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PETITIONER: A.   V. FERNANDEZ

       Vs.

RESPONDENT: THE STATE OF KERALA

DATE OF JUDGMENT: 02/04/1957

BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. JAGANNADHADAS, B. IMAM, SYED JAFFER MENON, P. GOVINDA KAPUR, J.L.

CITATION:  1957 AIR  657            1957 SCR  837

ACT:  Sales  Tax-Assessment--Gross and net turnover--Purchase  of copra--Sale  of  oil  both inside  and  outside  the  State- Deductions- -Assessable turnover-Constitution of India, Art. 286--Travancore-Cochin  General Sales Tax Act, 1125 (Act  XI of  1125  M.E.),  SS. 2 (j)  (k),  3,  26--Travancore-Cochin General Sales Tax Rules, 1950, rr. 7 (k), 20 (2).

HEADNOTE:   The business of the appellant consisted in the purchase of copra,  manufacture of cocoanut oil and cake  therefrom  and sale  of  oil  and  cake to  parties  inside  the  State  of Travancore-Cochin  and  sale of oil to parties  outside  the State.  Before the coming into force of the Constitution  of India, under the provisions of the Travancore-Cochin General Sales Tax Act, 1125, and the rules made thereunder, for  the purposes  of  assessment  to sales tax,  the  appellant  wag entitled to include in his gross turnover the total value of the oil sold by him whether inside the State or outside  the State and to deduct therefrom the whole of the value of  the copra purchased by him.  Subsequently, in 1951, the Act  was amended  by  the  addition  of  s.  26  which,  inter  alia, provided:   "Notwithstanding  anything  contained  in   this Act......  a tax on the sale or purchase of any goods  shall not,  after  the 31st day of March, 1951, be  imposed  where such  sale or purchase takes place in the course  of  inter- ,State trade......... For the year 1951-1952, the Sales  Tax Officer  assessed  the  appellant  to sales  tax  on  a  net assessable turnover by taking the value of the whole of  the copra purchased by him, adding thereto the respective values of the oil and the cake sold inside the State and  deducting only  the value of the copra corresponding to the  oil  sold inside  the State.  It was contended for the appellant  that in  the calculation of the net turnover he was  entitled  to include the total value of the oil sold by him, both  inside and outside the State, and deduct therefrom the total  value of  the copra purchased by him, and further that, under  the overriding provision of the Act under S. 26, he was entitled to  have  the  value  of the  oil  sold  outside  the  State

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deducted. Held, that the calculation made by the Sales Tax Officer  of the net turnover was correct. The non-obstante provision contained in S. 26 of the Act has the  effect of taking transactions relating  to  inter-State trade out of the purview of the Act and they are excluded in the calculation 108 838 of  the gross turnover as well as the net turnover on  which sales tax can be assessed. Aswani Kumar Ghosh v. Arabinda Bose, (1953) S.C.R. 1, relied on.

