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

2. The appellant is a registered manufacturer of coconut oil and cake who has obtained a certificate of registration in Form VI as per sub-r. (i) of R. 20 of the Travancore-Cochin General Sales Tax Rules, 1950. The business of the appellant for the purposes of this appeal consisted in the purchase of copra, manufacture of coconut oil and cake and sale of the same to parties inside the State of Travancore-Cochin and sale of the oil to parties outside the State.3. In the year 1951-52, the appellant purchased copra of the value of Rs. 7,16,048-1-4 and after manufacturing oil therefrom in his oil mills he sold the oil partly in the State and partly outside the State and the cake entirely within the State. The total value of the oil sold was Rs. 6,76,719-0-11 out of which the sales outside the State were of the value of Rs. 3,67,816-10-1 and the value of the cake sold in the State was Rs.total gross turnover of the appellant was thus Rs. 14,59,923-1-8 and he claimed to deduct therefrom the whole of the purchase price of the copra under R.7 (1) (k) read with R.The net turnover according to him was therefore only Rs. 7, 43, 875-0-4 and claimed to deduct out of this a further sum of Rs. 3,67,816-10-1 being the sale price of oil in inter-State transactions which could not be taxed under Art. 286 of the Constitution, thus showing a net assessable turnover of only Rs. 3,76,058-6-3.4. The Sales Tax Officer 2nd Circle, Quilon, however, fixed the net assessable turnover of the appellant at Rs. 7,54,144-8-4. He took the purchase value of the copra at Rs. 7,16,048-1-4 but added thereto Rs. 3,08,902-6-10 and Rs.67,155-15-5 being the respective values of the oil and the cake sold inside the State, excluding the sale price of inter- State sales of oil, namely, Rs. 3, 67, 816 -10-1 from suchthus excluded the sale price of inter-State sales of oil he deducted only the value of the copra corresponding to the oil sold inside the State namely, Rs. 3, 35, 216-0-0 as against the sum of Rs. 7,16,048-1-4 deducted by the appellant. He added a sum of Rs. 3,385-0-3 being the price of gum sold by the appellant and deducted a further sum of Rs. 6,130-15-6 being the Sales Tax collected by him. He thus arrived at the net assessable turnover of Rs. 7, 54, 144-8-4 and assessed the appellant for sales tax on the same.5. The appellant preferred an appeal to the Assistant Sales Tax Commissioner (S.T.A. No. 1480 of 1953-54) who dismissed the same by his order dated 10th May 1954. A further petition to the Government for redress met with the same fate and the appellant thereupon filed the petition in the High Court of Travancore-Cochin being O.P No.53 of 1954 with the result indicated above.This appeal with a certificate of witness under Art.132 (1) of the Constitution is directed against the order of the High Court of Travancore-Cochin dismissing the Original Petition No. 53 of 1954 filed by the appellant under Art. 226 for quashing the order of the Sales Tax Officer, 2nd Circle, Quilon, assessing him to sales tax on a net assessable turnover of Rs. 7,54,144-8-4 for the year 1951-52 (1st April, 1951 to 31st March 1952) and for issuing proper directions to the Sales Tax Authorities to assess the same according to law.

Reasoning: .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;