1980 (10) TMI 181 - SC - VAT and Sales Tax

Whether the expression registered dealer in section 8(ii) of the Bombay Sales Tax Act, 1959, as applicable to the State of Gujarat means only a dealer registered under section 22 of that Act or it also comprises a dealer registered under the Central Sales Tax Act, 1956? Held that - Appeal allowed. The legal fiction in sub-section (2) of section 4 is created for a limited purpose, namely, to make section 4 a self-contained code which not only imposes a charge of tax and lays down the rate structure, but also provides the machinery for assessment and recovery of tax and penalty. The legal fiction contained in sub-section (2) of section 4 of the Act cannot be stretched any further.

Summary

Issues Involved:
1. Interpretation of the term "registered dealer" under Section 8(ii) of the Bombay Sales Tax Act, 1959.
2. Applicability of Section 4 of the Bombay Sales Tax Act, 1959, in interpreting "registered dealer."

Issue-Wise Detailed Analysis:

1. Interpretation of the term "registered dealer" under Section 8(ii) of the Bombay Sales Tax Act, 1959:
The primary legal question was whether the term "registered dealer" in Section 8(ii) of the Bombay Sales Tax Act, 1959, includes only dealers registered under Section 22 of the Bombay Act or also those registered under the Central Sales Tax Act, 1956. The Supreme Court analyzed the definition of "registered dealer" in Section 2(25) of the Bombay Act, which explicitly states it means a dealer registered under Section 22 of the Bombay Act.

The Court emphasized that the context of Section 8(ii) does not indicate any reason to depart from this definitional meaning. The legislative intent behind Section 8(ii) was to prevent multiple point taxation on goods specified in Schedule C by ensuring that goods resold by a dealer, who purchased them from a "registered dealer" (as defined under Section 22 of the Bombay Act), should not be taxed again. The Court concluded that including dealers registered only under the Central Act would frustrate this intent, as it would allow goods to escape taxation altogether.

2. Applicability of Section 4 of the Bombay Sales Tax Act, 1959, in interpreting "registered dealer":
The revenue argued that Section 4 of the Bombay Act should influence the interpretation of "registered dealer" in Section 8(ii). Section 4(1) imposes tax liability on dealers registered under the Central Act but not under the Bombay Act, and Section 4(2) deems such dealers as "registered dealers" for specific sections of the Bombay Act related to tax recovery.

The Court rejected this argument, clarifying that the legal fiction created by Section 4(2) is limited to the purposes of Sections 32 to 38 and 46 to 48, which are machinery sections for tax recovery. This fiction cannot be extended to Section 8(ii). The Court stated that Section 4 and Section 8(ii) operate in distinct areas, with Section 4 dealing with tax liability for certain transactions and Section 8(ii) addressing the computation of turnover for tax purposes. Thus, Section 4 does not affect the interpretation of "registered dealer" in Section 8(ii).

Conclusion:
The Supreme Court set aside the High Court's judgment, which had erroneously expanded the meaning of "registered dealer" in Section 8(ii) to include dealers registered under the Central Act. The Court held that "registered dealer" in Section 8(ii) strictly refers to dealers registered under Section 22 of the Bombay Act. The appeal was allowed, and the question referred by the Tribunal was answered in favor of the revenue, with no order as to costs.