Case: Bhawani Cotton Mills Ltd Vs. State Of Punjab &amp; Anr

or non-imposition of tax, on the other. These observations, also, in our opinion, effectively provide an answer to the stand taken by the State, in this case, that S. 12 of the Act provides an adequate relief, by way of refund, even if tax is collected at an earlier stage.23. Having due regard to the various matters mentioned above, we are satisfied that the decision of the High Court, upholding the orders of assessment passed by the Officer, in question, cannot be sustained.24. We have already indicted that there is one other point, arising for decision, in Civil Appeals Nos. 2387 and 2388 of 1966. That relates to the validity of the Notification, issued by the State Government, under S. 5 of the Act, on September 26, 1961. The assessment periods, covered by these two appeals, relate to 1960-61 and 1961-62. At the material time, the definition of the expression purchase, as contained in S. 2 (ff), has been already referred to by us. The definition of the word purchase was first introduced in the Act, by Punjab Act VII of 1958. According to that definition, it was as follows :"Purchase, with all its grammatical or cognate expressions, means the acquisition of goods other than sugarcane, food-grains, and pulses for use in the manufacture of goods for sale, for cash or deferred payment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge."By Punjab Act XIII of 1959, the words other than sugarcane, food-grains and pulses, were omitted. Then there was a further amendment, by Punjab Act XXIV of 1959 and, after the said amendments, Cl. (ff) stood as follows:"Purchase, with all its grammatical or cognate expressions, means the acquisition of goods specified in Sch. C for use in the manufacture of goods for sale, for cash or deferred payment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge."25. This definition was again amended by Punjab Act XVIII of 1960. The rate of tax, provided by the Act, was 4 per cent and, we have already indicated that the Central Act was enacted in 1956; and we have also adverted to the material provisions therein.26. We have adverted to the fact that, under S. 5 of the Act, the rate of tax that is to be livied, is to be contained in the notification that is to be issued under S. 5 (1). Accordingly, on April 19, 1958, the State Government issued, under S. 5 (1), as amended by the Punjab Act VII of 1958, a Notification regarding the rate of tax. In that Notification, the rate of tax on the purchase of goods, by a dealer, for use in the manufacture of goods for sale, was fixed at 2 naye paise in the rupee. Section 2 (ff) was, later on, amended in 1960, by Punjab Act XVIII of 1960, and the definition of purchase, as contained in this provision, has already been referred to, by us. The State Government issued a Notification, under S. 5 (1) of the Act, on September 26, 1961. Under this Notification, it was provided that the rate of tax on the purchase of goods specified in Sch. C, appended to the Act, would be 2 naye paise in the rupee.27. The contention that was taken by the appellant was that, notwithstanding the fact that the definition of the expression purchase, was changed with effect from April 1, 1960, the Notification fixing the rate of tax, under that amended definition, was not issued until September 26, 1961, and it was further urged that, in consequence, no assessment could be made of any tax on declared goods, mentioned in Sch. C, prior to September 26, 1961.28. It was not disputed by the State that no fresh notification was issued, after the expression purchase was amended in 1960, till September 26, 1961. But the State attempted to sustain the levy on the ground that the original notification, of April 19, 1958, would be valid even after the amended definition, in S. 2 (ff), as it now stands. It is open to the State to tax all purchases which come within the definition of S. 2 (ff) as it now stands, but the State, it is pointed out, must be considered to have chosen to levy tax only if the purchases have been made for use in the manufacture of goods for sale. Alternatively, it was also pointed out that the notification, issued in 1958, must be considered to have validity, even after the amendment, by virtue of S. 22 of the Punjab General Clauses Act. We are not increased by these contentions, advanced on behalf of the State.29. S. 22 of the Punjab General Clauses Act has no application whatsoever, to these cases. Apart from the fact that there is no question of the 1958 Act being repealed or re-enacted, it is also clear that the definition of the expression, under S. 2 (ff), as it stood in 1958, on the basis of which the notification of 1958 was issued, is quite inconsistent with amended definition of the expression purchase, in S. a (ff), in 1960. The High Court has sustained the levy of tax under the original notification of 1958, on the basis of S. 22 of the Punjab General Clauses Act, which, in our opinion, does not assist the State. It is not open to the State to urge that it is entitled, in the matter of levying tax, on transactions by way of purchase, to tax only the category of purchases for use in the manufacture of goods for sale. Further, the State has not been able to satisfy US that there is any reasonable classification made, which will enable this Court to sustain the Notification inasmuch as no fresh notification had been issued, under S. 5 (1), till September 26, l961 the assessment for the years 1960-61 and 1961-62, on the basis of the Notification issued in 1958, cannot be sustained, on this additional ground also.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Therefore, the definition of the expression purchase, has reference to the goods specified to Schedule C. The expression turnover in S. 2 (i), will include the aggregate of the amounts of sales and purchases and parts of sales and purchases actually made by any dealer, during the given period. No doubt, certain deductions are also mentioned in the definition of that expression. In the appeals since we are concerned only with tax on purchases, it is not necessary far us to advert to the definition of sale in S. 2 (h), except to note that it excludes goods specified in Schedulethe returns that are being sent, the deader will have to include all purchases of cotton, effected him dining the quarter for which the return is sent. There is no indication, either in the Act or in the rules or the form prescribed a, whether the persons, from whom the appellant purchased cotton, have paid tax not. Section 15 of the Central Act is not restricted only to registered dealers. The will also be nothing to guide the appellant to know as to whether the goods, purchased by it, have been sold to it by its within the period mentioned in C1. (vi) of S. 5 (2) (a) of the Act. Under those