JUDGMENT:    CIVIL  APPELLATE  JURISDICTION: Civil Appeal No.  232  of 1955. Appeal  under Article 132 (1) of the Constitution  of  India from the Judgment and Order dated November 24, 1954, of  the former Travancore-Cochin High Court in Original Petition No. 53 of 1954. T.N.  Subramania  Iyer  and  R.  Ganapathy  Iyer,  for   the appellant. K.S.  Krishnaswamy  Iyengar  and  Sardar  Bahadur,  for  the respondent. 1957.  April 2. The Judgment of the Court was delivered by BHAGWATI J.-This appeal with a certificate of fitness  under Art.  132  (1) of the Constitution is directed  against  the order of the High Court of Travancore-Cochin dismissing  the Original  Petition  No. 53 of 1954 filed  by  the  appellant under  Art.  226  for quashing the order of  the  Sales  Tax Officer, 2nd Circle, Quilon, assessing him to sales tax on a net  assessable  turnover of Rs. 7,54,144-8-4 for  the  year 1951-52  (1st  April,  1951 to 31st  March,  1952)  and  for issuing  proper directions to the Sales Tax  Authorities  to assess the same according to law.    The  appellant is a registered manufacturer  of  cocoanut oil and cake who has obtained a certificate of  registration in  Form  VI as per sub-r. (i) of r. 20 of  the  Travancore- Cochin  General Sales Tax Rules, 1950.  The business of  the appellant for the purposes of this appeal consisted in  the’ purchase of copra, manufacture of cocoanut oil and cake  and sale of the same to parties inside the State of  Travancore- Cochin and sale of the oil to parties outside the State.   In the year 1951-52, the appellant purchased copra of  the value  of  Rs.  7,16,048-1-4  and  after  manufacturing  oil therefrom  in  his oil mills he sold the oil partly  in  the State and partly outside the State and the cake 839 entirely within the State., The total value of the oil  sold was  Rs.  6,76,719-0-11 out of which the sales  outside  the State  were of the value of Rs. 3,67,816-10-1 and the  value of the cake sold in the State was Rs. 67,155-155.  The total gross  turnover of the appellant was thus Rs.  14,59,923-1-8 and he claimed to deduct therefrom the whole of the purchase price of the copra under r. 7 (1) (k) read with r. 20.   The net  turnover  according  to  him  was  therefore  only  Rs. 7,43,875-0-4 and he claimed to deduct out of this a  further sum  of  Rs. 3,67,816- 10-1 being the sale price of  oil  in inter-State transactions which could not be taxed under Art. 286  of  the  Constitution, thus showing  a  net  assessable turnover of only Rs. 3,76 058-6-3.    The Sales Tax Officer,  2nd Circle, Quilon, however  fixed

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the  net  assessable  turnover  of  the  appellant  at   Rs. 7,54,144-8-4.   He took the purchase value of the  copra  at Rs. 7,16,048-1-4 but added thereto Rs. 3,08,902-6-10 and Rs. 67,155-15-5  being the respective values of the oil and  the cake  sold  inside the State, excluding the  sale  price  of inter-State  sales of oil, namely, Rs.  3,67,816-10-1,  from such  computation.  Having thus excluded the sale  price  of inter-State sales of oil, he deducted only the value of  the copra corresponding to the oil sold inside the State namely, Rs.  3,35,216-0-0,  as against the  sum  of  Rs.7,16,048-1-4 deducted by the appellant.  He added a sum of Rs.  3,385-0-3 being the price of gum sold by the appellant and deducted  a further sum of Rs. 6,130-15-6 being the sales tax  collected by  him.  He thus arrived at the net assessable turnover  of Rs. 7,54,144-8-4 and assessed the appellant for sales tax on the same.  The  appellant preferred an appeal to the  Assistant  Sales Tax Commissioner (S.T.A. No. 1480 of 1953-54) who  dismissed the  same  by  his  order dated May  10,  1954.   A  further petition  to  the Government for redress met with  the  same fate  and the appellant thereupon filed the petition in  the High Court of Travancore.  Cochin being O.P. No. 53 of  1954 with the result indicated above. The decision of this appeal turns on the construction of the relevant provisions of the Travancore-Cochin 340 General  Sales Tax Act, 1125 (Act XI of 1125 M.E.)  and  the Travancore-Cochin  General  Sales  Tax  Rules,  1950,   made thereunder which may be conveniently set out here.  The  preamble  to  the Act stated that it  was  enacted  to provide  for the levy of a general tax on the sale of  goods in the United State of Travancore and Cochin. Section 2 (j) defined a " sale " as under: "  Sale  " with all its grammatical variations  and  cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash   or   for   deferred   payment   or   other   valuable consideration........................    Explanation     (2) Notwithstanding  anything  to the contrary in  the  Sale  of Goods Act for the time being in force, the sale or  purchase of any goods shall be deemed for the purpose of the Act,  to have  taken place in the United State wherever the  contract of sale or purchase might have been made.  "   Section 2 (k) defined " turnover " as " the aggregate amount for which goods are either bought  by or  sold  by  a dealer, whether for  cash  or  for  deferred payment  or other valuable consideration, provided that  the proceeds  of  the  sale  by  a  person  of  agricultural  or horticultural produce grown by himself or grown on any  land in  which he has an interest whether as owner,  usufructuary mortgagee,  tenant or otherwise, shall be excluded from  his turnover.  "   An  explanation  was added to this definition’  which  is, however, not material for our purpose.   Section  3  was the charging section and it  provided  for levy of taxes on sales of goods in the terms following:-   "  (1)  Subject to the provisions of  this  Act;(a)  every dealer  shall pay for each year a tax on his total  turnover for  such year; and (b) the tax shall be calculated  at  the rate   of  three  pies  for  every  Indian  rupee  in   such turnover...............   (3)     A dealer whose total turnover in any year is  less than  ten thousand Indian rupees shall not be liable to  pay any tax for that year under sub-section_ (1) or  sub-section (2).

