PETITIONER:
KARAM CHAND THAPAR & BROS. (COAL SALES)LIMITED
Vs.
RESPONDENT:
STATE OF .UTTAR PRADESH AND ANOTHER
DATE OF JUDGMENT21/07/1976
BENCH:
GUPTA, A.C.
SINGH, JASWANT
CITATION:
1976 AIR 2101 1977 SCR (1) 25
1976 SCC (4) 257
ACT
Central Sales Tax ,Act (74 of 1956), s. 9(1), proviso-Scope
of.
U.P. Sales Tax ,Act, 1948, S. 22---Order of rectifica-
tion passed within 3 years of original order, but served
beyond 3 years--If barred by limitation.
HEADNOTE
Under s. 3(b), Central Sales Tax Act, 1956, a sale or
purchase of goods is deemed to take place in the course of
inter-State trade or commerce if the sale or purchase is
effected by a transfer of documents of rifle to the goods
during their movement from one State to another. Section
7(3 ) provides that on the application of the dealer the
prescribed authority shall register the applicant and grant
him a registration certificate which shall specify the class
or classes of goods for the purpose of s. 8(1); and the Form
prescribed by r. 3, Central Sales Tax (Registration and
Turnover) Rules, 1957, for application for registration,
requires the purposes for which the goods were purchased by
the dealer to be specified, resale being one such purpose.
Section 8(1)(b) provides that every dealer who, in the
course of inter-State trade or commerce sells to a regis-
tered dealer other than the Government, goods of the de-
scription referred to in sub-s. (3) shall be liable to pay
3.%_ of his turnover as.tax under the Act; whereas, under
s.. 8(2), the tax payable with respect to goods which do not
fall within sub-s.- (1) shall be, in the case of declared
goods, at the rate applicable to to the sale or purchase of
such goods inside the appropriate State and in the case of
other goods 10%, or the rate applicable in the State, which-
ever is higher. Prior to April 1, 1963, s. 8(3) stated,
that the goods referred to in s. 8(1)(b), "(a) in the case
of declared goods, are goods Of the class or classes speci-
fied in the certificate of the registered dealer purchasing
the goods as being intended for resale by him; and (b) in
the case of goods other than declared goods are goods of the
class or classes specified in the certificate of registra-
tion of the registered dealer purchasing the goods, as being
intended for resale by him." By the Amendment Act (8 of
1963), cl. (a) was omitted and the opening words in cl. (b),
"in the case of goods other than declared goods" were also
omitted; so that, after April 1, 1963, the goods referred to
in s. 8(1)(b) are specified in sub-s. (3) as goods of the,
class or classes specified in the certificate of registra-
tion of the registered dealer purchasing the goods as being
intended for resale by him. Section 8(4)(a) says that the
provisions of s. 8(1) shall not apply to any sale in the
course of inter-State. trade or commerce unless the dealer
selling the goods furnishes to the prescribed authority in
the prescribed manner, a declaration in the prescribed.
Form, duly filled and.signed by the registered dealer to
whom the goods are sold containing the prescribed particu-
lars. Section 9(1) contains a general rule that the tax
payable by any dealer on sales effected in the course of
inter-State trade or commerce would be levied by the Govern-
ment of India and collected in the State from which the
movement of the goods commenced. The proviso to the sub-
section qualifies this rule in the case of a subsequent sale
which is not exempted from tax under s. 6(2). and
states, .that the tax on such subsequent sale would be
levied and collected in the State from which the registered
dealer effecting the subsequent sale obtained, or could
have Obtained, the Form prescribed for the purpose of s.
8(4)(a). Coal is one of the declared goods having been
declared under s. 14 to be of special importance in inter-
State trade or commerce.
The appellant was a Company carrying on business as coal
agents and was registered in U.P. under the U.P. Sales Tax
Act, 1948, and the Central Sales Tax Act. The appellant
arranged for the supply of coal from collieries in W. Bengal
and Bihar to consumers in U.P. The collieries sent the coal
by
4--1003 SCI/76
26
rail, the railway receipts either in the name of the.appel-
lant or in the name of the consumer in U.P., and sent the
bills and invoices to the appellant’s head office in Calcut-
ta. The appellant forwarded the railway receipts to the
consumers in cases where the receipts were in the names of
the consumers, and in cases where the receipts were in the
appellant’s name also endorsed them in favour of the consum-
ers. There was thus, in the latter cases, a subsequent sale
of goods in the course of inter-State trade or commerce by
the transfer of documents of title by the appellant to the
consumers in U.P. For the assessment year 1966-67 the
appellant claimed that the turnover in cases where the
railway receipts had been subsequently endorsed in favour of
the consumers in U.P. was not taxable in U.P. The Sales-tax
Officer by order dated March 27, 1971, accepted the conten-
tion, relying on a decision of the High Court. But, in
subsequent decisions, the High Court held that in cases
where a regisetred dealer effected a second sale in the
course of inter State trade and commerce, sales tax on the
turnover was to be realised in the State where the dealer
effecting the sale was registered; and in one of the deci-
sions it was observed that the decision on which the Sales-
tax Officer relied had overlooked the proviso to s. 9(1 ) of
the Central Act. The Sales-tax Officer accordingly proposed
to rectify the error committed by him and after following
the procedure prescribed for rectification of errors appar-
ent on the face of the record in s. 22 of the U.P. Act,
passed an order on March 26, 1974, rectifying the mistake
and served it on the appellant on March 31, 1974. The
appellant challenged the order unsuccessfully in the High
Court.
In appeal to this Court it was contended:
(1) That the declaration prescribed under s.
8(4)(a) is necessary when s. 8(1) was applicable,
but that, after the omission in s. 8(3), reference
to ’declared goods’ is omitted in that section, so
that when s. 8 (1)(b) refers to the sale of goods
mentioned in s. 8(3) the reference is only to goods
other than declared goods and hence, when a dealer
sells declared goods, he could not have obtained
the prescribed declaration and so the proviso to s.
9(1) did not apply;
(2) Section 22’of the U.P. Act was not ap-
plicable as there was no mistake apparent on the
face of the record; and
(3) The order under s. 22 was barred by limi-
tation, because it was effective only when it was
served on the appellant.
Dismissing the appeal to this Court,
HELD: (1) The 1971-assessment order was wrong. [46 G]
The Act and the rules and the prescribed Forms make no
distinction between declared goods and other goods, except
for the purpose of the rate of tax. Under s. 7(3) the regis-
tration certificate granted to a dealer has to specify the
class or classes of goods for the purposes of s. 8(1) and it
makes no distinction between declared goods and other goods.
Sub-sections 8(1) and (3) also show that all sales to a
registered dealer other than the Government, whether of
declared goods or other goods, are covered by s. 8(1).
Clause (a) was omitted from s. 8(3) presumably because it
was considered unnecessary to retain it when cl. (b)
apparently covered all goods both declared and other than
declared. The declaration referred to in s. 8(4)(a) is
necessary for the dealer to avail himself of the benefit of
the rate of tax mentioned in s. 8(1). There is no valid
reason why the appellant could not have obtained the decla-
ration in the prescribed Form as required by the proviso to
s. 9(1 ). Since no .claim for exemption under s. 6(2) is
made by the appellant, the first order of assessment was
contrary to the proviso of s. 9(1) and the sales in question
were taxable within the respondent-State, where the appel-
lant was registered as a dealer. [45 D-H]
(2) The 1971-order of assessment was patently errone-
ous in that it failed to take into consideration the proviso
to s. 9(1). Therefore, it could be rectified under s. 22,
U.P. Act. [46 G]
27
(3) The order rectifying the mistake was recorded with
in 3 years of the date of the original order as required by
s. 22 of the U.P. Act. The fact that the order was communi-
cated, to the appellant on March 31, 1974 could not make any
difference. The order of rectification is deemed to be made
on the date of communication only for the purpose of count-
ing the period of limitation for filing the appeal, under s.
