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SUPREME COURT OF INDIA
19th December, 1955.
S.R. DAS, ACTG. C.J.I., BOSE, BHAGWATI, JAGANNADHA DAS AND SINHA, JJ.
The Union of India, Appellant
Versus
Commercial Tax Officer, West Bengal and others, Respondents.
Shri Ganesh Jute Mills Ltd., Appellant
Versus
Commercial Tax Officer and others, Respondents.
Civil Appeals Nos. 9 and 10 of 1954.
Civil Appeals Nos. 9 of 1954.
Civil Appeal No. 10 of 1954.
Advocates appeared
Mr. C. K. Dephtary, Solicitor-General of India, (Mr. R. Ganapathy Iyer and Mr. R. H. Dhebar, Advocates, with him) for Appellant (in C. A. No. 9/54) and Respondent No. 3 (in No. 10/54); Mr. S. Chowdhury Sr. Advocate (Mr. S. N. Mukherji, Mr. B. N. Ghosh and Mr. A. K. Basu, Advocate with him) for Appellant (in C. A. 10/54); Mr. S. M. Bose, Advocate-General of West Bengal (Mr. B. Sen and Mr. P. K. Bose, Advocates with him) for Respondent Nos. 1 and 2 (in both the Appeals).
Taxing Statutes-Exem.ptions to be strictly construed.
On the first September 1948 the Government of India, Ministry of Industry and Supplies, in Calcutta, placed with the Shri Ganesh Jute Mills Ltd. a confirmatory order in writing for the supply to the Government of India of a large quantity of hessian cloth of different descriptions at different prices therein mentioned. It was specifically mentioned that the goods ordered were required to meet an international obligation of the Government of India and as such the execution of the contract in accordance with the programme of deliveries as given in the schedule attached thereto was essential. The agreed prices were stated to be exclusive of the Bengal Sales Tax and it was stipulated that the Government of India would arrange direct payment of sales tax to the Government of West Bengal if it was ultimately found that Sales tax was payable in respect of that contract. Pursuant to the aforesaid contract, the Mills
I. From A.I.R. 1953 Pat. 370.
2.State of Assam v. Keshab Prasad Singh, 1953 S.C.R. 865: A.I.R. 1953 S.C. 309 referred to. supplied goods to the Government of India of the aggregate value of Rs. 2,10,040 calculated at the prices agreed upon.
The Commercial Tax Officer claimed that the aforesaid sales should be included in the taxable turnover of the Mill~ and assessed to sales tax. The Mills, on the other hand, claimed exemptions under Section 5 of the Bengal Finance (Sales Tax) Act, 194U
Held (by majority, Sinha J. dissenting) : (I) The Department of Industries and Supplies which was subsequently re-designated as the Ministry of Industries and Supply was not the same as the Indian Stores Department or the Supply Department of the Government of India under a differ-ent name. The scope and volume of the work entrusted to the Department of Industries and Supplies was much wider and larger than that with which the two departments which it replaced had been charged.
Unlike those of the two departments, its purchases were not confined to goods necessary for the prosecution of the war. To extend the benefit of statutory exemption to the sales made to the newly created department of Industries and Supplies, of goods not required for war purposes but, say, for meeting international obligations as in the present case, wiII necessarily widen the scope of the exemption and impose greater loss of revenue on the State of West Bengal than what the Act by its language intends to do.
In view of the ever expanding activities of the modern welfare State in different fields including that of trade and commerce, the Government departments are often entrusted with the performance of well defined activities and are authorised to deal with the outside world and to enter into contract of sale and purchase and other transactions in the same way as an ordinary person or company may do.
Such Government departments, therefore, may well be regarded as distinct units or quasi-legal entities, at least for the particular purpose for which they are created. At any rate, the Bengal Finance (Sales Tax) Act, 1941 by providing for the deduction of the sales to the two named departments from the taxable turnover certainly treated those two departments as distinct entities.
(2) This exemption is the creation of the statute and must be construed strictly and cannot be extended to sales to other departments. The fact that the section was not amended un til 1949 does not at all indicate that the Bengal Legislature intended to extend the benefit of the section to any but the departments specifically mentioned in the section. - SALES-TAX
Bengal Finance (Sales Tax) Act (6 of 1941), Section 5 (2) (iii)-Interpretation.
Judgement
S. R. DAS Actg. C. J. The only question canvassed before us in the above appeals, which have been heard together, is whether certain sales of goods made by Shri Ganesh Jute Mills, Ltd. (hereinafter referred to as the Mills) to the Government of India, Ministry of Industry and Supplies are to be deducted from the taxable turnover of the Mills so as to be exempt from sales tax demanded by the Commercial Tax Officer of the State of West Bengal. The relevant facts are stated below.
2. On the first of September 1948 the Government of India, Ministry of Industry and Supplies, in Calcutta, placed with the Mills, a confirmatory order in writing bearing No. Cal/J - 1/2001/103 for the supply to the Government of India, of a large quantity of hessian cloth of different descriptions at different prices therein mentioned. It was stipulated that the contract would be governed by the conditions of contract specified in Form WSB 133 as amended up-to date. It was specifically mentioned that the goods ordered were required to meet an international obligation of the Government of India and as such the execution of the contract in accordance with the programme of deliveries as given in the schedule attached thereto was essential.
The agreed prices were stated to be exclusive of the Bengal Sales Tax and it was stipulated that the Government of India would arrange direct payment of sales tax to the Government of West Bengal if it was ultimately found that Sales tax was payable in respect of the contract. Pursuant to the aforesaid contract, the Mills supplied goods to the Government of India of the aggregate value of Rs. 2,10,040 calculated at the prices agreed upon.
3. The Commercial Tax Officer, Beadon Street, District II Charge, claimed that the aforesaid sales should be included in the taxable turnover of the Mills and assessed to sales tax. The Mills, on the other hand, claimed exemption under section 5 of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941). The relevant portion of section 5 ran as follows : -
"5. (1) The tax payable by a dealer under this Act shall be levied at the rate of one quarter of an anna in the rupee on his taxable turnover.
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) .....................
(ii) ....................
(iii) sales to the Indian Stores Department, the Supply Department of the Government of India, and, any railway or water transport administration.
(iv) .................
(v) .................
(vi) ................
(b) ..........................."
The Mills further contended that if any sales tax was at all payable, the same was payable by the Government of India and not by them. The Commercial Tax Officer overruled both these objections and on 8-11-1950, he assessed the Mills to sales tax in respect of the supplies made by the Mills to the Government of India under the aforesaid contract and demanded a sum of Rs. 9,401-10-6.
4. On 6-12-1950, the Mills filed a petition under Art. 226 of the Constitution of India before the High Court at Calcutta. In the petition the Mills impleaded as respondents the Commercial Tax Officer the State of West Bengal and the Union of India. The Mills prayed for a writ of Mandamus on the respondents to cancel and / or recall and / or for bear from acting or giving effect to the demand dated 8-11-1950 and from realising the sum of Rs. 9,401-10-6 and for a writ of certiorari for production of the records and proceedings before the Commercial Tax Officer and for quashing the same and for other incidental reliefs. On the same day a rule was issued on the respondents to show cause why the orders prayed for should not be made.
5. The Commercial Tax Officer filed an affidavit in opposition disputing the contentions put forward by the Mills in support of their claim for exemption and maintaining that sales tax was due and ha
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