Appeal No 604 of 1966
Appeal by special leave from the judgment and order dated August 5 1964 of the Madras High Court in Tax Case No 131 of 1963 Revision No 87
G Ramanujam and A V Rangam for the appellant
K Srinivasan and R Gopalakrishnan for the respondent
The Judgment of the Court was delivered by Shah J
Ms R Nand Lal  Company hereinafter called the assessee are dealers in wool at Vaniyambadi in North Arcot District in  the State of Madras
In proceedings for assessment of sales tax for the year 1959 60 the assessees were assessed to pay tax at the rate of seven per cent
on a turnover of Rs 208343 05 from sales effected by them to certain registered dealers in the State of Punjab
The assessing authority declined to assess the turnover at one per cent
as prescribed by section 81 of the  because in his view the assessees had submitted declarations in Form C  covering two or more transactions contrary to the first proviso to r 101 of the Central Sales Tax Madras Rules 1957
The Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal Madras confirmed the order of the assessing authority
The High Court of Madras in exercise of its revisional jurisdiction set aside the order of the Sales Tax Appellate Tribunal and declared that the ass s were liable to pay tax on the turnover in dispute at the lower rate
The State of Madras has appealed to this Court with special leave
Section 8 of the as amended by Act 31 of 1958 insofar as it is material provided 1 Every dealer who in the course of inter State trade or commerce a b sells to a registered dealer other than the Government goods of the description referred to in sub section 3 shall be liable to pay tax under this Act which shall be one per cent
of his turnover
2 The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods 647 in the course of inter State trade or commerce not falling within sub section 1 a   b in the case of goods other than declared goods shall be calculated at the rate of seven per cent
or at the rate applicable to the sale or purchase of such goods inside the appropriate State whichever is higher 2A 3 4 The povisions 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 declaration duly filed 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 or b   5 It is common ground that the turnover was in respect of goods of the class specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or for use by him in the process of manufacture of goods for sale
A registered dealer selling goods in the course of inter State trade or commerce of the description referred to in sub section
3 is viable under section 8  1  of the  to pay tax only if the rate of one per cent
on his turnover
But to qualify himself for that rate of tax he has to furnish to the prescribed authority a declaration duly filled and signed by the registered dealer to whom the goods are sold
Such a declaration must contain the Prescribed particulars in the prescribed form obtained from the Prescribed authority
If the selling dealer fails to furnish the declaration in the prescribed form he is liable to pay tax at the higher rate mentioned in sub section
2 b of section 8
The respondents did furnish declarations in Form C  pres cribed under the Rules framed  by the Central Government in exercise of the powers vested by section 1 3 1 d of the 
But each such declaration covered more transactions of sale than one and the aggregate value of the transactions recorded in each declaration exceeded Rs 50001 The sales tax authorities and the Tribunal were of the view that these declarations contravened the express direction of the rule made by 648 the Madras State in exercise of the powers under section 13 4 e of the 
The High Court held that r 101 of the Central Sales Tax Madras Rules 1957 applied only to a transaction of purchase by a dealer in the State of Madras and not to the purchasing dealer in the State of Punjab that the Madras State was incompetent to frame rules governing the conduct of the purchasing dealers in the Punjab that since the corresponding rules framed by the State of Punjab under section 13 4 e of the did not include a provision requiring separate form to be used for each sale transaction the purchasing dealers were not obliged to comply with r 101 of the Madras Rules and that since the Madras selling dealers could not compel the purchasing dealers to comply with the rules relating to furnishing of separate declaration forms ordained by the Madras Rules the declarations were not defective
In any event the High Court held r 101 of the Madras Rules was directory and not mandatory
The assumption made by the High Court that no rule was framed by the State of Punjab under section 13 4 e of the requiring the purchasing dealers in the State of Punjab to issue a separate declaration form in respect of each individual transaction is erroneous
It is conceded before us that the Punjab Government had in purported exercise of the powers under sub sections
3  4 of section 13 of the Central Sales Tax 1956 made r 72 A with effect from February 17 1958 that No single declaration in Form C  prescribed under the Central
Sales Tax Registration and Turnover Rules  1957 shall cover more than one transaction of sale except when the total amount of sales does not exceed five thousand rupees But for reasons which we will presently set out the judgment of the High Court must still be affirmed
Sub section 4 of section 8 of the provides that in order to qualify himself for the lower rate of tax it respect of sales in the course of inter State trade or commerce the dealer selling goods has to furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold
The expressions prescribed authority and prescribed manner mean the authority and manner prescribed by rules under the Act
Section 131 of the  authorises the Central Government to make rules providing inter alia the form in which and the particulars to be contained in any declaration of certificate to be given under the Act
By sub section
3 of section 13 the State Government is authorised to make rules not inconsistent with the provisions of the Act and the rules made under sub section
1 to 64 9 carry out the purposes of the Act and by sub s 4 of section 13 the State Government is in particular and without prejudice to the powers conferred by sub section
3 authorised to make rules for all or any of the purposes set out therein including the authority from whom the Conditions subject to which and the fees subject to payment of which any form of declaration prescribed under sub section
4 of section 8 may be obtained the manner in which the form shall be kept in custody and records relating thereto maintained the manner in which any such form may be used and any such declaration may be furnished In exercise of the power conferred by section 131 d the Central Government has prescribed the form of declaration to be furnished by the purchasing dealer under section 8 4
That is Form C 
The form is in three sections the counterfoil the duplicate and the original
The original contains at the foot of the Form the following Note To be furnished to the prescribed authority in accordance with the rules framed under section 134 e by the appropriate State Government The Madras State Government presuming to act in exercise of authority under section 133 and section 134e framed the Central Sales Tax Madras Rules 1957 r 101 of which reads as follows  A registered dealer who wishes to purchase goods from another such dealer on payment of tax at the rate applicable under the Act to sales of goods by one registered dealer to another for the purpose specified in the purchasing dealer s certificate of registration shall obtain from the assessing authority in the City of Madras and the registering authority at other places a blank declaration form prescribed under rule 12 of the Central Sales Tax Registration and Turnover Rules 1957 for furnishing it to the selling dealer
Before furnishing the declaration to the selling dealer the purchasing dealeror any responsible person authorized by him in this behalf shall fill in all the required particulars in the form and shall also affix his usual signature in the space provided in the form for this purpose
Thereafter the counterfoil of the form shall be retained by the purchasing dealer and the other two portions marked original and duplicate shall be made over by him to the selling dealer Provided that no single declaration shall cover more than one transaction of sales except 650 a in cases where the total amount covered by one declaration is equal to or less than Rs 5000 or such other amount as the State Government may by a general order notify in the Fort
St George Gazette and b Ex facie this rule imposes no obligation upon a dealer in the State of Madras wishing to sell goods  it applies to a dealer wishing to purchase goods from another dealer
The argument that cl
1 of r 10 is intended to apply to a registered dealer in the State of Punjab is negatived by the scheme of the and the Rules framed thereunder
By section 7 of the  every dealer liable to pay tax under the Act has to make an application for registration under the Act to such authority in the appropriate State as the Central Government may by general order specify
The authority to be specified is designated in the Central Sales Tax Registration and Turn over Rules 1957 framed by the Central Government under section 131 the notified authority  vide r 2c
Rule 3 provides that an application for registration under section 7 shall be made by a dealer to the notified authority in Form A 
In exercise of the powers conferred by sub section
1 of section 7 of the  the Central Government issued a notification No SRO 643 dated February 22 1957 specifying the persons mentioned in Col
3 of the Schedule thereto as the authorities to whom the dealers of the description in Col
2 shall make the application for registration
Item 1 of the Schedule requires a dealer having a single place of business in a State to make an application to the authority competent to register him under the general sales tax law of the State if he were liable to be so registered  and item 2 provides that the dealer having more than one place of business in a State shall make an application to the authority competent to register him in respect of the principal place of business under the general sales tax law of the State if he were liable to be so registered
A registered dealer contemplated by r 10 is therefore registered in the State where he has his place of business
The expression assessing authority is defined in the Central Sales Tax Madras Rules 1957 as meaning any person authorized by the State Government to make any assessment under the Madras General Sales Tax Act 1959 Madras Act 1 of 1959
The dealer has again to obtain the form of declaration from the assessingauthority in the State of Madras
These are clear indications that the rules framed by the Madras Government were intended to apply to dealers within the State of Madras
The High Court was in our judgment right in holding that under the scheme of the and the Rules framed under that Act by the State of Madras the injunc 651 tion against the purchasing dealers in r 101 did not apply to dealers in the State of Punjab
It is unnecessary on that view to express any opinion on the question whether the State Government could in exercise of the powers under section 13 4 impose upon dealers not within the State obligations to comply with conditions relating to the contents of the C  Form declarations