9 of the U.P. Act. Therefore, in the instant case, the
appellant was not affected by the order under s. 22 being
communicated to it after the expiry not of 3 years from the
date of the original order. [47 B; 48 B]
Raja Harish Chandra Raj Singh v. The Deputy
Land Acquisition Officer [1962]. 3 S.C.R. 676 and
Madan Lal v. State of U.P. [1975] 3 S.C.C. 779
explained & distinguished.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 928 and 929 of 1975.
(From the Judgment and Order dated 8-10-1974 of the
Allahabad High Court in Civil Writ Nos. 2169 and
2276 of 1974).
F.S. Nariman, D.N. Misra and O.C. Mathur, for the
appellant.
S.C. Manchanda and O.P. Rana, for the respondents.
ARGUMENTS
APPELLANTS
1. Civil Appeal No. 928 of 1975.--In this Appeal
three questions arise for determination:
(i) Whether in the facts and circumstances of
the case the proviso to s. 9(1) of the Central
Sales Tax Act, 1956 was applicable so as to enable
the State of Uttar Pradesh to levy and collect
Central Sales Tax in respect of the subsequent
sales of coal effected by the Appellants to consum-
ers in the State of U.P. ?
(ii) Whether the Sales Tax Officer, Moradabad
had no jurisdiction to rectify the assessment for
the year 1966-67 as there was no error apparent
on the face of the record of the original assess-
ment (s. 22 of the U.P. Sales Tax Act, 1948)?
(iii) Whether the order of rectification
passed under s. 22 of the U.P. Sales Tax Act on
26th March, 1974 (for the assessment year 1966-67)
and communicated to the Appellants on 31st March,
1974 was barred by limitation as it could not be
said to be "within. three years from the date of"
the original assessment order dated the 27th
March, 1971 ?
II. Re: Whether in the facts and circumstances of the case
the proviso to Section 9(1) of the Central Sales Tax Act,
1956 was applicable so as to enable the State of Uttar
Pradesh to levy and collect Central
28
Sales Tax in respect of the subsequent sates of coal ef-
fected by the Appellants to consumers in the State of U.P. ?
(a) The proviso to s. 9(1) of the Central Sales Tax
Act, 1956 does not apply either :---
(i) to subsequent sales (in the course of
inter-State trade or commerce) of declared
goods--i.e. goods declared in s. 14 to be of spe-
cial importance in inter-State trade or commerce;
or
(ii) to sale of goods to persons other than
registered dealers;
(b) The argument ’in support of the submission that
the proviso to s. 9(1 ) does not apply to declared
goods is as follows :--
Section 8(1) and 8(2) of the Central Sales Tax
Act, 1956 deals separately with two types of goods,
namely, (i) goods of the description referred to in
sub-section(3) [see s. 8(1)(b) and (ii)] declared
goods [see s. 8(2)(a)]. The rates of tax for the
two types of goods have been and are differently
prescribed in sub-s. (1) and sub-s. (2) of s.
8---especially since the Amending Act VIII of 1963.
The expression "goods of the description referred
to in sub-section (3)" in s. 8(1) originally in-
cluded declared goods intended for re-sale [see s.
8(3)(a)] as originally enacted in the Central
Sales Tax Act, 1956 (reproduced in Chaturvedi’s
Central Sales Tax Act, 4th .Edition, p. 548). Sub-
section (3) of s. 8 then read as follows:
"(3) The goods referred to in sub-section (1)--
(a) in the case of declared goods, are goods
of the class or classes specified in the certifi-
cate of registration of the registered dealer
purchasing the goods as being intended for resale
by him; and
(b) in any ’other case, are goods of the class
or classes specified in the certificate of regis-
tration of the registered dealer purchasing the
goods as being intended for re-sale by him or for
use by him in the manufacture of goods for sale or
for use by him in the execution of any; contract;
and in either case include the containers or other
materials used for the packing of goods of the
class or classes of goods so specified."
By the Amending Act VIII of 1963 (which raised the rate
of tax under s. 8(1) to 2 per cent), clause (a) of s. 8(3)
stood deleted. The effect of this deletion was
29
that since 1963.declared goods fell outside the purview of
s. 8(3) Section 8(4) only applies to sales of goods of the
description referred to in sub-s. (3), since the provisions
of that sub-section have express reference to the provisions
of s. 8( 1 ). For the proviso to s. 9( 1 ) being applicable
it is necessary that the registered dealer effecting the
subsequent sale obtained or could have obtained the form
prescribed in s. 8(4)(a)--i.e. Form ’C’ prescribed under rr.
12 and 13 of the Central Sales Tax (Registration and Turn-
over) Rules, 1957 (see ’pages 25 and 27 of Chaturvedi’s
Central Sales Tax Act, Fourth Edition).
In the present case, the appellants neither obtained nor
could have obtained Form ’C’ from .their purchaser since s.
8(4) [read with s. 8(1) and (3)] did not (after 1963)
apply to declared goods.
It is submitted that to accept the arguments urged on
behalf of the Respondents that s. 8(4)(a) [read with s.
8(1) and (3)] dealt with declared goods as well, would be
to give no meaning to the provisions contained in s. 8(2).
Besides, as held by Their Lordships in State of Tamil Nadu
v. Sitalakshmi Mills & Others C [1974] 4 S.C.C. 408 at 412
para 6), s. 8 deals with three different classes of cases-
declared goods do not fall within the class mentioned in s.
8 ( 1 ).
The argument that the charging s. 6 does not make any
differentiation between declared and undeclared goods is of
no avail. Section 6(1) itself commences with the words
"Subject to the other provisions contained in this
Act .......... ". If the effect of any other provision is
to take away liability to pay sales tax, effect would have
to be given to that other provision notwithstanding the
charging section [see State of Mysore v. L. Setty 16 S.T.C.
231,239 (S.C.)]. Declared’ goods are clearly intended by the
framers of Central Tax Act, 1956 to receive preferential
treatment not only in respect of local sales tax on local
sales (see s. 15), but also Central Sales Tax in sales
effected during the course of inter-State trade or commerce
[see s. 8(2)].
(c) Even assuming that s. 8(4)(a) [read with s. 8(1) and (3)
include within its purview "declared goods", the proviso
to s. 9(1) is still inapplicable for the following reason
:--
For the proviso to s. 9(1) to be applicable and.
for the State of U.P. to have jurisdiction to levy
and collect the Central Sales Tax on subsequent
sales, it is necessary that the registered dealer
effecting the subsequent sales (by endorsement of
documents of title like Railway Receipt during the
course of the movement of the goods from one State
to another) either "obtained or as the case may be
30
could have obtained" the Form prescribed. in s.
8(4)(a) in connection with the purchase of such
goods involved in the subsequent sale. Such a
form could only be obtained under s. 8(4)(a) from
the appellants’ purchasers if the appellants’ sales
were to be "a registered dealer" [see s. 8(1)
(b)]. Admittedly in the present case the
appellants though registered dealer for the rele-
vant year in question did not sell coal to any
registered dealer [see the averments in para 11 of
the Writ Petition, page 62 Vol. 2 which have not
been denied in the Affidavit in Reply (para 8
page 109 Vol. 2]. Therefore, even assuming that
the provisions of s. 8(4)(a) [read with s. 8(1) and
(3)] were applicable to declared goods (even after
the Amending Act VIII of 1963), the sales result-
ing in the turnover of Rs. 5,59,172.38 not being to
registered dealers, the provisions of s. 8(1)(b)
were not attracted. Consequently the form pre-
scribed under s. 8(4)(a)--Form ’C’---could not have
been obtained by the appellants’ purchaser from the
prescribed authority. Consequently the appel-
lants could not obtain from their purchaser such
form under s. 2(4)(a). Accordingly the last part
of the proviso to s. 9(1) not being satisfied, the
State of U.P. had not jurisdiction to levy and
collect Central Sales Tax from the Appellants.
