ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA AND A ORS. v. M/S. PATIALA BISCUITS MFG. CO. NOW AS DALMIA BISCUIT PVT. LTD.

85 ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA AND A ORS. v. M/S. PATIALA BISCUITS MFG. CO. NOW AS DALMIA BISCUIT PVT. LTD. _March_ 1, 1977 [P. N. BHAGWAT!, R. S. SARKARIA AND S. MURTAZA FAZAL Au, JJ.] _Punjab General Sales Tax Act, 1948-Assessee entitled_ _to_ _certain deductions_ _if_ _seller and buyer are negisflered_ _dealers-Both_ _applied for_ _registration-('crtifi-_ _cates issued later ttdth retrospective_ _effect-Dealers-If_ _sl1011/d_ _be_ _in_ _physical_ _pos-_ _session_ _of_ _registration certificate at the_ _ti1ne_ _of_ _sale to_ _claini_ _deduction._ According to s. 5(2) (a) (ii) of the Punjab General Sales Tax Act, 1948, tnxable turnover means the part of a dealer's gross turnover during any period which remains after deducting therefron1 the turnover <luting 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 Geti.eral Sales Tax Rules, 1949' ### n c as amended in October 1966 provid~s that the certificate of registration issued D 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 registration 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. E The registration certificates were issued to them on March 27, 1966 with retro· spective 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 F since t?e certificate of regi~tra~ion ?ad been granted :with effect from January 1, 1966, 1.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 deduction under the Act both the purchasing and .selling dealers should be in physical possession of the registration certificate at the time of sale. Dismissing the appeal, G HELD: The assessees were entitled to deduction under s. 5(2) (a) (ii) in respect of sales made by them to the purchasing dealer during ·the quarter. [90 0] . (a) At t~e re!evant t~me, the registering au~hority was fully competent to issue the !eg1stration cer~1fic~te to the dealer with retrospective effect fron1 the date of filinc: of the application. The amendment of r. _5_ made in October 1966 did not c_onfe.r any new or additional power on the registering authority but V.'as H -Only clarrficatory 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] A **B** ## **c** **D** E 86 SUPREME COURT REPORTS [1977] 3 S.C.R. **(b) The** **\Vords** **"has** **been registered** **and** **possesses a registration certificate"** **i:._1** **s.** **,7 ( 1)** **should** **be** **construed** **in** **accord** **\Vith** **the general tenor** **of** **the section** **as** _**a**_ **\Vhole,** **and** **in** **a manner which would avoid** **oppressive,** **unreasonable** **and** **nnomalous results.** **So** **construed** **it** **could never be the intention** **of** **the legisla-** **ture** **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 registration** **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** **pres-** **cribed authority** **in** **issuing the registration certificate.** **Adoption** **of** **such a cons-** **truction** **'"'ould** **be to make** **an** **applicant liable to punishment for the laches** **and** **delays** **of** **the authority** **and** **its** **office.** **[90** **B·CJ** _**Chandra Industries**_ **v.** _**The Punjab State**_ _**&**_ _**Ors.**_ **29, S.T.O. 558, approved.** ( **c)** **The requirement** **of-** **r.** **26 will** **be** **substantia1ly satisfied if the number** **of** **the** **registration certificate** **is** **supplied by the claimant alongwith the dec1aration** **oi** **the** **purchasing dealer at the time** **of** **assessment to the Assessing Authority.** [90 El C!v1L 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. 1831of1968). _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 registrat10n under the Punjab General Sales Tax Act 1948, before his application is allowed, 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. Paliala Biscuits Manufacturers Pvt. Ltd. (hereinafter referred to as the assessees) appointed M/s. Rajpura Biscuit Company as their F sole selling agents. The agents made an application on 1.1.1966 in the appropriate form for regis!ration 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 ~im1lar application for obtaining registration certificate under the Central Sales T.ax Act. The appropriate Assessing Authority accepted both these applications and on March 27, 1966 issued the **G** registration Certificate with effect from 1.1.1966. ### ' **H** 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 assessees to the purchasing dealer between 1.1.1966 and 27.3.1966. The reason eiven by the Assessing Authority for refusing this relief to the assessees \~as that during this period, the purchasing dealer was not _in_ _possession_ ASSESSING AUTHORITY _v._ PATIALA BISCUIT _(Sarkaria,_ _!.)