circumstances, there is always a possibility, or ever a certainty, of more persons than one having paid tax or being made liable to pay tax in respect of the same goods at different stages That is quite opposed to the provisions of S. 15(a) of the Central At, Even otherwise, it is pointed out that if a person has purchased cotton and sells it after the period provided for in S. 5 (2) (a) (vi) , that party is liable to pay sales tax and would have also paid the same. Another purchaser from the said party will also be liable to pay tax, on the same commodity, if he sells the goods, after the period mentioned in Cl. (vi). That is, two persons are made liable for payment of tax, in respect of the same commodity. In other words, the purchases of the same item of declared goods, by the persons indicated above, are made liable for tax, there can be only one levy and collection of tax at one stage, either on sale or on purchase.We are not impressed with the contentions of the learned counsel for the State. A perusal of the judgment, under attack, shows that the learned Judges themselves were very much impressed by the various aspects presented before them, on behalf of the appellant In fact, the learned Judges observe that the various difficulties, pointed out by the petitioner, before them did exist in the actual working of the Act, but the view of the High Court was that S. 12 of the Act provided for obtaining a refund and, therefore, though the petitioner might have to deposit, initially, the tax in respect of the purchases, when the quarterly returns were being submitted, it was open to it to obtain refunds at the appropriateour opinion, there can be no legal liability for payment of tax accruing, until and unless the Act or the rules framed thereunder prescribe a single point for taxation. For the matter of that, even in the final return to be sent by a dealer, under the Act, the dealer will have to show. in the taxable turnover all purchases of cotton effected by him during the accounting year. We have already referred to the fact that, along with the returns, the tax payable on the basis of those returns will have to be paid. At that stage, the question naturally arises, as to whether there is anywhere in the Act or the rules any provision. by which the person sending the return, will be able to know that the tax in respect of the declared goods purchased by him, have already been paid by another dealer and that the value of the purchases, effected by him need not be shown in his return. He cannot take an off-hand chance in this matter, because there are very heavy penalties imposed on a dealer for failure to include, in the returns sent by him, any transactions in respect of which he is liable to pay tax. If that is the position at the end of a year, when the final return is sent the position becomes still worse when the quarterly returns, accompanied by payment of taxes, are to be sent during the course of the accounting yearin the matter of obtaining refunds, there can be no controversy, that the appellant will have to place, before the officer concerned, particulars of transactions connected with the commodity in question, and also the basis on which it claims the relief. It will be absolutely difficult, if not impossible, for persons like the appellant, to collect materials in this behalf, because, there is no provision contained either in the Act or the rules, on the basis of which it will be entitled to be supplied with all the material information relevant, for sustaining a request for refund. If the Central Act makes it mandatory that the tax: can be collected only at one stage, in our opinion, it is not enough for the State to say that a person, who is not liable to pay tax must, nevertheless, pay it in the first instance, and then claim refund at a later stage. We may state that the question as to how far a party can ask for refund without the order of assessment being set aside, by appropriate proceedings. is highly doubtful: because, at the time when the actual order of assessment is passed, in certain cases, it may not he possible for a party to say whether he is entitled to exemption or not, under sub-cl. (vi) of S. 5 (2) (a) of the Act. If a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a date stage, will not make the original levy valid because, if particular sales or purchases are exempt from taxation altogether they can never be taken into account at any stage for the purpose of calculating or arriving at the taxable turnover and for levying tax.Having due regard to the various matters mentioned above, we are satisfied that the decision of the High Court, upholding the orders of assessment passed by the Officer, in question, cannot be sustained.It was not disputed by the State that no fresh notification was issued, after the expression purchase was amended in 1960, till September 26, 1961. But the State attempted to sustain the levy on the ground that the original notification, of April 19, 1958, would be valid even after the amended definition, in S. 2 (ff), as it now stands. It is open to the State to tax all purchases which come within the definition of S. 2 (ff) as it now stands, but the State, it is pointed out, must be considered to have chosen to levy tax only if the purchases have been made for use in the manufacture of goods for sale. Alternatively, it was also pointed out that the notification, issued in 1958, must be considered to have validity, even after the amendment, by virtue of S. 22 of the Punjab General Clauses Act. We are not increased by these contentions, advanced on behalf of the State.29. S. 22 of the Punjab General Clauses Act has no application whatsoever, to these cases. Apart from the fact that there is no question of the 1958 Act being repealed or re-enacted, it is also clear that the definition of the expression, under S. 2 (ff), as it stood in 1958, on the basis of which the notification of 1958 was issued, is quite inconsistent with amended definition of the expression purchase, in S. a (ff), in 1960. The High Court has sustained the levy of tax under the original notification of 1958, on the basis of S. 22 of the Punjab General Clauses Act, which, in our opinion, does not assist the State. It is not open to the State to urge that it is entitled, in the matter of levying tax, on transactions by way of purchase, to tax only the category of purchases for use in the manufacture of goods for sale. Further, the State has not been able to satisfy US that there is any reasonable classification made, which will enable this Court to sustain the Notification inasmuch as no fresh notification had been issued, under S. 5 (1), till September 26, l961 the assessment for the years 1960-61 and 1961-62, on the basis of the Notification issued in 1958, cannot be sustained, on this additional ground also.