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TMI Blog1967 (4) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the years 1960-61 and 1961-62, on the basis of the notification issued in 1958, cannot be sustained, on this additional ground also. X X X X Extracts X X X X X X X X Extracts X X X X ..... aised, e.g., Civil Writs Nos. 191 of 1964 and 344 of 1964 etc. In these circum- stances the learned counsel for the respondents quite properly did not pursue the objection. In order to determine the points which have been canvassed, it is necessary to set out briefly the history of the legislation by which provisions were made for the levy of impugned tax. In the Schedule attached to the principal Act, as it stood before 1958, which exempted certain commodities from sales tax, ginned or unginned cotton was included as item No. 29. In the year 1958 by the East Punjab General Sales Tax (Amendment) Act, 1958 (Punjab Act 7 of 1958), item No. 29 was deleted from the Schedule with the result that cotton (ginned or unginned) became liable to the levy of sales tax. The definition of the word "purchase" was introduced for the first time by Punjab Act 7 of 1958 in section 2 of the principal Act. According to this definition: "2. (ff) 'Purchase', with all its grammatical or cognate expressions, means the acquisition of goods other than sugarcane, foodgrains and pulses for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and they were not liable to pay any tax at all when they exported their goods and effected sales outside the State. The State Legislature then enacted the Punjab General Sales Tax (Amendment and Validation) Act, 1960 (Punjab Act 17 of 1960). It is unnecessary to mention the amendments made by this Act because it was repealed and replaced by the Punjab General Sales Tax (Amendment and Validation) Repealing Act, 1961 (Punjab Act 28 of 1961). Yet another Act, the Punjab General Sales Tax (Amendment) Act, 1960 (Punjab Act 18 of 1960), was enacted, which changed the definition of the word "purchase". The definition as altered reads as follows: "2. (ff) 'Purchase' with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge." By the same Act, the second proviso to section 5(1) of the principal Act was inserted to the effect that "the rate of tax shall not exceed two naye paise in a rupee in respect of any declared goods as defined in clause (c) of section 2 of the Central Sales Tax Act, 1956, and such tax shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at with regard to the declared goods they shall not be liable to tax except at the point of sale by a dealer to the consumer. By the Mysore Act, the tax can be levied only at the stage of last purchase. In Madhya Pradesh it is leviable at the stage when the purchase is by a consumer or a manufacturer. In Madras it is the last purchase by a dealer on which the tax is leviable. Thus most of the other States in India have given effect to what was contemplated by section 15 of the Central Act of 1956 whereas in the principal Act no such stage has been fixed which is definite and certain. Reliance has been placed on a recent decision of the Madras High Court in The State of Madras v. T. Narayanaswami Naidu [1965] 16 S.T.C. 29. Under the Madras General Sales Tax Act, 1959, the taxable event in the case of cotton is the purchase, but the tax liability is attracted to it only when that purchase also satisfies the test of being at the stage of last purchase as mentioned in item 2 of the Second Sche- dule to that Act. It has been observed in that case that section 15 of the Central Act of 1956 contains an absolute direction that the State law in respect of declared goods shall make provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho does not sell the declared goods to a registered dealer within six months after the close of the assessment year. Moreover, once purchase tax is levied or becomes , leviable on a particular purchaser it cannot be levied on any subsequent purchaser by virtue of the prohibition contained in the second proviso to section 5(1) of the principal Act. Thus, apart from the stage being fixed, the goods cannot be subjected to levy of tax more than once. The counsel for the petitioners regard the above argument which had been developed by the learned counsel for the State as attractive on the face of it but say it is specious and in actual effect and working the tax can be levied more than once. Reference has been made to section 2(ff), which defines "purchase" to mean the acquisition of goods specified in Schedule C and the meaning of "turnover" as defined by section 2(i), which is stated to include the aggregate of the amount of sales and purchases and parts of sales and purchases actually made by any dealer during the given period. According to section 5(1), the tax has to be levied on the taxable turnover every year of a dealer. Section 5(2) defines the expression "taxable turnover". