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PETITIONER: POLESTAR ELECTRONIC(P) LTD.

       Vs.

RESPONDENT: ADDL.  COMMISSIONER, SALES TAX DELHI

DATE OF JUDGMENT20/02/1978

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. BEG, M. HAMEEDULLAH (CJ)

CITATION:  1978 AIR  897            1978 SCR  (3)  98  1978 SCC  (1) 636  CITATOR INFO :  D          1981 SC1055  (16)  R          1982 SC 149  (248)  D          1985 SC1041  (7,9,10)  F          1986 SC2146  (10)

ACT: Interpretation     of    statutes--Plain     and     natural meaning--Construction of a taxing statute--Letter of law  or spirit   of  law--Construction  of  provision  exposing   an assessee to penalty. Bengal  Finance  (Sales Tax) Act, 1947 as applied  to  Union Territory of Delhi--Sections 2(5) & 5(2)(a)(ii)--To get  the benefit  of  Sale for resale or to  a  manufacturer--Whether subsequent sale should be within Union Territory of Delhi.

HEADNOTE: Bengal  Finance  (Sales Tax) Act, 1947 was  applied  to  the Union Territory of Delhi subject to certain modifications by a  notification dated 28-4-1951.  Every dealer  whose  gross turnover exceeds the taxable quantum is liable to pay tax on sales effected by him after a specified date and while he is liable  to  pay tax, he cannot carry on business  unless  he gets   himself  registered  and  possesses  a   registration certificate.  The tax is leviable on a dealer in respect  of his  taxable  turnover.  To compute taxable  turnover  of  a dealer, certain deductions are required to be made from  his gross turnover and one of the deductions is that set out  in section 5(2)(a)(ii).  What is permitted to be deducted under this  provision is turnover of sales to a registered  dealer of   goods  of  the  class  or  classes  specified  in   his certificate of registration as being intended for resale  by him or for use by him as raw materials in the manufacture of goods for sale.  The first proviso enacts that the  turnover of  sales covered by s. 5 (2) (a) (ii) would  be  deductible only  if  a  declaration duly filled in and  signed  by  the Registered dealer to whom the goods are sold and  containing the  prescribed particulars in prescribed form is  furnished by  the selling dealer. The requirement of such  declaration as  condition  of deduction is clearly intended  to  prevent fraud and promote  administrative  efficiency.   The  second proviso  provides  that  where any goods  specified  in  the certificate  of registration are purchased by  a  registered

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dealer as being intended for resale by him or for use by him as  raw materials in the manufacture of goods for  sale  but are  utilised by him for any other purpose the price of  the goods  purchased shall be allowed to be, deducted  from  the gross  turnover of the selling dealer but shall be  included in the taxable turnover of the purchasing dealer. There  are broadly two groups in which the appeals  and  the writ  petitions  can  be divided.   One  group  consists  of appeals  where  the assessees purchased goods of  the  class specified  in  the  certificate  of  registration  as  being intended  for  resale by them and furnished to  the  dealers selling  the  goods,  declarations in  the  prescribed  form stating  that  the  goods  were  intended  for  resale  kind thereafter resold the goods though not within, the territory of  Delhi.  The second group consists of appeals  where  the assessees  Purchased  goods of the class  specified  in  the certificate  of  registration as being intended for  use  by there. as raw materials in the manufacture of goods for sale and  furnished to the prescribed particulars  in  prescribed form is furnished by the selling dealer, the dealers selling the  goods declarations in the prescribed form stating  that the goods were purchased by them for use as raw materials in the  manufacture of goods for sale and thereafter  used  the goods  purchased  as  raw materials in  the  manufacture  of goods,  in  some  cases outside Delhi  and  in  some  others inside,  but  in the after. sold the goods  so  manufacturer outside  Delhi.   The  High Court  of  Delhi  negatived  the contention  of the assessees that they were not  covered  by the second proviso to s. 5(2) (a) (ii).  The High Court took the  view  that for the purposes of s. 5(2)(a)(ii)  and  the second  proviso, resale of the goods purchased was  confined to,  resale  inside  Delhi  and so also  use  of  the  goods purchased is raw materials in the manufacture of goods and 99 sale of manufactured goods were required to be, inside Delhi and,  therefore, if the assessees resold the  goods  outside Delhi  or  used  them as raw materials  in  the  manufacture outside  Delhi, or even if the manufacture was inside  Delhi sold  the  goods  manufactured  outside  Delhi,  there   was utilisation  of  the goods by the assessees  for  a  purpose other than that for which they were purchased and hence  the second proviso to s. 5(2)(a)(ii) was attracted and the price of  the  goods purchased was liable to be  included  in  the taxable turnover of the assessees The question for consideration was whether "resale" under s. 5 (2) (a)(ii) and the second proviso means,resale any  where without  any geographical limitation or it is confined  only to resale inside Delhi. The Revenue contended (1)  the words "inside the Union territory of Delhi" are not to be found in s. 5 (2) (a) (ii) and the second proviso  but they must be read in these provisions   as   a   matter   of construction because               (a)   if resale outside Delhi were held to  be               within the terms of s.    5(2)(a)(ii) and  the               second  proviso, the Union territory of  Delhi               would  lose tax altogether in cases where  the               goods   were   resold  outside   Delhi.    The               intention  of the Legislature was  to  recover               tax at only one point while the goods were  in               the stream of trade.               (b)   the   Legislature  had  no   legislative               competence   to   tax  sale   outside   Delhi.               Therefore,  resale ",’thin the meaning  of  s.               5(2)(a)(ii)  and the second proviso could  not

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             possibly include resale outside Delhi.               (c)   the  words "by him" following  upon  the               word "resale" in s.  5(2)(a)(ii)    and    the               second  proviso  clearly indicated  ’that  the               resale contemplated under these provisions was               resale   by   the  purchasing  dealer   as   a               registered  dealer  and since the  concept  of               registered  dealer has relation only  to  sale               inside  Delhi, the resale must be  within  the               territory of Delhi. Allowing the appeals and Writ Petitions, HELD  : 1. It is a well settled principle of  interpretation that  a statutory enactment must or ordinarily be  construed according  to the plain natural meaning of its language  and that no words should be added, altered or modified unless it is  plainly  necessary  to  do so  in  order  to  prevent  a provision  from  being  unintelligible  absurd  unreasonable unworkable  or totally irreconcilable with the rest  of  the statute. [11OA] R.   v.  Dakees  [1959]  2  All  E.R.  350,  Federal   Steam Navigation Co. Ltd: v. V.     Department    of    Trade    & Industry,   [1974]   2  All  E.R.   97,   Narayanaswani   v. Pannersalvam & Ors. [1973] 1 SCR 172 relied on. 2.   Addition to or modification of words used in  statutory provision  is  generally not permissible but the  court  may depart  from this rule to avoid a patent  absurdity.   There are  no words such as ’inside the Union territory of  Delhi" qualifying  resale  so as to limit it to resale  within  the territory of Delhi.  The Legislature could have easily  used such words if its intention was to confine resale within the territory of Delhi but it omitted to do so. [IIIA, B, E] Attorney General-Sillen [1964] 2 H & C at 526 referred to. The  absence  of specific words limiting resale  inside  the territory of Delhi is not without significance and it cannot be made good bya process of judicial construction,  for to  do  so  would be to attribute  to  the  Legislature  and intention  which it has not chosen to express and  to  usurp the  legislative  function.  It is obvious  that  resale  is subsequent sale after the first and it must, therefore, have the  some  meaning  as  ’sale’  defined  in  s.  2(g).   The definition of sale in s. 2(g) is a general definition  which does  not limit it to a sale inside the territory of  Delhi. Even  a  sale outside the territory of Delhi is  within  the coverage  of the definition.  Section 5(2)(a)(ii)  does  not see to impose any tax on resale.  What it does is to provide deduction in respect of 100 sale to a registered dealer.  Even under the second proviso, what is taxed is the’ just sale made by tile, selling dealer and  not  the resale made by the  purchasing  dealer.   Thus there  is  no tax sought to be imposed on the  resale  under section  5(2)(a)(ii) or the second proviso and the  argument of  lack  of legislative competence has  no  substance.   It would,  be straining the language of the enactment too  much to  say that the words "by him" are intended to mean by  him as a registered dealer. [112B-D, El G. 113D] 3.   The argument of the Revenue that the Legislature  could never have intended that the Union territory of Delhi should be  altogether  deprived  of tax in cases of  this  kind  is erroneous.   It is not correct that the  legislative  intent was  to  exempt the sale. to the purchasing dealer  only  in those cases where the Union territory of Delhi would be able to recover the tax on resale of the goods by the  purchasing dealer.   It  is  now well settled that when  the  Court  is construing  a  statutory  enactment  the  intention  of  the

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Legislature should be gathered from the language used by  it and  it is not permissible to the court to  speculate  about the Legislative intent. [114C-D] Saloman  v.  Saloman & Co. Ltd. [1897] A.C. 22, at  38  and, Back-Clawson  International  Ltd.  v.  Papierwerke  Waldhof- Aschaffenburg [1975] 1 All E.R. 810 at  814, relied on. 4.   Section  5(1)(a)(ii) and the second proviso occur in  a taxing statute and it    is   a   well   settled   rule   of interpretation that in construing a taxing statute 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. [116A]  Cape Brandy Syndicate v. Inland Revenue Commissioner [1921] 1 K. B. 64 referred to. 5.   It would be flying in the face of well settled rules of construction  of a taxing statute to read the words  "inside the  Union territory of, Delhi" in section  5(2)(a)(ii)  and the  second proviso, when the Plain and undoubted effect  of the  addition of such words would be to expose a  purchasing dealer to penalty. [H116E] 6.   During  the period the department administered the  Act in West Bengal and for few years in Delhi, they administered it  on  the  basis that resale was not  confined  to  resale inside the State of West Bengal or Union territory of Delhi. It is true that the view of the department as to the meaning of a Statute which is administered by them is not admissible as  an aid to construction, because wrong practice does  not make  the law, but long acquiescence of the  Legislature  in the interpretation put upon an enactment may be regarded  as some sanction and approval of it.  The circumstance that for long  years the Legislature did not intervene to  amend  the law  by adding words "inside the Union territory  of  Delhi" even  though the Revenue was continually  administering  the law  on  the basis that resale means  resale  anywhere  does throw  some light on the intention of the Legislature.   The subsequent  amendment also throws light on the intention  of the Legislature. [117A-E, 118A]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1290 of 1977. (Appeal by Special leave from the Order dated. the 31-1-1977 of  the Additional Commr. of Sales Tax New Delhi  in  Appeal No. 665 of 1976-77).                             AND                CIVIL APPEAL NO. 1111 OF 1977 (Appeal  by Special leave from the Judgment and Order  dated the  17-7-1975 of the Allahabad High Court in  C.M.W.P.  No. 494 of 1975). 101 AND CIVIL APPEAL NO. 1352 OF 1977 (Appeal  by Special Leave from the Judgment and Order  dated the 30th April, 1977 of the Sales Tax Office at New Delhi).                             AND                CIVIL APPEAL NO. 1110 OF 1977 Appeal  by Special Leave from the Judgment and  Order  dated the  22nd March, 1977 of the Sales Tax Officer at New  Delhi in R.C. No 13754).                             AND CIVIL APPEAL NO. 1085 OF 1977 (Appeal  by Special Leave from the Judgment and Order  dated 30-3-1977 of the Sales Tax Officer, New Delhi.)                             AND