III. Re: Whether the Sales Tax Officer, Moradabad had no
jurisdiction to rectify the assessment for the year 1966-67
as there was no error apparent on the face of the record of
the original assessment (Section 22 )of the U.P. Sales Tax
Act, 1948) ?
It has been stated in the order of rectification dated
the 26th March, 1974 passed under s. 22 of the U.P. Sales
Tax Act, 1948 that (page 96, Vol. 2):
"In the present case of the assessee tiffs
error is apparent because if this fact that it was
registered under the Central Sales Tax Act had been
placed before the Hon’ble Allahabad High Court in
the case of Karam Chand Thapar & Bros. (Coal Sales)
Ltd., Moradabad for the year 1965-66 the decision
would have been against them as have been happened
in the above mentioned two cases.)
The error apparent on the face of the record, which is a
condition precedent to invoking the rectification provision
(s. 22) is that the appellants were treated as unregistered
dealers by the High Court in the decision for the earlier
assessment year 1965-66 (the judgment of the Hi h Court has
been extracted at pages 71--78 of Vol. 2. But in s. 22 the
error has to be an "error apparent on the face of the re-
cord" of the assessment--i.e. for the assessment year 1966-
67. This assessment order is dated 27th March, 1971 and a
copy of it is at pages
31
79-83 of VoL 2. In that order it is specifically mentioned
(page 79 viz).:
"10. Whether registered or not: Yes".
Thus it was known to the Sales Tax Officer passing the
original assessment order that the appellants were in fact
registered dealers.
An error apparent on the face of the record must be an
error which is "glaring and obvious" [see 34 I.T.R. 143, 150
(S.C.)]. Besides, there is a distinction between a mere
erroneous decision and a decision which could be characte-
rised as vitiated by "error apparent". A rectification is by
no means an appeal in disguise whereby an erroneous decision
is reheard and corrected. It lies only for patent error
(see Thungabhudra Industries Ltd. v. Government of Andhra
Pradesh [1964] 5 S.C.R. 174, 186) where the expression
"error apparent on the face of the record" in 0.47, r-i,
C.P.C. was interpreted by the Supreme Court). In that case
was also said that an error apparent on the face of the
record was one where "without any elaborate argument one
could point to the error" (page 186). This is also the.
view expressed in a Sales Tax Case--Master Construction Co.
17 S.T.C. 360, 365-366 (Subba Rao, J.).
In the present case, it is submitted that the view of
the Sales Tax Officer, Moradabad who passed the original
assessment order dated 27th March, 1971 following the deci-
sion of the Allahabad High Court dated the 24th July, 1970
in Civil Miscellaneous Writ No. 4356 of 1969 (pages 71 to
78) was not patently erroneous. As a matter of fact the
correctness of the subsequent decisions of the Allahabad
High Court is being doubted in the present Appeal and there
is no pronouncement of your Lordships on the question viz.,
interpretation of the proviso to s. 9( 1 ). Besides, it
cannot be said that at the time when the original assessment
order was passed there was a manifest error. Moreover, even
as a result of the subsequent decisions of the Allahabad
High Court it cannot be said that what was not an error on
27th March, 1971 became an error on 26th March 1974 (the
date of the rectification order under s. 22). In any event,
even assuming that there was an error, that error is not
apparent on the face of the record of the original assess-
ment it is a matter in which the arguments, to say the
least, are evenly balanced and a decision of the Highest
Court is now awaited.
In the circumstances there was no jurisdiction in the
Sales Tax Officer, Moradabad to rectify and set aside the
original order of assessment-
IV. Re: Whether the order of rectification passed
under Section 22 of the U.P. Sales Tax Act on 26th
March, 1974 (for the assessment year 1966-67) and
communicated to the Appellants on 31st March, 1974
was barred by limitation as it could not be said to
be "within three years from the date. of" the
original assessment order dated the 27th March,
1971 ?
It is submitted that the period of limitation under s.
22 of the U.P. Sales Tax Act, 1948, runs from the date on
which the order of rectification is communicated to the
assessee--which would enable the
assessee to file an appeal under s. 9 of the U.P. Sales Tax
Act, 1948. The period of limitation for filing an appeal is
30 days from the date of service of the copy of the order
appealed against. It is submitted that an order of rectifi-
cation is not complete as against the assessee unless it is
duly communicated to him. The order of rectification af-
fects the rights and liability of an assessee and it is
essentially fair and just that it should be communicated to
the party as stated by Your Lordships in a case under the
Land Acquisition Act where the phrase "date of the Collec-
tor’s award" was being considered..Your Lordships observed :
" .... If the award is treated as an admin-
istrative decision taken by the Collector in the
matter of the valuation of the property sought to
be acquired it is clear that the said decision
ultimately affects the rights of the owner of the
property and in that sense, like all decisions
which affect persons, it is essentially fair
and just that the said decision should be communi-
cated to the said party. The knowledge of the
party affected by such a decision, either actual or
constructive, is an essential element which must be
satisfied before the decision can be brought into
force. Thus considered the making of the award
cannot consist merely in the physical act of writ-
ing the award or signing it or even filing it in
the office of the Collector; it must involve the
communication of the said award to the party con-
cerned either actually or constructively. If the
award is. pronounced in the presence of the party
whose rights are affected by it it can be said to
be made when pronounced. If the date for the pro-
nouncement of the award is communicated to the
party and it is accordingly pronounced on the date
previously announced the award is said to be commu-
nicated to the said party even if the said party is
not actually present on the date of its pronounce-
ment. Similarly if without notice of the date of
its pronouncement an award is pronounced and a
party is not present the award can be said to be
made when it is communicated to the party later.
The knowledge of the party affected by the award,
either actual or constructive, being an essential
requirement of fair-play and natural justice the
expression ’the date of award’ used in the proviso
must mean the date when the award is either commu-
nicated to the party or is known by him either
actually or constructively. In our opinion, there-
fore, it would be unreasonable to construe the
words from the date of the Collector’s award used
in the proviso to s. 18 in a literal or mechanical
way."
(A.I.R. 1961 S.C. 1500, 1503--[1962] 1 S.C.R. 676,
683684).
It is submitted that on an analogy of reasoning the
words "the date of any order passed by him" in s. 22(1) of
the U.P. Sates Tax Act, 1948 must be construed to mean the
effective date of an order of rectification viz. the date
when it is communicated. In the instant case the order was
communicated after three years from the date of the assess-
ment order and, therefore, the order of rectification is
vitiated as being barred by time.
33
V. 1n Civil Appeal No. 929 of 1975 the only question that
arises is:
Whether in the facts and circumstances of the case
the proviso to s. 9(1) of the Central Sales Tax
Act, 1956, was applicable so as to enable the State
of Uttar Pradesh to levy and collect central sales
tax in respect of the subsequent sales of coal
effected by the appellants to consumers in the
State of U.P. ?
The assessment year in question is 1969-70 and the Appellant
adopts the arguments urged in Civil Appeal No. 928 of 1975.
