PETITIONER:
ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA ANDORS.
Vs.
RESPONDENT:
M/S. PATIALA BISCUITS MFG. CO. NOW AS DALMIABISCUIT PVT. LTD
DATE OF JUDGMENT01/03/1977
BENCH:
SARKARIA, RANJIT SINGH
BHAGWATI, P.N.
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 1339 1977 SCR (3) 85
1977 SCC (2) 389
ACT
Punjab General Sales Tax Act, 1948--Assessee entitled to
certain deductions if seller and buyer are registered deal-
ers--Both applied for registration--Certificates issued
later with retrospective effect--Dealers--If should be in
physical possession of registration certificate at the time
of sale to claim deduction.
HEADNOTE
According to s. 5(2)(a)(ii) of the Punjab General Sales
Tax Act, 1948, taxable turnover means the part of a deal-
er’s gross turnover during any period which remains after
deducting therefrom the turnover during that period, on
sales to a registered dealer of goods declared by him in a
prescribed form as being intended for re-sale in the
State. Section 7(1) provides that no dealer shall carry on
business as a dealer unless he has been registered and
possesses a registration certificate. Rule 5 of the Punjab
General Sales Tax Rules, 1949 as amended in October 1966
provides that the certificate of registration issued by the
Assessing Authority shall be valid from the date of receipt
by him of the application for registration or from the date
of Commencement of the liability to pay tax whichever is
later. Rule 26 provides that a dealer claiming deduction
under s. 5(2)(a)(ii) shall produce on demand the cash memos
or bill and a declaration in writing by the purchasing
dealer that the goods specified in the certificate of regis-
tration are for use by him.
The assessee (respondent) and the purchasing dealer, the
sole selling agent of the assessee, made applications on
January 1, 1966 for registration as dealers. The registra-
tion certificates were issued to them on March 27, 1966 with
retrospective effect from January 1, 1966.
The Assessing Authority rejected the assessee’s claim
for deduction under s. 5(2)(a)(ii) of sales made by them to
the purchasing dealer on the ground that during the period
between January 1 and March 31, 1966, the purchasing dealer
was not in possession of the registration certificate.
In a petition under Art. 226 of the Constitution the
High Court held that since the certificate of registration
had been granted with effect from January 1, 1966, i.e. the
date of application, it could not be said that the sales
during the quarter were to an unregistered dealer.
On appeal it was contended that to be entitled to deduc-
tion under the Act both the purchasing and selling dealers
’should be in physical possession Of the registration cer-
tificate at the time of sale.
Dismissing the appeal,
HELD: The assessees were entitled to deduction under s.
5(2)(a)(ii) in respect of sales made by them to the purchas-
ing dealer during the quarter.
[90 G]
(a) At the relevant time, the registering authority was
fully competent to issue the registration certificate to
the dealer with retrospective effect from the date of filing
of the application. The amendment of r. 5 made in October
1966 did not confer any new or additional power on the
registering authority but was only clarificatory of the law.
The language of s. 7 is clear that the registering authority
had the power to give effect to the registration from the
date of making the application. [90 F; A]
86
(b) The words "has been registered and possesses a registra-
tion certificate" in s. 7(1) should be construed in accord
with the general tenor of the section as a whole, and in a
manner which would avoid oppressive, unreasonable and
anomalous results. So construed it could never be the
intention of the legislature that a dealer liable to pay
tax, who has in compliance with the requirements of s. 7(2)
and (3) done all which lay in his power to obtain the regis-
tration certificate, should pull down his shutters and keep
his business closed under pain of being punished and await
indefinitely the pleasure and leisure of the prescribed
authority in issuing the registration certificate. Adoption
of such a construction would be to make an applicant liable
to punishment for the laches and delays of the authority and
its office. [90 B-C]
Chandra Industries v. The Punjab State & Ors. 29, S.T.O.
558, approved.