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is every possibility, nay probability, of the tax being collected by the State at multiple stages and if such a contingency cannot be ruled out, the impugned provisions should be declared invalid as not being in conformity with the mandatory provisions contained in section 15 of the Central Act of 1956. Now, it is necessary to examine the meaning of the word "levy" in taxation laws because the argument on behalf of the petitioners has proceeded on the premises that there is levy of purchase tax at multiple stages as each purchaser has initially to pay it though later on he may be able to claim a refund if he satisfies the conditions of sub-clause (vi) of section 5(2)(a). It has been urged by counsel for the petitioners that levy would include collection. Our attention has been invited to section 15(b) of the Central Act of 1956 where the word "levy" has been used in the sense of "collect" as in the context it can admit of no other interpretation. In Hazari Mal Kuthiala v. Income-tax Officer [1956] 30 I.T.R. 500., Bhandari, C.J., delivering the judgment of the Bench examined the meaning of the expressions "levy" "assessment" and "collection" in section 13 of the Finance Act. His ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h "levy" signifies to collect, or exact, etc. Reliance has also been placed on a Bench decision in Modi Spinning and Weaving Mills Company Ltd. v. The State of Punjab [1965] 16 S.T.C. 635., in which the validity of rules 20 and 35 of the Punjab General Sales Tax Rules, 1949, and certain provisions of the principal Act was examined. These rules provide that every registered dealer is bound to furnish returns quarterly within thirty days from the expiry of each quarter. The contention canvassed before the Bench was that according to sub-clause (vi) of section 5(2)(a) of the principal Act, in arriving at the figure of the taxable turnover for any period deductions had to be made from the dealer's gross turnover with reference to sub-clause (vi) and since those deductions covered the period of six months after the close of the year it would not be possible for the dealer to file a return and deposit the tax in accordance with the impugned rules quarterly before the expiry of the above period of six months. After referring to sections 10 and 12 of the principal Act and the other relevant provisions, the submissions made were repelled by the Bench and it was held that the rules were perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been levied or becomes leviable it cannot be levied on the goods at any subsequent stage owing to the second proviso to section 5(1) of the principal Act as also section 15 of the Central Act of 1956. The difficulties which have been pointed out with regard to sale to unregistered dealers do not have any foundation. The purchase of goods which are sold whether before or after the expiry of the period of six months of the close of the year to an unregistered dealer would be subjected to taxation in the hands of the first purchaser who effects such a sale. Thus the incidence of taxation is fixed and certain. Although for the reasons, which have been already stated, the second proviso to section 5(1) and sub-clause (vi) of section 5(2)(a) of the principal Act cannot be held to be invalid, it must be observed quite emphatically that it is highly desirable in the interest of the dealers as also the department that appropriate legislation should be enacted for making the stage of levy of tax more clear and precise and that a single point be fixed at which the tax can be levied as has been done in most of the other States in the country. The next point which arises for decision relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valid and effective until it was superseded by the notification of 26th September, 1961, to the extent it was not inconsistent with or repugnant to the provisions of the principal Act even after the amendments made by Punjab Act 18 of 1960. He says that quite rightly so far as declared goods are concerned the new definition of "purchase" contained in clause (ff) of section 2 did refer to Schedule C but in those cases where purchase had been made of goods for the particular purpose mentioned in the 1958 notification, namely, for use in the manufacture of goods for sale the tax would be leviable under that notification if the goods were such as come to be included in Schedule C after the enactment of Punjab Act 18 of 1960. The history of the insertion of Schedule C in the principal Act may be referred to briefly with advantage. It was by Punjab Act 13 of 1959 that Schedule C was inserted by section 19 of that Act after Schedule B. It stood as follows: "SCHEDULE C (See Section 6) 1. 2. 1. All goods which are or which may from time to time be specified in the first column of Schedule B Subject to the conditions and exception if any, set up against each in the second column ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er be in the positive, the assessment would be good; if in the negative, the assessment would naturally be bad and invalid. The next point which requires determination and which has been raised in some of the writ petitions, e.g., Civil Writ No. 344 of 1964, etc. is that the purchase tax should have been assessed in the hands of the commission agents through whom the purchases had been made and not in the hands of the petitioners. The term "dealer" has been defined by section 2(d). According to Explanation (2) therein, "a factor, a broker, a commission agent, a dealer's agent, an auctioneer or any other mercantile * * * * * who carries on the business of selling, supplying or purchasing goods and who has in the customary course of business, authority to sell goods belonging to principals or to purchase goods on their behalf is a dealer". In the above petition the assessee made an attempt to