sub-rule (1) of Rule 5 shall be allowed in connection with the sale of groundnut cake.' Rule 5(1) (k) referred to runs:
'All amounts which a registered manufacturer of groundnut oil and cake may be entitled to deduct from his gross turnover under Rule 18 subject to the conditions specified in that rule.'
2. The short question that is raised on the construction of Rule 18(2), is, whether the value of the oil sold by the dealers which is exempt from taxation by reason of these being sales in the course of inter-State trade or commerce within Article 286 of the Constitution, should be taken into account for the purpose of computing the turnover entitled to deduction under the rules. The departmental authorities decided against the assessee and the Tribunal upheld this construction of Rule 18(2), based on the decision of this Court in In re Sri Chandramowleswara Oil Co. Kurnool, : AIR1954Mad983 (A). That decision was rendered at the stage of admission, and when learned counsel appearing for the several asses-sees who have preferred the above tax revision cases requested an opportunity to reargue the point, we acceded to the request in view of the importance of the questions and the amounts involved. Virtually, therefore, the question we have to consider is the correctness of the decision in the case we have Just now referred to.
3. We must, however, add that a great deal of learning and a considerable amount of ingenuity have been brought to bear on the problem and the arguments addressed to us have not been confined merely to the interpretation of this and the relevant rules, but have included an attack on the validity of the entire set of rules, as also upon, the constitutionality of the tax on the purchase of groundnuts imposed by the Madras General Sales tax Act.
4. Merely to illustrate the problem which arises, we shall refer to the facts of one of these cases as these are typical of those in the others. T. R. C. No. 108 of 1955 relates to an assessee by name Swami Oil Mills, Madras. The assessment is in relation to the year 1950-51. The assessee returned a turnover of Rs. 1,20,78,476-9-2 and claimed an exemption in regard to the turnover of Rs. 72,16,911-12-9 and submitted that he was liable to pay tax only on a net turnover of Rs. 48.61,564-13-5. The gross turnover was accepted by the Deputy Commercial Tax Officer who completed the assessment. This is what the assessing Officer stated in regard to the claim for rebate under Rule 18.
'The assessee has submitted applications in Form A. 9 in time and claimed a total exemption of Rs. 581,14,390-15-6. But this contains sales of manufactured groundnut oil exported out of India and exempted from tax under item A (that is in the (sic) 1. In his (sic) tion letter dated 27-3-1952, the dealer stated that he. was entitled to rebate under Rule 18 also. Rule 18 deals with exemption on the sale of groundnut oil. The rebate under Clause (a) is to be allowed only if the sale is otherwise included in the turnover of tax; and the application in. Form A. 9 also refers to the tax paid and rebate claimed. If, therefore, sales of manufactured groundnut oil exported out of India are eliminate ed from the taxable turnover there is no question of granting rebate for the same turnover.'
Eliminating these items he worked out the turnover eligible for rebate under Rule 18 at Rs. 51,48,720-15-10, and determined the net turnover on that basis and levied the tax. The asses-see took the matter in appeal before the Commercial Tax Officer. The point urged before this appellate authority is thus stated by him:
'The subject-matter of the objection is the refusal of the Deputy Commercial Tax Officer to allow a deduction or Rs. 6,65,569-15-8 from the gross turnover on the ground that the deduction under Rule 18 is not admissible as the sales of manufactured groundnut oil exported outside the territory of the Indian Union were not subject to tax or in other words not included in the taxable turnover.'
The argument before him was summarised thus:
'On behalf of the appellant the following contentions are raised: 'the non-liability to pay tax on sales of oil exported outside the Indian Union under Article 386 of the Constitution cannot be a bar from claiming deduction under Rule 18.'
The appellate officer treated the expression 'turnover' in Rule 18 (2) to mean the gross turnover as distinguished from the taxable turnover and upheld the objection of the assessee and allowed the appeal. But this order of the Commercial Tax Officer was set aside by the proceedings of the Deputy Commissioner of Commercial Taxes who held that the construction adopted by the appellate authority was erroneous. The sssessee preferred an appeal to the Sales-tax Appellate Tribunal from this order of the Deputy Commissioner and that Tribunal following the decision of this Court in : AIR1954Mad983 (A) dismissed the appeal, and this is the subject-matter of revision before us.
5. We have already referred to the fact that the arguments before us were not confined merely to the interpretation of Rule 18 of the Turnover and Assessment Rules read in the light of the other relevant provisions of the General Sales Tax Act, but have ranged over a wide ground, including; the constitutional validity of the taxing provision in the General Sales Tax Act as well as the validity of the Turnover and Assessment Rules. We consider it convenient to dispose of these matters before dealing with the construction of the relevant rules.
