ONKARLAL NANDLAL v.

STATE OF RAJASTHAN & ANR.

SEPTEMliEK 23, 1985

[P.N, BHACMATI, C.J., R, S, PATHAK AND A, N, SEN, JJ,]

Rajasthan Sales Tax Act, 1954, s.2(o) Explanation II - Intervretatlon of - Effect of incorporating sub-s.(2) of s.4 of Central Sales Tax Act 1956 in the Explanation - l<esale of goods in the course of inter-State trade of commerce - \hether it can still be regarded as resale within the State.

Interpretation of Statutes - &lle of incorporation - Explained.

Practice & Procedure - Appeal directly against an order by an Officer in the hierarchy- When can be entertained - Art. 136,

Constitution of India.

The Rajasthan Sales Tax Act 1954 (State Act) by Sub-section

(o) of section 2 defines "sale" to mean inter alia "any transfer of property in goods for cash or for def erred payment or for any other valuable consideration. Explanation (ii) of section 2(0) provides that "a transfer of property in goods shall be deemed to have been made within the State if it fulfils the requirements of sub-sec. (2) of s. 4 of the Central Sales Tax Act, 1956 (Central Act). Sub-s.(s) of sec.2 defines "taxable turn over" to mean "that par~" of turn over which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods, which have been sold to persons outside the State for consumption outside the State. Sub-s.(l) of sec.4 of the Central Act provides that subject to the provisions contained in sec.3, when a sale or purchase is determined in accordance with sub-s.2 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. Sub-s.(2) lays down that a sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State in the case of specified or ascertained goods, at the time the contract of sale is made.

The appellant-assessee, a registered dealer both under the provisions of the State Act and the Central Act, purchased poppy seeds against Declarations in Form No •. s.T.17 furnished to the

SUPR&'!E COURT REPCRTS [1985] SUPP.3 s.c.R.

selling dealers. In the Declarations in Form No. S.T.17 it was stated that the assessee was purchasing the poppy seeds for the purpose of "resale within the State". The assessee, resold the poppy seeds to different buyers under contracts executed by and between the assessee and the buyers at Bhawani Mandi. Admittedly, when these contracts were made between the assessee and the buyers, the poppy seeds forming subject matter of the contracts were specific goods in deliverable condition situate in Bhawani Mandi and the property in the poppy seeds accordingly passed to the buyers under the contracts in Bhawani Mandi. While completing the assessment of the assessee to sales tax for the assessment years 1975-76 and 1976-77, the Colllllercial Tax Officer included the purchase price paid by the assessee for the poppy seeds in his taxable turn over under the provisions of second proviso to cl.4 of suH.(s) of s.2 of the State Act on the ground that the resales of the poppy seeds effected by the assessee were sales in the course of inter-State trade and connnerce and were therefore not sales within the State and hence the poppy seeds purchased by the assessee were used for a purpose other than that mentioned in the Declarations.

Aggrieved by the aforesaid order, the assessee preferred civil appeals Nos. 207 and 208 of 1983 by special leave directly to Supreme Court. The facts of these appeals are broadly similar to the facts of the other appeals comprised in this group.

Counsel on behalf of the appellant contended (i) that though it was true that the resales effected by it were sales in course of

inter-State trade or connnerce as defined in sub-s.(3) of the Central Act, they were still sales within the State in accordance with the principles formulated in sub-s.(2) of sec.4 of the Central Act; (ii) that the resale by it being sales in the course of inter-State trade or connnerce, were not liable to be taxed by the State and could be taxed only by the'Central Government under the Central Act but that did not deprive the resales of their character of sales within the State which character attached to them by reason of sub-s.(2) of sec.4 which was incorporated in the State Act by Explanation II to suH.(o) of sec.2 of the State Act and (iii) that what was incorporated in Explanation II to suH.(o) of sec.2 of the State Act was only suH.(o) of sec.2 of the State Act and not sub-a.(l) of sec.4 of the Central

Act and therefore the opening words in suH.(l) of sec.4 had no impact on the provisions enacted in the Explanation. On the other hand, counsel for the respondent-Revenue argued (1) that if on an application of the principles set out in sec. 3 of the Central .,, Act, a sale was a sale in the course of inter-State trade or Commerce, it could not possibly be regarded as a sale within the

ONKARLAL NA.~DLA.L v. STATE 1077

State and (2) that since the resales effected by the appellantassessee were admittedly sales in the course of inter-State admittedly sales in the course of inter-State trade or commerce, they could not be said to be resales within the State as envisaged in the Declarations in From No.ST 17.

