# HINDUSTAN VEGETABLE OILS CORPORATION LTD v. PROGRESSIVE INDUSTRIES AND OTHERS ETC

- **Citation:** [1995] Supp. 3 S.C.R. 386
- **Court:** Supreme Court of India
- **Decided:** 1995-09-07
- **Case number:** Civil Appeal Nos. 81988203 of 1995
- **Bench:** B.P. Jeevan Reddy, M.K. Mukherjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hindustan-vegetable-oils-corporation-ltd-v-progressive-industries-and-others-etc-13305
- **Pages:** 20

## Headnote

U.P. Sales TaxAct/U.P. Sales Tax Rules-Section 4B/Rule 25B-Declaration F onns agreed to be provided for purchase of raw mate1ial for manuf acturing notified goods intended to be sold within the State or in the course of
C
inter-State Trade or commerce or in the course of exp01t out of India-Not to be
extended to cases other than sale and for raw materials used for st01ing purposes.
Sections 6 & Section 22-Ganesh Flour Mills Company Ltd. (Acquisition and Transfer of Undenakings Act),. 1984-Contract between Ganesh
D Flour Mills and the Respondent selling dealers-Not liable to be honoured by
the appellant buying dealers (in whom the Ganesh Flour Mills have vested)
prior to the date of vesting unless the contract is ratified within 30 days from
the appointed day.
E
F
As per Section 4-B of the U.P. Sales Tax Act, and Rule 25-B of the U.P.
Sales Tax Rules, Ganesh Flour Mills which was a manufacturer of notified
. goods obtained recognition certificate and applied for declaration Form
111-B for concession in the rate of Sales Tax. Ganesh Flour Mills was subsequently taken over by the Central Government and came to be vested in the
Appellant corporation.
The appellant Corporation had also obtained recognition certificate.
Both Ganesh Flour Mills and the Appellant had purchased raw materials
viz. tins for packing Vanaspati from the Respondents against Declaration
Form llI-B. They were not only engaged in manufacturing Vanaspati by
themselves but were also undertakingjob works and part of the Vanaspati in
G tins was also sent to other States on consignment basis, i.e., without effecting
sale within the State of U.P.
The appellant could not issue Declaration Form 111-B in respect of
those tins which were not sold within U.P. or those tins which were used for
storing other Vanaspati. The Assessing Authorities accordingly levied tax
. H at the full rate on the selling dealers and also levied interest on those sales
386
-
HINDU ST AN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS.
387
for which no declaration forms were produced. Penalty proceedings were A
also initiated against the selling dealers.
In a writ petition filed by the selling dealers (Respondents) for
directing the appellants to issue Declaration Form 111-B for both the
periods viz. before vesting and after vesting of Ganesh Flour Mills Company, the High Court directed the appellant to furnish declaration forms B
for both the periods.
On Appeal the appellant contended that - (a) no mandamus ought
to have been issued by the High Court compelling the appellant to issue
declaration Forms, in respect of tins utilised for purposes other than those C
permitted by law since it would expose them to penalties under the U.P.
Sales Tax Act;
(b) That in such a case, the appellant could have been directed to
reimburse the tax levied upon the respondents for the period after
23.4.1984. However they can not be made liable to reimburse the interest D
and penalty; and
(c) The appellant cannot be held responsible for any of the acts,
defaults or liabilities for the period prior to acquisition i.e. 23.4.1984.
Allowing the appeal in part, this Court
HELD: 1. That with respect to the period subsequent to 23.4.1984 it
was not open to the Appellant to refuse to issue Declaration Forms on the
plea that they have used the tins for purposes other than those mentioned
in Section 4(B) (2) of U.P. Sales Tax Act. However, the direction given by
the High Court could be modified to the extent that, if the appellan~ could
not produce Declaration Form 111-B, they ought to reimburse the respondents (selling dealers) the entire amount of tax which the respondents were
made to pay as also for the interest and penalties paid by them. [ 400-E]
E
F
2. With respect to period prior to 23.4.1984 the Appellant Company G
is not liable since the contract between Ganesh Flour Mills and the
respondent had not been ratified by the Central Government within 30
days from the appointed day as required under section 22 of the Act of

## Text

_Characters 0–39,990 of 46,291. This is a partial read: ask again with offset=39990 for what follows._

A
HINDUSTAN VEGETABLE OILS CORPORATION LTD.
v.
PROGRESSIVE INDUSTRIES AND OTHERS ETC.
SEPTEMBER 7, 1995
B
[B.P. JEEVAN REDDY AND M.K. MUKHERJEE, JJ.]
U.P. Sales TaxAct/U.P. Sales Tax Rules-Section 4B/Rule 25B-Declaration F onns agreed to be provided for purchase of raw mate1ial for manuf acturing notified goods intended to be sold within the State or in the course of
C
inter-State Trade or commerce or in the course of exp01t out of India-Not to be
extended to cases other than sale and for raw materials used for st01ing purposes.
