ADDITIONAL COLLECTOR OF SALES TAX BOMBAY DIVISION BOMBAY Vs. MANILAL KESHAVJI
LAWS(BOM)-1962-4-7
HIGH COURT OF BOMBAY
Decided on April 10,1962

Additional Collector Of Sales Tax Bombay Division Bombay Appellant
VERSUS
Manilal Keshavji Respondents


Cited Judgements :-

E S RAMAKRISHNA SETTY VS. STATE OF ANDHRA PRADESH [LAWS(APH)-1964-8-11] [REFERRED TO]


JUDGEMENT

TAMBE, J. - (1.)BOTH these references are made at the instance of the Additional Collector of Sales Tax, Bombay, and they raise questions as regards interpretation of provisions (a) and (b) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952. The Advocate -General appearing for the Collector, however, has not pressed for an answer to question as regards the interpretation of proviso (b). We are, therefore, concerned only with the construction of the said proviso (a). Both these references can be disposed of by a common judgment. They arise out of the assessment of the respondent, Messrs Manilal Keshavji, for the two periods 1st November, 1952, to 31st March, 1953, and 1st April, 1953, to 31st March, 1954. During the first period, the sales tax was leviable under Ordinance III of 1952, and during the second period under the Bombay Sales Tax Act III of 1953. The provisions of the Ordinance and the Act except a slight change in the numbering of the sections are identical. The rules with which we are concerned, originally formed part of the Ordinance as its Third Schedule. These rules have been continued as rules under the Act of 1953. Shortly, stated, the sales tax leviable both under the Ordinance as well as under the Act is a tax on a dealer, i.e., a person carrying on business of selling goods in the State of Bombay, in relation to his taxable turnover, i.e., in relation to the aggregate of amounts of sale price of taxable goods received and receivable by him in respect of such sales. Section 7 of the Ordinance as well as the Act deals with determination of taxable turnover for the purposes of a general tax. It provides, inter alia :
'The taxable turnover for the purposes of sub -section (1) of section 6 shall be determined in the following manner, namely : -

(i) from the turnover of the dealer in respect of all his sales of goods during any period of his liability to pay the general tax, there shall first be deducted his turnover during that period in respect of -

(a) ....................

(b) such other sales as may be prescribed.' (prescribed means prescribed by rules)

Chapter III of the rules deals with calculation of taxable turnover, and rule 5 is in this Chapter. The material part of the rule is in the following terms :

'5. Deduction of certain sales in calculating taxable turnover under section 7. - (1) In calculating the taxable turnover of a dealer under section 7 the turnover in respect of the following sales may be deducted under clause (i)(b) of that section : -

* * *

(vii) sales to a registered dealer recognised for this purpose by the Collector, of any goods falling under any entry specified in column 1 of Schedule B hereto, where it is certified by the purchasing dealer that the goods purchased are intended for use by him in the manufacture of any goods falling under the corresponding entry in column 2 of the said Schedule, for sale :

Provided that -

(a) where any goods to which this clause applies are utilised by the purchasing dealer for purposes other than such manufacture, or

(b) where no general tax is actually payable by the purchasing dealer on any sale made by him of articles in the manufacture of which such goods have been used (except where such sale is itself eligible for deduction under the provision of this clause),

the price of the goods so purchased shall be included in the taxable turnover of the purchasing dealer under section 7.'

(2.)THE entry in Schedule B relevant for the purposes of this case is entry No. 1. It reads :
SCHEDULE B - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Goods purchased Goods in the manufacture of which the goods specified in column 1 are to be used. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -1 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1. Cloth ... Bleached, dyed or printed cloth. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The respondents are a proprietary concern doing wholesale business in the manufacture and sale of art silk cloth on wholesale basis. They are a registered dealer, and recognition also was granted to them by the Collector for the purposes of rule 5(1)(vii). During the accounting period, the respondents purchased from time to time from various dealers cloth on issuing certificates to the purchasers that the goods purchased by them were intended for use by them for bleaching, dyeing and printing for sale. The certificates were granted to the sellers in the prescribed from, which reads :

'I ....... of Messrs ....... (address) ..... do certify that I ..... am a registered dealer holding certificate of registration No. ......... dated ....... and that I have purchased the goods specified in ...... No. ...... dated ......... of Messrs ....... for use by me in the manufacture of ......... for sale.'

(3.)ON the basis of the certificates granted by the respondents the sale price was not included in the taxable turnover of the sellers. It is not in dispute that the cloth purchased by the respondents from time to time from these various dealers was either bleached, dyed or printed by them. The respondents however did not sell the bleached, dyed or the printed cloth in the State of Bombay, but sold it outside the State of Bombay. In the assessment of the respondents, therefore, the Sales Tax Authorities included the price of the aforesaid cloth purchased by the respondents in determining their taxable turnover. The contention of the respondents was that the case did not fall either under proviso (a) or proviso (b), and therefore the price of the cloth purchased by them was not liable to be included in their taxable turnover, while according to the Sales Tax Authorities, the case fell both under proviso (a) as well as under proviso (b). The respondents took the matter to the Sales Tax Tribunal, and the Tribunal upheld the contention of the respondents. At the instance of the Additional Collector, the Tribunal has drawn up the statement of the case and referred to us two questions of law arising out of the Tribunal's order under section 34 of the Bombay Sales Tax Act. As already stated, the first question has not been pressed by the Advocate -General. The second question is in the following terms :
'Whether the words 'such manufacture' occurring in the proviso (a) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952, should on a proper construction mean manufacture for sale within the meaning of the term 'sale' as defined in section 2(14) of the Bombay Sales Tax Act, 1953, that is sale within the State of Bombay ?'



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