summon certain parties from whom the purchases had been made for the purpose of showing that they were registered dealers who had supplied cotton seeds to the petitioners by purchasing the same from third parties. It was alleged there was no privity of contract between the petitioners and the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not disclose the name of his principal. The presumption is rebuttable and where the contract is in writing the whole of the contract is for that purpose to be examined. Then there is the case of that class of agents which is called Pakka arhtia. Macleod, J. (as he then was), observed in Chhogmal v. Jainarayan [1913] 20 I.C. 882., that the legal relationship between the client and the arhtia is that of a vendor and purchaser, whether the contract is written or oral. It is well-settled that a pakka arhtia, though a commission agent, is qua the persons entering into forward contracts in the position of a principal. He is liable to both parties for the performance of the contract. The position of a pakka arhtia is analogous to that of a del credere agent who incurs only a secondary liability towards the principal, and whose legal position is partly that of an insurer and partly that of a surety for the parties with whom he deals to the extent of any default by reason of insolvency or something equivalent. He is himself vitally interested in the performance of the contract that has been entered into through him [see Indian Contract Act by A.C. Dutt, Third Edition (1951) at page 806]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumn thereof and no dealer shall charge sales tax on the sale of goods which are declared tax-free from time to time under this section. (2) The State Government, after giving by notification not less than three months' notice of its intention so to do, may by like notification add to or delete from Schedule B and thereupon Schedule B shall be deemed to be amended accordingly." Schedule "B", as it stood originally, contained entry No. 43- "oil-cakes" and entry No. 44-"fertilisers". On the 20th May, 1955, by the Punjab Government Notification No. 2183-E. & T. (CH)-54/533, entry No. 54-"fodder of every type (dry or green)" was added. Entry No. 43-"oil-cakes" and entry No. 44-"fertilisers" continued to remain and were not deleted. The result was that as from 1955 three entries, i.e., entry No. 43 "oil-cakes", entry No. 44-"fertilisers" and entry No. 54--fodder of every type (dry or green)" continued to exist up till 1958. By Punjab Act 7 of 1958, entry No. 43-"oil-cakes" was deleted. The contention on behalf of the petitioners is that "oil-cakes" are included in entry No. 54-"fodder of every type (dry or green)" and the deletion of entry No. 43-"oil-cakes" does not make any differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated ordinarily as fertilisers and that is why exclusion has been specially made in entry No. 22. In Uttar Pradesh Sales Tax Act, 1948 (15 of 1948), in the list of notified exempted goods entry No. 3 is "cattle fodder including green fodder, chuni, bhusi, chhilka, cotton seed, gowar and oil-cakes ". It is asserted that in that Act since "oil-cakes" is included in "cattle fodder", therefore, oil-cake really is fodder. In the Rajasthan Sales Tax Act, 1954 (29 of 1954), in the Schedule of exemption entry No. 9 is "cattle feeds" and from this it is urged that anything which forms cattle feeds is exempt from sales tax there. It is contended on behalf of the petitioners that by deleting entry No. 43-"oil-cakes" by Punjab Act 7 of 1958 the Legislature did not intend to take away the exemption from the payment of tax on the sale of oil-cakes and this entry was not considered necessary and was deleted because oil-cakes are included in entry No. 54-"fodder of every type (dry or green)". The essential question, therefore, is whether by the deletion of the entry relating to oil-cakes in 1958 the exemption from payment of sales tax in respect of oil-cakes was with- drawn or whether the entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rackets, suggests that the intention was only to give exemption in respect of green grass or dry fodder, which is commonly known as chara and which is the ordinary fodder as understood for the cattle. Relying upon Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola, and Another [1961] 12 S.T.C. 286; A.I.R. 1961 S.C. 1325., it is said that the true test as to how entries in a taxing statute are to be understood is to take the word and construe it not in any technical sense or from the botanical point of view but as understood in common parlance. In that case under the C.P. and Berar Sales Tax Act (21 of 1947) all articles contained in the Schedule were exempt from sales tax and articles not so specified were taxable, as in the principal Act before us. In the Schedule, there were originally two items, i.e., item No. 6-"vegetables-except when sold in sealed containers" and item No. 36-"betel leaves". The Schedule was amended by the C.P. and Berar Sales Tax (Amendment) Act (16 of 1948) by which item No. 36 was omitted and it was con- tended that in spite of the omission, "betel leaves" were exempt from the payment of sales tax as they were covered by item No. 6 "vegetables-ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ami Chettiar and Co. v. Government of Madras [1957] 8 S.T.C. 222; A.I.R. 1957 Mad. 301. In that case a Division Bench of