(c) The requirement of r. 26 will be substantially
satisfied if the number of the registration certificate is
supplied by the claimant alongwith the declaration of the
purchasing dealer at the time of assessment to the Assessing
Authority.
[90 E]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 721 of 1972.
(From the Judgment and Order dated 13.10.1970 of the
Punjab & Haryana High Court in Civil Writ No. 1831 of 1968).
K.S. Suri, for the appellants.
R.S. Sharma and A. D. Mathur, for the respondent.
The Judgment of the Court was delivered by
SARKARIA, J.--The short question involved in this appeal
on certificate, directed against a judgment of the High
Court of Punjab and Haryana is: Whether the sales made to. a
dealer who has applied for registration under the Punjab
General Sales Tax Act 1948, before his application is al-
lowed, are to be treated as sales to an unregistered dealer
or registered dealer, when the registration is effected from
the date of the application ?
M/s. Patiala Biscuits Manufacturers Pvt. Ltd. (hereinaf-
ter referred to as the assessees) appointed M/s. Rajpura
Biscuit Company as their sole selling agents. The agents
made an application on 1.1.1966 in the appropriate form for
registration as a dealer under the Punjab General Sales Tax
Act, 1948 (hereinafter called the Act). On the same day,
the agents (referred hereafter as the purchasing dealer)
made a similar application for obtaining registration cer-
tificate, under the Central Sales Tax Act. The appropriate
Assessing Authority accepted both these applications and on
March 27, 1966 issued the registration Certificate with
effect from 1.1.1966.
The assessees filed their return for the quarter ending
March 31, 1966 in April, 1966 and claimed deductions under
s. 5(2)(a)(ii) in respect of sales of the value of Rs.
32,56,267.35 made by them between 1-1-1966 to 31-3-1966 to
the purchasing dealer. The Assessing Authority, Patiala
rejected this claim and assessed tax, amounting to Rs.
1,99,558.94. on the proceeds of the sales made by the asses-
sees to the purchasing dealer between 1.1.1966 and
27.3.1966. The reason given by the Assessing Authority for
refusing this relief to the assessees was that during this
period, the purchasing dealer was not in possession
87
of the registration certificate, the same having been issued
only on March 27, 1966.
The assesses impugned the validity of this order of the
Assessing Authority by a writ petition in the High Court,
under Articles 226/227 of the Constitution. The High Court
held that since the certificate of registration had been
granted with effect from 1-1-1966, which was the date of the
application, it could not be said that the sales during this
period commencing from 1.1.1966, were made to an unregis-
tered dealer. It further noted that apart from the asses-
sees, the purchasing dealer had also, been taxed with regard
to the same transactions resulting in double taxation which
was against the basic scheme of the Act, the Rules and the
notifications issued thereunder. On these premises, the
High Court allowed the writ petition and quashed the im-
pugned order to the extent to which it was contrary to
s.5(2)(a)(ii) of the Act in respect of sales made between
1.1.1966 and 27.3.1966. The High Court however granted a
certificate under Art. 133(1)(a) and (c) of the Constitu-
tion, on the basis of which the Revenue has come in appeal
to this Court.
It would be appropriate to have, at the outset, a look
at the relevant provisions of the Act and the Rules.
The material provision is in s. 5(2) (a) (ii) which reads as
under:
"In this Act the expression "taxable
turnover" means the 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 .... declared by him in a prescribed
form as being intended for re-sale in the
State of Punjab ........
Provided that in case of such sales,
a declaration duly filled up and signed by the
register dealer to whom the goods are sold and
containing prescribed particulars on a pre-
scribed form (obtained from the prescribed
authority) is furnished by the dealer who
sells the goods."
Section 7 provides for the registration of
dealers. It says:
"(1) No dealer shall, while being liable to
pay tax under this Act, carry on business as a
dealer unless he has been registered and
possesses a registration certificate.