6. Mr. Seshadri, the learned counsel for some of the assessees, contended that the levy of a tax in the purchase of groundnut at the rates prescribed by the Madras General Sales Tax Act was in contravention of the provisions of Article 276(2) of the Constitution. That article is in these terms:
'276 (2): The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings, and employments shall not exceed two hundred and fifty rupees per annum: Provided that if in the financial year immediately preceding the commencement of this Constitution there was in force in the case of any State or any such municipality, board or authority a tax on professions, trades, callings or employments, the rate, or the maximum rate, of which exceeded two hundred and fifty rupees per annum, such tax may continue to be levied until provision to the' contrary is made by Parliament by law, and any law so made by Parliament may be made either generally or in relation to any specified States municipalities, boards or authorities.' The argument was on these lines: No. doubt the Provincial Legislature under the Government of India Act. 1935, and the State Legislatures under the Constitution are vested with powers to impose a tax on the sale or purchase of goods. That power which is derived under Sections 99 and 100, Government of India Act, 1935, read with Item 48 of List II of Schedule VII and the corresponding Articles 245 and 246 of the Constitution of India, read with. Entry 60 of the State List is subject to the other provisions of the Constitution. One of such provisions is Article 276. This article has had a previous-history. Under Section 142A, Government of India Act 1935, which was introduced by the Amending India-Burma Miscellaneous etc., Act 1940, a limitation was laid upon the amount of tax 'on professions, trades and callings' which might be levied by Provincial Governments. The assssees in the present case are carrying on a business and it is in the course of that business and as constituting it, that they do the buying and selling, which give rise to the tax liability. Any tax, therefore, that is levied in respect of the transactions of buying or selling is a tax on the profession. In some cases the businessman is able-to pass on the tax to the buyer from him and the law itself provides a machinery for his being thus recouped. Where, however, there is no statutory provision for the passing on such a tax burden and the tax is collected from the dealer, it is virtually a tax on the dealer on his dealing in the way of his business. It, therefore, amounts to a tax on his trade and attracts to it the limitation as to amount provided in Article 276(2).
7. In support of this argument, learned-counsel relied on the decision of the Bombay High Court in State of Bombay v. Chamarbaugwalia : AIR1956Bom1 . The learned Judges of the Bombay High Court there considered the validity of the Bombay Lotteries and Prize Competition Control Tax Act, 1918 (Bom. Act 54 of 1948). Under that Act the tax was levied on promoters of cross word prize competitions on the gross receipts by way of entrance fees collected from competitors. One of such promoters, the R.M.D.C. Cross-words challenged the validity of the tax, which was sought to be justified as a legislation under Entry-62 of the State List reading 'Taxes on betting and gambling.' Chagla C.J. held that the tax was not a tax on betting or gambling as was suggested on behalf of the State, but a tax on trade or calling falling within Entry 60 of Schedule VII of the Constitution. It was held not to be a tax on betting because it was not a tax imposed upon the person who bet or gambled. The learned Chief Justice stated:
'When we analyse the nature of this tax, it is impossible for us to accept the contention that the tax is on the betting or on the person who lays the bet and the petitioners merely acted as the collecting agents of the State. If the legislation had provided that such competitor shall pay a certain percentage of his entrance fee as tax or that he shall pay so much amount as tax per entry and if the legislation had further provided that the tax shall be collected from the petitioners then undoubtedly it would have been a tax on betting and gambling and the petitioner would merely have been collecting it for the Government. What is taxed here is openly and obviously the gross proceeds in the hands of the petitioners. What is taxed is what the petitioners have realised in the course of their business as a result of their activity.'
On this reasoning the learned Judges held that this tax was in violation of the limitation imposed by Article 276(2) of the Constitution, and they declared it unconstitutional,
8. We do not see any analogy between the facts of that case and the tax on sales now impugned or as regards the applicability of the reasoning extracted above to the case before us. The Legislature has specifically conferred on it right to levy a tax on the sale of goods and it is not disputed that the tax in the present case is a tax on the sale, that is on the transaction of sale. It is hot a tax on trade, not a tax for the privilege of trading. It is a tax on a transaction and that is its Pith and substance, and that is not in controversy. The incidence of the tax is wholly irrelevant for considering its substance or nature. A tax on a transaction such as was provided for by Item 48 of the Provincial List has necessarily to be laid upon some person concerned in the transaction and this feature cannot, therefore render it other than a tax upon a transaction.
Whatever bearing the incidence of a tax might have in determining its nature in a Constitution like Canada where the a distinction is between direct and indirect taxes it can have none in a Constitution such as ours where the enumeration of taxing powers is on a wholly different basis altogether. The fact that the Madras enactment provides some cases where the tax may be passed on to a subsequent buyer, is, in our opinion, wholly irrelevant for the purpose of considering the constitutionality of this tax. It is not as if the Madras General Sales Tax Act was unconstitutional to start with and that the provision in Section 8 (b) of the Act which was introduced by an amendment of 1947 and the rules which permit registered dealer to collect amounts by way of tax from purchasers from them has validated this enactment,
If the reasoning Of Chagla C. J. were applied to the present case, the tax on the sale of goods would be perfectly valid, for the tax is here laid upon a party to a sale just as the Constitution intended. The Constitution, by itself, does not contain any provision making it conditional that the tax on the transaction of sale would be valid, only if it could be passed on The learned Chief Justice referred to the tax under the Bombay enactment not being levied on the person who bets, to negative the contention of the State which sought to rest the legislation on Entry 62 of the State List. The decision of the Bombay High Court therefore does not afford us any assistance for determining the questions we have to consider. . In our opinion the constitutional objection to the validity of the tax on purchases is entirely without substance. The fact therefore that the total amount of the tax payable by the assessee on the purchase of groundnuts exceeds the limit fixed by Article 276(2) of the Constitution does not render it invalid.