With regard to whether the sales by the appellants (in
1969-1970) during the course of the movement of the goods
from State to State were to registered dealers or to consum-
ers, there is no indication in the record as to wheth-
er the sales effected to registered dealers or to con-
sumers or unregistered dealers. In the event of Your Lord-
ships holding that declared goods are not covered by the
proviso to s. 9(1) this would make no difference because it
is admitted that the subsequent sales effected by the appel-
lants were of declared goods namely coal. But in the event
of Your Lordships coming to the conclusion that the proviso
to s. 9 (1 ) may include also subsequent sales of declared
goods, then the submission urged is (as in Civil Appeal No.
928 of 1975) that in any view of the matter it is only
subsequent sales to registered dealers which would attract
jurisdiction of the State authorities under the proviso to
s. 9( 1 ) and not subsequent sales by the appellants to
unregistered dealers or consumers. The fact would be easy
of ascertainment by the Sales Tax Officer and it is submit-
ted that in that event a direction ought to be given that
the State of U.P. could levy and collect central sales tax
under proviso to s. 9 (1 ) in respect of subsequent sales of
coal effected by the appellants only to registered
dealers--and not to unregistered dealers or consumers.
RESPONDENTS:
A. Contention No. 1. This is the main contention and is a
short one. It is as to which State has jurisdiction to tax
subsequent sales made by a registered dealer. In the
instant case, admittedly the appellant is a dealer regis-
tered in U.P. both under the Central and the U.P. Act.
Therefore, the short question which arises for consideration
is as to whether in the instant case the State of U.P. would
have the jurisdiction to tax such subsequent sales effected
by the enforcement of documents t0 parties in U.P. ? There
is a specific provision in the Act, which is proviso to s.
9 (1 ), to cover cases such as the present case. Section
9(1) reads:
"The tax payable by any dealer under this
Act on sales of goods effected by him in the course
of interstate trade or commerce, whether such sales
fall within clause (a) or clause (b) of s. 3,
shall be levied by the Government of India and
the tax so levied shall be collected by that gov-
ernment in accordance with the provisions of sub-
section (2) in the State from which the movement of
goods commence:
Provided that, in the case of a sale of goods
during their movement from one State to another,
being a sale subse
quent to the first sale in respect of the same
goods, the tax
34
shall, where such sale does not fall within sub-
section (2) of section 6, be levied and collected
in the State from which the registered dealer
effecting the subsequent sale obtained or, as the
case may be, could have obtained, the form pre-
scribed for the purposes of clause (a) of sub-sec-
tion (4) of section 8 in connection with the pur-
chase of such goods."
Sub-s. (2) of s. 9 merely provides that the
appropriate State on behalf of the Government of India shall
assess, ’reassess, collect and enforce payment of tax under
the Act as if the’ tax under the Act was a tax payable under
the general sales tax law of the State. Therefore, it is
that the tax to be collected under the Act is by the appro-
priate State for and on behalf of the Government of India.
In the case of at first sales, the substantive provisions
of s. 9 (1 ) are clear and unequivocal. Section 9 (1 )
selects out of several States one. particular State and
empowers it to levy and collect C.S.T. That State alone has
the power to levy the tax and all other States by implica-
tion are debarred. This was a simple device adopted in
order to fix the forum and jurisdiction of the particular
State to make the assessment in respect of first sales. A
simple test was evolved to avoid multiplicity of imposition
of tax by more than one State in respect of the same goods
and that was to link the tax with the commencement of the
physical movement of the goods on their Journey from one
State to another. This was simple to comprehend and exe-
cute. Therefore, the appropriate State was the one from
where the. movement of goods started on their interstate
journey. That problem does not concern us here as the
States of Bihar and Bengal from where the movement of coal
commenced have duly assessed the tax u/s 9 (1) of the Act.
The question, however, is which is the State which can
tax the subsequent sale in the instant case. For this
purpose the proviso had to be enacted as admittedly CST is
multipoint in nature and there is no provision for a single
point tax. The only exemption is to be found in s. 6(2)
which is the charging section and if the transaction does
not satisfy all the three conditions of s. 6(2), viz.,
(a) the purchaser is a registered dealer, (b) who by a
certificate of registration is authorised to purchase his
goods, and (c) the selling dealer furnishes to his assessing
authority :--
(i) a certificate duly filled and signed by the
registered dealer from whom the goods were pur-
chased containing the prescribed particulars in a
prescribed form obtained from the prescribed au-
thority,
and (ii) a declaration in C Form duly filled and
signed by the registered dealer to whom the goods
were sold.
(see Chaturvedi’s 3rd edition, page 383).
No attempt has been made by the appellant-assessee in the
instant case even to allege, what to say of proof, that the
aforesaid three conditions were satisfied.. Therefore, s.
6(2) which provides for exemption in respect of subsequent
sales, albeit of declared or undeclared goods, will have no
application. The position therefore would be that the
35
subsequent sales in the instant case would not be exempt
u/s 6(2). Therefore, the subsequent shies have to be taxed
and the only question is which State would have jurisdiction
to assess the subsequent sales. It was fairly conceded
that the subsequent sales would be assessable u/s 9 ( 1 ),
except sales of declared goods. The argument was built up
merely On the omission of el. (a) from s. 8(3) of the Act
with effect from 1-4-1963. Prior to that date section 8(3)
ran as follows:
"The goods referred to in clause (b) of sub-section
(1)-
(a) in the case of declared goods or goods
of the class or classes specified in the certifi-
cate or registration of the registered dealer
purchasing the goods as being intended for resale
by him.."
The above was omitted by s. 2(iii) (a) of the
C.S.T. Amendment Act (No. 8 of 1963) with effect
from 1st April, 1963. From this omission it was
assumed that it was no longer necessary for de-
clared goods to be specified in the declaration
prescribed under rule 12 and the Form C. This
assumption is wholly unwarranted and is contrary
to the provisions of the Amending Act (No. 8 of
1963), The omission of cl. (a) and certain words
in cl. (b) of s. 8(3) was necessitated as the
legislature probably wanted to do away with the
distinction between declared goods and undeclared
goods for purposes of s. 8(3). Hence it deleted
clause (a) in its entirety and the words "in the
case of goods other than declared goods" from cl.
(b) of s. 8(3). Thus with effect from 1-4-63 so
far as mentioning of goods in the certificate of
registration of purchasing dealer for purpose of
re-sale etc. are concerned they made only one
category and specified the same rate of tax as was
applicable u/s 8 ( 1 ) both for declared and
undeclared goods, provided Form C was duly submit-
ted. The above interpretation also finds support
from Chaturvedi’s Central Sales Tax Law, 3rd edi-
tion, 1973 at page 325, paras 7 and 8, which read
as :--
"Clause (a) of s. 8(3) was omitted by s.
2(iii) (a) of the Amendment Act, 1963 with effect
from 1-4-63. Before that the rate of tax for sales
covered in sub-section (1 ) was 1 p.c. and all the
sales or purchases of declared goods under the said
Act could be subjected to tax at the rate upto 2%
by virtue to s. 15 of the principal Act.
"Sales covered under sub.-s. (1) could enjoy
a concessional rate of 1 p.c. instead of the state
rate of 2 p.o..But when by the CST Amendment Act
(No. 8 of 1963) the rate of tax for sales covered
by sub-s. (1 ) was enhanced also to 2 p.o. there
was no use of cl. (a) of sub-s. (3) and it was
omitted.
"In el. (b) of sub-s. (3), the opening words
’in the case of goods other than declared goods’
were omitted by s. 2(iii) (b) of the C.S.T. Amend-
ment Act, 1963 with effect from 1-4-63."
