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TMI Blog1994 (3) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ly confined to provisions of law and Sales Tax Act and Entry Tax Act as it is without challenging or going into the question of "vires". 4.. Madhya Pradesh General Sales Tax Act, 1958 (Act No. 2 of 1959) (for short "the Sales Tax Act") came into force on April 1, 1959, vide notification dated March 21, 1959, published in the Madhya Pradesh Government Gazette on March 27, 1959. 5.. Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyarn, 1976 (for short "the Entry Tax Act") came into force on September 1, 1976. 6.. Shri Chafekar, Senior Advocate with other learned counsel for the petitioners, led arguments raising the following points: (1) Since cloth, sugar and tobacco are tax-free goods under section 10 of the Sales Tax Act, the taxability of the commodity itself is not in existence, the petitioners are not liable to pay entry tax. (2) The charging section 3 of the Entry Tax Act provides that a dealer who is liable to pay sales tax is liable to pay entry tax and since the petitioners are not liable to pay sales tax, are not liable to pay entry tax. (3) Section 6 of the Sales Tax Act being the charging section, is not to be confused or mixed up with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g material or in the execution of works contracts but not for sale therein, and such tax shall be paid by every dealer liable to tax under the Sales Tax Act who has effected entry of such goods." 9.. Section 10 of the Sales Tax Act provides: "10. Tax-free goods.-(1) No tax shall be payable on the sales or purchases of goods specified in the second column of Schedule I subject to the conditions and exceptions, if any, set out in the corresponding entry in the third column thereof. (2) The State Government may in respect of any goods, by notification amend Schedule I so as to include therein any goods not already specified or may relax or omit any of the conditions and exceptions set out in the corresponding entry in the third column thereof." 10.. It is not in dispute that item No. 6, all varieties of cloth manufactured in mills or on powerlooms or handlooms including processed cloth (but excluding hessian cloth), item No. 41, sugar including khandsari, and palmyra, but excluding mishri, batasha and chironji, and item No. 42, tobacco, manufactured or unmanufactured, cured or uncured and tobacco products including cigarettes, cigars, cheroots and bidis of Schedule 1, under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued and in construing such fiscal statutes and in determining the liability of a subject to tax one must have regard to strict letter of the law. It is only when the Revenue satisfies the court that the goods falls strictly within the provisions of the law the subject can be taxed. In this connection learned counsel cited Commissioner of Sales Tax v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC); AIR 1961 SC 1047 which holds as follows: "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed, it cannot import provisions in the statutes so as to supply any assumed deficiency." As already noted above sugar, cloth and tobacco included in Schedule I are not liable to tax. 15.. Learned counsel for the petitioners, in view of the plain language of sub-section (1) of section 10 of the Sales Tax Act, submitted that the heading "goods exempted from tax" in Schedule I is misleading. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be made to pay tax submitted that section 4 of the Sales Tax Act casts a liability to pay tax on every dealer whose turnover exceeds the limits prescribed by this section and the operation of this section is not restricted to the turnover of taxable commodities only. A strong reliance has been placed by the learned counsel on a Full Bench decision of this Court reported in Hukumchand Mills Ltd. v. Commissioner of Sales Tax [1988] 71 STC 101; [1987] MPLJ 570. 21.. Section 3 of the Entry Tax Act enjoins that such tax shall be paid by every dealer liable to pay tax under the Sales Tax Act; while the respondents placed reliance on section 4 of the State Sales Tax Act dealing with incidence of taxation, the petitioners relied on section 10 and charging section 6 which speaks of taxable turnover relating to goods specified in Schedule II. It is about the fact that cloth, sugar and tobacco are tax-free goods in Schedule 1. 22.. The question which therefore arises for consideration is whether transaction relating to such tax-free goods be included in the gross turnover of the dealer? A similar point arose before the Supreme Court in A.V. Fernandez v. State of Kerala [1957] 8 STC 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of cloth and yarn and was assessed to sales tax by the Assistant Commissioner of Sales Tax. The assessing authority found as a fact that the assessee had made sales of miscellaneous items such as discarded machineries, colours, chemicals, iron hoops and other materials. The case of the assessee in respect of sale of these materials was that these sales had not been made in the course of business of the assessee and consequently it could not be treated as a dealer in respect of sale of the said goods. According to it, these sales were casual sales and consequently were not liable to tax. The case set up by the assessee, however, did not find favour with the assessing authority and the transactions in question were held to be liable to