9. The next point urged was that the tax was levied on tile purchaser of groundnuts by reason of the provision in Rule 4 (2) of the Turnover and Assessment Rules which reads;
'In the case of the under mentioned goods, the gross turnover of a dealer for the purpose of these rules shall be the amount for which the goods are bought by the dealer:
This rule was made under the powers conferred on the State Government by Section 3 (2). Section 3 after 'laying a tax on every dealer (as defined by the Act) for each year on his total turnover for such year -- the tax being calculated at the rate of so many pies for every rupee in such turnover, --went on to enact in Sub-section (21 which was replaced by 'the present Section 3 (4). The turnover for all the purposes, of the Act shall be determined in accordance with and the tax shall be assessed levied and collected in such manner and in such instalments as may be prescribed by the rules made by the Provincial Government in this behalf.
10. The contention that was urged was, that the Act itself furnished no criteria for determining the goods whose turnover was to be assessed in the hands of a seller as distinguished from those in which it was to be assessed in the hands of the buyer, and that the delegation of such an extended and unlimited power to the rule-making authority was excessive and amounted to an abdication of legislative power and was, therefore, bad. We do not see any substance in this objection either. The general provision in Rule 4 is that winch is contained in Rule 4 (1), under which the turnover that is assessed is that of the seller, that is the tax is at the sale point. In certain cases, however, and among them are dealings in groundnut, the tax is levied from the purchaser and at the purchase point. In the determination of these goods the economic effect of the tax on the consumer as well as its assistance to export trade have been considered, and that is the basis upon which the goods have been selected. Surely, that was a matter for the executive to decide from time to time and need not be necessarily by the Legislature for all time, subject only to amendment. We find it unnecessary to dilate further on this point, since it is concluded against the petitioners by the authority of this Court in Syed Mohamed Co. v. State of Madras : AIR1953Mad105 . We, therefore, do not see-any constitutional objection to the validity of the original Section 3 (2) or the present Section 3 (4) of the General Sales Tax Act or Rule 4 of the Turnover and Assessment Rules.
11. The next attack was upon the validity of the Rules of the Madras General Sales-tax (Turnover and Assessment) Rules, 1939, which enable the tax to be levied and define the basis upon which the turnover is to be determined. The challenge was grounded on the failure to observe the provisions relative to the promulgation Of these rules. The Madras General Sales-tax Act (9 of 1939) received the assent of Governor on 4-6-1939 and was published in the Fort St. George Gazette on 13-6-1939, but it did not come into force immediately. Section 1 of the Act enacts:
'Section 1 (1): This Act may be called the Madras General Sales-tax Act, 1939.
(2) It extends to the whole of the Province of Madras.
(3) This section shall come into force at once,' and the rest of this Act shall come into force on such date as the Provincial Government may by notification in the Fort St. George Gazette, appoint.'
By a notification dated 28-9-1939 under Section 1 (3), 1-10-1939 was fixed as the date on which 'the rest of the Act shall come into force.'
It is now necessary to refer to the provisions in the Act under which the Turnover and Assessment rules whose validity is challenged were promulgated.
12. Section 3 (2) of the Act which figures as Section 3 (4) and (5) ran thus:
'Section 3 (3) : The turnover for all the purposes of this Act shall be determined in accordance with, and the tax shall be assessed, levied and collected in such manner and in such instalment as that be prescribed by, the rules made by the Provincial Government in this behalf: Provided that no rule for the determination of the turnover shall come into force unless approved by a resolution of the legislative assembly.'
The Proviso to Section 3 (1) further provided:
'Provided further (1) that in respect of the same transaction of sale, the buyer and the seller shall not both be taxed, but only one of them, is shall be determined by the rules made in this behalf under Sub-section (2), shall be taxed thereon, and (2) that, when the amount for which any goods were bought by a dealer has been included in his turnover, the amount for which the same goods were sold by ham shall not be included in his turnover, for the purposes of this Act.'
'Prescribed' is defined in Section 2 (f) to mean:
'prescribed by rules made under this Act.'
Section 19 empowers the State Government to make rules. The portions of that section which are material in the present context we shall set out:
'19 (1): The Provincial Government may make rules to carry out the purposes of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for--(a) all matters expressly required or allowed by this Act to be prescribed.
'19 (4); The power to make rules conferred by this section shall be subject to the condition of the rules being made after previous publication for a period of not less than four weeks.
'19 (5): All rules made under this section shall be published in the Fort St. George Gazette, and upon such publication shall have effect as if enacted in this Act.
