Commissioner Of Sales Tax, U. P. vs Modi Sugar Mills LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1960 Supreme(SC) 262

SUPREME COURT OF INDIA
31st October, 1960.
S.K. DAS, M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.
Commissioner of Sales-tax, U. P., Appellant
Versus
Modi Sugar Mills Ltd., Respondent.
Civil Appeal No. 443 of 1957.
Advocates appeared
Mr. C. B. Aggarwala, Senior Advocate, (Mr. C. P. Lal, Advocate, for Mr. G. N. Dikshit, Advocate, with him), for Appellant; M/s. S. K. Kapur and Mohan Behari Lal, Advocates, for Respondent.

Advocates:
C.B.AGARWAL, G.N.DIKSHIT, MOHAN BEHARI LAL, S.K.KAPOOR

Headnote:
UNITED PROVINCES SALES TAX ACT, 1948 - S. 3, 3-A, 7 - Notification under S. 3-A - Retrospective effect - Liability of assessee who opted for assessment on the basis of previous year's turnover - Whether assessee liable to be assessed at the flat rate of 3 pies per rupee on the whole of the turnover of the previous year or at the rates of 3 pies per rupee and 6 pies per rupee on the turnover of the previous year in proportion to the two periods from 1st April to 8th June, 1948, and from 9th June, 1948, to the 31st March, 1949.
Fact of the Case:

The assessee, a manufacturer and dealer of non-edible oils, elected the previous year as the basis of his assessment in the assessment year, 1948-49. On 8th June, 1948, the Provincial Government issued a notification under S. 3-A of the Act declaring that with effect from 9th June, 1948, the proceeds of sale of non-edible oils shall not be included in the turnover of any dealer except at the point in the series of sales by successive dealers mentioned in column 4 thereof under the circumstances shown in column 3 thereof. The assessee submitted its return for the assessment year 1948-49 on its taxable turnover of the previous year ending on 31st May, 1947, to the Sales Tax Officer, Meerut Range. The Sales Tax Officer assessed the tax at Rs. 1,16,238-12-0 holding that sales of non-edible oils for the first 69 days out of the year of the turnover were, to be taxed at the rate of 3 pies, and sales for the remaining 296 days were to be taxed at the rate of 6 pies per rupee. Against the order passed by the Sales Tax Officer, Meerut Range, an appeal was preferred to the Judge (Appeals) Sales Tax, under S. 9 of the Act. The appellate authority modified the order and directed the assessee to pay tax on non-edible oils on the turnover of the previous year at the flat rate of 3 pies per rupee and reduced the tax liability to Rs. 1,08,477-0-3. This order of the Judge (Appeals) was set aside by the revising authority and the order of the Sales Tax Officer was restored. On a direction made by the High Court, the revising authority drew up a statement of the case and submitted for opinion a question which in his opinion arose out of the assessment. The High Court re-framed the question as set out hereinbefore, and answered it in favour of the assessee.
Finding of the Court:

The High Court answered the question in favour of the assessee and held that the notification under S. 3(A) could not apply to determine the rate of tax payable by the assessee on his turnover of the previous year.
Issues: Whether the assessee, who is a manufacturer and a dealer of non-edible oils and who elected the previous year as the basis of his assessment in the assessment-year 1948-49 is liable to be assessed at the flat rate of 3 pies per rupee on the whole of the turnover of the previous year or whether he is liable to be assessed at the rates of 3 pies per rupee and 6 pies per rupee on the turnover of the previous year in proportion to the two periods from April 1 to June 8, 1948 and from June 9, 1948 to March 31, 1949.
Ratio Decidendi: The Act does not contemplate any difference in the incidence of the tax and the quantum of tax-liability flowing from the choice of either the "previous-year" or the "assessment-year" as the basis of the determination of the turnover. The entire basis underlying the charging provision S. 3(1) read with the option provided by S. 7(1) is that the sales of the previous year are fictionally treated as the sales of the current year for the purpose of the computation of the tax-liability. The change in the law either as regards the computation of the taxable turnover or as regards the rate of tax becoming operative sometime after the year has commenced makes no difference. The change in the rate of tax, was no doubt prospective. The phraseology employed merely means that in the case of the "assessment-year-turnover" dealers only the sale proceeds of sales effected after the specified date would be governed by the new rates. In the case of the "previous-year-turnover" dealers, the change operates to determine the amount of tax during their assessment year - just in the same manner as the original charge under the Act, of a flat rate of three pies determined the tax payable notwithstanding that none of the sales whose proceeds were included in their turnover were effected during the assessment year.
Final Decision: Appeal dismissed.

