http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12  

PETITIONER: COMMISSIONER OF SALES TAX, GUJARAT

       Vs.

RESPONDENT: UNION MEDICAL AGENCY

DATE OF JUDGMENT08/10/1980

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SEN, A.P. (J) VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR    1            1981 SCR  (1) 870  1981 SCC  (1)  51

ACT:      Bombay Sales  Tax Act,  1959 as  applicable to State of Gujarat-Interpretation of the expression "Registered dealer" in section  8(ii)-Whether it  means only a dealer registered under section  22 of  the Act  or it also comprises a dealer registered in  the Central  Sales Tax  Act, 1956-Rule  in ex visceribus actus explained.

HEADNOTE:      Allowing the  appeal by  special  leave  and  answering against the assessee, the Court. ^      HELD:  Per   Bhagwati,J.  (Concurring   with  Sen   and Venkataramiah, JJ.)      (1) The  expression  "Registered  dealer"  is  used  in section 8  (ii) in  its definitional  sense to mean a dealer registered under  section 22 of the Bombay Sales Tax Act and it does  not include  a dealer  under the  Central Sales Tax Act. [875A]      (2) The  object of  section 8  is to prevent a multiple point taxation  on goods  specified in  Schedule C  and  for imposition of  single point  tax on them under the Act. If a dealer is  registered only  under the  Central Act  and  not under the Bombay Act, it would mean that he is not liable to pay tax  under the  Bombay Act and in that event, even if he has sold  goods specified  in Schedule  ’C’, to a registered dealer under an intra-State sale, no tax would be payable by him on  such sale and if the purchasing dealer is also to be exempt from  tax in  respect of re-sale effected by him, the result would  be that  the goods would escape tax altogether and not  suffer even  single point  tax.  That  is  not  the intendment of  the legislature in enacting section 8(ii); on the contrary  it would  frustrate the  very object  of  that section. The situation would be the same even where the sale effected by  the dealer  registered under the Central Act is an inter-State  sale. That sale would undoubtedly be taxable under the Central Act but there is no reason why the Gujarat State would give exemption to re-sale of goods in respect of which, at  the time  of the  first sale  tax has been levied under the  Central Act  of which  the benefit  has  gone  to another State.  Moreover, in  such a  case, the  first  sale

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12  

being an  inter-State sale,  would be  taxable  at  a  fixed concessional rate under section 8(1)(a) or at the rate of 7% or at  a rate  equal to  or twice the rate applicable to the sale of such goods in the State of the selling dealer, under clause (a)  or (b)  of sub-section  (2) of  section 8 of the Central Act and if that be so, it is difficult to understand why the Legislature should have insisted, for attracting the applicability of  section 8(ii),  that the  goods re-sold by the dealer  should at  the time of their first sale be goods specified in Schedule ’C’. [873F-G, 874C-G] 871      (3) Sections 4 and 8(ii) of the Bombay Act are distinct and independent  provisions operating  on totally  different areas. The  legal fiction  in sub-section (1) of section (4) is created  for a  specific purpose and it is limited by the terms of  sub-section (2)  of section  4 and  it  cannot  be projected in  section 8(ii).  If a  dealer is not registered under the  Bombay Act, it could only be on the basis that he is not  liable to pay tax under the Bombay Act, but even so, section 4  sub-section (1) provides that if he is registered under the  Central Act,  he would be liable to pay tax under the Bombay  Act in  respect of  the transactions of sale set out in  that section. This liability arises despite the fact that the dealer, not being liable to pay tax under section 3 of the  Bombay Act,  is not  registered under  that Act. The dealer not  being  registered  under  the  Bombay  Act,  the machinery of  the Bombay  Act would  not of itself apply for the recovery  of tax  from him.  Section  4  sub-section  2, therefore, enacts that every dealer who is liable to pay tax under sub-section  (1) shall, for the purpose of sections 32 to 38  and 46  to 48  be deemed  to be  a registered dealer. Sections 32 to 38 and 46 to 48 are machinery sections and it is for the purpose of making the machinery of these sections applicable for  recovery of  the tax  imposed on  the dealer under sub-section  (1)  of  section  4  that  an  artificial fiction is  created deeming  the dealer  to be  a registered dealer, that is, a dealer registered under section 22 of the Bombay Act.      Per Sen,  J. (On  behalf of  himself and Venkataramiah, J.).      (1) It  is a well settled principle that when a word or phrase has  been defined in the interpretation clause, prima facie that  definition governs  whenever that word or phrase is used  in the  body of  the statute. But where the context makes the  definition clause  inapplicable, a  defined  word when used  in the body of the statute may have to be given a meaning different  from that contained in the interpretation clause; all  definitions given  in an interpretation clause, are, therefore,  normally,  enacted  subject  to  the  usual qualification -"unless  there is  anything repugnant  in the subject  or  context",  or  "unless  the  context  otherwise requires". Even  in the  absence of an express qualification to that  effect such  a qualification is always implied. The expression  "registered   dealer"  having  been  defined  in section 2(25)  of the  Bombay Act  as  having  a  particular meaning, that  is, a  dealer registered  under section 22 of the Act,  it is that meaning alone which must be given to it in interpreting  clause (ii)  of section 8 of the Bombay Act unless there is anything repugnant to the context [880B-D]      There being no obscurity in the language of clause (ii) of section  8 of  the  Bombay  Act,  it  is  clear  that  no deduction is  claimable in  respect  of  re-sales  of  goods purchased from  a dealer  registered under  the Central Act, who is not a registered dealer within the meaning of section 2(25) of the Act. It follows that the expression "registered