13. The net result of these provisions, therefore, is that in regard to the rules under Section 3 (2) regarding the determination of turnover the procedure prescribed both by the proviso to that Sub-section as well as that pointed out in Section 19 (4) have to be followed. In making this observation we have in mind the procedure prescribed by Section 19 (4) which is attracted to the rules made under 8. 3 (2) by reason of tile inclusion in Section 10 (2) (a) of 'all matters expressly required or allowed by the Act to be prescribed.'
14. Several irregularities or infractions of the law were pointed out in the matter of the promulgation of these rules. We shall deal with them seriatim.
15. It was first urged that there was a violation of the condition imposed by Section 19 (4). That sub-section which we have already extracted reads thus:
'The power to make rifles conferred by this section shall be subject to the condition of the rules being made after previous publication for a period of not less than four weeks.' This provision has to be read in conjunction with the Madras General Clauses Act (I of 1891). Chapter 2 of that Act deals with the general provisions applicable to future Acts and this is one of them; Section 4 (with which that Chapter opens) reads: 'The chapter shall apply to all Madras Acts made after the commencement of this Act unless a contrary intention appears in such Acts.'
Section 7 which is relevant in connection with the provisions in Section 19 (4) enacts:
'Section 7: Where, by an Act to which this Chapter applies, a power to make rules is expressed to be given, subject to the conditions of the rules being made after previous publication, the following provisions shall apply, namely:
(a) the authority having the power to make the rules shall, before making' them, publish a draft of the proposed rules:
(b) the publication shall be made in such manner as that authority deems to be sufficient, or if the condition with respect to previous publication so requires, in such manner as the Central Government or as the case may be, the Provincial Government prescribes:
(c) there shall be to published with the draft a notice specifying a date at or after which the draft will be taken into consideration;
(d) the authority 'having power to make the rules, and where the rules are to be made with the sanction, approval or concurrence of another authority, that authority also, shall consider any objection or suggestion which may be received by the authority having power to make the rules from any person with respect to the draft, before the date so specified.
(e) the publication in the Official Gazette of a rule purporting to have been made in exercise of a power to make rules after previous publication shall be conclusive proof that the rule has been duly made.'
The draft rules which ultimately became the General Sales-tax (Turnover and Assessment) Rules, 1939, and among these we are at present concerned with Rule 4, Rules 5 (1) (k) and 18, the other rules relevant to the present assessment having been passed long subsequently, were published on 18-7-1939, for eliciting public opinion. The preamble to this provision reads thus:
'The following draft rules which it is proposed to make in pursuance of the powers conferred by Sub-section (2) of Section 3 of the Madras General Sales-tax Act, 1939, is published for general information.'
The reference is to Sub-section. (2) of Section 3, the present Sub-sections (4) and (5) being then the provisions which figured as that sub-section. It was stated that the draft would be proposed for approval at the sitting of the Legislative Assembly on 3-8-1939. Rule 2 provided that the rules shall come into force on 1-10-1939. As stated in this draft publication it was laid before the Assembly on 3-8-1939 The rules were approved by the house and were published on 15-9-1939; and, as provided in Rule 3 thereof, they came into force on 1-10-1939, the date when the rest of the Act was brought into operation by the notification under Section l (3).
16. The first irregularity pointed out was that there was a violation of Section 7 (c) of the General Clauses Act in that in the draft which was published on 18-7-1939, there was no notice specifying a date at or after which the draft would be taken into consideration. Under the proviso (3) to Section 2 as it then was and Section 3 (4) as it exists now the rules had to be approved by the legislative Assembly before becoming effective. 'Taken into consideration' will necessarily refer to the specified date at which the draft would be taken into consideration, that is, by the Legislative Assembly. In our opinion, there was a literal compliance with the terms of Section 7 (c). Selection 19 (4) prescribed a-minimum interval of four weeks between the previous publication and the rules coming into operation and it is not contended that condition was not satisfied, since the rules were published in the Gazette on 28-7-1939, and came into operation on, 1-10-1939.
17. In view of our conclusion on this point it is not necessary to refer to Section 7 (e) under which the final publication in the Official Gazette of a rule is taken to be conclusive proof that the rule has been duly made.
18. It was urged by Mr. Seshardi, learned counsel for the petitioner, that Sub-section (e) would be attracted only to a case where the published rule expressly purports to be made in exercise of a power to make rules, after previous publication and that as the notification dated 15-9-1939 did not in terms purport to be made after previous publication, the provisions of that sub-section were not attracted to these rules. We are unable to accent this construction of that provision, which is designed to put an end to all controversy as regards the formalities prescribed by the preceding sub-sections. But, as' we have reached the conclusion that there has been a due compliance with Sub-section (c), it is unnecessary finally to decide the exact scope or application of Sub-section (e).
