# COMMISSIONER OF SALES TAX, UTTAR PRADESH v. THE MODI SUGAR MILLS LTD

- **Citation:** [1961] 2 S.C.R. 189
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Ci vii Appeal No. 443 of 1957
- **Bench:** 8. K. Das, M. Hidayatullah, K. 0. Das Gupta J.C. Shah, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-sales-tax-uttar-pradesh-v-the-modi-sugar-mills-ltd-2212
- **Pages:** 30

## Headnote

Sa1es Tax -
Previous year turnover opted for assessment--
Change of law and tax rates during assessment year-If applicable
to previous year turnover-Modification in the tax levied-If permissible-United Provinces Sales Tax Act, r948 (XV of 1948),
ss. 3, 3A, 7, IO and 22---U. P. Sales Tax Rules, mlc 39--U. P.
Government Notification dated June 8, r948.
The respondent company was a manufacturer of edible and
non-edible oils and was registered as a "dealer " under the
United Provinces Sales Tax Act, 1948. Its year of account commenced on June 1, and ended on May 31 of the next year.
Under s. 7(1) of the Act read with rule 39 of the rules framed
thereunder the respondent exercised the option of being as>essed
on the turnover of the previous year and submitted its return
for the assessment year 1948-49 on its taxable turnover of the
previous year ending May 31, 1947· The Sales Tax Officer
assessed the turnover in respect of edible oil at 3 pies per rupee
under s. 3, but in respect of non-edible oil he held that since a
notification dated June 8, 1948, issued under s. 3(A) had come
into force from June 9, of the assessment year providing for
the levy of tax at 6 pies per rupee, the assessee was liable to be
assessed at 3 pies per rupee on the turnover during the first 69
days of the year and at 6 pies per rupee for the remaining days
of the year. On appeal by the assessee the appellate authority
modified the order and directed that the tax be levied at a fiat
rate of 3 pies on both edible and non-edible oils. This order
was set aside by the rnvising authority and the order of the
Sales Tax Officer was restored. On a direction made by the
High Court the revising authority submitted a question for
opinion.. The High Court held that the assessee was liable to
pay the tax at a fiat rate of 3 pies per rupee. On appeal by the
Commissioner of Sales Tax by special leave,
Held, (per Hidayatullah, Das Gupta and Shah, JJ), affirming the view of the High Court, that the assessee who elected
to submit his return on the turnover of the previous year, is
liable to be assessed to sales-tax at the rate in force on the first
day of the year of assessment because the liability arises on
that date, and any subsequent enhancement of the rate by
virtue of a notification under s. 3(A) does not alter that liability.
A taxing statute must be interpreted in the light of what
1y60
October 31.
190
SUPREME COURT REPORTS
[1961]
,96u
is clearly expressed therein and nothing can be implied nor can
provisions be imported into them so as to supply an assumed
The Co1ntnissioner deficiency.
01 Sales-tax,
Per S. K. Das and Ayyangar, JJ.-The rate of tax as
Uttar Pradesh applied by the sales tax officer was in accordance with law.
The ·~1 odi
Having reg~rd to the scheme underlying the option to
5
M 11
L d elect for a prev10us year turnover conferred by s. 7(1) of the
ugar
' '
1 ·Act the change in the law and in the rate of tax effected during
the assessment year must apply to the turnover of the previous
year which is deemed to be the turnover of the assessment year
and sales effected during that period have to be assessed at_ the
rate prevailing in that year.
Although the notification was prospective and was made
with the object of changing the rate of taxation during the
assessment year, the date mentioned therein did not prevent
the application of the assessment year rate to the opted previous
year turnover.
It is not correct to say that there is absence of machinery
for reassessrnen t and refund of tax to justify the conclusion
that the basis of the tax liablity for an assessment year is that
which prevailed on the first day of that.¥ear since there are
•
provisions in the Act such as for instance ss. 10 and 22 which
provide for reductions, refunds and rectification of errors regarding taxation and even for enhancement of tho tax already
levied.
·
Shah ].
There was no ambiguity in the notification and the principle of reso!.ving ambiguities in favour of the asscssee

## Text

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2 S.C.R. SUPREME COURT REPOl{.TS
189
COMMISSIONER OF SALES TAX,
UTTAR PRADESH
v.
THE MODI SUGAR MILLS LTD.
(8. K. DAS, M. HIDAYATULLAH, K. 0. DAS GUPTA
J.C. SHAH and N. RAJAGOPALA AYYANGAR, JJ.)
