# THE STATE OF BIHAR v. RAI BAHADUR HUI~DUT ROY MOTI LALL

- **Citation:** [1960] 2 S.C.R. 331
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal No. 678 of 1957
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-bihar-v-rai-bahadur-hui-dut-roy-moti-lall-1864
- **Pages:** 15

## Headnote

f •
•
S.C.R.
SUPREME COURT REPORTS
331
case started, to modify the sentence passed. In our
view, a sentence of simple imprisonment for the period
already served and· a fine of R~. JOO with simple:
imprisonment for a period of fifteen days in default
of payment of the fine for ea_ch appellant will be
sufficient in this case and we order accordingly.
Subject to this modification of the sentence, this
appeal is dismissed.
Appeal disrnissed.
THE STATE OF BIHAR
v.
RAI BAHADUR HUI~DUT ROY MOT! LALL
JUTE :MILLS & ANOTHER
(and connected appeal)
(B. P. SINHA, C.J., P. B. GAJENDR.AGADKAR,
K. SuBBA Rao, K. 0. Das GUPTA and J.C. Sn.AH, JJ.) ·
Sales Tax-Amount realised by registered dealer from sales
outside the State-Forfeitu.re of such amotmt-Validity-.Allowablo
deduction, meaning of-Bihar Sales Tax Act, r947 (XIX of r947),
ss. 5, 6, 7, 8, r4A Proviso, 3:;, r. rg proviso.
The respondent mills, a registered dealer under the Bihar ·
Sales Tax Act, 1947 (Act III of 1947), was carrying on business
of manufacture and sale of gunny bags, hessian and other jute
products at Katihar. During the period April l, 1950, to
March 31, 1951, it sold and despatched its wares worth about
Rs. 92,24,386-1-6 to dealers outside the State and realised a sum
of Rs. 2,rr,222-9-6 as sales-tax from them. In assessing the ,
sales-tax payable by the said respondent for-the relevant period
the Superintendent of Sales Tax, Purnea, held that the said
amount of sales-tax had been realised in contravention of s. r4A
of the Act read with r. 19 of the Bihar Sales Tax Rules, and
directed its forfeiture under the proviso to that section. The'
respondent_ challenged the validity of the said order under
Arts. 226 an'Cl 227 of the Constitution. The High Court held
that the proviso to s. 14A of the Act was u.ltra 'vires the State
Legislature as it violated Arts. 20(1) and 31(2) of the Constitution
and set aside the order of forfeiture and quashed the proceedings
under s. r4A of the Act. The State of Bihar appealed to this
· Court. It was urged by way of preliminary objection on behalf
of the respondent that since the proviso to s. l4A of the Act had
no application to the facts of the case, there was no occasion to
decide its const\tutional validity. The contention of the appellant was that the proviso did apply to the respondent inasmuch
I959
Feroz Din
and Others
v.
The State of
West Bengal
Sarkar ].
z95(/'
November z6
...
•
332
SUPREME COURT REPQRTS [1960(2))
1959
as he had contravened the conditions and restrictions imposed by
the proviso tor. 19.
The question for determination, therefore,
The State of Biharwas whether the said respondent could·be said to have realised
v.
any amount by way of tax in respect of such part of its turn-over
Rni Ba.hadur
as was allowed to be deducted from his gross turn-over for the
llurdut Roy
determination of his taxable turn-over under the Act or the rules,
Moti Lall
as contemplated by the later part of the said pro\'iso.
Jute Milts
Held, that the preliminary objection must prevail.
Held, further, that before the penalty of forfeiture could be
imposed upon a dealer under the proviso to s. 14A of the Bihar
Sales tax Act, 1947, it had to be shown that he had acted contrary to the conditions and restrictions prescribed by the Rules
and it was not enough to show that the collection of the sales tax
made by him \Vas otherwise il~egal or improper.
The contraYention of the statutory provisions contained in s. r4A or of the
Rules prescribing conditions and restrictions in that behalf alone
could form the basis of the imposition of the penalty of forfeiture
prescribed by the said proviso.
With the insertion of s. 33 into the Act with retrospective
operation, prohibiting the imposition of the tax on sales taking
place outside the State and in view of the decision of this Court
in State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R.
ro69, the proviso to r. 19 must be construed on the basis that the
sales in question were outside the scope of the

## Text

f •
•
S.C.R.
SUPREME COURT REPORTS
331
case started, to modify the sentence passed. In our
view, a sentence of simple imprisonment for the period
already served and· a fine of R~. JOO with simple:
imprisonment for a period of fifteen days in default
of payment of the fine for ea_ch appellant will be
sufficient in this case and we order accordingly.
