Patna High Court
Tobacco Manufacturers (India) Ltd. vs The State Of Bihar on 16 May, 1950
Equivalent citations: AIR1950PAT450
JUDGMENT Das, J.
1. This is a reference under Section 21 (3), Bihar Sales Tax Act, 1914 (hereinafter to be referred to as the taxing statute). The taxing statute was repealed by the Bihar Sales Tax Act, 1947, but the proviso to Section 32 of the said Act saved all proceedings under the taxing statute. Nothing, therefore turns upon the repeal, and this case has to be decided on the construction of the relevant provisions of the taxing statute.
2. I give below a brief summary of the statement of the case on which the questions of law to be decided by us are raised. The assessee is the Tobacco Manufacturers (India) Limited, Monghyr (hereinafter to be referred to as the assesses). The opposite party was originally the Province of Bihar, now the State of Bihar. The accounting period for which the assessee is assessed is the period of six months from October 1944 to March 1945. The Superintendent of Commercial Taxes, Monghyr, by his order dated 26th July 1946, made an assessment against the assesses under Section 10 (2) (b) of the taxing statute. That assessment order shows that the gross turnover, as shown by the return submitted by the assesses, was Rs. 2,81,83,119-15-8. Making a deduction under Section 5 (2) (b) of the taxing statute, the taxable turnover was determined to be RS. 2,76,19,458. On this taxable turnover, the amount of tax assessed was Rs. 4,33,116-0.6. Against this order of Assessment there was an appeal to the Commissioner of Bhagalpur division, such appeal being provided under Section 20 of the taxing statute. By reason of certain revised returns which the assessee was allowed to file during the pendency of the appeal, the gross turnover was increased to Rs. 3,41,98,134-1-2. Out of this gross turnover, the assesses, in his revised return, stated that the taxable turnover was only RS. 57.5-0. Leaving out certain undisputed items to which the learned Commissioner has referred in his order dated 15th December 1947, the amount to which the present reference relates is Rs. 3,40,05,619-12-2 representing the, price of sales of tobacco and cigarettes by the assessee to the Imperial Tobacco Company of India Limited (hereinafter to be referred to as the Company). Out of the aforesaid sum of Rs. 3,40,05,619-12-2, the assessee claimed a deduction in respect of RS. 2,93,15,373-11-4 on two grounds. The first ground rested on Section 5 (2) (a) (v) of the taxing statute. The second ground, which was a ground in the alternative, rested on Section 5 (2) (a) (ii) of the taxing statute. In respect of the balance of Rs. 46,90,246.0-10, the assessee claim ed a deduction under Section 5 (2) (a) (ii) of the taxing statute. The learned Commissioner repelled both the grounds with regard to the deduction claimed in respect of the sum of Rs. 2,93,15,373-11-4. As to the other sum of Rs. 46,90,216-0-10, the learned Commissioner remanded the case with certain directions holding in effect that the assessee would be entitled to the deduction if the amount represented transactions which had passed through the Bihar depot of the Company. The learned Commissioner thus stated the directions:
"I would even at this stage permit the appellant to produce a declaration in accordance with Rule 36 (2) of the rules in support of his claim of exemption of this amount under Section 5 (2) (a) (ii) of the Act. This will be examined by the Sales Tax Officer and verified with the books of accounts of the Imperial Tobacco Company at Muzaffarpur either by himself or through the officer in charge of the Muzaffarpur Circle, and if the officer is satisfied of the genuineness of these transactions, this deduction may be allowed."
3. Against the order of the learned Commissioner, there was an application in revision to the Board of Revenue. The Board, by its resolution dated 7th September 1948, rejected the application. Then, on 13th October 1948, the Board was moved to make a reference to the High Court under Section 21 (1) of the taxing statute on seven questions of law, which according to the assessee arose out of the order. By its order dated 16th May 1919, the Board refused to make a reference on the questions formulated by the assessee, but thought that the following question should be referred to the High Court:
"Whether in view of the circumstances set forth above, the petitioner is entitled to exemption under Section 5 (2) (a) (ii) of the Act in respect of goods valued at Rs. 2,93,15,373-11-4, sold to Messrs. Imperial Tobacco Company of India Limited at Monghyr, and despatched to the branches of the said Imperial Tobacco Company Limited outside Bihar, even though these transactions did not pass through any registered branch of the said Imperial Tobacco Company of India Limited in Bihar."
The learned Member of the Board of Revenue thought that considerations of equity might justify some special treatment, though under the law the assesses was not entitled to any relief, and on that footing directed the reference of a question of equity to this Court for decision. I think that the learned Member was in error in thinking that a question of equity could be referred to this Court. An examination of the relevant provisions of Section 21 of the taxing statute makes it quite clear that a reference to the High Court is competent only on questions of law which arise out of the order. Sub-section (1) of Section 21 refers to "any question of law arising out of such order"; Sub-section (5) states that the High Court, upon the hearing of any such case, shall decide the question of law raised thereby, Thus, it seems clear to me that the learned Member of the Board of He. venue was not justified in referring a question of equity to this Court. It appears that, subsequently, when the Board of Revenue was required to state a case and refer it to the High Court under the provisions of Sub-section (3) of Section 21, the learned Member of the Board of Revenue himself realised that the original reference proposed by him was no longer necessary. However, this Court was moved against the order of refusal passed by the Board of Revenue, and this Court, then, formulated the following three questions, and called upon the Board of Revenue to state a case on them and refer it to the High Court; 1. Whether the assesses is entitled to claim deduction of Rs. 2,93,15,373-11-4 from the gross turnover by reason of the provisions of Section 5 (2) (a) (v), Bihar Sales-tax Act, 1944; 2, Or, in the alternative on the ground that the sales were made to registered dealers of goods, and therefore, exempted under Section 5 (2) (a) (ii); and 3. Whether the assessee is entitled to claim a deduction of Rs. 46,90,246-0-10 of sales from the gross turnover by reason of the fact that Section 5 (2) (a) (ii) entitles him to claim this deduction as the sales were made to a registered dealer of goods. The Board of Revenue stated a case accordingly on 14th September 1949.
4. To complete the statement of the case it is necessary to state that the Commissioner accepted the case that the sum of RS. 3,40,05,619-12-2 represented the sale of tobacco and cigarettes by the assessee to the Company in pursuance of an agreement dated 28th September 1943, some of the terms of which I shall presently mention. The aforesaid sale was certified by Messrs. Lovelockand Lewes, Chartered Accountants, Calcutta and verified by the Sales tax Officer. The Commissioner found that the agreement aforesaid was a manufacturing agree, meat, and the property in the goods (cigarettes and pipe tobacco manufactured under the agreement) had passed to the Company before despatch. It is not in dispute that cigarettes and tobacco of the price of Rs. 2,93,15,373-11.4 were despatched outside Bihar. The Commissioner gave two reasons for holding that a deduction of the amount could not be claimed under Section 5 (2) (a) (v) because (1) the property in the goods had passed before despatch, and (2) the despatch was made on behalf of the Company, viz., the purchaser, and not the assessee. As to the alternative claim of deduction under Section 5 (2) (a) (ii), the Commissioner found that the Company purchasing the goods through their Calcutta office (that is, at a place other than Muzaffarpur where it is a registered dealer) was not a registered dealer within the meaning of Section 7 of the taxing statute; the sale not being to a registered dealer, no deduction could be claimed under Section 5 (2) (a) (ii).
