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PETITIONER: ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA ANDORS.

       Vs.

RESPONDENT: M/S. PATIALA BISCUITS MFG. CO. NOW AS DALMIABISCUIT PVT. LTD

DATE OF JUDGMENT01/03/1977

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH BHAGWATI, P.N. FAZALALI, SYED MURTAZA

CITATION:  1977 AIR 1339            1977 SCR  (3)  85  1977 SCC  (2) 389

ACT:             Punjab General Sales Tax Act, 1948--Assessee entitled to         certain deductions if seller and buyer are registered  deal-         ers--Both  applied  for  registration--Certificates   issued         later  with retrospective effect--Dealers--If should  be  in         physical possession of registration certificate at the  time         of sale to claim deduction.

HEADNOTE:             According to s. 5(2)(a)(ii) of the Punjab General  Sales         Tax  Act,  1948, taxable turnover means the part of a  deal-         er’s  gross turnover during any period which  remains  after         deducting  therefrom the turnover during that   period,   on         sales  to a registered dealer of goods declared by him in  a         prescribed   form   as  being intended for  re-sale  in  the         State.  Section 7(1) provides that no dealer shall carry  on         business  as  a  dealer unless he has  been  registered  and         possesses a registration certificate.  Rule 5 of the  Punjab         General  Sales  Tax Rules, 1949 as amended in  October  1966         provides that the certificate of registration issued by  the         Assessing Authority shall be valid from the date of  receipt         by him of the application for registration or from the  date         of  Commencement  of the liability to pay tax  whichever  is         later.   Rule 26 provides that a dealer  claiming  deduction         under s. 5(2)(a)(ii) shall produce on demand the cash  memos         or  bill  and  a declaration in writing  by  the  purchasing         dealer that the goods specified in the certificate of regis-         tration are for use by him.             The assessee (respondent) and the purchasing dealer, the         sole  selling  agent of the assessee, made  applications  on         January  1, 1966 for registration as dealers. The  registra-         tion certificates were issued to them on March 27, 1966 with         retrospective effect from January 1, 1966.             The  Assessing Authority rejected the  assessee’s  claim         for deduction under s. 5(2)(a)(ii) of sales made by them  to         the  purchasing dealer on the ground that during the  period         between January 1 and March 31, 1966, the purchasing  dealer         was not in possession of the registration certificate.             In  a  petition under Art. 226 of the  Constitution  the         High Court held  that since the certificate of  registration         had been granted with effect from January 1, 1966, i.e.  the

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       date  of  application, it could not be said that  the  sales         during the quarter were to an unregistered dealer.             On appeal it was contended that to be entitled to deduc-         tion  under the Act both the purchasing and selling  dealers         ’should  be in physical possession Of the registration  cer-         tificate at the time of sale.         Dismissing the appeal,             HELD: The assessees were entitled to deduction under  s.         5(2)(a)(ii) in respect of sales made by them to the purchas-         ing dealer during the quarter.         [90 G]             (a) At the relevant time, the registering authority  was         fully  competent  to issue the registration  certificate  to         the dealer with retrospective effect from the date of filing         of  the application.  The amendment of r. 5 made in  October         1966  did  not  confer any new or additional  power  on  the         registering authority but was only clarificatory of the law.         The language of s. 7 is clear that the registering authority         had  the power to give effect to the registration  from  the         date of making the application.  [90 F; A]         86         (b) The words "has been registered and possesses a registra-         tion  certificate" in s. 7(1) should be construed in  accord         with  the general tenor of the section as a whole, and in  a         manner  which  would avoid  oppressive,   unreasonable   and         anomalous  results.   So  construed it could  never  be  the         intention  of  the legislature that a dealer liable  to  pay         tax, who has in compliance with the requirements of s.  7(2)         and (3) done all which lay in his power to obtain the regis-         tration certificate, should pull down his shutters and  keep         his  business closed under pain of being punished and  await         indefinitely  the  pleasure and leisure of  the   prescribed         authority in issuing the registration certificate.  Adoption         of such a construction would be to make an applicant  liable         to punishment for the laches and delays of the authority and         its office.  [90 B-C]         Chandra  Industries  v. The Punjab State & Ors.  29,  S.T.O.         558, approved.              (c)  The  requirement of r. 26  will  be  substantially         satisfied  if the number of the registration certificate  is         supplied  by the claimant alongwith the declaration  of  the         purchasing dealer at the time of assessment to the Assessing         Authority.                                                       [90 E]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 721 of 1972.              (From  the Judgment and Order dated 13.10.1970  of  the         Punjab & Haryana High Court in Civil Writ No. 1831 of 1968).         K.S. Suri, for the appellants.         R.S. Sharma and A. D. Mathur, for the respondent.          The Judgment of the Court was delivered by             SARKARIA, J.--The short question involved in this appeal         on  certificate,  directed against a judgment  of  the  High         Court of Punjab and Haryana is: Whether the sales made to. a         dealer  who  has applied for registration under  the  Punjab         General  Sales Tax Act 1948, before his application  is  al-         lowed, are to be treated as sales to an unregistered  dealer         or registered dealer, when the registration is effected from         the date of the application ?             M/s. Patiala Biscuits Manufacturers Pvt. Ltd. (hereinaf-         ter  referred  to as the assessees) appointed  M/s.  Rajpura         Biscuit  Company as their sole selling agents.   The  agents

