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TMI Blog1984 (4) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... m. The registration of the dealer was cancelled with effect from 1st June, 1972, as its business was closed, and in view of this cancellation the assessment was made in respect of the period from 1st April, 1972, to 31st May, 1972, being the relevant assessment period for the purposes of this reference. There were no sales or purchases made by the dealer during this period. However, on the date of the closure the dealer had a stock of unsold goods worth Rs. 36,100, which had been purchased by the dealer by issuing declarations in form 16 of the Bombay Sales Tax Rules, 1959. Section 15 of the said Act provides for the liability of the dealer to pay purchase tax and for the levy of such tax where a dealer liable to pay tax under the said Act discontinues his business and holds a stock of goods which were purchased on a declaration under section 11 or section 12. There was no dispute that the provisions of section 15 were applicable in respect of the unsold stock of Rs. 36,100 and that purchase tax was leviable thereunder on the said stock. The dispute was only in respect of the rate of purchase tax to be applied. The goods in question are admittedly covered by entry 22 of Schedule E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax. Section 12 of the said Act provides that no deduction from turnover of sales to an authorised dealer, a licensed dealer or a commission agent holding a permit on behalf of principal or to a registered dealer would be allowed as provided in sections 7, 8, 9 and 10, unless a certificate is furnished as provided in the said section by such licensed dealer or commission agent or authorised agent or registered dealer. Clause (c) of section 12 provides for the certificate to be given by a licensed dealer. The relevant part of section 14 of the purposes of this reference runs as follows: "14. (1) Where any dealer or commission agent has purchased any taxable goods under a certificate given by him under section 11 or 12 and contrary to such certificate, the goods are used for another purpose, or are not resold or despatched in the manner and within the period certified, then such dealer or commission agent shall be liable to pay purchase tax on the purchase price of the goods purchased under such certificate; and accordingly, he shall include the purchase price thereof, in his turnover of purchases in his return under section 32, which he is to furnish next thereafter: Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said Act. It deals with goods, the sale and purchase which is subject to sales tax, general sales tax, purchase tax and retail sales tax, and the rates of sales tax, general sales tax and purchase tax. There are five columns in the said Schedule. The first column merely contains the serial numbers, the second column contains description of goods, the third column sets out the rate of sales tax, the fourth column sets out the rate of general sales tax and the fifth column sets out the rate of purchase tax. Entry 22 of the said Schedule runs as follows: ----------------------------------------------------------------------Sr. Description of goods Rate of sales Rate of general Rate of purchase No. tax sales tax tax 1 2 3 4 5 ----------------------------------------------------------------------- "22. All goods other than Three paise Three paise in Three paise in those specified from in the rupee. the rupee. the rupee." time to time in Schedules A, B, C and D and in the preceding entries. ----------------------------------------------------------------------- *Here italicised Rule 21 of the Bombay Sales Tax Rules, 1959, makes provision for forms of certificate under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held that when a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion. 5.. We find ourselves unable to accept the argument of Mr. Lokur for the reasons which we shall presently state. In the first place, we may make it clear that it is the accepted position that once a legal fiction is introduced by a statute, it must be carried to its logical conclusion and that "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it": see East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 at 132. It must also, however, be remembered that a legal fiction must be carried to its logical conclusion and not to an illogical length. Nor can one allow oneself to be so carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion as if section 14 were applicable that would not enable us to be so carried away by the legal fiction as to ignore the words "at the relevant rate of purchase tax applicable thereto" which are used in the provision itself. It was contended by Mr. Lokur that, if the provisions of section 15(1) were to be interpreted as we have suggested above, then the words "as if such dealer had become liable to pay purchase tax on such goods under section 14" used in sub-section (1) of section 15 would be rendered redundant and hence such construction was not permissible. We are afraid, this is not correct. In the first place, it must be appreciated that liability to pay tax deals with the incidence of tax and levy is treated separately. We find that that is the scheme which is followed in Chapter II of the said Act, the very little of which indicates that the provisions therein are regarding "Incidence and levy of tax". Properly read, therefore, the relevant portion of sub-section (1) of section 15 shows that in the situation contemplated therein the dealer becomes liable to pay purchase tax, as if he had contravened the terms of the certificate referred to in section 14 but the levy of p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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