A.llowing the appeals,

llEill : 1. It cannot be said that the assessee used the goods for a purpose other than that mentioned in the Declarations. The assessee resold the goods within the State as mentioned in the Declarations in Form No. ST.17 furnished by him to be selling dealers. The assessments made on each asses see to the extent that the assessments sought to include in the taxable turnover the purchase price paid by the assessee in respect of the goods purchased against Declarations in Form No.

ST.17 furnished to the selling dealers are set aside. [1090 D-E]

2. There is, no antithesis between a sale in the.course of inter-State trade or coannerce and a. sale inside the State. Even an inter-State sale must have a situs and the situs may be in one State or another. It does not involve any contradictiOn in saying that an inter-state sale or purchase is inside a State or outside it. The situs of a sale may fall for consideration from more than one point of view. It. may require to be considered for the purpose of determining its exigibility to tax as also for other purposes such as the one arising in the present cases. Of course, a sale which is in the course of inter-State trade or commerce cannot be taxed by a State Legislature even if its situs is within the State, because the State Legislature has no legislative competence to impose tax on sale in the coursn of inter-State trade or commerce. That can be done only by Parliament. If therefore a question arises whether a sale is exigible to tax by the State Legislature, it may have to be considered whether it is a sale in the course of inter-State trade or commerce.

The same sale in another context may have to be examined from a different point of view for determining where its situs lies and whether it is a sale inside the State or outside the State. There is therefore no incompatibility in the same sale being both a sale in the course of inter-State trade or commerce within the meaning of sec. 3 of the Central Act as also a sale inside the State in accordance with the principles laid down in sub-s. 2 of sec.4 of the Central Act. [1086 D-H; 1087 A]

3. It is a recognised cannon of construction that an expression used in a rule, bye law or form issued in exercise of

SUPRE:1E COURT REPORTS [1985] SUPP.3 s.c.R. ,..

power conferred by a statute must, unless there is anything repugnant in the subject or context, have the same meaning as is assigned to it under the statute. The expression "resale within the State" in Form No. ST17 must therefore be read in the light of Explanation II to sub-s. (o} of sec.2 of the State Act which lays down as to when a sale shall be deemed to have been made within the State and this provision in the Explanation must govern the determination of what is "resalw within the State" within the meaning of that expression as used in Forom No. ST17.

(1087 C-E]

3,(ii) Explanation II to sub-s.(o} of sec.2 of the State Act, enacts as to when a sale shall be deemed to be a sale within the State by reference to sub-s.(2) of sec.4 of the Central Act.

It is only sub-s. (o} of sec. 2 which is incorporated in Explanation II to sub-s,(o} of sec.2 of the State Act and the Court is called upon to consider as to what is the effect of such incorporation. The Court is not concerned with the interpretation of sub-s.(l) or sub-s.(2) of s.4 in the context of s.3 of the Central Act.

The State Legislature could have very well reproduced the entire language of sub-s.(2) of sec.4 bodily in Explanation II to sub-s.(o) of sec.2 but it preferred to employ a

simplar device by incorporating by reference the provisions of sub-s,(2} of sec.4 in Explanation II to sub-s.(o) of sec.2, The rule of incorporation is that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or a part of itself, into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all. Therefore, Explanation II to sub-s,(o) of sec. 2 must be interpreted as if sub-s. (2) of sec. 4 were written out verbatim in the Explanation and once sub-s. (2) of sec.4 is written out in the Explanation, there is no occasion or need to refer to the Central Act from which this incorporation is made or to its purpose or context. (1087 E-F; 1088 H; 1089 A-C; 1089 C-ll]

In re Wood's Estate (1886) 31 Ch. D, 607 & Shamrao v.

