JUDGMENT Desai, C.J.
1. This petition, principally for certiorari for the quashing of an assessment order passed on 24-3-1962 by a Sales Tax Officer and an order passed by the Sales Tax Commissioner on 23-10-1961 refusing to issue certain directions to the Sales Tax Officer has been referred by oar brother Manchanda to a larger Bench on account of a conflict among various High Courts on the question of law involved in the impugned orders.
2. The assessee is a dealer carrying on interstate business in khandsari sugar in Uttar Pradesh. The question in this petition is of assessment to sales tax for the assessment year 1957-58 on the turnover of inter-state sales in khandsari sugar. Sales Tax is payable on turnover of inter-state sales under the Central Sales Tax Act No. 74 of 1950.
It defines dealer to mean any person who carries on business of buying and selling goods and turnover to mean the aggregate of the price received in respect of sales of any goods in the course of interstate trade. Section 6 lays down that every dealer shall be liable to pay tax under the Act on all sales effected by him in the course of inter-state trade during any year. Rates of tax payable by a dealer under the Act are laid down in Section 8. It is not in dispute that the rates mentioned in Sub-section (1) are not applicable in the instant case and it is Subsection (2), which reads as follows, that is applicable:
"The tax payable by any dealer in any case not tailing within Sub-section (1) ....... shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State, and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State notwithstanding that he, in fact, may not be so liable under that law"
Section 9 deals with the levy and collection of tax; it empowers the State authorities competent to assess, collect and enforce payment of any tax under the State Sales Tax Act to assess, collect and enforce payment of tax under the Central Sales Tax Act and the provisions of the State Act including those relating to returns, appeals, reviews etc. are to apply accordingly.
3. Under the U. P. Sales Tax Act every dealer has to pay a tax at the rate of 2 naya paise per rupee on his turnover of each assessment year to be determined in the prescribed manner, hut a dealer is not liable to pay tax if his turnover of the assessment year is less than Rs. 12,000/-, see Section 8. The assessee has been assessed on a turnover of Rs. 12,360/- so he would not be exempt from payment of the U. P. Sales Tax. Section 3-A provides that notwithstanding anything contained in Section 3, the State Government may declare that the turnover in respect of any goods shall not be liable to tax except at such single point in the series of sales by successive dealers as may be specified. In exercise of this power the State Government has declared, through notification No. 907, dated 31-3-1956, that tax on the turnover of Khandsari Sugar shall not, with effect from 1-4-1956, be paid except at the point of sale by an importer or manufacturer thereof. The assessee is neither an importer nor a manufacturer of khandsari sugar and, therefore, under the notification he would not be liable to pay tax under the U. P. Sales Tax Act even though his turnover was Rs. 12,360/-. No tax is payable on the sale of water, milk, salt etc., and of any other goods which the State Government may by notification in the official Gazette exempt, vide Section 4. Khandsari sugar is not among the exempted goods. Section 4-A confers power upon the State Government to exempt the turnover in respect of certain goods by the manufacturer for a certain period; we are not concerned with this provision. The procedure for determination of turnover and assessment of tax is laid down in Section 7. Section 8 provides for recovery of the assessed but and Sections 9, 10 and 11, for an appeal from an assessment order, revision of an assessment order or an appellate order and reference of a question of law to the High Court
4. The petitioner's contentions are these. Under the Central Sales Tax Act (henceforth to be referred to as the Central Act) not only the rates prescribed by the U. P. Sales Tax Act (henceforth to be referred to as the State Act) but also the manner of calculation of the tax prescribed therein is to be followed under Section 8(2) of the Central Act. In determining the tax payable one has to consider the rates of tax mentioned in Section 3 and the notifications and the manner of calculation as much as Section 3. Therefore, if an assessee would be exempt from payment of tax under the State Act, under a notification issued under Section 4, he will be exempt from payment of tax under the Central Act. An assessee is to be deemed to be a dealer liable under the State Act for the purpose of calculation of the tax payable by him; so all the provisions of the State Act prescribing the rates and the manner of calculation both will be applied to him. The legal fiction that the petitioner is a dealer liable to pay tax under the State Act is to be used whenever the tax payable by him is to be calculated.
The non-obstante clause in Section 8(2) of the Central Act ignores only the non-liability to pay the State tax under Section 3, i.e. on account of the assessee's turnover being of less than Rs. 12,000/-; if he is not liable to pay the State tax under another provision such as a notification issued under Section 4 the non liability remains attached to him and has to be considered when calculating the Central Tax. The petitioner was exempted from payment of the State tax under the notification issued under Section 4 and therefore the tax payable by him under the Central Act will be calculated at the figure of zero.
