# Slate of WtSt Bengal v. M/1. B. K. Mondal - **Citation:** [1962] Supp. 1 S.C.R. 913 - **Court:** Supreme Court of India - **Decided:** 1959-05-07 - **Bench:** B.P. Srnru, J. L. Kapur, M. HmAYAT-ULLAH, J.C. Shah, J.R. Mudholkar - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/slate-of-wtst-bengal-v-m-1-b-k-mondal-2576 - **Pages:** 21 ## Headnote Sales Tax-Exemptions-Notification is8'Ueil after commencement of financial 11ear-Whether effective from ilate of notification or trom eommenctment of financial year-East Punjab Genera Sales Tax Act, 1948 (E. P. of 1948). ss. 4,5,6, 10,11-Notification dated Sepltmber 27, 19ti4. Section 6( I) of the East Punjab General Sales Tax Act, 1948, provided that no tax shall be payable on the sale of goods specified in the Schedule to the Act and that no dealer shall charge sale~ tax on the sale of goods which were "declared tax-free from time to time". Sub-section (2) of s. 6 empowe"d the State Government by notification to add or . to delete from the Schedule. On September 27, 1954, the State Government issued a notification under s. 6 (2) 1961 Slate of WtSt Bengal v. M/1. B. K. Mondal Sarka, J. 1961 December i 11161 Al /s. Matlua PraJhad Y. Suu, of Pu•;ab 9U SUPREME OOURT REPORTS [1962] SUPP. adding item 51 relating to manufactured tobacco to the Schedule. The appellant contcn operation. It is to be clcady understood t-hat the Vend Fee·,yi!I be.proportionately reduced for the current financial yt>ar to adjust the period for wbfoh:sa"les tax will ha.ve been charged. Manufactur!'d tobacco will bo exempted from sales tax simultaneonsly with the·enforcemcnt of the Vend ]'e<'s." On August 2, l 954, the State Government issued an_rll,l1llr Press N::ote, in which .the decision ·was alteriic1. The Press Note said: "Governme.nt ,rt>cen tly ann om~ced through a ·press note that "the l(lvy' of Sales Tax on manufactured tobacco wo1ild be continued till the Vend Fee 'Licences camo into operation ahd that the Vend Fee woutd ho proportionately redu_ced for the currt>n~ financial year in respect. of the per!od f~r 'll;'hich Sales Tax: woulq have been. charged. In, orf the previous d,~cis,ion, deciy a lea.med Single Judge of the Punjab High Court, who held that the orders of Government were entirely in accordance with law, that the East Punjab Sa.Jes Tax Act, in so far as it relate··njab Hitlayal~ '.ai J. 922 SUPREME COURT REPORTS [l!J62) SUPP. is then defint-d by tho second su b·section to mean that part of a dealer's gross turnover duriug any period which remains after deducting therefrom, inJer alia his turnover during that period of tax-free sales, sales to registered dealers, sales to auy undertakinir supplying electrical energy, sales to dealers outside Punjab and other sales, as may he pre~cribcd. With none of these deductions we are concerned in this C'18e • .Kow, the appellants emphasise the words "gross turnover during the year" in s.4 ( J) and the words "taxable turnovt>r every year of a dealer" in s. 5 ( 1), and argue that the tax is computed yearwise, and the exemption must, therefore, operate for the whole of the year in which it is made, irrespective of the date on which the Xotification is made. The respondents, on the other hand, emphasise the words "gross turnover during any period·• and "his turnover during that period" occurring in s. 5, and contend that the tax is not year-wise but accrues, so to speak, from day to day or at least from period to period within a year, and the exemption thus operates not from the whole of the year, but for the period within which it is granted, and refer in aid of this argument, to ss. 6 and 10. Sections 4 (I) and 5 (I) are subject to s. 6, s. 5 (1 ), to other sections of the Act and so, s. 10, and we have to see what they provide. Section 6 (1) is brief, and may be quoted in extcnso. It reads: , ( . . "6 (1). No tax shall he payable under t . this Act on the sale of goods specified in the first column of the Schedule, subject to the conditions and exc11ptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge Sales Tax on the sale of goods which are declared taxfree from time to time under this section." The respondents emphasise the words "from time to time" in the first sub-section, and say that _,.. (1) S.C.R. SUPREME COURT REPORTS 923 - ' , I they also show that exemptions may be given, withdrawn, or given again and rgain several times during the year in respect of the same goods, and the exemptions, therefore, begin to operate when they are given and cease, when they are withdrawn. But, the appellants contend that these words merely indicate that the power may be exercised as often as needed, and do not indicate the time from which the operation of the exemption commences and the period during which it lasts. Section 10 ( 1) provio~s that the tax payable under the Act shall be paid m the manner provided at such intervals, as may be prescribed. Two Rules framed under s. 27 provide for such intervals. Rule 20 reads : "Every registered dealer other than those referred to in rules 17, 18 and 19, shall furnish returng in Form S.T.VIII or S.T. XXIJJ, if so permitted