Sections 6 & Section 22-Ganesh Flour Mills Company Ltd. (Acquisition and Transfer of Undenakings Act),. 1984-Contract between Ganesh
D Flour Mills and the Respondent selling dealers-Not liable to be honoured by
the appellant buying dealers (in whom the Ganesh Flour Mills have vested)
prior to the date of vesting unless the contract is ratified within 30 days from
the appointed day.
E
F
As per Section 4-B of the U.P. Sales Tax Act, and Rule 25-B of the U.P.
Sales Tax Rules, Ganesh Flour Mills which was a manufacturer of notified
. goods obtained recognition certificate and applied for declaration Form
111-B for concession in the rate of Sales Tax. Ganesh Flour Mills was subsequently taken over by the Central Government and came to be vested in the
Appellant corporation.
The appellant Corporation had also obtained recognition certificate.
Both Ganesh Flour Mills and the Appellant had purchased raw materials
viz. tins for packing Vanaspati from the Respondents against Declaration
Form llI-B. They were not only engaged in manufacturing Vanaspati by
themselves but were also undertakingjob works and part of the Vanaspati in
G tins was also sent to other States on consignment basis, i.e., without effecting
sale within the State of U.P.
The appellant could not issue Declaration Form 111-B in respect of
those tins which were not sold within U.P. or those tins which were used for
storing other Vanaspati. The Assessing Authorities accordingly levied tax
. H at the full rate on the selling dealers and also levied interest on those sales
386
-
HINDU ST AN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS.
387
for which no declaration forms were produced. Penalty proceedings were A
also initiated against the selling dealers.
In a writ petition filed by the selling dealers (Respondents) for
directing the appellants to issue Declaration Form 111-B for both the
periods viz. before vesting and after vesting of Ganesh Flour Mills Company, the High Court directed the appellant to furnish declaration forms B
for both the periods.
On Appeal the appellant contended that - (a) no mandamus ought
to have been issued by the High Court compelling the appellant to issue
declaration Forms, in respect of tins utilised for purposes other than those C
permitted by law since it would expose them to penalties under the U.P.
Sales Tax Act;
(b) That in such a case, the appellant could have been directed to
reimburse the tax levied upon the respondents for the period after
23.4.1984. However they can not be made liable to reimburse the interest D
and penalty; and
(c) The appellant cannot be held responsible for any of the acts,
defaults or liabilities for the period prior to acquisition i.e. 23.4.1984.
Allowing the appeal in part, this Court
HELD: 1. That with respect to the period subsequent to 23.4.1984 it
was not open to the Appellant to refuse to issue Declaration Forms on the
plea that they have used the tins for purposes other than those mentioned
in Section 4(B) (2) of U.P. Sales Tax Act. However, the direction given by
the High Court could be modified to the extent that, if the appellan~ could
not produce Declaration Form 111-B, they ought to reimburse the respondents (selling dealers) the entire amount of tax which the respondents were
made to pay as also for the interest and penalties paid by them. [ 400-E]
E
F
2. With respect to period prior to 23.4.1984 the Appellant Company G
is not liable since the contract between Ganesh Flour Mills and the
respondent had not been ratified by the Central Government within 30
days from the appointed day as required under section 22 of the Act of
1984. [402-F-G]
3. Since the writ petitions did not challenge the omission of Central H
388
SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.
A
Government to ratify the contract there is no need for any discussion in
regard to proviso to Section 22 of the Act of 1984, viz. the validity of
non-ratification in these writ petitions. [402-H]
B
c
CIVIL APPELLATE JURISDICTION
Civil Appeal Nos. 81988203 of 1995.
From the Judgment and Order dated 12.11.90 of the Allahabad High
Court in W.P. Nos. 32, 33, 140, 924/90, 323 & 503of1987.
WITH
Civil Appeal No. 8205 of 1995.
From the Judgment and Order dated 22.4.91 of the Allahabad High
Court in W.P. No. 1877 (T) of 1988.
D
RF. Nariman, D.N. Mishra, Adv. for JBD & Co., M.C. Dhingra,
R.A. Mishra and K.S. Rana for the Respondent Nos. 2, 3, 4.
·
Prashant Kumar Sunil Ambwani and Ashok K. Srivastava for the
Respondent No. 5.
E
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Leave granted.
These appeals are preferred against the judgment of the Allahabad
High Court allowing the writ petitions filed by the certain dealers under a
F
common order.
The management of the Ganesh Four Mills was taken over by the
Central Government under Section 18AA of the Industries Development
and Regulation Act, 1951 under an Order dated November 3, 1972. In the
year 1984, the Parliament enacted The Ganesh Flour Mills. Company
G Limited (Acquisition and Transfer of Undertakings) Act, 1984, providing
for the acquisition and transfer of the right, title and interest of certain
undertakings of the Ganesh Flour Mills Company Limited. The Act came
into force on January 28, 1984. By a notification dated April 23, 1984 issued
under Section 5 of the Act, the said undertakings were vested in the
H Hindustan Vegetable Oils Corporation Limited, the appellant herein.