Parulekar, Ill.strict llagistrate, Thana A.I.R. 1952 s.c. 324, relied upon.

Craies on Statute Law, 5th Edition, page 207, Crawford on Statutory .eoDstruction page 110, referred to,

ec-issiooer of Sales tax v. !1!>drej Soap Private Ltd. 23 s. r.c. 489, State of Orissa v. Jobri -Hal 37 s. r.c. 157 and Georgopoulos v. State of Maharashtra 37 S, T, C, 187, approved.

ONKARLAL NANDLAL v. STATE 1079

M/s. Polestar Electronic (Pvt.) Ltd. v. Addl. ec-issiODer Sales Tax and Anr. (1978) l s.c.c. 636, referred to.

In the instant case, at the time when the contracts of resale were made by the assessee, the goods were specific ascertained goods lying at Bhawani Mandi inside the State and if

... that be so, the resales affected by the assessee must be deemed to have taken place inside the State on the principles 1'1d down in sub41.(2) of sec.4 of the Central Act as incorporated in Explanation ll to sub-s.(o) of sec.2 of the State Act. lt did not make any difference to .. this position that the resales were sales in the course of inter-State trade or coumerce.

The only consequence of the resales being sales in the course of interstate trade or COOlllerce was that they were not taxable under the State Legislation. (1089 F-G]

Ordinarily the Supreme Court does not entertain an appeal directly against an order made by an officer in the hierarchy, when there are other remedies by way of appeal or revision provided to an assessee under the statute. However, it would be futile to drive the assessee to the procedure of appeal and revision and then a Writ Petition to the High Court when the High Court in another case has already taken the view that when a resale is made by an assessee which is in the course of inter- State trade or coumerce, it cannot be regarded as a resale within the State and hence such resale would constitute a breach of the Declaration given by the assessee to the selling dealer so as to attract of the applicability and the purchase price paid by the assessee would consequently be liable to be included in the taxable turnover of the assessee, (1081 C-G)

CIVIL APPELIATE JURISDICTION : Civil Appeal Nos. 207-08 Of 1983 etc.

From the Judgment and Order dated 22.9.1982 of the Commercial Taxes Officer, Jhalawar for Tax Assessment Year (1) 1982-83.

Soli J, SorabJee, F.S. Nariman, R.L. &11ieya and S.K.

Jain for the Appellant,

Dr. L.M. Singhvi and H.D. Sharma for the Respondents.

The Judgment of the Court was delivered by

A BHAGWATI, C, J, These appeals by special leave raise a short

question of construction of certain provisions of the Rajasthan

Sales Tax Act 1954 (hereinafter referred to as the State Act), It is a pure question of law and does not depend for its determination on the distinctive facts of any particular case out of this group of appeals but in order to arrive at a proper determination, it is necessary to consider this question in its ,... proper perspective and therefore the broad constellation of facts in which the question arises may be briefly stated.

We will confine ourselves only to the facts of Civil Appeal Nos. 207-208 of 1983 for the facts of this appeal are broadly similar to the facts of the other appeals comprised in this group. The assessee. is a partnership firm which carries on business in grains, oil seeds, poppy seeds~ etc., in Bhawani Mandi in District Jhalawar in the State of Rajasthan.

The assessee is a registered dealer under the provisions of the State Act and is also registered as a dealer under the provisions of the Central Sales Tax Act 1956 (hereinafter referred to Central Act). The assessment year with which we are concerned in this appeal are assessment years 1975-76 and 1976-77. During these two assessment years, the assessee purchased poppy seeds against Declarations in Form No.

