# TK. SuBBA RAo, C.J., J.C. SHAH, S.M. S1KRI v. RAMASWAMJ AND

- **Citation:** [1967] 2 S.C.R. 88
- **Court:** Supreme Court of India
- **Decided:** 1966-11-15
- **Case number:** Civil Appeal No. 242 of 1965
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tk-subba-rao-c-j-j-c-shah-s-m-s1kri-v-ramaswamj-and-4183
- **Pages:** 12

## Headnote

MOHANLAL HARGOVINDDAS
'·
STATE OF MADHYA PRADESH & ORS.
November 15, 1966
TK. SuBBA RAo, C.J., J.C. SHAH, S.M. S1KRI, V. RAMASWAMJ AND
C.A. VAJDIALII>GAM, JJ.]
Central Provinces and Berar Sales Tax Act (21 of 1947) as amended
by Madhya Pradesh Sales Tux Act (20 of 1953), ss. 27A and 4(6)-Goods
declared and mentioned in registration certificatt as meant for use as raw
material for manufac;•re of goods for sale, delivery and consumption in
Madhya Pradtsh actually used for export out oj Sta1--Whether liabl1 to
purchase tax-EOect of Salts Tax Laws Validalion Act. 1956.
The appellant was a firm i'I Madhya Pradesh and wa.s 1egistered u. a
'dealer' under the Central Provinces and Berar Sales Tax Act, 1947 u
J1IDenJed by the Madhya Piadesil Sales Tax (Amendment)
Act, 1953.
Durir.g 1951 and 1955 the firm imported tobacco from the State of
Bombay on the declaration that it would be used a.s raw material in the
manufac1'1rc of goods for sale by actual delivery in Madhya
Pradesh
for consumption in that State. Tobacco was mentioned as one of the raw
materials in the firm's registration certificate issued under s. 8 of the Act.
However the goods manufactured by the firm were utilised for a dilferent
purposes i.e. for expon outside the State.
Under s. 4(6) of the Act when
goods were used for a different purpose other than the one declared and
mentioned in the registration certificate the price paid by the dealer for
such goeds would be included in his taxable turnover. However in a
writ petition before the High Court the appellant finn contended
that
the goods exempt as inter..Siate sales were exempted from levy of sales
tax under s. 27A of the Act which incorporated the bans in Art. 286 of
the Constitution. The writ petition
wa.s allowed
in September 1955.
However in 1956 the Sales Tax Validation Ordinance and thereafter the
Sales Tax Laws Validation Act were passed. Accordingly the Sales Tax
Authorities issued notices to the appellant firm proposing to levy purebaae
tax on the tobacco purchased by it from non-resident dealers dilring the
period November 7, 1953 to September 5; 1955. The appellant thereupon filed another writ petition before the High Court challenging
the
levy but it was dismissed.
With certificate
tlie appellant came to this
Court.
It was urged on behalf of the appellant that (I) before advantage could
be taken of the Sales Tax Laws Validation Act. 1956 there had to be in
-existence a State Act imposing tax on inter.State sales and 1. 27 A of the
Act imposed no such tax, (ii) 1. 4(6) bad no applicatJon because tobacco
wa.s not spccitled in the certificate of registration granted to tho appellant
"as Intended for USc by it as raw material in the manufacture of any goods
for aale by actual delivery in Madhya Pradesh for the purpose of consumption in that State. tt
HEW : (i) Read with the third explanatlon to s. '2(g) of the Act
s. 27-A had a positive and not mettly a negative conlenL
It gave power to
the State of Madhya Pradesh to impose a tax OD a transaction falling
within its purview. It was therefore a pre.aisting law validated by the
Sales Tax Laws Validation Act,
1956 and the appellant could be taxed
UDcler it in ~
of inter-Sim sales only duriD8 the relevant period.
t95 H; 96 0-H]
A
B
c
D
E
F
G
R
A
B
c
MOHANLAL v. M. P. STATE (Ramaswami, 1.)
89
M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh, (19581
S.C.R. 1422, relied on.
(ii) The declaration made by the appellant to the Bombay dealers was
for the purpose of obtaining exemption from purchase tax. The same
was the purpose of the mention of tobacco in the registration certificate
under s. 8. If the language of the cenificate were construed in the coniext
of the s. 8. of the Act (as amended) and along with the declaration of
the appellant, it was manifest that the appellant was liable to JJay tax on
tobacco imponed from Bombay dealers an.d that the requirements cf
1. 4(6) were satisfied. The technical omission of the Sales Tax Officer to
make a specific entry i