the Madras High Court repelled an argument that as the enactment they were dealing with was a taxing measure, it should be held not to levy the tax unless the words were clear and held that this principle would not apply where the question is not of a levy but of an exemption. They relied upon the following observations of Lord justice Cohen contained in Littman v. Barron [1951] Ch. 993; [1951] 2 All. E.R. 393.: "The principle that in case of ambiguity a taxing statute should be construed in favour of the taxpayer does not apply to a provision giving a taxpayer relief in certain cases from a section clearly imposing liability." Crawford on Statutory Construction, 1940 Edition, in para. 258, at page 506, says- "Provisions providing for an exemption may be properly con- strued strictly against the person who makes the claim of an exemption. In other words, before an exemption can be recognised the person or property claimed to be exempt must come clearly within the language apparently granting the exemption." The reason for this rule of strict construction in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re included in the word "fodder" in the circumstances of the case is purely a question of fact depending upon evidence and any error on a question of fact in the impugned order is not amenable to the jurisdiction of this Court under Article 226 of the Constitution. It is now well-settled that it is only error of law apparent on the face of the record which can be corrected by this Court under Article 226 of the Constitution. It is, therefore, contended that in any case the Tribunal having held as a fact that the word "oil-cakes" is not included in the word "fodder" this Court cannot interfere exercising its jurisdiction under Article 226 of the Constitution. It is further urged that assuming that the finding as to the interpretation of the entries amounts to a finding in law, there is no error apparent on the face of the record and if there are two interpretations possible and the department has accepted one of them, then this Court will not interfere under Article 226. There appears to be considerable force in the contention pressed on behalf of the respondents. From a careful reading of Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola [1961] 12 S.T.C. 286; A.I.R. 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5(2)(a)(i) and (ii). Mr. Chetan Das for the respondents sought to argue that the Bench decision did not cover the matter agitated by the petitioners in the writ petition. In the first place it is not possible to see how counsel can now canvass a point contrary to what was admitted in the return. Even otherwise the legal position appears to be clear. It is not disputed that by a notification of the Punjab Government dated 30th May, 1951, edible oils were added as item No. 57 of the Schedule relating to tax-free goods. That entry stood as follows: "57. Edible oils produced from sarson, toria and til in ghanis, but not in hydrogenated form, e.g., vegetable ghee, vanaspati, etc." By a later notification dated 5th August, 1954, this entry was replaced by the following entry: "57. Edible oils produced from sarson, toria and til in indigenous kohlus worked by animal or human agency when sold by the owners of such kohlus only." The result was that edible oils produced in tel ghanis driven by mechanical power were excluded from the Schedule of tax-free goods. Thus there was reimposition of tax on sales of edible oils produced in the above manner. Such reimposition would be bad In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to costs. Civil Writ No. 1591 of 1963. In this petition the validity of the provisions by virtue of which purchase tax is imposed on cotton was challenged with reference to the assessment made for the year 1962-63. The petition cannot succeed on that point in view of our decision. It has been brought to our notice that the order was made by the Assessing Authority on 30th July, 1963, which was before the expiry of six months of the close of the year mentioned in clause (vi) of section 5(2)(a) of the principal Act. It has been submitted on behalf of the petitioners that on 30th July, 1963, the taxable turnover was not capable of determination and, therefore, the order of the Assessing Authority deserved to be set aside on that ground. This point does not appear to have been raised in the petition (original or amended) nor was it raised before the Assessing Authority. It is not open, therefore, to the petitioners to agitate that question now. At any rate, if the petitioners became entitled to claim any exemption under section 5(2)(a)(ii) of the principal Act, that exemption could be claimed under the relevant provisions. It may, however, be observed that the Assessing Authority sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is concerned, it has been decided against the petitioners. The petition, however, is allowed and the order of the Assessing Authority is quashed and it is directed under Article 227 of the Constitution to reassess the petitioners after giving an opportunity for production of proper evidence for determining whether the commission agents would be liable to purchase tax or the petitioners. It will be open to the petitioners to ask for any other relief in the light of our decision on the other points. Parties will bear their own costs. Civil Writ No. 191 of 1964. In this petition which