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12  

dealer" in clause (ii) of section 8 of the Act must bear the meaning of  that expression as given in section 2(25) of the Act. If  the meaning  of the  section is  plain it  is to be applied whatever the result, [879H-880A]      (2) The  meaning of  a word  or expression  defined may have to  be departed  from on  account  of  the  subject  or context in  which the  word had  been used  and that will be giving effect to the opening sentence in definition section, namely, "unless  the context otherwise requires". In view of this qualification,  the Court  has not  only to look at the words but  also to  look at the context, the collocation and the object  of  such  words  relating  to  such  matter  and interpret the  meaning intended to be conveyed by the use of the words  in a  particular section.  But where  there is no obscurity in the language of the section, 872 there is  no scope  for  the  application  of  the  rule  ex visceribus actus.  This rule  is never  allowed to alter the meaning of what is of itself clear and explicit. [881E-G]      Bywater v.  Brandling, (1828)  7 B.  & C.  645; Rein v. Lane, (1867) L.R. 2 Q.B. 144 and Jobbins v. Middlesex County Council, Craies, (1949) 1 K.B. 142, held inapplicable.      (3) The  provisions of  section 4,  sub-section (3)  of section 7  and clause  (ii) of  section 8  of the Bombay Act operate in  three different  fields. While  section 4 of the Act provides  that a registered dealer under the Central Act who may  not be liable to pay tax under section 3 of the Act may nevertheless  in certain  contingencies be liable to pay tax, sub-section (3) of section 7 provides for the levy of a single point  tax on sale in the course of inter-State trade and  commerce  of  declared  goods,  to  bring  the  Act  in conformity with clause (a) of section 15 of the Central Act. The object and purpose of enacting the provisions of section 8 are  entirely different,  namely, to  lay down the mode of computation of  the turnover  of sales  or  purchases  of  a registered dealer  for the  imposition of a tax. Clause (ii) of section  8 allows  for  deduction  of  re-sale  from  the turnover of  such  registered  dealer  when  the  goods  are purchased from  a  registered  dealer,  that  is,  a  dealer registered under section 22 of the Act. In effect, section 8 deals with  transactions of  sale or  purchase taking  place within the  State. The  disallowance of deduction claimed by the assessee  under clause  (ii) of  section 8  of the  Act, therefore, would  not result  in double taxation of the same goods. [881H-882C, 883C]      While it  is true that the Baroda dealer being a dealer registered under  section 7 of the Central Sales Tax Act, in the instant  case, was  in certain  contingencies, liable to pay tax under section 4 of the Act, but that circumstance by itself would  not make  him a "registered dealer" within the meaning of  section 2(25)  of the  Act. If  the  legislature really intended  that the  expression "registered dealer" in clause (ii)  of section  8 should  take within  its ambit  a dealer registered under the Central Sales Tax Act, upon whom liability to  pay sales  tax is  imposed by section 4 of the Bombay Act,  it would have said so in the clear words s. (2) of s.  4. The legal fiction in sub-s. (2) of s. 4 is created for a  limited purpose,  namely, to  make section  4 a self- contained code  which not  only imposes  a charge of tax and lays  down   the  rate  structure,  but  also  provides  the machinery for  assessment and  recovery of  tax and penalty. The legal fiction contained in sub-s. (2) of s. 4 of the Act cannot be stretched any further. [883D-E, G]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12  

