# KEDARNATH ;JUTE MANUFACTURING CO v. COMMERCIAL TAX OFFICER, CALCUTTA AND ORS

- **Citation:** [1965] 3 S.C.R. 626
- **Court:** Supreme Court of India
- **Decided:** 1965
- **Bench:** K. Subba Rao, J. c. SHAH, Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kedarnath-jute-manufacturing-co-v-commercial-tax-officer-calcutta-and-ors-3441
- **Pages:** 6

## Headnote

B
Bengal Finance (Sales Tax) Act, 1941 (Bengal Act 6 of 1941}-S.
5(2)(a) (ii) proviso. Effect of-Production of declaration forms required
under proviso whether mandatory or directory-Exemption
under
substantive clause whether can be claimed on the basis of other
et,idence.
The appellant a public limited company sought exemption under
C
s. 5(2) (a) (ii) of the Bengal Finance (Sales Tax) Act, 1941 in respect
of certain sales. However, it could not produce
before the commercial tax officer the declaration forms from the purchasing
dealers required to be produced under the proviso to that
sub-clause because the said• forms were lost. The appellant tried to
set duplicate forms from the purchasing dealers but without success.
His application under s. 21A to summon the dealers with the relevant
documents was rejected by the Commercial Tax Officer and the D
higher authorities also refused to issue
directions for the issue. of
duplicate declaration forms. The Commercial Tax Officer thereafter
passed an assessment order without allowing the said exemption.
Against that order the appellant filed a writ petition under Art. 226
and thereafter a Letters Patent appeal but failed to get redress. It then
appealed to this Court with certificate.
It was contended on behalf of the appellant that the exemption
E
granted under the subst2ntive sub-clause (ii) could be claimed by
the production of other relevant evidence if the declaration forms
· could not be produced; the proviso to that sub-clause requiring the
production of the said forms was only directory as was also proved
by the use of the words "on demand" in s. 27 A.
HELD: The exemption could be· claimed only by the production
F
of the declaration forms as laid down in the proviso.
(i) The effect of an exceptlpg proviso is to except from the main
clause something which but for the proviso would be within it.
Croies on Statute Law quoted:
If the intention of the Legislature wa• to give exemption if the
terms of the subs1'ahtive part of sub-clause (ii) above are complied
with, the proviso becomes redundant and
otiose. I~ . the oroviso is
treated as merely directory it will lead to the pos!tlon that i! the
G
declaration form is furnished well and good; but if not furnished
other evidence can be produced. That is to re;vrite the clause an~ to
omit the proviso. That will defeat the express mtenbon of the legislature. f622H-630A]
There is an understandable reason for the stringency of the provisions. The object of s. 5(2)(a)(ii) of the Act ~nd the mies made the;eB
under is self-evident. While they are obv10usly mtended to give
exemption to a dealer in respect of sales to registered dealrs. of
.,1Jecified classes of goods, it seeks also to prevent fraud and collusion
in an attempt to evade tax, [630G]
-026
KEDARNATH JUTE MFG. CO. V. C. T. 0, CALCUT1"- (8ub/Ja fU10, .J.) 627
A
State of Orissa v. M.A. Tulloch & Co. Ltd, (1964) 15 S.T.C. 641,
distinguished.
B
a
(ii) The words "on demand" in r. 27A only fix the time when the
declaration forms are to be produced; they do not mean that their
production is not obligatory. [630A-B]
(iii) Section 21A only empowers the Co1nmissioner or any person
appointed by him to take evidence on oath etc. It can be invoked only
in a case where the authbrity concerned is empowered t() take evidence
in respect of a particular matter, but that does not enable him to
ignore a statutory condition to claim exemption. [630C-D]
(iv} Sub-rules (3) and (4) of s. 27A do not enable the selling dealer
to either directly apply or to compel the purchasing dealers to apply
for duplicate forms; nor do they enjoin on the appropriate authority
to give the selling dealer a duplicate form to replace the lost one.