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               CIVIL APPEAL NO. 236 OF 1976 (Appeals by Special Leave from the Judgment and Orders dated the  18th December 1975 of the Sales Tax Officer,  Ward  No. 40,  Delhi  for  the assessment year 1973-74  in  Order  No. 856A).                             AND                 CIVIL APPEAL NO. 456 OF 1976 (Appeal  by  the Special Leave from the Judgment  and  Order dated  the 16th September, 1975 of the Delhi High  Court  in Civil Writ No. 343 of 1975).                             AND                 CIVIL APPEAL NO. 816 OF 1976 (Appeal by Special Leave from the Order dated the 30th  June 1976 of the Addl.  Commr. of Sales Tax, New Delhi in  Appeal No. 8945 of 1975-76).                             AND                 CIVIL APPEAL NO. 18 OF 1975 (Appeal by Special Leave from the Assessment Order No.  2667 dated  the  6th September, 1974 of  the  Sales-tax  Officer, Assessing Authority, Ward No. 40, Delhi, for the year  1971- 72).                             AND                CIVIL APPEAL NO. 1522 OF 1974 (From  the Judgment and Order dated the 26th April, 1974  of the Delhi High Court in Civil Writ No. 1426 of 1973).                             AND                CIVIL APPEAL NO. 1526 OF 1974 102 (From  the Judgment and Order dated the 26th April, 1974  of the Delhi High Court in Civil Writ No. 947 of 1973).                             AND     WRIT PETITIONS NOS. 166/77 & 329 OF 1975 WITH SLPs.                   NOs. 2522 & 2524 OF 1977 F.   S.  Nariman  (in CA 1290, 1085 & 1352) A.  K.  Sen  (in 1111), S. T. Desai (in 1110), Ravinder Narain, Talat  Ansari &  Balram  Saingal (in CA 1290 & 1 1 1 1), Shri  Narain  (in CAs.  1352, 1085 & 1110) Arjun Anand for J. B. Dadachanji  & Co. for the appellants in CAS.  Nos. 1290, 1111, 1085, 1352, 1110 & 1526. Shyamala  Pappu,  J.  Ramamurthi & R. Vaigai  in  CAs.  236, 456/76 718 of 1975 for the appellants. Sardar Bahadur & Bishnu Bahadur Saharya for the appellant in CA 1522 of 1974. Yogeshwar Prasad, Rani Arora & Meera Bali for the  appellant CAs.  Nos. 816 & in W.P. No. 166. G.   S. Chatterjee, D. P. Mukherjee & A. K. Ganguli for  the Petitioners in SLPs 2522 & 2524. K.   B. Rohatgi & M. K. Garg for the petitioners in W.P. No. 329/75. S.   V. Gupte Attorney General (in CAs. 1290, 1352, 816 & II 10), R.   C.  Chawla (in 1290 & W.P. 166 & CA 18/75)  R.  N. Sachthey and A.     Subhashini  for the respondents in  C.A. Nos. 1290, 1111, 1085,1352, 1110, 236, 456, 816 of 1976,  18 of  1975, 1522 & 1526/74, W.P. Nos. 166, 329 &  SLPS.   Nos. 2522 & 2524/77. The Judgment of the Court was delivered by BHAGWATI,  J.  These appeals raise a short  but  interesting question  of law relating to the interpretation  of  section 5(2)(a)(ii)  of the Bengal Finance (Sales Tax) Act, 1941  as applied  to the Union Territory of Delhi  (hereinafter,  for the sake of convenience referred to as Delhi).  The Act  was extended  to  Delhi subject to certain  modifications  by  a Notification  dated 28th April, 1951 issued by  the  Central Government in exercise of the powers conferred by section  2 of the Part C States (Laws) Act, 1950 and it came into force

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in  Delhi  on  28th May, 1951 by virtue  of  a  Notification issued  under section 1, sub-section (3) of the Act.   There have  been several amendments made in the Act from  time  to time  since the date of its application to Delhi but we  are concerned in these appeals only with the assessment  periods 1971-72 and 1972-73 and hence we shall confine ourselves  to the  relevant  provisions of the Act as  they  stood  during these assessment periods. Section 2 enacted the definition provision and clause (c) of that  section  defined  a ’dealer to  mean  any  person  who carries  on the business of selling goods in Delhi.   Clause (g) of section 2 contained the 103 definition of ’sale’.  It was a definition in general  terms and it mad,. no reference to the situs of the sale.  It  did not limit the definition to a sale inside Delhi.  There  was an  explanation to this clause which laid down as to when  a sale or purchase shall be deemed to take place inside Delhi. Section 4, sub-section (1) provided that every dealer  whose gross  turnover  during the year immediately  preceding  the commencement of the Act exceeded the taxable quantum at  any time  within such year shall be liable to pay tax under  the Act  on  all sales effected after the date notified  by  the Chief Commissioner and sub-section (2) of that section  said that  every dealer to whom sub-section (1) does  not  apply, shall,   if   his  gross  turnover   calculated   from   the commencement of any year exceeds the taxable quantum at  any time  within such year, be liable to pay tax under the  Act, on  the  expiry of two months from the date  on  which  such gross  turnover  first exceeds the taxable quantum,  on  all sales  effected  after  such  expiry.   Sub-section  (5)  of section 4 defined ’taxable quantum’ to mean, in relation  to any  dealer  who imports for sale any goods  into  Delhi  or manufactures or produces any goods for sale, regardless  of, the  value of the goods imported, manufactured or  produced, ten  thousand rupees, and in relation to any  other  dealer, thirty  thousand  rupees.   Sub-section  (1)  of  section  5 provided different rates of tax, according as the goods fell within one category or another, at which the tax payable  by a dealer shall be levied on his taxable turnover.  What  is- ’taxable turnover’ was defined in subsection (2) of  section 5 to mean :               "that part of a dealer’s gross turnover during               any  period  which  remains  after   deducting               therefrom-               (a)   his turnover during that period on-               (i)   the  sale  of  goods  declared  tax-free               tinder section 6;                (ii) sales to a registered dealer-of goods of               the   class  or  classes  specified   in   the               certificate of registration of such dealer, as               being  intended for resale by him, or for  use               by him as raw materials in the manufacture  of               goods  for  sale; and of containers  or  other               materials  for  the packing of  goods  of  the               class or classes so specified for sale :               Provided  that  in the case of  such  sales  a               declaration  duly filled up and signed by  the               registered  dealer to whom the goods are  sold               and containing the prescribed particulars on a               prescribed from obtainable from the prescribed               authority  is  furnished  in  the   prescribed               manner by  the dealer who sells the goods.                Provided   further  that  where   any   goods               specified  in the certificate of  registration

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             are purchased by a registered dealer as  being               intended for re-sale by him or for use by  him               as  raw materials in the manufacture of  goods               for  sale,  but are utilised by  him  for  any               other   purpose,  the  price  of   the   goods               purchased shall be allowed to be deducted from               the gross                104               turnover  of the selling dealer but  shall  be               included  in  the  taxable  turnover  of   the               purchasing dealer.               (iii) Sales to a registered dealer engaged  in               the  business  of raising coal, of  any  goods               which  are  shown to the satisfaction  of  the               Commissioner  to be required directly for  use               in connection with the raising of coal;               (iv)  sales   to  any  undertaking   supplying               electrical  energy  to  the  public  under   a               licence or sanction granted or deemed to  have               been granted under the Indian Electricity Act,               1910  (IX of 1910) of goods for use by  it  in               the generations distribution of such energy;               (v)   Sales  of goods which are shown  to  the               satisfaction of the Commissioner to have  been               dispatched  by, or on behalf of dealer  to  an               address  outside  the  (Union  Territory)   of               Delhi;               (vi)  such other sales as may be prescribed;"               This was the definition until 28th May,  1972,               when  by Finance Act, 1972 the main  enactment               in  section 5 (2) (a) (ii) was substituted  by               the following provision :               "(2)  In  this  Act  the  expression  ’taxable               turnover" means that part of a dealer’s  gross               turnover during any period which remains after               deducting therefrom-               (a)   his turnover during that period on-               (i)          x         x         x               (ii) sales to a registered dealer-               of goods of the class or classes specified  in               the   certificate  of  registration  of   such               dealer, as being intended for re-sale by  him,               or  "for  use by him as raw-materials  in  the               manufacture  in the Union Territory  of  Delhi               (hereinafter in this subclause referred to  as               Delhi),  of goods (other than  goods  declared               tax free under section 6)               (A)   for sale inside Delhi; or               (B)   for  sale in the course  of  inter-State               trade or commerce, being a sale occasioning or               effected by transfer of documents of title  to               such  goods during the movement of such  goods               from Delhi; or               (C)   for sale in the course of export outside               India being a sale occasioning the movement of               such  goods from Delhi, or a sale effected  by               transfer  of documents of title to such  goods               effected  during  the movement of  such  goods               from Delhi, to a place outside India and after               the  goods have crossed the customs  frontiers               of India; and               of  containers  or  other  materials  for  the               packing  of goods of the class or  classes  so               specified for sale;" 105