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841 (4)  For  the  purposes  of  this  section  and  the   other provisions  of  this  Act turnover shall  be  determined  in accordance with such rules as may be prescribed. (5)  The  taxes  under  sub-sections (1) and  (2)  shall  be assessed,  levied, and collected in such manner and in  such instalments, if any, as may be prescribed.  Provided  that:- (i) in respect of the same transaction of sale, the buyer or the seller but not both, as determined by such rules as  may be prescribed, shall be taxed; (ii) where a dealer has  been taxed in respect of the purchase of any goods in  accordance with the rules referred to in clause (i) of this proviso, he shall  not  be taxed again in respect of any  sale  of  such goods effected by him." Section  4  enacted  that the  provisions  of  the  charging section shall not apply to the sale of electrical energy and any goods other than arrack and foreign liquor on which duty is  or may be levied under the Travancore or  Cochin  Abkari Act, or the Travancore or Cochin Opium Act. Section 24 conferred upon the Government power to make rules to carry out the purposes of the Act. The  Act  as originally enacted received the assent  of  the Rajpramukh  on  January 5, 1950.  After the  advent  of  the Constitution,   however,   the  Act  was  amended   by   the Travancore-Cochin  General Sales Tax (Amendment) Act,  1951, and s. 26 was added thereto which ran as under: ’ " Notwithstanding anything contained in this Act :- (a)  a  tax  on the sale or purchase of goods shall  not  be imposed under this Act (i) where such sale or purchase takes place outside the State of Travancore-Cochin; or (ii)  where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of  India ; (b) a tax on the sale or purchase of  any  goods shall  not,  after the 31st day of March, 1951,  be  imposed where  such  sale or purchase takes place in the  course  of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. (2) The explanation to 842 clause  (1) of Art. 286 of the Constitution of  India  shall apply for the interpretation of sub-clause (i) of  clause(a) of sub-section (1)."   The Travancore-Cochin General Sales Tax Rules, 1950, which were  made  by_the Government under  the  rule-making  power conferred  upon it by sub-ss. 4 & 5 of s. 3 read with s.  24 of the Act laid down inter alia the provisions in regard  to the  determination of the total turnover of a  dealer  which was   liable  to  be  taxed.   Rule  4  provided   for   the determination of the gross turnover:  "  (1) Save as provided in sub-rule (2) the gross  turnover of  a dealer for the purposes of these rules ,shall  be  the amount  for which goods are sold by him. (2) In the case  of the undermentioned goods the gross turnover of a dealer  for the  purposes of these rules shall be the amount  for  which the goods are. bought by him. (a)  Cocoanut, copra, ground-nut and its kernel. (b)  Cashew, and its kernel. Rule 7 provided that the tax or taxes under s. 3 or 5 or the notification,or notifications under s. 6 shall be levied  on the  net turnover of a dealer.  It further provided that  in determining the net turnover, the amounts specified in  cls. (a)  to  (k)  were,  subject  to  the  conditions  specified therein, to be deducted from the gross turnover. Clause (k) is relevant for our purpose.  It specified "  all amounts which a registered manufacturer  of  cocoanut and/or groundnut oil and cake may be entitled to deduct from

