M/S. KANPUR VANASPATI STORES, KANPUR

THE COMMISSIONER OF SALES TAX, U.P. LUCKNOW

January 22, 1973

[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANN,\ J.J.] B

U.P. Salts Tax Act, Sec. 3A : (•successivt Dealer". whether includes an importer who is the first cleal". U, f. Scles Tc~• Act, Sec. 9(1) proviso; "tax adn1itted"-Whether restricted to ad1nission in 111e111oran dum of apptal only.

The assessee, among other things, imports and distributes vanaspati as agent of certain compa:nies..

For the year 1957-58, he filed a return on a turn over of Rs. 1,66,387.3 P and paid tax of Rs. 1060.30.

Before the assessing authority, he accepted the liability of Rs. 10,331H9 p.

On independent enquiries, the Sales Tax Officer came to the conclusion that the turn over was Rs. 58,06,132.31) and the tax liability was to the extent of Rs. 3,62,691. 62P. The tax authority had to resort to best assessment, as the assessce failed to appear, although 30 adjour.nments were given. The assessee filed an appeal to the appellate authority without depositing the tax, as required by proviso to Sec. 9 of the Act.

The appeal was dismissed for noncompli®ce of Sec. 9.

At the inst an~ .of the assessee, the question of maintainability of 'IJ'peal was referred to the High Court. During the pendency of the reference, the asses., e filed wnt petitions challeinging the validity of the Notification issued under section 3A and the legality of the proceedings. The High Court htld that the appeal was properly dismissed. Before this Court. the following questions were raised : (i) that the assessee-appellant being an importer cannot be considered as one of the successive dealers in the series of sales as contemplated by Section 3A aind, therefore, the Notification under section 3(A) was ultra vires, and (ii) that the dismissal of appeal, for want of payment of the admitted tax under section 9( I) , of the Act was illegaL

Dismissing the appeal, HELD : (i) An importer is one of the dealers.

He is the first deal.er in the State.

Chain of successive dealers begins from the first dealer and it goes to the 1ast dealer.

In view of this, dealer in this chaiu can be considered as a "suc'cessive dealer".

The series does not begin in the middle. The notification undelr section 3 is a valid notification Ram Ku1nar Rajendra Swaroop Vs. Co111111issjoner of Sr.fes Tax (19 S.T.C. 241) approved. [4266 C-DJ

(ii) Th.e assessee had accepted the liability of Rs. 10,339/- before the tax authorities. Under Rules 41 (2) read with 12 he was bound to submit the quarterly return and also deposit the tax due in accordance with the return.

The expression "tax'. admitted" in proviso . to Section 9(1) means tax admitted before the assessing authority and not hefore the appellate authority. A• par, ment of the admitt, ed tax is one of the cond1tlons for the maintainab11itv of the appenl, Section 9(1) would be rendered wholly useless, if it is interpreted to me:in ta~ admitted in the memorandum of appeal. Ordinarily. no interpretation •hould be placed on a provision which would have the effect of mnkin11 !he provision either otiose or a dead letter. [4260-H; 427A-DJ

Chanshyam Dass Balmukand v. The State of U.P. & Ors. (23 S. T.C. 282) and United Timber & Cmheu• Products (P) Ltd. v. Sales

1'ax Officer. Cannanor< (28 S.T.C. 526), overruled.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2300 to 2302 of 1969 and 14 & 15 of 1970.

Appeal by a special leave from the judgment dated August 7, 1968 and 18th August 1969 in Sales Tax Reference No. 574 of J 963. and Special appeal No. 330 of 1963, Misc. Application No. 177 of 1963 and S.A. Nos. 423 and 424 of 1968 respectively.

S. V. Gupte, K. L. Arora, S. K. Bagga and S. Bagga, for the nppellant.

N. D. Karklzanis and 0. P. Rana, for the respondent.

The Judgment of the Court was delivered by

HEGDE, J, These are appeals by special leave.

They are filed by the same assessee.

They arise from the decision of a Division Bench of the Allahabad High Court. The judgment under appeal not only deals with references made under the U.P. Sales Tax Act 1948 (hereinafter referred to as the Act) but also the two Writ Petitions filed by the assessee.

The assessee who is a registered dealer under the Act is having his business at Kanpur. It carries on business in hydrogenated oil and washing soap. It also imports and distributes vanaspati as an agent of Malwa Vanaspati and Chemical Company Ltd., Indore.

