BAPALAL AND COMPANY Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THIS appeal has been filed against the order of the Board of Revenue (Commercial Taxes) dated 24th June, 1976. The assessee is a fairly large dealer in jewellery. It reported a total and taxable turnover of Rs. 43, 60, 650.51 and Rs. 41, 35, 708.08 respectively for the assessment year 1969-70. The assessing officer found that the assessee had purchased old and worn-out ornaments from customers and utilised the articles for the manufacture of new jewellery for sale. Such purchases of old articles had not, in his view, suffered tax earlier since they had been purchased in the circumstances in which no tax was payable by the vendor. The assessing officer subjected an estimated turnover of Rs. 5, 00, 000 to tax at 3 per cent under section 7-A of the Act. On appeal, the Appellate Assistant Commissioner held that there was no liability under section 7-A of the Act in view of the decision of this Court in M. K. Kandaswami v. State of Tamil Nadu and remanded the case back to the assessing officer for fresh disposal in accordance with the decision of this Court. By his order dated 26th October, 1971, the Joint Commercial Tax Officer cancelled the assessment to the extent made under section 7-A of the Act.

(2.) THE order of the Appellate Assistant Commissioner was examined by the Board in the light of the decision of the Supreme Court in State of Tamil Nadu v. M. K. Kandaswami It was considered that the order of the Appellate Assistant Commissioner in setting aside the Assessment under section 7-A is not correct and it was, therefore, proposed to restore the assessment on the turnover of Rs. 5, 00, 000. THE assessee's objections were called for and by the impugned order, the Commissioner of Commercial Taxes held that the turnover of Rs. 5, 00, 000 should be restored in the assessment. He, however, directed levy of tax at one per cent as bullion under section 7-A of the Act with reference to the said turnover. This order of the Board of Revenue is the subject-matter of the present appeal.Section 7-A of the Act provides for the levy of purchase tax under certain circumstances, and it runs to the extent relevant, as follows : "Every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under section 3, 4 or 5, as the case may be, and either, - (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in section 3, 4 or 5, as the case may be, whatever be the quantum of such turnover in a year." It is unnecessary to reproduce the rest of the provision. This provision came up for consideration, as mentioned earlier by a Bench of this Court in M. K. Kandaswami v. State of Tamil Nadu That was a group of cases in which the dealers had purchased arecanuts from agriculturists and thereafter transported those goods outside the State for sale on consignment basis. THEre was also purchase of gingelly seeds from agriculturists and the gingelly seeds were crushed into oil by them. In other cases, there were purchases of butter from householders which was converted into ghee. THEre were also purchases of turmeric and grams from agriculturists and then transported outside the State for sale on consignment basis. THE Joint Commercial Tax Officer held that in respect of these transactions in the respective cases, the dealers were liable to pay purchase tax under section 7-A of the Act on the purchase price of the goods which were either consumed in the manufacture of other goods for sale or which were disposed of in the manner contemplated by section 7-A. On receipt of notice proposing to make assessments under section 7-A, the respective dealers filed writ petitions under article 226 of the Constitution in this Court challenging the validity of the pre-assessment notices. THE High Court accepted the contention of the assessees that the circumstances contemplated by section 7-A did not include the possibility or impossibility of verifiability of the transactions with the dealers from whom the petitioners had purchased the goods and that if the purpose of section 7-A was to check evasion, the phraseology has fallen short of achieving that purpose. In this Court's view, the language of section 7-A was far from clear as to its intention and the Joint Commercial Tax Officer was held to be not justified in invoking section 7-A. THE judgment of this Court was taken on appeal to the Supreme Court by the State. In the course of its judgment reported in the Supreme Court held that the interpretation placed by the learned Judges of this Court on section 7-A was not correct. At page 197, it was pointed out : "THE words'the sale or purchase of which is liable to tax under the Act'qualify the term'goods'and exclude by necessary implication goods, the sale or purchase of which is totally exempted from tax at all points under section 8 or section 17(1) of the Act. THE goods so exempted - not being'taxable goods'- cannot be brought to charge under section 7-A." Thus exempted goods would fall outside section 7-A. Further, in the same page, it was pointed out : "Notwithstanding the goods being'taxable goods', there may be circumstances in a given case, by reason of which the particular sale or purchase does not attract tax under section 3, 4 or 5. Section 7-A provides for such a situation and makes the purchase of such goods Taxable in the hands of the purchasing dealer on his purchase turnover if any of the conditions (a), (b) and (c) of sub-section (1) of section 7-A is satisfied." In the case of taxable goods, if no tax was paid by the sellers because they were not liable to tax, section 7-A was attracted. At page 201, towards the close of the judgment, it was observed : "It (7-A) creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act have not, due to the circumstances of particular sales, suffered tax under section 3, 4 or 5, and which after the purchase, have been dealt by him in any of the modes indicated in clauses (a), (b) and (c) of section 7-A(1)."

(3.) WHATEVER may be the object with which the bill was introduced in the legislature, we have to go by the language employed in the provision, and so far as the language has been interpreted by the Supreme Court in a particular manner, that interpretation would be binding with regard to the construction of the provision. In the present case, it has been held that section 7-A is by itself a charging section and that it is not subject to section 3. In the circumstances, whatever may be the object of the introduction of the provision, as the provision clearly creates a charge, that charge will have to be applied to the transactions arising in the case.The learned counsel for the assessee relied also on a Government Order that was issued by the revenue department on 14th February, 1970 (G.O. Ms. No. 486). In the said G.O., it was stated : "In the circumstances, in the case of single point goods, suppose the tax has been paid at the stage of first sale by the selling dealer, the purchasing dealer at second or subsequent stage of sale will not be liable to tax under section 7-A." This G.O. reflects what is stated in the objects and reasons. This was the understanding at the time when the Supreme Court had not rendered its decision. It is the decision of the Supreme Court that should govern the construction of the provision and not any G.O. on an incorrect understanding of the provision and, therefore, the interpretation placed by the executive authorities cannot be applied in the present case. We may, however, point out that in view of the clear words employed in the objects and reasons as well as in the G.O. which was simultaneously issued, which show that the intention was not to tax such goods at more than one point, if they had already suffered tax, it would be for the legislature to take notice of the anomaly that has arisen as a result of the language employed in the provision and rectify the provision in a suitable manner by amending the provision accordingly. We may also make it clear that whatever we have stated does not in any manner govern the case of declared goods, which may have to be considered separately.