This may cause hardship but the remedy lies with the Legislature
only. [630E, F]
Crv1L APPELLATE JURISDICTION: Civil Appeal No. 94 of 1964.
Appeal from the judgment and order dated August 17, 1961
of the Calcutta High Court in Appeal from Original Order No. 81
of 1959.
A. V. Viswa

## Text

KEDARNATH ;JUTE MANUFACTURING CO.
A
v.
COMMERCIAL TAX OFFICER, CALCUTTA AND ORS.
A pri/ 2, 1965
[K. SUBBA RAO, J. c. SHAH AND s. M, SIKRI, JJ.J
B
Bengal Finance (Sales Tax) Act, 1941 (Bengal Act 6 of 1941}-S.
5(2)(a) (ii) proviso. Effect of-Production of declaration forms required
under proviso whether mandatory or directory-Exemption
under
substantive clause whether can be claimed on the basis of other
et,idence.
The appellant a public limited company sought exemption under
C
s. 5(2) (a) (ii) of the Bengal Finance (Sales Tax) Act, 1941 in respect
of certain sales. However, it could not produce
before the commercial tax officer the declaration forms from the purchasing
dealers required to be produced under the proviso to that
sub-clause because the said• forms were lost. The appellant tried to
set duplicate forms from the purchasing dealers but without success.
His application under s. 21A to summon the dealers with the relevant
documents was rejected by the Commercial Tax Officer and the D
higher authorities also refused to issue
directions for the issue. of
duplicate declaration forms. The Commercial Tax Officer thereafter
passed an assessment order without allowing the said exemption.
Against that order the appellant filed a writ petition under Art. 226
and thereafter a Letters Patent appeal but failed to get redress. It then
appealed to this Court with certificate.
It was contended on behalf of the appellant that the exemption
E
granted under the subst2ntive sub-clause (ii) could be claimed by
the production of other relevant evidence if the declaration forms
· could not be produced; the proviso to that sub-clause requiring the
production of the said forms was only directory as was also proved
by the use of the words "on demand" in s. 27 A.
HELD: The exemption could be· claimed only by the production
F
of the declaration forms as laid down in the proviso.
(i) The effect of an exceptlpg proviso is to except from the main
clause something which but for the proviso would be within it.
Croies on Statute Law quoted:
If the intention of the Legislature wa• to give exemption if the
terms of the subs1'ahtive part of sub-clause (ii) above are complied
with, the proviso becomes redundant and
otiose. I~ . the oroviso is
treated as merely directory it will lead to the pos!tlon that i! the
G
declaration form is furnished well and good; but if not furnished
other evidence can be produced. That is to re;vrite the clause an~ to
omit the proviso. That will defeat the express mtenbon of the legislature. f622H-630A]
There is an understandable reason for the stringency of the provisions. The object of s. 5(2)(a)(ii) of the Act ~nd the mies made the;eB
under is self-evident. While they are obv10usly mtended to give
exemption to a dealer in respect of sales to registered dealrs. of
.,1Jecified classes of goods, it seeks also to prevent fraud and collusion
in an attempt to evade tax, [630G]
-026
KEDARNATH JUTE MFG. CO. V. C. T. 0, CALCUT1"- (8ub/Ja fU10, .J.) 627
A
State of Orissa v. M.A. Tulloch & Co. Ltd, (1964) 15 S.T.C. 641,
distinguished.
B
a
(ii) The words "on demand" in r. 27A only fix the time when the
declaration forms are to be produced; they do not mean that their
production is not obligatory. [630A-B]
(iii) Section 21A only empowers the Co1nmissioner or any person
appointed by him to take evidence on oath etc. It can be invoked only
in a case where the authbrity concerned is empowered t() take evidence
in respect of a particular matter, but that does not enable him to
ignore a statutory condition to claim exemption. [630C-D]
(iv} Sub-rules (3) and (4) of s. 27A do not enable the selling dealer
to either directly apply or to compel the purchasing dealers to apply
for duplicate forms; nor do they enjoin on the appropriate authority
to give the selling dealer a duplicate form to replace the lost one.