5. Mr. P.B. Das, appearing for the assessee, has raised before us certain other questions of law which are not covered by the question on which the case has been stated and referred to us, Firstly, he has contended that on a true construction of the agreement dated 28th September 1943, the assessee is not a "dealer" within the meaning of the definition of that term in Section 2 (c) of the taxing statute, nor were the transactions between the assessee and the Company sales within the meaning of the taxing statute. This question was raised specifically for the first time when the Board was moved to refer the case to the High Court (vide questions 6 and 7 mentioned in the application to the Board), Prior to that, both before the Commissioner and the Board, the assessee proceeded on the footing that he was a dealer liable to assessment of tax; he submitted a return and claimed deduction on that footing. In the circumstances, we do not think that we shall be justified in enlarging the scope of the case stated, by including questions on which no case has been stated and which do not arise out of the order passed. The jurisdiction we exercise in cases of this kind is of the nature of advisory jurisdiction, which should be limited Ordinarily to the questions raised on the case stated and referred to this Court. For the purpose of this case we must proceed on the footing that the assessee is a dealer and liable to assessment, leaving the new question now raised by Mr. Das to be decided hereafter if and when the occasion arises. To this course, Mr. Das has agreed on behalf of the assesses.
6. Another question which Mr. Das raised was that a tax on a first sale by a manufacturer is, in substance, a duty of excise, and therefore, outside the scope of the taxing statute. On the first day of his arguments. Mr. Das relied on Commonwealth Oil Refineries Ltd. v. State of South Australia, 88 Com. L. R. 408 and certain observations made by Sir Maurice Gwyer C. J. (as he then was) in Re the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, 1939 F. O. B. 18 : (A.I.R. (26) 1939 F. C. I.), with his usual fairness Mr. P.R. Das drew our attention, on the second day of his arguments, to the decisions of the Federal Court in Province of Madras v. Boddu Paidanna & Sons, 1942 F. C. R. 90: (A.I.R. (29) 1942 F.C. 33) and the Governor General in Council v. Province of Madras, 1943 F. C. R. 1: (A.I.R. (30) 1948 F.C. 11), which were against the view contended for by Mr. Das. The question ultimately went to the Privy Council in Governor-General in Council v. Province of Madras, 72 I. A. 91: (A.I.R. (32) 1945 P. C. 98). The Privy Council affirmed the view that the power of a Provincial Legislature to levy a tax on the sale of goods extends to sales of every kind, whether first sales by the manufacturer or producer or not, and a tax levied on the first sales by the manufacturer or producer is levied on him qua seller and not qua manufacturer or producer. Mr. Das concedes that the aforesaid decision, which is against his contention, is binding on this Court. It is, therefore, unnecessary to consider this question any further.
7. I now come to the three questions on which a case has been stated and referred to us.
8. Question No. 1--It is necessary to indicate very briefly the scheme of the taxing statute. Section 4 states, inter alia, that every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded Rs. 6000 shall be liable to pay tax under the act on sales effected after a notified date, the date being 1st October 1944. The expression "turnover" is defined in Section 2, and means "the aggregate of the amounts of sale-prices received and receivable by a dealer in respect of sale on supply of goods or carrying out of any contract, effected or made during a given period."
Section 5, which gives the rate of the tax, states, inter alia, that the tax payable by a dealer under the Act shall be levied at the rate of one quarter of an anna in the rupee on his taxable turnover. The expression "taxable turnover" is important for our purpose, and is explained in Sub-section (2) of Section 5. It means that part of a dealer's gross turnover which remains after making certain deductions therefrom. These deductions are stated seriatim in six sub-clauses under Clause (a) of Sub-section (2). Item 7 of deduction is mentioned in Clause(b) of Sub-section (2) of Section 6. The particular deduction which the assessee claimed and which has given rise to the first question, is stated to be under Sub-clause (v) of Clause (a) of Sub-section (2). Sub-clause (v) is in the following terms:
"Salas of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or in behalf of the dealer to an address outside Bihar."
The expression "dealer" is defined in Section 2, and means "any person who carries on the business of selling or supplying goods in Bihar, whether for commission, remuneration or otherwise and includes any firm or a Hindu joint family, and any society, club or association which sells or supplies goods to its members."
The expression "sale" is also defined in Section 2 in the following terms :
" 'Sale' means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge :
Provided that a transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price, be deemed to be a pate :
Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in Section 4 of that Act is made, shall wherever the said contract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar."
I have quoted in extenso the definition of the term "sale," as many of the arguments centered round the meaning of that term as used in Sub-clause (v) of Clause (a) of Sub-section (2) of Section 5.
9. Let me now go back to Sub-clause (v). The question which we have to answer is whether the assessee is entitled to claim a deduction of Rs. 2,93,15,373-11-4 from his gross turnover by reason of Sub-clause (v). Sub-clause (v), when analysed, shows that three conditions must be fulfilled--(1) there must be sales of goods; (a) it must be shown to the satisfaction of the Commissioner that the goods have been dispatched to an address outside Bihar ; and (3) the dispatch must be by the dealer or on behalf of the dealer. On the findings of the Commissioner and the Board, the first two conditions are clearly fulfilled. The question whether the third condition is fulfilled or not may present some difficulty to which I shall refer in due course. Mr. Das, appearing for the assessee, has very seriously contested the view of the Commissioner that Sub-clause, (v) applies only to cases where the property in the goods is still retained by the despatching dealer at the time of the despatch. On this point, the Commissioner expressed himself as follows :
"That clause obviously contemplates despatch of goods which at the time of despatch still is the property of the despatching dealer...... In my opinion Section 5 (2) (a) (v) of the Act only exempts, from the operation of the Sales Tax Act, those transactions in which property in the goods exported passes to the vendee outside Bihar, by the very act of despatch on the part of the despatching dealer."
The Advocate General has supported the view of the Commissioner.
10. In my opinion, the contention of Mr. Das is correct. The terms of Sub-clause (v) do not warrant the view expressed by the Commissioner. The sub-clause itself mentions "sales of goods." The word "which" following the expression "sales of goods" refers clearly to the "goods;" in other words, there is first a sale of goods; then a dispatch of the goods to an address outside Bihar. The sub-clause, in terms, does not speak of sales outside Bihar; but speaks of dispatch of the goods sold to an address outside Bihar. The learned Advocate-General has contended that his view of the sub-clause follows as a necessary corollary from the third condition imposed by the sub clause, namely, that the goods must be despatched by or on behalf of the dealer. It is pointed out that in cases where the property in the goods has already passed to the buyer, the despatch of the goods cannot be by or on behalf of the selling dealer, but must be by or on behalf of the buyer himself. It is contended by the learned Advocate General that the expression "sales of goods" occurring in Sub-section (v) really means agreement to sell at a future time or subject to some condition, or such contracts of sale as are referred to in Section 23, Sale of Goods Act ; in other words, the sub-clause applies in those cases only where the property in the goods has not passed to the seller prior to the despatch or even at the time of despatch, but will pass at some subsequent stage, outside Bihar. The learned Advocate-General has stated that the intention of the Legislature in enacting Sub-clause (v) was to exclude sales which took place outside Bihar.
11. It is, I think, well settled that a taxing statute must be construed strictly, and if an assessee gets an advantage which the Legislature may not have intended, but which he is entitled to on the construction of the statute, the Court should not deprive him of that advantage. Therefore, the crucial question is not the intention of the Legislature in the abstract, but the intention as expressed in the statute; in other words, the construction of the relevant clause of the taxing statute in accordance with well-recognised canons of interpretation. I have considerable doubt if the expression "sale" as used in the taxing statute includes an agreement to Bell. The definition of the word "sale" makes it quite clear, I think, that the word, with all its grammatical variations and cognate expressions, means "any transfer of property in goods for cash or deferred payment, etc." Now, in an agreement for sale, there is no transfer of property. Under Section 4, Sale of Goods Act, 1930, to which we were referred, a contrast of sale of goods is a contract whereby the seller either transfers or agrees to transfer the property in goods to the buyer for a price. The expression "contract of sale" thus includes (i) a sale, as well as (ii) an agreement to sell, Sub-clause (a) of Section 4, Sale of Goods Act says that a contract of sale may be absolute or conditional. Then, Sub-section (3) states that where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. The argument of the learned Advocate is that Sub-clause (v) of Section 5 (2) (a) of the taxing statute is confined to cases where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled; that is, to cases where there is merely an agreement to sell without a transfer of the property in the goods--an agreement which will become a sale when the time elapses or the condition is fulfilled subject to which the property in the goods is to be transferred. The reply to this argument is that the definition of the term "sale", as given in the taxing statute, makes it clear that it means a "transfer of property in the goods". Therefore, the word 'sale" occurring in the taxing statute is not coextensive with the expression "contract of sale" occurring in the Sale of Goods Act. One might say that the expression "contract of sale" is a wider circle within which are included two things; viz. ; (1) a sale by a transfer of property in the goods, and (2) an agreement to sell where the transfer of propriety in the goods is to take place at a future time and subject to the fulfilment of some condition. In the taxing statute the word "sale" is need in the same sense, that is, where there has been a transfer of property in the goods.