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his  gross turnover under Rule 20 subject to the  conditions specified in the rule.  "     Rule  20  so  far  as it is  material  for  our  purpose provided: "   1. Any dealer who manufactures cocoanut/  groundnut  oil and   cake   from  cocoanut  and/or   copra   or   groundnut and/or/kernel  purchased  by him may on application  to  the assessing  authority  having jurisdiction over the  area  in which he carries on his business, 843 be  registered as a manufacturer of  cocoanut/groundnut  oil and cake and a certificate issued in Form VI. 2.   Every   such  manufacturer  shall  be  entitled  to   a deduction  under clause (k) of sub-rule (i) of rule 7  equal to  the  value  of the cocoanut and/or  copra  or  groundnut and/or  kernel purchased and converted by him into  oil  and cake  provided that the amount for which the oil is sold  is included in his turnover." It  is  not  necessary to refer to any other  rule  for  the purposes of this appeal. The  main  controversy between the parties  centres  on  the method  of calculation of the net turnover.   The  appellant contends that in the calculation of such net turnover he  is entitled to include the total value of the oil sold by  him, viz.,  Rs. 6,76,719-0-11, irrespective of the  fact  whether these  sales were effected inside the State or  outside  the State  and  deduct  therefrom  the  total  value  of   copra purchased  by him from which the whole quantity of oil  sold by  him  was  manufactured,  viz.,  Rs.  7,16,048-1-4.   The resultant  figure,  according  to him,  represents  the  net assessable turnover on which the Sales Tax Authorities would be  entitled to assess him to sales tax if the  position  in law  was as is stood before the amendment of the Act by  the Travancore-Cochin  General Sales Tax (Amendment) Act,  1951. He  next contends that s. 26 which was added to the  Act  by the  Travancore-Cochin  General Sales  Tax  (Amendment)  Act 1951, prohibits the levy amongst others of a tax on the sale or purchase of goods where such sale or purchase takes place in the course of inter-State trade or commerce.  This is  an overriding provision which, it is contended, entitled him to deduct  the value of the oil sold outside the  State,  viz., Rs.  3,67,816-10-1, from the assessable turnover arrived  at as above.  The result of this mode of calculation is that he claims  to deduct from the gross turnover the whole  of  the purchase price of copra, viz., Rs. 7,16,048-1-4 and not  the purchase price of copra which can be allocated to his  sales of oil inside the State. The  Sales Tax Authorities on the other hand,  contend  that the appellant is not entitled to take into 844 computation  at all his ’sales of oil outside the State  and is  also not entitled to deduct from his gross turnover  the purchase price of copra allocated to the oil sold to persons outside  the State.  They claim to lift the whole  of  these sales  of  oil outside the State inclusive of  the  purchase price of the copra which can be allocated to them out of the calculations  of the net turnover because of the  provisions of  s.  26  set out above,  relying  upon  the  non-obstante provision contained therein, viz., "Notwithstanding anything contained  in  this Act, a tax on the sale  or  purchase  of goods shall not be imposed under this Act where such sale or purchase takes place in the course of inter-State trade or commerce." We  have  to decide which of these calculations of  the  net turnover is correct having regard to the relevant provisions

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of the Act and the rules made there-under.  The  definition  of ’sale" contained in s. 2  (j)  is  wide enough  to  include, the sales of oil  manufactured  by  the appellant whether these sales are effected inside the  State or  outside  the  State.  The definition  of  "  turnover  " contained  in s. 2 (k) of the Act also makes no  distinction between  the sales inside the State and out,side the  State. The  " turnover " is there defined as the  aggregate  amount for  which goods are either bought or 3old by a dealer  and, that definition comprises within its scope both these  types of  sales  whether inside the State or  outside  the  State. This  turnover of a dealer is under s. 3, sub-s. (4)  to  be determined   in  accordance  with  such  rules  as  may   be prescribed.   Rule 4 made by the Government under the  rule- making power prescribes that the gross turnover of a  dealer for the purposes of the rules shall be the amount for  which the goods are sold by him.  This rule also does not make any distinction  between sales inside the State or  outside  the State.  After having thus provided for the inclusion of  all sales within the gross turnover, r. 7 provides that the  tax or taxes under s. 3 (which is the charging section) shall be levied  on the net turnover of a dealer.  Such net  turnover is to be arrived at after deducting from the gross  turnover various 845 amounts  specified  in cls. (a) to (k) thereof and  cl.  (k) provides  that a registered manufacturer of cocoanut  and/or groundnut  oil and cake will be entitled to deduct from  his gross  turnover  such  amounts as are  mentioned  in  r.  20 subject to the conditions specified therein.   The-deduction under  r.  20  is available to  a  dealer  who  manufactures cocoanut/groundnut  oil  and cake from cocoanut  and  "  /or copra or groundnut and/or kernel purchased by him and he  is entitled to deduct the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by him  into oil  and cake provided that the amount for which the oil  is sold  is  included in his turnover.  Here also  we  find  no distinction  made between sales inside the State or  outside the State.  On  a prima facie reading of these provisions contained  in the Act and the rules made thereunder it would appear that a manufacturer of cocoanut or groundnut oil and cake would  be entitled to include in his gross turnover the total value of the oil sold by him Whether inside the State or outside  the State  and to deduct from such gross turnover the  whole  of the  value of the copra purchased by him and converted  into oil and   cake irrespective of the fact whether such oil  or cake was  sold by him inside the State or outside the State. The  only  thing which he had to do under r.  20,  sub-r.(2) was  to include the amount for which the oil is sold in  his turnover  and he would then under r. 7(1)(k) be entitled  to deduct from his gross turnover the whole of the price of the copra  purchased  and converted by him into  oil  and  cake, again  irrespective  of the fact whether the same  had  been sold by him inside the State or outside the State. This was certainly the position as it obtained prior to  the addition  of the s. 26 to the Act by  the  Travancore-Cochin General   Sales  Tax  (Amendment)  Act,  1951.    We   have, therefore.,  to consider what is the impact of s. 26 on  the other provisions of the Act and the rules made thereunder. The High Court decided against the appellant observing  that the  definitions  given  in s. (2)(j) and  (k)  of  the  Act applied only in the absence of "anything 109 846