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Section  7, sub-section (1) laid down that no dealer  shall, while  being  liable to pay tax under section  4,  carry  on business  as  a  dealer unless he has  been  registered  and possesses  a registration certificate and subsection (3)  of that  section provided for grant of a certificate of  regis- tration  to  a dealer on an application being  made  by  him under  subsection  (2)  and said that  such  certificate  of registration shall specify the class or classes of goods for the purposes of sub-clause (ii) it clause (a) of sub-section (2)  of section 5. Section 26 conferred power on  the  Chief Commissioner to make rules for carrying out the purposes  of the  Act and in exercise of this power, the Delhi Sales  Tax Rules,  1951  were made by the, Chief  Commissioner.   These rules  prescribed not only the form of the  application  for registration  but  also  the  form  of  the  certificate  of registration.  Clause (3) of the form of the certificate- of registration  provided that the sale of the specified  goods to  the  dealer "for purposes of manufacture" and  "for  re- sale" will be free of tax.  This was in conformity with  the requirement  of section 5 (2) (a) (ii) as it stood prior  to its  amendment  and  though  section  5  (2)  (a)  (ii)  was substituted  by the Finance Act of 19 72, no  amendment  was made  in the form of the certificate of registration and  it was only on 29th March, 1973 that clause (3) of the form  of the  certificate  of registration was substituted so  as  to declare that the sales of the specified goods to the  dealer will be free of tax when they are "for use as raw  materials in the manufacture in the Union territory of Delhi of goods- for sale in the, manner specified in section 5 (2) (a)  (ii) or  "for resale".  Similarly, the form of declaration to  be furnished by the purchasing dealer in order to entitle,  the dealer  who  has sold the goods to claim  deduction  of  the amount  in respect of such sales under section 5  (2)  (ii), which was prescribed by Rule 26, was also not amended  until 29th  March,  1973 and it continued to be in  the  following terms :                "Certified  that the goods mentioned  in  the               cash     memo/     Bill      No---------------               dated-------------have been purchased by me/us               from  M/s.-----------and are duly  covered  by               our          Registration          Certificate               No.---------------dated --------------and  are               required by me/us for, re-sale/for use as  raw               materials  in  the manufacture  of  goods  for               sale/for use in the execution of contract.                                 Signature                 Dealer"               It was only on 29th March, 1973 that the  form               of the declaration was substituted by amending               Rule  26  so as to bring it in line  with  the               amended  section 5 (2) (a) (ii) and after  the               substitution it ran as follows :               "  Certified that the goods mentioned  in  the               Cash  Memo/ Bill  No.-------dated---------have               been purchased  by         me/us          from               M/s.--------------and  are  duly  covered   by               me/our registration certificate No.                ------------valid  from  ------------and  are               required by me/us for               8-211 sci/78               106               re-sale/  for  use  as  raw-material,  in  the               manufacture  in Delhi in accordance  with  the               provisions contained in section 5 (2) (a) (ii)               of the Bengal Finance (Sales Tax) Act, 1941 as

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             in force. in the Union Territory of Delhi,  of               goods for sale.               Signature..............               Dealer................               The  Act  as  originally  enacted  ended  with               Section  26  but  by  Amending  Act  of  1959,               Section  27  was introduced in  the  Act  with               effect from 1st October, 1959 and this section               provided that nothing in the Act or under  the               rules  shall be deemed to impose or  authorise               the  imposition  of  a  tax  on  any  sale  or               purchase  of  any  goods,  if  such  sale   or               purchase takes place :               (i)   in  the course of Inter-state  trade  or               commerce;               (ii)  outside the Union territory of Delhi, or               (iii) in  the course. of import of  the  goods               into,  or  export  of the goods  out  of,  the               territory of India. This  section was obviously introduced with a view to  bring the   Act   into  conformity  with  Article   286   of   the Constitution. These are the relevant provisions of the Act in the light of which  we have to decide the question of law arising in  the appeals.   The assessees in all the appeals  are  registered dealers and during the relevant assessment periods they held certificates of registration specifying the class or classes of  goods intended for resale by them or for use by them  as raw-materials  in  the manufacture of goods for  sale.   The certificates  of registration were in the form as  it  stood prior to its amendment on 29th March, 1973 and they did  not specify that the resale of the goods purchased or their  use as raw-materials in the manufacture of goods, or the sale of manufactured  goods  should  be  inside  Delhi.   There  are broadly two groups in which the appeals can be. divided  for the  sake  of convenience.  One group  consists  of  appeals where  the assessees purchased goods of the class  specified in  the  certificate of registration as being  intended  for resale  by  them and furnished to the  dealers  selling  the goods declarations in the prescribed form, as it stood prior to  29th March, 1973, stating that the goods  were  intended for  resale  and  thereafter resold the  goods,  though  not within  the territory of Delhi, while the other consists  of appeals  where  the assessees purchased goods of  the  class specified  in  the  certificate  of  registration  as  being intended for use by them as raw materials in the manufacture of  goods for sale and furnished to the dealers selling  the goods declarations in the prescribed form, as it stood prior to  29th March, 1973, stating that the goods were  purchased by them for use as raw-materials in the manufacture of goods for  sale  and thereafter used the goods purchased  as  law- materials in the manufacture of goods, in some cases outside Delhi and in some others inside, but in the latter, sold the goods  so  manufactured outside Delhi.  Civil  Appeals  Nos. 1110   of  1977,  1111  of  1977  and  1290  of   1977   are representative  appeals belonging to the first  group  while Civil Appeals Nos. 1526 of 1972, 1085 of 1977, and 1352 of 107 1977 are illustrative of the appeals belonging to the second group.   Some  of the appears are brought by  special  leave directly from the orders of the assessing authority and some others  from the appellate or Previsional  orders.   Special leave  was  granted  in these cases  without  requiring  the assessees  to  exhaust their remedies under the Act  and  to approach  the  High Court of Delhi in  the  first  instance,

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because  a decision was already given by the High  Court  of Delhi on 26th April, 1974 in Fitwell Engineers v.  Financial Commissioner  of  Delhi negativing the  contentions  of  the assessees.   The  view taken in the orders impugned  in  the appeals  and accepted by the High Court of Delhi in  Fitwell Engineers’  case was that for the purpose of section  5  (2) (a)  (ii)  and  the  Second Proviso,  resale  of  the  goods purchased  was confined to resale inside Delhi and so  also, use   of  the  goods  purchased  as  raw-materials  in   the manufacture  of goods and sale, of manufactured  goods  were required  to  be  inside  Delhi,  and,  therefore,  if   the assessees resold the :.goods outside Delhi or used them  as, raw-materials  in manufacture outside Delhi, or even if  the manufacture  was inside Delhi, sold the goods  manufactured, outside  Delhi,  there was utilisation of the goods  by  the assessees for a purpose other than that for which they  were purchased and hence the, Second Proviso to section 5 (2) (a) (ii) was attracted and the price of the goods purchased  was liable  to  be  included  in the  taxable  turnover  of  the assessees.   The question which arises for determination  in the  appeals  is  whether  this  view’taken  by  the  Taxing Authorities  and  approved  by the High Court  of  Delhi  in Fitwell Engineers’ case is correct and can be sustained. We  may first examine the scheme of the relevant  provisions of the Act in so far as it bears on the present controversy. Every  dealer,  whose  gross turnover  exceeds  the  taxable quantum is liable to pay tax on sales effected by him  after a  specified  date  and while he is liable to  pay  tax,  he cannot  carry on business unless he gets himself  registered and  possesses  a  registration  certificate.   Though   his liability  to tax is deter-mined by reference to  his  gross turnover, whether it exceeds the taxable quantum or not, tax is leviable on him only in respect of his taxable  turnover. *The  concept of taxable turnover is different from that  of gross turnover and to compute taxable turnover of a  dealer, certain  deductions are required to be made from  his  gross turnover  and  one  of the deductions is  that  set  out  in section  5 (2) (-a) (ii).  What is Permitted to be  deducted under  this provision is turnover on sales by  a  registered dealer  of  goods of the class or classes specified  in  his certificate of registration as being intended for resale  by him or for use by him as raw-materials in the manufacture of goods for sale.  This deduction is allowed with reference to the intended end-use of the goods, namely, that they will be resold  or they will be used as raw materials in  the  manu- facture  of goods for sale, according as they are  purchased for  one  purpose  or  the  other.   But  in  view  of   the innumerable  transactions  that May be entered into  by  the dealers,  it  would be well nigh impossible for  the  taxing authorities to ascertain in each case whether the the  goods were  purchased as being intended for resale or for  use  as raw-materials in the manufacture of goods for sale and hence the the First Proviso was enacted qualifying the substantive provision  by saying that the turnover the sale  covered  by the terms of section 5 (2) (a) (ii). would be 108 deductible only if "a declaration duly filled in and  signed by  the  registered dealer to whom the goods  are  sold  and containing the prescribed particulars on a prescribed  form- is  furnished" by the selling dealer.  The result is that  a dealer  cannot get deduction in respect of the  turnover  of his  sales falling within section 5 (2) (a) (ii)  unless  he furnishes   a   declaration   containing   the    prescribed particulars on the prescribed form duly filled in and signed by   the  purchasing  dealer.   The  form   of   declaration

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prescribed  under Rule 26 as it stood upto 29th March,  1973 contained  an  expression  of intention  of  the  purchasing dealer to resell the goods purchased or to use them as  raw- materials  in  the  manufacture of  goods  for  sale.   Such declaration  given  by the purchasing dealer to  the  dealer selling the goods would afford evidence that the goods  were purchased  by the purchasing dealer "as being  intended  for resale  by  him or for use by him as  raw-materials  in  the manufacture  of  goods for sale".  The  dealer  selling  the goods would be granted deduction in respect of the sales  on the  strength  of such declaration given by  the  purchasing dealer.  The requirement of such declaration as condition of deduction  is clearly intended to prevent fraud and  promote administrative  efficiency. [Vide Kedarnath Jute  Mfg.   Co. Ltd. v. Commercial Tax Officer(1).] But what would be the position if the purchasing dealer does not  act according to the intention expressed by him in  the declaration given to the selling dealer and in the one case, does  not  resell the goods and in the other, does  not  use them as raw-materials in the manufacture of goods for  sale. The  selling dealer is granted deduction in respect  of  the sales made by him because the goods are purchased for resale or for use as raw-materials in the manufacture of goods  for sale  and  this intended and-use of the goods  purchased  is sought  to  be  ensured  by  taking  a  declaration  in  the prescribed  form  from the purchasing dealer.   But  if  the goods  are utilised by the purchasing dealer for some  other purpose  contrary to the intention expressed by him  in  the declaration,  the object and purpose of giving deduction  to the selling dealer would be defeated.  Even so, it would not be  right to withdraw the deduction. granted to the  selling dealer  because that would be penalising the selling  dealer for  a breach of faith committed by the  purchasing  dealer. The  legislative  wrath should in all fairness fall  on  the purchasing  dealer  and that is why the Second  Proviso  has been  introduced  in the Act by Delhi Amendment  Act  20  of 1959.   The object of the Second Proviso is to  ensure  that the  intention  expressed by the purchasing  dealer  in  the declaration  given  by  him is carried out and  he  acts  in conformity with that intention.  Where the purchasing dealer gives  a  declaration  of  intention  to  resell  the  goods purchased or to use them as raw-materials in the manufacture of  goods  for  sale, he must act in  accordance  with  that intention, because it is on the basis of that intention that deduction  is allowed,to the selling dealer and if  he  does not carry out that intention and utilises the goods for  any other  purpose,  it stands to reason that the tax  which  is lost  to the Revenue by reason of deduction granted  to  the selling dealer should be recoverable from him, that is,  the purchasing  dealer.   If no deduction were  granted  to  the selling dealer, he would be liable to (1)  16 S.T. Cases, 607. 109 pay tax on the sale made by him and ultimately the incidence of that tax would be passed on to the purchasing dealer, but by  reason  of deduction allowed to the selling dealer,  the purchasing  dealer  escapes  this  incidence  of  tax   and, therefore,  the  Second  Proviso  ’enacts  that  where   the purchasing dealer acts contrary to the intention declared by him,  the selling dealer shall not be penalised for the  sin of  the purchasing dealer and he shall continue to have  his deduction,  but  the price of the goods purchased  shall  be included  in the taxable turnover of the purchasing  dealer. The   Second  Proviso  is  thus  intended  to  provide   the consequence of the purchasing dealer not complying with  the