·~
_
..
-
HJNDUST AN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. (B.P. JEEVAN REDDY, J.) 389
Section 4-B(2) of the Uttar Pradesh Sales Tax Act provides that A
(a) where a dealer requires any goods, referred to in sub-section (1), for
use in the manufacture by him, in the State of any notified goods, or in the
packing of such notified goods manufactured or processed by him and
(b) such notified goods are intended to be sold by him in the State or in
the course of inter-State trade or commerce or in the course of export out
of India, (c) he may apply to the assessing authority, in such form and
manner and within such period as may be prescribed for the grant of a
recognition ce1tificate in respect thereof. The sub-section provides that if
the applicant satisfies such requirements and conditions as may be
prescribed, the assessing authority shall grant him in respect of such goods
a recognition certificate in such form and subject to such conditions as. may
be prescribed. The Explanation to sub-section clarifies that "goods required for use in manufacture" shall mean raw materials, processing
materials, machinery, plant, equipment, consumable stores, spare parts,
accessories, components, sub- assemblies, fuels or lubricants. Clause (b) of
B
c
the Explanation defines the expression "notified goods" to mean such goods D
as may from time to time be notified by the State Government in that
behalf.
Rule 25-B of the Uttar Pradesh Sales Tax Rules provides that "where
a dealer holding a recognition certificate purchases any goods referred to
in clause (b) of sub-section (1) of Section 4-B for use as raw material for E
the purpose of manufacture of any notified goods, he shall, if he wishes to
avail of the concession referred to therein, furnish to the selling dealer a
certificate in Form III-B (hereinafter called a 'Declaration Form')". The
rule provides that any dealer holding a recognition certificate and wishing
to avail of the concession referred to in Section 4-B (l)(b) shall apply to F
the appropriate Sales Tax Officer for Declaration Forms and the said
officer shall issue the same on being satisfied about the relevant particulars.
Ganesh Flour Mills, while under the management of the Central
Government, was granted a recognition certificate under Section 4-B(2).
The appellant-corporation has·also been granted a recognition certificate G
under the said provision. The Ganesh Flour Mills, prior to its vesting in
the appellant-Corporation (the date of vesting of the undertakings of the
Ganesh Flour Mille; in the appellant-corporation, as stated above, is April
23, 1984) and the appellant-corporation after such vesting has been placing
orders on certain dealers including Respondent Nos. 1 to 5 for supply of H
390
SUPREME COURT REPORTS [1995) SUPP. 3 S.C.R.
I
A tins of specified size and quality representing that it is a recognised dealer
and that the said supplies shall be made to it against the Declaration Forms
(Form III-Kha) to be issued by it. The High Court has extracted one such
order/Jetter dated April 10, 1982/April 26, 1982, which may be extracted
hereinbelow :
B
"(Subject to Kanpur Courts Jurisdiction)
c
D
E
F
G
H
THE GANESH FLOUR MILLS CO. LIMITED
(Govt. of India Management)
PURCHASE ORDER
Sales Tax Regd. No. KR 4938
C.S.T. No. KR-3, dt. 22.5.57
No. 163 558
To
Mis Tracto Auto Industries
12 P & T, Factory Area,
Kanpur - 208 012.
Dear Sirs,
Grams: 0GANESHMILL"
Tele : 21071, 21021, 21191,
21178.
Telex KP 354
P.B. No. 32.4 Kalpi Rd.,
Kanpur - 208012.
Dated : April 10, 1982
26 APR 1982
Sub : Supply of New Empty Tins of 18 litre capacity
We are pleased to place an order on you for 12,500 (twelve
and half thousand only) of 18 litre capacity with newman bung hole
and newman ticklies as per standard size @ Rs. 13.50 per tin
against 3 Kha fonn delivered at our works. The rates are F.O.R.
Kanpur.
2. It has been mutually agreed that payment will be made to you
within seven days of testing of each lot and submission of bills.
3. This order is effective from April 10, 1982 ....... Supplies should
be completed within 4 weeks.
p
HINDUSfAN VEG. OILSCORPN. LTD. v. PROGRESSIVEINDS.!B.P.JEEVAN REDDY,J.J 391
4 ................................ .
5 ............................... ..
11. You will submit separate bill for each challan. Please mention
order No. on challan as well as bill.
12 .............................. .
Please confirm your acceptance of order including the terms
and conditions written above by signing the duplicate copy of the
letter. Please return signed copy of order four our record.
Thanking you,
Yours faithfully,
sd/- MANAGER."
It is agreed that even after the . undertakings of the Ganesh Flour
Mills vested in the appellant-corporation, purchase orders were issued in
identical terms.