Sa1es Tax -
Previous year turnover opted for assessment--
Change of law and tax rates during assessment year-If applicable
to previous year turnover-Modification in the tax levied-If permissible-United Provinces Sales Tax Act, r948 (XV of 1948),
ss. 3, 3A, 7, IO and 22---U. P. Sales Tax Rules, mlc 39--U. P.
Government Notification dated June 8, r948.
The respondent company was a manufacturer of edible and
non-edible oils and was registered as a "dealer " under the
United Provinces Sales Tax Act, 1948. Its year of account commenced on June 1, and ended on May 31 of the next year.
Under s. 7(1) of the Act read with rule 39 of the rules framed
thereunder the respondent exercised the option of being as>essed
on the turnover of the previous year and submitted its return
for the assessment year 1948-49 on its taxable turnover of the
previous year ending May 31, 1947· The Sales Tax Officer
assessed the turnover in respect of edible oil at 3 pies per rupee
under s. 3, but in respect of non-edible oil he held that since a
notification dated June 8, 1948, issued under s. 3(A) had come
into force from June 9, of the assessment year providing for
the levy of tax at 6 pies per rupee, the assessee was liable to be
assessed at 3 pies per rupee on the turnover during the first 69
days of the year and at 6 pies per rupee for the remaining days
of the year. On appeal by the assessee the appellate authority
modified the order and directed that the tax be levied at a fiat
rate of 3 pies on both edible and non-edible oils. This order
was set aside by the rnvising authority and the order of the
Sales Tax Officer was restored. On a direction made by the
High Court the revising authority submitted a question for
opinion.. The High Court held that the assessee was liable to
pay the tax at a fiat rate of 3 pies per rupee. On appeal by the
Commissioner of Sales Tax by special leave,
Held, (per Hidayatullah, Das Gupta and Shah, JJ), affirming the view of the High Court, that the assessee who elected
to submit his return on the turnover of the previous year, is
liable to be assessed to sales-tax at the rate in force on the first
day of the year of assessment because the liability arises on
that date, and any subsequent enhancement of the rate by
virtue of a notification under s. 3(A) does not alter that liability.
A taxing statute must be interpreted in the light of what
1y60
October 31.
190
SUPREME COURT REPORTS
[1961]
,96u
is clearly expressed therein and nothing can be implied nor can
provisions be imported into them so as to supply an assumed
The Co1ntnissioner deficiency.
01 Sales-tax,
Per S. K. Das and Ayyangar, JJ.-The rate of tax as
Uttar Pradesh applied by the sales tax officer was in accordance with law.
The ·~1 odi
Having reg~rd to the scheme underlying the option to
5
M 11
L d elect for a prev10us year turnover conferred by s. 7(1) of the
ugar
' '
1 ·Act the change in the law and in the rate of tax effected during
the assessment year must apply to the turnover of the previous
year which is deemed to be the turnover of the assessment year
and sales effected during that period have to be assessed at_ the
rate prevailing in that year.
Although the notification was prospective and was made
with the object of changing the rate of taxation during the
assessment year, the date mentioned therein did not prevent
the application of the assessment year rate to the opted previous
year turnover.
It is not correct to say that there is absence of machinery
for reassessrnen t and refund of tax to justify the conclusion
that the basis of the tax liablity for an assessment year is that
which prevailed on the first day of that.¥ear since there are
•
provisions in the Act such as for instance ss. 10 and 22 which
provide for reductions, refunds and rectification of errors regarding taxation and even for enhancement of tho tax already
levied.
·
Shah ].
There was no ambiguity in the notification and the principle of reso!.ving ambiguities in favour of the asscssee could
not be applied in this case.
CIVIL APPELLATE JURISDICTION :
Ci vii Appeal
No. 443 of 1957.
Appeal by special leave from the judgment and
order dated April 25, 1955, of the Allahabad High
Court in Civil Misc. Case No. 26/1951.
0. B. Aggarwala1 O. P. Lal for G. N. Dikshit, for the
appellant.
S. K. Kapur and Mohan Behari Lal, for the respondent.
1960. October 31. The Judgment of Hidayatullah,
Das Gupta and Shah, JJ., was deliverecl by Shah, J.,
and the judgment of Das and Ayyangar, JJ., was delivered by Ayyangar, J.
SHAH J.-Judge (Bevisions) exercising authority
under s. 11 of the United Provinces Sales Tax Act XV
of 1948 drew up a statement of case and referred to
2 S.C.R. SUPREME COURT REPORTS
191
the High Court of Judicature at Allahabad the follow1960
question:
The c;;;;;;;;issioHer
"Whether the assessee, who is a manufacturer
of Sales-tax,
and a dealer of non-edible oils and who elected the
Uttar P•ai;sh
previous year as the basis of his assessment in the
v.