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statement of intention expressed in the declaration given by him to the selling dealer under the First Proviso.  This  is broadly the scheme and intendment of section 5 (2) (a)  (ii) and  its  two  Provisos read in the  context  of  the  other provisions of the Act. Now,  the  first question that arises for  consideration  is whether  ’resale’ in section 5 (2) (a) (ii) and the,  Second Proviso  means  resale any where  without  any  geographical limitation  or it is confined only to resale  inside  Delhi. The  contention  of the Revenue was that  though  the  words "inside the Union Territory of Delhi" are not to be found in section 5 (2) (a) (ii) and the Second Proviso, they must  be read  in  these provisions as a matter of  construction  and three reasons were given in support of this contention.  The first  reason was that if resale outside Delhi were held  to be within the terms of section 5 (2) (a) (ii) and the Second Proviso,  the  Union  Territory  of  Delhi  would  lose  tax altogether  in  cases where the goods  were  resold  outside Delhi, because in that event the first sale would escape tax by  reason of the deduction granted under section 5 (2)  (a) (if) and the resale would also be free from tax since, it is outside Delhi and- hence covered by the exempting  provision contained  in section 27.  The Legislature could never  have intended  to  bring  about such a  result  where  the  Union Territory of Delhi would be deprived altogether of tax.  The intention of the Legislature was to recover tax at only  one point  whilst the goods were in the stream of trade and  the Legislature, therefore, granted deduction in respect of  the first  sale on the basis that it would be levying  tax  when the  goods were resold and that postulated  the  requirement that  the  resale should be inside Delhi.  Secondly  it  was urged that the Legislature had no legislative competence  to tax sale outside Delhi and moreover, by reason of section 27 sale  outside Delhi was taken out of the purview of the  Act and resale within the meaning of section 5 (2) (a) (ii)  and the  Second Proviso could not, therefore,  possibly  include resale outside Delhi.  The last argument was that the  words ’by  him following upon the word ’resale’ in section  5  (2) (a)  (ii) and the Second Proviso clearly indicated that  the resale contemplated under these provisions was resale by the purchasing dealer as registered dealer and since the concept of registered dealer has relation only to sale inside Delhi, the resale must be within the territory of Delhi.  We do not think there is any substance or validity in these  arguments and we see no cogent or compelling reasons to add the  words "inside the Union Territory of Delhi" to qualify ’resale’ in section 5 (2) (a) (ii) and the Second Proviso. 110 Now,  if there is one principle of interpretation more  well settled  than any other, it is  that a  statutory  enactment must ordinarily be construed according to the plain  natural meaning of its languageand that no words should be  added, altered or modified unless it is plainly necessary to do  so in order to prevent a provision from beingunintelligible, absurd,  unreasonable,  unworkable or  total  irreconcilable with  the  rest  of  the  statute.  This  rule  of   literal construction  is,  firmly established and  it  has  received judicial  recognition  in numerous cases.  Crawford  in  his book  on "Construction of Statutes" (1940 ed.) at  page  269 explains the rule in the following terms:               "Where  the  statute’s. meaning is  clear  and               explicit,  words cannot be  interpolated.   In               the  first place, in such a case they are  not               needed.   If they should be interpolated,  the               statute would more than likely fail to express

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             the legislative intent as the thought intended               to  be  conveyed  might  be  altered  by   the               addition  of  new words.  They should  not  be               interpolated  even  though the remedy  of  the               statute  would thereby be advanced, or a  more               desirable  or just result would  occur.   Even               where the meaning of the statute is clear, and               sensible,  either with or without the  omitted               word,  interpolation  is improper,  since  the               primary source of the legislative intent is in               the language of the statute."               Lord  Parker  applied  the  rule,  in  R.   v.               Dakes(1)  to:  construe  "and",  as  "or"   in               section  7 of the Official Secrets  Act,  1920               and stated               "It seems to this Court that where the literal               reading  of  a statute, and a  penal  statute,               produces an intelligible result, clearly there               is no ground for reading in words or  changing               words  according to what may be  the  supposed               intention of Parliament.  But here we  venture               to think that the result is unintelligible."               Lord   Reid  also  with  great   clarity   and               precision   which  always   characterise   his               judgments  enunciated the rule as  follows  in               Federal   Steam   Navigation   Co.   Ltd.   v.               Department of Trade and Industry(2) :               "Cases where it has properly been held that  a               word  can be struck out of a deed  or  statute               and  another  substituted can as far as  I  am               aware  be  grouped under three heads  :  where               without  such  substitution the  provision  is               unintelligible    or   absurd    or    totally               unreasonable where it is unworkable and  where               it  is totally irreconcilable with  the  plain               intention  shown  by the rest of the  deed  or               statute." This  rule  in regard to reading words into  a  statute  was also affirmed by this Court in several decisions of which we may refer only to one, namely, Naraynaswami v.  Pannerselvam & Ors.(3) where the Court pointed out that: (1)  [1959] 2 All E.R. 350. (2)  [1974] 2 All E.R. 97. (3)  [1973] 1 S.C.R. 172. 111 "....  addition  to  or   modification  of  words  used   in statutory  provision  is  generally not  permissibly  but  " courts  may depart from this rule to avoid a  patent  absur- dity." Here, the word used in section 5 (2) (a) (ii) and the Second Proviso  is  ’resale’ simpliciter without  any  geographical limitation  and  according to its plain natural  meaning  it would  mean  resale  any where and  not  necessarily  inside Delhi.   Even where the purchasing dealer resells the  goods outside  Delhi,  he  would satisfy the  requirement  of  the statutory  provision  according  to  its  plain  grammatical meaning.   There  are  no words such as  ’inside  the  Union Territory of Delhi’ qualifying ’resale’ so as to limit it to resale within the territory of Delhi. The argument urged  on behalf of the Revenue requires us to readsuch limitative words in section 5 (2) (a) (ii) and the Second Proviso.  The question is whether there is any necessity or  justification for  doing so?  If ’resale is construed as not  confined  to the  territory  of Delhi, but it may take place  any  where, does section 5 (2) (a) (ii) or the Second Proviso lead to  a

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result  manifestly  unintelligible,  absurd,   unreasonable, unworkable  or irreconcilable with the rest of the Act ?  Is there  any compulsive necessity to depart from the  rule  of plain and natural construction and read words of  limitation in  section 5 (2) (a) (ii) and the Second Proviso when  such words have been omitted by the law-giver ?  We do not  think so. It  may  be  pointed  out  in  the  first  place  that   the Legislature  could  have  easily  used  some  such,words  as "inside  the Union Territory of Delhi" to qualify  the  word ’resale’, if its intention was to confine resale within  the territory  of Delhi, but it omitted to do what  was  obvious and  used  the  word  ’resale’  without  any  limitation  or qualification,  knowing  full well that  unless  restriction were  imposed  as to situs, ’resale would  mean  resale  any where  and  not merely inside the territory of  Delhi.   The Legislature was enacting a piece of legislation intended  to levy tax on dealers who are laymen and we have no doubt that if the legislative intent was that ’resale’ should be within the  territory  of Delhi and  not  outside,  the.Legislature would  have said so in plain unambiguous language  which  no laymen  could possibly misunderstand.  It is a well  settled rule of interpretation that where there are two  expressions which  might have been used to convey a  certain  intention, but one of those expressions will convey that intention more clearly  than the other, it is proper to conclude  that,  if the  legislature used that one of the two expressions  which would convey the intention less clearly, it does not  intend to convey that intention at all.  We may repeat what Pollock C.  B. said in Attorney-General v. Sillen(1) that  "If  this had  been the object of our legislature, it might have  been accomplished by the simplest possible piece of  legislation; it  might have been expressed in language so clear  that  no human  being  could entertain a doubt about it".   We  think that  in a taxing statue like the present which is  intended to tax the dealings of ordinary traders, if (1)  (1964) 2 W & C 431 at 526. 112 the  intention  of  the legislature were that  in  order  to qualify  a sale of goods for deduction, ’resale’ of it  must necessarily  be  inside Delhi, the  Legislature  would  have expressed  itself clearly and not left its intention  to  be gathered  by doubtful implication from other  provisions  of the  Act.  The absence of specific words  limiting  ’resale’ inside  the territory of Delhi is not  without  significance and it cannot be made good by aprocess    of    judicial construction,  for  to do ’so would be to attribute  to  the legislature an intention which it has chosen not to  express and to usurp the legislative function. It   is  true  that  the  Legislature  had  no   legislative competence  to tax sale outside the territory of  Delhi  and section  27  also in clear and explicit terms  exempts  sale outside  the territory of Delhi from liability to tax  under the  Act,  but  we fail to see  how  this  circumstance  can require  us to construe ’resale’ in section 5 (2)  (a)  (ii) and  the  Second  Proviso as excluding  resale  outside  the territory of Delhi.  It is obvious that resale is subsequent sale  after the first and it must, therefore, have the  same meaning as ’ sale’ defined in section 2(g).  The  definition of ’sale’ in section 2(g) is a general definition which does not limit it to- a sale inside the territory of Delhi.  Even a sale outside the territory of Delhi is within the coverage of  the  definition.  That is why section 27  provides  that nothing  in  the Act or the rules made thereunder  shall  be deemed  to  impose or authorise imposition of a tax  on  any

