JUDGMENT

A.M. Ahmadi, CJI. - These two appeals arise out of a common judgment delivered on 14.8.1978 by a Division Bench of the High Court of Andhra Pradesh whereby it repelled the contention of the appellant firm that Rule 12(3)(ii) of the Central Sales Tax (Andhra Pradesh) Rules was directory and not mandatory and if held to be mandatory the said rule was ultra vires the Central Sales Tax Act, 1956, hereinafter called the Act .

2. The appellant, M/s. Phool Chand Gupta, was at all material times a dealer in oil seeds. This firm was assessed under the Act by the Commercial Tax Officer, Vizianagaram, for the relevant assessment years 1971-72 and 1972-73. He granted exemption on a turnover in respect of mohwa seeds on the plea that the seeds were purchased by the firm while in transit and were sold to dealers outside the State. The Deputy Commissioner, however, noticed that the assessee had actually purchased the Railway Receipts relating to the mohwa seeds from non-resident dealers while the goods were in transit from places outside the State and were sold to non-resident dealers. He, therefore, opined that the exemption granted was irregular since the transaction fell within Section 3(b) and hence was not eligible for exemption in view of Section 6(2) of the Act unless the dealer furnished a certificate in Form E-1 obtained from the vendor and a declaration in Form C received from the registered dealer to whom he sold the goods. Since no document in Form C was furnished, it was held that the assessee was not entitled to exemption. The Deputy Commissioner, therefore, withdrew the exemption allowed by the Assessing Officer. In appeal the Sales Tax Appellate Tribunal affirmed this view since the requirement of Rule 12(3)(ii) of the Central Sales Tax (Andhra Pradesh) Rules (hereinafter called the State Rules ), was not satisfied. The High Court also approved the said point of view.

3. The High Court noticed that the appellant firm had purchased mohwa seeds from a dealer in the State of Orissa and while the consignment was in transit, it sold the same to a dealer in West Bengal by endorsing the Railway Receipt for that consignment. Thus, there is no dispute that the transaction took place in the course of inter-State trade falling within the scope of Section 3 (b) of the Act. On the turnover of these seeds exemption was claimed under Section 6(2) of the Act which was denied by the authorities since Rule 12(3)(ii) was not complied with. Before the High Court it was contended that the said rule was merely directory and not mandatory and that if it was construed to be mandatory, it would be ultra vires the provisions of the Act. The High Court negatived both these contentions and hence the present appeals by special leave.

4. We may at the outset notice a few relevant provisions of the Act as they stood at the material time. Section 3 provides that a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another; or is effected by a transfer of documents of title to the goods during their movement from one State to another. Section 6 imposes a liability to tax on inter-State sales. Sub-section (1) provides that subject to the other provisions in the Act, every dealer shall be liable to pay tax on all sales of goods other than electric energy effected by him in the course of inter-State trade or commerce during any year on and from the notified date. Sub-section (2) as it stood before 1.4.1973 read as follows :

"6(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A) where a sale in the course of inter-State trade or commerce of goods of the description referred to in sub-section (3) of section 8-

(a) has occasioned the movement of such goods from one State to another; or

(b) has been effected by a transfer of documents of title to such goods during their move