36
Thus it is manifest that the argument laboriously built
up had no foundation and the omission of sub-cl. (a) from
s. 8(3), if anything, goes against the contention of the
assessee and fully supports the contention of the Department
as that Vividly demonstrates that if .there was ever any
intention of the legislature to make any distinction between
declared and undeclared goods insofar as the sale of such
goods was made to government or to a regd dealer that
was done away with after 1-4-63. The contention for the
Department was that there was never any distinction made
between declared and undeclared goods even in the Act and
the Rules prior to 1963-64 in the matter of specification of
the class or classes of goods in the application under
Form A, the certificate under From B and the requisite
declaration under Forn C under rr. 5 and 12 of the CST
Rules.
The only place where the words "declared goods" occur
is in section 8(2) (a) which merely provides the rate of
tax applicable for sales without furnishing Form C’ and not
for any other reason. Thus the Act, the Rules and the Forms
make no distinction between declared and undeclared goods
whatsoever. The main argument, therefore, has no force and
in the absence of the condition u/s 6(2) having been satis-
fied, declared goods are taxable and the assessee being a
regd. dealer registered in U.P. both under the Central Act
and the U.P. Act and the subsequent sale having been effect-
ed by such registered dealer in the State of U.P. the provi-
so to s. 9 (1 ) is clearly attracted.
To sum up, in the instant case the State of U.P. would
have the jurisdiction to assess, levy and collect C.S.T. on
subsequent sales effected, by the assessee under the provi-
so to s. 9 (1 ), provided the following conditions are
satisfied:
(1) The sale is a subsequent sale made during the movement
of goods from the States of W. Bengal and’ Bihar to the
State of U.P .This condition was fairly conceded by the-
learned counsel for the assessee to be satisfied.
(2) The subsequent sale is in respect of the same goods.
Tiffs was also conceded.
(3) That the goods do not fail within s. 6(2), that is,
the sale was to a registered dealer other than Government,
if the goods are of the description referred to in Sub-
section (3) of S. 8. Such subsequent sale would be exempt
provided the necessary certificate in Form C is produced.
(4) The registered dealer effecting the subsequent sale
obtained or could have obtained the form prescribed for
purposes of el. (a) of sub.-s. (4) or s. 8, that is, Form C.
The last two conditions according to the learned couusel
do not require to be satisfied in case of declared goods.
As already stated there is no express warrant nor does the
scheme of the Act support any distinction for C.S.T. be-
tween declared and undeclared goods except in the conces-
sional rate applicable.
37
Section 15 only places restrictions and conditions in
regard to intra-state sales of declared goods.’ This has no
application to intexstate sales and, therefore, the single
point tax provided in s. 15 cannot be imported into the
other provisions of the Act. Therefore, C.S.T. is multi-
point in the absence of any specific provision to make it
single point.
The relevant sections are section 3 which artificially
determines when sale of goods can be said to take place in
the course of interstate trade or commerce.
Section 6 is the charging section. It is significant
that it charges tax on all sales. Therefore unless there is
a specific exemption, sales of both declared and undeclared
goods would be taxable. It is well settled that the burden
of proof lies heavily on the person ,who claims such exemp-
tion.
Section 6(2) deals with the charge to be levied in
respect of a subsequent sale effected by transfer of docu-
ments to a regd. dealer which would be exempt provided the
conditions specified in the proviso thereto are satisfied.
These conditions undoubtedly have not been satisfied. The
case .of the assessee is that they do not require to be
satisfied in the case of declared goods.
S. 7(3) requires in the certificate of registration
under r. 5 and for the purposes of s. 8 (1 ) the class or
classes of goods to be specified and it is only in respect
of those goods so specified that to be exemption or conces-
sional rate is available and not otherwise.
S. 8 merely provides the rates of tax on inter-state
sales. There is a concessional rate of 3% for sales to
regd. dealers provided the goods are of the description
referred to in s. 8(3) which refers to s. 7(3) and the
application in Form A and the certificate in Form B issued
under rr. 3 and 5 of the Rules. Section 8(2) refers specif-
ically to the concessional rate for declared goods vis-a-
vis undeclared goods. For declared goods it is 3 % being
the rate in the appropriate State, and 10% for undeclared
goods. Beyond this concessional rate there is no other
distinction made between declared and undeclared goods.
S. 8(3) refers back to s. 7(3), rr. 3 and 5 and Forms A
and B and only those goods, declared and undeclared, which
find a place the certificate are entitled to the conces-
sional rate and none others.
The proviso to s. 9(1) specifically covers the instant
case. The assessee is a regd. dealer, and the sales do not
fall within the exemption u/s 6(2) and being a regd. dealer
in U.P. he could have obtained the Form C from the Sales
Tax Officer of his Circle. It, therefore, follows that in
the instant case there can be no doubt whatsoever that the
admitted subsequent sales are taxable in the State of U.P.
for and on behalf of the Government of India u/s 9(1) of
C.S.T.
B. Contentions 2 and 3. These .may be dealt with togeth-
er. The argument of the learned counsel for the assessee in
short was that there was no error apparent on the face of
the record and, therefore,
38
s. 22 of the U.P. Act read with s. 9(2) of the Central Act
could not be invoked. It must be remembered that this point
is taken in a writ under Art. 226 when there was no possi-
bility of the appeal or revisional courts going into the
facts of the case. In these circumstances the facts as
found by the Sales Tax Officer in his order u/s 22 and by
the High Court in its judgment dismissing the writ petition
will have to be taken as sacrosanct. At page 92 of volume
II is the order u/s 22. At page 94, line 4, it is stated-
"The assessee is registered in this office
under C.S.T. Act and their Central regn. No. is
2931 which had been in existence since 4-12-65. In
the case of M/s Karam Chand Thapar & Bros. for
the year 1965-66.the High Court had held that
sales made by them were exempt from C.S.T. or U.P.
Sales Tax and the authorities of Bihar or West
Bengal only could assess the tax. Thereafter the
Hon’ble High Court of Allahabad in many cases held
that if the assessee was registered under the CST
the authority of that State had jurisdiction to
make assessments. Therefore, the S.T.O. Morada-
bad has jurisdiction to assess the assessee. In
the meanwhile the High Court of Allahabad held in
several cases that only dealers who are registered
under the C.S.T. are liable to be assessed under
the Act as for example ........ "
At page 96, line 2
"In the present case of the assessee this
error is apparent because if this fact that it was
registered under the C.S.T. had been placed before
the High Court .......... for the year 1965-66,
the decision would have been against them as hap-
pened in the above mentioned two cases."
At page 97, line 4-
"In the above mentioned case the error of law
is clear because u/s 9(1) the jurisdiction of
assessment of tax lies only with that State where
from the dealer has received their Central Regn.
No. and wherefrom the dealer receives C
Form."
Similarly, the judgment of the High Court is at
page 1, of volume I and at page 2, last paragraph,
the finding is:
The petitioner claimed that the turnover of
Rs. 30.07 lakhs was exempt from tax and that of Rs.
5.59 lakhs could not be taxed in the State of U.P.
The S.T.O. relying upon the observations made by
the High Court in petitioner’s own assessment case
for the year 1965-66 accepted his case that his
turnover amounting to Rs. 5.59 lakhs could not be
taxed in U.P. Subsequently in a number of cases
this Court ruled that in a case where a dealer
effecting a second sale in the course of inter-
state trade is a registered dealer, sales tax on
the turnover of such goods is to be realised in the
State where the dealer effecting the sale, is
registered."
39
Page 7, para 2:
"In the instant case we find that while
making the assessment order of 27-3-71 and holding
that petitioner’s turnover amounting to Rs. 5.59
lakhs was not liable to tax in U.P., the S.T.O.
relied upon a decision of this Court which, as
subsequently clarified in the case of Shinghal
Bros. & Co. v. State did .................... not
lay down that even in the case of a registered
dealer effecting a subsequent sale in the course of
inter-state trade or commerce would not be liable
to be taxed in the State where he is registered.
