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PETITIONER: KEDARNATH JUTE MANUFACTURING CO.

       Vs.

RESPONDENT: COMMERCIAL TAX OFFICER, CALCUTTA AND ORS.

DATE OF JUDGMENT: 02/04/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. SIKRI, S.M.

CITATION:  1966 AIR   12            1965 SCR  (3) 626  CITATOR INFO :  E&R        1978 SC 897  (4)  F          1988 SC1775  (6)  F          1992 SC  53  (6)

ACT: Bengal  Finance  (Sales  Tax)  Act,  1941   (Bengal  Act   6 of1941)--S.  5(2)(a) (ii) proviso. Effect of--Production  of declaration  forms required under proviso whether  mandatory or  directory--Exemption  under substantive  clause  whether can be  claimed on  the  basis of  other evidence.

HEADNOTE: The  appellant  a public limited  company  sought  exemption under s. 5(2)(a)(ii) of the Bengal Finance (S.ales Tax) Act, 1941  in  respect of certain sales. However,  it  could  not produce    before   the   commercial   tax    officer    the declaration forms from the purchasing dealers  required   to be   produced   under   the  proviso   to   that  sub-clause because the said forms were lost. The appellant tried to set duplicate  forms  from the purchasing  dealers  but  without success. His application under s. 21A to summon the  dealers with  the relevant documents was rejected by the  Commercial Tax   Officer   and the higher authorities also  refused  to issue   directions  for the issue of  duplicate  declaration forms.  The  Commercial  Tax Officer  thereafter  passed  an assessment  order  without  allowing.  the  said  exemption. Against that order the appellant filed a writ petition under Art.  226 and thereafter a Letters Patent appeal but  failed to  get  redress.  It  then  appealed  to  this  Court  with certificate.     It  was contended on behalf of the appellant   that  the exemption  granted  under the  substantive  sub-clause  (ii) could  be  claimed  by  the  production  of  other  relevant evidence if the declaration forms could not be produced; the proviso  to that sub-clause requiring the production of  the said forms was only directory as was also proved by the  use of the words "on demand" in s. 27A. HELD: The exemption could be claimed only by the  production the declaration forms as laid down in the proviso. (i)  The  effect of an excepting proviso is to  except  from the  main clause something. which but for the proviso  would

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be within it. Craies on Statute Law quoted: If  the intention of the Legislature was to give   exemption if  the  terms of the substantive part  of  sub-clause  (ii) above are complied with, the proviso. becomes redundant  and otiose.  If  the proviso is treated as merely  directory  it will  lead to the  position that if the declaration form  is furnished well and good; but if not furnished other evidence can  be produced. That is to rewrite the clause and to  omit the  proviso. That will defeat the express intention of  the legislature. [622H-630A] There is an understandable reason for the stringency of  the provisions. The object of s. 5(2)(a)(ii) of the Act and  the rules  made  thereunder  is  self-evident.  While  they  are obviously   intended  to   give exemption  to  a  dealer  in respect of sales to registered dealers of specified  classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. [630G]  627     State  of  Orissa v.M.A. Tulloch & Co.  Ltd.  (1964)  15 S.T.C. 641, distinguished. (ii) The words "on demand" in r. 27A only fix the time  when the  declaration forms are to be produced; they do not  mean that their production is not obligatory. [630A-B] (iii)  Section  21A only empowers the  Commissioner  or  any person appointed by him to take evidence on oath etc. It can be  invoked only in a case where the authority concerned  is empowered  to  take  evidence in  respect  of  a  particular matter,  but that does not enable him to ignore a  statutory condition to claim exemption. [630C-D] (iv)  Sub-rules  (3)  and (4) of s. 27A do  not  enable  the selling  dealer  to either directly apply or to  compel  the purchasing dealers to apply for duplicate forms nor do  they enjoin  on  the appropriate authority to  give  the  selling dealer  a duplicate form to replace the lost one.  This  may cause  hardship  but the remedy lies  with  the  Legislature only. [630E, F]

