1997 (9) TMI 503 - SC - VAT and Sales Tax

Whether it is permissible and possible-in the context of the language used-to read the words and furnishes as or furnishes in sub-clause (vd) of section 5(2) of the Bengal Finance (Sales Tax) Act 1941 ? Held that - Appeal allowed. We agree with the learned counsel for the appellant that if the sub- clause is read as aforesaid it does not make sense and the sentence gets distorted from a grammatical point of view and therefore the latter part of the sub-section dealing with the mandatory requirement of production of declaration from the seller as stated therein must be treated as not required to be fulfilled by the assessee for the purpose of the first part of sub-clause (vd) of section 5(2)(a). That would result in deleting the second limb-namely the ununderlined portion- and leave the first limb intact thus permitting the affected parties to produce such proof as they can in respect of the fact to be proved without being compelled to comply with the second limb of the sub-section.

Summary

Issues:
1. Interpretation of section 5(2)(a)(vd) of the Bengal Finance (Sales Tax) Act, 1941.
2. Constitutional validity of the provision.
3. Mandatory vs. directory nature of the requirement for furnishing a declaration from the seller.

Analysis:

Interpretation of Section 5(2)(a)(vd):
The case involved appeals by the Calcutta Iron Merchants' Association against the West Bengal Taxation Tribunal's orders regarding the interpretation of section 5(2)(a)(vd) of the Bengal Finance (Sales Tax) Act, 1941. The provision required dealers to furnish a declaration from the seller to claim exemption on subsequent sales of iron and steel. The Tribunal initially found the provision invalid but later deemed it as directory, not mandatory.

Constitutional Validity:
The appellants challenged the constitutional validity of the provision, arguing it imposed unreasonable restrictions on trade and violated articles 19(1)(g) and 14 of the Constitution. They contended that the requirement of furnishing a declaration from the seller was burdensome and unnecessary, affecting the free-flow of trade in iron and steel.

Mandatory vs. Directory Requirement:
The key issue was whether the provision's requirement for furnishing a declaration from the seller should be considered mandatory or directory. The Tribunal, in its orders, held the provision as directory, allowing flexibility in compliance. However, the appellants argued that the provision, if read as directory, would render it meaningless and grammatically incorrect. The Court agreed with the appellants, concluding that the requirement for furnishing a declaration should be treated as not mandatory, thereby allowing affected parties to provide proof in any suitable manner without strict adherence to the original provision.

Conclusion:
The Supreme Court, after considering the arguments and the language of the provision, declared that the requirement for furnishing a declaration from the seller should be treated as not mandatory. This decision aimed to balance compliance with the law while ensuring practicality and reasonableness in its application. The appeals were disposed of accordingly, providing clarity on the interpretation and application of section 5(2)(a)(vd) of the Bengal Finance (Sales Tax) Act, 1941.