Accordingly, the S.T.O. applied the law laid down
in this Court’s earlier judgment to the facts of
the present case under some misapprehension and it
is not disputed that in subsequent cases this
Court has very clearly laid down that in the case
of a subsequent sale effected during the course of
interstate trade and commerce by a regd. dealer the
turnover of such sale. is to be assessed in the
State where the dealer is registered. It is thus
clear that there Was a mistake in the assessment
order dr. 27-3-71. The mistake was apparent on the
face of the record inasmuch as the S.T.O. applied
the observations made by this Court in a case which
had been decided on the footing that the concerned
dealer was an unregistered dealer to a case where
the dealer was admittedly a registered dealer.
This mistake did not require any elaborate argu-
ment or prolonged debate on the merits or on the
questions of law involved in the case."
In view of these categorical findings by. two courts that
there was a clear and obvious mistake resulting from a
mistake which had crept into the judgment of the High Court
in the assessee’s own case for the A/year 1965-66 which the
S.T.O. was bound to follow and could not ignore, the mistake
in the subsequent assessments could be rectified u/s 22
within the period of limitation of 3 years. Action could
also have been taken u/s 21 under the U.P. Act for a
reassessment .where the period of limitation is 4 years.
It is well settled that ss. 21 and 22 are not mutually
exclusive and the same action may be taken under either of
the sections provided the conditions specified therein are
satisfied. The notice u/s 22 was issued within the period
of three years and there was yet another year to run for
action u/s 21, and in these circumstances a technical point
of this nature raised in a writ petition should not be
countenanced. The main point that the sum of Rs. 5.59 lakhs
was taxable not being in dispute as stated by the High
Court, no assessee has a vested right to the forum or to
succeed on mere technicalities.
The contention that the notice u/s 22. and the order
passed thereunder should have been communicated to the
assessee within three years is wholly unsupported by any
authority. Section 22 merely requires the order to be made
within three years. No rights of the assessee are af-
fected by the passing of the order and it is only when the
additional demand is served upon him under the provisions
of
40
s. 22(2) of the Act that the period of limitation for any
appeal, revision, etc. would begin to run.
Authorities
Rectification--Glaring and obvious mistake of law
34 ITR 143 SC
53 Cal Weekly Notes 869
87 ITR 669 Cal
100 ITR 118 A .P.
Date of order---meaning of
34 S.T.C. 257 SC
46 ITR 529 All.
86 ITR 141 SC
22 ITR 296 Pb
31 ITR 231 All.
The Judgment of the Court was delivered by
GUPTA, J. The appellant in Civil Appeal No. 928 of
1975. M/s. Karam Chand Thapar and Brothers, is a limited
company incorporated under the Companies Act, (referred to
hereinafter as the Company), and the six branches of the
Company at Allahabad, Moradabad, Kanpur, Varanasi,
Gorakhpur and Lucknow are the appellants in Civil Appeal
No. 929 of 1975. The Company carries on business as coal
agents and is registered under the Uttar Pradesh Sales Tax
Act, 1948 and the Central Sales Tax Act, 1956 with the
Sales Tax Officer at Moradabad in Uttar Pradesh. We shall
refer to these two statutes as the U.P. Act and the Central
Act for the sake of brevity. The Company used to arrange
supply of coal from collieries situate in West Bengal and
Bihar to consumers in Uttar Pradesh. The collieries used to
send the coal by rail and the railway receipts were pre-
pared either in the name of the Company or in the name of
the consumer in Uttar Pradesh on whose behalf the order for
supply of. coal was placed. The collieries sent the bills
and invoices in respect of the coal despatched to Uttar
Pradesh to the Company’s head office in Calcutta; the Compa-
ny forwarded the railway receipts to the consumers in cases
where the receipts were in the names of the consumers and
endorsed the receipts that were in the Company’s name in
favour of the consumers for whom the coal had been des-
patched. These two appeals, brought on certificates of
fitness granted by the Allahabad High Court, arise out of
two writ petitions filed in the High Court respectively by
the Company and its aforesaid branches. The petition filed
by the Company leading to Civil Appeal 928, is directed
against an order made under section 22 of the U.P. Act
giving rise to the question whether section 9 (1 ) of the
Central Act was applicable to the case enabling the State of
Uttar Pradesh to levy and collect Central sales tax in
respect of subsequent sales of coal effected by the Company
to consumers in Uttar Pradesh by endorsement of the
documents of title; in the other writ petition, filed by the
Company’s six branches, the applicability of section 9(1) of
the Central Act was
41
one of the points raised in the High Court, but this was the
only point urged before us in Civil Appeal No. 929. The
assessment year in question in Civil Appeal 928 is 1966-67,
and that in Civil Appeal 929 is 1969-70. As the Company’s
appeal covers the question involved in the other case and
raises two additional questions, we shall state only the
facts of Civil Appeal 928 to indicate how these questions
arise.
In the assessment year 1966-67, the Company filed
quarterly returns showing its turnover of coal in two cate-
gories:
(a) turnover in cases where the railway
receipts had been prepared in the names of the
consumers amounting to Rs. 30,07,439/02p.; and
(b) turnover in cases where the railway
receipts had been prepared in the name of the
Company but subsequently endorsed in favour of the
consumers in Uttar Pradesh amounting to Rs.
5,59,172/32p.
The dispute in this case relates to the amount of
Rs. 5,59,172/32p. which according to the Company
could not be taxed in the State of Uttar Pradesh.
Before We proceed further, it would. be convenient
to set out the relevant provisions of the two Acts.
Taking the Central Act first, section 2(c) de-
fines "declared goods" as the goods declared
under section 14 to be of special importance in
inter-State trade or commerce. SectiOn 14 which
declares certain goods to be of special importance
in inter-State trade or commerce mentions coal as
one of them. Under section 3 a sale or.purchase of
goods is deemed to take place in the course of
inter-State trade or commerce if the sale or pur-
chase, (a) occasions the movement of goods from one
State to another; or (b) is effected by a transfer
of documents of title to the goods .during their
movement from one State to another. The sales we
are concerned with in this case were of this second
type. Sub-section (1) of section 6 provides that
subject to the other provisions of the Act, every
dealer shall be liable to pay tax under this Act on
sales of goods effected by him in the course of
inter-State trade or commerce. Sub-section (2) of
section 6 states that notwithstanding what is
provided in sub-section (1), any subsequent sale of
goods effected by a transfer of documents of title
to the goods,-(A) to the Government, or (B) to a
registered dealer other than the Government, if the
goods are of the description referred to in sub-
section (3) of section 8, shall be exempt from tax
under this Act. There are two provisos to this
sub-section, but it is not necessary to refer to
them. Section 7(1) requires every dealer liable to
pay tax under this Act to apply for registration.
Sub-section (3) of section 7 provides that if the
application is in order, the prescribed authority
shall register the applicant and grant to him a
certificate of registration in the prescribed form
which shall specify the class or classes of goods
for the purpose of sub-section (1) of section 8.