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 631 of 1973.      Appeal by  Special Leave  from the  Judgment and  Order dated 14/16th  November, 1970  of the  Gujarat High Court in Sales Tax Reference No. 9/69.      R. P. Bhatt and S. P. Nayar for the Appellant.      Appeal Set-down ex-Parte against respondent.      The following Judgments were delivered.      BHAGWATI, J.-I  have had  the advantage  of reading the judgment prepared  by my  learned brother Sen and I entirely agree with  the conclusion  reached by him, but I would like to state briefly my 873 own reasons  for arriving  at  that  conclusion.  The  facts giving rise  to this  appeal have been stated with admirable succinctness by my learned brother Sen and I need not repeat them. The  facts in  deed are not material, because only one single question  of law  arises for  determination  in  this appeal and  it does  not depend on any particular facts. The question  is   a  very   simple  one,  namely,  whether  the expression ’Registered  dealer’ in  sec.8(ii) of  the Bombay Sales Tax  Act, 1959  as applicable  to the State of Gujarat (hereinafter referred  to as  the Bombay  Act) means  only a dealer registered  under section  22 of  that Act or it also comprises a  dealer registered  under the  Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act).      Since the  decision of  this question turns on the true interpretation of  the expression  ’Registered  dealer’.  in sec.8(ii) of  the Bombay  Act, we may reproduce that section as follows:           "Sec.8: There  shall be  levied a sales tax on the      turn-over of  sales of goods specified in Schedule C at      the rate  set out  against each  of them  in  column  3      thereof, but after deducting from such turnover-                (i) *          *         *         *                (ii) resales  of goods purchased by him on or           after the  appointed day  from a Registered dealer           if the  goods at  the time  of their purchase were           goods specified in Schedule C". This section  has obviously been enacted to prevent multiple point taxation on goods specified in Schedule C. Where goods specified in Schedule ’C’ are sold by a dealer and obviously he must  be a  dealer registered  under section  22  of  the Bombay Act,  if he  is liable  to pay tax under that Act-the turnover of  these sales  is liable  to be taxed at the rate specified against  each category  of goods in that Schedule, but if the sales in question are re-sales of goods purchased by  the  dealer  on  or  after  the  appointed  day  from  a ’Registered dealer’,  they would  be liable  to be  excluded from the turnover, because the ’Registered dealer’ from whom they are  purchased would  have paid tax under the main part of section  8 and  the goods having already borne tax in the hands of  the selling  ’Registered dealer’,  the legislative intent is  that they  should not  suffer tax  again. Now the expression ’Registered  dealer’ is  defined in section 2(15) of the Bombay Act to mean "a dealer registered under section 22" and  therefore, ordinarily,  the expression  ’Registered dealer’ as  used  in  section  8(ii)  must  carry  the  same meaning, namely, a dealer registered under section 22 of the Bombay Act. But, as the opening part of section 2 shows, the definitional meaning is subject to anything repugnant in the subject or 874

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12  

context. The  context in  which the  defined word occurs may clearly indicate  that it  is used in a sense different from that given  in the  definition clause. We must therefore see whether there is anything in section 8(ii) or in the context in which  it occurs  which should  compel us to place on the expression ’Registered  dealer’ as  used in  that section  a meaning different from that given to it in section 2(15). We are afraid we do not find anything in the subject or context of sec.8(ii)  which would  persuade us  to depart  from  the definitional meaning  of the expression ’Registered dealer’. The subject and context in fact re-enforce the view that the expression ’Registered  dealer’ in sec.8(ii) is used to mean a dealer registered under sec.22 of the Bombay Act, and does not include  a dealer registered only under the Central Act. If a dealer is registered only under the Central Act and not under the Bombay Act, it would mean that he is not liable to pay tax  under the  Bombay Act and in that event, even if he has sold  goods specified  in Schedule  ’C’, to a registered dealer under an intra-State sale, no tax would be payable by him on  such sale and if the purchasing dealer is also to be exempt from  tax in  respect of re-sale effected by him, the result would  be that  the goods would escape tax altogether and not  suffer even single point tax. That surely could not have been  the intendment  of the  legislature  in  enacting section 8(ii).  It would  indeed  frustrate  the  object  of section 8(ii)  which is  to provide for imposition of single point tax  on the  goods  specified  in  Schedule  ’C’.  The situation would  be the same even where the sale effected by the dealer  registered under  the Central  Act is  an inter- State sale. That sale would undoubtedly be taxable under the Central Act,  but it  is difficult  to see  why the  Gujarat State should  give exemption  to re-sale of goods in respect of which, at the time of the first sale, tax has been levied under the  Central Act  of which  the benefit  has  gone  to another State.  Moreover, in  such a  case, the  first  sale being an  inter-State sale,  would be  taxable  at  a  fixed concessional rate under section 8(1)(a) or at the rate of 7% or at  a rate  equal to  or twice the rate applicable to the sale of such goods in the State of the selling dealer, under clause (a)  or (b)  of sub-section  (2) of  sec.  8  of  the Central  Act  and  if  that  be  so,  it  is  impossible  to understand why  the Legislature  should have  insisted,  for attracting the  applicability of  section  8(ii),  that  the goods resold by the dealer should at the time of their first sale be  goods specified  in Schedule  ’C’. The  requirement that the  goods at  the time  of their  first  sale  by  the ’Registered dealer’  should be  of  one  of  the  categories specified in  Schedule ’C’,  is a  clear  pointer  that  the ’Registered dealer’  contemplated in  this  provision  is  a dealer registered  under  section  22  of  the  Bombay  Act, because it is only with reference to such a dealer liable to pay tax under the Bombay Act that this 875 requirement of  the goods  sold by him being goods specified in Schedule  ’C’ can  have any  meaning and significance. We are, therefore,  clearly of  the view  that  the  expression ’Registered  dealer’   is  used  in  section  8(ii)  in  its definitional sense to mean a dealer registered under section 22 of  the Bombay  Act and  it does  not  include  a  dealer registered under the Central Act.      The Revenue, however, relied on section 4 of the Bombay Act and  tried to  project it  in the  interpretation of the expression ’Registered  dealer’ in section 8(ii). We fail to see how  section 4  can at all help in throwing light on the true interpretation  of the  expression ’Registered dealer’.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12  