19. The next objection was that the rules were bad, in that the resolution of the Legislative Assembly referred in the proviso to Section 3(4) was passed at a time when Section 3(4) had not been brought into force, because the only portion of the enactment which came into force on the passing of the Act was Section 1 and the rest of the Act came into operation only by the notification in the Fort St. Gorge Gazette which fixed 1-10-1939 as the date when it would come into force. In our opinion, there is no substance in this point either. Section 6 of the General Clauses Act which applies to the Madras General Sales-tax Act enacts:
'Where, by an Act to which this Chapter applies and which is not to come into force immediately on the passing thereof, a power is conferred on Government or other authority to make rules, or to issue orders with respect to the application of the Act, or with respect to the appointment of any officer thereunder, such power may be exercised at any time after the passing of the Act, but rules or orders so made or issued shall not take effect till the commencement of the Act.'
It is by virtue of the power thus conferred that the rules made under the Act were got ready for being brought into force on 1-10-1939. Section 6 refers not merely to the powers conferred on the Government in the matter of making rules but also to other authority. The approval of the Legislature is merely Part of the procedure or machinery for the making of the rule; and by virtue of Section 6 of the General Clauses Act, it must be taken that that provision also was in operation from the date of the passing of the Act; and that power could be exercised at any time after the passing of the Act, though, however, 'the rule so made shall not take effect until the commencement of the Act.'
20. A minor point which was feebly suggested was that it was not proper that the rule should, be approved by a resolution merely of the Legislative Assembly and not also by the Legislative Council. We do not see any force in this point; because it is a matter for the Legislature to determine the formalities as' to how the rule shall be framed. We do not see any impropriety, unconstitutionality or irregularity in the terms of the proviso to Section 3(2) as it originally stood which is now the proviso to Section 3(4) by which the power of approval is confined to the Legislative Assembly of the State Legislature.
21. We shall now pass on to a consideration of the construction of Rule 18(2) and the other relevant provisions of the Sales-tax Act on the basis that the rules had been validly passed. We consider that the scope of the provisions which are now found in the Act and the rules, would best be determined by reference to their form, language and contents from time to time.
22. The Madras General Sales-tax Act, 1939, as it was originally passed, with which the rules came into force on 1-10-1939, did not as already mentioned contain the rebate provided by the present Rule 18(3). Rule 18 was introduced by G. O. No. P. 1515, Revenue, dated 5-7-1941, while Rule 5(1) (k) of the Turnover and Assessment Rules came in much later under G. O. No. 2051 Revenue dated 13-10-1944. The position, in 1941, before Rule 18 was introduced was this. On the purchase of groundnut a tax was levied on the purchaser on his purchase turnover (Rule 4(2) of the Turnover and Assessment Rules). When such a purchaser converted a groundnut into oil and cake by milling it, these products were treated as commodities different from the ground-nut on which tax had' been paid at purchase point and became liable to 'tax on their sale turnover in the hands of the miller-dealer under Rule 4(1) of the Turnover and Assessment Rules. As groundnut and oil were treated as different commodities the second proviso to Section 3(1) did not come into play. That provision was in these terms:
'When the amount for which any goods were brought by a dealer has been included in his turnover the amount for which the same goods were sold by him shall not be included in his turnover for purposes of this Act.'
So that, the position was that the miller, who extracted oil from groundnut purchased by him, was liable to pay tax both on the purchase of his groundnuts as well as on the sale of the oil and cake by him. This, however, was subject to the terms of Section 7, which provided some relief. This section enacted:
'Section 7: In respect of such finished articles of industrial manufacture as may be notified by the State Government and subject to such restrictions and conditions as may be prescribed, a rebate shall be allowed of one half of the tax levied on sales of such articles for delivery outside the State if such articles are actually so-delivered.'
Where, therefore, the oil or cake was sold for delivery outside the Province and they were so delivered, there was a rebate of one half of the tax levied on the sale turnover.
23. This was the position until Rule 18 was introduced, and its purpose was obviously to alleviate the hardship which arose out of the same dealer having to pay tax both on the purchase of groundnut and on the sale of the oil. This was particularly needed because groundnut oil was a commodity in regard to which there was considerable amount of export there being a demand for this variety of oil in foreign markets. Sub-clause (1) of Rule 18 provided for the registration of manufacturers of groundnut oil. This was designed to provide a method of checking that the benefit of this provision was confined to those for whom it was intended. Sub-clause (2) contained the benefit which was to be conferred on such vendors of oil. The original form which the Sub-clause (2) took when it Was introduced in July 1941 was:
'Every such manufacturer shall be entitled to a rebate of the tax payable under the Act on groundnut and/or kernel purchased and converted by him into oil and cake, provided that the amount for which the oil is sold is included in his turnover.'
Then followed an explanation which provided a table of conversion for groundnut, kernel and oil. This provision was in nearly the same terms as is now found in Rule 18 and as we have set this out in the opening paragraphs we are not repeating it here. After the explanation followed two illustrations which have subsequently been omitted. These were:
'Illustration 1: A purchases 7400 lbs. groundnuts' (not kernel) in a certain month for Rs. 195. In the same month, he sells two candies of oil for Rs. 90. Two candies of oil is equal to 1000 lbs. of oil which is equal to 33251/2 lbs of groundnut. Against the sales-tax due on Rs. 90, A may claim a rebate on the tax paid on the purchase of 33251/2 lbs. calculated at 7400 lbs. for Rs. 195'.
