BHANDARI, J. - (1.) THESE Writ petitions under Art. 226 of the Constitution raise common questions of law and are therefore disposed of together by this judgment.
(2.) IN Writ Petition No. 169 of 1957, the petitioner is a firm carrying on business of sugar dealers at Alwar. The case of the petitioner is that it purchased crystal sugar, Khandsari and Guria Shakkar worth Rs. 9,17,696/10/3 in the year 1955-56 from the dealers residing outside Rajasthan but carrying on business in Rajasthan. The aforesaid commodities were brought in Rajasthan by Railway, in motor trucks and other means of transport as detailed in the petition and were delivered to the petitioner for consumption in Rajasthan and later on sold to other persons in Rajasthan. The Sales Tax Officer, Alwar Circle, held the petitioner liable to pay tax amounting to Rs. 12523/4/3 for the Sales Tax on these goods which were purchased by the petitioner from outside dealers. The penalty Rs. 101/- was also imposed for late submission of return and non-payment of tax. A notice of demand for the aforesaid amount was also served on the petitioner. The petitioner has challenged the said assessment order mainly on the ground that the outside dealers must be deemed to be sellers at the first point in the series of sales and they were liable to pay the Sales Tax under the provisions of the Rajasthan Sales Tax Act, 1954 (Act No. 29 of 1954), hereinafter referred to as the Act, and the Rajasthan Sales Tax Rules, 1955, hereinafter referred to as the Rules. The petitioner states that as a purchaser it was not liable to pay any Sales Tax under the relevant law, and, as such, the demand of the aforesaid amount from the petitioner was not under the authority of law. The petitioner prays that a writ of certiorari be issued quashing the order of the Assistant Commissioner, Excise and Taxation, Alwar, dated the 14th of August, 1957 and the Notice of Demand of the same date. In Writ Petition No. 205 of 1957, the petitioner is Mohammed Umar, one of the partners of Messrs S. Mohammed Ali Abdullah, Biri & Cigarette Dealers in Johari Bazar, Jaipur City. His case is that in the year 1955-56, he imported certain goods from outside Rajasthan and in some cases made local purchases from the accredited agents of non-resident dealers who sent goods to Rajasthan. The Sales Tax Officer, Jaipur City Circle (Circle 'a') assessed the petitioner to pay sales tax amounting to Rs. 23,561-06 Np. for the quarter year beginning from the 1st of April, 1955 to the 31st of March, 1956 in respect of the goods purchased by him from the outside dealers some of whom were also carrying on the business through their accredited agents in the State of Rajasthan and they had already paid the tax. A penalty of Rs. 500/- was also imposed on him for not filing returns in time and for not depositing the tax under sec. 16 (1) (b) (c) of the Act. The petitioner in this writ petition challenges the aforesaid assessment order to the extent of Rs. 23,591-06 Np. which, it is alleged by the petitioner is being realized from him without authority of law as under the relevant provisions of the Sales Tax Act, this amount could not be recovered from the petitioner. The Rajasthan Sales Tax Rules are also challenged on various grounds of which we will take notice later on. The State of Rajasthan has contested these writ petitions. In reply to writ petition No. 169 of 1957 of Messrs Tulsiram Pannalal, it is alleged that the sale of crystal sugar, Khandsari and Guria Shakkar was made by non-resident dealers who were not carrying on business of selling and supplying sugar in the State of Rajasthan within the meaning of sec. 2 (f) of the Act, and, therefore, the first sale within the State was made by the petitioner. In Writ Petition No. 205 of I957,the reply of the State is that the rules were properly framed and were brought in force in accordance with law and were valid and effective and that the penalty was validly imposed on the petitioner in accordance with the provisions of the Sales Tax Act. At the time of the arguments, it was contended by Mr. Agarwal in "writ Petition No. 159 of 1957 that for the purpose of decision of this writ petition, it may be taken that the outside dealers from whom the various commodities were purchased, must be taken to be not carrying on business in Rajasthan. In Writ Petition No. 205 of 1957, the learned Government Advocate conceded that if the sale of any of the goods has already been taxed, the Government will be prepared to refund that amount to the petitioner on his proving the same. We now proceed to examine the contentions of the parties in both the writ petition; in the light of the provisions of the Act and the rules made thereunder. It is necessary at this stage to refer to the relevant provisions of the Act and the rules in order that these contentions may be properly appreciated. In the title as well as in the preamble of the the Act, it is provided that the Act was enacted for the levy of on the sale of goods in the State of Rajasthan. The definitions of 'dealer', 'sale' and 'taxable turnover' given