S.T. 17 furnished to the selling dealers. 'These Declarations in Form No. S.T. 17 stated that the assessee was purchasing the poppy seeds for the purpose of resale within the State. The assessee, after purchasing the poppy seeds against these Declarations, resold the same to different buyers under contracts executed by and between the assessee and the buyers. at l:Shawani Mandi. It was not disputed that at the date when these contracts were made between the assessee and the buyers, the poppy seeds forming subject matter of the contracts were specific goods in deliverable condition situate in Bhawani Mandi and the property in the poppy seeds accordingly passed to the buyers under the contracts in Bhawani Mandi. The resale of poppy seeds to the buyers were therefore, according to the assessee, sales within the State and it could not be said that

the poppy seeds purchased by the assessee were used by it for any purpose other than the one mentioned in the Declarations furnished by the assessee to the selling dealers. But while

completin~ the assessment , of the assessee to sale tax for the assessment years 1975-76 and 1976-77, the Commercial Tax Officers took the view that the resale of the poppy seeds effected by assessee wer~ sales in the course of inter-State trade and commerce and were therefore not sales within the State and hf •lCe the poppy seeds purchased by the assesseewere used for a purpose

• ONKARLAL NANDLAL v. STATE [BHACMATI C, J,] 1081

other than that mentioned in the Declarations furnished by the assessee to the selling dealers and consequently the purchase price of the poppy seeds was liable to be included in the taxable turn over of the assessee. The Commercial Tax Officer accordingly passed two assessment orders on 22nd September 1982, one for the assessment year 1975-76 and the other for the assessment year 1976-77 and included the purchase price paid by the assessee for the poppy seeds in the taxable turn over of the assessee. The assessee there upon preferred the present appeal by special leave directly to this Court. ·

Now at the outset we should like to make it clear that ordinarily we do not entertain an appeal directly aginst an order made by an officer in the hierarchy, when there are other remedies by way of appeal or revision provided to an assessee under the statute. Here the assessee coud have preferred an appeal against the order of assessment made by the Commercial Tax Officer and he could have then gone in revision to the Board of Revenue and thereafter to the High Court under article 226 or 227 of the Constitution and then, if he was aggrieved by the order passed by the High Court, he could come to this. Court under Article 136. We would have ordinarily insisted on the assessee going through this hierarchy of judicial process and declined to entertain the petition for special leave directly against the order of assessment made by the Commercial Tax Officer. But we were informed by the learned Advocate appearing on behalf of the assessee, and this was not controverted by the learned advocate appearing on behalf ot the Department, that the High Court in another case has already taken the view that when a resale is made by an assessee which is in the course of inter-State trade or commerce, it cannot be regarded as a resale within the State. and hence such resale would constitute a breach of the Declaration given by the assessee to the selling dealer so as to attract of the applicability and the purchase price paid by the assessee would consequently be liable to be included in the taxable turnover of the assessee. It would therefore, argued the learned counsel for the assessee, be futile to drive the assessee to the procedure of appeal and revision and then a Writ Petition to the High Court. This contention urged on behalf of the assessee had force and we accordingly granted special leave and entertained this appeal. Similarly we granted special leave in the other cases as well and hence those appeals are placed before us alongwi th this appeal,

The short but interesting question that arises for consideration on these facts is : when an assessee purchases

goods from a selling dealer against a Declaration in Form No. ST

17 stating that the goods are being purchased by him for resale within the State and he then proceeds to resell the goods and such resale is in the course of inter-State trade or conmerce, would such resale be liable to be regarded as a sale not within the State for the purpose of the Declaration in Form No. ST 17, merely because it is a sale in the course of inter-State trade or conmerce. Would the character of such resale, namely, that it is a sale in the course of inter-State trade or commerce be inconsistent with its being also a sale within the State as contemplated in the Declaration in Form No. ST 17. The determination of this question depends on the true interpretation of a few relevant provisions of the State Act. Section 2 is the definition Section and it defines various terms used in the State Act. Sub-section (o) of Section 2 defines sale to mean inter alia "any transfer of property in goods for cash or for deferred payment or for any other valuable consideration". There are two Explanations to Section 2 sub-section (o). We need not refer to the first Explanation since it has no bearing on the issues arising in these appeals but the second Explanation is material and it may be reproduced as follows

"A transfer of property in goods shall be deemed to have been made within the State if it fulfils the requirements of sub-section (2) of Section 4 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956.)"