A
B
c
D
In view of the fact that Ganesh Flour Mills as well as appellant-car-
'E
poration were recognised dealers and had purchased the raw material
required by them (for storing the vanaspati in those tins) against Declaration Forms in Form III-Kha, the selling dealers charged the tax on such
sales at the concessional rate of one percent as against the normal rate of
four percent, as contemplated by clause (b) of Section 4-B(l). It is stated
before us that according to the then obtaining practice, the Declaration F
Forms (Forms III-Kha) were supplied either at the time of supply of the
raw material or at a later point of time. (According to the rules, the selling
dealer could produce these declaration Forms before the assessing
authority "upto the date on which he is required to furnish his accounts for
final assessment in respect of the year to which the claim pertains" vide G
sub-1Ule (5) of Rule 25-B.)
Ganesh Flour Mills prior to its vesting in the appellant-corporation
and the appellant-corporation after the said date of vesting were engaged
not only in manufacturing van<:lspati by themselves but were also undertaking job works on behalf of other parties. Even the vanaspati manufactured H
392
SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.
A
by them was not sold entirely within the State or in the course of inteiSta.te trade or commerce or in the course of export out of India, as
contemplated by sub-section (2) of section 4-B. Part of it was sent to other ·
States on consignment basis without effecting sale thereof within the State
of Uttar Pradesh. According to the provisions of Section 4-B., it may be
B
c
D
E
F
reiterated,the facility of recognition certificate is confined only to cases
where a manufacturer purchases raw material for manufacturing notified
goods (or for packing such notified goods manufactured or processed by
him) and which are intended to be sold within the State or in the course
of inter-state trade or commerce or in the course of export out of India.
In other words, the said facility was not available for storing (packing) the
vanaspati manufactured on account of third parties (this is the common
case of the parties before us) or for storing the vanaspati which was sent
to other States on consignment basis otherwise than by effecting the sale
within the State or in the course of inter-State trade or commerce or in the
course of export out of India. It follows from the above that the recognised
dealer (appellant herein) was not entitled to rely upon his recognition
certificate or to issue Declaration Foi:ms (Form III-Kha) to such selling
dealers in respect of tins purchased it but intended for the above purposes
(purposes other than those mentioned in sub-section (2) of Section 4-B).
But what happened in this case is this : the Ganesh Flour Mills while under
Central Government management and the appellant-corporation, after the
date of vesting aforesaid, have been purchasing tins from the respondents
undertaking to supply Declaration Forms (Form III-Kh11.) in that behalf and
on the basis of such representation, the selling dealers charged sales tax at
the concessional rate of one percent instead of the normal four percent.
Having so purchased the tins and having used part thereof in connection
with job works and/or for storing vanaspati (which was not sold or exported
as contemplated by sub-section (2) of Section 4-B but was sent to other
States on consignment basis) Ganesh Flour Mills and the appellant found
it not possible to issue Declaration Forms (Form III-Kha) in respect of
such purchases. To be precise while they did issue declaration Forms in
respect of the tins required for storing (packing) the vanaspati manufacG tured by them which was sold within the State/sold in the course of
inter-State trade or commerce/sold in the course of export out of India,
they could not and did not issue such Declaration Forms in respect of tins
which were used for storing (packing) the remaining quantity of vanaspati.
The result was that the respondents-selling dealers could not produce
Declaration Forms (Form III-Kha) before the assessing authority in the
H course of their assessments. On that account, the assessing authority levied
-
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.] 393
tax at the full rate of four percent and also levied interest under the A
provisions of the Uttar Pradesh Sales Tax Act. The respondents complain
that even penalty proceedings were initiated against them for the said
failure. It is then that they approached the Allahabad High Court by way
of writ petitions from which these appeals arise. The principal relief sought
in the v,rrit petitions was for issuance of a writ of mandamus directing the
appellant-corporation to furnish to the writ petitioners Declaration Forms
(Form III-kha) prescribed under the Uttar Pradesh Sales Tax Rules in
respect of that quantity of tin containers which were supplied by the writ
petitioners to the appellant-corporation on the strength of recognition
certificate and against the undertaking to furnish the Declaration Forms
(Form III-Kha). The claim of the writ petitioners pertained both to the
period anterior to April 23 1984 (the date of vesting of the undertakings
of Ganesh Flour Mills in the appellant-corporation) and also for the period
subsequent to the said date. The Union of India was also impleaded as a
respondent to the writ petitions.
B
c
The appellant-corporation denied any responsibility or liability to D
issue the Declaration Forms (Form III-Kha) for the period prior to April
23, 1984. They disclaimed any responsibility for the said period relying on
the provisions of the Ganesh Flour Mills Company Limited (Acquisition
and Transfer of Undertaking) Act, 1984 [hereinafter referred to as "Acquisition Act"] So far as the period subsequent to April 23, 1984 is
concerned, the appellant-corporation submitted that in view of the fact that
the said tins were used for purposes other than those specified in Section
4-B(2), they could not have issued Declaration Forms (Form III-Kha) in
respect of those purchases inasmuch as issuance of such forms would have
exposed them to pe~alties under sub-section (6) of Section 4-B. They
expressed their readiness to pay the difference of sales tax which was levied
upon and collected by the State from the selling dealers (writ petitioners).