Rule 3 of the Central Sales Tax (Registration and
Turnover) Rules, 1957, states that an application
for registration under section 7 shall be made in
Form A, and Form A requires the purpose or purposes
for which the goods or
5--1003 SCI/76
42
casses of goods are purchased by the dealer in the
course of interState trade or commerce to be speci-
fied; as would appear from the Form, ’resale’ is
one such purpose. Rule 5 (1 ) of the Rules pro-
vides that the certificate of registration must be
in Form B. Section 8(1) provides that every dealer
who in the course of inter-State trade or commerce,
(a) sells to the Government any goods; or (b) sells
to a registered dealer other than the Government
goods of the description referred to. in sub-sec-
tion (3) of this section, shall be liable to pay
tax under this Act at the rate of three per cent of
his turnover. Subsection (2) of section 8 states
that the tax payable by any dealer on his turnover
relating to the sales of goods in the course of
inter-State trade or commerce which does not fall
within sub-section (1) shall be--(a) in the case
of declared goods, at the rate applicable to the
sale or purchase of such goods inside the appropri-
ate State, and (b) in the case of goods other than
declared goods, at the rate of ten per cent or at
the rate applicable to the sale or purchase of such
goods inside the appropriate State, whichever is
higher. The goods referred to in clause (b) of
sub-section (1) are specified in sub-section (3) of
this section as goods of the class or classes
specified in the certificate of registration of the
registered dealer purchasing the goods as being
intended for resale by him. Sub-section (4) of
section 8 says that the "provisions of sub-section
(1) shall not apply to any sale in the course of
inter-State trade or commerce unless the dealer
selling the goods furnishes to the prescribed
authority in the prescribed manner (a) a declara-
tion duly filled and signed by the registered
dealer to whom the goods are sold containing the
prescribed particulars in a prescribed form
obtained from the prescribed authority;" rule 12(1)
of the Rules states inter alia that the declaration
referred to in sub-section (4) of section 8 shall
be in Form C. Clause (b) of sub-section (4) is not
relevant to the present purpose. Section 9 (1)
reads:
"9. (1) Levy and collection of tax and penal-
ties.
The tax payable by any dealer under this Act
on sales of goods effected by him in the course of
inter-State trade or commerce, whether such sales
fall within clause (a) or clause (b) of section 3,
shall be levied by the Government of India and the
tax so levied shall be collected by that Government
in accordance with the provisions of sub-section
(2), in the State from which the movement of the
goods commenced:
Provided that, in the case of a sale of
goods during their movement from one State to
another, being a sale subsequent to the first sale
in respect of the same goods, the tax shall, where
such sale does not fall within sub-section (2) of
section 6, be levied and collected in the State
from which the registered dealer effecting the
subsequent sale obtained or, as the case may be,
could have obtained, the form prescribed the
purposes of clause (a) of sub-section (4) of
section 8 in connection with the purchase of such
good
43
The dispute in this case turns on whether the
proviso to section 9 (1 ) is applicable to the
case. Reference may also be made to section 15
which provides the restrictions and conditions in
regard to the tax on sale or purchase of declared
goods within a State. The tax on sale or purchase
of such goods inside the State. is not to exceed
three per cent of the price thereof, and such tax
is not to be levied at more than one stage.
The only provision of the U.P. Act which is
relevant is section 22 which is in these terms:
"22. Rectification of mistakes. (1) The
assessing, appellate, revising or additional revis-
ing authority may, at any time within three years
from the date of any order passed by it, rectify
any mistake apparent on the record;
Provided that no such rectification, which
has the effect of enhancing the assessment shall be
made unless the authority concerned has given
notice to the dealer of his intention to do so and
has allowed him a reasonable opportunity of being
heard.
(2) Where such rectification has the effect
of enhancing the assessment, the authority con-
cerned shall serve on the dealer a revised notice
of demand in the prescribed form and therefrom all
the provisions of the Act and the rules framed
thereunder shall apply as if such notice had been
served in the first instance."
The Sales Tax Officer had accepted the contention that the
turnover amounting to Rs. 5,59,172/32p. was not taxable in
Uttar Pradesh. In taking this view the Sales Tax Officer
appears to have proceeded upon the observations in a Judg-
ment of the Allahabad High Court in the Company’s own as-
sessment case for the year 2965-66.. However, in several
subsequent decisions, the High Court held that m a case
where a registered dealer effected a second sale in the
course of interState trade and commerce, sales tax on the
turnover was to be realised in the State where the dealer
effecting the sale was registered. In one of these cases,
M/s. Singhal & Co. v. State & Ors(1) it was pointed out
that the earlier decision of the High Court had completely
overlooked the proviso to section 9(2) of the Central
Act. The Company being admittedly a registered dealer under
the Central Act and liable to pay tax under that Act, the
Sales Tax Officer thought that there was an apparent error
in the order of assessment made on March 27, 1972 exempting
the turnover amounting to Rs. 5,59,172/32 p. which in view
of the proviso to section 9(1) of the Central Act was
taxable in Uttar Pradesh. Accordingly, he proposed to
rectify the error under section 22 of the U.P. Act, and on
March 21, 1974 he issued a notice to the Company requiring
it to appear before him on March 25, 1974. In response to
the notice a representative
(1) (1973) U.P. Tax Cases 466.
44
of the Company appeared. contended against the proposed
rectification, and also filed a written objection. The
Sales Tax Officer recorded an order on March 26, 197.4
overruling the objections and rectified the order of assess-
ment dated March 27, 1.971. A copy of the order passed on
March 26, 1974 rectifying the mistake in the earlier assess-
ment order was served on the Company on March 31, 1974.
The Company challenged the order dated March 26, 1974 by
a writ petition in the Allahabad High Court which, was
dismissed giving rise to this appeal.
Mr. Nariman appearing for the appellants in these ap-
peals pressed the following grounds:
(1) the proviso to section 9 (1 ) of the Cen-
tral Act has no application to goods declared to be
of special importance in inter-State sales or
commerce under section 14 of the Central Act;
(2) section 22 of the U.P. Act was not applica-
ble as there was no mistake apparent on the face of
the record; and
(3) in any event, the order made under section
22 of the. U.P. Act was barred by limitation.
The argument. that the proviso to sub-section (1) of
section 9 does not apply to declared goods proceeds as
follows: Sub-section (1) (b) and sub-section 2(a) of sec-
tion 8 of the Central Act deal with two different types of
goods. Sub-section (1)(b) speaks of goods of the descrip-
tion referred to in sub-section (3), and subsection (2)
relates to declared goods. Sub-section (3) of section 8
only mentions the goods referred to in sub-section (1)(b)
which are goods of the class or classes specified in the
certificate of registration of the dealer purchasing the
goods as being intended for resale. Subsection (4) requires
a declaration for the purposes of sub-section (1) (b), and
as sub-section (1)(b) does not speak of declared goods, the
declaration referred to in sub-section (4) would not be
necessary in the case of sale’ or purchase of declared
goods.
We fail to see any valid distinction between declared
goods and other goods for the purpose of the applicability
of sub-section (1 ) of section 8. The .distinction was made
by Mr. Nariman inferentially from the Central Sales Tax
(Amendment) Act (8 of 1963) which omitted with effect from
April 1, 1963, clause (a) from sub-section (3) of section 8
as it stood prior to that date. Sub-section (3), it may be
recalled, specifies the goods referred to in section
8(1)(b). Prior to April 1, 1963, section 8(3)listing such
goods, stated in clause (a)--
"(a) in the case of declared goods, are goods of
the class
or classes specified in the certificate of
registration
45
of the registered dealer purchasing the goods as
being intended for resale by him."
Clause (b) of section 8(3) then began with the words: "in
the case of goods other than declared goods, are ........
". By the same Amendment Act (8 of 1963) the opening words
of clause (b), "in the case of goods other than declared
goods", were consequentially omitted, also with effect from
April 1, 1963. The omission of clause (a) is the basis of
the argument that declared goods are altogether outside the
purview of sub-section (3) and, therefore, of sub-section
(1) of section 8, and, as the declaration referred to in
sub-section (4) of section 8 was required where sub-section
(1) of the section was applicable, it was not possible for
the Company to obtain such a declaration.