"Sale Price" is defined in Section 2 sub-section (p) to mean inter alia 11the amount payable to a dealer as consideration for the sale of any goods, less any swn allowed as cash discount".

Then there is the definition of 11turn over 11 in sub-section (t) of Section 2 and according to this definition,

11turn over" means "the aggregate of the amount of sale price received or receivable by a dealer in respect of the sale or supply of goods in the carrying out of any contract." The expression

11taxable turn over" is defined in sub-section (s) of Section 2 and it provides inter alia that "taxable turn over" means "that part of turn over which remains after deducting therefrom the aggregate amount of the proceeds of sale of goods, which have been sold to persons outside the State for consumption outside the State". It is clear on a combined reading of these definitions that "taxable turn over" means the aggregate amount. of sale price received or receivable by a dealer in respect of sales of goods within the State, It is only sales of goods within the State which can be taxed by the State Legislature Clause (i) of Article 286 of the

,..

• ONKARLAL NAND!AL v. STATE [BHAGIATI C.J,] 1083

Constitution provides inter alia that no law of a State sall

impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place outside . the State and Clause (ii) of that Article empowers Parliament to formulate principles for determining when a sale or purchase of goods can be said to have taken place outside the State. These ' principles have been formulated by Parliament in Section 4 of the Central Act which reads :

"4. When is a sale or purchase of goods said to take place outside a State - (l) Subject to the provisions contained in Section 3, when a sale or purchase is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States.

(2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State -

(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and

(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation."

3ub-section (2) of Section 4 lays down the principles for determining when a sale or purchase of goods shall be deemed to take place inside the State. Once on the application of these principles set out in sub-section (2) of Section 4, it is determined that a sale or purchase of goods has taken place inside a particular State, both according to general principles as also by the express words of sub-section ( l) of Section 4 it must be deemed to have taken place outside all other States. Such sale or purchase can then be fixed only by the State in which it must be deemed to have taken place on the application of the principles set out in sub-section (2) of Section 4 and no other State can impose tax on such sale or purchase by reason of Clause

(i) of Article 286. Parliament has also in Section 3 of the

t Central Act formulated principles for determining when a sale or purchase of goods can be said to take place in the course of inter-State trade or cormnerce and in Section 5 of the Central Act

A principles have been formulated for determining when a sale or purchase of goods can be said to take place in the course of import or export.

These principles were necessary to be formulated because a sale or purchase of goods in the course of inter-State trade or commerce cannot be taxed by a State on account of Entry 92A in List I of the Seventh Schedule of the B Constitution which sets out the topic of tax on sale or purchase I of goods in the course of inter-State tra4e or conmerce within the exclusive legislative competence of Parliament and so far as sale or purchase of goods in the course of import or export is concerned it is also not taxable by a State by reason of Clause

(i) of Article 286, It is necessary to mention here that c sub-section (1) of Section 4 opens with the words "Subject to the provisions contained in Section 311 , but when we turn to Explanation II to sub-section (o) of Section 2 of the State Act

we find that what is incorporated in that sub-section is only sub-section (2) of Section 4 and not sub-section (1) of Section 4 Ill nor Section 3 or Section 5 of the Central Act. ~

Now the lleclarations in Form No. ST 17 furnished by the assessee to the selling dealers uniformally stated that the goods were purchased by the assessee for the purpose of resale within the State. The advantage of furnishing a lleclaration in Form No.

ST 17 is that the selling dealer would not be liable to pay E sales-tax on the sale effected by him against the Declaration and the assessee would not therefore have to pay to the selling dealer sales-tax as part of the purchase price nor would the ."' assessee be liable to pay any purchase tax on the purchase made by him on account of the saving enacted in Section SA of the State Act. But the second proviso to clause (iv) of sub-section F

(s) of Section 2 of the State Act provides as to what would be the consequence if an assessee purchases goods without paying any tax on the strength of a Declaration furnished by him and the goods are then used by him for a purpose other than the one mentioned in the Declaration. It enacts the following provision .. with a view to penalising an assessee who cotmnits a breach of the statement made by him in the lleclaration:

"Provided further that when any dealer has purchased any goods without paying any tax on the strength of any declaration furnished by him and the said goods are used by him for any purpose other than the one mentioned in the declaration, the purchase price of t such goods shall be included in his taxable turn over.