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sale  outside  the territory of Delhi.  This  provision  was introduced to bring the Act into conformity with Article 286 of the Constitution.  Therefore, for the purpose  taxability only ’sale outside the territory of Delhi would be  excluded from  the scope and purview of the Act.  But section  5  (2) (a) (ii) does not seek to impose any tax on resale.  What it does  is  to  provide  deduction in respect  of  sale  to  a registered  dealer provided the condition is satisfied  that the goods purchased are of the class or classes specified in the certificate of registration of the purchasing dealer  as being intended for resale by him and a declaration is  given by the purchasing dealer that he has purchased the same  for resale.   Undoubtedly, where the purchasing dealer does  not act  in conformity with the intention expressed by  him  and utilises the goods for any other purpose, he becomes  liable to  tax  under the Second Proviso, but even there,  what  is taxed  in his hands is the price of the goods  purchased  by him,  that  is, the turnover exempted in the  hands  of  the selling  dealer-and not the turnover of resale made by  him. It is still the first sale made by the selling dealer  which is  taxed and not the resale made by the purchasing  dealer. Thus  there  is no tax sought to be imposed  on  the  resale under  section  5 (2) (a) (ii) or the  Second  Proviso,  but resale is made a condition of granting deduction in  respect of  the first sale.  It is, therefore, difficult to see  how lack   of  legislative  competence  on  the  part   of   the Legislature to tax sale outside Delhi or exemption from  tax provided to sale outside Delhi under section 27 can  operate to  cut down the plain meaning of resale’ so as  to  exclude resale outside Delhi. The  Revenue  placed  some reliance on the  words  ’by  him’ following  upon  ’resale’ in section 5(2) (a) (ii)  and  the Second Proviso for the purpose of contending that the resale contemplated there is resale by 113 the  purchasing dealer, as a registered dealer and  since  a registered  dealer  is a dealer who carries on  business  in Delhi and whose liability to tax is determined by  reference to his gross turnover in Delhi, resale by him must be resale within  the territory of Delhi.  But this contention has  no merit  and the utmost that can be said about it is  that  it raises  a  point that has position, but no  magnitude.   The words  ’by  him’ are merely descriptive  of  the  purchasing dealer  and  they  are  introduced merely  with  a  view  to emphasizing that the goods must be resold by the same person who has purchased them.  It is clear from the scheme of  the Act  that a dealer who carries on business of selling  goods in the territory of Delhi and who is liable to pay tax under section  4  of the Act is required to be registered  and  he must  possess a registration certificate.  If such a  dealer purchases  goods  of the class or classes specified  in  his certificate of registration on furnishing a declaration that the  same are intended for resale "by him, the sale  to  him would be exempt from tax and hence he would not have to  pay any  amount by way of tax to the selling dealer.   But  then the  goods must be resold by the purchasing  dealer  himself and, in case of such resale the requirement of the statutory provision as well as the declaration would be satisfied  and there  will  be  no breach of  the  statement  of  intention contained in the declaration.  The emphasis which is  sought to be added by the words ’by him’ is that the goods must  be resold  by the same person who has purchased  them,  namely, the  purchasing dealer.  It would be straining the  language of the enactment too much to say that the words ’by him’ are intended to mean ’by him as a registered dealer’.  Moreover,

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it may be noted that though a registered dealer has to be  a person  who  carries  on business of selling  goods  in  the territory  of Delhi. there is no requirement of law  that  a registered  dealer must effect sales only in Delhi  and  not outside.   There  is nothing in the Act  which  prohibits  a registered  dealer from selling goods outside Delhi.   If  a registered  dealer  can  effect sales outside  Delhi  it  is impossible  to  see how, by any stretch  of  reasoning,  the words ’by him’ can be pressed into service for the,  purpose of resting ’resale to that inside Delhi. We fail to see any reason why the word ’resale’ in section 5 (2) (a) (ii) and the Second Proviso should not be  construed according to its plain natural meaning to comprehend  resale taking  place any where without any limitation as  to  situs and  it should be read as referring only to  resale  inside, Delhi as if the words ’inside the Union Territory of  Delhi’ were  added  by  way of  limitation  or  restriction.   Even without  such  words  and reading  the  statutory  provision according to its plain natural sense as referring to resale, irrespective whether it is inside or outside Delhi,  section 5  (2) (a) (ii) and the Second Proviso do not become  absurd unintelligible,  unworkable  or  unreasonable,  nor  is   it possible to say that they come into conflict with any  other provision of the Act.  We have already explained the  scheme of section 5 (2) (a) (ii) and its two provisos and, even  on the  view  that  ’resale  means resale  any  where  and  not necessarily  inside Delhi, they enact a statutory  provision which  is quite intelligible, reasonable and workable.   The selling dealer is granted deduction in respect of sale to  a registered dealer where the goods purchased are of the class or classes specified 114 in the certificate of registration of the purchasing  dealer as  being  intended  for resale by him  and  the  purchasing dealer  gives a declaration that the goods are purchased  by him  for resale.  So long as the goods are required  by  the purchasing  dealer  for resale, whether  inside  or  outside Delhi,  the sale to the purchasing dealer is  exempted  from tax.   It is true that if the purchasing dealer resells  the goods outside Delhi, the Union Territory of Delhi would  not be able to recover any tax since the sale to the  purchasing dealer would be exempt from tax under section 5(2) (a)  (ii) and  the resale by the purchasing dealer would also be  free from  fax by reason of section 27.  But that is not  such  a consequence as would compel us to read the word ’resale’  as limited to resale inside Delhi.  The argument of the Revenue was that the Legislature could never have intended that  the Union  Territory of Delhi should be altogether  deprived  of tax  in  cases of this kind.  The legislative  intend  could only be to exempt the sale to the purchasing dealer in those cases  where the Union Territory of Delhi would be  able  to recover tax on resale of the goods by the purchasing dealer. The goods must be taxed at least at one point and it  could- not  have been intended that they should not be  taxable  at all  at  any  point by the Union Territory  of  Delhi.   The Revenue  urged  that it was for the purpose  of  taxing  the goods  at  least at one point that the  Second  Proviso  was enacted by the Legislature.  We do not think this contention based on the presumed intention of the Legislature is.  well founded.   It  is now well settled that when  the  court  is construing  a  statutory  enactment, the  intention  of  the Legislature should be gathered from the language used by  it and  it is not permissible to the court to  speculate  about the legislative intent.  Some eighty years ago, as far  back as  1897,  Lord  Watson said in an  oft  quoted  passage  in

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Saloman v. Saloinan & Co. Ltd.(1)               "  ’The  intention of the  legislature’  is  a               common   but  very  slippery  phrase,   which,               popularly  understood,  may  signify  anything               from intention embodied in positive  enactment               to   speculative  opinion  as  to   what   the               legislature   probably   would   have   meant,               although  there has been an omission to  enact               it.   In  a court of law or equity,  what  the               legislature  intended to be done or not to  be               done  can only be legimately ascertained  from               that  which it has chosen to enact, either  in               express  words or by reasonable and  necessary               implication."               The  same  view  was echoed by  Lord  Reid  in               Black-Clawson     International    Ltd.     v.               Papierwerke Waldh of Aschaffenburg               "We  often  say that we are  looking  for  the               intention of Parliament, but that is not quite               accurate.   We are seeking the meaning of  the               words  which Parliament used.  We are  seeking               not what Parliament meant but the true meaning               of what they said." (1)  [1897] A.C. 22, at 38, (2)  [1975] 1 All E.R. 810, at 814. 115 If  the language of a statute is clear and explicit,  effect must  be  given  to it for in such a  case  the  words  best declare  the  intention of the law giver.  It would  not  be right to refuse to place on the language of the statute. the plain  and natural meaning which it must bear on the  ground that it produces a consequence which could not have been in- tended by the legislature.  It is only from the language  of the  statute that the intention of the Legislature  must  be gathered, for the legislature means no more and no less than what  it  says.   It  is not permissible  to  the  Court  to speculate as to what the Legislature must have intended  and then to twist or bend the language of the statute to make it accord  with  the  presumed intention  of  the  legislature. Here,  the language employed in section 5 (2) (a)  (ii)  and the  Second Proviso is capable of bearing one and  only  one meaning  and  there is nothing in the Act to show  that  the legislature exempted the sale to the purchasing dealer  from tax  on  the hypothesis that the Union  Territory  of  Delhi would  be  entitled  to tax the  resale  by  the  purchasing dealer.   The intention of the legislature was  clearly  not that the Union Territory of Delhi should be entitled to  tax the  goods at least at one point so that if the sale to  the purchasing  dealer is exempt, the resale by  the  purchasing dealer  should be taxable.  We do not find evidence of  such legislative  intent  in any provision of the  Act.   On  the contrary, it is very clear that there are certain categories of  resales  by the purchasing dealer which  are  admittedly free  from  tax.   If, for example,  the  purchasing  dealer resells  the goods within the territory of De1hi,  but  such resale is in the course of inter-State trade or commerce, or in  the course of export out of the territory of  India,  it would   be   exempt   from  tax  and  yet,   even   on   the construction.suggested on behalf of the Revenue, the sale to the purchasing dealer would not be liable to tax.  Both  the sale as well as the resale would be free of tax even if  the word  ’resale’  were read as limited to  resale  inside  the territory  of  Delhi.   Then again, take a  case  where  the resale by the purchasing dealer, though inside the territory of Delhi, falls within section 5 (2) (a) (v).  The resale in