12. There has been some argument before as whether the second proviso to the definition clause of the term "sale", in any way enlarges the scope of the definition. The second proviso mentions the Sale of Goods Act, 1930, and also uses the expression "contract of sale". The Seamed Advocate-General has referred us to several American decisions where it has been stated that though, ordinarily, the purpose of a proviso is to provide some sort of an exception to the general rate mentioned in the substantive clause or to make the meaning of the substantive clause clear, a proviso may sometimes enlarge the scope and meaning of the substantive clause. I need refer to only one of the decisions to which the learned Advocate-General has drawn our attention. In Inter-State Commerce Commission v. Daniel G. Baird, 194 U. S. 860, Day J. quoted an earlier American decision to the following effect :
"The general purpose of a proviso, as is well known, is to except the clause covered by it from the general provisions of a statute or from some provisions of it, or to quality the operation of the statute in some particular. But it is often used in other senses. It is common practice in legislative proceedings on the consideration of bills, for parties desirous of securing amendments to them to precede their proposed amendments with the term ''provided", so as to declare that, notwithstanding existing provisions, the one thus expressed is to prevail, thus having no greater signification than would be attached to the conjunction "but" or "and" in the same place, and simply serving to separate or distinguish the different paragraphs or sentences."
13. It may be conceded that the purpose and meaning of a proviso will depend on the construction to be put on the words used in the proviso. The question is really one of construction of the terms of a proviso, and not of legislative theory or practice. The second proviso to the definition clause of the term "sale." in the taxing statute, no doubt, mentions the expression "contract of sale"; but does the proviso, in any way enlarge the meaning of the word "sale" as given in the definition clause ? In my opinion, it does not. The proviso itself gays that there must be a sale of goods; but if the goods are actually in Bihar an the time when the contract of sale as defined in Section 4, Sale of Goods Act is made, the sale shall be deemed to be a sale in Bihar irrespective of the question where the contract for sale (which may be either an agreement to sell or contract transferring the property in the goods) is made in or outside Bihar. Clearly enough, the second proviso is meant to prevent an escape from the taxing statute of those sales where the goods are in Bihar, but the contract of sale is entered into outside Bihar. If this proviso were not there, such sales would have been held to have taken place outside Bihar, and thus would have fallen outside the scope of the taxing statute. Therefore, the proviso says: "shall be deemed for the purposes of this Act to have taken place in Bihar"; this means that under the Sales of Goods Act the sales legally took place outside Bihar, but they will be deemed to have taken in Bihar under the taxing statute. The proviso changes the place of sale in an artificial way, but not the conception of sale which still means a transfer of property in goods. The second proviso does not mean that a mere agreement to sell, which does not transfer property in the goods, is to be read as a sale for the purposes of the taxing statute. It is true that an agreement to sell ripens into a sale without a second contract, it ripens into a sale when the stipulated time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. That does not, however, mean that an agreement to sell operates at once as a transfer of property in the goods. If that were so, there would be no difference in law between a sale and an agreement to sell. The distinction which Sub-section (3) of Section 4, Sale of Goods Act, 1930, draws will then disappear.
14. The learned Advocate-General has referred us to some English decisions as to when property in the goods passes. I do not think that it is necessary to examine those decisions. The finding of fact on which we are deciding the question of law is that the property in the goods in the case before us passed to the Company from the assessee before the dispatch of goods. There was, thus, a sale of goods, and if Sub-clause (v) relates to sales of goods and not to mere agreements to sell, then the first condition contemplated by Sub-clause (v) is fulfilled. In my opinion, Sub-clause (v) cannot be confined solely to agreements to sell or to sales outside Bihar, and the Commissioner was wrong in thinking that Sub-clause (v) applies only in cases where the property in the goods is still retained by the dispatching dealer before dispatch. The argument that Sub-clause (v) applies to those transactions only where property in the goods passes outside Bihar is open to these objections : (i) it gives the word "sales" in the first line of the sub-clause a meaning against the definition clause; (ii) the sub-clause loses its grammatical sense, and the relative pronoun "which" carries no meaning; (iii) the dispatch of goods to an address outside Bihar becomes meaningless, because the crucial test then becomes not where the goods are despatched but where the sale takes place; and (iv) it becomes difficult to reconcile the sub-clause with what is "deemed to be a sale in Bihar" under the Proviso 2 to the definition clause. Take this case, for example. A contract for sale is made outside Bihar, but the goods are in Bihar, Under proviso 2, the sale shall be deemed to be in Bihar. If the goods are not dispatched outside Bihar, the assessee will be liable for tax. If the goods are despatched outside Bihar by the dealer, can he claim a deduction ? By a fiction of law the sale is deemed to be in Bihar: therefore, it cannot be said that the sale is outside Bihar. How can then such a dealer claim exemption under Sub-clause (v), unless the test is--where the goods are dispatched and by whom ? If Sub-clause (v) refers only to sales outside Bihar, then sales which are deemed to be sales in Bihar under Proviso 2 to the definition clause can never attract the operation of Sub-clause (v) even though the goods are despatched to an address outside Bihar by the dealer. To give relief to such a dealer, one must, perforce, hold that Sub-clause (v) has reference to where the goods are despatched and by whom. There may be more than one reason why the Legislature laid down such a test for exemption, viz., dispatch of goods by the dealer to an address outside Bihar. If one were permitted to speculate, one reason might be that the goods dispatched outside would be liable to tax in another province. Be that as it may, our plain duty is to interpret the law as we find it. If the intention were merely to exempt sales where property in the goods passes outside Bihar, irrespective of where the goods are despatched and by whom, one fails to see the necessity of proviso 2 in the definition clause and Sub-clause (v). It would have been quite easy to say that sales, where the property in the goods passes outside Bihar, were to be excluded. If, however, the intention were that both conditions must be fulfilled--viz. (1) the property in the goods must pass outside Bihar, and (2) the goods must be dispatched to an address outside Bihar by the dealer, then the use of the word "sales" in sub-clause is inapt in that it is than being used in a sense contrary to the definition clause; for there is no sale till the property in the goods is transferred.
15. I have not lost sight of the fact that the taxing statute provides "to impose a tax on the sale of goods in Bihar." In such a statute it would be unnecessary to refer to sales of goods outside Bihar, because they would not come under the purview of the Act and no question of granting an exemption on that ground would arise. In spite of a proviso like Proviso 2 to the definition clause, the 1947 Act avoids the kind of difficulty which has arisen, by omitting any provision like Sub-clause (v).