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 94 of  1954. Appeal from the judgment and order dated August 17, 1951  of the Calcutta High Court in Appeal from Original Order No. 81 of 1959. A.V. Viswanatha Sastri and P.K. Ghosh, for the appellant. P.K. Chatterjee and P.K. Bose, for the respondents. The Judgment of the Court was delivered by     Subba Rao, J. This appeal on a certificate  granted   by the  High  Court  of Calcutta raises  the  question  of  the interpretation  of  s. 5(2)(a) (ii) of  the  Bengal  Finance (Sales  Tax) Act, 1941 (Bengal Act VI of 1941),  hereinafter called the Act.     The  material facts are as follows: The appellant  is  a public  limited’  company registered as a dealer  under  the Act, having its registered place of business at Calcutta. In respect  of  the accounting year ending with  31st  December 1954, in the return for the year the assessee had shown  its gross  turnover at Rs. 70,99,928-10-0 and claimed  exemption under two heads, namely, (i) under s. 5(2)(a)(i) of the  Act Rs.  1,33,730-6-6; and (ii) under s.   5(2)(a)(ii)   thereof Rs. 69,65,979-9-6. After deducting the said amounts from the gross  turnover the assessee showed its taxable turnover  at Rs. 218-9-0 and deposited the tax of Rs. 9-12-6 on the  said amount in the treasury. The Commercial Tax Officer by notice

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dated April 22, 1955, fixed August 4, 1955, for hearing  the assessee  in respect of its  return. Under  s.  5(2)(a)(ii), the appellant in order  to  claim  exemption thereunder  had to  furnish declaration forms  duly  filled in  and’  signed by  registered dealers to whom the goods  were sold  by  it. After  taking  some adjournments of the enquiry  it  appears that in the second week ’of January 1957 the assessee  found that  its  file containing 147 declaration  forms  received’ from  its dealers in respect of the goods received  from  it was missing. The assessee, it is said, made various attempts to get duplicate forms of declaration from the dealers, but, on account of circumstances over which it had no 628 control  and because of the unhelpful and hostile   attitude of the Commercial Tax Officer within whose jurisdiction  the said  dealers  functioned, it was not able  to  furnish  the duplicate forms for all the declarations that were lost.  On August  8, 1957, the assessee applied to the Commercial  Tax Officer under s. 21A of the Act for summoning the dealers to produce  the   necessary  documents in order to  prove  that they  had issued the declaration forms to it, but the  said’ officer  did not issue the requisite summons to the  parties concerned.  The  assessee then flied an application  to  the Commissioner   of   Commercial  Taxes,  West   Bengal,   for directions  to issue duplicate declaration forms,  but  that application was rejected. The revision filed to the  Revenue Board  was  also  dismissed.  On  November  21,  1957,   the Commercial   Tax  Officer  made  an  order   of   assessment disallowing the assessee’s claim for exemption in    respect of the said sales made to the purchasing registered  dealers amounting   to  Rs.  22,46,006-0-6   and  levied    on    it additional       tax    of Rs.  1,49,778-4-6.  The  assessee thereafter   flied  a  petition  under  Art.  226   of   the Constitution  in the High Court of Calcutta for  issuing  an order  directing the respondents, i.e., the  Commercial  Tax Officer  and  the  Commissioner of  Commercial  Taxes.  West Bengal, not to implement the said assessment order. The said application  came up, at the first instance,  before  Sinha, J.,  who dismissed the same. On appeal, a Division Bench  of the  said High Court confirmed the order of Sinha, J.  Hence the present appeal.     At the outset we must make it clear that in the view  we are taking on the construction of s. 5 of the Act we do  not propose  to go into the question whether the department  was responsible  for  preventing the  assessee  from  furnishing duplicate  forms  of the declarations alleged to  have  been lost or on the question whether the department went wrong in not summoning the dealers to produce the relevant  documents to establish that the declaration forms alleged to have been lost were in fact issued’ by them.     The  only  question, therefore, that arises  is  whether under  s.  5(2)(a)(ii)  of the Act  the  furnishing  of  the declaration  forms  issued by the purchasing dealers  was  a condition for claiming the exemption thereunder.     In   substance  s.  5(2)(a)(ii)  exempts  from   taxable turnover  all sales to a registered dealer of goods  of  the class   or   classes  specified  in   the   certificate   of registration  of  the  dealer  as  being  intended  for  the purposes mentioned, therein. But the said exemption is  made subject  to  a proviso. Under that proviso, in the  case  of such  sales a declaration form duly filled up and signed  by the  registered  dealer  to  whom the  goods  are  sold  and containing  the prescribed particulars on a prescribed  form obtainable   from  the  prescribed  authority  has   to   be furnished’ in the prescribed manner by the dealer who  sells