.
assessment year 1948-49, is liable to be assessed at the
The Mod•
fl.at rate of 3. pies per rupee on the whole of the turn- 5"gar Mills Ltd.
over of the previous year, or whether be is liable to -be
Shah 1.
assessed at the rates of 3 pies per rupee and 6 pies per
iupee 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 ?"
The High Court answered the question as follows :
"The applicant company is liable to pay tax for
the assessment year 1948-49 on the turnover of the
previous year in respect of sales of non-edible oils at
the fl.at rate of 3 pies per rupee."
Against the order of the High Court recording its
answer, this appeal with special leave is preferred.
The facts which give rise to the appeal are briefly
these:
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 I, 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
192
SUPREME COURT REPORTS
[1961]
196°
made up to a date within the said twelve months
-. .
iu respect of a year ending on any date other than
The Commissioner h
'd 31
M
h h
h
'
f h
d )
of Sales-lox.
t e sa1
st
arc t en, at t e optio~ o t e
ea er,
uttar Pradesil the year ending on the day to which his accounts had
v.
so been made up. "Turnover" was defined as meanThe Modi
ing the aggregate of the proceeds of sale by a dealer.
Sugar Mill., Ltd. By s. 3, a tax at the rate of 3 pies per rupee of 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 class 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 prescribed. By the proviso, the
Government was authorised to prescribe that any
dealer or class of dealers may submit in lieu of the
return or returns specified in that section, a return or
returns of his turnover of the assessment year at such
intervals as may be prescribed. Provision was made
by the Act for appeals against the order of assessment
and revision against the order of the appellate authority.
By s. 11, the High Court of Judicature at
Allahabad was authorised to decide questions of law
raised in any case in the course of assessment and
2 S.C.R. SUPREME COURT REPORTS
193
referred. to it on a statement of the case drawn up by
z960
the Revising Authority. By s. 24, the Provincial Th
Commissioner
Government was invested with power to make rules to '01 Sales-ta
carry out the purposes of the Act and in particular in
Uttar Prade:~
respect of certain specified matters.
v.
In exercise of the powers conferred by s. 24 of. the
The Modi
Act, the Government of U. P. framed rules. Rule 39 Sugar Mills Ltd.
of the U. P. Sales Tax Rules gave to every dealer an
option to submit his return of the turnover of the
assessment year in lieu of the return of the turnover
of the previous year. A dealer who did not carry on
business during the whole of the previous year had no
option, but was bound to submit his return of the
turnover of the assessment year. By r. 40, it was
provided that every dealer who elected to submit a
return of the turnover of his previous year shall with.
in sixty days of the commencement of the a.ssessment
year, submit to the Sales Tax Officer a return showing
his turnover of the previous year. By r. 41, it was
provided that every dealer whose estimated turnover
during the assessment year was not less than Rs. 15,000
and who elected to submit his return of such year
shall before the last day of July, October, January and
April submit to the Sales Tax Officer, a return of
his gross turnover for the quarters ending June 30,
September 30, December 31 and March 31.
In exercise of the authority conferred by s. 3-A
which was incorporated in the Act by Act XXV of
1948, the Government of U. P. issed the following
notification:
" In exercise of the powers conferred by s. 3-A
of the United Provinces Sales Tax Act, 1941, as
amended by the United Provinces Sales Tax (Amendment) Act, 1948, the Governor is hereby pleased. to
declare that with effect from June 9, 1948, the proceeds of sale of goods entered in column 2 of the
schedule hereto 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.
(2) The Governor is further pleased to order that
Shah ].
194
SUPREME COURT REPORTS
[1961]
i96o
as from June 9, 1948, the rate of tax in respect of the
C
. .
turnover of the aforesaid goods shall be as entered in
The
oniniis.noner
of sates-tax.
column 5 of the schedule hereto.
Uttar Prndesh
(3) Every dealer by or on whose behalf goods
v.
mentioned in the schedule aforesaid are held at the
Tile Modi
close of the 8th day of June, 1948, shall submit a
Sugar Mills Ltd. statement showing the quantity and price of such
Shah 1 .
stock and of the stock of such goods held on the 24th
day of May, 1948, to the appropriate assessing authority by the 30th day of June, 1948."
To this notification was appended a schedule which
set out the descriptions of diverse commodities, the
"circumstances under which the turnover was to be
calculated " the point of tax and the rate of tax. Item
14 of the schedule was "oils of a.II kinds excluding
edible oils but including Vanaspati" and sales thereof
by manufacturers in the U. P. were liable to tax at
the rate of 6 pies per oopee.