relates to the assessment for the year 1960-61, apart from the points which have been raised in Civil Writ No. 344 of 1964, an additional matter has been agitated. That relates to tax levied in respect of purchase of machinery. It appears from the order of the Assessing Authority that machinery worth Rs. 39,600 had been purchased from different firms on the strength of the assessee's registration certificate without making any payment of sales tax and this very machinery bad been sold during the year under assessment for Rs. 42,534-6-0. The assessees claimed that the machinery had been purchased for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown to have been used by the petitioners for purposes other than those for which it was sold to them. (b) The petitioners admittedly do not deal in machinery and this is apparent from the order of the Assessing Authority itself inasmuch as the amount on account of sale of machinery has been subtracted from the gross sales turnover of the petitioners. Mr. Chetan Das has not been able to point out any infirmity in the above reasoning and we would accordingly hold that the order of the Assessing Authority suffers from an apparent error inasmuch as the petitioners were subjected to payment of purchase tax on a sum of Rs. 39,600 on account of the machinery which could not be done under the law. This petition, therefore, succeeds on the above point as also on the question of determination of the liability of the com- mission agents or the petitioners inter se with regard to payment of purchase tax and fails on all the other points. The order of the Assessing Authority, therefore, is quashed but a direction is issued to it under Article 227 of the Constitution to make a fresh assessment in the light of our decision on the various points. There will be no order as to costs. Civil Wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-61 and 1961-62 and the only points which have been agitated are with regard to imposition of sales tax on oil-cakes which has been decided against the petitioners and the effect of the notification dated 26th September, 1961. The second point was never raised before the Assessing Authority and, therefore, the facts had not been investigated and it is not possible to give any relief to the petitioners on that point. If, however, in the light of our decision on that point the petitioners are entitled to any relief the Assessing Authority is hereby directed to give it to them if they ask for it. These petitions, therefore, stand disposed of accordingly. There will be no order as to costs. Civil Writ No. 2341 of 1963. In this petition, which relates to the assessment year 1962-63, the only point agitated is with regard to the levy of sales tax on oil- cakes. The petition is dismissed owing to our decision on that point. There will be no order as to costs. Civil Writ No. 2576 of 1964. This petition relates to the assessment made for the year 1961-62. The following points have been raised in this petition. 1.. The levy of purchase tax on oil-seeds was invalid. 2. Purchases made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chetan Das and have proceeded to dispose of such other points also which call for decision in these petitions to obviate unnecessary multiplicity of proceedings. The assessees in Civil Writs Nos. 1591 of 1963 and 1913 and 1914 of 1962 appealed to the Supreme Court: S.T. Desai, Senior Advocate (A.N. Sinha, C.D. Garg and B.P. Jha with him), for the appellant in C.A. No. 2386 of 1966. H.L. Shibal, Senior Advocate (A.N. Sinha, C.D. Garg and B.P. Jha, with him), for the appellant in C.As. Nos. 2387 and 2388 of 1966. Bishan Narain, Senior Advocate (O.P. Malhotra and R.N. Sachthey with him), for the respondents in all the appeals. JUDGMENT The judgment of SUBBA RAO, C.J., SHAH and VAIDIALINGAM, JJ., was delivered by VAIDIALINGAM, J. SIKRI, J., delivered a separate judgment and RAMASWAMI, J., agreed with SIKRI, J. VAIDIALINGAM, J.-In all these three appeals on certificate, the common judgment of the High Court of Punjab, dismissing the three writ petitions filed by the appellant, is under attack, by Mr. S.T. Desai, learned counsel for the appellant. The appellant, who is the same in all these appeals, is the Bhawani Cotton Mills Ltd., running a cotton ginning factory, and engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion on the more important question, which Is common to all the appeals. In order to appreciate the contentions that have been taken before us, by Mr. S.T. Desai, learned counsel for the appellant, and Mr. Bishan Narain, learned counsel for the State, it is necessary to refer to the relevant provisions in both the Acts. It is only necessary to refer to the provisions of the Act, as they stood on April 1, 1960. The Act of 1948 has been amended from time to time, and it may not be necessary to refer to those amendments, excepting on one aspect, when we deal with the validity of the notification referred to earlier. Coming to the Act, according to its preamble, it is an Act to provide for the levy of a general tax on the sale or purchase of goods in Punjab. The expressions "dealer", "goods", "prescribed", "pur- chase", "sale", "turnover" and "year" are defined in clauses (d), (e), (f), (ff), (h), (i) and (j) of section 2. Particularly section 2(ff) defining "purchase" is as follows: "2. (ff) In this Act, unless there is anything repugnant in the subject