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PUNJAB & HARYANA HIGH COURT
Harbans Singh and Jindra Lal JJ.
Janki Dass Bhagat Ram
Versus
Excise And Taxation Officer
Civil Writ No. 1613 of 1962,
Decided On : OCTOBER 5, 1964
SALES TAX - Deduction of purchase price of goods sold within six months from the close of the year to a registered dealer - Interpretation of Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Punjab General Sales Tax Act, 1948 - Whether sale by commission agents on behalf of the petitioner to a foreign buyer resulting in the export of the cotton sold entitles the petitioner to deduct the purchase price thereof from the gross turnover.
Fact of the Case:
The petitioner, a cotton trading company, challenged the assessment order passed by the Assessing Authority under the Punjab General Sales Tax Act, 1948. The petitioner claimed deductions from the gross turnover for various items, including the purchase price of cotton and cotton seeds sold within six months from the close of the year to a registered dealer, the purchase price of binolas extracted from unginned cotton and sold to registered dealers, and the purchase price of cotton sold to a foreign buyer for export through commission agents in Bombay.
Finding of the Court:
The court held that the petitioner was entitled to deduct the purchase price of cotton and cotton seeds sold within six months from the close of the year to a registered dealer, as provided under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act. The court also held that the petitioner was entitled to deduct the purchase price of binolas extracted from unginned cotton and sold to registered dealers, as per the decision of a Division Bench of the court in Patel Cotton Company Private Ltd. V/s. The State of Punjab and Ors. C.W. No. 114 of 1964 decided on 14th May, 1964.
Issues: 1. Whether the petitioner was entitled to deduct the purchase price of cotton and cotton seeds sold within six months from the close of the year to a registered dealer under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Punjab General Sales Tax Act, 1948? 2. Whether the petitioner was entitled to deduct the purchase price of binolas extracted from unginned cotton and sold to registered dealers? 3. Whether the petitioner was entitled to deduct the purchase price of cotton sold to a foreign buyer for export through commission agents in Bombay?
Ratio Decidendi: 1. The court interpreted Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act to mean that the purchase price of goods sold within six months from the close of the year to a registered dealer could be deducted from the gross turnover, irrespective of whether the goods were purchased in the market or obtained as a by-product from ginning cotton. 2. The court relied on the decision of a Division Bench of the court in Patel Cotton Company Private Ltd. V/s. The State of Punjab and Ors. C.W. No. 114 of 1964 to hold that the petitioner was entitled to deduct the purchase price of binolas extracted from unginned cotton and sold to registered dealers. 3. The court held that the sale of cotton to a foreign buyer for export through commission agents in Bombay was a sale in the course of export out of the territory of India, and therefore the petitioner was entitled to deduct the purchase price of such cotton from the gross turnover under Sub-clause (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act.
Final Decision: The court quashed the assessment order of the Assessing Authority to the extent that it ran counter to the observations made in the judgment. The Assessing Authority was directed to reconsider the whole matter and proceed in accordance with law after hearing the petitioner.
Harbans Singh, J.
1. This writ filed by Messrs Janki Das Bhagat Ram challenges the order of assessment passed by the Assessing Authority under the Sales Tax Act and was referred to a Division Bench by me because of a number of law points that were raised in it.
2. The relevant facts necessary for the disposal of this writ may briefly be stated as under:-
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Under Sub-section (1) of Section 5 of the Punjab General Sales Tax Act, tax is levied on the "taxable turnover" at a particular rate mentioned therein. Under Sub-section (2) of this section "taxable turnover" means "that part of a dealers gross turnover during any period which remains after deducting therefrom" certain sales and purchases that are detailed under various clauses under that sub-section. "Gross turnover" means the "aggregate of the amounts of sales and purchases and parts of sales and purchases actually made by any dealer during the given period..." It may be mentioned here that according to Clause (ff) of Section 2, "purchase" for the purposes of the section means "the acquisition of goods specified in Schedule C" and "sale" means "any transfer of property in goods other than goods specified in Schedule C".
3. From the above it is clear that there are certain commodities detailed in Schedule C, on which tax is levied at the time of their purchase. In respect of those commodities, no tax is leviable on their sale, and, conversely, tax is leviable on sale of commodities other than those mentioned in Schedule C. Cotton, which expression includes ginned and unginned cotton, and oil seeds which include cotton seeds, are amongst the commodities mentioned in Schedule C and on these, only the purchase value thereof is to be added in determining the gross turnover of a dealer.
4. The petitioner-company submitted its return to the Assessing Authority under the General Sales Tax Act for the assessment year 1960-61. Out of the gross turnover they claimed certain deductions, as provided under Sub-section (2) of Section 5. Some of these deductions were allowed and others, it is alleged, were disallowed. In paragraph 21 of the petition, five items were detailed which had been so disallowed and these are as follows:-
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(i) Purchase of oil seeds amounting to Rs. 1,34,815-75 nP.
(ii) Sale of binola within six months from the close of year which had been earlier purchased from the market: Rs. 53,685-94 nP.
(iii) Sales which had taken place in the course of export out of the territory of India: Rs. 1,52,657-07 nP.
(iv) Sale of binola (which had been extracted from cotton purchased) to registered dealers: Rs. 1,38,943-58 nP.
(v) Sale of cotton within six months from the close of the year which had been purchased earlier in the market to registered dealers: Rs. 23,954-63 nP.
5. So far as the first item is concerned, it is now conceded by the learned Counsel for the petitioner-company that in view of certain decisions of this Court, this amount could not be deducted out of the gross turnover, and, consequently, this item need not be considered.
6. Exemption with regard to the remaining four items is sought under Sub-clauses (ii) and (vi) of Clause (a) of Sub-section (2) of Section 5 of the Act. The relevant portions of these may be reproduced as below:-
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(a) his turnover during that period on-- (i) ... ... ... ... ... ...
(ii) sales to a registered dealer of goods declared by him in a prescribed form.... ...or sale in the course of export of goods out of the territory of India...
(vi) the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer or in the course of inter-State trade or commerce or in the course of export out of the territory of India.
7. As would be clear from the items detailed in paragraph 21 of the petition as reproduced above, we are concerned only with the sale or purchase of cotton and cotton seeds. As already indicated above, no tax is leviable on the sale of these goods. Tax is levied only on purc
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