16. I have already stated that the second condition, namely, despatch to an address outside Bihar has been fulfilled, on the finding of the Commissioner. The third condition, namely, whether the despatch was by the dealer or out his behalf, presents some difficulty. The word "despatch" in its ordinary dictionary sense means "to send away hastily," "to perform speedily." The despatcher need not necessarily be the owner of the goods. It is not unusual that the property in the goods is with one person, but the despatch is made by another. Mr. Das gave the ordinary example of a person who goes into a shop, buys certain things, pays the price and asks the shopkeeper to send the goods by post or rail: in such a case, the property in the goods has passed to the buyer, and if there is a loss in transit, the loss will fall on the buyer, But the despatch is being made by the seller, even though he has no more any property in the goods. If the intention of the legislature in enacting Sub-section (v) was to exclude such transactions of dispatch, then the words they have used in Sub-clause (5) are inapt to give effect to that intention. In the Bihar Sales Tax Act, 1947, the position has been made clear in Section 4 by stating that the liability to pay tax under the Act will arise on sales which have taken place in Bihar, and there is no sub-clause like Sub-clause (v). It may be unfortunate that a loophole is provided by the way is which Sub-clause (v) has been drafted, but this Court has to interpret the terms of the sub-clause as it stands, and to give to every word used therein its natural and accepted meaning. With regard to the third conditions, the finding of the Commissioner, as I understand it, is that the goods were actually despatched by the assesses, but the consignment note was in the name of the Company. I may usefully refer here to one of the terms of the agreement between the assessee and the Company under which the goods were manufactured and despatched, Clause 9 of the agreement reads :
"The Manufacturing Company (the assessee) shall invoice all goods manufactured for the Imperial to the Imperial or as the Imperial may direct, and payment shall be made by the Imperial in accordance with Clause 7 hereof within fourteen days of the receipt of invoice each month."
It is not in dispute that the despatch was made in accordance with the term mentioned above. Therefore what happened was that the despatch was actually made by the assessee, though the property in the goods had passed to the company. I am unable to accept the argument that the despatch by or on behalf of the dealer necessarily means that the property in the goods is retained by the despatches.
17. Therefore, my answer to the first question is in the affirmative, namely, that the assessee is entitled to claim deduction of Rs. 2,93,15 373-11.4 from the gross turnover by reason of the provisions of Section 5 (2) (a) (v), Bihar Sales Tax Act, 1944.
18. Question No. 2. The deduction claimed in the alternative in respect of RS. 2,93,15,373-11-4 is under Sub-clause (ii) of Section 5 (2) (a). The sub-clause reads as follows :
"Sales to a registered dealer of goods specified in the purchasing dealer's certificate of registration as being intended for re-sale by him, or for use by him in the manufacture of any goods for sale or in the execution of any contract, and on sales to a registered dealer of containers and other materials for the packing of such goods; "
The answer to the question turns upon whether the Company, wherever it may have its place of business, is a registered dealer within the meaning of Section 7 of the taxing statute, and whether the sale to the Company was intended for resale by it or for use by it in the manufacture of any goods etc. Learned Counsel for the assesses has given us a copy of the certificate of registration under Section 7, Bihar Sales Tax Act, 1944, which was issued to the Company by the Sales Tax Officer of Muzaffarpur. At the relevant date the Company had only one place of business in Bihar in the town of Muzaffarpur, though it had warehouses at other places. The certificate shows that the Imperial Tobacco Company of India, Limited, with only one place of business in the town of Muzaffarpur is a registered dealer for the re-sale of cigarettes and smoking tobacco. It is not in dispute that the sales in question were not transacted through its place of business at Muzaffarpur. The sales were made to the Imperial Tobacco Company of India, Limited, through its place of business in Calcutta.
19. The learned Commissioner has referred to Section 7 of the taxing statute of 1944 and the rules made under the taxing statute. One of the rules Rule 6, requires that a dealer having places of business in the jurisdiction of different Sales Tax Officers shall make one separate application to each such officer in respect of the place or places of business within the jurisdiction of that officer. Another relevant rule is Rule 36 which relates to claims for deduction under Sub-clauses (i) and (ii) of Clause (a) of Sub-section (2) of Section 5, That rule requires that a dealer who wishes to claim deduction under the aforesaid sub clauses must produce duplicate copies of the relevant cash receipts. The registered dealer in the present case was, in my opinion, the Imperial Tobacco Company of India, Limited, with its place of business at Muzaffarpur, and not the Imperial Tobacco Company of India, Limited, with its place of business in Calcutta. The fact that the Imperial Tobacco Company of India, Limited is one business or one Company is of no consequence. The expression "registered dealer in the taxing statute has an artificial, statutory meaning, a meaning which must be consistent with the schemes and purpose of the taxing statute. Section 7 enacts that no dealer shall, while being liable under Section 4 to pay tax under this Act, carrying on business as a dealer unless he has been registered under this Act and possesses a registration certificate. Sub-section (2) of Section 7 states that very dealer requited by Sub-section (1) to be registered shall make application in such behalf in the prescribed manner to the prescribed authority. Therefore, the provisions of Section 7 should be read with the rules made under the taxing statute, the word "prescribed" meaning prescribed by rules under the Act, If the provisions of Section 7 are read with the rules made under the taxing statute, then it is clear that the only registered dealer within the meaning of the taxing statute of 1944 is the Imperial Tobacco Company of India, Limited, with its place of business at Muzaffarpur. One can easily realise the anomaly or difficulty which will arise if one were to take the Imperial Tobacco Company, of India, Limited, as one entity for she purposes of the taxing statute, though the Company with its place of business in Calcutta or other places outside Bihar was not registered at all. A registered dealer has to submit returns of its transactions. The Company with its place of business in Calcutta did not submit any return to the taxing officers under the taxing statute and the sales in respect of Rs. 2,93,15,373-11-4, were not shown by the Company with its place of business at Muzaffarpur. I am unable to accept the contention that for the purposes of the taxing statute the Company should be deemed to be one unit, and the registration certificate issued to the Company with its place of business at Muzaffarpur, should be taken as a registration certificate to the Company with all its place of business inside and outside Bihar. That would render nugatory the provisions of Section 7 and the rates made under the taxing statute.
19a. I would, therefore, answer the second question against the assessee.
20. Question No. 3. The answer to the third question must follow the answer to the second question, and the learned Commissioner was right in directing that an enquiry should be made whether the sales to the extent of Rs. 46,90,216-0-10 were made to a registered dealer within the meaning of Section 5 (2) (a) (ii) of the taxing statute of 1944, namely, the Imperial Tobacco Company of India, Limited, with its place of business at Muzaffarpur.
Sarjoo Prasad, J.
21. The facts giving rise to this reference have been very lucidly stated in the judgment of my learned brother Das as I find from the draft prepared by him and sent for my perusal. It is, therefore, unnecessary to reiterate those facts. I am in complete agreement with him in regard to his answers to questions 2 and 3 on which a statement of case was called fur from the Board of Revenue. I also agree that the questions which do not arise out of the orders passed by the Commissioner and the Board of Revenue and on which no statement of case was called for by this Court should not be answered at this stags. Mr. P.R. Das who appeared for the assessee did urge two Important points for our consideration in addition to those formulated by this Court; (1) that the assessee was not a "dealer" and that the transactions of the assessee did not in fact amount to "sale" within the meaning of the Bihar Sales Tax Act. This argument, in my opinion, assumed considerable force on the interpretation of the deed of agreement itself between the assessee and the Imperial Tobacco Company. But Mr. P.R. Das very rightly abandoned the point for the purpose of this reference and reserved it for consideration on some future suitable occasion. He was also justified in not pressing his second point, viz. (2) that the duty levied on the sale of goods immediately after their manufacture was necessarily in the nature of an "excise duty". Such an assumption, as Mr. P.R. Das himself pointed out, was against the Privy Council view in Governor-General in Council v. Province of Madras, 72 1. A. 91 : (A.I.R. (32) 1945 P. C. 98). These grounds, therefore, need no further consideration.
22. I find myself, however, in the unhappy position of not being able to agree with my learned brother in his answer to question No. l arising out of the reference. The difference relates to the interpretation of Section 5(2) (a) (v), Bihar Sales Tax Act (Bihar Act VI [6] of 1944) under which reduction is claimed by the assessee. For the sake of convenience I shall also refer to this Act as the "Taxing Statute". As the amount involved affects almost the bulk of the taxable turnover" to the tune of RS. 2,93,15,373-11-4, and the difference is in any case one of vital importance, it is necessary for me to record my own views.