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such a case would be exempt from tax and equally so would be the  sale.   So also the resale would not be taxable  if  it falls  within Rule 29 and in that case too the sale as  well as  the  resale  would both be exempt  from  tax.  it  will, therefore,  be seen that it is not possible to discover  any legislative  intent to tax the goods at least at  one  point and to exempt the sale to the purchasing dealer only if  the resale  by  the  purchasing dealer is liable  to  tax.   The Second  Proviso  too does not support any  such  legislative intent,  for in the event there contemplated, namely,  where the  purchasing  dealer utilises the goods for  any  purpose other  than  ’resale’,  what is taxed in the  hands  of  the purchasing dealer is not the resale, by him but the sale  to him  and that is done not with a view to ensuring  that  the goods must suffer tax at least at one point, but because the purchasing dealer having committed a breach of the intention expressed  by him in the declaration, on the basis of  which exemption  is granted to the selling dealer, he  should  not be,  allowed to profit from his own wrong and to escape  the amount of tax on the sale.  We do not, in the circumstances, see  any cogent or, compelling reason for reading the  words ’inside  the  Union Territory of Delhi’  after  ’resale’  in section 5(2)(a)(ii) and- the Second Proviso. 116 It must also be remembered that section 5(2)(a)(ii) and  the Second  Proviso occur in a taxing statute and it is  a  well settled  rule of interpretation that in construing a  taxing statute  "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".  The oft quoted words of Rowlett, J., in  Cape Brandy Syndicate v. Inland Revenue  Commissioner(1) lay  down  the correct rule of interpretation in case  of  a (fiscal statute : "in a taxing.  Act one has to look  merely at  what  is  clearly  said.   There  is  no  room  for  any intendment.   There is no equity about a tax.  There  is  no presumption as to a tax.  Nothing is to be read in,  nothing is to be implied.  One can only look fairly at the  language used".  It is a rule firmly established that "the words of a taxing Act must never be stretched against a tax-payer".  If the legislature has, failed to clarify its meaning by use of appropriate language, the benefit must go to the  tax-payer. Even if there is any doubt as to interpretation, it must  be resolved in favour of the subject.  We would, therefore,  be extremely  loathe  to add in section 5(2)(a)  (ii)  and  the Second  Proviso  words  which are not there  and  which,  if added,  ’would have the effect of imposing tax liability  on the  purchasing dealer.  Moreover, it may not noted that  if the purchasing dealer resells the goods outside Delhi, then, on the construction contended for on behalf of the  Revenue, he would be liable to include the price of the goods paid by him  in  his return of taxable turnover and pay tax  on  the basis  of  such return and if he fails to do  so,  he  would expose himself to penalty, through he has complied literally with  the declaration made by him.  We find that in  fact  a penalty  of Rs. 2 lacs has been imposed on the assessees  in Civil Appeal No. 1085 of 1977 for not including the price of the  goods  purchased  by them in their  return  of  taxable turnover  and  paying tax on the basis of such  return.   It would  be  flying  in  the face of  well  settled  rules  of construction  of a taxing statute to read the words  ’inside the Union Territory of Delhi’ in section 5(2)(a)(ii) and the Second  Proviso, when the plain and undoubted effect of  the addition  of  such  words would be to  expose  a  purchasing dealer to penalty. It is also significant to note that if the words ’inside the

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Union  Territory of Delhi’ are to be read after ’resale’  in section 5(2)(a)(ii) and the Second Proviso, they would  also have to be read in the prescribed form of the declaration to be  given by the purchasing dealer.  But we fail to see  how any  such  words can be read in a declaration  of  intention which  refers to resale simpliciter without any  restriction as  to  place.   When  a declaration  of  intention  in  the prescribed for without the words ’inside the Union Territory of  Delhi’ is given by the purchasing dealer at the time  of purchase,  how  can these words be read in  the  declaration when  they are not there.  It might be permissible  to  read such  words in a statutory Provision like section 5 (2)  (a) (ii)  and  the Second Proviso, but we fail to see  how  such ’Words  can be read in a declaration of intention  furnished by a purchasing dealer. It may also be pointed out that the Act in the present  case was originally enacted by the Bengal Legislature in 1941 and it was (1)  [1921] 1 k.B. 64. 117 applied  in Delhi with certain modifications by the  Central Government  (in  28th  April, 1951.  The Act  was:  thus  in operation prior to 15th August 1947 in Bengal and thereafter in  ’West Bengal for an aggregate period of about ten  years before it was made applicable to Delhi.  It was not disputed on  behalf  of  the  Revenue that  during  this  period  the Department administered the provision of section 5(2)(a)(ii) on the basis that ’resale’ was not confined to resale inside the State of Bengal or West Bengal, as the case may be,  but it  also  included outside State resale.  When  the  Central Government  applied  the Act to the territory of  Delhi,  it must  be presumed to be aware of this, interpretation  which had been placed on section 5(2)(a)(ii) by the Revenue in the State  of  West Bengal.  Even so,  the  Central  Government, whilst it made several other modifications in the Act  while applying it to the territory of Delhi, did not add the words ’inside the Union Territory of Delhi’, to qualify  ’resale’. Then  again,  it was common ground that at least for  a  few years after the Act was made applicable to the territory  of Delhi, the Revenue interpreted ’resale’ in section 5 (2) (a) (ii) to mean resale any where and not necessarily inside the territory of Delhi and administered the law on the basis  of such interpretation.  It is, no doubt, true that the view of the  Department  as to the meaning of a  statute  which  is- administered  by  them  is  not  admissible  as  an  aid  to construction  because wrong practice does not make the  law, but,  as  pointed out by Maxwell in his well-known  work  on ’The Interpretation of Statutes’ (12th ed.) at page 264 : "- the   long   acquiescence   of  the   legislature   in   the interpretation put upon its enactment by notorious  practice may,  perhaps, be regarded as some sanction and approval  of it".   The circumstance that for long years the  Legislature did  not  intervene  to amend the law by  adding  the  words ’inside the Union Territory of Delhi’ in section 5(2)(a)(ii) even  though the Revenue was continually  administering  the law on the basis that ’resale’ in section 5(2)(a)(ii)  means resale any where and not necessarily inside the territory of Delhi and acquiescence in this interpretation placed by  the Revenue is a circumstance which does throw some little light on  the intention of the Legislature and indicates that  the Legislature  did  not  intend  to  restrict  resale  to  the territory of Delhi. Similarly,  for  the same reasons which we need  not  repeat again,  ’manufacture’ and ’sale’ in section 5(2)(a)(ii)  and the  Second  Proviso  mean manufacture and  sale  any  where

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without    any   geographical   limitation    and    neither ’manufacture’  nor ’sale’ is restricted to the territory  of Delhi.  There are no words like ’inside the Union  Territory of  Delhi’ to qualify ’ manufacture’ or ’sale’ and there  is no  cogent  or compelling reason for reading such  words  in section 5(2)(a)(ii) and the Second Proviso.  The use of  the goods purchased as raw-materials in the manufacture of goods may,  therefore,  take place any where and  not  necessarily inside   Delhi  and  equally  the  sale  of  the  goods   so manufactured  may be effected any where, whether  inside  or outside  Delhi.   The only end-use of  the  goods  purchased required  to  be made for attracting  the  applicability  of section  5(2)(a)(ii) is that the goods must be  utilised  by the purchasing dealer as raw-materials in the manufacture of goods and 118 the goods so manufactured must be sold, irrespective whether the manufacture or sale takes place inside Delhi or outside. If the purchasing dealer does not use the goods purchased as raw-materials   in  the  manufacture  of  goods  or   having manufactured the- goods does not sell them, he would  commit a   breach  of  the  intention  expressed  by  him  in   the declaration  furnished to the selling dealer and the  Second Proviso would immediately be attracted and the price of  the goods purchased by him would be liable to be included in his taxable  turnover.   But  so  long as  he  carries  out  the intention  expressed in the declaration and uses  the  goods purchased  as  raw-materials in the  manufacture  of  goods, whether  inside  or outside Delhi, and sells  the  goods  so manufactured  in Delhi or outside, he would not tall  within the Second Proviso and the sale to him would not be  taxable in his hands. The  subsequent  history  of  the  Act  also  supports   the construction which we are inclined to place on section 5 (2) (a)  (ii) and the Second Proviso.  Section  5(2)(a)(ii)  was amended with effect from 28th May, 1972 by Finance Act, 1972 and  the words ’in the Union Territory of Delhi’ were  added after   the  word  ’manufacture’  so  as  to  provide   that manufacture should be inside the territory of Delhi.  It was also provided by the amendment that the sale of manufactured goods should be inside Delhi or in the course of inter-State trade or commerce or in the course of export outside  India. This amendment clearly excluded manufacture of goods as also sale of manufactured goods outside Delhi.  It is clear  from the statement of objects and reasons that this amendment was not  introduced  by Parliament ex abundant cautela,  but  in order to restrict the applicability of the exemption  clause in  S.  5(2)(a)(ii).  The statement of objects  and  reasons admitted in clear and explicit terms that               "at  present sales of raw-materials  in  Delhi               are exempted from tax irrespective of the fact               whether  the goods manufactured therefrom  are               sold in Delhi or not.  It is, therefore,  made               clear that sales of raw-materials will be  tax               free  only when such sales are made- by  those               who  manufacture  in Delhi taxable  goods  for               sale." It  is obvious that under section 5(2)(a)(ii), as  it  stood prior  to the amendment, the exemption was available to  the selling dealer even if the purchasing dealer used the  goods purchased  as rawmaterials in manufacture outside Delhi,  or having  manufactured  the goods, sold  them  outside  Delhi. That  is why Parliament amended section 5(2)(a)(ii)  with  a view  to restricting manufacture as well as sale inside  the territory  of Delhi.  It is of’ course true that  a  parlia-