That section provides:           "Sec. 4(1): Notwithstanding anything in section 3,      a dealer  who is registered under the Central Sales Tax      Act, 1956,  but who  is not liable to pay tax under the      said section  3, shall  nevertheless be  liable to  pay      tax-                (a) on  Sales of  goods  is  respect  of  the           purchase of  which he  has furnished a declaration           under sub-sec.  (4) of  section 8  of the  Central           Sales Tax Act, 1956, and                (b) on  sales of  goods in the manufacture of           which the goods so purchased have been used;      and accordingly,  the provisions  of sections  7 to  12      (both inclusive)  shall apply  to such  sales, as  they      apply to  the sales  made by a dealer liable to pay tax      under section 3.           (2) Every  dealer who  is liable  to pay tax under      sub-section (1) shall, for the purposes of sections 32,      33, 35,  36, 37,  38, 46,  47 and  48 be deemed to be a      Registered dealer." It is  obvious that  if a dealer is not registered under the Bombay Act,  it could  only be  on the  basis that he is not liable to pay tax under the Bombay Act, but even so, section 4, sub-section  (1) provides  that if he is registered under the Central  Act, he  would be  liable to  pay tax under the Bombay Act in respect of the transactions of sale set out in that section.  This liability  arises despite  the fact that the dealer,  not being  liable to pay tax under section 3 of the Bombay  Act, is  not  registered  under  that  Act.  The question then  would be:  if the  dealer is  not  registered under the  Bombay Act,  how to recover the tax from him? The dealer not  being  registered  under  the  Bombay  Act,  the machinery of  the Bombay  Act would  not of itself apply for recovery  of  tax  from  him.  Section  4,  sub-section  (2) therefore enacts  that every dealer who is liable to pay tax under sub-section (1) shall, for the purposes of sections 32 to 38 and 46 876 to 48 be deemed to be a Registered dealer. Sections 32 to 38 and 46  to 48  are machinery  sections and  it  is  for  the purpose of making the machinery of these sections applicable for recovery  of the  tax imposed  on the  dealer under sub- section (1)  of section  4 that  an  artificial  fiction  is created deeming  the dealer  to be a Registered dealer, that is, a  dealer registered under section 22 of the Bombay Act. This legal  fiction is created for a specific purpose and it is limited by the terms of sub-section 2 of section 4 and it cannot be  projected in  section 8(ii).  Section 4  has,  in fact, nothing  to do  with section  8(ii). They are distinct and independent  provisions operating  on totally  different areas, and  it is  difficult to  see how  section 4  can  be availed of  for the  purpose of  interpreting the expression "Registered dealer" in section 8(ii).      I would  therefore set  aside the  judgment of the High Court under  appeal and  answer the question referred by the Tribunal in  favour of the Revenue and against the assessee. There will be no order as to costs of the appeal.      SEN, J.-This  appeal,  by  special  leave,  is  from  a judgment of  the Gujarat  High Court, upon a question of law referred to  it under  sub-s.(1) of s.61 of the Bombay Sales Tax Act,  1959 (hereinafter  referred to  as ’the  Act’). By that judgment  the High Court answered the question referred in the  affirmative and in favour of the assessee. The point involved is of considerable importance.      The facts  giving rise  to the  reference  were  these:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12  