Subject to this modification of the sentence, this
appeal is dismissed.
Appeal disrnissed.
THE STATE OF BIHAR
v.
RAI BAHADUR HUI~DUT ROY MOT! LALL
JUTE :MILLS & ANOTHER
(and connected appeal)
(B. P. SINHA, C.J., P. B. GAJENDR.AGADKAR,
K. SuBBA Rao, K. 0. Das GUPTA and J.C. Sn.AH, JJ.) ·
Sales Tax-Amount realised by registered dealer from sales
outside the State-Forfeitu.re of such amotmt-Validity-.Allowablo
deduction, meaning of-Bihar Sales Tax Act, r947 (XIX of r947),
ss. 5, 6, 7, 8, r4A Proviso, 3:;, r. rg proviso.
The respondent mills, a registered dealer under the Bihar ·
Sales Tax Act, 1947 (Act III of 1947), was carrying on business
of manufacture and sale of gunny bags, hessian and other jute
products at Katihar. During the period April l, 1950, to
March 31, 1951, it sold and despatched its wares worth about
Rs. 92,24,386-1-6 to dealers outside the State and realised a sum
of Rs. 2,rr,222-9-6 as sales-tax from them. In assessing the ,
sales-tax payable by the said respondent for-the relevant period
the Superintendent of Sales Tax, Purnea, held that the said
amount of sales-tax had been realised in contravention of s. r4A
of the Act read with r. 19 of the Bihar Sales Tax Rules, and
directed its forfeiture under the proviso to that section. The'
respondent_ challenged the validity of the said order under
Arts. 226 an'Cl 227 of the Constitution. The High Court held
that the proviso to s. 14A of the Act was u.ltra 'vires the State
Legislature as it violated Arts. 20(1) and 31(2) of the Constitution
and set aside the order of forfeiture and quashed the proceedings
under s. r4A of the Act. The State of Bihar appealed to this
· Court. It was urged by way of preliminary objection on behalf
of the respondent that since the proviso to s. l4A of the Act had
no application to the facts of the case, there was no occasion to
decide its const\tutional validity. The contention of the appellant was that the proviso did apply to the respondent inasmuch
I959
Feroz Din
and Others
v.
The State of
West Bengal
Sarkar ].
z95(/'
November z6
...
•
332
SUPREME COURT REPQRTS [1960(2))
1959
as he had contravened the conditions and restrictions imposed by
the proviso tor. 19.
The question for determination, therefore,
The State of Biharwas whether the said respondent could·be said to have realised
v.
any amount by way of tax in respect of such part of its turn-over
Rni Ba.hadur
as was allowed to be deducted from his gross turn-over for the
llurdut Roy
determination of his taxable turn-over under the Act or the rules,
Moti Lall
as contemplated by the later part of the said pro\'iso.
Jute Milts
Held, that the preliminary objection must prevail.
Held, further, that before the penalty of forfeiture could be
imposed upon a dealer under the proviso to s. 14A of the Bihar
Sales tax Act, 1947, it had to be shown that he had acted contrary to the conditions and restrictions prescribed by the Rules
and it was not enough to show that the collection of the sales tax
made by him \Vas otherwise il~egal or improper.
The contraYention of the statutory provisions contained in s. r4A or of the
Rules prescribing conditions and restrictions in that behalf alone
could form the basis of the imposition of the penalty of forfeiture
prescribed by the said proviso.
With the insertion of s. 33 into the Act with retrospective
operation, prohibiting the imposition of the tax on sales taking
place outside the State and in view of the decision of this Court
in State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R.
ro69, the proviso to r. 19 must be construed on the basis that the
sales in question were outside the scope of the Act and no tax
could be imposed on them. It could not, therefore, be said that
that part of the respondent's tum-over which was in question
was an allowable deduction within the meaning of the said
proviso. Such allowable deductions as are contemplated by the
proviso are clearly based on the provisions of ss. 6, 7 and 8 of
the Act as is quite clear from the Explanation to s. 5 of the Act.
State of Bombay & Another v. The United Motors (India)
Ltd. & Others, [1953] S.C.R. ro6g, referred to.
An allowable deduction under the said proviso was not the
same thing as exclusion of a part of the turn-over on the basis of
s. 33(1)(a)(1) of the Act. It stands on an entirely different footing.
