Case: A. V. Fernandez Vs. The State Of Kerala

20 (2) at all to these cases. The amount for which the oil is sold inter-State trade or commerce would not be lawfully included in the turnover of the dealer and if the amount for which such oil is sold cannot thus be included in this turnover no occasion would arise for the deduction under R.7 (1) (k) of the value of the coconut and/or copra or groundnut and/or kernel purchased and converted by the dealer into such oil and cake.38. A distinction was sought to be made between the inclusion of the value of such oil in the turnover of the dealer for the purpose of assessment and the levy of tax thereupon. It was urged that the inclusion of such oil in the turnover for the purpose of assessment was quite distinct from the liability for tax which was the only thing prohibited by S. 26 of the Act and therefore the value of such oil could be lawfully included in the turnover involving as a necessary consequence the deduction of the value of the copra purchased by the dealer and converted by him into such oil from such turnover, the resultant turnover being the net turnover for the purposes of assessment, the value of the oil sold in the course of inter-State trade or commerce being further deducted therefrom by reason of the operation of S.26 of the Act, thus making in effect a distinction between assessable turnover and the taxable turnover.39. Reliance was placed in support of this position on the observations of this Court in Chatturam Horilram Ltd. v. Commr. of Income tax, B. and O., 1955-2 S C R 290 at p. 297 : (AIR 1955 S C 619 at p.622) (F) :As has been pointed out by the Federal Court in Chatturam v. Commr. of I.T., Bihar, (1947) F C R 116 at p.126: (AIR 1947 F C 32 at p. 35) (G), (quoting from the judgment of Lord Dunedin in Whitney v. Commrs. of Inland Revenue, (1926) A C 37 (H), there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what person in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay.40. The appellant, however, forgets that the three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same.41. There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed.42. If this distinction is borne in mind, it is clear that S.26 of the Act enacts a provision with regard to non-liability of these transactions to tax and these transactions were therefore taken out of the purview of the Act.43. We are therefore of opinion that the non-obstante provision contained in S. 26 of Act has the effect of taking these transactions out of the purview of the Act with the result that the dealer is not required nor is he entitled to include them in the calculations of his turnover liable to tax thereunder.44. This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealers turnover.45. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution and the corresponding provision enacted in the Act, as above.46. We are, therefore, of opinion that the conclusion reached by the High Court was correct;

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

Explanation:
1[ds].It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the, substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities.our opinion, S.26 of the Act, in cases falling within the categories specified under Art.286 of the Constitution has the effect of setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the imposition of tax on the sale or purchase of such goods and in particular the provisions contained in the charging section and the provisions contained in R.20 (2) and other provisions which are incidental to the process of levying suchfar as sales falling within the categories specified in Art. 286 of the Constitution and the corresponding S. 26 of the Act are concerned, they are, as it were, taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if S. 26 had not been added to the Act. If these provisions of the Act and the rules made thereunder do not apply to the sales falling within those categories, the value thereof cannot be included in the turnover of the dealer and no question would arise of the applicability of R. 7 (1) (k) and R. 20 (2) at all to theseamount for which the oil is sold inter-State trade or commerce would not be lawfully included in the turnover of the dealer and if the amount for which such oil is sold cannot thus be included in this turnover no occasion would arise for the deduction under R.7 (1) (k) of the value of the coconut and/or copra or groundnut and/or kernel purchased and converted by the dealer into such oil andor purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same.41. There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can bethe latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied orthis distinction is borne in mind, it is clear that S.26 of the Act enacts a provision with regard to non-liability of these transactions to tax and these transactions were therefore taken out of the purview of the Act.43. We are therefore of opinion that the non-obstante provision contained in S. 26 of Act has the effect of taking these transactions out of the purview of the Act with the result that the dealer is not required nor is he entitled to include them in the calculations of his turnover liable to tax thereunder.44. This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealersinclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution and the corresponding provision enacted in the Act, as above.We are, therefore, of opinion that the conclusion reached by the High Court was correct;