By virtue of this notification, non-edible oils became liable to a single point
tax as from June 9, 1948, at the time of sale by an
importer or manufacturer in the United Provinces.
The assessee submitted its return for the assessment
year 1948-49 on its taxable turnover of the previous
year ending on May 31, 1947, to the Sales Tax Officer,
Meerut Range. On the assessee's return, 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 H.ange, 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 fiat 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
2 S.C.R. SUPREME COURT REPORTS
195
which in his opinion arose out of the assessment. The
r96o
High Couurt re-framed the question as set out herein- Tl
Conimis.iio""'
before, and answered it in favour of the assessee.
·:,Sales-tax,
By s. 3 and s. "3-A, which are the charging sections,
uitrtr Pradesh
the liability to pay sales tax in each assessment year
v.
is charged on the total turnover of a dealer.
By s. 7, .
The l\Jodi
read with r. 39, tho assessee has the option to adopt 5"car Mills Ltd.
the turno•rnr of the previous year as the taxable turnover for the year of assessment: and if he does so, he
has to submit within sixty days of the commencement
of the assessment year returns showing his turnover
for that previous year. If, however, the assessee
adopls the turnover in the year of assessment as his
taxable turnover, he has to submit returns before the
last day of July, October, January and April his •
gross turnover for each of the four quarters ending
30th June, 30th September, 31st December and 31st
March. The tax is evidently levied in respect of
the year of assessment: it is not levied in respect of the
business carried on in the previous year. Again, the
rate applicable in assessing the tax is the rate in force
in the year of assessment. That is clear from the terms
of ss. 3 and 3-A. .But the taxable turnover for the
year of assessment may, except in certain cases not
material for the purpose of this appeal, at the option
of the tax payer be either the turnover of the previous
year or of the year of assessment. If the assessee
adopts the turnover ofthe previous year, by the provisions contained in s. 3 and s. 7 and .fr. 39 and 40,
the liability to pay tax arises on the 1st of April and
the rate applicable is the rate in force on that date.
The liability of the assessee adopting the turnover of
tho year of assessment arises by virtue of ss. 3 and 7
and r. 41 at the end of each quarter. When the
taxable turnover is based on the turnover of the previous year, the tax is assessed on an artificialturnover
not related to the actual sales of the year of assessment: whereas the levy of tax on a. return made on
the turnover of the year of assessment is made on
actual sales of that year. The tax pa.id on the turnover
of the previous year is not related to the actual sales
of the year of assessment, and there is, in the Act, no
Shah .f.
196
SUPREME COURT REPORTS
[1961]
' 960
provision for making adjustments in the liability to
The c:;;;;issionet tax on ascertainment of the actual turnover at the
of Sales-tax,
end of the year of assessment.
Uttar Pradesh
The Government of the United Provinces had by
v.
notification dated June 8, 1948, altered the rate of tax
.
The Modi
in the matter of various commodities including non-
.sugar Mills Ltd. edible oils with effect from June 9, 1948. '.Phe Sales
Shah J.
Ta.x Officer was right in his view that the levy of tax
at the altered rate was not to operate on sales effected
before June 9, 1948. Initially, when tbe liability of
the assessee to pay tax on edible oils for the assessment year arose, the rate was undoubtedly 3 pies per
rupee on the turnover, and the questiop which falls
to be determined is whether by reason of the alteration of the rate and its incidence in the course of the
year, the a.ssessee .became liable to pay tax at the
higher rate on a pa.rt of the turnover of the previous
year and if so, on what basis. A tax payer who adopted the previous year's turnover had under s. 7 a.nd r.
40 to submit his return within sixty days of the commencement of the assessment year, and no provision
for submission of any supplementary returns in the
case of a.Iteration of rates in t,he course of the year
was made in the Act or the Rules : nor was any
method provided for retrospective modification of an
assessment once made. There were under the Act and
the Rules two distinct and clear-cut schemes to assess
sales tax, (1) where the tax payer elected to submit his
return based on the turnover of the previous year and
(2) where he elected to or was bound by law to submit
his return on the turnover of the year of assessment.
Under these two schemes the points of time at which
liability arose and the turnover on which liability was
to be assessed were in their nature not identical. The
tax-payers paying tax under the first scheme paid it on
the turnover of the previous year and at the rate in
force after the end of the period and applicable to it.