Transactions \Vhich fall within the said section are in substance
outside the Act and no tax can be imposed on them. The tran-
,, saction in question did not, therefore, fall within the proviso to
r. 19 and the proviso to s. 14A was not attracted and the order
of forfeiture passed against the respondent was unjustified and
illegal.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
678 of 1957.
Appeal from the judgment and order dated August 1,
1956, of the Patna High Court, in Misc. Judicial Case
No. 188 of 1955.
WITH
Civil Appeals Nos. 546 of 1958 and 115 of 1959.
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S.C.R.
SUPREME COURT REPORTS
333
Appeals from the judgment and order dated March 8,
x959
1957, of the Patna High Court, in Misc. Judicia) Cases n/stat• of Bihar
Nos. 116 and 215 of 1956.
,
v.
.
Lal Narayan Sinha and S. P. Varma, for the appelRaiBaliadur
Hurdut
~
~~~
0. K. Daphtary, Solicitor-Genera1 of India and R. C.
Jute Mills
Prasad, for respondent No. 1 in O. A. No. 678 of 57.
B. C. Ghose and P. K. Chatterjee, for the intervener.
H. N. Sanyal, Additional Solicitor-General of India
,
and C. P. Lal, for respondent No. 1 in C.A. No. 546
of58.
H. N. Sanyal, Additional Solicitor-General of India
and P. K. Chatterjee, for respondent No. 1 in O.A. No.
115 of 1959.
·
1959. November 26.
The Judgment of the Court
was delivered by
·
GA.JENDRAGADKAR J.-This is a group of three Gajendragadkar ].
appeals which have been filed in this Court by the
State of Bihar (hereinafter called the appellant) against
three separate registered dealers with a certificate
issued by the Patna High Court under Art. 132(1) of
of the Constitution that they involve a substantial
question of law as to the interpretation of Art. 20(1) of
the Constitution. The facts in each one of the three
appeals are similar, though not exactly the same, but
they raise a common question of law under the proviso
to s. 14A of the Bihar Sales Tax Act, 1947 (Act XIX
of 1947) (hereinaftncalled the Act). Orders of forfeiture
have been passed against the three registered dealers
in the three appeals respectively, and they raise a
common question of law in regard to the validity of
the said orders. By consent Civil Appeal No. 678 of
1957, has been argued before us as the principal appeal
and it has been conceded that our decision in that
appea.I will govern the two other appeals. We would,
therefore, set out the faets in Civil Appeal No. 678 of
1957 a,nd deal with the merits of the points raised for
our decision in that appeal.
Rai Bahadur Hurdut Roy Motilal Jute Mills, Katihar
(hereinafter called the first respondent) was at the
43
334
SUPREMJ<.: COUHT REPORTS [1960(2)]
'959
material time registered as a dealer under the Act and
Th• Sta-;;:1 Bihar was carrying on bu~iness of manufac~ure and sale of
v.
gunny bags, Hessian and other 3ute products at
Rai Bahadur
Katihar in the District of Purnea. During the period
Hurd~t
April 1, 1950, to March 31, 1951, the said respondent sold
'?"Y Moe. Lall and despatched its ware worth about Rs. 92,24,386-1-6
l"" Mills
to dealers outside the State of Bihar and realised a
Gajendragadkar J. sum of RR. 2,11,222-9-6 as sales tax from such dealers.
The said respondent's assessment to sales tax for the
relevant period was taken up by the Superintendent of
Sales Tax, Purnea (hereinafter called the second
respondent) on May 31, 1953; and in consequence of
these proceedings the impugned order of forfeiture
came to be passed.
Meanwhile Art. 286 of the Constitution along with
other articles was considered by this Court in the State
of Bombay & Anr. v. 'Phe United 111otors (India) Ltd. &
Ors. (1).
The question which this Court had to consider in that case was about the vires of the impugned
provisions of the Bombay Sales Tax Act, 1952 (Act
XXIV of 1952), and for the decision of the said question Art. 286 fell to be considered. According to the
majority judgment in that case Art. 286(1)(a) read with
the explanation thereto and construed in the light of
Art. 301 and Art. 304 prohibits the taxation of sales
or purchases i1ivolving inter-State elements by all
States except the State in which the goods are delivered
for the purpose of consumption therein. The latter
State is left free to tax such sales or purchases and
it derives this power not by virtue of the explanation
to Art. 286(1) but under Art. 243(3) re.ad with Entry 54
of List II. The view that the explanation does not
deprive the State in which the property in the goods
passed of its taxing power and that consequently both
the State in which the property in the goods passes
and the State in which the goods are delivered for
consumption have the power to tax is not correct.