quarterly within thirty days from the expiry of each quarter." (words underlined were introduced on June 28, 1955). Rule 23: "Notwithstanding the provisions of rules 20 and 21, the appropriate Assessing Authority may, for. reasons to be reco~ded in writing, fix monthly returns for a dealer, who would otherwise be required to furnish quarterly or annually under these rules." Section 10 and Rules 20 and 23 clearly provide that returns may be made annually, quarterly or monthly. The forms, S. T. VIII and S.T. XXIU, also are forms of returns of sales tax payable for the year; quarterly or monthly. It is thus possible that some dealers pay tax annually some, quarterly, and some, monthly. The contention of the appellants is that s.10 read whith Rules 20 and 23 merely provides for making of returns at prescribed intervals and the 19~1 --,.- M/s. Mathra Prashad Y, State of Punjai Hidayatullah J. 1961 M/J. Matlrta Pr quantum (a. 4.(1) ) or snbsequrntlv hecomos so during any year. S. 5.(1\ "Subject, to the provisions of this Act, there ~hall be lPvicd on the ta.xahle turnover every vear of a dealer a tax at such rates not Pxce~dina two pice in a rupee as the State Government may by notification direct: Provided that Government may by notific.a.tion in the Official Gazette declare that in reRpPct of any goods or cln.ss of goods the dealer may pay such lump-sum by way of composition of the tnx payable under this Act as the Go\•ernment may notify from time to time. (2) In this Act th'l expression "taxable turnover" means that part of a dealer's groRs turnover during any period which remains after deducting therefrom. (a) bis turnover during that period on (i) the sale 0f goods declared tax-free under section 6; (ii) .................................................. . ( ''') " 111 ....••••••••••••••••••••.••••••••••••••••••••••••• Section 6 which makes provision for giving exemption is as follows:- S.6( l) "No tax sh111l be payable under this aot on the sale of goods Rpecified in the first column ., ' ' • > • • > (1) S.C.R. SUPREME COURT REPORTS 929 of the Schedule subject to the conditions and exceptions, if any, set out in the corresponding entry in the Hecond column thereof, and no deiilcr 'shall char)(e Sales Tax on the sale of goods whfoh 1ire declared tax-free from time to . time undn this section. (2) The State Government, after giving by notification not kss than three months' notice of its intention so to do, may by like notification add to or delete from the Schedule and thereupon the Schedule shall be deemed to he am~nded accordingly." Section 10 deals with payment of taxes otnd returns. Clause (1) of s. IO provides:- S.10 (1) "Tax payable under this Act shall be paid in the manner hereinafter provided at such interv1t!s as may be prescribed." Section 11 is the section dealing with assessments. It provides that if the Assessing Authority is satis· fied that the returns furnished are correct and complete he shall assess the amount of tax due and if he is not so sntisfied he can require the production of evidence which may be necessary and provision is also, made for default in carrying out the notice issn<'d. Seetion 27 giveR the Government the power to make ru !es. The relevant portions of this section are clauses (h) and (i) which were as follows:- (h) "the return to be furnished under sub-section (3) of section IO, and dates by which and the authority to which, such returns shall be furnished; (i) the date by which returns for any period are : to be furnished and the procedure to be followed for assessment under section 11." Under the rule making power rules have been framed by the Punjab Government and reference may be made to Rules 20 and 23. Under the 1961 J\!/s, J\!athra Prashad v. State of Punjab Kapur J . 19111 Jiffs. Mat/pa Prashad v, Slalt of Punjab Kopu' J: 930 SUPREME COURT REPORTS [1962) SUPP· 111 former rule every regis!Rred dealer is required to furnish returns in Form ST-VITI or ST-XXIII if so permitted quarterly within thirty days from the expiry of each quarter. Under the latter the ABBessing Authority is iiivPn the power to tax the returns to be made monthly in the case of a dealer who would otherwise be required to furnish them quarterly or annually. It was argued that the tax under s.5 was a. yearly tax and therefore whenever the exemption may be given during a. financial year the effect of the exemption will become operative as from the bPginning of the financial year and emphasis was laid on the words "there aha.II be levied on the taxable turnover everv year of a dealer a. tax ...... " The argument was that it was a yearly tax on the turnover and not that every year a. tax was to be levied on the taxable turnover i. e. aggregate of the sales made during a given period. It was also argued that if the exem ption of the turnover was to operate for the quarter in which the exemption was notified, the consequence will be absurd as those who pay the tax on quarterly returns or monthly returns will not be able to get the advantage of the exemption whereas those who pay on yearly returns will be so entitled. I a.m unable to agree that the effect of the collection of the words in s. 5 and particularly of the words "shall be levied on the taxable turnover every year ............ a tax'' is what was argued by the appellants i.e. it was a. yearly tax like the income tax. Section 6 which provides for exemption specifically envisages the declaration fr<>m time to time of exemption of goo·ls which a.re to bo taxfree. The use of the words "tax-free from time to time", in my opinion, means that the exemption may be given at any time during the year but it does not suggest that the exemption will operate from the beginning of the year and not from the time that the exemption is 'liven. If this were not so then the imposition of sales tax by excluding an • ' I (1) S.C.R. SUPREME COURT REPORTS 931 article exempt from tax from the schedule say about the end of the financial year would render the dealer liable to sales tax for the whole' year even though he may not have collected any sales tax from his customers which under the law he would be entitled to do if the article is not in the schedule. It will be an imposition which is not enviHaged by the general scheme of ~he Sales Tax Act because the tax is exigible on taxable turnover in every return made monthly or quarterly or yearly as the case may be. It appears that it is for that reason that in the definition of the word "turnover" the legislature has chosen the word "during the given period" i.e. the period for which the tax is leviable and is levied. Similarly in subsection (2) of s. 5 where sales tax is levied on the taxable turnover of a dealer the use of the word "during any period" is again repeated and in cl.(a) of that section reference is made to deduction from his turnover during that period of the sale of goods declared tax-free under s. 6 and that is for a good reason because s. 6 itself mentions the declaration of tax-free goods from time to time indicating that whenever during the year or at any time during the year when goods are notified to be tax-free. That the intention of the legislature waa to give exemption from the date of the notification or such date as is mentioned in the notification is further supported by the provisions of ss. IO and ll of the Act. Under s. IO a dealer ma.y be required to furnish his return at such intervals as may be prescribed and when he makes a return it must necessarily be of the goods on which during that period sales tax was exigible. Under sub-s.(4) of s.10 the dealer is required to pay into the Government treasury the full amount of tax according to his return. Under s. II the assessment of the tax either on the acceptance of the return or after production of such evidence as may be required is to be made. From the provisions of s. 11, it doe1 1961 M/s. Mothra Prashad v. State of P@Jab Kapur J. 1961 JI/ s. lrI athra Prashad - v. State •f Punjab KapurJ: • -----·--· ---- 932 SUPREME COURT REPORTS [l952J SUPP. not appear that returns are to be scrutinised at the end of the year like in income tax C'aseR a nil assessment made on the income of the year preceding the assessment year. It is to be made in regard to each return whenever accoriling to the mlPs -the return has to be and is made. The tax is also paid for that period i.e. on the taxable turnover for the period for which the return is madA and which becomes the subject matter -of Msessment. When the assessment has been made and th" tax assessed is paid the asses>ment for that neriod is completed and all proceedings and liabilities and subjected to what is·stated _aA _to escaped periods. This is further clear from the rules which have been made in regard to registration and furnishing of returns. In the registration certificate it has to be mentioned as to what goods are free of fax. Returns a.re required to bP made in the Forms which are given i.e. Form VIII or Form XXIII. A return under Form VIII may be monthly, quarterly or yearly. A return to be made also provides for mentioning the turnover . of tax-free rmods and goods which are exempted from sales tax, If the contention of the appellants is correct, then after all the returns have be•>n filed, the .- amount of sales tax according to the returns assessed and payments made, there will have to be proceedings for reassessment, remission or refund as the case may be in regard to those periods, if any goods are added to the schedule exempting them from sales tax after the assessment or any goods are deleted from the schedule thns making them liable for sales tax and that will be for th" periods of which the assessment had already been completed and finished. That does not seem to be the scheme of the Act. It does not envisage reassessment for the purpose of refunding the tax assessed and paid on articles which were as~essablc at the time the assessment was made bnt became exempt later nor is it envisaged in tbe case of • - (I) S.C.R. SUPREME COURT REPORTS 933 articles excluded from the schedule. Section 11(6) which deals with reassessments at the relevant time provided : " If upon informa.tion which has come into his possession the Assessing Authorit,i: is satisfied.