Case: Commissioner Of Sales Tax,Uttar Pradesh Vs. The Modi Sugar Mills Ltd

1. Judge (Revisions) exercising authority under S. 11 of the United Provinces Sales Tax Act XV of 1948 drew up a statement of case and referred to the High Court of Judicature at Allahabad the following question :2. The High Court answered the question as follows :5. The Modi Food Products Co., Ltd. - hereinafter referred to as "the assessee", manufactures oils - edible and non-edible in its factory at Modinagar. District Meerut, State of Uttar Pradesh. The assessee is registered as a "dealer" under the United Provinces Sales Tax Act XV of 1948. The assessees year of account commences on June 1, and ends on May 31, next year. For the year of account 1946-47, the assessees sales of edible and non-edible oils amounted to Rs. 63,02,849-7-7. The U. P. Legislature enacted with effect from April 1, 1948, the United Provinces Sales Tax Act XV of 1948, the United Provinces Sales Tax Act XV of 1948 providing for the levy of a tax on sales of certain commodities. This Act was amended by Act XXV of 1948, with retrospective operation from April 1, 197. In exercise of the authority conferred by S. 3-A which was incorporated in the Act by Act XXV of 1948, the Government of U. P. issued the following notification :3. Every dealer by or on whose behalf goods mentioned in the schedule aforesaid are held at the close of the 8th day of June, 1948, shall submit a statement showing the quantity and price, of such stock and of the stock of such goods held on the 24th day of May, 1948, to the appropriate assessing authority by the 30th day of June, 1948."8. To this notification was appended a schedule which set out the descriptions of diverse commodities, the "circumstances under which the turnover was to be calculated" the point of tax and the rate of tax. Item 14 of the schedule was "oils of all kinds excluding edible oils but including Vanaspati" and sales thereof by manufacturers in the U. P. were liable to tax at the rate of 6 pies per rupee. By virtue of this notification, non-edible oils became liable to a single point tax as from June 9, 1948, at the time of sale by an importer or manufacturer in the United Provinces9. The assessee submitted its return for the assessment year 1948-49 on its taxable turnover of the previous year ending on May 31, 1947, to the Sales Tax Officer, Meerut Range. On the assessees return, the Sales Tax Officer assessed the tax at Rs. 1,16,238-12-0 holding that sales of non-edible oils for the first 69 days out of the year of the turnover were, to be taxed at the rate of 3 pies, and sales for the remaining 296 days were to be taxed at the rate of 6 pies per rupee. Against the order passed by the Sales Tax Officer, Meerut Range, an appeal was preferred to the Judge (Appeals) Sales Tax, under S. 9 of the Act. The appellate authority modified the order and directed the assessee to pay tax on non-edible oils on the turnover of the previous year at the flat rate of 3 pies per rupee and reduced the tax liability to Rs. 1,08,477-0-3. This order of the Judge (Appeals) was set aside by the revising authority and the order of the Sales Tax Officer was restored. On a direction made by the High Court, the revising authority drew up a statement of the case and submitted for opinion a question which in his opinion arose out of the assessment. The High Court re-framed the question as set out hereinbefore, and answered it in favour of the assessee.

Court's reasoning:
12. Section 18 cl. (c) of the Act which provides for proportionate reduction of tax when in the case of a change or discontinuance taking place in the course of the assessment year of a firm which has been assessed for such year on the turnover of the previous year does not support the contention that an artificial division of the turnover of the previous year is intended in cases of alteration of circumstances during the course of the assessment year. It may be noticed that the provision is limited to changes in or discontinuance of the business of a firm, in terms it does not apply to individuals. It is not for us to consider why the Legislature has not chosen to make a similar provision in respect of individuals. But the fact that the Legislature has made an express provision dealing with changes or discontinuance of business of firms in the course of the assessment year enabling a reduction proportionately to the tax already paid would be a ground indicating that in cases not governed by that provision no alteration in the liability was permissible when the taxable turnover was based on the previous years turnover13. It is not provided that in giving effect to the alteration of the rate during the course of the year of assessment an artificial division of the turnover of the previous year should, in applying the altered rate be made. The Legislature having failed to provide machinery for working out the liability, the attempted projection becomes unworkable. A legal fiction must be limited to the purposes for which it has been created and cannot be extended beyond its legitimate field. The turnover of the previous year is fictionally made the turnover of the year of assessment : it is not the actual or the real turnover of the year of assessment.By the imposition of a different tariff in the course of the year, the incidence of tax liability may competently be altered by the Legislature, but for effectuating that alteration, the Legislature must devise machinery for enforcing it against the tax payer and if the Legislature has failed to do so, the court cannot resort to a fiction which is not prescribed by the Legislature and seek to effectuate that alteration by devising machinery not found in the statuteExpress provision in that behalf there is none: and it is difficult to imply such a provision in the Act. The dates of commencement and closure of the previous year of a tax payer may vary according to the system of accounting adopted by the assessee. The year may commence from any day of any recognised calendar year, and the year may not consist of 365 days. The method of antedating by one year the date on which the alteration is made in the rate or incidence will be manifestly inappropriate. The method of division of the turnover proportionate to the period of the assessment year before the alteration of the rate and after such alteration though prospective, must be deemed to have been made retrospectively in the previous year, and on a day which is removed from the commencement of the year of account by the number of days by which the date of alteration of rate is removed from the commencement of the year of assessment. But the adoption of the turnover of the previous year as the taxable turnover for the year of assessment is itself based on a fiction and in the absence of any express provision either in the Act or the Rules or even in the notification setting out machinery for such a division of the year, we are unable to hold that this scheme of a fictional division may be projected into the previous year to make an artificial division of the turnover for imprinting thereon the altered rate of assessment as from the date of the division. Counsel for the State of Uttar Pradesh submitted several hypothetical cases suggesting that by refusing to adopt this method of division of the previous year of assessment for the application of the altered rate, several anomalies may arise in working out the liability to tax. He submitted that a person who was not a manufacturer or an importer of goods included in the schedule to the notification under S. 3-A may, if he has adopted the turnover of the previous year as his taxable turnover be liable even though it was the intention of the Government to absolve him from liability to pay tax. But a tax payer adopting the turnover of the previous year for payment of tax makes his choice voluntarily and subject to the advantages and disadvantages which that step involves. The fact that he may have to pay tax from which persons choosing the alternative method of submitting of return may partially be exempted, because of an exemption granted in the course of the year, may not, in our judgment, be a ground for not giving full effect to the provisions of the Act as they stand. In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must took squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed : it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiencyThere is no express provision in the Act or in the Rules in that behalf. Nor does the notification suggest that it was so intended. In the case of a dealer who adopts the turnover of the year of assessment for purposes of taxation, the application of the notification altering the rate of tax and the incidence of tax does not present any difficulty. The notification enjoins levy of the tax at the altered rate only in respect of sales taking place after the fixed date, and all sales which preceded that date are to be taxed at the original rate. In the fact of the language employed sales anterior to the date specified could not be affected.