They submitted that no writ can be issued to them compelling them to do
an act prohibited by law and which would expose them to penalties under
the provisions of the Uttar Pradesh Sales Tax Act.
El
F
The High Court has allowed the writ petitions on the following G
findings:
(i) Where the purchasing dealer wishes to avail himself of the concession referred to in Section 4-B(l)(b ), as in the present cases, it is not
competent for the purchasing dealer to withhold the Declaration Form H
394
SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R.
A
(Form III-Kha) from the selling dealer. If the purchasing dealer wishes to
avail of the concession provided by section 4-B, he has no option bu( to
furnish to the selling dealer the Declaration Form (Form III-Kha).
B
c
(ii) where the purchasing dealer represents to the selling dealer that
he wishes to avail of the concession admissible to him under Section 4-B
and on the basis of such representation avails himself of such concession
by accepting the sale and supply from the selling dealer at the concessional
rate of tax, it is not open to such purchasing dealer to tlirn round and refuse
to issue the Declaration Form (Form III-Kha) on the specious plea that he
now does not wish to avail of the concession and that he is willing to pay
to the selling dealer tax at full rate. The matter cannot be left to the whims
and fancies of the purchasing dealer.
(iii) That by virtue of the provisions contained in Section 22 of the
Acquisition Act, the appellant corporation is liable, and bound, to issue
the Declaration Forms (Forni III-Kha) even with respect to the period
D prior to April 23, 1984. Section 6(1) of the Acquisition Act does not relieve
the appellant-corporation of the said obligation and liability.
(iv) The writ petitioners are not seeking to enforce any contractual
obligation by means of the said writ petitions l;>ut were only seeking to
enforce the statutory obligation placed upon the appellant-corporation.
E
Even otherwise, the corporation being a 'State' within the meaning of
Article 12 is bound to act fairly and hence amenable to writ jurisdiction.
(v) It appears from the record placed before the Court that the
appellant-corporation has been picking and choosing dealers in the matter
of issuance of Declaration Forms (Form III-Kha). To some they have
F
issued the forms and to others they have refused. The plea of the corporation that such forms were issued to some dealers under a mistake is not
acceptable.
(vi) The plea of the appellant-corporation that issuance of such
G Declaration Forms (Form III-Kha) would expose it to penalties under the
Uttar pradesh Sales Tax Act is also not acceptable. (The Court, however,
declined to express any opinion on the question whether in fact the
corporation would become liable for penalties if it issued the Declaration
Forms (Form III-Kha) as directed by the Court).
H
The correctness of the said findings is called in question in these
HINDUSTAN VEG. Oll-5 CORPN. LTD. v. PROGRESSIVE INDS. (B.P. JEEVAN REDDY, J.) 395
appeals by the appellant-corporation. Sri Rohinton F. Nariman, learned A
senior advocate for the appellant-corporation submitted that inasmuch as
issuance of Declaration Forms in Form III-Kha in respect of tins which
were utilised for purposes other than those specified in Section 4-B(2)
would expose the corporation to penalties under the provisions of Uttar
Pradesh Sales Tax Act, no mandamus ought to have been issued by the
High Court compelling the appellant-issued by the High Court compelling B
the appellant- corporation to issue such Declaration Forms. The proper
course would have been to direct the corporation to pay over to the
respondents-dealers (writ petitioners) the difference of tax which they were
made to pay to the State on account of the appellant-corporation's failure c
to furnish the Declaration Forms to them. The corporation should not,
however, be made liable to reimburse the respondents in respect of the
interest amount, if any, levied by the State upon the selling dealers on
account of or as a result of their failure to produce the Declaration Forms
(Form III-Kha) in their assessments. The learned counsel further contended that so far as the period prior to April 23, 1984 is concerned, the D
appellant-corporation can in no event be held liable for issuing the said
forms. The provisions of the Acquisition Act are clear and emphatic, says
the learned counsel. The corporation is not responsible for any of the acts,
defaults or liabilities for the period prior to the date of acquisition. On the
other hand, Sri M. C. Dhingra, learned counsel for the respondents-writ
petitioners supported the reasoning and conclusions arrived at by the High
Court. He emphasised in particular the fact that while in case of some
dealers, the appellant-corporation has been issuing such Declaration
Forms (Form III-Kha), it has declined to do so in the case of respondentswrit petitioners alone. This, the learned counsel complained, is discriminatory and that the appellant-corporation being a State cannot be
permitted to indulge in such discriminatory treatment.