ONKARLAL NANDLAL v. STATE [BHAGWATI C, J,] 1085

It was on the basis of this proviso that the Comercial Tax A Officer sought to tax the assessee on the purchase price paid by it to the selling dealers on the ground that the assessee had not resold the goods within the State but had resold them in the course of inter-State trade or commerce and thus use the goods for a purpose other than that mentioned in the, Declarations in Form No. ST 17. The question is whether this view t, aken by the B Commercial Tax Officer is right.

The principal argument advanced on behalf of the Department was that since the resales effected by the assessee were admittedly sales in the course of inter-State trade or commerce they could not be said to be resales within the State as C envisaged in the Declarations in Form No. ST 17 and the goods were therefore used by the assessee for a purpose other than that mentioned in the Declarations. The.Department contended that if on an application of the principles set out in Section 3 of the Central Act, a sale was a sale in the course of inter-State trade or commerce, it could not possibly be regarded as a sale within D the State and in support of this contention the Department relied on the opening words "Subject to the provisions contained in Section 3" in sub-section (1) of Section 4 of the Central Act.

The assessee on the other hand contended that though it was true that the resales effected by it were sales in the course of inter-State trade or commerce as defined in sub-section (3) of E the Central Act, they were still sales within the State in accordance with the principles formulated in sub-section (2) of • section 4 of the Central Act. The argument of the asessee was that the resa!es effected by it being sales in the course of inter-State trade or commerce were not liable to be taxed by the

State and could be taxed only by the Central Government under the F C.entral Act but that did not deprive the resales of their character of sales within the State which character attached to them by reason of sub-section (2) of Section 4 which was incorporated in the State Act by Explanation II to sub-section (o) of Section 2 of the State Act. The answer given by the assessee to the argument of the Department based on the opening words of G sub-section (1) of Section 4 of the Central Act was that what was incorporated in ; J{planation II to sub-section (o) of Section 2 of the State Act was only sub-section (2) of Section 4 and not subsection (1) of Section 4 of the Central Act and therefore the opening words in sub-section (1) of Section 4 had no impact on the provisions enacted in Explanstion. These rival arguments \ raised an interesting question of interpretation and though it is H integra so far as this Court is concerned we find that there

are a large number of decisions of various High Courts which have accepted the construction contended for on behalf of the assessee. We may refer only to a few of these decisions namely, Colllllissioner of Sales Tax v. Godrej Soap Private Limited 23 s. T.C 489, State of Orissa v. Johri Mal 37 S.T.C 157 and Georgopoulos

v. State of Maharashtra 37 S.T.C 187.

We may first clear the ground by stating facts which were t not in dispute between the parties. There were two basic facts on which there was no dispute. One was that the resales effected by the assessee were sales in the course of inter-State trade or CO!Wllerce within the meaning of section 3 of the Central Act. The assessee did not dispute the correctness of this position. The second was that at the time when the contracts of resale were made by the assessee, the goods were specific ascertained goods situate in Bhawani Mandi, that is, within the State and on the principles formulated in sub-section (2) of section 4 of the Central Act, the resale effected by the assessee were deemed to take place inside the State. The only question is whether by reason of the resale being sales in the course of inter-State trade or commerce, they ceased to be sales inside the State. We do not think the answer to this question admits to any serious doubt. There is, in our opinion, no antithesis between a sale in the course of inter-State trade or commerce and a sale inside the State. Even an inter-State sale must have a situs and the situs may be in one State or another. It does not involve any contradiction in saying that an inter-State sale or purchase is inside a State or outside it. The situs of a sale may fall for consideration from more than point of view. It may require to be considered for the purpose of determining its exigibility to tax as also for other purposes such as the one arising in the present case. Of course a sale which is in the course of inter-state trade or COlllllerce cannot be taxed by a State Legislature even if its situs is within the State, because the State Legislature has no legislative competence to impose tax on sale in the course of inter-State trade or commerce. That can be done only by Parliament. If therefore a question arises whether a sale is exigible. to tax by the State Legislature, it may have to be considered whether it is a sale in the course of inter-State trade or comemerce.