23. The Commissioner and the Board of Revenue took the view that the sales having been completed in Bihar and the property in the goods having passed to the Imperial Tobacco Company from the lessee before the despatch of the goods, a deduction under Section 5(2)(a)(v) was not permissible and the sale proceeds in respect of those goods, their sales having been effected in Bihar, could not be excluded from the "taxable turnover" of the assessee. Mr. P.R. dAS appearing for the assessee, however, contends that on the strength of this very finding, if the goods in question were found to the satisfaction of the Commissioner to have been despatched outside Bihar, by or on behalf of the dealer, the assesses should be held entitled to a deduction of the sale prices in respect of those goods. According to his contention, the sale-price of such goods, even though the goods were sold in Bihar should be exempted from taxation. This contention, as I shall presently show, runs counter to the fundamental purpose of the "Taxing Statute" which is an Act "to impose a tax on the sale of goods in Bihar". I have come to this conclusion both on an examination of the scheme of the Act as also of the language of Section 5(2)(a)(v) itself on which reliance is placed by the assessee.
24. Tue scheme of the Act shows that it was brought into existence for the purpose of levying sales tax in respect of goods sold in Bihar, and the acid test, therefore, in interpreting the provisions of the Act is to see where the sale has taken place. If the sale has taken place in Bihar, then to fulfil the purpose of the statute a tax has to be imposed upon such a sale unless by express terms of the statute the sale has been so exempted. The statute is not concerned as to what happens to the goods after the sale is effected. Whether the goods after the sale, in other words, after title in the goods has passed on to the vendee, are despatched by the vendor, himself or by the vendee to any place outside.
Bihar is hardly of any moment. The despatch of the goods after their sale has nothing to do with the imposition of sales tax under the statute which is to be levied on the sale of goods in Bihar, These basic considerations have to be kept in view in ascertaining the meaning of Section 5 (2) (a) (v) which, as I shall show hereafter, is intended to exempt from taxation the sale price of such goods as hare been sent by the dealer to a place outside the province of Bihar and have been sold as such a place.
25. I may refer to some of the provisions of the taxing statute in order to clarify the position. The term "dealer" under the statute means any parson who carries on the business of selling or supplying goods in Bihar. I am adopting this definition after discarding some of the expressions which are irrelevant for the present. This dealer may be a "wholesaler" or a "retailer" and his business in ordinary course of events may relate to transactions both outside and inside the province. The sale and supply of goods may be also in pursuance of contracts for sale entered into by the dealer who has his place of business in Bihar, and in pursuance of such contracts he may have to supply and despatch the goods outside the province.
26. The word "sale", again speaking broadly, has been defined in the Act as: (i) transfer of property in goods for cash paid or promised or other valuable consideration; (ii) supply of goods on hire-purchase system where the vendor retains his lien over the goods for unpaid purchase money; and (iii) supply of goods in pursuance of any contrast of sale when at the date of such contract the goods were in Bihar. In all these three class of cases the transactions of the dealer would be regarded as "sale" for the purpose of assessment. It is not necessary for me to go into any elaborate discussion as to the import and meaning of a proviso. My learned brother in his judgment has fully discussed the matter, and I agree that though ordinarily a proviso does not enlarge the meaning of the section, yet in many cases the effects thereof may be to add to the terms of the section and enlarge its connotation. The construction to be put on the words of a proviso would depend upon the context in which it is used; and so far as the definition of "sale" is concerned, it seems quite obvious to me that it was intended to include transactions of all the three characters which I have indicated above. Now, these sales, as I said, may take place in Bihar or may take place outside the province because the dealer in the ramification of his business is at liberty to sell his goods either in this province or outside it. Cases of such a dealer are not uncommon. His "turnover," therefore, means "the aggregate of the amounts of sale-prices received and receivable by a dealer in respect of sale or supply of goods during the period of assessment." I have, of course, again broadly referred to this definition only in so far as the words are material. The above definitions are embodied in Section 2 Clauses (c), (g) and (i) of the taxing statute. The definition of "turnover" is material because it relates to the aggregate of sale prices obtained by the dealer and may include not only sale prices in respect of goods sold by the dealer in Bihar in course of his transactions, but also in respect of the goods sold by the dealer at any place outside the province. In short his "turnover" would relate to all transactions irrespective of the place where the sales are held, and if his books are kept in regular course of business, as presumably they would be they must show all the sale-prices received by him in his day to day transactions.
27. It is again important to consider the bearing of Section 4 of the statute upon the point which I am seeking to illustrate. Section 4 of the taxing statute refers to incidents of taxation. It provides in substance that every dealer whose "gross turnover" during the year immediately preceding the commencement of the Act exceeded a certain sum of money, would be liable to pay the tax under the Act on sales that took place after the relevant date notified under the provision. This gross "turnover," as I have shown refers to all sales effected by the dealer. Therefore, the incidents of taxation would depend upon the aggregate of sale prices received by the dealer which might as well include not only sale prices of goods sold by the dealer in the province of Bihar but also despatched for sale in prosecution of his business outside the province and sold there. The legislature must be taken to have been cognisant of these factors when providing for the deductions in ascertaining the ''taxable turnover" of the dealer. In Bach cases when goods are sold outside the province the "despatch of the goods by and on behalf of the dealer" for the purpose of selling them outside the province would be only in normal process of transaction. Therefore, nothing much turns upon the meaning of the term "despatch" and it is safer to adopt the natural meaning of the expression.
28. I next come to Section 5 of the taxing statute. which is the taxing provision under the Act. It is significant that in this provision it is not the "gross turnover" on which the assessment is to be made but on the "taxable turnover,' though the incidents of taxation depend upon the former. This "taxable turnover" is to be ascertained by the taxing authority after making certain deductions from the gross turnover of the dealer. These deductions are enumerated in the various sub-clauses of Section 5 (2) (a) as also in Clause (b) of the statute. Some of the deductions contemplated are where the sale price relates to (i) sale of goods which are tax-free and have been declared to be so under Section 6 of the Act by the Provincial Government; (ii) sale of goods to a registered dealer of the goods specified in the purchasing dealer's certificate of registration (iii) sale of goods to the Indian Stores Department, the Supply Department of the Government of India etc.; and (iv) where the sale price relates to sale of goods which have been shown to the satisfaction of the Commissioner to have been despatched for sale to an address outside Bihar. It is this deduction which is in question here and which I have advisedly put in that form. I need not refer to the other deductions contemplated by the provision. From what I have discussed above, the conclusion appears to follow that under Section 5 (2) (a) (v) the deduction contemplated was in respect of that part of the dealer's turnover which related to sales of goods despatched for sale outside the province of Bihar. In respect of such sales the dealer had to be exempted under the Act and the receipt of such sale-prices had to be deducted from his "gross turnover" during the period of assessment in determining his "taxable turnover".
29. My conclusion in this respect is further strengthened by another provision in the taxing statute. Under Section 9 of the Act a dealer is required to furnish to the Commissioner a return in the prescribed manner. Under Section 26 of the Act the Provincial Government is empowered to frame rules for carrying out the purposes of the Act. Amongst others the Government is entitled to frame rules for submission of returns under Section 9 of the Act. Accordingly rules have been framed by Government, and Rule 21 provides for submission of all returns by a dealer in form VI. The form indicates that the dealer must mention his gross turnover and then claim the permissible deductions. Serial No. 7 in the form which under the heading "Deductions under Section 5 (2) (a) on account of sales effected during the return period" refers to Clause (v) and shows that deductions can be claimed on account of sales "to addresses outside Bihar," These rules are statutory rules and are an integral part of the taxing statute. The deduction permissible under Section 5 (2) (a) (v) is on the footing that it relates to sales to an address outside Bihar; in other words, the sales effected outside the province. The emphasis is upon "sale" and not upon "despatch" and the word "despatch" does not even occur in the form. The dealer in submitting his return must therefore mention the aggregate of sale-prices received by him in respect of all sales effected by him both inside, and outside the province during the period of assessment; but the taxing authority in ascertaining his taxable turnover will permit him a deduction in respect of the sale-prices of those goods which were despatched by him for sale to an address outside Bihar and sold there.