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repugnant  in the subject or context", and on a  perusal  of the  relevant  provisions  of the Act  and  the  rules  made thereunder,  it was of opinion that these  definitions  were clearly inapplicable for the following reasons:   "There  can be no doubt that what has been intended  is  a taxation of copra at the purchase point and the avoidance of sales  tax in respect of the oil extracted by  a  registered manufacturer  from such copra to the extent of the value  of the  copra used for the said manufacture in all those  cases where  but for the concession he would have been  liable  to pay both the purchase tax on copra and the sales tax on  oil under the Travancore-Cochin General Sales Tax Act, 1125.  In other  words,  the  object  is the  avoidance  of  a  double taxation  by the State, one at the purchase point  of  copra and the other at the sale point of oil, and it is impossible to invoke the definition and say that the concession will be available  to a registered manufacturer even in those  cases where  only one and not both the taxes can be realized  from him under the provisions of the Act."  The  answer given by the learned counsel for the  appellant to the above reasoning was that in fiscal statutes what  you have got to look to is not the spirit of the statute but the letter  of the law; and if you could not bring a  particular tax  within the letter of the law, the subject could not  be made  liable for the same.  Our attention was drawn in  this connection  to the observations of Lord Russell of  Killowen in Inland Revenue Commissioners v. Duke of Westminster(1) : "I -confess that I view with disfavour the doctrine that  in taxation  cases the subject is to be taxed if in  accordance with  a Court’s view of what it considers the  substance  of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute.  The subject  is not  taxable  by inference or by analogy, but  only  by  the plain  words  of  a  statute applicable  to  the  facts  and circumstances  of his case." As Lord Cairns said many  years ago  in  Partington  v.  The  Attorney  General  (1):-"As  I understand the (1) [1936] A.C. 1, 24. (2)(1869) 4 H.L. 100, 122. 847 principle  of  all  fiscal legislation it is  this:  if  the person sought to be taxed comes within the letter of the law he  must be taxed, however great the hardship may appear  to the  judicial mind to be.  On the other hand, if the  Crown, seeking to recover the tax, cannot bring the subject  within the  letter  of  the  law,  the  subject  is  free,  however apparently  within  the  spirit of the law  the  case  might otherwise appear to be." The passage was quoted with approval by the Privy Council in the Bank of Chettinad v. Income Tax Commissioner (1) and the Privy Council registered its protest against the  suggestion that  in revenue cases "the substance of the matter" may  be regarded  as distinguished from the strict  legal  position. (See also F.   L. Smidth & Co. v. F. Greenwood (2)).   It is no doubt true that in construing fiscal statutes and in  determining the liability of a subject to tax  one  must have  regard to the strict letter of the law and not  merely to  the spirit of the statute or the substance of  the  law. If  the  Revenue  satisfies the Court that  the  case  falls strictly  within the provisions of the law, the subject  can be  taxed.  If, on the other hand, the case is  not  covered within  the  four corners of the provisions  of  the  taxing statute, no tax can be imposed by inference or by analogy or by  trying to probe into the intentions of  the  legislature and by considering what was the substance of the matter.  We