Messrs Union  Medical Agency, Ahmedabad was, at all material times, carrying on business in spirit and alcohol, and was a dealer  registered   under  s.22  of  the  Act  (hereinafter referred to as ’the assessee’). In the assessment year 1964- 65, the  corresponding accounting year of which was the year ending March  31, 1965,  the assessee claimed deduction from its  turnover   in  respect  of  resales  of  certain  goods purchased from  one Motibhai  Gopalbhai Patel of Baroda who, at the  relevant time,  was a dealer registered under s.7 of the Central  Sales Tax Act, 1956 (hereinafter referred to as ’the Central Act’), but was not a dealer registered under s. 22 of  the Act.  The Sales Tax Officer rejected the claim of the assessee  for such deduction on the ground that the said Motibhai Gopalbhai  Patel from whom the goods were purchased was not a registered dealer within the meaning of cl.(ii) of s.8 of the Act inasmuch as he was not registered as a dealer under  s.22  of  the  Act.  The  assessee  appealed  to  the Assistant Commissioner  of  Sales  Tax,  the  only  material ground being  that the expression ’registered dealer’ in cl. (ii) of s. 8 of the Act was wide enough to 877 include a  registered dealer under the Central Sales Tax Act but the  Assistant Commissioner affirmed the disallowance of the deduction.  On further  appeal, the  Gujarat  Sales  Tax Tribunal agreeing  with the Sales Tax Authorities, held that in order  to claim  deduction from  the turnover of sales of goods under  cl. (ii)  of s. 8 of the Act, what was required to be  shown was that the goods were purchased by the dealer on or  after the  appointed day  from a  ’registered dealer’ under the  Act, and  that in  view of  the definition of the expression ’registered  dealer’ in  sub-s.(25) of s.2 of the Act, such dealer had to be a dealer registered under s.22 of the Act.  The Tribunal  accordingly held that since Motibhai Gopalbhai Patel,  the Baroda  dealer, from whom the assessee had purchased  the goods,  was not a registered dealer under the Act, therefore the requirements of cl.(ii) of s.8 of the Act were  not fulfilled, and the claim for deduction made by the assessee had been rightly disallowed. On the application of  the   assessee,  the  Tribunal  referred  the  following question of  law to the High Court under sub-s. (1) of s. 61 of the Act, for its opinion, namely:           "Whether for  the purpose  of  allowing  deduction      from the turnover of sales under clause (ii) of section      8 of the Bombay Sales Tax Act, 1959, purchases of goods      made by  a dealer registered under the Bombay Sales Tax      Act, 1959  from a  dealer registered  under the Central      Sales Tax Act, 1956 but not registered under the Bombay      Sales Tax  Act. 1959  can be  said to  be purchases  of      goods made  from a registered dealer within the meaning      of clause  (ii) of  section 8  of the  Bombay Sales Tax      Act, 1959."      It appears  that the  High Court  was not  satisfied at this formulation  as it  felt that the statement of the case as made  by the Tribunal did not bring out the real question of law  arising out  of its  order. At  the instance  of the assessee, it re-framed the question in the following terms:           "Whether for  the purpose  of  allowing  deduction      from the turnover of sales under clause (ii) of section      8 of the Bombay Sales Tax Act, 1959, purchases of goods      made by  a dealer registered under the Bombay Sales Tax      Act, 1959  from a  dealer who  is registered  under the      Central Sales  Tax Act,  1956 and  who is liable to pay      tax under  section 4  of the Bombay Sales Tax Act, 1959      though not  registered under  the Bombay Sales Tax Act,      1959 can  be said  to be purchases of goods made from a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12  