The tax payer paying ·tax under the second scheme
paid tax in quarterly instalments based on the previous
quarter's actual turnover and at the rate or rates prevalent in the quarter or applicable to it. Was it
intended, when a.Iteration was ma.de in the rate of tax
2 S.C.R. SUPREME COURT REPORTS
197
or its incidence during the course of the year, to
1 960
assimilate these two schemes of taxation so as to T' c
. .
rie
omnn.sszonef
permit of a departure from the one to the other ?
of sales-tax,
There is .ao express provision in the Act or in the
Uttar l'radeslr
Rules in that behalf. Nor does the notification suggest
v.
that it was so intended. In the case of a dealer who
The Modi
adopts the turnover of the year of assessment for pur- S1tgar Mills Ltd.
poses of t11,xation, the application of the notification
Shah J.
altering the rate of tax and the incidence of tax does
nut present any difficulty. The notification enjoins
levy of the tax at the altered rate only in respect of
sales taking place after the fixed date, and all sales
which preceded that date are to be taxed at the
original rate. In the face of the language employed
sales anterior to the date specified could not be affected. The question next arises : Is any machinery provided in the Act or the Rules for projecting this
division of the year of assessment into the previous
year, and for apportioning the turnover of that year?
Express provision in that behalf there is none : and it
is difficult to imply such a. provision in the Act. The
dates of commencement and closure of the previous
year of a tax payer may vary according to the system
of accounting adopted by the assessee. The year may
commence from any day of any recognised calendar
year, and the year may not consist of 365 days. The
method of antedating by one year the_date on which
the alteration is made in the rate or incidence will be
manifestly inappropriate. The n:i.ethod of division of
the turnover proportionate to the period of the assessment ~'ear before the alteration of the rate and after
such alteration though prospective, must be deemed to
have been made retrospectively in the previous year,
I .
· and on a day which is removed from the commencement of the year of account by the number of days
. by which the date of alteration of rate is removed
from the commencement of the year of assessment.
· '.But the adoptiOn of the turnover of the previous year
as the taxable turnover for the year of assessment is
itself based on a fiction and in the absence of any
express provision either in the Act or the Rules or
even in the notification setting out machinery for such
198
SUPREME COURT REPORTS
[1961]
' 960
a division of the year, we are unable to hold that this
T/ie co:::;;ssiollcr scheme of a fictional division may be projected into
of satco-tax.
the previous year to make an artificial division of the
uuar Prade>h turnover for imprinting thereon the altered rate of
v.
assessment as from the date of the division.
Counsel
5 Theftt;;di L for the State of Uttar Pradesh submitted several
ucar
' '
td. hypothetical cases suggesting that by refusing to
Shah J.
adopt this method of division of the previous year of
assessment for the application of the altered rate,
several anomalies may arise in working out the liabi.
lity to t>tx.
He submitted that a person who was not
a manufacturer or an importer of goods included in
the schedule to the notification under s. 3-A may, if
he has adopted the turnover of the previous year as
his taxa,ble turnover be liable even though it was the
intention of the Government to absolve him from
liability to pay tax. But a tax payer adopting the
turnover of the previous year for payment of tax
m1tkes his choice voluntarily and subject to the
advantages and disadvantages which that step invol.
ves.
The fact that he may have to pay tax from
which persons choosing the alternative method of submitting of return may partially be exempted, because
of an exemption granted in the course of the year,
may not, in our judgment, be a ground for not giving
full effect to the provisions of the Act aH they stand.
In interpreting a taxing statute, P,quitable considerations are entirely out of place. Nor can taxing
statutes be interpreted on any presumptions or
assumptions. The court must look squarely at the
words of the statute and interpret them. It must
interpret a taxing statute in the light of what is clearly
cxpreHsed : it cannot impl.JZ anything which is not
expressed; it cannot import provisions in tho statutes
so as to supply any assumed deficiency.
Section 18 cl. (c) of the Act which provides for
proportionate reduction of tax when in the case of a
change or discontinuance taking place in the course
of the assessment year of a firm which has been assessed for such year on tho turnover of the previous year
docs not support the contention that an artificial divi.
sion of the turnover of the previous year is intended
2 S.C.R. SUPREME COURT REPORTS
199
in cases of alteration of circu.mstances during the
course of the assessment year. It may be noticed that
the provision is limited to changes in or .discontinu11"0/;~
1
;;•;'.;~i;uei
ance of the business of a firm, in terms it does not
Uttar l'radesh
apply to individuals. It is not for us to consider why
v.
the Legislature has not chosen "to make a similar proThe Modi
vision in respect of individuals. But the fact that the Sugar Mills Ltd.
Legislature has made an express provision dealing
with changes or discontinuance of business of firms in.
the course of the assessment year enabling a reduction
proportionately to the tax already paid would be a
ground indicating that in cases not governed by that
provision, no alteration in the liability was permissible
when the taxable turnover was based on the prc:viuus
year's turnover.