In these appeals we are concerned with the assessee's assessment of sales tax for the assessment year 1957-58. Its return for that year disclosed a gross as well as net turnover of Rs. 1,66,387.03 P. Along with its return the assessee paid Rs. l ,060.30P. towards the tax due. Before the assessing authority the assessee admitted that its tax liability was Rs. 10,339.l 9P. It is admitted as well as proved that the assessee had collected from its purchasers the said amount of Rs. 10,339.19P. The Sales Tax Officer after making certain enquiries came to the conclusion that the total turnover of the assessee during the assessment year in 4uestion was Rs. 58,06, l 32.30P. The assessee was given opportunity to show that the estimate made by the Sales Tax Officer was not correct. from the records of the case we find that as many as 30 adjournments were given to the assessee to establish its case but the assessee did not take advantage of those opportunities. The case was finally posted for bearing on 24th March, 1962. That day the assessee was absent; but it made an application for adjournment of the case by 15 days. That adjournment was not granted and it could not have been granted because the assessment would have been.barred by the end of the financial year 1961-62. Hence the

assessing authority, on the basis of its best judgment determined the A tum-over of the assessee at Rs. 58,06,132.30P. and determined its tax liability at Rs. 3,62,691.62P. under section 3A of the Act.,

Against the order of assessment the assessee filed an appeal within 30 days from the date of the order of assessment. At the time of filing the appeal the assessee deposited only a sum of Rs. 1, 600. In appears that the office of the AppcJlate Judge raised some objections as to the maintainability of tho appeal. Am:r receiving some explanation from the assessee the appeal was entertained and notice issued to the assessing authority. When the Sales Tax Officer put in his appearance in he appeal he objected to the maintainability of the appeal on the ground that the Priviso to Section 9 of the Act had not been complied with. That objection was accepted and the appeal was dismissed as not mainminable.

Thereafter at the instance of the assessee certain questions were referred to the High Court for ascertaining it~ opinion. During the pendency of that refernce the assessee filed a Writ Petition under Article 226 of the Constitution challenging the validity of the Notification issued under Section 3 A. Thereafter another application was made under Article 227 of the ConsHtution challenging the recovery proceedings. Both the Writ Petitions were dismissed. In the reference made by the AppcJlate Judge the High Court came to the conclusion that the appeal was properly dismissed.

Mr. Gupte, the learned counsel for the assessee-appellant E advanced the following contentions before us;-

(!) That the appeal was illegally dismissed;

(2) That the assessee-appellant being an importer cannot be considered as one of the successive dealers in the series of sales .as contemplated F by Section 3A; and

(3) That the Notification issued under Section 3A was ultra vires the power granted on the government.

In order to appreciate the contentions advanced, it is necessary to refer to certain provisions of the Aot

Section 3 ( 1 ) of the Act provides :

"Subject to the provisions of this Act every dealer shall, for each assessment year, pay a tax at the rate of three pies per rupee on his turnover of such year, which shall be determined in such manner as may be prescribed." (Remaining portion of the provision is not relevant for our purpose).

Section 3A(l) reads thus:

"Notwithstanding anything contained in Section 3, the State Government may, by notification in the official Gazette, declare that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." (Remaininl( por'tion of Section 3A is not relevant for our purpose).

Now we come to Section 9 ( 1) and this section provides :

. "Any dealer objecting to an order allowing or refusing an application for exemption certificate under clause

(b) of sub-section ( 1) of Section 4 or to an order refusing an application under Sec. 30 or to an order inposing a penalty under Section 15-A or an assessment made.under Section 7, 7-A, 7-B 18 or 21, may within 30 days from the date of service of the cfopy of the order or notice of assessment, as the case may be, appeal to such authority as may be prescribed :

Provided that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount of tax admitted by the ap- .pe//ant to be due, or of ruch instalments thereof as may

have become payment : (emphasis supplied)" (Second Proviso is not relevant fcir our present purpose) . .. we may now turn to rules 12 and 41 (2). Rule 12 provides for the submission of the quarterly returns by an importer. Rule 41 prescribes the mode of submission of returns and assessment. Sub- Rl!ltl 2 of Rule 41 prescribes:-

"Before submitting. the return under sub-rule ( 1), the dealer shall deposit in the 'treasury the amount of tax calculated by him on the turnover shown in such return and shall submit the treasury challan with the return or submit with the return a cheque for the amount so calculated." (Proviso is not relevant for our present purpos~).

Having referred to the material provisions in the Act and the Rules, let us now turn biack to the contentions advanced before us.

We shall take up the last two contentions first, namely; that the assessee, who is an importer, not being one of the "successive dealers" could not have been brought to tax under section 3A and as H such the notification issued by the Government under section 3A bringing to tax the import of vam1spati rriade by the assessee from Indore under Section 3-A, is ultra vires.

It may be noted that Section 3 is the general provision.

It provides for multipoint tax. 12-L796Sup. CI/73

To this general Rule cartain exceptions are provided. One of the exceptions is that provided under Section 3A.