(2) Every dealer required by sub-section
(1) to be registered dealer shall make appli-
cation in this behalf in the prescribed manner
to the prescribed authority.
(3) If the said authority is satisfied that
an application for registration is in order,
he shall, in accordance with
7--240SCI/77
88
such rules and on payment of such fees as may
be prescribed, register the application and
grant him a certificate of registration in the
prescribed forms which may specify the class
or classes of goods for the purpose of sub-
clause (ii) of clause (a) of subsection (2) of
section 5.
(4) ...
(5) When any dealer has paid the amount of
penalty imposed under s. 23 in respect of any
contravention of sub-section (1) of this
section, the Commissioner shall register such
dealer and grant him a certificate of regis-
tration, and such registration shah take
effect as it had been made under sub-section
(3) of this section on the dealer’s applica-
tion.
(6) ..
In case a dealer commits default is not getting himself
registered as required by Sec. 7, certain consequences
follow. Under s.11(6) such a defaulting dealer is liable to
be assessed on the basis of best judgment and the Assessing
Authority may, in addition to the tax so assessed, impose
on him by way of penalty a sum not exceeding one and half
times that amount. Such a defaulter is further liable to
prosecution under s. 23 (1) for carrying on business as a
dealer in contravention of the provisions of s. 7(1), and
on conviction, he can be sentenced to fine not exceeding Rs.
1,000/-.
The application for registration has to be made to the
appropriate Authority in the prescribed Form. The manner
in which such an application is to be dealt with by the
Authority is provided in Rule 5 of the Punjab General Sales
Tax Rules, 1949 framed under the Act. This Rule as it stood
before the amendment of October 10, 1966 was as follows:
"When the appropriate Assessing Authori-
ty, after making any enquiry that he may think
necessary, is satisfied that the applicant is
a bona fide dealer and has correctly given all
the requisite information that he has deposit-
ed the registration fee into the appropriate
Government treasury and that the application
is in order, he shall register the dealer and
shall issue a Certificate of registration in
Form S.T.III or S.T. IV according as the
dealer has one or more than one place of
business in Punjab."
Rule 5 was amended by Punjab Government Notification No.
GSR237/PA 46/48/S-27/Amd(5)/66 dated 10th October, 1966, and
in place of the last sentence commencing with the words
"in .Form S.T .... "of the old Rule, the following was
substituted:
" .... in Form S.T. IV which shall be
valid from the date of receipt of application
for registration by the Assess-
89
ing Authority or from the date of commencement
of the liability to pay tax, whichever is
later."
Ride 26 provides:
"A dealer, who wishes to deduct from his
gross turnover the amount in respect of a sale
on the ground that he is entitled to make such
deduction under the provisions of subclause
(ii) of clause (a) of sub-section (2) of
section 5 of the Act, shall, on demand, pro-
duce in respect of such a sate the copy of the
relevant cash memo or bill, according as the
sale is a cash sale or a sale on credit, and a
declaration in writing in Form S.T. XXII by
the purchasing dealer or by his agent, that
the goods in question are intended for re-sale
in the State of Punjab or such goods are
specified in his certificate of registration
for use by him in the manufacture in the
State. of Punjab of any goods for sale."
Rule 26 was also amended later. The amended
Rule is, in substance, the same, excepting
that it was clarified that the dealer claiming
deduction has to produce the declaration of
the purchasing dealer, in the prescribed form,
at the time of assessment.
The main contention of Shri K.S. Suri, learned Counsel
for the appellant is that the declaration form prescribed
under the old Rule 26, as it stood at the material time,
required the purchasing dealer to specify at the time of
the sale, in the prescribed Form S.T. XXII, the number of
the registration certificate. Stress has also been placed
on the words "registered and possesses" used in sub-section
(1) of Sec. 7, which according to Counsel, indicate that a
dealer having a taxable turnover, cannot validly carry on
his business, unless he is actually registered and is in
physical possession of the registration certificate issued
under Sec. 7. A compliance with the aforesaid mandatory
requirement of s. 7(1) and Rule 26, Form XXII--proceeds the
argument--could be possible only if at the time of the sales
in question, the purchasing dealer as well as the selling
dealer, both, were in actual possession of the requisite
registration certificates. Shri Suri has adopted the
reasoning of the Sales-Tax Tribunal in Appeal No. 109 of
1967-68 (M/s. Darshan Soap Mills, Batala Road, Amritsar v.