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       made an application on 1.1.1966 in the appropriate form  for         registration as a dealer under the Punjab General Sales  Tax         Act,  1948 (hereinafter called the Act).   On the same  day,         the  agents (referred hereafter as the purchasing    dealer)         made  a similar application for obtaining registration  cer-         tificate, under the Central Sales Tax Act.   The appropriate         Assessing Authority accepted both these applications and  on         March  27, 1966  issued  the registration  Certificate  with         effect from 1.1.1966.             The assessees filed their return for the quarter  ending         March  31, 1966 in April, 1966 and claimed deductions  under         s.  5(2)(a)(ii)  in  respect of sales of the  value  of  Rs.         32,56,267.35  made by them between 1-1-1966 to 31-3-1966  to         the  purchasing  dealer.  The Assessing  Authority,  Patiala         rejected  this  claim  and assessed tax,  amounting  to  Rs.         1,99,558.94. on the proceeds of the sales made by the asses-         sees   to  the  purchasing  dealer  between   1.1.1966   and         27.3.1966.   The reason given by the Assessing Authority for         refusing  this relief to the assessees was that during  this         period, the purchasing dealer was not in possession         87         of the registration certificate, the same having been issued         only on March 27, 1966.              The assesses impugned the validity of this order of the         Assessing  Authority by a writ petition in the  High  Court,         under Articles 226/227 of the Constitution.   The High Court         held  that  since the certificate of registration  had  been         granted with effect from 1-1-1966, which was the date of the         application, it could not be said that the sales during this         period  commencing from 1.1.1966, were made to  an  unregis-         tered dealer.   It further noted that apart from the  asses-         sees, the purchasing dealer had also, been taxed with regard         to the same transactions  resulting in double taxation which         was  against the basic scheme of the Act, the Rules and  the         notifications  issued thereunder.   On these  premises,  the         High  Court  allowed the writ petition and quashed  the  im-         pugned  order  to  the extent to which it  was  contrary  to         s.5(2)(a)(ii)  of the Act in respect of sales  made  between         1.1.1966  and  27.3.1966. The High Court however  granted  a         certificate  under Art. 133(1)(a) and (c) of  the  Constitu-         tion,  on the basis of which the Revenue has come in  appeal         to this Court.              It would be appropriate to have, at  the outset, a look         at   the relevant provisions of the Act and the Rules.         The material provision is in s. 5(2) (a) (ii) which reads as         under:                             "In  this  Act the  expression  "taxable                       turnover"  means the part of a dealer’s  gross                       turnover during any period which remains after                       deducting therefrom:                         (a)   his   turnover  during   that   period                       on .......                           (i)   ....         ....                           (ii)  sales  to  a  registered  dealer  of                       goods   ....  declared by him in a  prescribed                       form  as  being intended  for re-sale  in  the                       State of Punjab  ........                                 Provided that in case of such sales,                       a declaration duly filled up and signed by the                       register dealer to whom the goods are sold and                       containing  prescribed particulars on  a  pre-                       scribed  form  (obtained from  the  prescribed                       authority)  is  furnished by  the  dealer  who                       sells the goods."                       Section  7  provides for the  registration  of