This may cause hardship but the remedy lies with the Legislature
only. [630E, F]
Crv1L APPELLATE JURISDICTION: Civil Appeal No. 94 of 1964.
Appeal from the judgment and order dated August 17, 1961
of the Calcutta High Court in Appeal from Original Order No. 81
of 1959.
A. V. Viswanatha Sastri and P.K. Ghosh, for the appellant.
P. K. Chatterjee and P. K. Bose, for the respondents.
The Judgment of the Court was delivered by
E
Subba Rao, J. This appeal on a certificate granted by the
High Court of Calcutta raises the question of the interpretation of
s. 5(2)(a) (ii) of the Bengal Finance (Sales Tax) Act, 194 l (Bengal
Act VI of 194!), hereinafter called the Act.
The material facts are as follows: The appellant is a public
F
l;mited company registered as a dealer under the Act, having its
registered place of business at Calcutta. In respect of the accounting year ending with 31st December l 954, in the return for the year
the assessee had shown its gross turnover at Rs. 70.99,928-10-0 and
claimed exemption under two heads, namely, (i) under s. 5(2)(a)(i)
of the Act Rs. 1,33,730-6-6; and (ii) under s.
5(2)(a)(ii) thereof
G
Rs. 69 ,65 ,979-9-6. After deducting the said amounts from the gross
turnover the assessee showed its taxable turnover at Rs. 218-9-0 and
deposited the tax of Rs. 9-12-6 on the said amount in the treasury.
The Commercial Tax Officer by notice dated April 22, 1955, fixed
August 4, 1955, for hearing the assessee in respect of its return.
Under s. 5(2)(a)(ii), the appellant in order to claim exemption
S:
thereunder had to furnish declaration forms duly filled in and
signed by registered dealers to whom the "goods were sold by it.
After taking some adjournments of the enquiry it appears that in
the second week of January 1957 the assessee found that its file
containing 147 declaration forms received from its de.alers in respect
of the goods received from it was missing. The assessee, it is said,
made various attempts to get duplicate forms of declaration from
the dealers, but, on account of circun;stances over which it had no
628
SUPRI<~ME COURT REPORTS
[1965] 3 s.c.R
control and because of the unhelpful and hostile attitude of the
Commerc;al Tax Officer within whose jurisdiction the said dealers
functioned, it was not able to furnish the duplicate forms for all
the declarations that were lost. On August 8, 1957, the assessee
applied to the Commercial Tax Officer under s. 21 A of the Act for
summoning the dealers to produce the necessary documents in
order to prove that they had issued the declaration forms to it, but
the said officer did not issue the requisite summons to the parties
concerned. The assessee then filed an application to the Commissioner of Commercial Taxes, West Bengal, for directions to issue
duplicate declaration forms, but that application was rejected. The
revision filed to the Revenue Board was also dismissed. On November 21, 1957, the Commercial Tax Officer made an order of assessment disallowing the assessee's claim for exemption in respect of
the said sales made to the purchasing registered dealers amountjng
to Rs. 22,46,006-0-6 and levied
on it additional
tax
of
Rs. 1.49.778-4-6. The assessee thereafter filed a petition under Art.
226 of the Constitution in the High Court of Calcutta for issuing
an order directing the respondents, i.e., the Commercial Tax Officer
and the Commissioner of Commercial Taxes. West Bengal, not to
implement the said assessment order. The said application came
up, at the first instance, before Sinha, J .. who dismissed the same.
On appeal, a Division Bench of the said High Court confirmed the
order of Sinha, J. Hence the present appeal.
At the outset we must make it clear that· in the view we are
tak;ng on the construction of s. 5 of the Act we do not propose to
go into the question whether the department was responsible for
preventing the assessee from furnishing duplicate forms of the declarations alleged to have been lost or on the question whether the
department went wrong in not summoning the dealers to produce
the relevant documents to establish that the declaration forms alleged to have been lost were in fact issued by them.