or context,- 'Purchase' with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e levied on the purchase or sale of such goods at more than one stage." The expression "taxable turnover " is defined in section 5(2), but, in arriving at the taxable turnover, the various deductions, mentioned in the sub-clauses of section 5(2)(a) and section 5(2)(b), are exempt. Sub-clause (vi) of section 5(2)(a), which mentions one of the items which is deductible in arriving at the taxable turnover, is as follows: "......turnover during that period on the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the territory of India: Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction. " Section 7 deals with the registration of dealers. Section 10 relates to payment of tax and the filing of returns. Its sub-section (1) pro- vides that the tax payable, under the Act, shall be paid in the manner provided, at such intervals as may be prescribed. It may be mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of certain goods, which are declared to be of special importance, shall be subject. The expressions "dealer" and "declared goods" are defined in sections 2(b) and 2(c) respectively. "Declared goods" means goods declared under section 14 to be of special importance in inter-State trade or commerce. Section 14 enumerates the various goods which are declared to be of special importance in inter-State trade or commerce. One of the items so declared is "cotton", under item (ii), which is described as follows: "Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." Section 15, imposing restrictions and conditions in regard to tax on sale or purchase of declared goods within a State, is as follows: "15. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of, a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in clause (vi) of section 5(2)(a) of the Act. Under those circumstances, there is always a possibility, or even a certainty, of more persons than one having paid tax or being made liable to pay tax in respect of the same goods at different stages. That Is quite opposed to the provisions of section 15(a) of the Central Act. Even otherwise, it is pointed out that if a person has purchased cotton and sells it after the period provided for in section 5(2)(a)(vi), that party is liable to pay sales tax and would have also paid the same. Another purchaser from the said party will also be liable to pay tax on the same commodity, if he sells the goods after the period mentioned in clause (vi). That is, two persons are made liable for payment of tax in respect of the same commodity. In other words, the purchases of the same item of declared goods, by the persons indicated above, are made liable for tax, whereas, under the Central Act, there can be only one levy and collection of tax at one stage, either on sale or on purchase. Further, it is argued that the second proviso to section 5(1) of the Act is contrary to section 15(a) of the Central Act, inasmuch as the main section, which le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be adopted is indicated in rule 27-A, of such a purchaser getting a declaration in the form mentioned therein, from the dealer to whom such goods are sold, or by his agent. Therefore, under those circumstances, if once a dealer gives a declaration to his vendor, the former will clearly know that the latter is exempt from taxation, and the liability to pay tax is his, unless he is able to pass it on to others, There is no uncertainty, in the matter of fixing the stage, regarding the levy of sale or purchase tax. Therefore, that provision also is not violative of the Central Act. Counsel also urges that in case a party is eligible for refund on the ground that he is not liable to pay, in respect of any particular purchase, ample provision Is made for obtaining refund, under section 12 of the Act. Therefore, under those circumstances, the State presses for the decision of the Punjab High Court, being upheld. We are not impressed with the contentions of the learned counsel for the State. A perusal of the judgment, under attack, shows that the learned Judges themselves were very much impressed by the various aspects presented before them, on behalf of the appellant. In fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that laid down in the Central Act. Therefore, the mere injunction, by the Legislature, as contained in the second proviso to section 5(1), that the rate should not be higher than the one fixed In the Central Act, and that the levy must be at one stage, as again mentioned in the Central Act, will be of no avail, unless the Act, or the rules framed under it, make it very clear that there will be no levy or collection of tax, except from the persons who are bound to pay, as per the Central Act. It is here that there is considerable difficulty caused by the absence of any provision, either in the Act or in the rules or the forms, indicating the stage at which the tax is to be levied. In the case of commodities, like cotton, which come under the category of "declared goods", tax can be levied only at a single point, as is made clear by section 15(a) of the Central Act, and, in our opinion, there can be no legal liability for payment of tax accruing, until and unless the Act or the rules framed thereunder, prescribe a single point for taxation. For the matter of that, even In the final return to be sent by a dealer under the Act, the