When the first respondent's assessment was taken
up by the second respondent his attention was invited
to this Court's decision in the case of the United
Motors (1); he followed the said decision and held that
{I) [1953] S.C.R. 1069.
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S.C.R.
SUPREME COURT REPORTS
335
the turn over of Rs. 92,24,386-1-6 on account of desz959
patch of manufactured jute products to out-of-State
--1
B'h
f
1
f
.
The State o
• ar
buyers was exempted rom the evy o tax ; this meant
v.
a deduction of the said amount from the amount of
Rai Bahadur
the total turnover shown by the first respondent in
Hurdut
the return submitted by him according to the proviRoy Moti Lall
sions of the Act.
··
Jule Mills
Subsequently the second respondent proceeded G . d-dk r 1
· ·
a;en raga
a
•
agamst the first respondent under s. 14A of the Act
and issued a notice in that behalf on June 18, 1954.
By this notice the first respondent was called upon to
show cause why the entire amount of Rs. 2,ll,222-9-6
which had been recovered by him as sales tax from
the dea,lers .should not he forfeited to Government.
The first respondent showed cause but the second
respondent was not satisfied with the explanation
given by the first respondent, and so he directed the
:first respondent to deposit the said amount into the
Government treasury and produce the proof of payment
before him within a month of the receipt of his order.
This order was passed on February IO, 1955. It shows
that the second respondent thought that the matter
raised for his decision was simple ; the first respondent
had collected the amount in question as tax under
the Act from his customers for and on behalf of the
appellant, and so he could not retain the said amount ;
it must go to the State coffers. He also held that the
first respondent had represented to the ,purchasers
that the amount was chargeable as sales tax under
the Act and as such the first respondent had clearly
contravened the explicit provisions of s. 14A of the
Act read with r. 19 of the Bihar Sales Tax Rules
(hereinaft~r called the Rules). It is on these :findings
that the second respondent passed the impugned
order of forfeiture.
The first respondent then applied to.the Patna High
Court, under Arts. 226 and 227 of ,the Constitution
challenging the validity of the said order. It was
urged on his behalf that the proviso to s. 14A under
which the impugned order was purported to have
been passed did not apply to the case of the first
respondent, and as such the order was not justified
336
SUPREME COURT REPOHTS [1960(2)]
'959
by the said proviso. It was also contended that if it is
T '· 5 -, -, n·' held that the said proviso justified the impugned
'~ '" ' o,
'''"'
d
"t
l
.
h St
L
. 1
.
I
v.
or er i was u tra vires t e
ate eg1s ature masmuc i
Rai Bahadur
as it violates Art. 20(1) and Art. 31(2) of the ConstituHurdut
tion. The High Court did not consider the first
Roy Moti foll contention raised before it ; it dealt with the two
Ju1:__}!.'
11'
constitutional points urged by the first respondent
Ga'endragadkar ]. and found in his favour on both of them. On these
J
findings the petition filed by the first respondent was
allowed, the impugned order of forfeiture was set
aside and the proceedings taken against the first
respondent under s. 14A were quashed. The appellant then applied for and obtained a certificate from
the said High Court under Art. 132(1) of .the Constitution.
On behalf of the appellant Mr. Lal Narain Sinha
has contendetl that the High Court was in error in
holding that the proviso to s. 14A violates either
Art. 20(1) or Art. 31(2) of the Constitution. He has
addt"essed us at length in support of his case that
neither of the tn·o articles is violated by the impuged proviso. On the other band, the learned SolicitorGeneral lrns sought to support the findings of the
High Court ou the said two constitutional points; and
he has pressed before us as a preliminary point his
argument that on a fair and reasonable construction,
the proviso cannot be applictl to the case of the first
respondent. We would, therefore, first deal with this
preliminary point. In cases
\~1here the vires of
statutory provisions are challenged on constitutional
grounds, it is essential that the materia.l facts should
first be clarified and ascertained with a vie\y to determine whether the impugnetl statutory provisions
are attracted; if they are, the constitutional challenge
to their validity must be examined and decided.
If,
however, the facts admitted or proved do not attract
the impugned·, provisions there is no occasion to
decide the issue about the vires of the said provisions.
Any decision on the said question would in such a
case be purely academic. Courts are and should be
reluctant to decide constitutional points merely as
matters of academic importance.
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S.C.R.
S.UPREME COURT REPORTS
337
Before considering the preliminary point raised by
z959
the first respondent it is necessary to refer briefly to The 510;; of Bihar
the relevant scheme of the Act.