The same sale in another context may have to be examined from a different point of view for determining where its situs lies and whether it is a sale inside the State or outside the State. There is therefore no incompatibility in the same sale being both a sale in the course of inter-state trade or conmerce within the meaning of Section 3 of the Central Act as also a sale ,1

ONKARLAL NANDLA.L v. STATE [BHAGIATI C.J.] 1087

inside the State in accordance with the principles laid down in A sub-section (2) of Section 4 of the Central Act.

Now let us turn to consider the purpose mentioned in the Declarations in Form No. ST 17 furnished by the assessee to the selling dealers.

The purpose for which the goods were purchased by the assessee was stated in the Declarations to be "resale within the State".

Obviously the expression "resale within the State" in Form No. ST 17 wst bear the same meaning it has in the State Act. Form No; ST 17 has been prescribed by the State Government in exercise of the power conferred under Section 26 of the State Act and it is a recognised cannon of construction that an expression used in a rule, by law or form issued in exercise of power conferred by a statute must, unless there is anything repugnant in the subject or context, have the same meaning as is assigned to it under the statute. The expression "resale within the State" in Form No. ST 17 must therefore be read in the light of Explanation II to sub-section (o) of section 2 of the State Act which lays down as to. when a sale shall be deemed to have been made within the State and this provision in the Explanation must govern the determination of what is "resale within the State" within the meaning of that expression as used in Form No. ST 17.

That takes us to a consideration of Explanation II to sub-section (o) of Section 2 of the State Act. This Explanation enacts as to when a sale shall be deemed to be a sale within the

State by reference to sub-section (2) of Section 4 of the Central Act. If a sale fulfils the requirements of .sub-section (2) of Section 4 of the Central Act, it shall be deemed to be a sale within the State and it will be so also for the purpose of the Declaration in Form No.

ST 17. It is with reference to the requirements of sub-section (2) of Section 4 that we shall have to judge whether the resales effected by the assessee were sales within the State. But before we do so, it would be convenient at this stage to refer to the argument of the Department based on the opening words "Subject to the provisions contained in section 3" in sub-section (1) of Section 4 of the Central Act. The Department argued that since the enactment in sub-section (1) of Section 4 is expressly made subject to the provision contained in Section 3, the latter provision must over-ride the former and therefore, once it is found on an application of the principles formulated in Section 3 that a sale is in the course of interstate trade or comnerce, the provision enacted i.n Section 4 would have no application and it cannot be said of such a sale that it

is a sale inside the State. This argument of the Department suffers from an obvious fallacy. In the first place, all that the opening words "Subject to the provisions contained in Section 3" intend to convey is that even where a sale is determined in accordance with sub-section (2) of Section 4 to take place inside a State and therefore outside all other States, it would not exclude the applicability of Section 3 and if it satisfies the requirements of that section, it would still be a sale in the course of inter-state trade or commerce taxable ur..der the provisions of the Central Act. Secondly, we are not concerned here with the interpretation of sub-section (1) or sub-section

(2) of section 4 in the context of Section 3 of the Central Act.

We are concerned only with Explanation II to sub-section (o) of

Section 2 of the State Act and that Explanation refers only to sub-section (2) of section 4 and not to sub-section (1) of that section or to section 3. It is only sub-section (2) of Section 4 which is incorporated in Explanation II to sub-section ( o) of section 2 of the State Act and we are called upon to consider as to what is the effect of such incorporation. The State Legislature could have very well reproduced the entire language of sub-section (2) of section 4 bodily in Explanation II to subsection (o) of Section 2 but it preferred to employ a simpler: device by incorporating by reference the provisions of subsection (2) of Section 4 in Explanation II to sub-section (o) of section 2. The doctrine of incorporation by reference has been succintly explained by Lord Es her, M. R. in In re Wood's Estate

(1886) 31 Ch. D, 607 in the following words :

"It is to put them into the Act of 1855, just as if they had been written into it for the first time. If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it, and, the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all."