For a proper appreciation of the questions arising herein, it would
be appropriate to set out sub-sections (1), (2) and (6) of Section 4 of the
Uttar Pradesh Sales Tax Act along with sub-rule (1) of Rule 25-B of the
E
F
Uttar Pradesh Sales Tax Rules:
G
"4-B. Special relief to wtain Manufacturers. - (1) Notwithstanding
anything contained in Sections 3, 3-A 3-AAAA and 3-D:--
(a) Where any goods, liable to tax under sub-section (1) of H
A
B
c
D
E
F
G
H
396
SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.
Section 3-D are purchased by a dealer who is liable to tax on
the turnover of first purchases under that sub-section or
where any goods are purchased by any dealer in circumstances in which such dealer is liable to purchase tax in respect
thereof under. Section 3-AAAA and the dealer holds a recognition certificate issued under sub-section (2) in respect
thereof, he shall be liable in respect of those goods to tax at
such concessional rate, or be wholly or partly exempt from
tax, whether unconditionally or subject to the conditions and
restrictions specified in the behalf, as may be notified in the
Gazette by the State Government in that behalf;
(a-1) Where any declared goods liable to tax under subsection (1) of Section 3-D are sold or supplied by a dealer,
who is the first purchaser thereof, to another dealer, holding
a valid recognition certificate issued under sub-section (2) in
respect thereof, the dealer who made the first purchase shall
in respect of such purchase and subject to such conditions
and restrictions as may be specified by notification in that
behalf, be exempt from tax or be liable to tax at such concessional rate as may be notified by the State Government :
(Provisos omitted as unnecessary)
(b) Where any goods liable to tax under any other provisions
of this Act are sold by a dealer to another dealer and such
other dealer furnishes to the selling dealer in the prescribed
form and manner a certificate to the effect that he holds a
recognition certificate issued under sub-section (2) in respect
thereof, the selling dealer shall be liable in respect of those
goods to tax at such concessional rate, or by wholly or partly
exempt from tax, whether unconditionally or subject to the
conditions and restrictions specified in that behalf, as may be
notified in the Gazette by the State Government in that
behalf.
(2) Where a dealer requires any goods, referred to in sub-section
(1), for use in the manufacture by him, in the State of any notified
goods, or in the packing of such notified goods manufactured or
processed by him, and such notified goods are intended to be sold
HINDUSTAN VEG. OILS CORPN. LTD. i·. PROGRESSIVE INDS. [B.P. JEEVAN REDDY. J.) 397
by him in the State or in the course of inter-State trade or A
commerce or in the course of export out of India, he may apply
to the assessing authority in such form and manner and within such
period as may be prescribed, for the grant of a recognition certificate in respect thereof; and if the applicant satisfies such requirements and conditions as may be prescribed, the assessing authority
shall grant to him in respect of such goods a recognition certificate
in such form, and subject to such conditions, as may be prescribed.
(6) Where a dealer, in whose favour a recognition certificate has
been granted under sub-section (2), purchases any goods for use
B
in the manufacture or packing of any notified goods without C
payment of tax or by paying tax at a concessional rate of less than
four per cent, and such notified goods are sold or disposed of by
such dealer' otherwise than by way of sale in the State or in the
course of inter-state trade or commerce or in the course of export
out of India, such dealer shall be liable to pay as penalty such
amount as the assessing authority may fix, which shall not be less D
than the amount of tax that would have been payable under the
provisions of this Act, on the sale or purchase 0£ such goods and
not more than double the amount of such tax, less any amount
which he may have actually paid as tax on the purchase of such
goods.
E
25-B. Authority from which Declaration Forms may be obtained :
use, custody and maintenance of records of such forms and matters
incidental thereto-- (1) Where a dealer holding a recognition
certificate purchases any goods referred to in clause (b) of subsection (1) of Section 4-B for use as raw material for the purpose
of manufacture of any notified goods, he shall, if he wishes to avail
of the concessional referred to therein, furnish to the selling dealer
a certificate in Form III-B (hereinafter called a 'Declaration
Form').
It would equally be appropriate to set out at this stage the relevant
provisions of the Acquisition Act :
The preamble to the Act recites that for sustaining and strengthening
F
G
the nucleus of public owned. or controlled units required for ensuring
supply of wholesome vanaspati and refined edible oils, etc. to the public at H
398
SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.
A
reasonable prices and for giving effect to the State policy specified in clause
(b) and ( c) of Article 39 of the Constitution, it has been decided to acquire
the undertakings of the Ganesh Flour Mills, the management whereof was
taken over by the Central Government under the J.D.R. Act, 1951.