in sec. 2 of Act, a: it stood at the time of the sales which had taken place in these two writ petitions so far relevant for the matter under consideration are given below : - ' (f) "dealer'' means any person who carries on the business of selling or supplying goods in the state and includes a Hindu Undivided Family, and also a society, club or any other association which sells or supplies goods to its members;' Explanation : - Where a dealer who resides outside the State carries on the business of selling or supplying goods in the State through a manager or agent, the manager or agent shall; in respect of such business, be deemed to be a 'dealer' for the purpose of this Act; " (o) "sale" with all its grammatical variations and cognate expressions means any transfer of property in goods made in course of execution of a contract, but does not include a mortgage, hypothecation, charge or pledge; Explanation 1. . . . . . . . . . . . . Explanation 2.- Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1950 ( III of 1930 ), the sale of any goods which have actually been delivered in the State as a direct result of such sale for the purpose of consumption in the said State, shall be deemed for the purpose of this Act, to have taken place in the said State, irrespective of the fact that the property in the goods has, by reason of such sale, passed in another State; ' (s) "taxable turnovet"means that part of the turnover which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods on which no tax is leviable under this Act or which have already been subjected to a tax under this Act;' In sec. 3, the 'incidence of Taxation' is provided and it is laid down that every dealer whose turnover in the previous year in respect of sales or supplies of goods exceeds the amount mentioned in the three sub-clauses of that section, shall be liable be pay tax under the Act on the taxable turnover in respect of sales or supplies of goods effected from the date of the commencement of the Act. Sec. 16 provides for the offences, penalties and prosecutions etc Sec. 26 (1) grants rule making power to the State Government to carry out the purposes of the Act and sec. 26 (5) provides that all rules made under sec. 26 shall be published in the Gazette and upon such publication shall have effect as if enacted in this Act, from such dab as may be notified in this behalf. See. 29 provides for the application of the General Clause Act (X of 1897 ). This Act received the assent of the President on the 22nd of December 1954 and came into force on 1st April, 1955. The Government of Rajasthan, in exercise of the powers conferred by sec. 26 of the Act, made the rules which were published in the Rajasthan Rajpatra dated the 28th of March, 1955. RR. 15, 26-A and 26-B are important and they run as follows: - "15. Point of Tax - (1) Subject to the provisions of sub-rule (2) and sub-rule (3), the tax payable under the Act shall be at the first point in a series of sales and this sub-rule shall apply to all dealers; including manufacturers and importer, and applies to all goods, including goods mentioned in the third proviso to sec. 5". "26a Non-resident dealers - Declaration of Return - Every registered dealer residing in Raj. who purchases goods from a dealer who resides outside Rajasthan, and liable to Rajasthan Sales Tax, shall, within fifteen days of the delivery, supply him with a declaration in Form S. T. 6a in duplicate and every such non-resident dealer shall while submitting the return of turnover to the prescribed Rajasthan Sales Tax authority, attach one copy of such declaration to the same' "26b. Non-resident dealers - Further Returns A dealer residing outside Rajasthan and liable to Rajasthan Sales Tax' shall furnish information in Form S. T. 6b in respect of goods sold and delivered by him for consumption in Rajasthan within four weeks of the expiry of the quarter referred to in rule 25 (3), during which the goods were so delivered". Thereafter the Rajasthan Sales Tax (Amending and Extending) Act was passed. There were certain amendments in the provisions of the Act from time to time with which we are not concerned. After the decision of their Lordships of The Supreme Court in the Bengal Immunity Co. Ltd. Vs. The State of Bihar (1) and after the filing of these petitions, the Rajasthan Sales Tax (Assessment and Recovery) Validating Act, 1958, was enacted which was published in the Rajasthan Gazette dated the 5th of December, 1958. The Rajasthan Sales Tax Rules Validating Act, 1959 (No. 43 of 1959) came into force on the 17th of December, 1959. By sec. 3 of this Act, it was provided that - "notwithstanding any defect or want of form or prodedure and notwithstanding anything contained in the Act or the rules or in any other law or instrument or in any decision or order of any Court: - (a) The Rules shall be deemed to have come into force on the 1st day of April, 1955, the decree on which the Act came into force,. . . . '
