FITWELL ENGINEERS Vs. FINANCIAL COMMISSIONER DELHI ADMINISTRATION DELHI

JUDGEMENT

(1.) THE decision of this and the connected six writ petitions depends on the construction of section 5 (2) (a) (ii) of the Bengal Finance (Sales Tax) Act, 1941, as applied to Delhi (hereinafter called the Act) reproduced below : " 5. (1) THE tax payable by a dealer under this Act shall be levied (on taxable turnover ). . . . . . (2) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom - (a) his turnover during that period on. . . . . . (ii) sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for resale by him, or for use by him as raw materials in the manufacture of goods for sale; and of containers or other materials for the packing of goods of the class or classes so specified for sale : Provided that in the case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods : Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for resale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer. "

(2.) ALL the petitioner are registered dealers. Those in C. Ws. 590 of 1973, 1549 of 1973 and 894 of 1973 purchased goods specified in their registration certificates as being intended for resale by them. The others in C. Ws. 147 of 1974, 111 of 1974, 947 of 1973 and 1426 of 1973 purchased goods specified in their registration certificates for use by them in the manufacture of goods for sale. But the actual resales and the post-manufacture sales by them took place outside Delhi. The Financial Commissioner, acting for the Chief Commissioner under section 20 (3) of the Act in revising the assessment of M/s. Fitwell Engineers for the year 1969-70, held on 26th April, 1973, that the resale as well as the post-manufacture sale of goods by the registered dealers who had purchased goods free from sales tax under section 5 (2) (a) (ii) had to be in Delhi. If the resale or the post-manufacture sale is made outside Delhi, them the conduct of the registered dealers would attract the second proviso to section 5 (2) (a) (ii ). As they utilised the goods "for any other purpose" the price of the goods purchased tax-free by them would be included in their taxable turnover even though it had been already deducted from the gross turnover of the selling dealers and was not included in the taxable turnover of the selling dealers. This decision was followed by the sales tax authorities in the assessment proceedings of the other petitioners also. This action of the sales tax authorities under the second proviso to section 5 (2) (a) (ii) is being challenged in these writ petitions.

(3.) THE concept of territoriality of a dealer is strengthened by his registration. For, in his application for registration he must mention his place or places of business. THE registration certificate which is issued to him is restricted to the sales made by him at his place of business. Sales by him outside his place of business would not be regarded as sales by him as a registered dealer. This is established by the decision of the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh v. Minerva Minerals ([1970] 25 S. T. C. 64 (S. C.) ). THE dealer in that case was registered in the old Madhya Pradesh with his places of business at Nagpur and Gondia. Chhindwara and Wara Seoni were also in Madhya Pradesh but were not were not shown as places of business of the dealer in the registration certificate. After the division of Madhya Pradesh in 1956 Chhindwara and Wara Seoni were included in the new Madhya Pradesh while Nagpur and Gondia went into Maharashtra. THE dealer obtained a registration certificate for the new Madhya Pradesh on 8th March, 1958. THE question was whether in the assessment for the period from 1st November, 1956, to 3rd July, 1958, the sales made by the assessee at Chhindwara and Wara Seoni could be regarded as sales made by him as registered dealer in the new Madhya Pradesh. It is to be noted that some of these sales in new Madhya Pradesh were made after 8th March, 1958, when he was registered in the new Madhya Pradesh. But even then Chhindwara and Wara Seoni were perhaps not shown as his places of business. THE question was whether the sales which took place at Chhindwara and Ware Seoni before as well as after the date of registration could be regarded as sales by a registered dealer. THE question was dealt with by their Lordships at pp. 68, 69 and 70 in the following words : " It was argued that having regard to the scheme of the Act, the High Court ought to have held that the registration certificate obtained by a dealer in Madhya Pradesh operated for his benefit in respect of all places of business throughout the territory of the State of Madhya Pradesh as it existed on 31st October, 1956, and this was the legal position notwithstanding the fact that some places of business like Chhindwara and Wara Seoni were not shown in the registration certificate as places of business of the respondent. In support of this argument reference was made to section 2 (c) of the Act defining a 'dealer' as 'any person who whether as principal or agent carries on in Madhya Pradesh the business of selling or supplying goods whether for commission, remuneration or otherwise'. It was said that under section 4 of the Act every dealer was liable to pay tax if his turnover during the year preceding the commencement of the Act exceeded the limits specified in sub-section (5 ). It was therefore argued that the liability of the dealer to pay tax was dependent on the totality of transactions in the entire area of Madhya Pradesh and not on the transactions carried on in any particular place or places of business noted in the registration certificate. In other words, the contention was that when a dealer got himself registered under the Act he was getting himself registered as a dealer who carries on the business of selling and supplying goods in Madhya Pradesh and not vis-a-vis any particular place or places noted in the registration certificate. We are unable to accept the argument of the appellant for we are satisfied that the provisions of the Act and rules do not support such an argument. . . . . . It is plain on an examination of the relevant sections and statutory rules that the certificate of registration is granted with reference to the place of business or places of business of the dealer and not with reference to the whole area of the State though for the purpose of determining the liability of the dealer, his turnover in respect of all places of business in the State including those not mentioned in the registration certificate is to be taken into consideration. It follows therefore that if a registered dealer carries on business in places not disclosed in the registration certificate he will have to be treated as an unregistered dealer vis-a-vis those places. Our conclusion in the present case is that the respondent cannot be treated as a registered dealer in the new State of Madhya Pradesh on the strength of the registration certificate issued to the respondent before coming into force of the States Reorganisation Act as no place of business in that area was specified in the registration certificate. "