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must  of  necessity, therefore, have regard  to  the  actual provisions  of the Act and the rules made thereunder  before we can come to the conclusion that the appellant was  liable to assessment as contended by the Sales Tax Authorities. It  may  be noted at the outset that the main  bulk  of  the Sales   Tax   Acts  enacted  by   the   various   Provincial Legislatures  was  enacted before the  Constitution.   There were  on the Statute Book various Sales Tax Acts enacted  by the  Provincial  Legislatures, viz., Bihar  Sales  Tax  Act, 1947,  Bengal Finance (Sales Tax) Act, 1941, Madhya  Pradesh Sales  Tax  Act, 1947, Madras Sales Tax  Act,  1939,  Mysore Sales Tax Act, 1948, Orissa Sales Tax Act, 1947, East Punjab General Sales Tax Act, 1948, and the Uttar Pradesh Sales Tax Act, (1) A.I.R. (1940) P.C. 183. (2) VIII T.C. 193, 206, 348 1948,---all  of  which levied sales tax on a  more  or  less uniform  basis bringing within their ken not only the  sales which  were actually effected within the territory but  also sales  where  adopting  the nexus theory  eve1  one  of  the ingredients of sale was found to have taken place within the territory.  The Assam Sales Tax Act, 1947, and the Hyderabad General Sales Tax Act, 1950, also followed the same pattern. When the Constitution came to be inaugurated on January  26, 1950,  Art.  286(2)  laid down  restrictions  on  the  State Legislatures  to  enact  laws imposing  or  authorising  the imposition  of  tax  on the sale or  purchase  of  goods  in certain  cases therein specified, so that after January  26, 1950, no State could impose a tax on the sale or purchase of goods  falling within these categories.  The Sales Tax  Acts enacted   by  the  various  Provincial   Legislatures   had, therefore, to be brought in line with this provision of  the Constitution  and  various expedients were  devised  by  the State Legislatures in order to effectuate this object.  This  object was sought to be achieved in the main bulk  of the  Sales  Tax Acts by adding towards the end of  the  Acts sections  like s. 26 of the Travancore-Cochin General  Sales Tax  Act, 1125, incorporating therein the terms of Art.  286 of  the Constitution.  The non-obstante provision  was  thus enacted  in the main bulk of the Sales Tax Acts  which  laid down:  "Notwithstanding anything contained in this  Act  the tax  on the sales or purchase of goods shall not be  imposed under  this Act where.................. (and the  provisions of Art. 286 were in terms incorporated therein)."  A  different expedient was adopted in the Assam  Sales  Tax Act,  1947  and the Hyderabad General Sales Tax  Act,  1950. The  Assam Sales Tax Act, 1947, had incorporated therein  an addition to the charging section (section 3 of the Act)  and s. 3 (1-A) which was inserted by s. 3 of the Assam Sales Tax (Amendment)  Act,  1947 (Assam Act IV of 1951)  was  to  the following effect: "Nothing in sub-section (1) shall,except in cases covered by the  first proviso to sub-section (12) of section 2 of  this Act be deemed to render any dealer 849 liable  to  tax on the sale of goods-where such  sale  takes place: (1) outside the State of Assam; (2)  in  the  course  of the import of the  goods  into,  or export  of the goods out of, the territory of India; or (3)   in the course of inter-State trade or commerce  except in so far as Parliament may by law otherwise provide.  The  Hyderabad  General Sales Tax Act, 1950 had  a  similar provision incorporated in its definition of sale given in s. 2 (k) of the Act.  The Explanation (2) which was substituted

