Bhagwati, J. - (1.) These appeals raise a short but interesting question of law relating to the interpretation of S. 5 (2) (a) (ii) of the Bengal Finance (Sales Tax) Act, 1941" as applied to the Union Territory of Delhi (hereinafter, for the sake of convenience referred to as Delhi). The Act was extended to Delhi subject to certain modifications by a Notification dated 28th April, 1951 issued by the Central Government in exercise of the powers conferred by S. 2 of the Part C States (Laws) Act, 1950 and it came into force in Delhi on 28th May, 1951 by virtue of a Notification issued under S. 1, sub-s. (3) of the Act. There have been several amendments made in the Act from time since the date of its application to Delhi but we are concerned in these appeals only with the assessment periods 1971-72 and 1972-73 and hence we shall confine ourselves to the relevant provisions of the Act as they stood during these assessment periods.
(2.) Section 2 enacted the definition provision and Clause (c) of that section defined a "dealer" to mean any person who carries on the business of selling goods in Delhi. Clause (g) of S. 2 contained the definition of "sale". It was a definition in general terms and it made no reference to the situs of the sale. If did not limit the definition to a sale inside Delhi. There was an explanation to this Clause which laid down as to when a sale or purchase shall be deemed to take place inside Delhi. S. 4. sub-section (1) provided that every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded the taxable quantum at any time within such year shall be liable to pay tax under the Act on all sales effected after the date notified by the Chief Commissioner and sub-section (2) of that Section said that every dealer to whom sub-section (1) does not apply, shall, if his gross turnover calculated from the commencement of any year exceeds the taxable quantum at any time within such year, be liable to any tax under the Act, on the expiry of two months from the date on which such gross turnover first exceeds the taxable quantum, on all sales effected after such expiry, Sub-section (5) of S. 4 defined "taxable quantum" to mean in relation to any dealer who imports for sale any goods into Delhi or manufactures or produces any goods for sale, regardless of the value of the goods imported, manufactured or produced, ten thousand rupees, and in relation to any other dealer, thirty thousand rupees. Sub-section (1) of S. 5 provided different rates of tax, according as the goods fell within one category or another, at which the tax payable by a dealer shall be levied on his taxable turnover. What is "taxable turnover" was defined in sub-s. (2) of S. 5 to mean: "that part of a dealer"s gross turnover during any period which remains after deducting therefrom- (a) his turnover during that period on; (i) the sale of goods declared tax-free under S. 6; (ii) sales to a registered dealer- of goods of the class or classes specified in the certificate or registration of such dealer, as being intended for re-sale by him, or for use by him as raw materials in the manufacture of goods for sale; and of containers or other materials for the packing of goods of the class or classes so specified for sale; Provided that in the case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed from obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods: Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for re-sale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilised by him for any other purpose, the price of the goods purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer. (iii) Sales to a registered dealer engaged in the business of raising coal, of any goods which are shown to the satisfaction of the commissioner to be required directly for use in connection with the raising of coal; (iv) Sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (IX of 1910) of goods for use by it in the generation or distribution of such energy; (v) Sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or on behalf of dealer to an address outside the (Union Territory) of Delhi. (vi) Such other sales as may be prescribed." This was the definition until 28th May, 1972, when by Finance Act, the main enactment in S. 5 (2) (a) (ii) was substituted by the following provision: "(2) In this Act the expression "taxable turnover" means that part of a dealer"s gross turnover during any period which remains after deducting therefrom - (a) his turnover during that period on- (i) ********** (ii) sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or "for us by him as raw-materials in the manufacture in the Union territory of Delhi (hereinafter in this sub-clause referred to as Delhi), of goods (other than goods declared tax free under S. 6):- (A) for sale inside Delhi; or (B) for sale in the course of inter-State trade or commerce, being a sale occasioning or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or (C) for sale in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents or title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; and of containers or other materials for the packing of goods of the class of classes so specified for sale." Section 7, sub-s. (1) laid down that no dealer shall, while being liable to pay tax under S. 4, carry on business as a dealer unless he has been registered and possesses a registration certificate and sub-s. (3) of that section provided for grant of a certification of registration to a dealer on an application being made by him under sub-s. (2) and said that such certificate of registration shall specific the clases or class of goods of the purpose of sub-cl. (ii) of Cl. (a) of sub-s. (2) of S. 5. Section 26 conferred power on the Chief Commissioner to make rules for carrying out the purposes of the Act and in exercise of this power, the Delhi Sales Tax Rules, 1951 were made by the Chief Commissioner. These rules prescribed not only the form of the application for registration but also the form of the certificate of registration Clause (3) of the form of the certificate of registration provided that the sale of the specified goods to the dealer "for purposes of manufacture" and "for re-sale" will be free of tax. This was in conformity with the requirement of S. 5 (2) (a) (ii) as it stood prior to its amendment and though S. 5 (2) (a) (ii) was substituted by the