B
c
Section 3 provides that "on the appointed day (January 28, 1984), The
Ganesh Flour Mills and the right, title and interest of the Company in
relation to the Ganesh "Flour Mills, shall, by virtue of this Act, stand
transferred to, and shall vest in, the central Government". Section 4 sets
out the consequences of such vesting. Section 5 provides that notwithstanding anything contained in Sections 3 and 4, if the Central Government is
satisfied that a government company is willing to comply with or has
complied with such terms and conditions as the Government may think fit
to impose, the Ganesh Flour Mills and the right, title and interest of the
I
company in relation thereof which is vested in the Central Government can
be vested in turn in such government company under a notificatl.on issued
by the Central Government. Sub-section (2) of Section 5 says that where
D such further vesting takes place "the government company shall, on or from
the date of such vesting, the deemed to have been become the owner of
the Ganesh Flour Mills" and all the rights and liabilities of the Ce~tral
Government in relation to the Ganesh Flour Mills shall become the rights
E
F
G
H
and. liabilities of such-government company on and from the date of such
vesting. It is pursuance of Section 5 that Ganesh Flour Mills was vested by
the Central Government in the appellant-corporation under and by virtue
of the notification dated April 23, 1984.
Section 6 of the Acquisition Act is relevant for our purposes and
must be extracted in toto:
"6. (1) Every liability, other than the liability specified under
sub-section (2), of the Company in relation to the Ganesh Flour
Mills in respect of any period prior to the appointed day shall be
the liability of the Company and shall be enforceable against it and
not against the Central Government or, where the Ganesh Flour .
Mills vest in a Government company, against the Government
company.
(2) Any liability in respect of the amount advanced, after the dated
of taking over, to the Company in relation to the Ganesh Flour
Mills, together with interest due thereon and the wages, salaries
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.] 399
and other dues of persons employed in the Ganesh Flour Mills in A
respect of any period after the date of taking over shall, on and
from the appointed day, be the liability of the Central Government
and shall be •discharged by the Central Government or, for and on
behalf of that Government, by the Government company as and
when repayment of such amount becomes due and as and when
such wages, salaries and other dues become due and payable.
(3) For the removal of doubts, it is hereby declared that --
B
(a) save as otherwise expressly provided in this section or in any
other section of this Act, no liability, other than the liability C
specified in sub-section (2) of the company in relation to the
Ganesh Flour Mills, in respect of a period prior to the appointed
day shall be enforceable against the Central Government or the
Government company, as the case may be.
(b) no award, decree or order of any court, tribunal or other D
authority in relation to the Ganesh Flour Mills, passed after the
appointed day, in respect of any matter, claim or dispute in relation
to any matter, not being a matter referred to in sub- section (2),
which arose before that day shall be enforceable against the
Central Government or the government company, as the case may E
be;
( c) no liability incurred by the Company before the appointed day,
for the contravention, in relation to the Ganesh Flour Mills, of any
provision of law for the time being in force, shall be enforceable
against the Central Government or the Government company, as
F
the case may be."
In view of the fact that Section 22 has been relied upon by the High
Court, it would be appropriate to set out the said section as well :
"22. Every contract, entered into by the Company in relation to the G
Ganesh Flour Mills which has vested in the Central Government
un'der Section 3, for any service, sale or supply and in force
immediately before the appointed day, shall, on or before the
expiry of a period of thirty days from the appointed day, cease to
have effect unless such contract is, before the expiry of that period, H
A
B
c
D
E
F
400
SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R.
ratified, in writing, by the Central Government or the Government
company and in ratifying such contract the Central Government
or the Government company may make such alteration or
modification therein as it may think fit.
Provided that the Central Government or the Government
company shall not omit to ratify a contract and shall not make any
alternation or modification in a contract --
(a) Unless it is satisfied that such contract is unduly onerous or·
has been entered into in bad faith or is detrimental to the interests
of the Central Government or the Government company; and
(b) except after giving the parties to the contract a reasonable
opportunity of being heard and except after recording in writing
its 1 reasons for refusal to ratify the contract or for making any
al~eration or modification therein."
We /shall first take up the issue relating to the peliod subsequent to
April 23, 1984. We are of the opinion that having placed orders for
purchase of tins undertaking to supply Declaration Forms in Form 111-I{ha
and having received the supplies on that basis, it is not open to the
appellant- corporation to refuse to issue the said declaration forms on the
plea that they have used the tins for purposes other than those mentioned
in Section 4-B(2). The user for purposes other than those mentioned in
Section 4-B(2) was a voluntary act on the part of the corporation. Therefore, it alone should take the blame for it and be responsible for consequences flowing therefrom. The corporation ought not to have made such
a representation while purchasing that quantity of tins which it did not .
intend to use for purposes specified in Section 4-B(2). The High Court
cannot, therefore, be held to be in error in issuing the direction which it
did. We, however, wish to provide. a modification to the direction issued
by the High Court in view of the provisions of sub-section (6) of Section
4-B of the Uttar Pradesh Act and particularly in view of the time-lapse
G since the controversy has arisen. In all likelihood, the assessments of the
respondents under the Uttar Pradesh Act must have been completed long
ago and the question of filing the Declaration Forms now, by the respondents, appears to be an impracticable thing. The modification is this : if
the appellant is not in a position to issue the Declaration Forms, it may
H not issue them but in such a case it shall reimburse the respondents-selling
,...