That Section permits the Government to Select certain items of goods foia single point levy.

Vanaspirti is one of the items of goods for a single point levy.

The appellant does not contest the competence of the legislature to enact Section 3A. It also does not contest 'th~ validity of the power conferred on the Government to select sale of certain goods for single-point taxation. What is contended on its behalf i. that section 3A provides that single-point levy can be imposed

nly on the "successive dealers" in the series of dealers; an importer is not one such dealer; he being the very first dealer in the

State. Undoubtedly, an importer is one of the dealers. He is the first dealer in the State. The chain of successive dealers begins from the first dealer and it goes upto the last dealer. Any one of the dealers in this chain can be considered as a "successive dealer".

The series do not being in the middle. It must necessarily begin at the very beginning. This is also. the view taken by the Allahabad High Court in Ram Kw:nar Rajendra Swaroop vs. Commissioner of Sales Tax ('). It is an obvious conclusion. If an importer is one of the successive dealers, which undoubtedly he is, necessarily the notification issued by the Government must be considered to be a valid notification. In this view we reject the last two contentions :advanced by Mr. Gupte.

Now turning our attention to the first contention advanced by Mr. Gupte, we find there are several difficulties in the way of acoeepting the same. As mentioned earlier the assessee in his 'return

has shown what its turnover was and at what rate the tax is pay- .able by it. It had admitted before the assessing authority what its turnover was.

Further it had also admitted before that aulhority that rt was liable to pay tax at the rate of one anna per rupee on its

tumO\'er which comes to Rs. 10.339.190. It had also admitted before the same authority that it had collected that amount from its purchasers. It did not dispute before the assessing authority the validity of the notification issued under section 3A. Under Rule 41 (2) read with Rule 12 it was bound to submit quarterly returns.

We take it that it must have submitted its quarterly returns. Under "Sub-rule 2 of Rule 41 the assessee was bound to deposit the tax due from it according to its returns. In other words even according to the assessee it was bound to deposit into the Treasury or pay cheqUe to the assessing authority of Rs. 10,339.19p. Admittedly, it Jiad not done so: What is urged by the learned counsel is that whatever might be the facts admitted in the return and whatever might be the admissions made before the assessing authority it was open to the assessee to take a different stand in its memorandum of appeal and what is relevant for the purpose of Section 9 is the

(I) 19 ST.C 241.

...

' ..

stand taken by the assessee in the memorandum of appeal. In support of that contention two decisions; One of the Allahabad High Court in Ghansh, vam Dass Balmukund. vs. The State of 1 , Uttar P.radesh & Ors. ( 1) and the other of rthe Kerala High Court in United Timber & Cashew Products (P) Ltd. vs; Sales Tax Officer, Cannanore,(') were cited .. Those decisions undoubtedly sup-_ port the contention of the Appellant but we find it difficult to accept the conclusions r.eached by the Allahabad High Court and the Kera la _High Court. In his decision the learned single Judge or

the Kerala High Court has merely followed the Allahabad High Court's.decision. If we come to the conclusion that the expression "tax admitted" in the proviso to Section'9(1) means that admitted in the memorandum of appeal, section 9 can be made whollyuseless.

All that an asses.see has to do is not to admrt his liability in the memorandum of appeal, whatever his stand might have been before the assessing authority. Ordinarily no interpretation should be placed on a provision which would have the effect of making the provision either otiose or a dead letter. Further, to find out the true meaning of the expression "tax admitted" we must take into consideration the remaining words of the proviso namely "or such instalments thereof as may become payable". Those words furnish

a key to the interpretation. If one of the conditions for maintainability of the appeal is payment of the instalments which have become payable under Rule 41 (2). It means that th.e admission that has got to be taken into consideration is that made before the assessing authority and not before the a12pellate authority. 1kit

apart we do not think that the stand taken by the Appellant before the appellate authority can be considered as a qona fide stand.

We are of the opinion that the contention taken by the appe'.hat, before the appellate authority that it cannot be brought within the scope of section 3A of the Act was an after-thoµght.

No such contention was taken before the assessing authority. If the :issessee believed that contention to be true it would not have collected from. its _purchasers the tax @ 1 anna per Rupee Further it is now well settled by the decision of this court that no . one can challenge the .validity of a provision of an Act or Rule made thereunder or .even a notification issued either under the Act or under the Rules made before the authorities constituted urider the - Act. It is true as contended by Mr. Gupte that these decisions were rendered long after 1962 but the fact remains that the decisions in question merely interpret what the law is .

We find neither merit nor equity in these appeals.

Hence these appeals are dismissed with costs; hearing fee one set.

SBW

(I) 23 S.T.C. 282.

Appeals dismissd.

(2) 28 S.T.C. 526. c