Illustration 2: A purchases 14800 lbs. groundnut for Rs. 400 and 10,000 lbs. of Kernel for Rs. 385. In the same month he sells two candies of oil for Rs. 90. At the rate of 143 lbs. of groundnut to 100 lbs. kernel, 14800 lbs. nut equal to 10349 1/2 lbs. kernel, so his total purchases for the month are reckoned at 20349 1/2 lbs. kernel for Rs. 785. 1000 lbs. of oil equal to 2325-1/2 lbs. kernel against the sales tax due on Rs. 90. A may claim a rebate of tax on the purchase of 2325J lbs. kernel calculated at 20349 1/2 lbs. purchased for Rs. 785.' Then followed Sub-clauses (3), (4) and (5), which then ran;
'(3) Every such manufacturer shall, not later than the 20th day of each month, submit a statement to the registering authority furnishing the following particulars in respect of transactions relating to the previous month:
(i) the aggregate amount of groundnut and/or kernel purchased by him, the total purchase price and the tax paid on such purchase; and
(ii) the quantity of the groundnut oil manufactured, the amount for which it was sold and the amount included in the turnover and the sales tax due.
(4) The rebate shall be worked out on the price for which the manufacturer purchased the groundnut and/or kernel in the month to which his application for rebate relates or, if no purchase was made in that month, in the last Preceding month in which the manufacturer made the purchase.
(5) No rebate of tax on purchase of groundnut and/or kernel shall be allowed in connection with the sale of groundnut cake.' On Rule 18(2) as it then stood two things would be clear. (1) that the rebate that was granted was of the tax paid on the purchase of the groundnut. In other words, no rebate could be claimed where no tax had been paid on the purchase. (2) As the subtrahend was the tax paid, it would follow that the minuend also would be the amount of the tax paid. Though the expression used in Rule 18(2) was 'the amount for which oil as sold is included in his turnover' it would necessarily mean his taxable turnover. The very conception of the concession afforded by Rule 18(2) being a rebate would require that the turnover had borne tax before the rebate is claimed, a matter expressed with clarity in the illustrations which then formed part of the rule.
24. To test what we have stated above, it would be useful to consider the combined effect of Section 7 and Rule 18(2) where oil was sold for delivery outside. In such cases where the oil was sold outside the State the rebate provided for by 87 would also operate, with the result that half the tax payable on the sales after the rebate obtained under Rule 18(2) would be leviable from the dealer. We shall illustrate the effect of this in a concrete case. Suppose the total value of the kernel purchased by a miller on which he has been taxed under Rule 4(2) of the Turnover Rules is Rs. 6400; the tax on that would be Rs. 100. If he has milled the entire quantity of the kernel and the value of the oil sold is, say, Rs. 9600 and of the cake Rs. 1280; he would have been liable to a tax of Rs. 150 on the oil and Rs. 20 on the value of the cake sold. Before Rule 18(2) the total amount of tax that would have been collected from him would be Rs. 100 plus Rs 150 p]us Rs. 20. After Rule 18(2) come into operation, the position would be this. Out of Rs. 150 payable as tax on the sale of the oil he would have been entitled to claim a reduction of the Rs. 100 he had already paid as tax on his purchase turnover. He would, therefore, be liable to a tax of Rs. 60 alone, in regard to the sales. In other words, he would have paid Rs. 100 at the moment of his purchase plus Rs 50, that is Rs. 150 at the moment of the sale of the oil on both the purchases and the sale of the oil in addition to a tax of Rs. 20 on the cake sold.' If he were to export the oil, so as to bring himself within the concession granted by Section 7 the effect would be this. He would have paid a tax of Rs. 100 on the purchase. After the rebate under Rule 18(2) he would be paying a tax of Rs. 50 on the sale of the oil and on this he would obtain a further rebate of Rs. 25 under Section 7; and he would also obtain a rebate of Rs. 10 if the cake was also sold outside. In other words, the total amount of tax then payable by him would be Rs. 100 plus Rs. 25 plus Rs. 18.
25. Rule 5(1) (k) was introduced by G. O. No. 2051 dated 13-1-1944, reading thus:
'5(1) (k): All amounts which a registered manufacturer of groundnut oil and cake may be entitled to deduct from his gross turnover under Rule 18 subject to the conditions specified in that rule'.
The same G. O; amended the language of Rule 18(2) by substituting for the words 'to a rebate of the fax payable under the Act on groundnut and/or kernel' the expression 'to a deduction under Clause (k) of Sub-rule (1) of Rule 5 equal to the value of the groundnut and/or kernel' and the illustrations to Rule 18(2) were omitted as also the words 'the tax paid' in Sub-rule (3) of Rule 18. In our opinion the changes thus made in the language of Rule 18 were merely formal and made no difference in the content of the provision. When, on 26-1-1950, the Constitution came into force, and with it there was a ban on the imposition of tax on the sale of goods which was the subject of inter-State trade or commerce, two new factors came in. Firstly, where the foods which were outside the State were purchased in the course of inter-State trade or commerce, a tax on their purchase could not be levied by the State. Secondly, where the oil produced in the State were exported to other States, and the transport involved in the transaction was an integral part of the sale. Article 286(2) imposed a ban on the levy of tax on such transactions. As groundnut oil was the subject of considerable sales of this character, the effect of it was that a large volume of such sales became exempt from tax under the Sales-tax Act.
