Case: State Of Tamil Nadu Vs. M. K Kandaswami Etc. Etc

2. All the respondents are dealers against whom eitherproceedings have been initiated or assessments have been made under Sectionof the Act on the purchase turnover of certain goods.3. Thein Civil Appeals Nos. 1040. 1041, 1042 and 1044 of 1973 are said to have purchased arecanuts from agriculturists, and thereafter transported those goods outside the State for sale on consignment basis,4. The twenty assessees in Civil Appeals Nos.0, 1061 to 1066, 1068 to 1072 of 1973 are alleged to have purchased Gingelly seeds from agriculturists. Gingelly seeds so purchased were crushed into oil by them.5. The four respondents in Civil Appeals Nos. 1045, 1050, 1058 and 1067 of 1973 are alleged to have purchased butter fromand then converted it into Ghee.6. The three assessees in Civil Appeals Nos. 1051, 1052 and 1053 of 1973 purchased turmeric and grams from agriculturists and then transported those goods outside the State for sale on consignment basis.7. The assessees in Civil Appeal No. 1043 of 1973 are alleged to have purchased castor seeds from (unregistered?) dealers on bought notes and thereafter crushed them into oil.8. It will be convenient to take the last mentioned case as a model. Therein, the Joint Commercial Tax Officer, Leigh Bazar, and Gugai Division, Salem issued a notice datedto the assessee in these terms:"You are liable to pay purchase tax under Sectionof the T. N. G. S. T. Act, 1959, on the purchase price of the Castor Seeds purchased and which was consumed in the manufacture of other goods for sales or disposed of otherwise.The turnover of such purchases made from70 amounts to Rs. 33,03,323.67 and the tax due works out to Rs.are hereby requested to pay the amount as stated above within 10 days of the receipt of this notice,"9. This was followed by a Memorandum datedin which it was inter alia stated :"Admittedly you have purchased the castor seeds through your own bought notes from registered dealers whose transactions are not verifiable. As per Section 10 the burden of proof that any dealer or any of his transactions is not liable to tax under this Act shall lie on such dealer. Therefore, the purchases effected by you have suffered tax already , should be proved by you."10. All the aforesaid dealers (thereafter referred to as the asseessees) filed writ petitions under Article 226 of the Constitution in the High Court of Madras challenging the validity of theproceedings / assessments and the demand notices. The High Court accepted the contention of the assessees that "the circumstances contemplated by that provision (Sectiondid not include the possibility or impossibility of verifiabilitv of the transactions with the dealers from whom the petitioner had purchased.With regard to the purchases of butter, the learned Judges said:"We fail to see how this could be done under SectionButter is taxable totax and is levied on the sales, That being the case, we do not understand how purchase tax can also be levied at the purchase point of the sales which were also theof charge. If the purchases were made from householders or other persons who are not dealers, even so, inasmuch as the transactions were not liable to tax at all under the Act, on that ground. S.could not be invoked."12. On the above reasoning the High Court by a common judgment, datedallowed all the writ petitions and quashed the impugned proceedings and assessments. Hence these appeals by the State.

Reasoning: 17. We are unable to accept this interpretation which would render Sectionwholly nugatory. With due respect, it seems to us that arriving at this erroneous interpretation, the learned judges mixed up concept of goods liable to tax with the transactions liable to tax under the Act.The scheme of the Act involves threebut distinct concepts which may conveniently be described as taxable person. taxable goods and taxable event. All the three must be satisfied before a person can be saddled with liability under the Act. Nevertheless, the distinction between them, if overlooked, may lead to serious error in the construction and application of the Act.It may be remembered that Sectionis a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation.The impugned Sectionis based on Section 7 of the Madhya Pradesh Act. Although the language of these two provisions is not completely identical, yet their substance and object are the same. Instead of the longish phrase. "the goods, the sale or purchase of which is liable to tax under this Act" employed in Sectionof the Madras Act, Section 7 of the Madhya Pradesh Act conveys the very connotation by using the convenient, terse expression, "taxable goods". The ratio decidendi of Ganesh Prasad, (1969) 3 SLR 490 = (AIR 1969 SC 1276  ) (supra) is therefore an apposite guide for construing SectionUnfortunately that decision, it seems was not brought to the notice of the learned Judges of the High Court.The judgment of the learned Judge was affirmed in appeal by a Division Bench of the same High Court (vide. Yusuf Shabeer v. State of Kerala. 32 STC 359   = (1974 Tax LR 1730) (Ker). The Bench expressly absented from the view taken by the Madras High Court in the judgment now under appeal.34. In our opinion, the Kerala High Court has correctly construed Sectionof the Kerala Act which is in pari materia with the impugned S.of the Madras Act. "Goods the sale or purchase of which is liable to tax under this Act in Section(1)" means taxable goods, that is, the kind of goods, the sale of which by a particular person or dealer may not be taxable in the hands of seller but the purchase of the same by a dealer in the course of his business may subsequently become taxable.We have pointed out and it needs to be emphasised again that Sectionitself is a charging section. It creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act, have not due to the circumstances of particular sales suffered tax under Sections 3, 4 or 5, and which after the purchase, have been dealt by him in any of the modes indicated in clauses (a).(b) and (c) of Section