Case: The State Of Bihar  Vs. Rat Bahadur Hurdut Roy-Mott Lall Jute Mills &amp; Another

2. Rai Bahadur Hurdut Roy Motilal Jute Mills, Katihar (hereinafter called the first respondent) was at the material time registered as a dealer under the Act and was carrying on business of manufacture and sale of gunny bags, hessian and other jute products at Katihar in the District of Purnea. During the period April 1, 1950 to March 31, 1951, the said respondent sold and despatched its ware worth about Rs. 92,24,386-1-6 to dealers outside the State of Bihar and realised a sum of Rs. 2,11,222-9-6 as sales tax from such dealers. The said respondents assessment to sales tax for the relevant period was taken up by the Superintendent of Sales Tax, Purnea (hereinafter called the second respondent) on May 31, 1953; and in consequence of these proceedings the impugned order of forfeiture came to be passed.3. Meanwhile Art. 286 of the constitution along with other articles was considered by this Court in the State of Bombay v. The United Motors (India) Ltd., 1953 SCR 1069 : (AIR 1953 SC 252 ). The question which this Court had to consider in that case was about the vires of the impugned provisions of the Bombay Sales Tax Act, 1952 (Act XXIV of 1952), and for the decision of the said question Art. 286 fell to be considered. According to the majority judgment in that case Art. 286(1) (a) read with the explanation thereto and construed in the light of Art. 301 and Art. 304 prohibits the taxation or sales of purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. The latter State is left free to tax such sales or purchases and it derives this power not by virtue of the explanation to Art. 286(1) but under Art. 243(3) read with Entry 54 of List II. The view that the explanation does not deprive the State in which the property in the goods passed of its taxing power and that consequently both the State in which the property in the goods passes and the State in which the goods are delivered for consumption have the power to tax is not correct.4. When the first respondents assessment was taken up by the second respondent his attention was invited to this Courts decision in the case of the United Motors, 1953 SCR 1069 : (AIR 1953 SC 252 ): he followed the said decision and held that the turnover of Rs. 92,24,386-1-6 on account of despatch of manufactured jute products to out of State buyers was exempted from the levy of tax; this meant a deduction of the said amount from the amount of the total turnover shown by the first respondent in the return submitted by him according to the provisions of the Act.5. Subsequently the second respondent proceeded against the first respondent under S. 14A of the Act and issued a notice in that behalf on June 18, 1954. By this notice the first respondent was called upon to show cause why the entire amount of Rupees 2,11,222-9-6 which had been recovered by him as sales tax from the dealers should not be forfeited to Government. The first respondent showed cause but the second respondent was not satisfied with the explanation given by the first respondent, and so he directed the first respondent to deposit the said amount into the Government treasury and produce the proof of payment before him within a month of the receipt of his order. This order was passed on February 10, 1955. It shows that the second respondent thought that the matter raised for his decision was simple; the first respondent had collected the amount in question as to under the Act from his customers for and on behalf of the appellant, and so he could not retain the said amount; it must go to the State coffers. He also held that the first respondent had represented to the purchasers that the amount was chargeable as sales tax under the Act and as such the first respondent had clearly contravened the explicit provisions of S. 14A of the Act read with R. 19 of the Bihar Sales Tax Rules (hereinafter called the Rules). It is on these findings that the second respondent passed the impugned order of forfeiture.6. The first respondent then applied to the Patna High Court under Art. 226 and 227 of the Constitution challenging the validity of the said order. It was urged on his behalf that the proviso to S. 14A under which the impugned order was purported to have been passed did not apply to the case of the first respondent, and as such the order was not justified by the said proviso. It was also contended that if it is held that the said proviso justified the impugned order it was ultra vires the State Legislature inasmuch as it violates Art. 20(1) and Art. 31(2) of the Constitution. The High Court did not consider the first contention raised before it; it dealt with the two constitutional points urged by the first respondent and found in his favour on both of them. On these findings the petition filed by the first respondent was allowed, the impugned order or forfeiture was set aside and the proceedings taken against the first respondent under S. 14A.were quashed. The appellant then applied for and obtained a certificate from the said High Court under Art. 132(1) of the Constitution.