dealer will have to show in the taxable turnover all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered dealer, within the period, sub-clause (vi) will not help the original purchaser. We may also point out, at this stage, that sub-clause (vi) of section 5(2)(a) negatives the assumption that the normal rule, under the Act, in respect of declared goods is to levy the tax on the first purchaser. Mr. Bishan Narain, counsel for the State, faced with these difficulties, no doubt, referred us to the provisions contained in section 12 of the Act relating to refunds. Counsel pointed out that the manner in which a purchaser can claim refunds is also elaborately indicated in rules 48 to 55 of the Rules. If persons, like the appellants, satisfied the authorities concerned that they had paid amounts, by way of tax, which they were not legally bound to pay, it was open for them to ask for refunds of such excess amounts paid. Therefore, even assuming that, in the first instance, the appellant has paid the purchase tax and, later on, it is found that it is not liable for the same, section 12 of the Act would afford adequate relief. We are not impressed with this argument. The position is not so simple. Even in the matter of obtaining refunds, there can be no controversy, that the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same. There is a broad distinction between the provisions contained in the statute in regard to the exemption of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non- imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are Prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon as they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was 4 per cent. and we have already indicated that the Central Act was enacted in 1956; and we have also adverted to the material provisions therein. We have adverted to the fact, that under section 5 of the Act, the rate of tax that is to be levied, is to be contained in the notification that is to be issued under section 5(1). Accordingly, on April 19, 1958, the State Government issued under section 5(1), as amended by Punjab Act 7 of 1958, a notification regarding the rate of tax. In that notification, the rate of tax on the purchase of goods by a dealer for use in the manufacture of goods for sale, was fixed at 2 naye paise in the rupee. Section 2(ff) was later on amended in 1960 by Punjab Act 18 of 1960, and the definition of "purchase", as contained in this provision, has already been referred to by us. The State Government issued a notification under section 5(1) of the Act on September 26, 1961. Under this notification it was provided that the rate of tax on the purchase of goods specified in Schedule C, appended to the Act, would be 2 naye paise in the rupee. The contention that was taken by the appellant was that, not- withstanding the fact that the definition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the notification issued in 1958, cannot be sustained, on this additional ground also. We therefore allow the appeals in the manner indicated above. The State will pay costs to the appellant in Civil Appeal No. 2386 of 1966. SIKRI, J.-I have read the judgment prepared by my brother, Vaidialingam, J. I agree with him that assessments for the years 1960- 61 and 1961-62 on the basis of notification issued cannot be sustained and Civil Appeals Nos. 2387 and 2388 of 1966 have to be allowed. But, with respect, I regret I cannot agree with him that the assessments in question have to be quashed on the ground that they violate section 15 of the Central Sales Tax Act. My brother has set out the relevant statutory provisions and it is not necessary to extract them here. In my opinion the Punjab Act does in effect comply with the requirements of section 15 of the Central Sales Tax Act because it Is possible to find out the stage at which purchase tax becomes leviable on goods mentioned in Schedule C. This stage is the first purchase by a dealer, which is not exempted from taxation or which is not deductible from the taxable turnover of a dealer under section 5(2) of the Punjab Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve given above let us deem C to be an unregistered dealer. A sells to B, and B sells to C. B will be liable to pay purchase tax because he cannot claim exemption under section 5(2)(a)(vi). Suppose B in the above illustration is an unregistered dealer. Here B is liable to purchase tax unless he sells to C, a registered dealer, and obtains the prescribed declaration. If C, is an unregistered dealer, then B would be liable and not C. If an unregistered dealer wants to escape taxation and his transactions are not known to the Sales Tax Authorities till he is assessed under section 11(6) of the Punjab Act, the only way of com- plying with the second proviso to section 5 and section 15 of the Central Act is to give refund to a dealer who has been taxed in the meantime. The same thing would happen, as far as I can see, under the State Acts which fix in terms a specific stage. I may here mention that according to me the second proviso to section 5 serves one useful purpose. It makes the Punjab Act immune from challenge on the ground that Its provisions infringe section 15 of the Central Act. The Punjab Act being good, it is only the assessments that can be challenged on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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