The Act was originv.
ally passed in 1947 because the Legislature thought
Rai Bahadur
it neceBsary to make an addition to the revenue of
Hurdi<tL
11
Bihar, and for that purpose to impose a tax on the RJu:°!:rm:
sale of goods in Bihar. The provisions of the Act as
well as the statutory Rules framed under it have been Gajendragadkar J.
subsequently modified from time to time. In our
present discussions we would refer to the provisions
and the Rules which were in operation at the material
time. The goods the s.ale of which is taxed under the
Act are defined by s. 2(d) as meaning all kinds of
moveable property other than those specifically
excepted. Section 2(g) defines " sale " inter alia as
meaning any transfer of property in goods for cash or
other considerations and the second proviso to it
prescribes that the sale of any goods-(1) which are
actualls in Bihar at the time when, in respect thereof
the contract of sale as defined in s. 4 of that Act is
made, or (2) which are produced or manufactured in
Bih'ar by the producer or manufacturer thereof,-shall
wherever the delivery or contract of sale is made, be
deemed for the purposes of this Act to have taken place
in Bihar. The tax leviable under the Act is defined
by s. 2(hh) as including a fee fixed in lieu of the tax
under the first proviso to s. 5, whereas under s. 2(i)
"turnover " means the aggregate of the amounts of
sale prices received and receivable by a dealer in
respect of sale or supply of goods or carrying out of
any contract, effected or made during the given
period, or, where the amount of turnover is determined in the prescribed manner, the amount so determin- .
ed. Section 4 which is the charging section provides
that ev·ery dealer whose gross turnover during the
specified period on sales which have taken place both
in and outside Bihar exceeds Rs. 10,000 shall be
liable to pay tax on sales which have taken place in
Bihar on and from the date of the commencement
of the Act. This section shows that the incidence of
taxation can be attracted only where the gross
turnover of the dealer exceeds Rs. 10,000 and in
338
SUPREME COURT REPORTS [1960(2))
z959
determining this prescribed minimum, sales which
-
take place both in Bihar and outside are taken into
The State of Bihar
S
·
5
"b
h
f
·
account.
ect10n , prescn es t e rate o tax at six
Rai R";,hadur
pies in a rupee on the taxable turnover. The provisos
Hurdut
to this section confer specific powers on the State
Roy Moti Lall Government; the first proviso which is relevant for
Jute Mills
our purpose empowers the State Government by
G . d-dk 1 notification to fix a higher rate of tax not exceeding
a1en raga
ar
.
.
.
one anna rn a rupee or any lower rate of tax m respect
of sale of any goods or class of goods specified in such
notification subject to such conditions as it may
impose.
The explanation to .this section indicates
what the taxable turnover for the purpose of the
section means. " Taxable turnover " according to
this explanation means that part of a dealer's gross
turnover on sales which have taken place in Bihar
during any period which remains after deducting
therefrom the items specified in els. (a) and (b) of the
explanation. The sale of any goods declared from
time to time as tax-free goods under s. 6 is one of
those items. Section 6 empowers the State Government to exempt sale of any goods or class of goods
from the levy of tax under this Act subject to the
conditions specified in the section, whereas s. 7 empowers the Government to exempt dealers from tax,
and s. 8 authorises the Government to prescribe points
at which goods may be "taxed or exempted. Section 9
deals with the question of registration of dealers and
provides that no dealer who is liable to pay tax under
s. 4 shall carry on business unless he has been registered under the Act and possesses
a registration
certificate. Under s. 11 a list of registered dealers is
published, and by s. 12 such registered dealers are
required to furnish such returns by Sl!Ch dates and to
such authorities as may be prescribed. Section 13
prescribes the procedure for assessment, and s. 14
requires that the tax payable under the Act shall be
paid in the manner hereinafter provided at such
intervals as may be prnscribed.
Section 14(2) requires
the registered dealer to pay into a Government
treasury the full amount of tax due from him according to the returns which he !ms to file and has to
•
..
' '
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s.c.R.
S0PREME COURT REPORTS
339
furnish along with the said return a receipt from the
z959
treasury showing the payment of such amount.