The bnly question, therefore, that arises is whether under
s. 5(2)(a)(ii) of the Act the furnishing of the declaration forms issued
by the purchasing dealers was a condition for claiming the exemption thereunder.
In substance s. 5(2)(a)(ii) exempts from taxable turnover all
sales to a registered dealer of goods of the class or classes specified
in the certificate of registration of the dealer as being intended for
the purposes mentioned therein. But the said exemption is made
subject to a proviso. Under that proviso, in the case of such sales a
declaration form duly filled up and signed by the registered dealer
to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority has to be furnished· in the prescribed manner by the dealer who
sells the goods. Under r. 27A of the Bengal Sales Tax Rules, 1941,
hereinafter called the Rules, a dealer who wishes to claim the said
exemption shall on demand produce such a declaration in writing
A
B
c
D
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F
a
B
A
B
c
D
E
F
G
H
REDARNATl! JUTE MFG. co. v. c. T. o. CAWUTTA·(Subba Rao, J.)
629
signed by the purchasing dealer. Sub-r. (2) thereof enjoins on a
dealer not to accept and on the purchasing dealer not to give a
declaration except in the form prescribed. The other rules make
stringent provisions to prevent the misuse of the said forms.
The argument of Mr. A. V. Viswanatha Sastri, learned counsel
for the appellant, may be briefly stated thus: The substantive part
of s. 5(2)(a)(ii) of the Act provides for the e/(emption in respect of
certain sales to a dealer if the sales are made to a registered dealer
for the purposes mentioned thereunder. The proviso to the said subclause prescribes in effect that the declaration form in the manner
prescribed is the best evidence to prove that the sales were for the
said purposes. The proviso cannot be construed as laying down a
condition for ·giving the exemption, but only as a directory provision to subserve the substantive provision in a reasonable way. If so
construed, a dealer is not precluded in a case where the proviso
cannot be strictly complied with from producing other relevant
evidence to prove that the sales to the registered dealers were for
the purposes mentioned in the said sub-clause. This conclusion is
sought to be supported on the basis of the expression "on demand"
in r. 27 A which, according to the learned counsel, indicates that
the production of the prescribed declaration is not obligatory but
only to be made if a demand is made by the authority concerned.
The learned Solicitor General, on the other hand, contends on
behalf of the respondents that a dealer can claim exemption under
the said sub-clause,, but if he seeks exemption he must comply
strictly with the conditions under which the exemption can be
granted. He argues that· the clear terms of the clause, read w;th the
proviso, impose a condition on a dealer for claiming exemption.
Section 5(2)(a)(ii) of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly construed. The substantive clause
gives the exemption and the proviso qualifies the substantive
clause. In effect the proviso says that part of the turnover of the
selling dealer covered by the terms of sub-cl. (ii) will be exempted
provided a declaration in the form prescribed is furnished. To put
it in other words, a dealer cannot get the exemption unless he
furnishes the declaration in the prescribed form. It is well settled
that "the effect of an excepting or qualifying proviso, according to
the ordinary rules of construction, is to except out of the preceding
portion of the enactment, or to qualify something enacted therein,
which but for the proviso would be within it": see "Craies on
Statute Law", 6th Edn,, p. 217. If the intention of the Legislature
was to give exemption if the terms of the substantive part of sub-cl.
(ii) alone are complied with, the proviso becomes redundant and
otiose. To accept the argument of the learned couTisel for the appellant is to ignore_ the proviso altogether, for if his contention be
correct it will lead to tht position that if the declaration form is furnished, well and good; but, if not furnished. other evidence can be
630
SUPREME COUR'l' REPORTS
(1965] 3 S.C.B.
produced. That is to rewrite the clause and to omit the proviso. That
will defeat the express intention of the Legislature. Nor does r. 27 A
support the contrary construction. The expression "on demaud"
only fixes the point of t;me when the declaration forms are to be
produced; otherwise the rule would be inconsistent with the sectibn.