Finance Act of 1972, no amendment was made in the form of the certificate of registration and it was only on 29th March, 1973 that Cl. (3) of the form of the certificate of registration was substituted so as to declare that the sales of the specified goods to the dealer will be free of tax when they are "for use as raw materials in the manufacture in the Union territory of Delhi of goods ... ... for sale in the manner specified in S. 5 (2) (a) (ii) " or "for re-sale". Similarly, the form of declaration to be furnished by the purchasing dealer in order to entitle the dealer who has sold the goods to claim deduction of the amount in respect of such sales under S. 5 (2) (a) (ii), which was prescribed by Rs. 26, was also not amended until 29th March, 1973 and it continued to be in the following terms: "Certified that the goods mentioned in the cash memo/Bill No. ... ... ... Dated ... ... ... have been purchased by me/us from M/s. ... ... ... and are duly covered by our Registration Certificate No. ... ... dated ... ... ... and are required by me/us for re-sale/for use as raw materials in the manufacture of goods for sale/for use in the execution of contract. Signature Dealer" It was only on 29th March, 1973 that the form of the declaration was substituted by amending R. 26 so as to bring it in line with the amended S. 5 (2) (a) (ii) and after the substitution it ran as follows:- "Certified that the goods mentioned in the Cash Memo/Bill No. ... ... ... dated ... ... ... worth Rs. ... ... ... have been purchased by me/us from M/s. ... ... ... and are duly covered by me/our registration certificate No. ... ... ... valid from ... ... ... and are required by me/us for resale/for use as raw-material, in the manufacture in Delhi in accordance with the provisions contained in S. 5 (2) (a) (ii) of the Bengal Finance (Sales Tax) Act, 1941 as in force in the Union Territory of Delhi, of goods for sale. Signature ... ... ... Dealer ... ... ..." The Act as originally enacted ended with S. 26 but by Amending Act of 1959, S. 27 was introduced in the Act with effect from 1st October, 1959 and this section provided that nothing in the Act or under the shall be deemed to impose or authorise the imposition of a tax on any sale or purchase of any goods, if such sale or purchase takes place: (i) in the course of inter-State trade or commerce; (ii) outside the Union territory of Delhi, or (iii) in the course of import of the goods into, or export of the goods out of, the territory of India. This section was obviously introduced with a view to bring the Act into conformity with Art. 286 of the Constitution.
(3.) These are the relevant provisions of the Act in the light of which we have to decide the question of law arising in the appeals. The assessees in all the appeals are registered dealers and during the relevant assessment periods they held certificates of registration specifying the class or classes of goods intended for resale by them or for use by them as raw-materials in the manufacture of goods for sale. The certificates of registration were in the form as it stood prior to its amendment on 29th March, 1973 and they did not specify that the resale of the goods purchased or their use as raw-materials in the manufacture of goods or the sale of manufactured goods should be inside Delhi. There are broadly two groups in which the appeals can be divided for the sake of convenience. One group consists of appeals where the assessees purchased goods of the class specified in the certificate of registration as being intended for resale by them and furnished to the dealer selling the goods declarations in the prescribed form, as it stood prior to 29th MArch, 1973, stating that the goods were intended for resale and thereafter resold the goods, though not within the territory of Delhi, while the other consists of appeals where the assessee purchased goods of the class specified in the certificate of registration as being intended for use by them as raw-materials in the manufacture of goods for sale and furnished to the dealers selling the goods declarations in the prescribed form, as it stood prior to 29th March, 1973, stating that the goods were purchased by them for use as raw-materials in the manufacture of goods for sale and thereafter used the goods purchased as raw-materials in the manufacture of goods, in some cases outside Delhi and in some others inside, but in the latter, sold the goods so manufactured outside Delhi. Civil Appeals Nos. 1526 of 1972, 1085 of 1977 and 1290 of 1977 are representative appeals belonging to the first group while Civil Appeals Nos. 1526 of 1972, 1035 of 1977 and 1352 of 1977 are illustrative of the appeals belonging to the second group. Some of the appeals are brought by special leave directly from the orders of the assessing authority and some others from the appellate or revisional orders. Special leave was granted in these cases without requiring the assessees to exhaust their remedies under the Act and to approach the High Court of Delhi in the first instance, because a decision was already given by the High Court of Delhi on 26th April, 1974 in Fitwell Engineers v. Financial Commissioner of Delhi, (1975 Tax LR 1866) (Delhi) negativing the contentions of the assessees. The view taken in the orders impugned in the appeals and accepted by the High Court of Delhi in Fitwell Engineer"s case was that for the purpose of S. 5 (2) (a) (ii) and the Second Proviso, resale of the goods purchased was confined to resale inside Delhi and so also, use of the goods purchased as raw-materials in the manufacture of goods and sale of manufactured goods were requited to be inside Delhi, and, therefore, if the assessees resold the goods outside Delhi or used them as raw-materials in manufacture outside Delhi, or even if the manufacture was inside Delhi, sold the goods manufactured, outside Delhi, there was utilisation of the goods by the assessees for a purpose other than that for which they were purchased and hence the Second Proviso to S. 5 (2) (a) (ii) was attracted and the price of the goods purchased was liable to be included in the taxable turnover of the assessees. The question which arises for determination in the appeals is that or this view taken by the taxing authorities and approved by the High Court of Delhi in Fitwell Engineers" case is correct and can be sustained.;