I
HINDUSTAN VEG. OILS CORPN. LTD. v. PROGRESSIVE INDS. [B.P. JEEVAN REDDY, J.J 401
dealers in_full for the difference amount of tax which the respondents were A
made to pay on account of the appellant's failure to furnish the said
Declaration Forms and also in respect of interest or the penalties, if any,
imposed in that behalf and paid by them. We cannot appreciate the
argument of Sri Nariman that the appellant- corporation should be made
liable only for reimbursing the difference of tax amount but not the interest. B
We see no justification behind such a plea. Indeed, if the selling dealers
have been made liable to any penalties on account of their failure to
produce in their assessments the Declaration Forms (which ought to have
been furnished by-the appellant-corporation to such selling dealers) then
the appellant-corporation shall equally be liable to reimburse the selling
dealers in that behalf as well.
We may now take up the main question urged before us, viz, the
liability, if any, of the appellant-corporation to issue Declaration Forms or
c
to reimburse the selling dealers (as directed hereinabove) in respect of the
period prior to April 23, 1984. This calls for an examination of the relevant D
provisions of the Acquisition Act, which we have set out hereinabove.
Section 5(2), the relevant portion whereof has already been extracted
hereinabove, says that with effect from the date of vesting of the Ganesh
Flour Mills in the Corporation, the Corporation shall take over the rights
and liabilities of the said government company (Ganesh Flour Mills, which
had become the Government company on its statutory vesting in the E
Central Government on January 28, 1984). Sub-section (1) of Section 6
clearly states that "every liability other than the liabilities specified under
sub-section (2) of the company in relation to the Ganesh Flour Mills in
respect of any period prior to the appointed day shall be the liability of the
company and shall be enforceable against it and not against Central F
Government or where the Ganesh Flour Mills vest in a government company, against the government company". The sub-section is clear and
emphatic. ["Company" in the above provision means the Ganesh Flour
Mills Company limited prior to its vesting in the Central Government-Section 2(c) - and the expression "government company" means the appellantcorporation - Section 2(i).] It is agreed before us that the obligation in G
question is not one of the matters specified in sub-section (2) of Section 6.
Sub-section (3) makes the matter further clear and beyond any doubt. It
declares, in the interest of removal of doubts, that "(a) save as otherwise
expressly provided in this section or any other section of this Act, no
liability, other than the liability specified in sub-section (2) of the company H
'402
SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.
A
in relation to the Ganesh Flour Mills in respect of a period prior to the
appointed day shall be enforceable against the Central Government or the
government company, as the case may be". Clause (b) of sub-section (3)
says that no award, decree or order of any Court, Tribunal or other
authority in relation to Ganesh Flour Mills with respect to any matter,
B
claim or dispute not being a matter referred to in sub- section (2) and
which arose before the date of vesting shall be enforceable either against
the Central Government or against the government company, as the case
may be. Similarly, clause ( c) of sub-section (3) states that "no liability
incurred by the company before the appointed day, for the contravention,
in relation to the Ganesh Flour Mills of any provision of law for the time
C being in force shall be enforceable against the Central Government or the
government company, as the case may be". ("Company" is defined in clause
(c) of Section 2, as stated above, to mean the Ganesh Flour Mills Company
Limited, Delhi, a company within the meaning of Companies Act, 1956 and
having its registered office at Subzi Mandi, Delhi.) The provisions in
D Section 6 thus make it clear beyond any doubt that any liability of Ganesh
Flour Mills prior to the date of vesting in the Central Government (January
28, 1984) shall not be enforceable against the Central Government and that
"' similarly no such liability shall be enforceable. against the government
company/appellant-corporation. Sub-section (3) also puts the matter
beyond any doubt.
E
Now, let us see whether Section 22 qualifies Section 6 in any manner
or whether it makes the appellant-corporation liable to issue Declaration
Forms for purchasers made prior to April 23 1984. The first thing be
noticed is that Section 22 and Section 6 being provisions of the same
F
enactment have to be construed harmonicusly; the effort should be to give
effect to both. Be that as it may, let us see what does Section 22 say. It says
that a contract entered into the Ganesh Flour Mills Company Limited, with
respect to the said mills, for any service, sale or supply and which was in
force immediately before the appointed day (January 28, 1984) shall on and
from the expiry of a period of thirty days from the appointed day cease to
G have effect unless such contract is, before the expiry of the said period,
ratified in writing by the Central Government or the government company
(appellant-corporation), as the case may be. Even where the Central
Government or the appellant-corporation ratifies such contract, it is open
to them to make such alternations or modifications therein as they may
H think fit. The proviso to Section 22 says that the Central Government or
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HINDUSTAN VEG.