The Stat• of Bihar
Naving thus provided for the recovery of the tax
v.
charged under s. 4, s. 14A- in effect authorises
Rai Bahadur
registered dealers to reimburse their dues by making
HurdutL 1
.
bl b
h
.
d
Roy M oti al
collections of the tax paya e y t em m accor ance
Jute Mills
with the restrictions and conditions as may be prescribed. It provides that no dealer who is not a regis-Gajendragadkar J.
tered dealer shall realise any amount by way of tax on
sale of goods from purchasers nor shall any registered
dealer make any collection of tax except in accordance
with such restrictions and conditions as may be
prescribed. That takes us to the proviso to s. 14A
with which we are directly concerned in the present
appeal. It reads thus:
"Provided that if any dealer collects any amount
by way of tax, in contravention of the provision of
this section or the conditions and restrictions
prescribed thereunder, the amount so collected
shall, without prejudice to any punishment to which
the dealer may be liable for an offence under this
Act, be forfeited to the State Government and such
dealer shall pay such amount into the Government
treasury in accordance with a direction issued to
him by the Commissioner or any officer appointed
under section 3 to assist him and in default of such
payment, the amount shall be recovered as an
arrear of land revenue."
The effect of this proviso is clear. A dealer is authorised to collect amounts by way of tax from the purchasers only in accordance with the provision of s. 14A
and the conditions and restrictions prescribed thereunder. The conditiorni and restrictions referred to
in the proviso are to be found in the material Rules
framed under the Act. If it is shown that a dealer
has collected an amount by way of tax in violation
of the conditions and restrictions prescribed by the
Rules he incurs the penalty of forfeiture as specified in
the proviso. There can be no doubt that before the
penalty of forfeiture can be imposed upon the dealer
under the proviso it must be shown that he has acted
contrary to the conditions and restrictions prescribed
340
SUPREME COURT REPORTS
[1960(2)]
1959
by the Rules. It would not be enough to show that
T
-
1
the collection of the amounts in question by the dealer
he Slate " llihar .
th
.
'll
l
.
Th
.
v.
is o · erwrne I ega or improper.
e contravent10n
Rai Bahadur
of the statutory provision contained in s. 14A or of
Hurdut
the Rules prescribing conditions and restrictions in
Roy Moti Lall that behalf alone can form the basis of the imposition
Jute Mills
of the penalty under the proviso. This_posiLion is not
Gaje,,drngadkar J. disputed before us.
_
The appellant contends that t.he proviso is attracted
to the present case because the first respondent has
contravened the conditions and restrictions imposed
by the proviso to r. 19, whereas the first respondent
argues that a proper construction of this latter proviso
does not justify the appellant's plea. It would thus be
seen that the decision of the preliminary point raised
by the first respondent involves the narrow question
of the construction of the proviso to r. 19.
Before construing the said . proviso it is, however,
necessary to refer to s. 33 of the Act.
This section
was enacted on April 4, 1951, but it has been expressly
made retrospective as from January 26, 1950.
Therefore at the material time this section must be deemed
to have been in operation. Section 33(l)(a)(i) provides
that notwithstanding anything contained in the Act a
tax on the sale or purchase of goods shall not be
imposed under the Act where such a sale or purchase
takes place outside the State of Bihar. Section 33(2)
makes the explanation to cl. (1) of Art. 286 of the
Constitution applicable for the interpretation of subcl. (i) of cl. (a) of sub-s. (1). It is common ground that
if the relevant provision just cited is construed in the
light of the decision of this Court in the case of the
United Motors {1) there can be no doubt that the sales
which are the subject-matter of the present proceedings consist of transactions on which a tax cannot be
imposed under the Act. That is why the appellant
strongly relies on this provision and contends that in
construing the proviso to r. 19 the true legal position
in respect of the transactions in question must be
borne in mind.
Let us now read the proviso to r. 19. Rule 19 itself
prescribes the procedure which has to be followed by
<•l [1953J s.c.R. 1069.
L
,
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•
S.C.R.
SUPREME 80URT REPORTS
341
a registered dealer in realising any amount by way of
r959
tax on sale of goods from purchasers. This procedure
-
£
h .
f
h
b"ll
"b The State of Bihar
re ers to t e ISsue o a ca.s memo or a
I
as prescn -
ed by it. The proviso to this Rule lays down that no
Rai B:hadur
such registered dealer shall realise any amount by way
Hurdut
of tax at a rate higher than the rate at which he is
Roy Moti Lall
liable to pay ta.x under the Act, or realise any amount
Jute Mills
by way of tax in respect of such part of his turnover G . d-dk
as is allowed to be deducted from his gross turnover a;en raga
ay ].
for the determination of his taxable turnover under
the Act or these Rules.