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for  the original Explanation (2) by s. 2 of  the  Hyderabad General Sales Tax (Amendment) Act, 1950 (Hyderabad Act XXXII of 1950) read as under: Explanation  (2)-" Notwithstanding anything to the  contrary in any other law for the time being in force, a transfer  of goods in respect of which no tax can be imposed by reason of the provision contained in Article 286 of the  Constitution, shall not be deemed to be "sale" within the meaning of  this clause.  " A further expedient which was adopted in this connection may be  noted  in  r. 5 of the Bombay  Sales  Tax  Rules,  1952, enacted  under  the Bombay Sales Tax Act,  1952-(Bombay  Act XXIV  of  1952), which authorised the deduction  of  certain sales  coming  within  Art. 286 of  the  Constitution  while calculating the taxable turnover of a dealer. We are not called upon to express any opinion as to  whether the  incorporation  of  the provisions of Art.  286  of  the Constitution  in the charging section as it was done in  the Assam Sales Tax Act, 1947, or in the definition of "sale" as it was done in the Hyderabad General Sales Tax Act, 1950, or even  in the rules in regard to the calculation  of  taxable turnover as it was done in the Bombay Sales Tax Rules, 1952, had  the  effect  of taking the  sales  falling  within  the categories  specified in Art. 286 out of the purview of  the respective  Sales  Tax  Acts,  so that  they  would  not  be included  at all within the calculation of the net  turnover on which only the sales tax could be levied.  What was  done in the instant case before us as in the bulk of the Sales 850 Tax  Acts  above  noted  was  the  incorporation  of   those provisions of Art. 286 of the Constitution therein by adding a non-obstante provision at the end of the respective  Sales Tax  Acts in the manner above indicated.  The definition  of "sale"  was not amended nor was the charging  section.   The rules  as  to  the  calculation of  the  net  turnover  also remained the same, without any deduction in regard to  sales coming   within   Art.  286  of   the   Constitution   being incorporated  therein,  with the result that the  Sales  Tax Authorities   founded  themselves  upon   the   non-obstante provision  incorporated in the Act by the addition of s.  26 therein   by   the  Travancore-Cochin  General   Sales   Tax (Amendment) Act, 1951.   What, then, is the effect of this non-obstante provision ? This  Court in Aswani Kumar Ghosh v. Arabinda Bose (1)  made the following observations in connection with the non-obstante clause: "It  should first be ascertained what the enacting  part  of the  section  provides on a fair construction of  the  words used  according to their natural and ordinary  meaning,  and the non-obstante clause is to be understood as operating  to set aside as no longer valid anything contained in  relevant existing laws which is inconsistent with the new enactment."  The  same  ratio applies to the construction  of  the  non- obstante  provision  contained  in s. 26  of  the  Act  with reference  to  all  the other provisions  of  the  Act  that preceded the same.  In  our opinion, s. 26 of the Act, in cases falling  within the categories specified under Art. 286 of the  Constitution has  the effect of setting at nought and of obliterating  in regard thereto the provisions contained in the Act  relating to  the  imposition of tax on the sale or purchase  of  such goods  and  in particular the provisions  contained  in  the charging  section and the provisions contained in r. 20  (2) and other provisions which are incidental to the process  of levying  such  tax.   So far as  sales  falling  within  the