It is not provided that in giving effect to the alteration of the rate during the course of the year of assessment an artificial division of the turnover of the previous year t:ihould, in applying the altered rate be
made.
The Legislature having failed to provide
machinery for working out the liability, the attempted
projection becomes unworkable. A legal fiction must
be limited to the purposes for which it has been created and cannot be extended beyund its legitimate field.
The turnover of the previous year is fictionally made
the turnover of the year of assessment : it is not the
actual or the real turnover of the year of assessment.
By the imposition of a different tariff in the course of
the year, the incidence of tax liability may competently
be altered by the Legislature, but for effectuating that
alteration, the Legislature must devise machinery for
enforcing it against the tax payer and if the Legislature has failed to do so, the court c:tnnot resort to. a
fiction which is not prescribed by the Legislature and
seek to effectuate that alteration by devising machinery not found in the statute.
We are therefore of the view that the conclusion of
the High Court is correct. The appeal therefore fails
and is dismissed with costs.
Shah j.
AYYANGAR J.-We regret we are unable to agree
A~'ya 11 gar J.
with the judgment just now pronounced.
The facts giving rise to this appeal are briefly
200
SUPREME COURT REPORTS
[1961]
r96o
these: A company qalled 'The Modi Food Products
1 , c -. .
Ltd.' (amalgamated with the respondent) which will
. r1e
01n1niss1oner
,
of Sal"-'""
be referred to herernafter as the assessee, was during
u11,., P1adesh the years 1946 & 1947 a manufacturer of and dealer
v.
in vegetable oils-both edible and non-edible. During
_
The Modi
that year there was no legislation imposing any tax
·'"g',,. Miu, Ltd. on sales. The U. P. legislature enacted the U. P.
Ayyangai ;.
Sales Tax Act in 1948 and the statute received the
assent of the Governor and was published in the
official Gazette on June 5, 1948. Section 1 (2) of the
Act enacted that it shall be deemed to have come into
force on April 1, 1948. The appeal is concerned with
the liability to sales-tax under the Act of the assesseecompany in respect of the sale of oil effected by the
assessee during the period June 1, 1946 to May 31,
1947, which was the account-year of the assessee previous to the first assessment year under the Act1948-49.
Section 3 of the Act, to quote only the
relevant words, as it stood at the material time, enacted :
"Section 3.
Liability to tax under the Act. Subject to the provisions of this Act, every dealer shall
pay on-turnover in each assessment year a tax at the
rate of 3 pies a rupee:
Provided that-
(i) the Provincial Government may, by notification in the official Gazette, reduce the rate of tax on
the turnover of any dealer or class of dealers or on the
turnover in respect of any goods or class of goods;
(ii) a dealer whose turnover in the previous year
is less than Rs. 12,000 or such larger amount as may
be prescribed shall not be liable to pay the tax under
this Act for the assessment year."
By the U. P. Sales Tax Amendment Act, 1948 (Act
XXV of 1948) this proviso was slightly modified and
s. 3(A) was inserted in the Act reading as follows:
"Section 3-A. Single_ point taxation.
(1) Notwithstanding anything contained in Section 3, the
Provincial Government may, by notification in the
official Gazette, declare that the proceeds of sale
of any goods or class of goods shall not be included in
the turnover of any dealer except at such single point
•
'
I
2 S.C.R. SUPREME COURT REPORTS
. 201 -
in the series of sales by successive dealers as may be
I96°
prescribed.
Th c
· ·
(2) If h P
.
. l G
k
d l
e
omnnssioner
.
t e rovrnc.1a
overrnn_ent ma. es a. ec aof sates-tax,
rat10n under sub-section (1) of this Sect10n, 1t may
u11ur P.tadesh
further declare that the turnon'r of the dealer, in
v.
whose turnover the sale of such goods is included,
The MorJ.i
shall, in respect of such sale, be taxed a't such rate as Sugar Mills Ltd.
may be specified not exceeding one anna per rupee if
Ayyangar J.
the sale relates to goods specified below.
(A list of
goods was then set out)
and nine pies per rupee if it relates to any other
goods."
Non-edible oil which is the commodity with the sale
of which t~e assessment in the present appeal is co11cerned is not in the list of goods set out in s. 3(A) and
would therefore be covered by the residuary clause
of the section.
The U. P. Government issued the
following notification dated June 8, 1948,
under
s. 3(A) of the Act:
" In exercise of the powers conferred by Section
3-A of the United Provinces Sales-Tax Act, 1948, as
amended by the United Provinces Sales-Tax (Amendment) Act, 1948, the Governor is hereby pleased to
declare that with effect from June 9, 1948, the proceeds of sale of goods entered in column 2 of the
Schedule hereto 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.