5. These contentions were opposed by the State Counsel. His reply was that even if an assessee was not liable to pay the State tax on account of a notification issued under Section 4 he is to be deemed to be a dealer liable to pay tax under the State Act and that the Central tax payable by him will be calculated by applying the rates prescribed by the State Act. All that is required to make an assessee liable under Section 8(2) is that he is a dealer under the State Act liable to pay tax. Therefore whatever may be the reason for his nonliability to pay the State Tax he is deemed to be a dealer liable to pay the State tax and the Central tax payable by him is to be determined by applying the rates, and following the procedure, prescribed in the State Act. The manner of calculating the State tax is the procedure laid down in Section 7; only this provision is to be followed and other provisions of the State Act exempting an assessee from the liability to pay the State tax are to be ignored and the assessee is to be deemed to be liable to pay the State Tax.
6. The question raised before us is not easy of solution and it is no wonder that there has been a serious conflict of opinion on it. I am inclined to accept the contention advanced on behalf of the petitioner. The manner of calculating the State Tax payable by a dealer includes not only the procedure prescribed in Section 7 but also the consideration of other provisions, such as Section 4 which exempts turnover on certain goods absolutely or at a particular point of sale, Section 5 which allows rebate of tax in certain circumstances and Section 6 which exempts from tax certain transactions carried out in accordance with the terms and conditions of the licence. The State Tax payable by a dealer cannot be calculated without considering these provisions. In the case of a person who is not an importer or manufacturer of Khandsari sugar the tax payable by him under the State Act will be calculated after ignoring the turnover of sale of khandsari sugar; he will be assessed on the turnover of sale of other goods. The operative part of Section 8(2) of the Central Act is the very first clause and the second clause embodying a legal fiction is only for the purpose of giving effect to the first clause.
If one were to read only the first clause one would be obliged to hold that the petitioner, who would not have been liable to pay any tax under the State Act, will not be liable to pay any tax under the Central Act and the second clause having been intended to give effect to, and not alter the effect of the first clause should not be interpreted as laying down a rule conflicting with that laid down in the first clause. I confess I am not quite sure about the necessity for the second clause; the first clause seems to be quite ample to achieve the object behind it and it does not seem to have been necessary for the legislature to enact the second clause. If the tax payable by a dealer is to be calculated at the same rates and in the same manner as would have been done if the sale had been an intra State sale one would have of necessity to assume that the dealer is a dealer liable to pay the State Tax. Without such an assumption the provisions of the State Act would not be applied to him (because they are applicable only to an intra-state dealer) and the tax payable by him under the State Act could not be calculated.
7. All that is enacted by the second clause is that an inter-state dealer will be deemed to be a dealer liable to pay the State Tax. An inter-state dealer may under the State Act itself be not liable to pay intra-state tax and it may be that all that the legislature intended was that the dealer must be assumed to be a dealer liable to pay the State Tax even though under the State Act he is not liable. If this interpretation of the second clause is correct, nothing is added by it to, or subtracted from, the first clause. One should then ignore only the fact that the dealer is an interstate dealer and assuming him to be an intra-state dealer calculate the tax payable by him under the State Act. The dealer will only be assumed to be a dealer liable under the State Act, but if the State Act itself imposes no liability upon him, because the goods are exempted from the State Tax, this fact will have to be taken into account when the tax that he would have paid under the State Act is calculated. Only those provisions of the State Act which declare a dealer not liable to pay tax under the State Act will be ignored and despite them he will be deemed to be a dealer liable to pay the State Tax.
Other provisions exempting goods from the liability will not be ignored and will be taken into account in calculating his tax under the State Act, The legal fiction embodied in the second clause is that the assessee is a dealer liable to pay the State Tax and not that he is a dealer liable to pay the State Tax on the goods which he has sold The only dealer who is exempted from the liability to pay tax under the State Act is one whose turnover is of less than Rs. 12,000/-; every other dealer is liable to pity the State Tax though the turnover on some of the goods may be exempt under the provisions of Sections 4, 5 and 6, Whether a dealer is liable to pay the State Tax or not is a question different from the question on the turnover of which goods he has to pay the tax. In calculating the tax payable by a dealer under the State Act both the questions will have to be considered, but the effect of the second clause is that in calculating the tax the first question will be ignored and the dealer will be deemed to be a dealer liable to pay the State Tax notwithstanding the provisions of the State Act and in calculating the amount of the tax the provisions of the State Act exempting certain goods from the tax will be given effect to. The Parliament's distinguishing between the non-liability on account of the turnover being less than the minimum prescribed under the State Act and the non-liability on account of the goods being exempted or the sales being exempted from tax under the State Act is understandable.