The State) decided on 12-2-1968.
It is contended that Rule 5, as it stood at the material
time, did not empower the registering Authority to grant the
registration Certificate retrospectively, with effect from
the date of the application.It is maintained such a power
was conferred on the Authority, only by the Punjab Govern-
ment Notification No. GSR-237/PA 46/48/S-27 Amd.(5)/16 with
prospective effect from October 10, 1966.
Taking the last point first, we are of opinion that the
amendment of Rule 5 by the Punjab Government Notification,
dated October 10, 1966, did not confer any new or additional
power on the registering Authority. The power to grant the
registration Certificate with effect from the date of the
application was already there. The amendment was only
clarificatory of the law as it stood prior to it. It only
90
made explicit which was formerly implicit. A definite
indication is available in the language of sub-section (5)
read with sub-sections (2) and (3) of s. 7, . itself, that
the registering Authority had the power to give effect to
the registration from the date of making the application.
Be that at it may, the words "has been registered and
possesses a registration certificate" used in sub-s. (1 ) of
s. 7 have to be construed in accord with the general tenor
of the Section as a whole, and in a manner which would
avoid oppressive, unreasonable and anomalous results. As
rightly pointed out in Chandra Industries v. The Punjab
State and ors.(1), it could never be the intention of the
Legislature that a dealer liable to pay tax who has in
compliance with the requirements of sub-sections (2) and (3)
of s. 7, "done all which lay in power to obtain the regis-
tration certificate, should pull down his shutters and keep
his business closed under pain of being punished under s.
23(1) and await indefinitely the pleasure and leisure of the
prescribed authority in issuing the registration certifi-
cate. Adoption such a construction would be to make the
applicant liable to punishment for the laches and delays of
the authority and its office."
As regards the requirement enjoined by the Form pre-
scribed under Rule. 26, to enter the number of the registra-
tion certificate in the declaration of the purchasing dealer
at the time of sale, the same has to be viewed with rea-
sonable flexibility and reconciled with Rule 5 as clarified
by the Notification, dated October 10, 1966. Thus con-
strued harmoniously with the related statutory provisions,
the requirement of Rule 26 will be substantially satisfied,
if the number of the registration certificate--granted
subsequently, but covering retrospectively the period of the
sales in respect of which deduction is claimed-is supplied
by the claimant along with the declaration of the purchasing
dealer at the time of assessment to the Assessing Authority.
It is thus clear as daylight that at the relevant time,
also, the registering Authority was fully competent to
issue the registration certificate to the dealer with
retrospective effect from the date of filing the applica-
tion. A perusal of the registration certificate would show
that it was, in terms, made effective from January 1, 1966.
This is manifest from the words "the dealer is liable to pay
tax w.e.f. 1.1.1966" used by the Authority, prominently,
in the heading of the Certificate.
It necessarily follows, therefore, that during the
period from 1.1.1966 to 27.3.1966, also, the purchasing
dealer was a registered dealer possessing a registration
Certificate within the Contemplation of s. 7(1) of the Act.
This being the correct position, the assessees; were enti-
tled to the deduction under s. 5(2)(a)(ii) of the Act in
respect of the sales made by them to the purchasing dealer
during the whole of the quarter ending 31st March 1966.
The High Court was therefore, right in determining the
question posed, in favour of the assessees and against the
Revenue.
The appeal fails and is dismissed with costs.
P.B.R Appeal dismissed.
(1) 29, S.T.O. 558.
91