If the primary idea were borne in mind, that the concession granted by Rule 18(2) is in the nature of a 'rebate' on the tax paid by a miller on the sale of oil there cannot be any doubt that no claim could be made for rebate on that portion of the turnover on Which no tax had been paid. The only question is whether the change in the language of the rule, by which the expression 'rebate' which occurred there has been limited, makes any difference to the scope of the concession.
In considering this, it might not be irrelevant to take into consideration the contents of Form A. 9, which the dealer is required to submit before he can obtain the benefit of that concession. This form was introduced by a notification C. O. No. Ms. 99 Revenue dated 11-1-1950. That G. O. also effected amendments to Rule 3 by replacing the original Sub-rule (3) which we have set out earlier by the present Sub-rules (3) and (3-A) which run thus:
'(3) Every such manufacturer shall submit so as to reach the registering authority not later than the 25th day of every month, a statement in Form A. 9 in respect of the transactions relating to the previous month.
(3-A) If any such manufacturer fails to submit the statement in Form A. 9 within the time specified in Sub-rule (3) or if he omits to furnish any of the particulars required by that form, the Commercial Tax Officer may, in his discretion^ after making such enquiry as he considered necessary, condone the delay or omission or both; Provided that such manufacturer has maintained a true and correct account of his business showing all the particulars required by Sub-rule (3).'
26. The Form A. 9 is in these terms:
'Application for rebate under Rule 18 of the Turnover and Assessment Rules (see Rule 18(3)).
The Assessing Authority,
' I/We registered manufacturer (S)of groundnut oil at request that I/We maybe granted a rebate of tax under Rule 18 of theMadras General Sales-tax (Turnover and Assessment) Rules 1839, in respect of the sale of oilmanufactured by me/us, particulars of which aregiven below :
1. Quantity of groundnut reduced to kernel and/or kernel purchased.
2. Purchase rate.
3. Total purchase price.
4. Quantity of manufactured oil remaining unsold at the end of previous month.
5. Quantity of oil manufactured in the month.
6. Total (column 4 plus column 5).
7. Quantity sold out of that in column 6.
8. Balance (column 6 minus column 7).
9. Rate at which sold.
10. Total sale value.
11. Amount of tax paid.
12. Quantity of kernel required to held the oil in column 7.
13. Turnover on which rebate to be allowed (column 12 x column 2).
14. Amount of rebate claimed.
Note : (1) Reduce groundnut kernel as per the following table:
143 lbs. of groundnut is equivalent to 100 lbs. of kernel.
100 lbs of kernel is equivalent to 40 lbs. of oil.
500 lbs. of oil is equivalent to one candy.
(2) In column 1, quantity purchased in the month and if no purchase is made in the month, that in the last preceding month should be noted.
(3) Give reasons if the amount in column 13 should exceed that in column 10.
(4) The statement should be submitted so as to reach the registering authority not later than the 25th day of every month in respect of the transactions relating to the previous month.' It will be seen that this form sets out in more detail the basis upon which the original Sub-rule (3) not only referred to the concession under Rule 18(2) as a rebate but made it clear that that rebate was a deduction from the tax paid and not a subsidy. We are making this observation because if the argument of counsel for the sssessee is accepted, Rule 18(2) would become a subsidy. This basic idea of the concession being a rebate was clearly brought out by the terms of Rule 18(2) in the form in which it stood when it was introduced into the rules in 1941.
The change in the language of the rule, by which the expression 'rebate' was eliminated from the rule, while it still appeared in form A. 9 should not make any difference in the scope or effect of the concession. In our opinion this was merely a drafting device which was evidently considered to be necessitated to bring it in conformity with the provision of Rule 5(1) (k) introduced in 1944. If the concept of the concession being a 'rebate' is borne in mind, it would be clear that the deduction is from the tax paid which necessarily posits the previous payment of the tax.
The idea behind the concession is that, when a dealer pays tax on the oil sold, he is reimbursed that proportion of the tax, worked out on the basis of the conversion table in Rule 18 (2) the amount of the tax paid on the purchase of the groundnut which has gone into the production of the oil. Thus viewed, the dealer cannot claim the 'repayment' of a tax that he has not paid at all. Conversely, in the computation of the purchase-tax which he is entitled to get a refund of, that part of his turnover on which he has paid no tax at the moment of purchase would also have to be excluded and this is exactly the interpretation laid down by the two decisions of this Court in : AIR1954Mad883 and Radhakrishna, Groundnut Oil Mill v. State of Madras, 1954 2 MLJ 550 (D).