    registered dealer  within the meaning of clause (ii) of      section 8 of the Bombay Sales Tax Act, 1959." 878 We feel  that the High Court was not justified in re-framing the question  as referred. It is nobody’s case that Motibhai Gopalbhai Patel,  the Baroda  dealer from  whom the assessee had purchased  the goods, had ever paid any tax on the sales effected by  him under  s.4 of  the Act.  Nor is  there  any material on  record to  suggest that  any  proceedings  were started  against   the  Baroda  dealer  for  subjecting  the transactions to tax.      In answering  the  reference  in  the  affirmative,  in favour of the assessee and against the Commissioner of Sales Tax, the High Court observes:           "The result  of the  foregoing discussion  is that      having regard  to  the  context,  collocation  and  the      object of  the expression ’registered dealer’ in clause      (ii) of  section 8 of the Bombay Act, and having regard      to the  policy of  the Act,  the said  expression would      also include  a dealer registered under the Central Act      on whom  special liability  to pay  sales tax  has been      imposed under  section 4  of  the  Act.  A  dealer  who      purchases goods  from a  dealer  registered  under  the      Central Act, who is liable to pay sales tax on the sale      of the  said goods  by  virtue  of  the  provisions  of      section 4  of the  Bombay  Act,  would,  therefore,  be      entitled to deduct from his turnover of sales of goods,      resales of  goods so  purchased by  him on or after the      appointed day  if the  goods,  at  the  time  of  their      purchase, were goods specified in Schedule C." This conclusion of the High Court can hardly be supported.      The short  question that falls for determination in the appeal is  whether the  expression  ’registered  dealer’  in cl.(ii) of  s.8 of  the Act  must bear  the meaning  that is assigned to  it in s. 2(25) which is the definition section, or the  said expression  is capable  of bearing  an enlarged meaning, in  view of  the subject and context in which it is used in cl.(ii) of s.8 of the Act.      The  decision   of  the   appeal  must   turn  on   the construction of cl.(ii) of s.8 of the Act, which provides:           "8. There  shall be  levied a  sales  tax  on  the      turnover of  sales of  goods specified in Schedule C at      the rate  set out  against each  of them  in  column  3      thereof, but after deducting from such turnover:-                (i) *     *    *    *    *    *    *                (ii) resales  of goods purchased by him on or           after the  appointed day  from a Registered dealer           if the  goods at  the time  of their purchase were           goods specified in Schedule C." 879      In the  Act,  the  expression  ’registered  dealer’  is defined in s. 2(25) in these terms:      "2.  In  this   Act,  unless   the  context   otherwise           requires,-                (25)  "Registered   dealer"  means  a  dealer           registered under section 22."      The error in the decision of the High Court lies in its misunderstanding of the scope and effect of s. 4 of the Act, which it  has tried  to project into cl. (ii) of s. 8 and it reads as follows:           "4.  (1) Notwithstanding  anything in section 3, a      dealer who  is registered  under the  Central Sales Tax      Act, 1956,  but who  is not liable to pay tax under the      said section  3, shall  nevertheless be  liable to  pay      tax-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12  

              (a) on  sales of  goods  in  respect  of  the           purchase of  which he  has furnished a declaration           under sub  section (4) of section 8 of the Central           Sales Tax Act, 1956, and                (b) on  sales of  goods in the manufacture of           which the goods so purchased have been used,      and accordingly,  the provisions  of sections  7 to  12      (both inclusive)  shall apply  to such  sales, as  they      apply to  the sales  made by a dealer liable to pay tax      under section 3.           (2) Every  dealer who  is liable  to pay tax under      sub-section (1) shall, for the purposes of sections 32,      33, 34, 35, 36, 37, 38, 46, 47 and 48 be deemed to be a      Registered dealer."      Sub-section (3) of s. 7 reads:           "7.(3) In  order to  ensure that after the date of      the coming  into force  of section  15 of  the  Central      Sales Tax  Act, 1956,  tax shall  not be  levied on the      sales or  purchases of  Declared goods at more than one      stage, it  is hereby provided that if under this Act or      any earlier law, any tax has been levied or is leviable      on the  sale or  purchase of such goods then no further      tax shall  be levied  under this  Act on any subsequent      sale or  purchase thereof;  and  accordingly,  for  the      purpose of  arriving at  the taxable turn over of sales      or purchases  of a dealer, there shall be deducted from      his total  turnover of sales, or as the case may be, of      purchases, the  sales or  purchases  of  such  declared      goods as have borne tax at any earlier stage."      There is no obscurity in the language of cl. (ii) of s. 8 of the Act. It is clear from the terms of cl. (ii) of s. 8 that no  deduction is  claimable in  respect of  resales  of goods purchased  from a  dealer registered under the Central Act, who is not a registered dealer within the meaning of s. 2(25) of the Act. It follows that the 880 expression ’registered  dealer’ in  cl. (ii)  of s. 8 of the Act must  bear the meaning of that expression as given in s. 2(25) of the Act. If the meaning of the section is plain, it is to be applied whatever the result.      It is  a well  settled principle  that when  a word  or phrase has  been defined in the interpretation clause, prima facie that  definition governs  whenever that word or phrase is used  in the  body of  the statute. But where the context makes the  definition clause  inapplicable, a  defined  word when used  in the body of the statute may have to be given a meaning different  from that contained in the interpretation clause; all  definitions given  in an  interpretation clause are,  therefore,  normally  enacted  subject  to  the  usual qualification-’unless there  is anything  repugnant  in  the subject  or  context’,  or  ’unless  the  context  otherwise requires’. Even  in the  absence of an express qualification to that effect such a qualification is always implied.      The expression  ’registered dealer’ having been defined in s.2(25)  of the Act as having a particular meaning, i.e., a dealer  registered under  s. 22  of the  Act, it  is  that meaning alone  which must be given to it in interpreting cl. (ii) of  s.8 of  the Act, unless there is anything repugnant to the context. It was not permissible for the High Court to ignore a  statutory definition  and give to the expression a wider meaning independent of it. There is nothing to suggest that the  expression ’registered dealer’ is used in cl. (ii) of s.8 of the Act in any different sense from that in’ which it is defined. It is significant to notice that whenever the legislature wanted  that the  expression ’registered dealer’