30. I cannot, therefore, see bow it can be successfully argued that although the sale of the goods had taken place in Bihar and title to the goods had passed on to the vendee, yet the dealer could claim an exemption from taxation in respect of the sale price of those goods merely because after the completion of the sale the goods were despatched outside the province. If this were so, a wholesale dealer, although carrying on business in Bihar and completing all his transactions here, could avoid taxation by sending away the goods outside the province. Such an interpretation of the relevant provisions of the statute would, as I have said, defeat the very purpose and object of the legislation, the essential purpose of which was to tax all sales of goods in the province.
31. I quite agree that a taxing statute has got to be strictly construed. It also cannot be doubted that if there is a lacuna or loophole in the statute allowing the assesses to escape taxation, the advantage thereof must be conceded to the assesses. At the same time, however, it cannot be denied that a statute has got to be construed in such a manner as to give effect to the purpose for which it has been enacted and not so as to defeat its purpose. I am afraid if the argument advanced by Mr. P.R. Das is to be accepted, it would plainly be against the very purpose of the legislation, and in violation of its taxing provisions.
32. Nor is the interpretation, which I have given inconsistent with the language of the provision itself. It is true that in the new Acts of 1947 the position has been absolutely clarified; but even in the Act of 1944, though there may be some amount of circumlocution, the meaning is quite clear. As I have pointed out, the test is where has the sale taken place. If the sale has taken place in Bihar, then the legislature never intended in enacting this statute to exempt the sale prices of such sales from taxation. There is no meaning in providing that it should be shown to the satisfaction of the Commissioner that the goods have been despatched "by or on behalf of the dealer" unless it was to emphasise that the property in the goods remained in the dealer before the despatch of the goods. Why should the statute require that the Commissioner should have proof to be satisfied that the despatch was "by or on behalf of the dealer" if there was no intention to tax the sales which bad been already effected? It would be a futile enquiry by the Commissioner because mare proof of despatch of the goods outside the province ought to have served the purpose. It should have been enough for the assessee to show that the goods were despatched outside the province either by the assessee himself or by the vendee. But why must needs the dealer show that the despatch wag by him and on his behalf? On the interpretation of Mr. P.R. Das, the sale having been completed in Bihar and the title to the goods having already passed, such an insistence by the legislature would be utterly meaningless. What does it matter to the Commissioner whether the dealer himself despatched the goods or the vendee to whom title to the goods had passed already, as contended for by Mr. P.R. Das, despatched on his own behalf ? The natural meaning, therefore, seems to be that this enquiry wag necessary in order to ascertain whether title to the goods was still in the dealer before the despatch of the goods. It, therefore, contemplated sale of goods after the despatch was so made by the dealer to an address outside Bihar. That seems to be the inevitable inference. Sale-prices so received by the dealer in respect of such goods sent for sale outside the province of Bihar will be exempted from taxation and will have to be deducted from the dealer's turnover in finding out the "taxable turnover" on which the assessment is to be levied.
33. I would here refer to the contest in which Sub-clause (v) of Section 5 (2) (a) occurs. My learned brother has, if I may respectfully say so, rightly pointed out that Sub-clause (v) requires three conditions : (i) Sale of the goods; (ii) that it must be shown to the satisfaction of the Commissioner that the goods were despatched to an address outside Bihar; and (iii) that the despatch must be by and on behalf as the dealer, But the mare fact that the expression "sales of goods" occurs in the very beginning of the sub-clause does not necessarily signify that the sales must have taken place before the goods were despatched to "an address outside Bihar". Let us reproduce Sub-section (2) (a) of Section 5 of the Act along with Sub-clause (v) only eliminating the other sub-clauses and see how it reads. It reads thus:
"(2) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover daring any period which remains after deducting therefrom,--(a) his turnover during that period on--(v) sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or on behalf of, the dealer to an address outside Bihar."
The words which follow the conjunction "which" in Sub-clause (v) of the section qualify not only the term "goods" but the term "sales of goods" or rather "the turnover daring that period on sales of goods". We know the meaning of the expression "turnover" which means the aggregate of sale prices received by the dealer. Therefore the natural rendering of the provision would be: sale prices of such goods as "are shown to the satisfaction of the Commissioner to have been despatched" for sale "by and on behalf of the dealer to an address outside Bihar" should be deducted from the aggregate of sale prices received by him during the relevant period in determining the "taxable turnover" of the dealer. This rendering would be quite consistent with the other provisions of the statute and the purpose of the statute itself.
34. I am not much impressed with one of the arguments of the learned Advocate-General which was to the effect that the words "sales of goods" in the sub-clause in question refer only to contract of sale as contemplated by Section 23, Sale of Goods Act. I have already said that the definition of the term "sale" for the purposes of taxing statute includes all the three kinds of transactions, namely, (i) sale for consideration paid or promised; (ii) sale or supply of goods on hire-purchase system; and (iii) sale in pursuance of a contract of sale where at the time of the contract the goods were in province of Bihar. Even under Sub-clause (v) of Section 5 (2) (a) Act the terms "sales" might well be intended to refer to all the three kinds of transactions stated above; and there is no reason why it should be confined merely to contract of sale under which the property in the goods passes at a later stage to the vendee. In my opinion, there is no anomaly whatsover in importing the above concepts of sale even in the application of Section 5 (2) (a) (v) of the taxing statute.
35. In forming my conclusions, as aforesaid, I have endeavoured to give full effect to all the relevant provisions of the statute and the language of the sub-clause itself under which the assessee claims deduction. I cannot in spite of my most anxious consideration of the matter come to a conclusion different from the one at which I have arrived, and this conclusion, as I have shown, is not prompted by any supposed intention of the legislature but by a plain reading of the language of its various provisions.
36. It is also significant to note that neither before the Commissioner nor before the Board of Revenue the present argument which is now advanced by Mr. P.R. Das was ever advanced. Before the Commissioner the argument was that the deduction should be allowed because the sales "had not" taken place in Bihar, whereas before this Court the argument now is that deduction should be allowed because the sales "have" taken place in Bihar but the goods were despatched outside. Before the Commissioner the argument proceeded on the assumption that if the sales did take place in Bihar, the assessee could not be entitled to the deduction as contemplated by Section 5 (2) (a) (v), A similar attitude was taken also before the Board of Revenue. I will refer to the relevant passages in the order of the Commissioner and the Board of Revenue. The learned Commissioner after an elaborate examination of the terms of an agreement between the assessee Company and the Imperial Tobacco Company Ltd. came to the conclusion as follows :
"In my opinion, Section 5 (2) (a) (v) of the Act only exempts from the operation of the Sales Tax Act those transactions in which, property in the goods exported passes to the vendee, outside Bihar, by the very act of despatch on the part of the despatching dealer. It property has already passed at a point of time antecedent to the of time of despatch this clause will not be operative. In this case at that time of despatch, the property is no longer that of the appellant; it became the property of the Imperial Tobacco Company Ltd., in accordance with the terms of the agreement the moment it was manufactured and put in a deliverable State, It is not open to the appellant thereto claim exemtion under Section 5 (2) (a)(v) of the Act on the ground of export outside Bihar, of goods which are not his property."