Section 5(2)(a)(ii) says that the declaration form is to be furnished
by tl\e dealer and r. 27 A says that it shall be furnished on demand,
that is to say it fixes the time when the form is to be furn'shed. This
reconciles the provisions of r. 27 A with those of s. 5 (2)(a)(ii) of the
Act, whereas the construct'.on suggested by the learned· counsel introduces an incongruity which shall be avoided. Section 21A on
which reliance is placed has no bearing on the question to be dec;ded. It only empowers the Commissioner or any person appointed to
assist him under sub-s (!) of s. 3 to take ev;dence on oath etc. It
can be invoked only in a case where the authority concerned is
empowered to take evidence in respect of any particular matter; but
that does not enable him to ignore a statutory condifon to claim
exemption.
Sub-rules (3) and (4) of r. 27 A are not helpful lo the appellant. They prov'ide only safeguards against abuse of the declaration
forms by the purchasing dealers; they do not enable the selling
dealer to either directly apply or to compel the purchasing dealers
to apply for dupl'cate forms; nor do they enjoin on the ar'.'ropriate
authority to give the selling dealer a duplicate form to replace ik
lost one. We realise that the section and the rules as they stand may
conceivably cause unmerited hardship to an honc~t dealer. He n'ay
have lost the declaration forms by a pure acc;dent. such as tire,
theft etc., and yet he will be penalised for something fo:· which he
is not responsible. But it is for the Legislature or for the rule-making
authority to intervene to soften the rigour of the provisions and it
is not for this Court lo do so where the provision's are clear and unambiguous.
There 's an understandable reason for the stringency of the
provisions. The object of s. 5(2)(a)(ii) of the Act and the rules made
thereunder is self-evident. While they are
obviomly iDtended to
give exempt'on to a dealer in respect of sales to registered dealers
of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. In the nature of things, in view
of innumerable transactions that may be entered into between
dealers, it will wellnigh be impossible for the taxing authorities to
ascerta'n in each case whether a dealer has sold the specified goods
to another for the purposes mentioned in the section. Therefore,
presumably to achieve the twofold object, namely, prevention of
fraud and facilitating administrative efficiency, the exemption given
is made subject to a condition that the person claiming the exempt;on shall furnish a declaration form in the manner prescribed under
the section. The liberal construction suggested will facilitate the
commission of fraud and introduce admin'strative inconveniences,
both of which the provisions of the said clause s~ek to avoid.
A
B
c
D
E
F
G
H
A
B
c
D
KEDARNATH JUTE MFG. CO. V. C. T. O. CALCUTTA• (Subba Rao, J.)
631
The decision of this Court in The Stat~ of Orissa v. M.A.
Tulloch and Co. Ltd.(') does not help the appellant. That decisioa
was concerned with s. 5(2)(a)(ii) of the Orissa Sales Tax Act, 1947.
That section was similar in terms to s. 5(2)(a)(ii) of the Act in question, but there was no proviso to that section in the Orissa Act
similar to the one found in the present section. That makes all the
difference, for it is the proviso that imposes the
condition. But
under r. 27(2) made under the Orissa Act "a dealer shall prodnce a
true declaration in writing by the purchasing dealer or by such
responsible person as may be authorized in writing in this behalf
by such dealer that the goods in question are specified in the purchasing dealer's certificate of registration as being required for res:lle by him or in the execution of any contract." This Court held
that the said mandatory provision was inconsistent with s. 5(2)(a)-
(i i) of the Orissa Sales Tax Act; and to avoid that conflict it reconciled both the provisions by holding that the rule was only direct iry and, therefore, it would be enough and if it was substantially
compiled with. The said provisions may afford a guide for amending the relevant provisions of the Act and the rules made thereunder, but do not furnish any help for construing them.
Before parting with the case we must make it clear that we
are not expressing any opinion on the bona {ides of the appellant or
the appropriate sales tax authorities, for we have not scrutinized
the evidence in that regard.
E
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.
-------·
(') [IS64] 7 S.O.R. w:.