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mentary  assumption  may be unfounded and an  amendment  may proceed  on  an erroneous construction of the  statute  and, therefore, it cannot alter the correct interpretation to  be placed  upon the statute; but if there is any  ambiguity  in the  statute,  the  subsequent amendment  can  certainly  be relied upon for fixing the proper interpretation which is to be  put  upon  the  statute prior  to  the  amendment.   The amendment made in section 5(2)-(a)(ii) read with the 119 statement  of objects and reasons thus clearly supports  the construction that under the unamended section manufacture as well  as sale could be any where and not necessarily  inside the territory of Delhi.  It is also significant to note that though   Parliament   amended   section   5(7)(a)(ii)    for restricting manufacture as well as sale to the territory  of Delhi,  it did not carry- out any amendment in  the  section with  a  view to limiting resale in the same manner  by  the addition  of some such words as ’in the Union ’Territory  of Delhi’   or   ’inside   Delhi’.    This   clearly    evinces parliamentary  intent  not  to  insist  upon  resale   being restricted to the territory of Delhi.  It is a  circumstance which  lends  support to the view that ’resale’  in  section 5(2)(a)(ii)  and the Second Proviso meant resale outside  as well as inside Delhi. We  must,  therefore, reach the conclusion that  during  the relevant  assessment years, ’resale’ within the  meaning  of section 5(2)(a)(ii) and the Second Proviso was not  confined to the territory of Delhi, but also included resale  outside the  territory of Delhi and similarly, for the  period  upto 28th  May,  1972  when section 5(2)(a)(ii)  was  amended  by Finance  Act, 1972 ’manufacture and ’sale’  contemplated  by the  section were not restricted to the territory  of  Delhi but  could  also  be outside.   There  was  no  geographical limitation  confining ’resale’, ’manufacture’ or  ’sale’  to the  territory of Delhi.  On this construction,  the  Second Proviso would be attracted only if the purchasing dealer, in the former case, did not resell the goods at all and in  the latter  case,  did  not use them  as  raw-materials  in  the manufacture of goods, or even if he manufactured the  goods, failed  to sell them and thus utilised the  goods  purchased for  a  purpose  different from that  for  which  they  were purchased.   Now,  the  burden of  proving  that  the  goods purchased  were  utilised  by the purchasing  dealer  for  a different  purpose  would be on the Revenue if  the  Revenue wants  to  include the price of the goods purchased  in  the taxable  turnover  of the purchasing dealer, and  it  would, therefore.  be for the Revenue to show in a given case  that the  goods purchased were utilised by the purchasing  dealer for  a  different purpose, that is, where he  purchased  the goods  for  resale,  he did not resell  them  and  where  he purchased  the goods for use by him as raw-materials in  the manufacture of goods for sale, he either did not use them as raw-materials  in the manufacturer of goods, or even  if  he did  so, the goods manufactured were not sold by him.   Here in  the  present  appeals,  the  assessees  were  purchasing dealers  and in some of the cases, they purchased goods  for resale  and  in  others, for use  as  Taw-materials  in  the manufacture  of  goods  for sale.   This  intention  of  the assessees was evidenced by the declarations given by them to the  selling dealers at the time of purchase of  the  goods. On  the  view  taken  by us, it  was  immaterial  where  the assessees who purchased goods for resale, resold them inside Delhi  or outside : in either case the Second Proviso  would not  be applicable and the assessees would not be liable  to be  taxed  on  the price of the  goods  purchased  by  them.

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Equally, for the period.upto 28th May, 1972, it did not make any difference whether the assessees, in those cases 120 where  they purchased goods for use as raw-materails in  the manufacture  of  goods for sale used them as  raw  materials inside Delhi or out-side, or having manufactured the  goods, sold  them inside or outside Delhi, for in either  case  the Second  Proviso would not be attracted and the price of  the goods  purchased  by them would not be includable  in  their taxable turnover.  The burden of showing that the  assessese utilised the goods purchased for any other purpose that  is, for  a purpose different from that for which the goods  were purchased  as evidenced by the declaration, would be on  the Revenue and the Revenue may discharge this burden by calling upon the assessees to produce evidence to show, in one  case that  the goods were resold by them, and in the other,  that the  goods  were  used  by  them  as  raw-material  in   the manufacture  of  goods and the goods  so  manufactured  were sold.  This would be a fact exclusively within the knowledge of  the  assessees  and  it the  assessees  do  not  produce sufficient  evidence  to establish this fact,  it  might  be legitimate  for the Revenue to raise an inference  that  the assessees  did  not utilise the goods for  the  purpose  for which they were purchased, but utilised them for ’any  other purpose?’. The  question still. remains in regard to the taxability  of the  assessees under the Second Proviso subsequent  to  28th May, 1972 in cases where the goods were purchased for use as raw-materials in the manufacture of goods for sale,  because some  of the appeals relate to the assessment  year  1972-73 which  comprises  the  period from 28th May,  1972  to  31st March,  1973. We have already pointed out that on 28th  May, 1972,  section 5(2)(a)(ii) was amended by Finance Act,  1972 and  the words ’in the Union Territory of Delhi’ were  added after  the  word ’manufacture’ and the words  ’inside  Delhi after the word ’sale’. It is clear from this amendment  that from  and  after 28th May 1972, sale of goods  was  exempted from tax only if the goods were purchased by the  purchasing dealer "as being intended-for use by him as raw-materials in the manufacture in the Union Territory of Delhi-of goods-for sale inside Delhi". Both ’manufacture’ and ;’sale’ were  now required  to be in the territory of Delhi and  not  outside. But  the  form  of  the declaration  to  be,  given  by  the purchasing  dealer’ to the selling dealer, as prescribed  in Rule 26, was not amended until 29th March, 1973 with a  view to bringing it in conformity with the amended section 5  (2) (a)  (ii). The result was that from 28th May, 1972  to  29th March, 1973 the form of the declaration continued to be  the same as before and carried the statement that the goods were purchased  by the purchasing dealer "for use by him as  raw- matinal  in the manufacture of goods for sale"  without  any restriction as to place of manufacture or sale and this  was the form in which declarations were given by the,  assessees to  the selling dealers when they purchased the  goods.  The declarations  given by the assessees did not state that  the goods were purchased for use by them as raw-materials in the manufacture  in  the-territory of Delhi of  goods  for  sale inside Delhi, since that was not the prescribed form and the First Proviso required that the declaration should be  given only  on  the prescribed form.   Now,  if  the  declarations given  by  the assessees stated the purpose of  purchase  of goods  to  be used as raw-materials in  the  manufacture  of goods for sale and did not specify that the manufacture and 121 sale will be inside the territory of Delhi, it is  difficult

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to see how the assessees could be said to have utilised  the goods for "any other purpose" if they used the goods as raw- materials  in  manufacture outside Delhi or sale  the  goods manufactured outside Delhi.  Even if they manufactured goods outside  Delhi  and sold the goods so  manufactured  outside Delhi,  the use by them of the goods purchased would be  for the  purpose stated in the declarations and it would not  be right  to  say that they utilised the goods  for  any  other purpose.   The  problem can also be looked at  from  another point  of view and that too yields the same conclusion.   We may assume for the purpose of argument that since the  words ’in  the Union Territory of Delhi’ and ’inside  Delhi’  were added after ’manufacture? and ’sale’ respectively section  5 (2) (a) (ii), a similar amendment may also be taken to  have been  effected in the Second Proviso and we may  read  there the  words ’in the Union Territory of Delhi’ after the  word ’manufacture’  and the words ’inside Delhi’ after  the  word ’sale’.   What  the Second Proviso,  on  this  construction, postulates  in  that  the goods must  be  purchased  by  the purchasing  dealer as being intended for use by him as  raw- materials in the manufacture ’in the territory of Delhi’  of goods  for sale ’inside Delhi’.  But the declarations  given by the assessees being in the unmended form, it would not be possible  to  say  that  the goods  were  purchased  by  the assessees as being intended for use as raw-materials in  the manufacture,  ’in the territory of Delhi’ of goods for  sale ’inside Delhi’.  The condition for the applicability of  the Second Proviso was, therefore clearly not satisfied and  the Second Proviso could not be invoked for including the  price of  the  goods  purchased in the  taxable  turnover  of  the assessees.   Even if we take the view that by reason of  the amendment  of  section  5  (2) (a)  (ii)  the  form  of  the declaration also stood amended, though in fact no  amendment was made in it until 29th March, 1973, it would not help the Revenue, because in that case the declarations given by  the assessees to the selling dealers could not be said to be  on the  prescribed form and in terms of section 5 (2) (a)  (ii) and  the  consequence  of that would  be  that  the  selling dealers  would be disentitled to exemption under  section  5 (2)  (a) (ii) and not that the price of the goods  purchased would   be  includable  in  the  taxable  turnover  of   the assessees.   Exemption  would be available to  the,  selling dealers under section 5 (2) (a) (ii) only if they could show that  they  have  obtained  proper  declarations  from   the assessees  and consequently if the declarations are  not  on the  prescribed form or in terms of section 5 (2)  (a)  (ii) (on  the  assumption  that  they  are  required  to  be   in conformity  with that provision), it is the selling  dealers who would be ineligible for exemption and there would be  no question of the assessees being made liable to tax under the Second Proviso.  It would not be competent to the  assessing authority  to  read the words ’in the  territory  of  Delhi’ after the word ’manufacture’ and the word inside Delhi after the  word "said" in the declaration given by  the  assessees when  these  words are conspicuous by their absence  and  on that  basis  to grant exemption to the selling  dealers  and then to seek to impose liability on the assessees under  the Second  Proviso.   It  Is indeed difficult to  see  how  the assessees  could be saddled with liability to tax under  the Second  Proviso when they have literally complied  with  the statement  of intention expressed in the declarations  given by them to the selling dealers. 9-211 SCI/78 122 The Revenue strongly relied on the decision of this Court in

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Modi Spinning and Weaving Mills Co. Ltd. v. Commissioner  of Sales  Tax, Punjab & Anr.(1) in support of  its  contention, but  we fail to see how this decision can be of any help  to the Revenue.  It is necessary to refer briefly to the  facts of  this case in order to understand the true ratio  of  Its decision.  The assessment year for which the appellants were being  assumed in this case was the financial  year  1959-60 and  the assessment was being made under the Punjab  General Sales Tax Act, 1948.  Section 5(2)(a)(ii) of the Punjab Act, as it stood prior to its amendment, was in material respects identical  with the unmended section 5 (2) (a) (ii)  of  the Delhi Act.  However, it was amended by Punjab Act No. 13  of 1959  by the addition of the words "in the State of  Punjab" after the word ’manufacture’ and the amended section applied during the relevant assessment year.  When section 5 (2) (a) (ii)   was   amended,  the  rule   making   authority   also simultaneously amended Rule 26 and Form S.T. XXII which  was the  prescribed form of declaration, by the addition of  the same  words ’in the State of Punjab’.  The result  was  that not only was section 5 (2) (a) (ii) amended to make it clear that the manufacture must be in the State of Punjab but also Rule 26 and the form of declaration were also amended so  as to  provide that the declaration must set but the  intention of  the purchasing dealer to use the goods purchased in  the manufacture ’in the State of Punjab’ of goods for sale.  The appellants  gave declarations in the amended form  with  the word  ’in the State of Punjab’ after the word  ’manufacture’ against purchases of raw cotton made by them and they ginned the  cotton  in their ginning mills and sent  the  bales  to their  spinning and weaving mills situated in the  State  of Uttar Pradesh for the purpose of manufacture of cloth.   The question  arose  whether  the price of  the  raw-cotton  was liable  to  be  included  in the  taxable  turnover  of  the appellants  under the Second Proviso which was in  identical terms  with  the Second Proviso in the  present  case.   The principal argument advanced on behalf of the appellants  for repelling  the applicability of the Second Proviso was  that since  the certificate of registration held by them was  not amended  by  the  addition of the words  ’in  the  State  of Punjab’ and there was no condition in it that the goods must be  purchased  for use in the manufacture ’in the  State  of Punjab’  of goods for sale, they were not bound to  use  the cotton purchased in the manufacture of cloth in the State of Punjab and even if they did so outside the State of  Punjab, the  Second Proviso was not attracted.  The reason  why  the appellants   continued  to  have  the  old  certificate   of registration in the unamended form was that though section 5 (2)  (a)  (ii) was amended, no corresponding  amendment  was made  in the form of the certificate of  registration  until 29th  September,  1961  long after  the  expiration  of  the relevant  assessment  year.   This  argument  was,  however, rejected  by  a bench of five Judges of this  Court  on  the ground  that  it was not right to read  the  certificate  of registration by itself but that "sections 5 and 7 have to be read  with Rule 26 and Form S.T. XXII, the declaration"  and so read, "the old registration certicate, even though it did not  contain the words ’in the State of Punjab’ would  stand impliedly modified by the sections and the Rule and Form ST. XXII  operating together".  This Court emphasised  that  the appel- (1)  16 S. T. Cases 310. 123 lants had to comply With the Act and the Rules and could not take  shelter behind the unamended certificate and the  only question  which  Court  had  to  consider  was  whether  the