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12  

should have  a different  meaning, it has expressly said so. Thus in  sub-s.(1) of  s.4 it  mentions of  ’a dealer who is registered under  the Central  Sales  Tax  Act,  1956’.  The distinction  between   the  two   classes  of   dealers  is, therefore, clearly maintained.      The High  Court was obviously wrong in not interpreting the expression  ’registered dealer’  in the  context of  cl. (ii) of  s.8 but  with reference  to the other provisions of the Act,  particularly in  the light  of s. 4 of the Act, to give effect to the so-called legislative intent for the levy of a  single point  tax.  It  was  in  error  in  making  an exposition ex  visceribus actus  and  in  relying  upon  the leading cases of Bywater v. Brandling, Rein v. Lane, Jobbins v. Middlesex Country Council Craies on Statute Law, 6th ed., 99, and Maxwell on Interpretation of Statutes, 8th ed., 30.      The High  Court expresses the view that the legislative intent in  enacting cl.  (ii) of  s.8 of the Act is two-fold (1) to restrict the levy 881 of sales tax to a single point and to avoid multiple levy of sales tax  on goods, and (2) that sales tax should be levied at the  stage of the first sale and should be recovered from the registered  dealer who  effects the  first sale and that all subsequent  sales of  such goods should not be subjected to sales  tax over  again. In  the light  of this  so-called legislative intention  and the  policy of  the Act, the High Court  observes   that  ’having   regard  to   the  context, collocation and  the object  of the  expression  ’registered dealer’ in cl.(ii) of s.8 of the Act’, and ’having regard to the legislative  intent, namely,  to levy a single point tax under  sub-s.(3)   of  s.7   of  the  Act’,  the  expression ’registered dealer’  in cl. (ii) of s.8 would also include a dealer registered  under the Central Sales Tax Act, 1956, on whom a  special liability  to pay sales tax has been imposed under s.4.  Upon that  view,  it  held  that  a  dealer  who purchased goods  from a  dealer registered under the Central Act, who  was liable  to pay  sales tax  on the sale of such goods by  virtue of  the provisions of s.4 of the Act, would be entitled  to deduct  from his turnover of sales of goods, resales of  goods so  purchased  by  him  on  or  after  the appointed day  if the  goods at  the time of their purchase, were  goods   specified  in   Schedule  C  of  the  Act.  It accordingly  held   that  the   meaning  of  the  expression ’registered dealer’  in cl.(ii)  of s.8 was not limited only to a  dealer registered under the Act but it was wide enough to also include a dealer registered under the Central Act.      There is  no dispute  with  the  proposition  that  the meaning of  a word  or expression  defined may  have  to  be departed from  on account of the subject or context in which the word had been used and that will be giving effect to the opening sentence  in definition  section, namely ’unless the context otherwise  requires’. In view of this qualification, the Court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to  such matter  and interpret the meaning intended to be  conveyed by  the use  of the  words in  a  particular section, there  is no scope  for the application of the rule ex visceribus actus. This rule is never allowed to alter the meaning of  what  is  of  itself  clear  and  explicit.  The authorities relied  upon by  the High  Court are, therefore, not applicable.      While accepting that sub-s.(3) of s.7 of the Act was to give effect  to cl.(a)  of s.15  of  the  Central  Act,  and therefore cannot  control the  interpretation of  cl.(ii) of s.8, the  High Court commits the mistake of interpreting the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12  

