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TMI Blog1975 (7) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... by SARKARIA, J.-These appeals by the State of Tamil Nadu on a certi- ficate granted by the High Court under article 133(1)(c) of the Constitution raise a question as to the interpretation and scope of section 7-A of the Madras General Sales Tax Act, 1959 (hereinafter called the Madras Act). All the respondents are dealers against whom either pre-assessment proceedings have been initiated or assessments have been made under section 7-A of the Act on the purchase turnover of certain goods. The assessee-respondents in Civil Appeals Nos. 1040, 1041, 1042 and 1044 of 1973 are said to have purchased arecanuts from agriculturists, and thereafter transported those goods outside the State for sale on consignment basis. The twenty assessees in Civil Appeals Nos. 1046-48, 1054-1057, 1059-1060, 1061 to 1066, 1068 to 1072 of 1973 are alleged to have purchased gingerly seeds from agriculturists. Gingelly seeds so purchased were crushed into oil by them. The four respondents in Civil Appeals Nos. 1045, 1050, 1058 and 1067 of 1973 are alleged to have purchased butter from householders and then converted it into ghee. The three assessees in Civil Appeals Nos. 1051, 1052 and 1053 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me reason no tax is payable in respect of them. It appears to be a contradiction in terms, and we are unable to visualise the circumstances except what we have noticed above in which section 7-A could be applied. In fact, we are unable to visualise the circumstances in which the twofold requirement of the sale being liable to tax but for some reason no tax is payable under section 3, 4 or 5 can arise, except in cases of exemption. Even there, the difficulty arises whether one can say that the sale which is exempted is liable to tax, and then assume that because of exemption, the tax is not payable. To our minds, the language of section 7-A is far from clear as to its intention, and we think that the joint Commercial Tax Officer was not justified in invoking section 7-A." With regard to the purchases of butter, the learned Judges said: "We fail to see how this could be done under section 7-A. Butter is taxable to multi-point tax and is levied on the sales. That being the case, we do not understand how purchase tax can also be levied at the purchase point of the sales which were also the subject-matter of charge. If the purchases were made from householders or other persons who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale or purchase in the course of inter-State trade or commerce. Section 7-A(1) can be invoked if the above ingredients are cumulatively satisfied. The proviso to the sub-section exempts a dealer (other than a casual trader or agent of a non-resident dealer), if his turnover for a year is less than Rs. 25,000 (which by a subsequent amendment was raised to Rs. 50,000). The assessees prima facie fall within the definition of "dealer" in section 2(g), which includes not only a person who carries on the business of "selling, supplying or distributing" goods but also the one who carries on the business of "buying" only. Difficulty in interpretation has been experienced only with regard to that part of the sub-section which relates to ingredients (4) and (5). The High Court has taken the view that the expression "goods, the sale or purchase of which is liable to tax under this Act" and the phrase "purchases ...... in circumstances in which no tax is payable under section 3, 4 or 5," are a "contradiction in terms". We are unable to accept this interpretation which would render section 7-A(1) wholly nugatory. With due respect, it seems to us that in arriving at this erroneous interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted from tax at all points under section 8 or section 17(1) of the Act. The goods so exempted-not being "taxable goods"---cannot be brought to charge under section 7-A. The words "under the Act" will evidently include a charge created by section 7-A also. It is to be noted that section 7-A is not subject to section 3; it is by itself a charging provision. Section 7-A brings to tax goods the sale of which would normally have been taxed at some point in the State, subsequent to their purchase by the dealer if those goods are not available for taxation, owing to the act of the dealer in (a) consuming them in the manufacture of other goods for sale or otherwise, or (b) despatching them in any manner other than by way of sale in the State, or (c) despatching them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce. Ingredients (4) and (5) are not mutually exclusive and the existence of one does not necessarily negate the other. Both can co-exist and in harmony. Ingredient (4) would be satisfied if it is shown that the particular goods were "taxable goods", i.e., the goods, the sale or purchase of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State for sale on consignment basis, their case would also be covered by clause (b) or (c) of section 7-A(1) and such dealers would be liable to tax on the purchase turnover of these goods. It may be remembered that section 7-A is at once a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation. In Ganesh Prasad Dixit v. Commissioner of Sales Tax [1969] 24 S.T.C. 343 (S.C.); [1969] 3 S.C.R. 490., section 7 of the Madhya Pradesh General Sales Tax Act, 1959 (for short, Madhya Pradesh Act), was under challenge. That section was as follows: "Every dealer who in the course of his business purchases any tax- able goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is based on section 7 of the Madhya Pradesh Act. Although the language of these two provisions is not completely identical, yet their substance and object are the same. Instead of the longish phrase, the goods, the sale or purchase of which is liable to tax under this Act employed in section 7-A of the Madras Act, section 7 of the Madhya Pradesh Act conveys the very connotation by using the convenient, terse expression "taxable goods". The ratio decidendi of Ganesh Prasad [1969] 24 S.T.C. 343 (S.C.); [1969] 3 S.C.R. 490., is, therefore, an apposite guide for construing section 7-A. Unfortunately, that decision, it seems, was not brought to the notice of the learned judges of the High Court. Section 5A of the Kerala General Sales Tax Act, 1963 (for short, the Kerala Act), which is identical with the impugned provision, runs thus: "5A. Levy of Purchase tax.-(1) Every dealer who in the course of his business purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under section 5, and either- (a) consumes such goods in the manufacture of other goods for sale or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and the sales are of goods which are taxable under the Act but when he sells these goods, it is not part of his turnover. Therefore, it is a case of a dealer selling goods liable to tax under the Act in circumstances in which no tax is payable under the Act. In such a case, the purchaser is sought to be taxed under section 5A provided the conditions are satisfied. The case of growers selling goods to persons to whom section 5A thus applies is covered by this example." The judgment of the learned judge was affirmed in appeal by a Division Bench of the same High Court (vide Yusuf Shabeer v. State of Kerala [1973] 32 S.T.C. 359.). The Bench expressly dissented from the view taken by the Madras High Court in the judgment now under appeal. In our opinion, the Kerala High Court has correctly construed section 5A of the Kerala Act which is in pari materia with the impugned section 7-A of the Madras Act. "Goods, the sale or purchase of which is liable to tax under this Act" in section 7-A(1) means "taxable goods", that is, the kind of goods, the sale of which by a particular person or dealer may not be taxable in the hands of the seller but the purchase of the same by a dealer in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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