Case: Mohanlal Hargovinddas Vs. State Of Madhya Pradesh &amp; Ors

2. The appellant is a firm carrying on the business of manufacturing and selling bidis. During the period April 1, 1951 to September 6, 1955, the appellant was registered as a "dealer" under the Central Provinces and Berar Sales-tax Act, 1947 (C. P. and Berar Act XXI of 1947) (hereinafter called the Act). For the purposes of manufacture of bidis, the appellant imported from the State of Bombay large quantities of tobacco. During the period from November 7, 1953 to October 26, 1954, the appellant imported from that State tobacco worth Rs. 84,29,580/15/- and during the period from October 27, 1954 to November 14, 1955 the appellant imported tobacco worth Rs. 1,38,27,630/12/6. In the usual course the tobacco, after being imported into the State of Madhya Pradesh, was rolled into bidis which were largely exported to other States for sale and consumption in those States. In respect of the imports of tobacco the Sales Tax authorities required the appellant to file returns in Part B of Form IV clause 2 of which stated as follows:"Purchase price of goods other than those mentioned in Schedule II purchased on declaration under rule 26 as being goods specified in the registration certificate as intended for use as raw materials in the manufacture of any goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilised for any other purpose, such as ones own consumption or for export outside the State for which deduction is claimed under Section 27 A or for use in the manufacture of goods exported outside the State for which deduction is claimed under Section 27-A, etc."The appellant filed a return for the quarter from May 3, 1954 to July 29, 1954 showing the amount of Rs. 16,47,567/3/3 as the purchase price of goods purchased on declaration as being goods specified in the registration certificate as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilised for any other purpose. In the return which was filed for the quarter beginning from July 27, 1954 and ending with October 26, 1954, the appellant did not fill in any figure but showed the above item as blank contending that the Sales-tax authorities were not entitled to levy any purchase tax against it in respect of the same. The appellant thereafter moved this Court under Art. 32 of the Constitution for the issue of a writ of mandamus or any other suitable writ to restrain the respondents from enforcing forcing the provisions of the Act and for other consequential reliefs. In Writ Petition No. 67 of 1955 decided on September 20, 1955 - M/s. Mohanlal Hargovind Das v. State of Madhya Pradesh, 1955-2 SCR 509   : (AIR 1955 SC 786  ) this Court observed in the course of its judgment as follows :"All the transactions entered into by a registered dealer, however, do not necessarily import a liability to pay tax under the Act because whenever the question arises in regard to his liability to pay any tax under the Act, such liability would have to be determined in spite of his being a registered dealer with reference, inter alia, to the provisions of Section 27-A of the Act which incorporates within its terms the bans which have been imposed on the powers of the State Legislatures to tax under Article 286 ; (1) (a) and (2) of the Constitution. If, therefore, a dealer who has got himself registered as dealer under the provisions of Section 8 (1) of the Act is sought to be made liable in respect of transactions of sale effected by him he could claim exemption from such liability if the transactions of sale or purchase took place in the course of inter State trade or commerce after the 31st March, 1951, except in so far as Parliament may by law otherwise provide. In the case before us there was no such provision made by Parliament and the transactions in question were all after the 31st March, 1951, with the result that the ban imposed by Article 286 (2) was in operation and if the transactions took place in the course of inter-State trade or commerce not only were Shri Chhaganlal Ugarchand Nipani and Shri Maniklal Chunanlal Baroda exempt from the liability to pay the tax on these transactions but the petitioners also were similarly exempt. No liability, therefore, could he imposed either for Sales Tax or for Purchase Tax within the terms of the Act on these transactions which as above stated took place in the course of inter-State trade or commerce. "This Court accordingly granted a writ to the following effect :"The respondents will be restrained from enforcing the Central Provinces and Berar Sales Tax Act, 1947, and its provisions against the petitioners and from imposing a tax in respect of the transactions in question and in particular from imposing a tax on the purchase price of goods purchased on the declarations under Rule 26 being goods specified in the registration certificate as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilised for any other purpose under the provisions of Section 4 (6) of the Act."In view of this writ the Assistant Commissioner of Sales Tax, Jabalpur, by his two orders, dated September 9, 1956 and September 10, 1956, exempted the appellant from tax on the purchases of tobacco made in the State of Bombay, which, after being imported into the State of Madhya Pradesh, was used as raw material for manufacturing bidis exported to other States. The appellant preferred appeals to the Deputy Commissioner of Sales Tax against the two orders, dated September 9, 1956 and September 10, 1956. In the meantime, on March 21, 1956, the Sales Tax Laws Validation, Act, 1956 (Act 7 of 1956), which repealed the Sales Tax Validation Ordinance 3 of 1956, had come into force. Thereupon, on December 5, 1958, the Deputy Commissioner of Sales Tax issued two notices to the appellant proposing to levy tax on purchases of tobacco during the period from November 7, 1953 to September 5, 1955 from non-resident dealers under S. 4 (6) of the Act. The appellant filed in the High Court of Madhya Pradesh Miscellaneous petition No. 395 of 1958 praying for grant of a writ it of certiorari to quash the notices dated December 5, 1958 issued by the Deputy Commissioner of Sales Tax and for a writ in the of mandamus us restraining the respondents from enforcing the provisions of the Act and of the Central Act 7 of 1956 and from imposing any tax on purchases of tobacco and other raw materials from non-resident dealers. By its judgment, dated February 19, 1962, the High Court of Madhya Pradesh rejected the petition of the appellant.

Court's reasoning:
In this connection reference may be made to S. 2 (j) (a) (ii) which states that a selling dealer is entitled to deduct from his turnover sales to a registered dealer of goods "specified in such dealers certificate of registration as being intended for use by him as raw materials in the manufacture of any goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State". It is manifest that the only legitimate object which the purchasing dealer seeks in having a class of goods specified in the certificate of registration as "raw materials" is to purchase the goods tax-free in the sense contemplated by the Act. By asking for such specification the dealer represents that he intends to use the goods specified in the manufacture of other goods for the purpose of sale by actual delivery in the State of Madhya Pradesh for the purpose of consumption that State. In this context reference should be made to declarations made by the appellant to the Bombay dealers printed at page 88 of the Paper Book. In these declarations the appellant stated that it was purchasing tobacco for use as raw materials in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State and that tobacco was so specified in its certificate of registration. As we have already said, the certificate of registration granted to the appellant must be construed in the context of S. 8 as it stood after its amendment and the declarations of the appellant made to the Bombay dealers. If the language of the certificate is so construed in the context of the amended S. 8 of the Act and along with the declarations of the appellant, it is manifest that the appellant is liable to pay tax on tobacco imported from Bombay dealers for the relevant periods and that the requirements of S. 4 (6) of the Act are satisfied in this case. The view that we have taken is borne out by the decision of this Court in Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner of Sales Tax, Punjab, 1965-16 STC 310  : (AIR 1965 SC 957  ) in which it was held that the registration certificate was only evidence that the assessee was a registered dealer for purposes of certain commodities to be used in manufacture and any formal defect in the registration certificate was not material. We, therefore, hold that the technical omission of the Sales Tax Officer to make a specific entry in the certificate will not confer any benefit on the appellant if there is other incontrovertible evidence in the case to how that the appellant did purchase the goods specified in the certificate as raw materials in the manufacture of any goods for the purpose of sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State. We, therefore, hold that Mr. A. K. Sen has not been able to make good his argument on this aspect of the case.