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                     dealers.  It says:                          "(1) No dealer shall, while being liable to                       pay tax under this Act, carry on business as a                       dealer  unless  he  has  been  registered  and                       possesses a registration certificate.                           (2)  Every dealer required by  sub-section                       (1) to be registered dealer shall make  appli-                       cation in this behalf in the prescribed manner                       to the prescribed authority.                          (3) If the said authority is satisfied that                       an  application for registration is in  order,                       he shall, in accordance with                       7--240SCI/77                       88                       such rules and on payment of such fees as  may                       be  prescribed, register the  application  and                       grant him a certificate of registration in the                       prescribed  forms which may specify the  class                       or  classes of goods for the purpose  of  sub-                       clause (ii) of clause (a) of subsection (2) of                       section 5.                           (4) ...                           (5) When any dealer has paid the amount of                       penalty imposed under s. 23 in respect of  any                       contravention  of  sub-section  (1)  of   this                       section, the Commissioner shall register  such                       dealer  and grant him a certificate of  regis-                       tration,  and  such  registration  shah   take                       effect  as it had been made under  sub-section                       (3)  of this section on the dealer’s  applica-                       tion.                            (6) ..             In case a dealer commits default is not getting  himself         registered  as  required  by Sec.  7,  certain  consequences         follow.  Under s.11(6) such a defaulting dealer is liable to         be assessed on the basis of best judgment and the  Assessing         Authority may, in addition  to  the  tax so assessed, impose         on  him by way of penalty a sum not exceeding one  and  half         times  that amount.   Such a defaulter is further liable  to         prosecution  under s. 23 (1) for carrying on business  as  a         dealer   in contravention of the provisions of s. 7(1),  and         on conviction, he can be sentenced to fine not exceeding Rs.         1,000/-.             The  application for registration has to be made to  the         appropriate  Authority in the prescribed Form.   The  manner         in  which such   an application is to be dealt with  by  the         Authority is provided in Rule 5 of the Punjab General  Sales         Tax Rules, 1949 framed under the Act. This Rule as it  stood         before the amendment of October 10, 1966 was as follows:                             "When the appropriate Assessing Authori-                       ty, after making any enquiry that he may think                       necessary, is satisfied that the applicant  is                       a bona fide dealer and has correctly given all                       the requisite information that he has deposit-                       ed  the registration fee into the  appropriate                       Government  treasury and that the  application                       is in order, he shall register the dealer  and                       shall  issue a Certificate of registration  in                       Form  S.T.III  or  S.T. IV  according  as  the                       dealer  has  one  or more than  one  place  of                       business in Punjab."             Rule 5 was amended by Punjab Government Notification No.         GSR237/PA 46/48/S-27/Amd(5)/66 dated 10th October, 1966, and         in  place of the last sentence commencing  with  the   words         "in   .Form S.T  ....  "of the old Rule, the  following  was

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       substituted:                             "  ....  in Form S.T. IV which shall  be                       valid from  the date of receipt of application                       for registration by the Assess-                       89                       ing Authority or from the date of commencement                       of  the  liability to pay  tax,  whichever  is                       later."                       Ride 26 provides:                             "A dealer, who wishes to deduct from his                       gross turnover the amount in respect of a sale                       on the ground that he is entitled to make such                       deduction  under the provisions  of  subclause                       (ii)  of  clause  (a) of  sub-section  (2)  of                       section  5 of the Act, shall, on demand,  pro-                       duce in respect of such a sate the copy of the                       relevant  cash memo or bill, according as  the                       sale is a cash sale or a sale on credit, and a                       declaration   in writing in Form S.T. XXII  by                       the  purchasing dealer or by his  agent,  that                       the goods in question are intended for re-sale                       in  the  State  of Punjab or  such  goods  are                       specified  in his certificate of  registration                       for  use  by  him in the  manufacture  in  the                       State. of Punjab of any goods for sale."                       Rule  26 was also amended later.  The  amended                       Rule  is,  in substance, the  same,  excepting                       that it was clarified that the dealer claiming                       deduction  has to produce the  declaration  of                       the purchasing dealer, in the prescribed form,                       at the time of assessment.             The  main contention of Shri K.S. Suri, learned  Counsel         for  the appellant is that the declaration  form  prescribed         under  the  old Rule 26, as it stood at the  material  time,         required the purchasing dealer     to specify at the time of         the  sale, in the prescribed Form S.T. XXII, the  number  of         the registration certificate.   Stress has also been  placed         on the words "registered and possesses" used in  sub-section         (1)  of Sec. 7, which according to Counsel, indicate that  a         dealer  having a taxable turnover, cannot validly  carry  on         his  business,  unless he is actually registered and  is  in         physical possession of the  registration  certificate issued         under  Sec. 7.   A compliance with the  aforesaid  mandatory         requirement of s. 7(1) and Rule 26, Form XXII--proceeds  the         argument--could be possible only if at the time of the sales         in  question, the purchasing dealer as well as  the  selling         dealer,  both, were   in actual possession of the  requisite         registration  certificates.    Shri  Suri  has  adopted  the         reasoning  of  the Sales-Tax Tribunal in Appeal No.  109  of         1967-68  (M/s. Darshan Soap Mills, Batala Road, Amritsar  v.         The State) decided on 12-2-1968.             It is contended that Rule 5, as it stood at the material         time, did not empower the registering Authority to grant the         registration  Certificate retrospectively, with effect  from         the  date of the application.It is maintained such  a  power         was  conferred on the Authority, only by the Punjab  Govern-         ment Notification No. GSR-237/PA 46/48/S-27 Amd.(5)/16  with         prospective effect from October 10, 1966.             Taking the last point first, we are of opinion that  the         amendment  of Rule 5 by the Punjab Government  Notification,         dated October 10, 1966, did not confer any new or additional         power on the registering Authority.   The power to grant the         registration  Certificate   with effect from the date of the         application  was  already there.   The  amendment  was  only         clarificatory of the law as it stood prior to it.   It only

