9911796707
TMI Blog1959 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the relevant assessment years the assessee obtained a licence in conformity with rule 5 of the Sales Tax Rules. The Tribunal found that the turnover, the taxability of which was in issue was that of purchase of cotton from persons or firms resident outside the State of Madras, which the petitioner effected through its buying agent, Messrs Comorin Investment and Trading Co., Ltd. The Tribunal recorded: "It is also clear..............that Messrs Comorin Investment and Trading Co., was used as an agent by the appellants for effecting the purchases and they were paid a small commission by the appellants for the purpose. There is evidence to show that Messrs Comorin Investment and Trading Co., Ltd., clearly informed the foreign sellers about their capacity as the agents of the appellants for the purpose of settling the transactions. The property in the goods passed directly from the seller to the appellants and the price was paid by the appellants to the sellers." The Tribunal further found: "There is no doubt that the cotton was despatched by the seller to the buyer directly using either the railway or the steamer for conveyance." The Tribunal sustained the claim of the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton by a licensed dealer from an unlicensed dealer did not come within the purview of that rule. It was common ground that the petitioner was a licensed dealer, and that the purchases made by the petitioner were from unlicensed dealers. The dealers who sold the cotton were outside the State of Madras, and they were obviously in the position of unlicensed dealers, that is, dealers not licensed under the Madras General Sales Tax Act. We shall deal first with the second of these contentions based on the learned counsel's interpretation of the relevant rules. Section 3 of the Act, which is the general charging provision is itself subject, in the case of cotton, to section 5(ii) of the Act, which provides for a single point levy on transactions in cotton. As pointed out at page 805 in Noor Mohammed and Co. v. State of Madras[1956] 7 S.T.C. 792., the exemption granted by section 5(ii) of the Act is to the commodity, that is, to the cotton, and is of an impersonal character, which is not dependent on any restrictions to which the dealer in cotton may be subjected by the rules, for example, rule 5 of the Sales Tax Rules. Section 5(ii) required: "Subject to such restrictions and condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the cotton, and is of an impersonal character, which is not dependent on any restrictions to which the dealer in cotton may be subjected by the rules, for example, rule 5 of the Sales Tax Rules. Section 5(ii) required: "Subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees..............the sale of cotton (including kapas)..............shall be liable to tax under section 3, sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed, and only at the rate of one half of one per cent. of the turnover at that point." The prescription of a single point in the case of cotton was by rule 4-A(iv) of the Turnover Rules. Rule 4(2) prescribed: "In the case of the undermentioned goods the gross turnover of a dealer for the purposes of these rules shall be the amount for which the goods are bought by the dealer..............(bb)..............cotton (including kapas) bought by spinning mill or by dealer who exports outside the State." S.T.C. 792. This is a rule which complied with the requirements of section 3(5) of the Act to prescribe whether it was the seller or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State, the tax shall be levied from the dealer who buys it in the State and is the last dealer not exempt from taxation under section 3(3), on the amount for which the cotton is bought by him; (c) all other sales of cotton (including kapas) by licensed dealers in cotton shall be exempted from taxation: Provided that the burden of proving that a transaction is not liable to taxation under this clause shall be on the dealer." It should be obvious that there is no express reference either in clause (a) or in clause (b) to the dealer who sells the cotton. Nor is there any express requirement in either of these clauses that either the dealer who sells or the dealer who purchases the cotton should be a licensed dealer. The contention of Mr. Venkatasubramania Aiyar, learned counsel for the assessee, was as follows: All the three clauses (a), (b) and (c) of rule 4-A(iv) should be considered together, and that too against the background of rule 5 of the Sales Tax Rules to gather what the rule-making authority intended when it promulgated rule 4-A(iv). Despite any express reference to licensed dealers, what the rule-making authority intended to prescribe and did prescribe in clauses (a) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the issue, what was it that was taxable under clauses (a) and (b) of rule 4-A(iv). We have already pointed out that there is no express requirement either in clause (a) or in clause (b) that the transactions should be between licensed dealers. At one stage the learned counsel for the assessee invited us to consider the position, that ultimately resulted from decisions of this Court on the scope of rule 16 of the Turnover Rules, which prescribed a single point for transactions in hides and skins. Even independent of rule 16(5), which was struck down as ultra vires, the position was that there was prescription of a single point only in the series of transactions between licensed dealers. But that was specifically based on the language of rule 15 as well as rule 16, which expressly referred to licensed dealers. But the language of rule 4-A(iv) is not identical with that of rules 15 and 16, and we have to construe the scope of clauses (a) and (b) of rule 4-A(iv) on the wording of these sub-clauses and not on the analogy of what applied to hides and skins under rules 15 and 16 of the Turnover Rules. We have pointed out that the use of the expression "other sales" with the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule-making authority had not the authority to confine the scope of section 5(ii) of the Act only to licensed dealers under a rule. Whether because of clause (c) of rule 4-A(iv) dealers other than licensed dealers would be liable to tax under rule 4(1) of the Turnover Rules does not arise for determination in this case. But, if it did arise, the position would be that rule 4 did not concern itself with prescribing a single point required by section 5(ii). Only two points were prescribed by rule 4-A(iv). It is the absence of a valid prescription that would make other transactions non-taxable. The exemption that clause (c) of rule 4-A(iv) purported to grant would therefore be really illusory. But that, in our opinion, is not enough to import the requirement that the transactions referred to in clauses (a) and (b) should be only between licensed dealers, and that conclusion we have reached on the express language employed in rule 4-A(iv). Therefore the fact that the assessee purchased the cotton in question from unlicensed dealers did not take these transactions outside the scope of the taxing provision, rule 4-A(iv) read with section 5(ii) and section 3 of the Act. The next question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Act could not therefore validate the levy of sales tax. We have pointed out that these were explanation sales, that is, inter-State sales which however fell within the scope of the Explanation to Article 286(1)(a). The President's order which was in operation during this period could validate a levy only if there had been a levy. It did not validate a levy made after the Constitution came into force. Since, as we have pointed out, the levy in this case was a post-Constitution levy under section 22 of the Act, the President's Continuance Order did not validate the levy under section 22. It was outside the scope of Act 7 of 1956. Therefore, even though section 22 was there, since the other bans imposed by Article 286 of the Constitution were in force during the period, the tax liability under section 22 was unenforceable. It is on this ground that we have to allow T.R.C. No. 21 of 1957 and direct that the turnover of Rs. 3,54,152-9-9 be excluded from the taxable turnover of the assessee. Since neither party has wholly succeeded in this batch, we direct the parties to bear their respective costs. The learned Government Pleader urged with reference to T.R.C. No. 21 of 1957 that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