27. To pursue the Concrete case which we have set out earlier with variations to illustrate the present point : If out of the purchase of kernels for Rs. 6,400 the miller obtained oil valued at Rs. 9,600 and exported oil outside the State in the course of inter-State trade to the extent of Rs. 6,400 and sold oil within the State for Rs. 3 200, the result would be that no tax would be leviable on the sales to the extent of Rs. 6,400 as that would be protected by Article 286(2) of the Constitution.
The argument of the assessees is that the miller would be entitled to calculate rebate on the basis that the sale turnover to be taken into account is Rs. 9,600. If such were the case the position would be this. The assessee would have paid a tax of Rs. 100 at the time when he purchased the kernel, He would have paid a tax of Rs. 50 when he sold the oil within the State -- the rest of the sales of the oil to the extent of Rs. 6,400 not being subjected to tax by reason of the Constitution. Therefore the total amount of the tax paid by him on the sale turnover would have been Rs. 50
If the argument of the assessee were accepted it would mean that in such a case, as the miller had paid Rs. 100 at the time of the purchase he would be entitled to a refund of Rs. 100, this being the difference between Rs. 150 the tax which would have been payable on the turnover, if it were subject to tax, and Rs. 100 the purchase tax actually paid by him. In other words he would get a refund of Rs. 50 which would be the entire amount of sales tax paid by him on his internal sales. To press it to its logical extent, if the entire Rs. 9,600 worth of oil had been sold outside the State, the result would be that the miller would be entitled to get from the Government a subsidy of Rs. 50. that is a refund out of a portion of the sales tax paid by him out of the purchase tax which had been collected at the moment of his purchase under Section 4 (2).
In our opinion, this result amply demonstrates that the argument put forward as to the construction of this provision is unsound. The changes effected in the language of B. 18 (2) and (3) by the amendments carried out from 1944 upto the assessments in the present case do not, in our opinion, affect the substance of the relief granted. In our judgment, the basic idea underlying the relief to be granted is as regards the tax paid; and this is brought out by Form A-9 which is part of the rule.
Though in terms the rule as it now stands refers to the turnover, it is in our opinion, merely a convenient made of referring to the tax levied on the basis of the turnover, for in essence the Sub-rule is designed to grant a rebate, a rebate in the tax. Therefore, both in the subtrahend as well as in the minuend it is the tax that is material. Just as a purchase turnover on which no purchase tax has been levied could not be included in the subtrahend similarly, no sale on which tax has not been paid could be intended to be included as part of the turnover in the minuend as envisaged by the provision.
28. Learned counsel for the assessees urged that as this was a taxing enactment we should not travel beyond the words used and imply a tax which had not in express terms been laid by the Legislature. Stress was laid on the language of Rule 5 (1) (k) by which a registered manufacturer was declared entitled to deduct from his gross turnover the amounts mentioned in Rule 18 and to the terms of Rule 18 itself where the reference to the turnover of the oil sold was general and not confined to the taxable turnover.
Learned counsel contended that, in the absence of any expression in Rule 18 (2) confining the turnover, to the taxable turnover the Court ought to construe that' expression as including his entire turnover -- turnover as defined by Section 2 (1) read in conjunction with Explanation 2 to Section 2 (h). The argument was that otherwise we would be reading into the taxing provision words Which were not there; in the present instance the word 'taxable' before the expression 'turnover' which occurs at the end of Rule 18 (2). We were invited to the decisions bearing upon the, construction of taxing enactments and particularly a passage in the Judgment in Cape Brandy Syndicate v. Inland Revenue Commrs., 1921 1 KB 64 (E), where Rowlatt J., said :
'In the 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 tax, nothing is to be read in, nothing is to be implied One can only look fairly at the language used'.
Having considered the argument carefully we are clearly of the opinion that it ought to be rejected. The legislative history of this rule affords positive proof that the construction urged on behalf of the assessees for our acceptance is erroneous. The language of Form A-9 which has replaced portions of Rule 18 as it originally stood, makes it clear that the provision is only concession by way of a rebate on the tax paid.
29. Coming to the argument based on the enactment being a taxing measure and therefore should be held not to levy the tax unless the words were clear, we have to point out that the provision in Rule 18 (2) does not levy a tax but provides an exemption. In regard to the construction of such provisions, Cohen L. J. pointsed out in Littman v. Barren, 1951 Ch 993; 1951 3 All EB 393 (F):
'In view of an argument addressed to us by Junior counsel for the Crown, I would add that I agree with him that the principle that in case of ambiguity a taxing statute should be construed in favour of the tax-payer does not apply to a provision giving a tax-payer relief in certain cases from a section clearly imposing a liability'.
In the result the conclusion that we have reached is just in accord with what this Court laid down in : AIR1954Mad983 and this is about what we have termed the figure from which the purchase tax has to be deduced. So far as the purchase tax itself is concerned, that is the tax on the purchase turnover this is governed by this Court's decision in 1954 2 MLJ 550 (D). Both these decisions are logical complementariness of each other and after a full and exhaustive consideration of the points urged by the learned counsel for the assessees, We are dearly of the opinion that both these decisions correctly interpret the relevant provision of the sales Tax Act.
30. In this view all the tax revision cases are dismissed.