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categories specified in Art. 286 of the Constitution and the corresponding s.    26  of the Act are concerned, they  are, as it were, (1) [1953] S.C.R. 1, 21, 22. 851 taken  out of the purview of the Act and no effect is to  be given  to those provisions which would otherwise  have  been applicable if s. 26 had not been added to the Act.  If these provisions  of the Act and the rules made thereunder do  not apply  to.  the sales falling within those  categories,  the value  thereof  cannot be included in the  turnover  of  the dealer  and no question would &rise of the applicability  of r.  7  (1)  (k) and r. 20 (2) at all to  these  cases.   The amount  for  which the oil is sold in inter-State  trade  or commerce  would not be lawfully included in the turnover  of the  dealer  and if the amount for which such  oil  is  sold cannot  thus be included in his turnover no  occasion  would arise  for the deduction under r. 7 (1) (k) of the value  of the  cocoanut  and/or  copra  or  groundnut  and/or   kernel purchased  and  converted by the dealer into  such  oil  and cake.  A  distinction was sought to be made between the  inclusion of  the value of such oil in the turnover of the dealer  for the purpose of assessment and the levy of tax thereupon.  It was urged that the inclusion of such oil in the turnover for the  purpose  of  assessment was  quite  distinct  from  the liability for tax which was the only thing prohibited by  s. 26  of the Act and therefore the value of such oil could  be lawfully  included in the turnover involving as a  necessary consequence  the  deduction  of  the  value  of  the   copra purchased  by the dealer and converted by him into such  oil from  such  turnover, the resultant turnover being  the  net turnover  for the purposes of assessment, the value  of  the oil  sold  in the course of inter-State  trade  or  commerce being further deducted therefrom by reason of the  operation of  s.  26 of the Act, thus making in effect  a  distinction between assessable turnover and the taxable turnover.  Reliance  was  placed in support of this  position  on  the observations  of this Court in Messrs.   Chatturam  Horilram Ltd. v. Commissioner of Income-Tax, Bihar and Orissa(1): " As has been pointed out by the Federal Court in  Chatturam v. C.I.T., Bihar(,) (quoting from the (1) [1955] 2 S.C.R. 290, 297.  (2) [1947] F.C.R. 116, 126. 852 judgment  of  Lord Dunedin in Whitney  v.  Commissioners  of Inland Revenue (1) ’there are three stages in the imposition of  a tax.  There is the declaration of liability,  that  is the  part  of the statute which determines  what  person  in respect  of  what property are liable.  Next, there  is  the assessment.  Liability does not depend on assessment.  That, ex-hypothesi,  has  already  been  fixed.   But   assessment particularises  the exact sum which a person liable  has  to pay.   Lastly,  come the methods of recovery if  the  person taxed does not voluntarily pay"   The  appellant, however, forgets that the three stages  in the imposition of a tax which are laid down here  predicate, in  the  first instance, a declaration of liability  as  the starting  point.   If there is a liability to  tax,  imposed under  the  terms  of the taxing statute,  then  follow  the provisions  in regard to the assessment of  such  liability. If  there  is  no  liability to  tax  there  cannot  be  any assessment  either.  Sales or purchases in respect of  which there  is no liability to tax imposed by the statute  cannot at  all be included in the calculation of turnover  for  the purpose of assessment and the exact sum which the dealer  is

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liable  to  pay must be ascertained  without  any  reference whatever to the same’.  There  is  a  broad  distinction  between  the   provisions contained in the statute in regard to the exemptions of  tax or refund or rebate of tax on the one hand and in regard  to the  non-liability  to tax or non-imposition of tax  on  the other.   In  the  former case, but  for  the  provisions  as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the  only thing which the dealer is entitled to  in  respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be  imposed. In the latter case, the sales or purchases are exempted from taxation  altogether.   The Legislature cannot enact  a  law imposing  or authorising the imposition of a  tax  thereupon and they are not liable to any such imposition  (1) [1926] A.C. 37. 853 of  tax.  If they are thus not liable to tax, no tax can  be levied  or imposed on them and they do not come  within  the purview  of  the Act at all.  The very fact  of  their  non- liability  to  tax is sufficient to exclude  them  from  the calculation  of  the  gross  turnover as  well  as  the  net turnover on which sales tax can be levied or imposed. If this distinction is borne in mind, it is clear that s. 26 of the Act enacts a provision with regard to nonliability of these  transactions  to  tax  and  these  transactions  were therefore taken out of the purview of the Act. We are therefore of opinion that the non-obstante  provision contained in s. 26 of the Act has the effect of taking these transactions  out of the purview of the Act with the  result that  the  dealer  is not required nor  is  he  entitled  to include  them in the calculations of his turnover liable  to tax thereunder. This  position is not at all affected by the provision  with regard  to  registration and submissions of returns  of  the sales tax by the dealers under the Act.  The legislature, in spite  of its disability in the matter of the imposition  of sales  tax  by virtue of the provisions of Art. 286  of  the Constitution, may for the purposes of the registration of  a dealer  and submission of the returns of sales  tax  include these   transactions   in  the  dealer’s   turnover.    Such inclusion,  however,  for the purposes aforesaid  would  not affect  the non-liability of these transactions to  levy  or imposition of sales tax by virtue of the provisions of  Art. 286  of  the Constitution and  the  corresponding  provision enacted in the Act, as above. We are, therefore, of opinion that the conclusion reached by We  are therefore therefore, of opinion that the  conclusion reached  by the High Court was correct; the calculations  of the net turnover made by the Sales Tax Authorities were also correct; and this appeal must stand dismissed with costs.                                 Appeal dismissed. 854