There was no argument before him that even if the sales are completed in Bihar and the title to the goods passed to the vendee by the mere fact of the goods having been despatched outside Bihar, the assessee was entitled to an exemption in respect of she gale price of such goods. Before the Board of Revenue the argument was on the same footing. So far as the alternative argument in respect of this item is concerned, my learned brother has elaborately dealt with it, and I respectfully agree with that part of the judgment. I will, therefore refer only to the argument advanced in regard to the application of the exemption claimed under Section 5 (2) (a) (v) of the Act:
"The learned advocate who appeared for the petitioner argued with considerable force, that according to the provisions of Section 23 (2), Sales of Goods Act, the Bale by the petitioners to the Imperial Tobacco Co. of India Ltd. was not completed be fore the despatch of the goods to the branches of the Imperial Tobacco Co. of India Ltd. in Calcutta and other places in India. The learned Commissioner has examined this point, in great detail, with reference to the contents of the agreement between the two parties and the provisions of law contained in the Bihar Sales Tax Act and the Sales of Goods Act and has given overwhelming reasons for his finding, with which I see no reason to disagree, that the sale was completed as soon as the petitioners completed the manufacture of goods in their factory at Monghyr and put them in a deliverable condition and that the legal position remained unaltered whether or not the goods were sent elsewhere according to the directions of the purchaser restored in the petitioners' godowns for disposal according to such directions as the purchasing company might have issued in future."
37. From the above findings and examination of the judgments of the Commissioner and the Board of Revenue on the point, it is apparent that the argument was focussed only on the question that the sales of goods had not been completed in Bihar, and, therefore, the benefit of Section (2) (a) (v) was available to the assessee. This argument was consistent with the natural meaning of the provision and the general tenor of the taxing statute. If it had been found by the Commissioner and the Beard of Revenue on the evidence on record that the title to the goods had not passed to the Imperial Tobacco Company and the title remained in the vendor before the goods were despatched outside the province, then, in my opinion, the assessee would have been entitled to a deduction in respect of the sale proceeds of those goods within the meaning of the provision. But on that point there is a definite finding of fact against him, and, in my opinion, the finding is a perfectly correct finding. This finding has not been questioned before us and could not be question, ed. That being so, strictly speaking, the point now argued before us did not arise on the orders of the Commissioner or the Board of Revenue. What Mr. P.R. Das now argues is something just contrary to the argument advanced before them. I need hardly point out that under Section 21 (3) read with Section 21 (1) of the Act the Board may require to make a reference to the High Court in respect of any questions of law arising out of such order, which means the order of the Commissioner or the Board of Revenue as contemplated by the preceding section, namely, Section 20 (3) of the Act.
38. For all these reasons, I am inclined to think that the answer to the first question also should be that the assessee is not entitled to claim deduction from the gross turnover in respect of the sum of RS. 2,93,15,373-11.4 under Section 5 (2) (a) (v), Bihar Sales Tax Act (Bihar Act VI [6] of 1944) and that the order of the revenue authorities on the point is substantially correct.
Sinha, J.
39.This case comes before me on a difference between my learned brothers Das and Sarjoo Prosad, JJ. on the construction of the provisions of Section 5 (2) (a) (v), Bihar Sales Tax Act (Bihar Act VI [6] of 1944). This Act has now been replaced by Bihar Act XIX [19] of 1947; but the case depends upon the true construction of the provisions of the repealed Act. The Board of Revenue, which is the highest authority under the Act, refused to make a reference under Section 21 (1) of the Act. Thereupon, the assessee moved this Court, and, under the provisions of Sub-section (3) of Section 21 of the Act, this Court called upon the Board of Revenue to state a case. This reference was thus made under the directions of this Court. Three questions were formulated by this Court for reference. My learned brothers Das and Sarjoo Prosad, JJ. agreed on the answer to be given to the second and the third questions; but they did not agree as to the answer to be given to the first question, which is in these terms:
"Whether the assesses is entitled to claim deduction of Rs. 2,93,15,373-11.4 from the gross turnover by reason of the provisions of Section 5 (2) (a) (v), Bihar Sales Tax Act, 1944."
40. It is not necessary for me at this stage to state in detail all the facts of the case, which have been set out in the judgment of my learned brother Das, J. It is only necessary to state that, in pursuance of an agreement between the petitioner Company (Messrs. Tobacco Manufacturers ( India ). Ltd. ) and the Imperial Tobacco Company of India, Ltd., the assessee manufactures Tobacco and cigarettes in the District of Monghyr, exclusively for the Imperial Tobacco Company of India, Ltd., the latter Company having its registered office in Calcutta. The assessee also agreed to despatch all the manufactured goods on behalf of the Imperial Tobacco Company, Ltd., and in their name, to destination inside Bihar, or out of it, according to the directions of the latter Company which agreed to pay, by way of remuneration, to the assessee full cost of manufacture plus 20 per cent. of such cost. Accordingly, the assessee has been manufacturing tobacco and cigarettes for, and on behalf of the Imperial Tobacco Company, Ltd., and despatching the same in their name to destinations outside Bihar. Such despatches during the relevant period, namely, October 1944 to March 1945, were of the value of Rs. 2,93,15,373-11 4. In short, it was an agreement between the two companies aforesaid for the manufacture and supply of tobacco and and cigarettes in Bihar for a remuneration. When the matter came before the learned Commissioner, be recorded the following findings :
"That the property is not his (that is, the assessee's) at the time of despatch is abundantly proved by the other circumstantial evidence, such as the certificate in document (b) filed by the appellant with his petition dated 16th October 1947 (filed on 31st October 1947), where the despatch is mentioned as being made by the appellant on behalf of the Imperial ; and by the fact that consignments are always made in the name of the Imperial Tobacco Company, Ltd., as consignor. This shows clearly that the patties had intended that property in the goods should pass to the Imperial before the despatch."
41. It is thus clear that the petitioner is a "dealer" within the meaning of Section 2 (c) of the Act, as, by its contract with the Imperial Tobacco Company, it has agreed, for a remuneration, to supply goods to the latter. The remuneration agreed to be paid to the assessee is "sale price," according to Clause (h) of Section 2. The transaction between the parties to the agreement is, therefore, a "sale" within the meaning of Clause (g) of Section 2, being ''a transfer of property in goods involved in the execution of contract" (omitting the unnecessary words of that clause for one present purposes). Moreover, it is not necessary to enter into an elaborate discussion of this point, as, in this Court at least, the arguments on behalf of the assessee proceeded on the assumption that the transaction was one of sale.
42. The real difference between the parties centres round the true meaning of the expression ''taxable turnover" in Sub-section (2) of Section 5 of the Act. On this question, the position of the assessee has not been consistent throughout. In the Revenue Courts, the contention raised on behalf of the assessee was that the sales in question did not take place in Bihar at all, and that, as a matter of law and fact, these sales took place outside Bihar, and were, therefore, not taxable. In this Court, the position taken by the learned Counsel on behalf of the assessee was that the transactions of sale were completed in Bihar but that the goods were despatched to addresses outside Bihar on behalf of the assessee, and that, therefore, the conditions laid down in Sub-clause (v) of Clause (a) of Sub-section (a) of Section 5 of the Act were satisfied. The position taken up on behalf of the Revenue has been that the sales took place in Bihar, that the delivery by the assessee also took place in Bihar ; and that, as a consequence, the goods wire despatched outside Bihar not on behalf of the assessee but on behalf of the purchaser, namely, the Imperial Tobacco Company of India, Ltd. My learned brother Das J., in effect, accepted the contentions raised on behalf of the assessee, and answered the first question in the affirmative, that is to say, he took the view that the assessee was entitled to claim deduction of the said sum of Rs. 2,93,15,373-11-4 from the gross turnover by reason of the provisions of Section 5 (2) (a) (v), Bihar Sales Tax Act, 1944. On the other hand, my learned brother Sarjoo Prasad J., answered the question in the negative, in agreement with the Revenue authorities.
43. It is manifest that the answer to the first question, which is the only question before me, must depend upon the true construction of the provisions of Sub-clause (v) aforesaid. In terms of Sub-section (2) of Section 5 :
"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 (v) sales of goods which are shown to the satisfaction of the Commissioner to have been despatched by, or on behalf of, the dealer to an address outside Bihar."