This Court also explained the doctrine of incorporation by reference in similar terms in Shamrao v. Parulekar, v. DI.strict Magistrate, lbana A.I.R, 1952 S.C. 324, when Court observed :

"The rule is that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or -~ a part itself, into the earlier, then the earlier Act

... ....

ONKARLAL NANDLAL v. STATE [BHAQIATI C.J.) 1089

must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all. lhis is the rule in England : see Craies on Statute Law, 5th &lition, page 207; it is the law in America: see Crawford on Statutory Construction, page 110; and it is the law which the Privy Council applied to India in Keshor1111 Poddar v. llandulal llallick."

We must therefore proceed to interpret Explanation II to sub-section (o) of Section 2 as if sub-section (2) of section 4 were written out verbatim in the Explanation and once sub-section

(2) of Section 4 is written out in the Explanation, there is no occasion or need to refer to the Central Act from which this incorporation is made or to its purpose or context. We need not therefore allow ourselves to be oppressed by the opening words "Subject to the provisions contained in Section 3" in sub-section

(1) of Section 4 or by the context in which Section 4 occurs in the Central Act.

We must accordingly read Explanation II to sub-section ( o) of Section 2 of the State Act as if sub-section (2) of section 4 of the Central Act were written into it and then proceed to apply the Explanation to the facts of the present case in order to determine whether the resales effected by the assessee were sales inside the State within the meaning of the Explanation. Now it was not disputed on behalf of the Department that at the time when the contracts of resale were made by the assessee, the goods were specific ascertained goods lying at Bhawani Mandi inside the

State and if that be so, the resales effected by the assessee must be deemed to have taken place inside the State on the principles laid down in sub-section (2) of Section 4 of the • Central Act as incorporated in Explanation II to sub-section (o) of Section 2 of the State Act. It did not make any difference to this position that the resales were sales in the course of inter- State trade or commerce. The only consequence of the resales being sales in the course of inter-State trade or commerce was that they were not taxable under the State Legislation. But there is no provision in the State Act which requires that in order that an assessee may be exempt from purchase tax in respect of lpurchase of goods made by him against a Declaration in Form No.

ST 17, he must resell the goods within the State in such a manner

1090 SUPlill1E COURT !(£PORTS [1985] SUPP.3 s.c.R. ,~

A that such resale becomes exigible to tax under the State Legislation. lie had occasion to consider a similar question in M/s Polestar Electronic (Pvt,) Ltd. v. Addl. Comnissioner, Sales

Tax and Aor., [1978] l S.C.C, 636, where we pointed out in relation to the llengal Finance (Sales Tax) Act 1941 as applicable in Delhi that the words "for resale by him" included not only . resale in Delhi but also outside Delhi even if no tax was I exigible under that legislation on sale outside Delhi, But apart frorn the fact that it makes no difference that the resales effected by tl1e assessee were not exigible to tax under the State Legislation, it may be possible to contend that such resales were taxable under the Central Act and if that be so, a substantial c part of the tax recovered under the Central Act would go to the State to agument its revenues.

We are therefore of the view that the assessee resold the goods within the State as mentioned in the Declarations in Forro ,. _ _.......

No. :; r 17 furnished by the assessee to the selling dealers and it D cannot be said that the assessee used the goods for a purpose other than that mentioned in the Declarations. We must therefore allow these ar>peals and set aside the assessments made on each assessee to the extent that the assessments sought to include in the taxable turnover the purchase price paid by the assessee in respect of the goods purchased against Declarations in Form No.

ST 17 furnished to the selling dealers. The respondents will pay £ to the assessee in each appeal costs throughout including the costs of the appeal.

H, L.A, Appeals allowed.