NATHMAL TARACHAND Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) THIS is a reference under section 15(5) of the Rajasthan Sales Tax Act, 1954 (hereinafter in this judgment referred to as the Act). Messrs Nathmal Tarachand of Bikaner is a firm of registered dealers carrying on business in gold and silver bullion and ornaments. The annual turnover of the firm for the year 1955-56 was assessed by the Sales Tax Officer, Bikaner, on the 14th of June, 1956, and exemption from sales tax was allowed only for the period commencing from the 22nd of September, 1955, to the end of the year, and no exemption was allowed for the period before the 22nd of September, 1955. The accounts of the firm were maintained from Diwali to Diwali. It is not in dispute that the firm deposited a fee of Rs. 10 on the 1st of July, 1955, for grant of an exemption certificate under the notification issued by the State Government on the 14th of April, 1955. It is contended by the firm that an application for grant of exemption was made by it on the day on which the fee was deposited, but the department's contention is that the application was made only on the 22nd of September, 1955, and was allowed on the 29th of September and a certificate was issued on the 1st of October, 1955. The firm approached the Sales Tax Officer for grant of exemption for the whole of the year, but its request was rejected. No appeal was filed from that order but the firm went in revision to the Commissioner of Sales Tax, which was rejected on the 21st of August, 1957. An application was then made to the Commissioner for stating the case under section 15(1). That application was also rejected. The firm then moved this Court under section 15(2) of the Act and a direction was issued by this Court on the 11th of August, 1958, for stating the case and referring the following questions of law for determination :- (1) Whether the grant of exemption certificate under section 4(2) of the Rajasthan Sales Tax Act (Act No. XXIX of 1954) before the end of the accounting year 1955-56 operated for the entire business transacted in that year where the fee prescribed was not in relation to the turnover, but was a fixed annual sum, or whether such certificate was effective only from the date of the application. (2) Whether the deposit of the fee for exemption certificate on the 1st of July, 1955, followed later by a written application for exemption being granted under section 4(2) of the Act, made the application effective or operative from the 1st of July, 1955. The Commissioner of Sales Tax has accordingly made this reference. Mr. Sumerchand for messrs Nathmal Tarachand has cited the decision of the Supreme Court in Mathra Parshad and Sons v. State of Punjab and Others ([1962] 13 S.T.C. 180; A.I.R. 1962 S.C. 745) and he has contended that the sales tax in Rajasthan being an annual tax, the exemption under the notification referred to above should be deemed to be effective for the whole year even though it was granted in the middle of the year on the 1st of October, 1955. Mr. Rajnarain for the State has tried to distinguish the decision of the Supreme Court in Mathra Parshad's case ([1962] 13 S.T.C. 180; A.I.R. 1962 S.C. 745) by saying that it was a case of the nature contemplated by section 4(1) of the Act, there being an absolute exemption, whereas the exemption which was granted in the instant case was of a conditional nature and fell under section 4(2) of the Act and consequently the rule laid down by the decision did not hold goods in this case and that the exemption granted to the petitioner should therefore be deemed to have been allowed from the date of the grant of the certificate. He has also pointed out that the Punjab Sales Tax Act, which was considered in that case, does not recognise any year other than the financial year while the Rajasthan Sales Tax Act, on the other hand, allows an option to an assessee to follow the financial year, or any other year, according to the mode of accounting. He has thus argued that if the exemption is to be construed in the present case to be effective for the whole year, it would be difficult to say whether the year in this connection should mean the financial year or the accounting year of the assessee. He has further argued that where an exemption is claimed from payment of a tax, the law on the point should be construed strictly. He has cited in this connection the decision in Inder Singh v. Sales Tax Officer, Jodhpur ([1961] 12 S.T.C. 557; 1961 R.L.W. 314). He has also contended that the assessee-firm may have charged the sales tax from its customers before making an application for the grant of exemption and that if it is allowed an exemption for the whole year, it may pocket that amount of tax without making it over to the State.

(2.) IN Mathra Parshad's case ([1962] 13 S.T.C. 180), the assessee was a firm of registered dealers which manufactured tobacco. Its sales were liable to sales tax under the Punjab Sales Tax Act. On the 27th of September, 1954, the State Government exempted those sales from the tax. The authorities assessed the firm to sales tax during the accounting year up to the 27th of September, 1954, and allowed exemption only from the 27th of September, 1954. When the case went up to the Supreme Court, their Lordships, by a majority judgment, held as follows :- "There is no doubt that the tax is yearly tax. It was payable, in the first instance, by a dealer whose gross turnover during the financial year immediately preceding 1st May, 1949, was above the taxable quantum. The tax is to be levied on the taxable turnover of a dealer every year. The difference between gross turnover and taxable turnover is this, that to arrive at the taxable turnover of any period some deductions have to be made for the same period. This clearly shows that the tax is for a year. The method of collection allows collection of tax at intervals; in some cases, the tax is collected at the end of the year; in some others, the tax is collected quarterly and in still other cases, even monthly. If the exemption can be said to operate for that period for which the tax is payable according as it is annually, quarterly or monthly, the tax would be different for different persons. Those who are paying the tax annually would get exemption for the whole year; but those who are paying it quarterly or monthly would get benefit in the quarter or the month of the Notification but not for earlier quarters or months. It could not have been intended that the exemption was to operate differently in the case of dealers with different intervals of assessment. The exemption thus must operate either from the date of the Notification or from the Commencement of the financial year. Here, the nature of the tax, as disclosed in sections 4 and 5, is decisive. IN section 5, the tax is made leviable 'on the taxable turnover every year of a dealer'. The divisions of the year and the taxable turnover into different parts are to make easy the collection of tax, and form part of the machinery sections. If the tax is yearly and is to be paid on the taxable turnover of a dealer, then the exemption, whenever it comes in, in the year for which the tax is payable, would exempt sales of those goods throughout the year, unless the Act said that the Notification was not to have this effect, or the Notification fixed the date for the commencement of the exemption. IN the present case, the Notification did not fix the date from which the exemption was to operate, probably because the Act omitted to make such provision, enabling the State to do so, and the exemption must, therefore, operate for the whole year, during which it was granted."