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       90         made  explicit  which  was formerly  implicit.   A  definite         indication  is available in the language of sub-section  (5)         read  with sub-sections (2) and (3) of s. 7, . itself,  that         the  registering Authority had the power to give  effect  to         the registration from the date of making the application.             Be  that at it may, the words "has been  registered  and         possesses a registration certificate" used in sub-s. (1 ) of         s.  7 have to be construed in accord with the general  tenor         of  the  Section as a whole, and in   a manner  which  would         avoid  oppressive, unreasonable and anomalous results.    As         rightly  pointed  out in Chandra Industries  v.  The  Punjab         State  and ors.(1), it could never be the intention of   the         Legislature  that  a  dealer liable to pay tax  who  has  in         compliance with the requirements of sub-sections (2) and (3)         of  s. 7, "done all which lay in power to obtain the  regis-         tration certificate, should pull down his shutters and  keep         his business closed under pain of being punished   under  s.         23(1) and await indefinitely the pleasure and leisure of the         prescribed  authority in issuing the  registration  certifi-         cate.    Adoption such a construction would be to  make  the         applicant liable to punishment for the laches and delays  of         the authority and its office."             As  regards  the requirement enjoined by the  Form  pre-         scribed under Rule. 26, to enter the number of the registra-         tion certificate in the declaration of the purchasing dealer         at  the time of sale, the same   has to be viewed with  rea-         sonable flexibility and reconciled with Rule 5 as  clarified         by  the  Notification, dated October 10, 1966.    Thus  con-         strued harmoniously with the related  statutory  provisions,         the requirement of Rule 26 will be substantially  satisfied,         if  the  number of   the  registration  certificate--granted         subsequently, but covering retrospectively the period of the         sales  in respect of which deduction is claimed-is  supplied         by the claimant along with the declaration of the purchasing         dealer at the time of assessment to the Assessing Authority.         It  is  thus clear as daylight that at  the  relevant  time,         also,    the  registering Authority was fully  competent  to         issue   the  registration  certificate to  the  dealer  with         retrospective effect from the date   of filing the  applica-         tion.  A perusal of the registration certificate would  show         that it was, in terms, made effective from January 1,  1966.         This is manifest from the words "the dealer is liable to pay         tax    w.e.f. 1.1.1966" used by the Authority,  prominently,         in the heading of the Certificate.             It  necessarily  follows,  therefore,  that  during  the         period    from 1.1.1966 to 27.3.1966, also,  the  purchasing         dealer  was  a registered dealer possessing  a  registration         Certificate within the Contemplation of s. 7(1) of the  Act.         This  being the correct position, the assessees; were  enti-         tled  to  the deduction under s. 5(2)(a)(ii) of the  Act  in         respect  of the sales made by them to the purchasing  dealer         during  the  whole of the quarter ending  31st  March  1966.         The  High  Court  was therefore, right  in  determining  the         question  posed, in favour of the assessees and against  the         Revenue.                The appeal fails and is dismissed with costs.         P.B.R                       Appeal dismissed.         (1) 29, S.T.O. 558.         91