44. I have omitted those portions of Sub-section (2) which do not enter into the controversy before me. They are the other items of deduction which an assessee may claim under the provisions of Sub-section (2) of Section 5. The two learned Judges constituting the Division Bench have agreed that, in order to attract the operation of Sub-clause (v), quoted above, the following three conditions must be fulfilled :
"(1) there must be sales of goods; (2) it must be shown to the satisfaction of the Commissioner that the goods have been despatched to an address outside Bihar; and (3) the despatch must be by the dealer or on behalf of the dealer."
I would modify the second and the third conditions as under : (2) it must be shown to the satisfaction of the Commissioner that the goods have been despatched by, or on behalf of, the dealer; and (3) the Commissioner mast also be satisfied that the goods had been despatched to an address outside Bihar. The legislature, in its wisdom, has constituted the Commissioner the sole authority who has to be satisfied as to the two matters stated in conditions (2) and (3). If the Commissioner, on the evidence before him, is not satisfied as to any or both of them, the assessee will not be entitled to the benefit of the deduction provided therein. In the present case, as I read the findings of the learned Commissioner, though he was satisfied that the goods bad been despatched to an address outside Bihar (condition 3), he was not satisfied that the goods had been despatched by, or on behalf of, the dealer ; on the other hand, he came to the conclusion that the goods had been despatched by, or on behalf of, the purchaser, the Imperial Tobacco Company of India, Ltd.
45. The legislature has made the question of despatch by or on behalf of, the dealer one of crucial conditions for the application of Sub-clause (v) aforesaid, advisedly because, in my opinion, delivery of the goods within the Province of Bihar has been taken to be the essential condition of liability for the tax. If the goods had not been delivered by the dealer to the purchaser within the Province of Bihar, the dealer would not be liable for the tax, though the sale may have taken place in Bihar. In the supposed case, the goods would be despatched by the dealer or on his behalf; whereas only where the goods had been delivered by the dealer to the purchaser within the Province of Bihar could the purchaser have been able to despatch the goods on his own behalf to himself as consignee to any destinations as he directed, in pursuance of the contract between the dealer and the purchaser. Hence, on a plain reading of the relevant provisions of the Act. and giving effect to every word of those provisions, it must be held, in my opinion, that on the findings of the Commissioner, the assessee has failed to satisfy him that the goods had been despatched by him or on his behalf, and that, therefore he has failed to satisfy one of the essential conditions to attract those provisions, in order to get the deduction in respect of the amount in question. For these reasons, I do not agree with the following observations of my learned brother Sarjoo Prosad, J:
"The statute it not concerned as to what happens to the goods after the sale is effected. Whether the goods after the sale, in other words, after title in the goods has passed on to the vendee, are despatched by the vendor himself or by the vendee to any place outside Bihar is hardly of any moment. The despatch of the goods after their sale hag nothing to do with the imposition of sales tax under the statute which is to be levied on the sale of goods in Bihar."
These observations of my learned brother are, in my opinion, in teeth of the express words of the very Sub-clause (v) which has to be construed. One of the cardinal principles of construction of a statute is that each and every word used in a particular provision of the statute must be given its full effect and meaning. If my learned brother Sarjoo Prosad, J. is right in his observations quoted above, then the words "despatched by, or on behalf of, the dealer" in the Sub-clause aforesaid are redundant. With all respect to his views, in ray opinion, those words are not only not redundant but provide the key to the construction of the whole sub-clause. If the dealer as in the present case, has entered into an agreement with the vendee that, on manufacture of the goods and their being packed into a deliverable state, the goods be. come the property of the vendee, and are delivered to him in Bihar, the transaction of sale has become complete and effective in all respects. If, after all that has happened, the goods are despatched to places outside Bihar, those despatches must, in fact and law, be on behalf of the vendee, and in accordance with the scheme of the taxing statute, those transactions become part of the "taxable turnover". If, on the other hand, the agreement between the parties were that the goods, after their manufacture and being packed in a deliverable state, were still at the disposal of the dealer, and that the responsibility for the goods would attach to the vendee upon their delivery either inside Bihar or outside it, then, in accordance with the terms of this sub-clause, the dealer shall not be liable for taxes on those transactions in which the delivery took place outside the limits of Bihar. The crucial test, therefore, in ray opinion, laid down by the sub-clause is where the goods have been delivered to the vendee. If they have been delivered within the Province, the dealer is liable to pay taxes thereon: if they have been delivered outside the Province, then the dealer is entitled to the deduction provided for in the sub-clause in question. That is the criterion which has been laid down by the legislature for determining the question of whether or not the transactions were liable to be taxed. Hence, to ignore those crucial words would be wholly unjustified.
46. The question of who despatched the goods, or on whose behalf the goods were despatched, is not a question of form but very much a question of substance, to determine which the legislature has constituted the Commissioner the sole authority. In all the circumstances of the case, the Commissioner has to determine the all-important question by whom, or on whose behalf, the goods had been despatched outside Bihar. Naturally the Commissioner has to take into his consideration the circumstances of each particular case in order to arrive at his conclusion. In the present case, the Commissioner has recorded the finding that the goods had been despatched not on behalf of the dealer but on behalf of the Imperial Tobacco Company who, in terms of the contract between the parties, must be deemed to have taken delivery of the goods as soon as they were manufactured and packed.
47. I do not also agree with my learned brother Sarjoo Prosad J. when he makes the following observations on the grammatical construction of Sub-clause (v) of Clause (a) of Sub-section (2) of Section 8:
"The words which follow the conjunction 'which' in Sub-clause, (v) of the section qualify not only the term 'goods' but the term 'sales of goods' or rather 'the turnover during that period on sales of goods."
My learned brother Das J. has pointed out very elaborately the pitfalls in such a construction. aS I entirely agree with the observations of my learned brother Das J. on the grammatical construction of the sub-clause in question, I need not repeat those reasons. It is clear that the word 'which' following the expression 'sales of goods' clearly refers to the 'goods'. I also entirely agree with my learned brother Das J. that, under Sub-clause (v) in question, the test is where the goods were despatched and by whom? and that, in order to give relief to a dealer under Sub-clause (v), the question must be answered--where the goods were despatched and by whom? I am absolutely clear in my mind that my learned brother Das J. is right in holding that the sub-clause in question has reference to sales and not to contract for sales in Bihar. I also agree with both my learned brothers that the conditions (1) and (3), as I have analysed them, are satisfied in this case; but, in disagreement with my learned brother Das J., I must hold that condition (2) in my analysis, which is condition (3) with a little difference in my learned brother Das's analysis has not been fulfilled in this case. My learned brother Das J., has felt the difficulty in the penultimate paragraph of his judgment dealing with the first question. He has in my opinion, with all due respect to his views, lost sight of the fundamental finding recorded by the learned Commissioner that he was not satisfied that the goods had been despatched by or on behalf of, the dealer. It is true that the learned Commissioner came to the conclusion that the goods were despatched by the assesses; but he has also come to the conclusion that that des. patch was made on behalf of the vendee, the assesses acting as the agent of the Imperial Tobacco Company. At this stage, it is not open to this Court to whittle down the findings of the Commissioner, or to go behind them. The Legislature, in its wisdom, has not vested this Court with appellate jurisdiction, so as to enable this Court to re-open the findings of fact recorded by the Commissioner. The finding of the learned Commissioner is entirely in consonance with the agreement between the assessee and the Imperial Tobacco Company, and has got to be accepted at its face value. Hence, I disagree with my learned brother Das J. in his conclusion on the question whether the essential condition for attracting the provisions of sub. Clause (v) has been fulfilled. In my opinion, the learned Commissioner has not found that the goods had been despatched by, or on behalf of, the dealer, and, therefore, he is not entitled to the deduction claimed. Hence, in the result, though I agree with most of the reasons given in the judgment of my learned brother Das J., I disagree with his conclusion as to the answer to be given to the first question. I also do not agree with all the reasons given by my learned brother Sarjoo Prasad J., as already indicated; but, all the same, I agree with him in his conclusion that the first question should be answered in the negative.