(3.) IN both the writ petitions learned counsel for the petitioners have confined their arguments broadly to two points. The first point is that while the Act came into force on the 1st of April, 1955, the Rules came into force by virtue of Rule 1 on the date of their publication in the Rajasthan Gazette on the 28th of March, 1955, and, as such, the Rules, which had come into force before the Act came into force, had no validity. The second contention is that by force of the definition of 'sale' as given in the Act as it stood at the time of assessment, the outside dealers whether they were carrying on business in Rajasthan or not, were the persons who were liable to pay the sales tax, as under sub-rule (1) of R. 15, it was the first sale in the series of sales which was liable to be taxed. The Rajasthan Sales Tax Assessment and Recovery Validating Act, 1958, is challenged on the ground that it transfers the liability of the outside dealers who sold the goods to pay the tax on to the dealers in Rajasthan who purchased the goods and it offends Art. 14, 19 and 31 of the Constitution. We first take notice of the question of the validity of the Rules. It is true that sec. 26 (5) as it originally stood, required that the date on which the Rules were to come into force must be notified and there was no such notification issued after the Act had come into force till the Rajasthan Sales Tax Validating Act, 1959, was enacted and brought in force on the 17th of December, 1959, but that Act brought the Rules in force from the 1st day of April, 1955 and the only question is whether the Rules could be brought into force retrospectively. The retrospective legislation for the purpose of imposing a tax is permissible. This point is concluded by the decision of their Lordships of the Supreme Court in Union of India Vs. Madanlal Kabra (2 ). The question, however, remains whether the penalties imposed in the two cases in writ Petition No. 169 of 1957 of Rs. 101/- and in writ Petition No. 205 of 1957 of Rs. 500/- are valid. Under Art. 20 (1) of the Constitution, no person can be convicted of any offence except for a violation of a law in force at the time of the commission of the act charged as an offence. This prohibition against post facto legislation which involves the imposition of a penalty is one of the fundamental rights guaranteed under the constitution as such for the purpose of Sec. 16 of the Act the rules cannot be given retrospective effect. We are, therefore, of opinion that the order of recovery of penalty in both the cases cannot be sustained. We now come to the second point. Learned counsel for the petitioners have laid great enphasis on the definition of 'sale' as it stood before the Amending Act No. 19 of 1957 and urged that by virtue of Explanation 2, the situs of sale is fixed in Rajasthan where the goods are delivered as a direct result of the sale irrespective of the fact that property in the goods had by reason of such a sale passed in any other State. It has been argued that when the situs of the sale has been fixed in the State, though the sale may have been made by an outside dealer, that transaction of sale by the outside dealer must be taken to be the first sale in the series of sales and the seller of that sale is liable to pay the tax. The petitioners, who were purchasers cannot be held liable to pay the sales tax. Neither can they be held liable for the subsequent sales in the State of Rajasthan and if sec. 3 of the Rajasthan Sales tax Assessment and Recovery Validating Act, 1958 cannot stand, no sales tax can be imposed on the petitioners. Learned Government Advocate relied on the definition of dealer given in the Act and the explanation to that definition for showing that only a dealer who carries on business in the State of Rajasthan is liable to pay the tax because sec. 3 makes only a dealer liable and not any other person and as such the first sale for purpose of sales tax was by such dealer. In reply to this contention, it has been urged by the petitioners that it is not necessary that in order that a person may come within the definition of the term 'dealer' the man should be carrying on business in the State. It is sufficient if such person is selling or supplying goods in the State. The argument is that the words 'in the State' have bearing only on selling or supplying goods and have no relevance in the matter of carrying on business which may be carried on anywhere provided that the character of the business must be of selling or supplying goods in the State. Reliance in this connection is placed on Cement Marketing Co. of India Ltd. Vs. State of Assam (3), V. O. Vakkan Vs. The State of Madras (4) and Messrs. Mohanlal Hargovind Das Vs. State of Madhya Pradesh (5) Of the authorities relied on behalf of the petitioners, it is only the case of the Cement Marketing Co. of India Ltd. Vs. State of Assam (3), which directly supports him. In that case, the relevant definitions of 'dealer' and sale were in similar language as in the Rajasthan Sales Tax Act. Sarjoo Prosad, C. J. of the Assam High Court, as he then was, considered the definition of the word 'sale' and then the definition of the word 'dealer' and it was observed that: - "the words "carries on