While the Parliament could respect the State Act in so far as it exempted certain goods or certain sales it could not be expected to respect the minimum prescribed by the State Act for taxability because the minimum that is prescribed is for the total turnover and cannot be applied to a part of a turnover. A dealer effects sales in the course of inter-state trade and also in the course of intra-state trade. While the total turnover may exceed the minimum prescribed by the State Act, the turnover of the inter-state sales may be less than the prescribed minimum. On account'of the total turnover being above the prescribed minimum he must pay tax on the total but the question is of dividing the tax between the State and the Union of India. The State would assess him on the turnover of the intra-state sales and the Union will assess him on the turnover of the inter-state sales; in the latter case the amount of the turnover should have nothing to do with his liability to the Central Tax. Otherwise a majority of dealers will escape the Central Tax for no reason other than that the amount of the turnover of the inter-state sales is less than the minimum prescribed under the Stats Act. A State Act never prescribes the minimum for a part of the turnover; such a thing may be said to be meaningless.
8. The argument that "manner of calculation" means the procedure of assessment cannot he accepted because Section 9 of the Central Act makes ample provision for the procedure and no further provision in respect of the procedure was necessary to be made in Section 8(2).
9. It was contended that If the Parliament meant, as I think it did, it would have simply said that the tax shall be assessed as if the dealer were a dealer liable to pay tax under the State Act, but I am not sure that that provision would have been free from difficulties and hence an improvement on the provision "and for the purpose of....... under that law"
10. Sub-section (1) of Section 8 deals with a dealer who in the course of inter-state trade sells any goods to the Government or sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3). Sub-section (2) deals with the turnover of sale of other goods. 1 have not been able to see that the difference in the treatment of the goods mentioned in Sub-section (1) and the goods mentioned in Sub-section (2) bas any bearing on the interpretation to be placed upon the words "and for the purpose .. under that law".
It seems that in respect of the goods mentioned in Sub-section (1) the Parliament did not intend to give to the dealer any benefit of the exemptions given by a State Act to certain goods and to certain sales. Apart from the difference in the rates the only difference that there can be between Sub-section (1) and Sub-section (2) is the difference that arises from the interpretation placed by me and there must be some difference, otherwise the Parliament would not have used different words in respect of the two cases. Even under Sub-section (1) the dealer would be liable to pay the tax regardless of the amount of his turnover; if that was all that was intended by the Parliament in a case governed by Sub-section (2) it would not have used the above mentioned words.
11. Section 8(2) of the Central Act came in for interpretation before the High Court of Mysore in Y. Lakshminarasimhiah Setty and Sons v. State of Mysore, (1962) 13 STC 583 (Mys), the Kerala High Court in Deputy Commr. of Agricultural Income-tax and Sales Tax v. Gopalan, (1962) 13 STC 832; (AIR 1962 Ker 264) and the High Court of Madras in Mariappa Nadar v. State of Madras (1962) 13 STC 371; (AIR 1962 Mad 290) and in M. A. Abbas and Co. v. State of Madras (1962) 13 STC 433: (AIR 1962 Mad 457). In the Mysore case (1962) 13 STC 583 (Mys) the question was the same as the question that has arisen in this petition and was answered as I have answered it, It was contended in that case on behalf of the State that in the same manner means following the same procedure for assessment and this contention was repelled by Hegde and Mir Iqbal Hussain JJ. The learned Judges pointed out that the non-obstante clause refers to the dealer and not to sales which are the subject matter of taxation, that a State Sales Tax Act usually provides three types of exemptions, one exempting dealers, another exempting goods and the third exempting sales and that the clause simply ignores the exemption given to dealers but not the other exemptions given to goods and to sales.
The facts in the Kerala case (1962) 13 STC 832 ; (AIR 1962 Ker 264) also were similar; the question was whether a dealer, who would not be liable to the State tax because he sold the goods at a point other than the point at which the sale would be taxable, was liable to pay the Central tax and Menon, C. J. and Govindan Nair, J. held that he was not liable. They said at p. 833 (of STC): (at p. 264 of AIR):
"What the sub-section directs is to treat the inter-State sales as intra-State sales and assess them on the basis of the State enactment. It follows that if there is no liability under the State enactment, there can be no liability under the Central Act either".