The contention seems to us untenable. Section 9(1) of
the Central Act contains a general rule that tax payable by
any dealer under this Act shall be levied and collected in
the State from which the movement of the goods commenced.
The proviso to section 9(1 ) qualifies this rule in the
case of a subsequent sale which is not exempt from tax under
section 6(2), and states that the tax on such subsequent
sale would be levied and collected in the State from which
the registered dealer effecting the subsequent sale obtained
or could have obtained the form prescribed for the pur-
poses of section 8 (4) (a). No exemption under section 6(2)
is claimed in this case. The declaration referred to in
section 8 (4) (a) is necessary for the dealer to avail of
the benefit of the rate of tax mentioned in section 8(1 ).
Under section 7(3) the certificate of registration granted
to a dealer has to specify the class or classes of goods for
the purposes of section 8 (1 ). Rule 3 of the Central Sales
Tax (Registration and Turnover) Rules, 1957 requires an
application for registration under section 7 to be made in
Form A, and Form A requires the purpose for which the
goods or class of goods are purchased by the dealer to be
specified; resale is one of the purposes mentioned in Form
A. Thus, section 7(3) makes no distinction between declared
goods and other goods; it is impossible to argue therefore
that declared goods purchased by a dealer for resale need
not be specified in his certificate of registration. Reading
sub-section (1) and sub-section (3) of section 8 together,
it is clear that all sales to a registered dealer other than
the Government, whether of declared goods or other goods,
are covered by subsection (1) of section 8. Clause (a) was
omitted from sub-section (3) of section 8 by the Amendment
Act (8 of 1963) presumably because it was considered unnec-
essary to retain clause (a) to deal with declared goods
when clause (b) apparently covered all goods, both declared
and other than declared. The Act and the rules and the
prescribed forms make no. distinction between declared goods
and other goods except for the purpose of the rate of tax.
There is no valid reason why the Company could not have
obtained a declaration in Form C as required by the proviso
to section 9(1). It follows therefore that the order of
assessment dated March 27, 1971 was wrong as it held,
contrary to the proviso to section 9(1), that the sales in
question were not taxable in the State of Uttar Pradesh
where the Company was registered as a dealer under this Act.
46
Another point sought to be made against the applicabili-
ty of the proviso to section 9(1) was tiffs. The proviso
refers to the Form prescribed for the purpose of section
8(4)(a) which should contain a declaration duly filled and
signed by the registered dealer to. whom the goods were
sold. It was argued that as the declaration was required
only where the sale was to a registered dealer, and as there
was no finding in this case that the sales were to regis-
tered dealers, the proviso was not attracted. It appears,
however, that the Company never claimed before the Sales Tax
Officer that the sales were not to registered dealers; in
the written objection filed before the Sales Tax Officer
pursuant to the notice under section 22 of the U.P. Act,
the only ground taken was that no declaration was required
to be filed in the case of declared goods. The point was
taken for the first time in the writ petitions. We do not
think we should allow this question, which is one of fact,
to be raised at this stage.
The next question is whether this error in the original
order of assessment can be called an apparent error within
the meaning of section 22 of the U.P. Act. There is no
dispute that an apparent error means a patent mistake, an
error which one could point out without any elaborate
argument. The order of assessment relating to the assess-
ment year in question, 1966-67, was made on March 27, 1971
by the Sales Tax Officer relying on a Judgment of the Alla-
habad High Court on a writ petition made by the Company
questioning the validity of the assessment in respect of the
assessment year 1965-66. In that Judgment the High Court
held, referring to the provisions of section 9(1 ) of the
Act, that "the Sales tax authorities in the State of U.P.
had no. jurisdiction to make any assessment even if there
was any inter-State sale which could be liable to tax in the
hands of the petitioner Company. The only State which could
levy tax could be either Bihar or West Bengal. The impugned
assessment order passed by the Sales Tax Officer, Moradabad,
is therefore clearly without jurisdiction and is liable to
be quashed". In this Judgment there is no reference to the
proviso to section 9(1 ). It appears from the Judgment
under appeal that the High Court in a number of latter
decisions held that in view of the proviso, tax on a
subsequent sale by a registered dealer in the course of
inter-State trade or commerce was to be levied and collected
in the State where the dealer effecting the subsequent sale
was registered. We are of the view that the order of as-
sessment dated March 27, 1971 was apparently erroneous in
that it failed to take into consideration the proviso to.
section 9(1). It is not that the order dated March 27, 1971
was in accordance with law when it was made but the subse-
quent decision of the High Court took a different view of
the law. For the reasons we have given above, it was pat-
ently erroneous when it was made, but in view of the obser-
vations of the High Court in the case relating to the as-
sessment of an earlier year, the Sales Tax Officer felt that
he had to dispose of the assessment case for the year 1966-
67 in the manner he did. The Judgment of the High Court
which the Sales Tax Officer followed in making the assess-
ment for the year in question did not concern itself with
the proviso to section 9(1).
47
The next, and the last, question is whether the order
dated March 22, 1974 rectifying the assessment order made on
March 27, 1971 was barred by limitation. Under section 22(
1 ) of the U.P. Act any mistake apparent on the record may
be rectified at any time within three years from the date of
the order. It is not disputed that the other requirements
of section 22 have been complied with. The Company’s
representative appeared before the Sales Tax Officer
pursuant to the notice served on them on March 25, 1974, and
the objections to the proposed rectification were heard.
There is no dispute that the order rectifying the mistake
was recorded by the Sales Tax Officer on March 26, 1974, and
this order was communicated to the appellant on March 31,
1974 According to Mr. Nariman, the order of rectification
must be held to have been made on March 31, 1974 when it was
communicated to the assessee which was beyond three years
from the date of the order of assessment. Mr. Nariman
relied on the well-known rule of fairplay that the rights of
a party cannot be affected by an order until he has notice
of it. In Raja Harish Chandra Rai Singh v. The Deputy Land
Acquisition Officer and another,(1) this Court considering
the meaning of the words "the date of the award" occurring
in s. 18 of the Land Acquisition Act, 1894 observed.
"The knowledge of the party affected by the
award, either actual or constructive, being an
essential requirement of fairplay and natural
justice the expression "the date of the award" used
in the proviso must mean the date when the award is
either communicated to the party or is known by him
either actually or constructively. In our opinion,
therefore, it would be unreasonable to construe the
words "from the date of the Collector’s award"
used in the proviso to s. 18 in a literal or me-
chanical way.
...... where the rights of a person are
affected by any order and limitation is prescribed
for the enforcement of the remedy by the person
aggrieved against the said order by reference to
the making of the order must mean either actual or
constructive communication of the said order to the
party concerned."
Following this decision, this Court held in a
subsequent ease under the Indian Forest Act, 1927,
Madan Lal v. State of U.P. and others,(1) that the
right of appeal given by s. 17 of the Forest Act
should be deemed to be the date when the party
aggrieved by an order came to know of that order
from which an appeal was sought to be preferred.
But how have the Company’s rights been affected in
this case ?
(1) [1962] 1 S.C.R. 676. (2) [1975] 3 S.C.C.
779.
48
Section 9 of the U.P. Act gives a right of appeal
to "any dealer objecting to any order made by the
assessing authority, other than an order mentioned
in S. 10-A", within thirty days from the date of
service of the copy of the order. In this case the
Company was not affected by the order under s. 22
being communicated to it after the expiry of three
years from the date of the order because the limi-
tation for an appeal from that order did not begin
to run before the communication of the order. The
provisions of s. 9 of the U.P. Act make that clear.
The appeals therefore fail and are dismissed.
Considering the circumstances, we direct the par-
ties to bear their own costs here and in the High
Court.
V.P.S.
Appeals dismissed.
49