2.
The Governor is further pleas~d to order that
as from June 9, 1948, the rate of tax in respect of the
turnover of the aforesaid goods shall be as entered in
column 3 of the Schedule hereto.
3.
Every dealer, by or on whose behalf goods
mentioned in the schedule aforesaid are hold at the
close of the 8th day of June, 1948, shall submit a statement showing the quantity and price of such stock
and of the stock of such goods hold on the 24th day of
May, 1948, to the appropriate assessing authority by
the 30th day of June, 1948 ''.
In the Schedule annexed to this notification, nonedible oil of the typ~ d'}a.lt with by t.he a'l.'1·1iB(}e wi.s
26
202
SUPREME COURT REPORTS
[1961]
z96o
. subject to a. tax @ 6 pies per rupee if the same was
-
manufactured in U. P.
ne Commissioner s .
7 f h A
.
d
h d
1
of Sales-ta•,
e~t10n o t e
ct, as 1t stoo at t e ate re evant
Uttar Pradesh to this a.ppeal, enacted :
v.
" Section· 7.
Determination of turnover and assessTh• Modi
ment of tax.-(1) Subject to the provisions of Secs,.gar Mills Ltd. tion 18, every dealer whose turnover in the previous
Ayyangar J.
year is Rs. 12,000 or more in a. year shall submit such
return or returns of his turnover of the previous year
within sixty days of the commencement of the a.ssess.
ment year in such form and verified in such manner
as may be prescribed :
Provided tha.t the Provincial Government may
prescribe that any dealer or class of dealers may submit, in lieu of the return or returns specified in this
section, a return or returns of his turnover of the
assessment year at such intervals, in such form and
verified in such manner as may be prescribed, a.nd
thereupon all the provisions of this Act shall apply as
if such return or returns had been duly submitted
under this section.
Provided further that the assessing authority
may in his discretion extend the date for the submission of the return by any person or cla.ss of persons ".
Rules were framed by Government inter alia under
the power conferred by the 1st proviso just now set
out and by rule 39 of the said rules an option was
given to dealers to submit relurns of their turnover of
the assessment year in lieu of the turnover of the previous year.
The assessee exercised the option of being assessed
on the basis of the turnover of the previous year
under s .. 7(1) of the Act and in respect of first assessment year after the Act came to force-assessment
year 1948-49, it filed a return in respect of the turnover of its previous year June 1, 1946 to May 31,
194 7.
The total turnover of the assessee during this
period was Rs. 63,02,849-7 · 7.
The Sales Tax Officer
by his order dated March 12, 1949, assessed the turnover in respect of edible oil at 3 pies per rupee.
As
regards the sale of non-edible oil, the sales.tax officer
held that since the notification set out above under
2 S.C.R. SUPREME COURT REPORTS
203
s. 3(A) had come into force as and from June 9 of the
r960
assessment year, the assessee was liable to be assessed T
c - ..
.
.
fi
he
ommissioner
@ 3 pies per rupee on the turnover durmg the rst 69
of sates-tax
days of the year and @ 6 pies per rupee in respect of uttar Prade;,,
the remaining days of the year and he computed the
v.
tax accordingly. The assessee preferred an appeal to
The Modi
the Judge (Appeals}, Meerut Range, Meerut, against Sugar Mills Ltd.,
the order of the Sales-Tax Officer. This officer allowed
the appeal of the assessee and held that the entire
turnover was liable to be taxed only at a flat rate of3
pies per rupee under s. 3(1) of the Act on all oil sold
by the assessee-edible or non-edible. The reason
assigned for the order was that on the terms of the
notification the new rate of tax could not be applied
to sales effected in the previous year which had been
opted for the purppses of assessment by the assessee
:rnd that so to apply it would be tantamount to giving
retrospective effect to the notification which was contraindicated by the terms of the notification itself. The
department thereupon moved the Judge (Revision)
who accepted its contention and restored the order
of the Sales-tax Offi.cer applying the provisions of the
notification to the turnover of the assessee. Thereafter the assessee made an application to the Judge
(Revi~ion) to state a case for the opinion of the High
Court under s. 11 of the Act as to whether the rate of
tax fixed by the notification could be applied to the
sales of the commodity which factually took place on
or before June 8, 1948. This petition having been
dismissed, an application was filed before the High
Court for directing the reference and on this being
ordered the following question (as reframed by the
High Court) was referred to it for determination:
"Whether the assessee who is a manufacturer and
a dealer of non-edible oils a9d 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."
Ayyangar ].