the business of selling or supplying goods in the State", are comprehensive enough to cover the transactions which the petitioner has been admittedly carrying; namely, the selling and supplying of cement to dealers and consumers in this State. " The learned Chief Justice rejected the contention that the law contemplated some fixed place of abode to make a person 'dealer' with the following observations: - "the definition of the term 'dealer' under the Act does not carry any such limitation and I find nothing in the urles to subtantiate the contention of the petitioner. The jurisdiction to levy tax arises from the territorial nexus where the goods are delivered for consumption as a direct result of sale and purchase. The place of residence of the dealer is not at all material. " With great respect, we regret our inability to accept this view. Under the scheme of the Act, tax is to be levied on the sale of goods in the State of Rajasthan and it is true that by virtue of definition of 'sale' as given in sec. 2 (o) of the Act as it stood before the amendment, the situs of sale shall be deemed to be in Rajasthan even if the property in the goods had passed in any other State if the goods are delivered as a direct result of such sale for the purpose of consumption in the State of Rajasthan. But the person liable to pay the tax is the dealer and the tax is payable on the first point in the series of sale by successive dealers as prescribed under Rule 15. The liability to pay a tax being that of a dealer, it is the definition of the dealer which has direct bearing on the incidence of taxation. The territorial nexus is directly established if the dealer to be taxed carries on business in the State. It may be helpful to take into consideration the whole scheme of taxation as provided in the Act. As already observed, a tax is to be recovered from a dealer in respect of sales or supplies of goods, in accordance with his turnover. No doubt, sales tax is to be recovered on the sale of goods, but it is aggregate of such sales by a dealer on which the tax is imposed. If the limit of turnover is less than that laid down in sec. 3, there can be no incidence of taxation even though there might be a sale. Thus, although it is the sale of goods which is intended to be the occasion for the imposition of tax but in the scheme of this taxation 'the dealer' is the inevitable intermediary. It is the sale by him alone, subject to certain conditions, that creates the liability on him to pay the tax. Again, if it is a dealer who has not fulfilled any duties provided in the Act, who has to pay the penalty for breach thereof. Thus it is the dealer as defined in the Act who becomes an important factor in the matter of imposing of tax and the recovery thereof. No doubt, in the definition of 'dealer' the words 'in the State' have been put after the words 'selling or supplying the goods', giving rise to the argument that these words have bearing on selling and supplying goods, as contended by the petitioner and have no bearing on the words 'carrying on business'. We are, however, of opinion that the words 'in the State' have bearing both on the words 'carrying on business' and on the words 'selling or supplying the goods'. By adopting this interpretation a territorial nexus is directly established between the State and the subject liable to pay tax. It would be better to adopt an interpretation which recognises such a direct territorial nexus, unless there are other compelling reasons. It may also be mentioned that this interpretation makes the imposition and recovery of the tax and punishment of the offences much less cumbersome than if the other interpretation is adopted. The preamble of the Act also says that sale in the State is to be taxed. The explanation in the definition of dealer further reinforces this argument inasmuch as it was thought necessary that there must be some person representing the outside dealer in the State answerable for him even to the extent that he may be personally liable for any offence committed by the outside dealer. It is pertinent to note that for this reason the case of a non-resident dealer has received pointed attention in the explanation and if there is a manager or agent of the dealer residing in the State, he is deemed to be a dealer for the purpose of the Act. Read with the explanation, we are of opinion that a person to be a 'dealer' must carry on business in the State either by himself or through his manager or agent. Chowdhary J. of Allahabad High Court in J. D. Morison Vs. The Sales Tax Officer (8), has also taken the same view. He has further pointed out that both in the definition of 'dealer' and in the explanation, the words used are 'carrying on the business of buying and selling' and not merely 'selling'. It may, however be mentioned that this case went up in appeal to a Division Bench in Sales Tax Officer, Banaras Vs. J. D. Morison Son & Jones (India) Ltd. (9) and the Division Bench did not express any opinion regarding the true interpretation of the word 'dealer', as the appeal was disponed of on another point. ;