Court's reasoning:
16. This question can be considered from another point of view. The provisions which allow deductions to be made or grant exemptions in respect of certain transactions obviously postulate that but for them the transactions in question would be liable to tax under the Act; and so when such transactions are included in the return the registered dealer is allowed to claim appropriate deductions in respect of them. But, the position with regard to S. 33 is entirely different; transactions which attract the provisions of the said section are in substance outside the scope of the Act and no tax can be imposed on them at all.If that be the true position the claim which can be made by the registered dealer in respect of such transactions cannot in law be regarded as a claim for allowable deductions or exemptions properly so-called; it is really a claim that the Act itself does not apply to the said transactions. Therefore, in our opinion it would be straining the language of the second part of the proviso to R. 19 to hold that the transactions in question fell within its purview.17. There is one more point to be considered in this connection. Form VI which has been prescribed for making the returns under S. 12 requires the gross turnover to be mentioned at the outset, and then it provides for the different deductions allowable under the Act. This form was prescribed in 1949 and has not been amended after the addition of S. 33 to the Act. On looking at this form it seems difficult to entertain the argument that the claim for the total exclusion of the transactions in question can be made under any of the headings prescribed in the form. The appellant, however, contends that the first item of gross turnover means the whole of the gross turnover which must include all sale transactions whether they took place within Bihar or outside it, and in support of this argument reliance is placed on the definition of "turnover" contained in S. 2(i). If the whole of the gross turnover has to be mentioned under item 1, it is urged, the claim for the exclusion of the transactions in question can well be adjusted under one or the other of the deduction items prescribed in the form. We are not inclined to accept this argument. The form as it has been prescribed construed in the light of the material provisions contained in Ss. 6, 7 and 8 does not support the case that in prescribing its several items it was intended that the transactions falling under S. 33 should be first shown under item I and then excluded under one or the other of the remaining items of deduction. Besides it may be relevant to point out that the heading of Chapter VII which deals with the submission of returns by dealers is "return of taxable turnover" and it is arguable that the gross turnover mentioned in Form VI may mean "gross taxable turnover" and not the gross turnover including the transactions which are outside the scope of the Act.18. Then as to the argument about the contravention of S. 14A itself it is difficult to appreciate how any provision of S. 14A can be said to have been contravened. S. 14A consists of two parts both of which are put in a negative form. The second part with which we are concerned in effect means nothing more than this, that a registered dealer can make collections of such tax only as is payable by him in accordance with the restrictions and conditions as may be prescribed.If the argument is that the first respondent was not liable to pay any tax and as such was not entitled to make any corresponding collection, then the collection made by him may fall outside S. 14A and be otherwise unjustified or improper; but it does not amount to the contravention of any provision of S. 11A as such.In fact S. 14A itself refers to the restrictions and conditions which may be prescribed, and, as we have already seen, these conditions and restrictions are prescribed by the Rules in general and by R. 19 in particular. So the argument urged under S. 14A takes us back to the question as to whether the proviso to R. 19 has been contravened. In dealing with this question we cannot ignore the fact that the relevant provisions which fall to be construed in the present appeal impose a serious penalty on the registered dealer, and so, even if the view for which the appellant contends may perhaps be a possible view, we seen no reason why the other view for which the first respondent contends and which appears to us to be more reasonable should not be accepted.In the result we hold that the proviso to S. 14A cannot be invoked against the first respondent and so the order of forfeiture passed against him by the second respondent in unjustified and illegal.19. In view of this conclusion it is unnecessary to consider the objections raised by the first respondent against the validity of the proviso on the ground that it contravenes Arts. 20(1) and 31(2) of the Constitution. We may incidentally add that during the course of the arguments before us we have also heard all the learned counsel on the question as to whether the said proviso contravenes the provisions of Art. 19(1)(f) as well.