Decided on February 02,1967



- (1.)THE circumstances giving rise to this revision petition on behalf of the State of Rajasthan against the order of Dy. Commissioner, Appeals, Jaipur dated 10. 1. 64 are as under : - THE Assistant Sales Tax Officer, Jaipur as per his assessment order dated 6. 8. 63 estimated the G. T. O. of the non-applicant at Rs. 11,100/- and taxable turnover at Rs. 5500/- in respect of Pan (Betel leaves ). THE non-applicant had not filed any return nor paid tax for the period under assessment (1962-63) and no account books of the sales were maintained in spite of instructions. THE Dy. Commissioner (Appeals) in appeal filed by the non-applicant held that in the year under assessment the appellant was not a registered dealer and a non-registered dealer cannot be charged to tax. He accepted the appeal and set aside the order of Asstt. Sales Tax Officer, Jaipur. Aggrieved by this order, the State has come in revision.
(2.)I have heard counsel for the parties and perused the record. The learned counsel for the State contended that no notice under rule 35 (1) of the Rajasthan Sales Tax Rules was given by the lower appellate court and further argued that the non-applicant was under statutory obligation to set his registration renewed and on his failure to do so he was liable to penalty u/s 16 (1) (a) of the Sales Tax Act and that he was also liable to pay tax as per Sec. 3 (1) of the Act. He contended that the non-applicant is a manufacturer is goods and liable to pay tax on the turnover of Rs. 5000/- & more. Referring to Sec. 7 of the Act as it stood previously the learned counsel contended that for the period in question it was imperative to have submitted the returns even though the non-applicant was not registered.
The learned counsel for the non-applicant replied that before 4. 5. 64 only dealers liable to pay tax had to furnish returns and after that date registered dealers and such other dealers as were required to do so had to furnish returns. Regarding furnishing of declaration he drew my attention to Rule 25a wherein specific provision has been made for requisition by assessing authority of returns from unregistered dealers and further referring to Rule 25 (c) contended that it is only the registered dealer who is under statutory obligation to furnish declaration. The unregistered dealer is required to submit returns only when called upon to do so. He cited 1965 RRD page 3, 1966, R. L. W. Revenue Supplement p. 41 and 1966 Supreme Court S. T. C. Vol. XVII p. 313 in support of his contention that the non-applicant is not covered by the definition of a 'manufacturer' and as such he is not liable to tax on the turnover of Rs 5500/- as held by the Assistant Sales Tax Officer.

A point was tried to be raised on behalf of the State. Sec. 6 (6) was referred to and it was contended that in view of the provisions of this clause a 'dealer' once registered should always be deemed to be registered. This clause runs as below: - "every dealer shall, until his registration is cancelled, be liable to pay, within the prescribed period, such fee as may be prescribed for every financial year subsequent to that in which a certificate of registration is granted to him under sub-section (3)".

As such it was contended that the non-applicant should be deemed to have been registered in the year 1962-63 and liable to pay tax. Advocate on behalf of the non-applicant contended that this point had not been raised before the first appellate court nor taken up in the memo of revision submitted to the Board and could not be allowed to be raised now.

The contention of the non-applicant is upheld and besides sec. 6 (6) refers only to the point of fees which is not in issue here. In this court the point is taxing limit in respect of non-applicant. In R. R. D. 1965 page 3 (D. B. C. Writ petition No. 424 of 1960, decided on 7th August 1964) the Hon'ble Judges of High Court of Rajasthan have held in case M/s. Chohan Pan Bhandar Vs. A. S. T. O. Beawar that interpretation should not be so liberal as to promote fraud or allow evasion of tax by dishonest devices and it should also not be so narrow or unreasonable, by importing limitations not inserted by legislature which may defeat its very purpose. It was held that 'betel leaves' and Pan are synonyms and include also Chuna Khatha application to it which makes no change in its original form till consumed. The expression 'betel leaves' does not exclude Pan with Katha Chuna. RLW 1966 Revenue Supplement page 41 (M/s. Phoolchand Vs. State) lays down that chiselling and straightening stone (on which tax has been paid at the first instance) and making them fit for use as Chokhat, does not amount to manufacture of Chokhats. In 1966 Supreme Court S. T. C. page 313 (State of Madhya Bharat Vs. Hiralal) their lordships have held that "the respondent was entitled to exemption from sales tax under item 39 of Notification No. 58 dated 24. 10. 53 issued under the Madhya Bharat Sales Tax Act, 2007. Scrap iron purchased by the respondent was processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The bars, flats and plates sold by the respondents were "iron and steel" exempted under the notification. "

In the instant case the rule laid down by the Rajasthan High Court reported in R. R. D. 1966 p. 3 applies and it is clear that the sale of Pan after applying Katha and Chuna does not come within the definition of manufacture. This view is further confirmed by the rules laid down in the other rulings cited above where even the bars, flats and plates processed from scrap iron were held as not coming within the definition of manufacture. Chiselling and straightening stone and making them fit for use as Chokhat was held to not come within the ambit of definition of 'manufacture'. The Assistant Sales Tax Officer Jaipur was, therefore, wrong in holding the preparation of Pans as being covered by the definition of 'manufacture'. As for registration and submission of declaration I find that the statutory obligation for submission of returns by even unregistered dealers (when called upon) has been inserted afterwards and it was not a condition pertaining to the assessment period. The Dy. Commissioner (Appeals) has observed that the non-applicant should have applied for renewal and could be penalised under sec. 16 (l) (a) of Rajasthan Sales Tax Act but a non registered dealer cannot be charged to tax. The point to be decided is if the tax imposed by the Assistant Sales Tax Officer is proper and as preparation of Pan by application of Chuna, Katha is not manufacture, taxation with regard to non-applicant would be attracted in terms of sec. 3 (1) (c), that is, when his turnover exceeded Rs. 15,000/ -. This admittedly is not the case.

The plea of non-issue of notice to the department falls to the ground as it is quite clear that Government was properly represented before the Dy. Commissioner (Appeals) and the departmental Parokar had argued before him.

The result of the above discussion is that I find that there is no force in the application on behalf of the State which fails. .

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