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appellants  had  complied. with the Act and  the  Rules  and since  the Act and the Rules required that  the  manufacture must  be  in  the  State  of  Punjab,  the  appellants,  who manufactured cloth, out of the cotton purchased, outside the State of Punjab, could not be said to have complied with the Act  and  the  Rules  and  hence  the  Second  Proviso   was applicable to them.  It would be seen that the only question before the Court was as to what was the effect of absence of the  words  ’in the State of Punjab’ in the  certificate  of registration in a case where Rule 26 and Form S.T. XXII were both  simultaneously  amended along with section 5  (2)  (a) (ii)  and the declaration on given by the purchasing  dealer contained the words ’in the State of Punjab’ after the  word ’manufacture’  so that there was a breach of  the  statement contained in the declaration when the purchasing dealer used the  goods  purchased in manufacture  outside  the-State  of Punjab.  The Court was not concerned- with a case where Rule 26 and Form S.T. XXIII continued to stand unamended and  the declaration  given  by the purchasing dealer did  not  state that the use of the goods purchased in manufacture would  be in  the  State  of Punjab, but merely  contained  a  general statement  that  the goods purchased would be  used  in  the manufacture  of  goods for sale and  the  purchasing  dealer utilised  the  goods purchased in  manufacture  outside  the State of Punjab without committing a breach of the statement in  the declaration.  That is the case before us and  it  is entirely  different  from the case decided by the  Court  in Modi Spinning & Weaving Mills case (supra).  The decision in Modi  Spinning  &  Weaving  Mills  case  is,  therefore,  no authority  for the proposition that even where the  deolara- tion is given on the Prescribed form by a purchasing dealer. which  does not contain a statement that the manufacture  of goods  would be in Delhi or the manufactured goods would  be sold  in  Delhi,  this condition should  be  read  into  the declaration  by the addition of some such words  as  ’inside Delhi’  after ’manufacture and ’sale, so that if  the  goods purchased  are not used as raw-materials in  manufacture  in Delhi or the goods manufactured are sold outside Delhi,  the purchasing  dealer could be said to have committed a  breach of  the statement made in the declaration so as  to  attract the applicability of the Second Proviso.  We are clearly  of the view that such is not the correct legal position and the Second Proviso is not attracted in such a case. We  are conscious that the result of this view which we  are taking would be that both the selling dealers as well as the assessees would escape tax even in cases where the assessees have manufactured goods outside Delhi or having manufactured goods, sold them outside Delhi.  But that is an  unfortunate result  for which the blame must lie fairly and squarely  at the  door of the administration.  We fail to understand  why the  administration should not have amended Rule 26 and  the form  of  the declaration until 29th March, 1973,  when  the amendment in section 5 (2) (a) (ii) was made as far back  as 28th  May, 1972.  The lethargy and inaction on the  part  of the  administration are inexplicable and it is a  matter  of regret that the Union Territory of Delhi should have lost- a large amount of Revenue entirely due to gross negligence and default on the part of the administration. 124 We  may refer to one other contention advanced on behalf  of the  appellants in Civil Appeals Nos. 17 and 18 of 1975  and 236  and  450  of 1976.  The contention was  that  what  the Second Proviso sought to do, in effect and substance, was to tax purchases made by the purchasing dealer by including the price  of  the goods purchased in his taxable  turnover  but

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this  was  impermissible  because section  4  was  the  only charging section in the Act and under that section, tax  was payable  only  on sales effected by a dealer  and  purchases effected by him could not be taxed.  No tax, it was  argued, could  be levied on purchases effected by a dealer  even  by resorting to the fiction of deeming them to the sales.  This contention,   we   are  afraid,  is  rather   difficult   to appreciate.   We  asked  the learned  counsel  appearing  on behalf of the appellants in these appeals as to what was the sequester  of  this  contention  and  whether  it  was   her submission that the Second proviso was void as being outside the  legislative  competence of the  Legislature.   But  she frankly  conceded  that  it  was not  possible  for  her  to challenge the vires of the Second Proviso on ground of  lack of  legislative competence, because it is competent  to  the Legislature to impose a tax as much on purchase as on  sale. She,  however,  urged  that in  her  submission  the  Second Proviso  was inconsistent with section 4 and, therefore   no effect  should be given to it.  This contention is,  in  our opinion,  wholly  unsustainable.   We fail to  see  how  the Second  Proviso can be said to be inconsistent with  section 4.  It  may  be pointed out that even  if  there  were  some conflict,  which we do not think there is, it would have  to be  reconciled by a harmonious reading of the  two  sections and  it  would not be right to adopt  a  construction  which tenders one of the two sections meaningless and  ineffectual unless   the  conflict  between  the  two  is   so   utterly irreconcilable that the Court is driven to that  conclusion. Here  we find that section 4 merely imposes liability  on  a dealer to pay tax if his gross turnover exceeds the  taxable quantum.  It is really section 5 which provides for levy  of tax  and it says that the tax payable by a dealer  shall  be levied on his ’taxable turnover.  Now, ’taxable turnover’ is a  concept entirely different from gross turnover and it  is arrived at by making certain additions and deductions to the gross  turnover.   Section  5 (2) (a) (ii)  provides  for  a deduction  while the Second Proviso speaks of  an  addition. Where  the conditions of the Second Proviso  are  satisfied, the  price  of  the goods purchased is to be  added  to  the ’taxable  turnover’  of the purchasing dealer and  it  would then form part of the ’taxable turnover on which the tax  is levied.   This  provision has been made in order  to  ensure that  the purchasing dealer does not commit a breach of  the declaration given by him on the basis of which exemption  is given  to  the selling dealer.  The sale to  the  purchasing dealer  is  exempted from tax in the hands  of  the  selling dealer but it is taxed in the hands of the purchasing dealer on account of breach of faith committed by him.  We do  not, therefore,  see any inconsistency at all between  section  4 and the Second Proviso and the contention urged on behalf of the appellants in these appeals must be rejected. Lastly,  it was contended that the resales effected  by  the branches  of  the  assessees  outside  Delhi  could  not  be regarded  as resales by the assessees within the meaning  of section 5 (2) (a) (ii) and the Second 125 Proviso  and  hence  the  assessees must  be  held  to  have utilised  the  goods for a purpose different from  that  for which  the goods were purchased, namely, resale by them  and the  price of the goods purchased must be included in  their taxable  turnover  under  the  Second  Proviso.   But   this contention fails to take into account the plain and  obvious fact  that  when the branches of the  assessees  resell  the goods  outside Delhi, it is really the assessees who  resell the goods, for the branches are not distinct and independent

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from  the,  assessees but are merely establishments  of  the assessees.   Resales  effected by the branches  are  nothing else than resales made by the assessees at the, branches and hence  it  is not possible to say that when the  goods  were resold  by the branches, the resales were not by the ass  so as to attract the applicability of the Second Proviso. That  leaves  only one other point and that relates  to  the imposition  of penalty of Rs. two lakhs on the assessees  in Civil Appeal No. 1085 of 1977.  This penalty was imposed  on the  assessees on the ground that they failed to include  in the returns filed by them for the period from 8th May,  1972 to 29th March, 1973 the price of the goods purchased by them for  use  as raw-materials in the manufacture of  goods  for sale  and to pay tax on the amount of such price along  with the  submission of the returns.  There were several  grounds on  which the imposition of this penalty was  challenged  on behalf of the assessees, but it is not necessary to refer to all  of  them, since there is one ground which  is,  in  our opinion   sufficient  to invalidate the order  imposing  the penalty.   We have already pointed out that even  where  the assessees  used the goods purchased as raw-materials in  the manufacture  of goods outside Delhi or  having  manufactured the  goods, sold them outside Delhi, there was no breach  of the intention expressed by them in the declarations given to the  selling  dealers  and they could not be  said  to  have utilised the goods for any purpose other than that for which they  were purchased so as to attract the  applicability  of the  Second  Proviso.  Now, if the Second  Proviso  was  not attracted in the case of the assessees even where then, used the goods purchased as raw-materials in manufacture  outside Delhi  or sold the manufactured goods outside  Delhi,  there could be no obligation on the assessees to include the price of the goods purchased in their returns or to pay tax on the amount of such price along with the returns.  The  assessees could.  if  at all, be made liable for penalty  only  if  it could be shown that they did not use the goods purchased  as raw-materials in manufacture of goods or having manufactured the goods, did not sell them but utilised them for any other purpose.   But of this there was no evidence at  all  before the assessing authority and the order imposing penalty  was, therefore,   plainly   unjustified.    It   was   based   on misconstruction  of  section 5 (2) (a) (ii) and  the  Second Proviso and it must, therefore, be quashed and set aside. We accordingly allow the appeals and the writ petitions, set aside  the orders passed by the High Court in Civil  Appeals Nos. 1724 of 1974 and 456 of 1976 as also the orders  passed by the assessing authority which are impugned in the appeals and  the writ petitions and direct the  assessing  authority whose orders are set aside to pass 126 fresh orders in each case in the light of the above decision given  by us.  We may make it clear that the assessee  shall not be entitled to reagitate before the assessing  authority any  other point except that relating to the  taxability  of the price of the goods purchased by the assessees tinder the Second  Proviso.  We also set aside the order passed by  the assessing authority imposing penalty of Rs. two lakhs on the assessees in Civil Appeal No. 1085 of 1977.  The  respondent will  pay  the costs of the appellants/petitioners  in  each appeal and writ petition. P.H.P. Appeals allowed. 127

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