tax. At this stage, it may be mentioned that cloth manufactured by the assessee, falls under the category of tax-free goods as contemplated by section 10 of the Act, read with entry 6 of Schedule I to the Act." What was contended before the Full Bench was that cloth being tax-free goods under section 10 of the Act, the assessee could not be treated as a dealer, within the meaning of section 2(d) of the Sales Tax Act so as to include the sale proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the charging section 3 of the Entry Tax Act. Reliance has been placed by the learned counsel following the observation of the Supreme Court as reported in Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax [1971] 28 STC 672; AIR 1971 SC 2145: "Now under all sales tax laws including the statute with which we are concerned, the moment a dealer makes either purchases or sales which are subject to taxation, the obligation to pay the tax arises and taxability is attracted." The other case is that of State of Madhya Pradesh v. Shyama Charan Shukla [1972] 29 STC 215 (SC) relied upon by the respondents. This case also holds that under general scheme of sales tax laws taxes become due, the moment a dealer makes purchase or sales which are subject to taxation. 28.. We are concerned with the applicability of section 3 of the Entry Tax Act. The taxing event under this provision under the sub-section (1) occurs on entry of goods specified in Schedules II and III under conditions into local area by a dealer as provided under clauses (a) and (b) of sub-section (1) of section 3 of the Entry Tax Act and such tax is payable by every dealer under the Sales Tax Act who has effected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutes has been held as not conveying the sense of an absolute obligation or penalty, but merely importing a possibility of attracting such obligation. [See Superintendent and Remembrancer of Legal Affairs to Govt. of West Bengal v. Abani Maity [1979] 4 SCC 851. 34.. The expression liable to tax viewed in this perspective would mean, amenable to tax, exposed to tax. The petitioners have placed strong reliance on Kandaswami's case [1975] 36 STC 191 (SC); AIR 1975 SC 1871 which lays down taxability of goods as an essential condition for imposition of tax. This case has also been considered by the Full Bench of this Court in Hukumchand Mills Ltd.'s case [1988] 71 STC 101; [1987] MPLJ 570, and dealing with the case the Full Bench has said: "Learned counsel for the assessee then placed reliance on State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191 (SC) where dealing with the definition of 'taxable goods' in the Madras General Sales Tax Act, 1959 in connection with such goods being brought to charge under section 7-A of that Act, it was held by the Supreme Court that the words 'the sale or purchase of which is liable to tax under the Act' qualify the term 'goods' and exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by addition of section 26 which incorporated the ban of article 286 of the Constitution and was in pari materia with section 7 of the Act. For the year 1951-52, the Sales Tax Officer assessed the assessee to sales tax on a net assessable turnover by taking the value of the whole of the copra purchased by him, adding thereto the respective values of the oil and cake sold inside the State and deducting only the value of the copra relatable to the oil sold inside the State. It was contended by the assessee that in the calculation of the net turnover, he was entitled to include the total value of the oil sold by him, both inside and outside the State, and deduct therefrom the total value of the copra purchased by him and further, under the overriding provisions of section 26 of the Act, he was entitled to have the value of the oil sold outside the State deducted. The main controversy between the parties centred round the method of computation of the net turnover. The contention advanced by the assessee was rejected by the High Court, which limited the deduction to purchase of copra relatable to the sales inside the State. In affirming that decision, this Court observed that so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of 'gross turnover' in section 2(i) of the Act is adopted not for the purpose of bringing to surcharge inter-State sales or outside sales or sales in the course of import into, or export of goods out of the territory of India, but is only for the purpose of classifying dealers within the State and to identify the class of dealers liable to pay such surcharge. The underlying object is to classify dealers into those who are economically superior and those who are not. That is to say, the imposition of surcharge is on those who have the capacity to bear the burden of additional tax. There is sufficient territorial nexus between the persons sought to be charged and the State seeking to tax them. Sufficiency of territorial nexus involves a consideration of two elements, viz., (a) the connection must be real and not illusory, and (b) the liability sought to be imposed must be pertinent to that territorial connection: State of Bombay v. R.M.D. Chamarbaugwala [1957] SCR 874; AIR 1957 SC 699, Tata Iron and Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267 (SC); [1958] SCR 1335; AIR 1958 SC 452 and International Tourist Corporation v. State of Haryana [1981] 2 SCR 364; AIR 1981 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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