_ 87 of the registration certificate, the same having been issued _only on_ A March 27, 1966 . . The asse,·sccs 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 B this period commencing from 1.1.1966, were made to an unregistered dealer. It further noted that apart from the a>sessees, 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 ## impugned order to the extent to which it was contrary to s.5(2) (a) (ii) c of the Act m 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 Constitution, 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 relernnt prm 1sions 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) oaks to a registered dealer of goods .... declared ty him in a prescribed form as being intended' for re-sale in the Slate 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 prescribed form (obtained from the vrescribed authority) is furnished by the dealer who sells the goods." Seetion 7 provides for the registration of dealers. It says : " ( l ) 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 reRis tered dealer shall make application 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--240SCll77 D E F G H 88 SUPREME COURT REPORTS [J 977] 3 S.C.R. 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 lhe purpose of sub-<:lause (ii) of clause (a) of subsection (2) of section 5. A B ### c D E F G ( .+) (5) When any dealer has paid the amount of penalty imposed under s. 23 in respect of any contravention of sub-section (I) of this section, the Commissioner shall register such dealer and grant him a certificate of registration, and such registration shall take effect as it had been made under sub-section (3) of this section on the dealer's application. (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 Auihority may, in addition to the tax so assessed, impose on him by way of penalty a sum not exce('ding 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 appropria~e 't-· Authority in the prescribed Form. The. manner in which such an,;. application 1s 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 : "Wlien the appropriate Assessing Authority, 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 deposited the registration fee into the appropriate Government treasury and that the application is in order, he shall register the dealer and shall bsue a certificate of registration in Form S.T.TTI 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 H 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 ASSESSING AUTHORITY _v._ PATIALA BISCUIT _(Sarkaria,_ I.) ing Authority m from the date of commencement of the liability to pay tax, whichever is later." y ~ Rule 26 provides : 89 A B ## c #### • 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. D The main contention of Shri K. S. Snri, learned Counsel for the appellant is that the declaration form prescribed nuder 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. Strer.s has also been placed on the words "registered and possesses" used in snb-section (! r of Sec. E 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 s;:tles in question, the purcha,ing dealer as well as the selling dealer, both, were in F actual _possessioll_ of the requisite registration certificates. Shri Suri lias adopted tl1e 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 Certifi ~ate r~troypectively1 with effect from the date of the application. It G 1s mamtamed such a power was conferred on the Authority, only by !he Punjab Government 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 H 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 "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 (i.i) of clause (a) of sub-section (2) of section 5 of the Act, shall, on demand, produce in respect of such a sale 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--saJe, in the State of Punjab or such goods are specified in his certificate uf registration for use by him in the manufacture in the State of Punjab of any goods for sale." **A** **B** ## **c** **D** **E** **F** **G** **H** 90 SUPREME COURT REPORTS [1977) 3 S.C.R. made explicit which was formerly implicit. A definite indication is available m 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 Pun;ab_ _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 his power to obtain the registration 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 authonty in issuing the registration certificate. Adoption of such a construction would be to make the applicant liable to punishment for the !aches and delays of the authority and its office." As regards the requirement enjoined by the Form prescribed under Rule 26, ~o enter the number of the registration certificate in the deciaration of the purchasing dealer at the time of sale., the same has to be viewed with reasonable flexibility and reconciled with Rule 5 as clarified by the Notification, dated October 10, 1966. Thus construed harmoniously with the related statutory provisions, the requirement of Rl!ie 26 will be substantially satisfied, if the number of the registration certificate-granted subsequent!.¥, but covering retrospectively the period of the sales in respect of which deduction is claimedis supplied by the claimant along with the declaration of the purchasing dealer al 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 application. A perusal of the regi'stration 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 entitled to the deduction under s. 5(2) (a) (ii) of the Act in respect of ti:e sales made by them to the purchasing dea.ler durlng 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. Tbe appeal fails and is dismissed with costs. **P.B.R.** _Appeal dismissed._ (I) 29, S.T.O. 558. #### ' •