expression ’registered  dealer’ appearing  therein,  in  the context of  s.4 of the Act. The provisions of s.4, sub-s.(3) of s.7  and cl.(ii)  of s.8  of the  Act  operate  in  three different fields. 882 While s.4 of the Act provides that a registered dealer under the Central  Act who  may not be liable to pay tax under s.3 of the  Act may  nevertheless in  certain  contingencies  be liable to  pay tax,  sub-s. (3) of s.7 provides for the levy of single  point tax  on sales  in the course of inter-state trade and  commerce of  declared goods,  to bring the Act in conformity with  cl.(a) of  s.15 of  the  Central  Act.  The object and  purpose of  enacting the  provisions of  s.8 are entirely  different,   namely,  to  lay  down  the  mode  of computation of  the turnover  of sales  or  purchases  of  a registered dealer  for the  imposition of a tax. Clause (ii) of s.8  allows for deduction of resales from the turnover of such registered  dealer when  the goods are purchased from a registered dealer,  i.e., a  dealer registered under s.22 of the Act.  In effect,  s.8 deals with transactions of sale or purchase taking place within the State.      There is  a fallacy in the reasoning of the High Court. It seems  that the High Court was obsessed with two factors, namely (1) the concept of a single point tax under sub-s.(3) of s.7 of the Act, and (2) the fact that a registered dealer under the Central Act who may not be liable to pay tax under s.3 of  the Act may nevertheless in certain contingencies be liable to  pay tax.  It failed to appreciate that cl.(ii) of s.8 which  allows for  deduction of  sales by one registered dealer to  another, deals  purely  with  inside  sales.  The expression ’registered  dealer’ in  cl.(ii) of s.8 is sought to be  given an  enlarged meaning  by stretching, in effect, the legal  fiction contained  in  sub-s.(2)  of  s.4.  After observing that  the legal  fiction in  sub-s.(2) of  s.4  is created for a limited purpose, it goes on to observe:           "It would,  therefore, have  been inappropriate or      at any  rate wholly  inartistic for  the legislature to      provide in  sub-section (2)  of section  4  that  every      dealer who  is liable  to pay tax under sub-section (1)      shall be  deemed to  be a  registered  dealer  for  the      purpose of  clause (ii)  of section  8 since the latter      section provides  for the levy of sales tax on sales of      goods of  an altogether  different dealer  after making      certain deduction  from the  turnover of sales of goods      of such  dealer. The  legislature  could  have  made  a      specific provision,  if any,  in this  behalf  only  in      clause (ii)  of section 8 and not in sub-section (2) of      section 4."      The High  Court proceeds  on the  hypothesis  that  the transactions in  question must  have been  brought to tax in the hands  of the  Baroda dealer  and, therefore,  it became necessary to  avoid multiple  levy of  sales  tax.  On  that assumption, it  felt that  it was  necessary to  give to the assessee the  benefit of  s.8(ii) of  the Act  although  the Baroda dealer was not a registered dealer within the meaning of 883 s. 2(25)  i.e., registered  as a  dealer under  s. 22 of the Act. We  regret to say that in reaching that conclusion, the High Court  has proceeded  on mere conjectures and surmises. For aught  we know,  the Baroda dealer at the relevant time, might not be engaged in the business of selling goods in the State of  Gujarat and was, therefore, not a dealer liable to pay  tax  at  all.  Perhaps  he  was  primarily  engaged  in effecting sales  in the  course  of  inter-State  trade  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12  

commerce, or it may be that the inside sales effected by him did  not   exceed  the  taxable  limits.  Both  the  parties proceeded upon  the basis that the purchases effected by the assessee were  not subjected  to tax. It was, therefore, not right for  the High  Court to  hold that the disallowance of deduction claimed  by the  assessee under  cl.(ii) of s.8 of the Act would result in double taxation of the same goods.      It is  evident  that  the  High  Court  has  completely misdirected itself.  The transactions  of sales  effected by the Baroda  dealer to  the assessee  who  was  a  dealer  at Ahmedabad, were  clearly inside sales. While it is true that the Baroda dealer being a dealer registered under s.7 of the Central Sales  Tax Act was, in certain contingencies, liable to pay  tax under  s.4 of  the Act, but that circumstance by itself would  not make  him a ’registered dealer’ within the meaning of s. 2(25) of the Act.      If the  legislature really intended that the expression ’registered dealer’ in cl.(ii) of s.8 should take within its ambit a  dealer registered  under the Central Sales Tax Act, upon whom  liability to  pay sales  tax is imposed by s.4 of the Bombay  Act, it  would have  said so  in clear words. It would have  made necessary  provision in that behalf in sub- s.(2) of  s.4 which provides that every dealer liable to pay tax under  sub-s.(1) shall  be deemed  to  be  a  registered dealer for  purposes of  certain sections  of the Bombay Act viz., ss. 32, 33, 34, 35, 36, 37, 38, 46, 47 and 48.      It is thus apparent that the legal fiction in sub-s.(2) of s.4  is created  for a  limited purpose,  namely, to make section 4  a self-contained  code which  not only  imposes a charge of  tax and  lays down  the rate  structure, but also provides the  machinery for  assessment and  recovery of tax and penalty. The legal fiction contained in sub-s.(2) of s.4 of the Act cannot be stretched any further.      For these  reasons, the  judgment  of  the  High  Court answering the  reference in  favour of  the assessee  is set aside. The  question referred by the Tribunal is answered in the negative and in favour of the Revenue. There shall be no order as to costs. S.R. Appeal allowed. 884