Judgment

SHAH, J. : (For himself and Hidayatullah and K. C. Das Gupta, JJ.) Judge (Revisions) exercising authority under S. 11 of the United Provinces Sales Tax Act XV of 1948 drew up a statement of case and referred to the High Court of Judicature at Allahabad the following question :

"Whether the assessee, who is a manufacturer and a dealer of non-edible oils and who elected the previous year as the basis of his assessment in the assessment year, 1948-49, is liable to be assessed at the flat rate of 3 pies per rupee on the whole of the turnover of the previous year, or whether he is liable to be assessed at the rates of 3 pies per rupee & 6 pies per rupee on the turnover of the previous year in proportion to the two periods from 1st April to 8th June, 1948, and from 9th June, 1948, to the 31st March, 1949?"

2. The High Court answered the question as follows :

"The applicant company is liable to pay tax for the assessment year 1948-1949 on the turnover of the previous year in respect of sales of non-edible oils at the flat rate of 3 pies per rupee."

3. Against the order of the High Court recording its answer, this appeal with special leave is preferred.

4. The facts which give rise to the appeal are briefly these :

5. The Modi Food Products Co., Ltd. - hereinafter referred to as "the assessee", manufactures oils - edible and non-edible in its factory at Modinagar. District Meerut, State of Uttar Pradesh. The assessee is registered as a "dealer" under the United Provinces Sales Tax Act XV of 1948. The assessee s year of account commences on June 1, and ends on May 31, next year. For the year of account 1946-47, the assessee s sales of edible and non-edible oils amounted to Rs. 63,02,849-7-7. The U. P. Legislature enacted with effect from April 1, 1948, the United Provinces Sales Tax Act XV of 1948, the United Provinces Sales Tax Act XV of 1948 providing for the levy of a tax on sales of certain commodities. This Act was amended by Act XXV of 1948, with retrospective operation from April 1, 1948. By the Act, "assessment year" was defined as meaning the twelve months ending on March 31 and "previous year" was defined as meaning the twelve months ending on the 31st March next preceding the assessment year, or, if the accounts of the dealer had been made up to a date within the said twelve months in respect of a year ending on any date other than the said twelve months in respect of a year ending on any date other than the said 31st March then, at the option of the dealer, the year ending on the day to which his accounts had so been made up. "Turn-over" was defined as meaning the aggregate of the proceeds of sale by a dealer. By section 3, a tax at the rate of 3 pies per rupee on turnover was, subject to certain exceptions, made payable by every dealer in each assessment year whose turnover in the previous year exceeded Rs. 12,000/- or such larger amount as may be prescribed; the Provincial Government was however authorised to reduce the rate of tax on any dealer or class of dealers on the turnover in respect of any goods or class of goods. By S. 3-A, the Government of U. P. was authorised to introduce instead of the multiple point scheme of taxation provided by S. 3, a single point system of taxation and by notification to declare that the proceeds of sale of any goods or loss of goods shall not be included in the turnover of any dealer except to such single point in the series of sales by successive dealers as may be prescribed; and if the Government made such a declaration, the turnover of the dealer in whose turnover the sale of such goods was included was in respect of such sale to be taxed at such rate as may be specified not exceeding one anna per rupee. By S. 7, every dealer whose turnover in the previous year was Rs. 12,000/- or more was directed to submit such return or returns of his turnover of the previous year within sixty days of the commencement of the assessment year in such form and verified in such manner as may be pre

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