The appellant relies on the
latter part of the proviso and argues that the part of
the turnover of the first respondent which is in question fell within s. 33(l)(a)(i) and as such was not liable'
to be taxed. That being so there was no justification
for the first respondent to collect any amount by way
· of tax from his purchasers under s. l4A. The scheme
of s. 14A is to permit the registered dealer to collect
such amounts of tax from his purchasers as he in his
turn is liable to pay to the appellant. Authority to
collect such tax amounts given to the registered dealer
inevitably postulates his liability to pay a similar
amount to the appellant. Therefore the conduct of
the first respondent in collecting amounts by way of
tax from his purchasers amounts to a breach of s. 14A
itself.
It is also contended that having regard to the provisions of s. 33(I)(a)(i) the first respondent was entitled
to claim a deduction of the transations in qtl:estion
from his gross turnover under the latter part of the
proviso, and that clearly means the first part of the
said proviso applies to his case and it prohibited him
from realising the said amounts. His conduct in
collecting the amounts, therefore, constitutes a breach
of the conditions specified in the proviso tor. 19.
In appreciating the validity of these arguments it
would be relevant to remember that at the material
time there was considerable confusion in the minds of
the public as well as the State authorities about the
true scope and effect of the provisions of Art. 286(1)
of the Constitution: It is not disputed that during the
material period and in the years preceding it registered
I
•
342
SUPREME COURT REPORTS [1960 (2)]
'959
dealers used to pay tax in respect of transactions
-
which were really not liable to be taxed under
The State of Bihar s. 33(1)(a)(i) and such tax was being received by the
v.
Rai Bahadur
appellant. In fact, as we have already pointed out
Hurdut
s. 14 of the Act imposes a liability on the registered
Roy Moti Lall
dealer to furnish along with his return a receipt for
Jute Mitfa
the payment of the tax which is payable under the
G .
-
return. Such payments were made by registered
a1endragadkar J. d 1
•
t
f
· ·1
t
t•
d
ea ers m respec
o
s1m1 ar ransac 10ns an
were
accepted. It is an accident that the assessment proceedings of the first respondent were actually taken up
for decision by the second respondent after the decision
of this Court in the case of the United Motors('). If
the question about the first respondent's liability to
pay the tax under the Act had been decided before
the date of the said decision there is no doubt that he
would have been required to pay the tax for the transactions in question. Indeed it is common ground that
the notification issued for the material period levied a
tax at three pies on the goods in question "if the sales
tax authority is satisfied that the goods have been
despatched by or on behalf of the dealer to any person
outside the Province of Bihar." This notification is
consistent with the definition of the word " sale " as it
then stood. It is thus clear that at the material time
the appellant thought that transactions like those in
question in the present appeal were liable to pay the tax
at the rate of three pies as prescribed by the relevant
notification; the registered dealers also had no doubt
on the point; and so taxes were collected in respect of
such transactions by the appellant from the registered
dealers and by the registered dealers in their turn from
their 'purchasers.
Nevertheless, after the enactment of s. 33 the legal
fiction about the retrospective operation of the said
section must be given effect to and in construing the
proviso to r. 19 it must be assumed that the transactions in question were outside the scope of the Act and
no tax could have been imposed in respect of them.
Construing the proviso on this assumption, can it be
said that in respect of the part of the first respondent's
(1) [1953] S.C.R, 1069.
•
•
•
-
-
S.C.R.
SUPREME COURT REPORTS
343
turnover which is in question a deduction was allowz959
able within the meaning of the proviso ? In our
.
· ·
tt..~
·
t b
d ·
c
·
fThe State· of Bihar
opm10n ms quest10n canno
e answere m .iavour o
-
the appellant. Rule 19 itself was framed in 1949 and
Rai ;~hadur
has not been amended subsequent to the enactment of
Hurdut
s. 33.
As it was framed its reference to the allowable
Roy Moti Lall
deductions was clearly based on the provisions of ss. 6,
Jute Mills
7 and 8 of the Act. This position would be clear G . d-dk 1
b
d
11 d
b "f
d h
. l
d .
h
a;en raga av
•
eyon a
ou t i we rea t e matena wor s m t e
proviso in the light of the explanation to s. 5 of the
Act. The explanation in terms enumerates deductions
which have to be made in determining the taxable
turnover of the registered dealer and it is to these
deductions which are allowable under the three sections
specified in the explanation to which the latter part of
the proviso tor. 19 refers. A claim for the exclusion
of a ,part of the first respondent's turnover on the
strength of s. 33(l)(a)(i) cannot, therefore, be said to be
an allowable deduction under the proviso.