According to them the reason for the non-obstante clause was that a person may be a dealer under the Central Act but not under the State Act and that the Parliament intended to make him liable to the Central Tax even though he is not liable to the State Tax. An instance in which a dealer may be fable to the Central Tax even though he is not liable to the State Tax is when the State Act does not a tax turnover less than a certain amount I respectfully agree with these decisions.
12. Both the Madras decisions ware given by Jagdisan and Srinivasan, JJ. Under the Madras Sales Tax Act the amount paid by way of excise duty to the Central Government is to be excluded from the turnover for assessment of the State Tax and in the case of Mariappa Nadar, (1962) 13 STC 871: (AIR 1968 Mad 290) it was contended by the dealer that in assessing the Central Tax the same deduction should be made. This claim was rejected by the learned Judges. They observed that what is taxed under the Central Act is the turnover under the Central Act and not the turnover under the State Act and that what is provided by Section 8(2) is that It is only the rate which should apply to those transactions that is specified in this sub-section and not that the entire State law is made applicable to the transaction. They did not think that the affect of the words "for the purpose of... liable under that law" was that the transaction was declared to lose its inter-state character and to become an intra-state transaction. They said at p 379 (of STC):(at p. 194 of AIR):
"What is intended by this part of the section is that even though such a dealer may be exempt from the payment of tax under the local Sales Tax Act, by reason of his turnover falling short of the prescribed minimum or for any other special provisions that may exist in the local sales tax law, he is nevertheless liable to pay under the Central Act; and this provision in effect denies him the exemption which he would enjoy under the local law"
Under the Madras Sales Tax Act turnover of sales of hides and skins was taxable only at a certain point and the dealer in the case of M. A. Abbas and Co., (1962) 13 STC 433: (AIR 1962 Mad 457) sold these goods at a different point and claimed that because it would not have been taxed under the State Act it could not be taxed under the Central Act also. The learned Judges dismissed the contention with the observation that, "for the purpose of attaching the liability to Central Sales Tax, the fact that in respect of that transaction he may not he liable to tax under the local sales tax law is of no consequence" (p. 485 (of STC): (at p. 458 of AIR)). With great respect to the learned fudges. I cannot share their view.
13. I, therefore, find that the petitioner is to be deemed to be a dealer liable to pay the State Tax (and would have been deemed to be a dealer liable to pay the State Tax even if the turnover of inter-state sales had been less than Rs. 12,000/-) and that in calculating the State Tax which it would have paid the fact that the turnover of sale of khandsari sugar by a person other than its manufacturer or importer has been exempted must be taken into account. Accordingly it is not liable to be assessed to the Central Tax.
14. The Sales Tax Officer and the Commissioner of Sales Tax had no jurisdiction to tax the petitioner on the turnover.
15. The other question raised by the petitioner is about the rate at which the turnover of the packing material used in packing the khandsari sugar is taxable. Section 8(3) of the Central Act lays down that the goods referred to In Sub-section (1) Clause (b) are containers or other materials used for the packing of any goods specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale or used for the packing of any containers or other materials specified in the certificate of registration; only such containers and other materials used or intended to be used for the packing are liable to pay tax at 1 per cent of the turnover under Section 8(1).
The instant case, however, is not governed by Section 8(1) at all because the petitioner has not sold any goods to the Government or to a registered dealer. Containers and other materials used in, or intended for the packing are to be taxed at the rate mentioned in Section 8(1) only if they are sold to the persons mentioned in Clauses (a) and (b) of Section 8(1). If they are not sold to those persons and the tax payable on the turnover of their sales is governed by Sub-section (2) of Section 8 it is to be calculated as if it were a tax payable under the State Act, i.e. the rates mentioned in the State Act are to be applied to the turnover of that sale. The sales tax authorities charged sales tax on the sale of packing material at the correct rate.
16. Though I have found that the petitioner should not have been assessed under the Central Act, its petition should be dismissed because ft had an alternative adequate remedy open to it by means of an appeal. It should not be permitted to shortcircuit the departmental remedy by applying for certiorari, see C. A. Abraham v. Income-tax Officer, (1961) 41 ITR 423: (AIR 1961 SC 609).
17. In the result the petition should be dismissed but without any order as to costs.
Pathak, J.
18. I agree.