Since r 10  1  requiring that a separate declaration form in respect of each individual transaction shall be furnished was intended only to apply to dealers in the State of Madras and not to dealers outside the State proviso to r 101 which directs that no single declaration shall cover more than one transaction of sale except in certain cases has no application to a purchasing dealer outside the State of Madras
Rule 102 provides  A registered dealer who claims to have made a sale to another registered dealer shall in respect of such claim attach to his return in Form the portion marked original of the declaration received by him from the purchasing dealer
The assessing authority may in its discretion also direct the selling dealer to produce for inspection the portion of the declaration marked duplicate
 But this rule does not direct that a declaration covering more than one transaction of sale shall not be given
The rules framed by the Madras Government do not otherwise impose any binding obligation upon the selling dealer in the State of Madras to obtain a separate declaration form in respect of each sale transaction nor do the rules visit him with a penalty on failure to comply with the requirement
We are constrained to observe that the rule making authori ties have failed to appreciate the scheme of section 13 of the 
We are of the opinion that it was not within the competence of the State authorities under section 133  4 of the to provide that a single declaration covering more than one transaction shall not be made
Authority to prescribe such an injunction cannot have its source in section 133 or section 13 4 e  it can only be in the authority conferred by cl
d of section 131 by the Central Government
The Central Government has in exercise of the power under section 1 3 1 d prescribed the form of declaration and the particulars to be contained in them declaration
A direction that there shall be a separate declaration in respect of each individual transaction may appropriately be made in exercise of the power conferred under section 13 1 d
The State Government is undoubtedly empowered to make rules under sub sections
3 and 4 of section 13 but the rules made by them 652 State Government must not be inconsistent with the provisions of the Act and the rules made under sub section
1 of section 13 to carry out the purposes of the Act
If the authority to make a rule prescribing that the declaration shall not contain more than one transaction can be made only under section 13 1 d the State Government cannot exercise that authority
The situation which has arisen in this case could have been avoided if instead of each State making its rules requiring that no single declaration shall cover more than one transaction the Central Government in exercise of the power under section 13 1 d of the Act had made the rules
The appeal fails and is dismissed with costs
GC Appeal dismissed


Summary:
The assessee firm was a dealer  in Madras State
For the year 1959 60 the firm was taxed at 7 on certain sales effected to registered dealers in the Punjab on the ground that the declarations taken from dealers in Punjab in Form C  were not in accordance with r 101 of the Central Sales Tax Madras Rules 1957
The latter rule required that there must be a separate declaration in respect of each transaction whereas the declarations in the present case were in respect of several transactions each
The appellant firm claimed that on the turnover in question it should have been assessed at one Per cent only as laid down in section 81 of the Central Sales Tax Act 1056
The claim was turned down by the Sales tax Authorities and the Tribunal but the High Court held that r 101 of the Central Sales Tax Madras Rules 1957 applied only to transactions of purchase by a dealer in the State of Madras and not to the purchasing dealer in the State of Punjab that the Madras State was incompetent to frame rules governing the conduct of the chasing dealers in the Punjab and that in any event r 101 was tory and not mandatory
The State appealed
HELD i Ex facie r 101 imposes no obligation upon a dealer in the State of Madras wishing to sell goods  It applies to a clear wishing to purchase goods from another dealer
The High Court was further right in holding that under the scheme of the Central Sales Tax Act and the Rules framed under that Act by the State of Madras the injunction against the purchasing dealers in r 101 did not apply to dealers in the State of Punjab
650B 651A Accordingly the proviso to r 101 whichdirects that no single declaration shall cover more than one transaction of sale except in certain cases has no application to a purchasing dealer outside the State of Madras
Nor does r 102
impose any binding obligation upon the selling dealer in Madras to obtain a separate declaration form in respect of each sale transaction
651C F The appellants were therefore to be taxed at the rate of one per cent and not seven per cent on the turnover in question
ii A rule prescribing that a declaration by a purchasing dealer shall not contain more than one transaction can only be made by the Central Government under section 131d and the State Governments do not have 646 power under section 133 and section 134e to make any such rule
The situation which had arisen in this case could have been avoided if instead of each State making its rules requiring that no single declaration shall cover more than one transaction the Central Government in exercise of the power under section 131d of the Act had made the rule
651G H 652A B