K R C S BALAKRISHNA CHETTY AND SONS AND COMPANY Vs. SATE OF MADRAS
LAWS(SC)-1960-11-10
SUPREME COURT OF INDIA (FROM: MADRAS)
Decided on November 29,1960

K.R.C.S.BALAKRISHNA CHETTY AND SONS AND COMPANY Appellant
VERSUS
SATE OF MADRAS Respondents


Cited Judgements :-

J SAMEERANA VS. ANDHRA PRADESH STATE COUNCIL FOR HIGHER EDUCATION [LAWS(APH)-1998-2-22] [REFERRED TO]
PROJECT DIRECTOR VS. M.VIJAYALAKSHMI [LAWS(MAD)-2020-2-131] [REFERRED TO]
J K INDUSTRIES LTD VS. UNION OF INDIA [LAWS(SC)-2007-11-75] [REFERRED TO]
TELECOM EMPLOYEES CO-OPERATIVE HOUSING SOCIETY LTD VS. SCHEDULED CASTES SCHEDULED TRIBES MINORITY COMMUNITIES AND BACKWARD [LAWS(KAR)-1990-8-64] [REFERRED TO]
UNION OF INDIA VS. BRIGADIER P S GILL [LAWS(SC)-2012-3-27] [REFERRED TO]
S ABEL VS. DISTRICT JUDGE [LAWS(ALL)-1980-2-27] [REFERRED TO]
AL KARIM EDUCATIONAL TRUST VS. MEDICAL COUNCIL OF INDIA [LAWS(DLH)-2011-7-420] [REFERRED TO]
BHOOPENDRA SINGH VS. UTTAR PRADESH SARKAR [LAWS(ALL)-2007-7-200] [REFERRED TO]
B R VASUDEVAMURTHY VS. MINISTER FOR REVENUE GOVERNMENT OF KARNATAKA [LAWS(KAR)-2006-12-1] [REFERRED TO]
PRINCE MULTIPLAST PVT. LTD. VS. UNION OF INDIA [LAWS(GJH)-2011-4-251] [REFERRED TO]
BUNDU KHAN VS. SNEH MEHTA [LAWS(DLH)-2022-8-121] [REFERRED TO]
M/S. ALLIED EXPORTS AND IMPORTS, GUDUR NELLORE DISTRICT VS. STATE OF A. P. [LAWS(APH)-1970-2-38] [REFERRED TO]
PETROLEUM AND NATURAL GAS REGULATORY BOARD VS. INDRAPRASTHA GAS LIMITED [LAWS(SC)-2015-7-6] [REFERRED TO]
JUBBULPORE GENERAL INDUSTRIES PVT LTD VS. ADDITIONAL ASSISTANT COMMISSIONER OF SALES TAX [LAWS(MPH)-1995-9-40] [REFERRED TO]
MOHAN LAL VS. VINOD KUMAR [LAWS(J&K)-1987-9-19] [REFERRED TO]
ANANT BALAJITODKAR VS. VIJAYA RAMKRISHNA GIRDE [LAWS(BOM)-2005-3-160] [REFERRED TO]
RAJESH SHARMA VS. UNION OF INDIA [LAWS(DLH)-2009-5-7] [REFERRED TO]
MAHESH VIKRAM SINGH VS. DISTRICT ASSISTANT REGISTRAR, CO [LAWS(ALL)-1990-1-97] [REFERRED TO]
NARASAMMA VS. NIRANNANILATHA MOMMEN JOHN [LAWS(KAR)-2006-8-57] [REFERRED TO]
AMIRTHAMMAL VS. M K MANI IYER [LAWS(MAD)-1981-9-55] [REFERRED TO]
STATE OF RAJASTHAN VS. BHANWARI DEVI [LAWS(RAJ)-1997-3-17] [REFERRED TO]