204
SUPREME COURT REPORTS
[1961]
r96o
The learned Judges answered the question in favour
Th• co-;;;,;;-i,,ioner of the a.ssessee and held that the notification under
of Sales-tax,
s. 3(A) could not apply to determine the rate of tax
Uttar Pradesh payable by the assessee on his turnover of the previous
v.
.
year. The present appeal is against this answer by
The Mod•
the High Court.
Sugar Mills Ltd.
A
h
b ,.
d
·
s t e arguments e1ore us procee ed on pra.ct1cally
Ayyangar J.
the same lines a.s before the High Court, it will be convenient if we set out the rea81Jning by which the
learned Judges upheld the a.ssessee's contention that
the notification under s. 3(A) was inapplicable to
determine the rate of tax payable by it. The grounds
were ma.inly five: (l) The assessee could not be charged a.t the rates prescribed by the notification unless
the new rates operated retrospectively; (2) thats. 3(A)
which was introduced into the pa.nent Act (Act XV of
1948) by the Amending Act XXV of 1948 was not
enacted with retrospective effect. Though the charge
imposed by s. 3(1) of the Act read with s. 7(1) imposed
tax retrospectively as and from April 1, 1948, s. 3(A)
dit not on its terms so operate as and from that date.
Hence the liability of the a.ssessee which had become
fixed under Act XV of 1948, as it originally stood,
could not be and was not varied by s. 3(A) and would
not therefore be affected by any notification issued
under the la.st mentioned provision ; (3) that a. notification under s. 3(A) could not have retrospective
effect since s. 3(A) itself did not operate of its own
ii
force and merely empowered the Government, by a.
i'
notification, to effect changes in the law and hence
such changes when notified could not operate as from
any date prior to the date of the notification; (4) Sec-
.· tion 3(A) which used the ·words " in respect of such
sales" contemplated particular sales ta.king place after
the notification issued unde~ it and hence the notification issued under that section could not alter the rate
of levy in respect of sales anterior to the date of the
notification; (5) that the . terms of the notification
carried out the genera.I scheme of the Act and negatived retrospective operation and that as on its language it a. pp lied only to sales w hi oh took place on or
after June 9, 1948 and as the sales of the a.ssessee were
2 S.C.R. SUPREME COURT REPORTS
205
admittedly effected long prior thereto in the previous
1?60
year the same could not be affected by the enhanced Ths Com»1issioner
rate of duty·
of Sales-tax,
Before proceeding further it must be pointed out uttar Pradesh
that the learned Judges of the High Court were not
v.
right in thinking that s. 3(A) was not enacted to opeThe Modi
rate retrospectively from the commencement of the Sugar Mills Ltd.
parent Act. Section 1(2) of the Sales-tax Amending
Ayyangar J.
Act XXV of 1948 which introduced s. 3(A) enacted:
"It (this Act) shall be deemed to have come into
force on the 1st April, 1948."
and as s; 3(A) was one of the sections of this enactment, it would have effect from the earlier date. This
inadvertent error, however, would not affect the
central point of the reaso~ing of the learned Judges.
Besides elaborating thJJ othe.r; points i,n the judgment of the High Court, learned Counsel for the respondent further pressed upon us that there was no
specific provision in the Act for refund or reassessment
which would have been present if the levy of a rate
with retrospective effect were contemplated by the
Act as applicable to the assessees who had opted for
the "previous-year-turnover" basis of assessment.
He pointed out that in the case of those assessees who
opted for their being assessed in respect of their turnover during the assessment year, quarterly returns
were submitted along with the payment provisionally
of the tax due on the ha.sis of that return, the final
assessment being completed only after the close of the
year when the amount due for the year was ascertained and a demand made for the balance due after
adjustment of the amounts already paid during the
course of the year (Rule 41). Obviously in their case
no difficulty could arise by reason of any change in
the law either in the rate or basis of taxation effected
during the year, as these would automatically be given
effect to in the final assessment. If, however, changes
made in the rate of tax payable during the year were
held applicable to those assessees who had opted for
the previous-yeM-turnover basis, necessary adjustments could not be made in their assessment for lack
of specific machinery to achieve the same. From this
206
SUPREME COURT REPORTS
[1961]
1960
he argued that the scheme of the Act was that in the
·n c--. .
case of the previous-year-turnover assessees, to use
i 11e
01n11nssio11er
,
h
.
, ,
01 sales-ta•
a convement p rase, the tax hab1hty had to be deterui1a, p,_d,;h mined on t.he state of the law as it prevailed on the
v.
lst day of the assessment year and that it got fixed
The Modi
and crystallised on that date and remained unaffected
Sugar Mills Ltd.