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the goods. Under r. 27A of the Bengal Sales Tax Rules, 1941, hereinafter  called the Rules, a dealer who wishes to  claim the   said  exemption  shall  on  demand  produce   such   a declaration in writing 629 signed by the purchasing dealer. Sub-r. (2) thereof  enjoins on  a dealer not to accept and on the purchasing dealer  not to  give  a declaration except in the form  prescribed.  The other rules make stringent provisions to prevent the  misuse of the said forms.     The  argument  of Mr. A.V.  Viswanatha  Sastri,  learned counsel  for the appellant, may be briefly stated thus:  The substantive  part of s. 5(2)(a)(ii) of the Act provides  for the exemption in respect of certain sales to a dealer if the sales  are  made  to a registered dealer  for  the  purposes mentioned  thereunder.  The proviso to  the  said  subclause prescribes in effect that the declaration form in the manner prescribed is the best evidence to prove that the sales were for  the said purposes. The proviso cannot be  construed  as laying  down a condition for giving the exemption, but  only as  a  directory  provision  to  subserve  the   substantive provision in a reasonable way. If so construed, a dealer  is not precluded in a case where the proviso cannot be strictly complied  with  from producing other  relevant  evidence  to prove that the sales to the registered dealers were for  the purposes  mentioned in the said sub-clause. This  conclusion is sought to be supported on the basis of the expression "on demand"  in r. 27A which, according to the learned  counsel, indicates that the production of the prescribed  declaration is not obligatory but only to be made if a demand is made by the authority concerned.     The  learned  Solicitor  General,  on  the  other  hand, contends  on  behalf of the respondents that  a  dealer  can claim  exemption under the said sub-clause, but if he  seeks exemption he must  comply strictly with the conditions under which  the   exemption  can be granted. He argues  that  the clear  terms of the clause, read with the proviso, impose  a condition on a dealer for claiming exemption.     Section  5(2)(a)(ii)  of  the Act in  effect  exempts  a specified turnover of a dealer from sales tax. The provision prescribing  the  exemption shall,  therefore,  be  strictly construed.  The substantive clause gives the  exemption  and the  proviso  qualifies  the  substantive clause. In  effect the  proviso says that part of the turnover of  the  selling dealer covered by the terms of sub-cl. (ii) will be exempted provided a declaration in the form prescribed is  furnished. To put it in other words, a dealer cannot get the  exemption unless  he furnishes the declaration in the prescribed form. It  is  well  settled that "the effect of  an  excepting  or qualifying  proviso,  according  to the  ordinary  rules  of construction,  is to except out of the preceding portion  of the  enactment,  or to qualify  something  enacted  therein, which  but for the proviso would be within it": see  "Craies on  Statute Law", 6th Edn., p. 217. If the intention of  the Legislature  was  to  give exemption if  the  terms  of  the substantive  part of sub-cl. (ii) alone are complied’  with, the  proviso  becomes redundant and otiose.  To  accept  the argument  of  the learned counsel for the  appellant  is  to ignore  the  proviso altogether, for if  his  contention  be correct it will lead to the position that if the declaration form  is  furnished, well and good; but, if  not  furnished, other evidence can be 630 produced.  That  is to rewrite the clause and  to  omit  the proviso.  That  will  defeat the express  intention  of  the