FITTYDENT INTERNATIONAL GMBH VS. BRAWN LABORATORIES LTD. [LAWS(DLH)-2010-5-235] [REFERRED TO]
BASANTI GAUR VS. REGIONAL INSPECTRESS OF GIRLS SCHOOLS VII REGION GORAKHPUR [LAWS(ALL)-1987-2-2] [REFERRED TO]
A P STATE ROAD TRANSPORT CORPORATION VS. CENTRAL POWER DISTRIBUTION COMPANY [LAWS(APH)-2008-5-19] [REFERRED TO]
SHAH BROTHERS VS. UNION OF INDIA THROUGH MINISTRY OF MINES AND STEEL [LAWS(JHAR)-2016-10-91] [REFERRED TO]
TARUN SHARMA SON OF SHRI DEEPAK SHARMA VS. VISHWAS SARANG SON OF SHRI KAILASH SARANG [LAWS(MPH)-2010-6-17] [REFERRED TO]
STATE OF MEGHALAYA VS. CMJ FOUNDATION [LAWS(MEGH)-2021-5-2] [REFERRED TO]
SMT. RAM DEVI VS. STATE AND OTHERS [LAWS(ALL)-1963-4-43] [REFERRED TO]
STATE VS. THE UNION OF INDIA THROUGH THE MINISTRY OF MINES AND STEEL [LAWS(JHAR)-2016-10-82] [REFERRED TO]
ALLIED EXPORTS AND IMPORTS GUDUR NELLORE DISTRICT VS. STATE OF ANDHRA PRADESH HYDERABAD [LAWS(APH)-1970-10-9] [REFERRED TO]
STAR INDIA PRIVATE LIMITED VS. DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION [LAWS(MAD)-2018-3-42] [REFERRED TO]
KUNHAMINA UMMA VS. KRISHNAN [LAWS(KER)-1978-3-41] [REFERRED TO]
SUNIL KUMAR VS. KAPOOR CHANDRA AGARWAL DHARAMSHALA TRUST [LAWS(ALL)-2019-5-150] [REFERRED TO]
SHIV OM POLYNETS PRIVATE LTD. VS. MARINE FABRICE & ANR. [LAWS(CAL)-2013-1-74] [REFERRED TO]
DILIPKUMAR NALINKANT GANDHI VS. STATE OF GUJARAT & 2 ORS [LAWS(GJH)-2015-7-217] [REFERRED]
COMMISSIONER OF C. EX. AND CUSTOMS VS. SAURASHTRA CEMENT LTD. [LAWS(GJH)-2010-9-253] [REFERRED TO]
V BALASUBRAMANIAM VS. TAMIL NADU HOUSING BOARD [LAWS(SC)-1987-9-57] [RELIED ON]
KEWAL KRISHAN KUTHIALA VS. COMMISSIONER OF GIFT-TAX [LAWS(P&H)-1984-3-21] [REFERRED TO]
GUJARAT NARMADA VALLEY FERTILIZERS CO LTD & 1 ORS VS. UNION OF INDIA & 1 ORS [LAWS(GJH)-2016-9-153] [REFERRED]
ADANI GAS LIMITED VS. UNION OF INDIA [LAWS(SC)-2021-9-98] [REFERRED TO]
H.C. KULWANT SINGH VS. H.C. DAYA RAM [LAWS(SC)-2014-6-26] [REFERRED TO]
FORBES, EWART AND FIGGIS (PTE. ) LTD. VS. BOARD OF REVENUE (TAXES), KERALA STATE [LAWS(KER)-1961-7-64] [REFERRED TO]
ANNA TRANSPORT CORPORATION LTD., SALEM VS. R. SENGODAN AND OTHERS [LAWS(MAD)-1994-9-103] [REFERRED TO]