This question can be considered from another point
of view. The provisions which allow deductions to be
made or grant exemptions in respect of certain transactions obviously pop,tulate that but for them the
transactions in question would be liable to tax under
the Act ; and so when such transactions are included
in the return the registered dealer is allowed to claim
appropriate deductions in respect of them. But, the
position with regard to s. 33 is entirely different ;
transactions which attract the provisions of the said
section are in substance outside the scope of the Act
and no tax can be imposed on them at all. If that be
the true position the claim which can be made by the
registered dealer in respect of such transactions cannot
in law be regarded as a claim for allowable deductions
or exemptions properly so-called ; it is really a claim
that the Act itself does not apply to the said transactions. Therefore, in our opinion it would be straining
the language of the second part of the proviso to r. 19
to hold that the transactions in question fell within its
purview.
There is one more point to be considered in this
connection. Form VI which has been. prescribed, . for
\
344
SUPREME COURT REPORTS [1960 (2))
'959
making the returns under s. 12 requires the gross
The State of Bih turnover to be mentioned at the outset, and then it
v.
ar provides for the different deductions allowable under
Rai Bahadur
the Act. This form was prescribed in 1949 and has
Hurdue
not been amended after the addition of s. 33 to the
Roy Moti Lall
Act.
On looking at this form it seems difficult to
Ju~ills
entertairr the argument that the claim for the total
.Gajendragadkar J. exclusion of the transactions in question can be made
under any of the headings prescribed in the form. The
appellant, however, contends that the first item of
gross turnover means the whole of the gross turnover
which must include all sale transactions whether they
took place within Bihar or outside it, and in support
of this argument reliance is placed on the definition of
"turuover" contained in s. 2(i). If the whole of the
gross turnover has to be mentioned under item 1, it is
urged, the claim for the exclusion of the transactions
in question can well be adjusted under one or the other
of the deduction items prescribed in the form.
'Ve
are not inclined to accept this argument. The form
as it has been prescribed construed in the light of the
material provisions contained in ss. 6, 7 and 8 does not
support the case that in prescribing its several items
it was intended that the transactions falling under
s. 33 should be first shown under item I and then
excludea under one or the other of the remaining items
of deduction.
Besides it may be relevant to point out
that the heading of Chapter VII which deals with the
submission of returns by dealers is " return of taxable
turnover " and it is arguable that the gross turnover
mentioned in Form VI may mean "gross taxable
turnover " and not the gross turnover including the
transactions which are outside the scope of the Act.
Then as to the argument about the contravention
of s. 14A itself it is difficult to appreciate how any
provision of s. 14A can be said to have been contravened.
Section 14A consists of two parts both of which
are put in a negative form.
The second part with
which we are concerned in effect means nothing more
than this, that a registered dealer can make collections
of such tax only as is payable by him in accordance with the restrictions and conditions as may be
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S.C.R.
SUPREME COURT REPORTS
345
prescribed: If the argument is that the first respondent
z959
was not liable to pay any tax and as such was not The State of Bihar
entitled to make any corresponding collection, then
v.
the collection made by him may fall outside s. 14A
Rai Bahadur
and be otherwise unjustified or improper; but it does
Hurdut
not amount to the contmvention of any provision of
Roy Moti_Lall
s. 14A as such. In fact s. 14A itself refers to . the
Jute Mills
restrictions and conditions which may be prescribed, Gajendragadkar J.
and, as we have already seen, these conditions and
restrictions are prescribed by the Rules in general and
by r. 19 in particular. So the argument urged under
s. 14A takes us back to the question as to whether the
proviso to r. 19 has been contravened. In dealing
with this question we cannot ignore the fact that the
relevant provisions which fall to· be construed in the
present appeal impose a serious penalty on the registered dealer, and so, even if the view for which the
appellant contends may perhaps be a possible view,
we see no reason why the other view for which the
first respondent contends and which appears to us to
,
be more reasonable should not be accepted. In the
result we hold that the proviso to s. 14A cannot be
invoked against the first respondent and so the order
of forfeiture passed against him by the second respondent is unjustified and illegal.
In view of this conclusion it is unnecessary to
. consider the objections raised by the first respondent
against the validity of the proviso on the ground that
it contravenes Arts. 20(1) and 31(2) of the Constitution.
We may incidentally add that during the co,irse of the
arguments before us we have also heard all the learned
counsel on the question as to whether the said proviso
contravenes the provisions of Art. 19(l)(f) as well.
The result is the appeal fails and is· dismissed with
costs ..
The decision of this appeal governs Civil Appeals
Nos. 546 of 1958 and 115of1959. They also fail and
are dismissed with costs.
'
Appeal dismissed.