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Legislature.   Nor   does  r.  27A  support   the   contrary construction.  The  expression "on demand"’ only  fixes  the point of time when the declaration forms are to be produced; otherwise  the rule would be inconsistent with the  section. Section 5(2)(a)(ii) says that the declaration form is to  be furnished  by  the dealer and r. 27A says that it  shall  be furnished  on demand, that is to say it fixes the time  when the form is to be furnished. This reconciles the  provisions of r. 27A with those of s. 5 (2)(a)(ii) of the Act,  whereas the   construction   suggested  by  the   learned’   counsel introduces  an incongruity which shall be avoided.   Section 21A  on  which  reliance is placed has  no  bearing  on  the question to be decided. It only empowers the Commissioner or any  person appointed to assist him under sub-s (1) of s.  3 to  take evidence on oath etc. It can be invoked only  in  a case  where  the authority concerned is  empowered  to  take evidence in respect of any particular matter; but that  does not  enable  him to ignore a statutory  condition  to  claim exemption. Sub-rules  (3)  and  (4) of r. 27A are not  helpful  to  the appellant. They provide only safeguards against abuse of the declaration  forms  by the purchasing dealers; they  do  not enable  the  selling dealer to either directly apply  or  to compel the purchasing dealers to apply for duplicate  forms; nor do they enjoin on the appropriate authority to give  the selling  dealer  a duplicate form to replace  lost  one.  We realise  that  the section and the rules as they  stand  may conceivably cause unmerited hardship to an honest dealer. He may  have  lost the declaration forms by a  pure   accident, such  as fire, theft etc., and yet he will be penalised  for something for which he is not responsible. But it is for the Legislature or for the rule-making authority to intervene to soften  the rigour of the provisions and it is not for  this Court   to  do  so  where  the  provisions  are  clear   and unambiguous. There  is  an understandable reason for  the  stringency  of the provisions. The object of s. 5(2)(a)(ii) of the Act  and the  rules made thereunder is self-evident. While  they  are obviously intended to give exemption to a dealer in  respect of  sales  to  registered dealers of  specified  classes  of goods,  it seeks also to prevent fraud and’ collusion in  an attempt  to evade tax. In the nature of things, in  view  of innumerable transactions that may be  entered  into  between dealers.  it  will  wellnigh be impossible  for  the  taxing authorities  to ascertain in each case whether a dealer  has sold  the  specified  goods  to  another  for  the  purposes mentioned in the section.  Therefore, presumably to  achieve the  twofold  object,  namely,  prevention  of  fraud   and’ facilitating administrative efficiency, the exemption  given is made subject to a condition that the person claiming  the exemption  shall  furnish a declaration form in  the  manner prescribed  under  the  section.  The  liberal  construction suggested  will   facilitate  the commission  of  fraud  and introduce  administrative inconveniences, both of which  the provisions of the said clause seek to avoid. 631 The decision of this Court in The State of  Orissa v.   M.A. Tulloch  and Co. Ltd.(1) does not help the  appellant.  That decision  was  concerned with s. 5(2)(a)(ii) of  the  Orissa Sales Tax Act, 1947. That section was similar in terms to s. 5(2)(a)(ii) of the Act in question, but there was no proviso to  that section in the Orissa Act similar to the one  found in  the present section. That makes all the difference,  for it is the proviso that imposes the  condition. But under  r. 27(2)  made under the Orissa Act "a dealer shall  produce  a

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true  declaration in writing by the purchasing dealer or  by such  responsible person as may be authorized in writing  in this  behalf by such dealer that the goods in  question  are specified   in  the  purchasing  dealer’s   certificate   of registration  as being required for resale by him or in  the execution  of any contract." This Court held that  the  said mandatory provision was inconsistent with s. 5(2) (a)(ii) of the  Orissa  Sales Tax Act; and to avoid  that  conflict  it reconciled both the provisions by holding that the rule  was only directory and, therefore, it would be enough and if  it was  substantially  compiled with. The said  provisions  may afford  a guide for amending the relevant provisions of  the Act  and the rules made thereunder, but do not  furnish  any help for construing them. Before parting with the case we must make it clear that   we are  not  expressing any opinion on the bona  fides  of  the appellant  or the appropriate sales tax authorities, for  we have not scrutinized the evidence in that regard. In the result, the appeal fails and is dismissed with costs. Appeal dismissed. [1964] 7S.C.R.810. 632