JUDGEMENT

KAPUR, - (1.)THE following Judgment of the court was delivered by :
(2.)TWO suits were brought by the appellants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. TWO appeals were taken to the High court by the State of Madras against those decrees and by a judgment dated 18/02/1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a certificate of that court.
The appellants are merchants dealing in cotton yarn. They obtained a license under s. 5 of the Madras General Sales Tax Act (Act IX of 1939), hereinafter referred to as the 'Act'. This license exempted them from assessment to sales tax under s. 3 of the Act on the sale of cotton yarn and on handloom cloth `subject to such restrictions and conditions as may be prescribed including conditions as to license and license fees`. The license was issued on 31/03/1941, and was renewed for the following years. On 20/09/1944, the Commercial Tax Authorities made a surprise inspection of the premises of the appellants and discovered that they were maintaining two separate sets of account on the basis of one of which the appellants submitted their returns to the Department. Because the other set of account books showed black-market activities of the firm Balakrishna Chetty was prosecuted and sentenced to six months' imprisonment for an offence connected with the breach of Cot. ton Yarn Control Order. During the pendency of those proceedings the Deputy Commercial Tax Officer made assessments for the years. 1943- 44 and 1944-45, the tax for the former was Rs. 37,039.00 and for the latter Rs. 3,140.00. The appellants unsuccessfully appealed against these assessments and their revisions also failed. On 24/08/1945, the appellants brought a suit for a declaration and injunction in regard to the first assessment alleging that the assessment was against the Act. On 2/09/1946, a similar suit was brought in regard to the second assessment. It is out of these suits that the present appeal has arisen.

The controversy between the parties centres round the interpretation of the words `subject to` in s. 5 of the Act. The High court has held that on a true interpretation of the provisions of the Act and the rules made thereunder, the observance of conditions of the license was necessary for the availability of exemption under s. 5; that as the appellants had contravened those conditions they were liable to pay tax for both the years notwithstanding the license which had been issued to them under s. 5 of the Act.

It will be convenient at this stage to refer to the provisions of the Act which are relevant for the purpose of this appeal. S. 2(b) ` dealer` means any person who carries on the business of buying or selling goods;` S. 2(f) ` `prescribed` means prescribed by rules made under this Act;`. S. 3(1) `Subject to the provisions of this Act, every dealer shall pay in each year a tax in accordance with the scale specified below:- (a)................................. (b) if his turnover exceeds One half of I per twenty cent of such turn thousand rupees. over`. S. 5 `Subject to such restrictions and conditions as may be prescribed, including the conditions as to licenses and license fees, the sale of bullion and specie, of cotton, of cotton yarn and of any cloth woven on handlooms and sold by persons dealing exclusively in such cloth shall be exempt from taxation under Section 3`. S. 13 `Every dealer and every person licensed under section 8 shall keep and maintain a true and correct account showing the value of the goods sold and paid by them; and in case the accounts maintained in the ordinary course, do not show the same in an intelligible form, he shall maintain a true and correct account in such form as may be prescribed in this behalf.`. The following rules are relevant for the purpose of this appeal and we quote the relevant portions: R. 5 `(1) Every person who(a).......................... (b) deals with cotton and/or cotton yarn, (c)............................. (d)............................. (e) shall if he desires to avail himself of the exemption provided in S. 5 and 8 or of the concession of single point taxation provided in section 6, submit an application in Form-I for a licence and the relevant portion of Form III is as follows: JUDGEMENT_1152_AIR(SC)_1961Html1.htm

The contention raised on behalf of the appellants was that as long as they held the licence it was immaterial if they were guilty of any infraction of the law and that they were not liable to any assessment of sales-tax under the provisions of the Act and the only penalty they incurred was to have their licence cancelled and/or be liable to the penalty which under the criminal law they had already suffered. The contention comes to this that in spite of the breaches of the terms and conditions of the licence, having a licence was sufficient for the purpose of exemption under the Act. This contention, in our opinion, is wholly untenable. Section 3 is the charging section and s. 5 gives exemption from taxation but that section clearly makes the holding of a licence subject to restrictions and conditions prescribed under the provisions of the Act and the rules made thereunder because the opening words of that section are `subject to such restrictions and conditions as may be prescribed.`

(3.)UNDER B. 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is r. 5 of the General Sales Tax Rules which provided that if any person desired to avail himself of the exemption provided in s. 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under s. 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words `subject to` do not mean `conditional upon` but `liable to the rules and the provisions` of the Act. So -construed s. 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself ; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words `subject to` has reference to effectuating the intention of the law and the correct meaning, in our opinion, is `conditional upon`.
The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act. The appeals are therefore dismissed with costs.

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