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TMI Blog1990 (12) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Sales Tax Act. According to the petitioner, it manufactured medicines in Delhi by using the said raw materials which it had purchased without paying the tax and, thereafter the medicines which were so manufactured were transferred to its branches outside Delhi. According to the petitioner, these transfers took place against form F which had been issued under the relevant provisions of the Central Sales Tax Act and that no chargeable event, according to the petitioner had occurred because no sale was involved in such transfer of goods. The Sales Tax Officer, vide his assessment order dated 15th February, 1990, observed that the petitioner had purchased the raw material on the basis of its registration certificate. Undoubtedly, the petitioner had transferred its manufactured medicines to its branches outside Delhi, but according to the said officer the provisions of the aforesaid third proviso to section 4(2)(a)(v) of the Act were clearly attracted. Invoking the said provisions, the Sales Tax Officer added to the petitioner's turnover the value of the raw material which the petitioner had originally purchased without payment of tax and sales tax was thereby levied on this. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him in the course of inter-State trade or commerce, being a sale occasioning, or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or (3) for sale by him in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents of title to such goods effected during the movement of such goods from Delhi; to a place outside India and after the goods have crossed the customs frontiers of India; or (B) of goods of the class or classes specified in the certificate of registration of such dealer as being intended for resale by him in Delhi, or for sale by him in the course of inter-State trade or commerce or in the course of export outside India in the manner specified in sub-item (2) or subitem (3) of item (A), as the case may be; and (C) of containers or other materials, used for the packing of goods, of the class or classes specified in the certificate of registration of such dealer, other than goods specified in the Third Schedule, intended for sale or resale; (vi).............. ................... ................... Provided also that where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter the manufactured goods should be sold locally or by inter-State sale or in the course of export. We may here notice that the corresponding provision under the Bengal Finance (Sales Tax) Act to section 4(2)(v) of the present Act was section 5(2)(a)(ii) of the said Bengal Finance (Sales Tax) Act. There was, however, one difference. In the second proviso to section 5(2) of the Bengal Finance (Sales Tax) Act, the words "in Delhi" were missing prior to 1972 and it had been held by judicial pronouncements that it was not incumbent upon the purchasing dealer, under those circumstances, to manufacture in Delhi or to sell the goods in Delhi or from Delhi. In order to penalise the misutilisation of the certificate and the S.T. 1 and S.T. 35 forms, the third proviso to section 4(2)(a)(v) of the Act was inserted. The language of the said provision is very clear and unambiguous. It clearly states that where the goods are purchased for the purpose mentioned in sub-clause (v), namely, for manufacture in Delhi, and thereafter sale in Delhi or from Delhi, but the goods so purchased are not utilised in any manner, then the price of the goods purchased shall be included in the taxable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the S.T. 1 and S.T. 35 forms, a question would obviously arise as to levy of tax on the sale by which the purchasing dealer had bought the raw material which it misutilised. It would be clearly unjust and unfair to tax the selling dealer for the wrong committed by the purchasing dealer. Therefore, the third proviso was inserted in order to tax the sale of raw material but not in the hands of the seller but in the hands of the purchaser. It is true that under the Delhi Sales Tax Act, there is no tax on the purchases but the third proviso does not, in effect, tax the purchases. It taxes the sale but in the hands of the purchaser when the purchaser has breached the provisions of the certificate issued by him and the provisions of section 4(2)(a)(v) of the Act. Strong reliance was placed by the learned counsel for the petitioner on a decision of the Supreme Court in the case of Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71. In our opinion the said decision is of no assistance to the petitioner. The Supreme Court in that case was concerned with the provisions of section 9 of the Haryana General Sales Tax Act, 1973. In that case the petitioner had manufactured goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary to the intention expressed by him in the declaration, the object and purpose of giving deduction to the selling dealer would be defeated. Even so, it would not be right to withdraw the deduction granted to the selling dealer because that would be penalising the selling dealer for a breach of faith committed by the purchasing dealer. The legislative wrath should in all fairness fall on the purchasing dealer and that is why the second proviso has been introduced in the Act by the Delhi Amendment Act 20 of 1959. The object of the second proviso is to ensure that the intention expressed by the purchasing dealer in the declaration given by him is carried out and he acts in conformity with that intention. Where the purchasing dealer gives a declaration of intention to resell the goods purchased or to use them as raw materials in the manufacture of goods for sale, he must act in accordance with that intention, because it is on the basis of that intention that deduction is allowed to the selling dealer and if he does not carry out that intention and utilises the goods for any other purpose, it stands to reason that the tax which is lost to the Revenue by reason of deduction granted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words "in the Union Territory of Delhi" were added. In view of this decision, the question of any reliance being placed on Goodyear's case [1990] 76 STC 71 (SC) does not and cannot arise. Confronted with the aforesaid decision, the learned counsel for the petitioner sought to contend that being a Union Territory, the Parliament was undoubtedly competent to legislate. He, however, contended that when there is a specific entry in any of the three Lists then the Parliament cannot invoke the provisions of entry 97 of List I in order to legislate in respect thereto. The submission of the learned counsel was that sales tax can be imposed by virtue of the relevant entry in List II. He, however, submitted that what was sought to be taxed by virtue of the third proviso to section 4(2)(a)(v) was to tax a transaction which was not a sale. The Parliament could not, it was submitted, regard something as a sale which in fact was not a sale prior to the Forty-sixth amendment of the Constitution. In other words, the submission of the learned counsel was that transfer on consignment basis could not be subjected to tax as the same was not sale and such transfer could not be deemed to be sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in Delhi or would be sold in the course of inter-State trade or commerce. The effect of this would be that at one point of time tax would be levied on the price of the raw material used in the manufacture of the goods. That tax would be levied when the manufactured goods are either sold in Delhi or the sales are made in the course of inter-State trade or commerce from Delhi. When the purchasing dealer does not adhere to the certificate which he had furnished, then obviously the State has been wrongfully deprived of the revenue which was due to it. Instead of, at that stage, seeking to reopen the assessment of the selling dealer and taxing such a sale, what the law now permits by the third proviso is to deem that sale as to take place at the time when the misutilisation occurs, and furthermore, deem it to be the turnover of the purchasing dealer when the purchasing dealer is himself subjected to sales tax under the local Act. In our opinion, the Parliament was clearly empowered to pass such a legislation even under entry 97 of List I and we see no lack of jurisdiction in this connection. It was also sought to be contended by the learned counsel for the petitioner that there has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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