## Text

MOHANLAL HARGOVINDDAS
'·
STATE OF MADHYA PRADESH & ORS.
November 15, 1966
TK. SuBBA RAo, C.J., J.C. SHAH, S.M. S1KRI, V. RAMASWAMJ AND
C.A. VAJDIALII>GAM, JJ.]
Central Provinces and Berar Sales Tax Act (21 of 1947) as amended
by Madhya Pradesh Sales Tux Act (20 of 1953), ss. 27A and 4(6)-Goods
declared and mentioned in registration certificatt as meant for use as raw
material for manufac;•re of goods for sale, delivery and consumption in
Madhya Pradtsh actually used for export out oj Sta1--Whether liabl1 to
purchase tax-EOect of Salts Tax Laws Validalion Act. 1956.
The appellant was a firm i'I Madhya Pradesh and wa.s 1egistered u. a
'dealer' under the Central Provinces and Berar Sales Tax Act, 1947 u
J1IDenJed by the Madhya Piadesil Sales Tax (Amendment)
Act, 1953.
Durir.g 1951 and 1955 the firm imported tobacco from the State of
Bombay on the declaration that it would be used a.s raw material in the
manufac1'1rc of goods for sale by actual delivery in Madhya
Pradesh
for consumption in that State. Tobacco was mentioned as one of the raw
materials in the firm's registration certificate issued under s. 8 of the Act.
However the goods manufactured by the firm were utilised for a dilferent
purposes i.e. for expon outside the State.
Under s. 4(6) of the Act when
goods were used for a different purpose other than the one declared and
mentioned in the registration certificate the price paid by the dealer for
such goeds would be included in his taxable turnover. However in a
writ petition before the High Court the appellant finn contended
that
the goods exempt as inter..Siate sales were exempted from levy of sales
tax under s. 27A of the Act which incorporated the bans in Art. 286 of
the Constitution. The writ petition
wa.s allowed
in September 1955.
However in 1956 the Sales Tax Validation Ordinance and thereafter the
Sales Tax Laws Validation Act were passed. Accordingly the Sales Tax
Authorities issued notices to the appellant firm proposing to levy purebaae
tax on the tobacco purchased by it from non-resident dealers dilring the
period November 7, 1953 to September 5; 1955. The appellant thereupon filed another writ petition before the High Court challenging
the
levy but it was dismissed.
With certificate
tlie appellant came to this
Court.
It was urged on behalf of the appellant that (I) before advantage could
be taken of the Sales Tax Laws Validation Act. 1956 there had to be in
-existence a State Act imposing tax on inter.State sales and 1. 27 A of the
Act imposed no such tax, (ii) 1. 4(6) bad no applicatJon because tobacco
wa.s not spccitled in the certificate of registration granted to tho appellant
"as Intended for USc by it as raw material in the manufacture of any goods
for aale by actual delivery in Madhya Pradesh for the purpose of consumption in that State. tt
HEW : (i) Read with the third explanatlon to s. '2(g) of the Act
s. 27-A had a positive and not mettly a negative conlenL
It gave power to
the State of Madhya Pradesh to impose a tax OD a transaction falling
within its purview. It was therefore a pre.aisting law validated by the
Sales Tax Laws Validation Act,
1956 and the appellant could be taxed
UDcler it in ~
of inter-Sim sales only duriD8 the relevant period.
t95 H; 96 0-H]
A
B
c
D
E
F
G
R
A
B
c
MOHANLAL v. M. P. STATE (Ramaswami, 1.)
89
M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh, (19581
S.C.R. 1422, relied on.
(ii) The declaration made by the appellant to the Bombay dealers was
for the purpose of obtaining exemption from purchase tax. The same
was the purpose of the mention of tobacco in the registration certificate
under s. 8. If the language of the cenificate were construed in the coniext
of the s. 8. of the Act (as amended) and along with the declaration of
the appellant, it was manifest that the appellant was liable to JJay tax on
tobacco imponed from Bombay dealers an.d that the requirements cf
1. 4(6) were satisfied. The technical omission of the Sales Tax Officer to
make a specific entry in the cenificate would not confer any benefit on the
appellant when there was other incontrovertible evidence to show that the
appellant did purchase the goods specified
in. the certificate
rui
raw
materials in the manufacture of any goods for the purpose of sale by
actual delivery ;~ Madhya Pradesh for the purpose of consumption in that
State. E98 F-H; 99 A]
Modi Spinning & Weaving Mills Co. Ltd. v. Commissioner of Sal.,
Tax, Punjab & Anr. 16 S.T.C. 310, reli,ed on.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 242 of
1965.
D
Appeal from the judgment and order dated February 19, 1962
E
F
G
H
of the Madhya P~adesh High Court in Misc. Petition No. 395 of
1958.
A. K. Sen, R. M. Hazarnavis, D. N. Verma, 0. P. Malhotra,
0. C. Mathur, J. B. Dadachanji and Ravinder Narain, for the appellant.
B. Sen and I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J. Tiris appeal is brought, by certificate, from the
judgment of the High Court of Madhya Pradesh dated February 19,
1962 in Miscellaneous Petition No. 395 of 1958.
The appellant is a firm carrying on the business of manufacturing and selling bidis. During the period April 1, 1951 to
September 6, 1955, the appellant was registered as a "dealer" under
the Central Provinces & Berar Sales Tax Act, 1947 (C.P. & Berar
Act 21 of 1947) (hereinafter called the 'Act'). For the purposes of
manufacture of bidis, the appellant imported from the State of
Bombay
large quantities of tobacco. During the period from
November 7, 1953 to October 26, 1954, the appellant imported
from that State tobacco worth Rs. 84,29,580-15-0 and during the
period from October 27, 1954 to November 14, 1955 the appellant
imported tobacco worth Rs. 1,38,27,630-12-6. In the usual course,
the tobacco, after being imported into the State of Madhya Pradesh,
was rolled into bidis which were largely exported to other States for
sale and coasumption in those States. In respect of the imports of
tobacco the Sales Tax authorities required the appellant to file
returns in Part B of Form IV clause 2 of which stated as follows:
M19Sup.CI/66-7
90
SUPRBl\ll! COURT RBPORTS
[1967] 2 S.C.ll
"2. Purchase price of goods other than those mentioned in Schedule II purchased on declaration under rule 26
3£ being goods specified in the registration certificate as
intended for use as raw materials in the manufacture of
any goods for sak by actual delivery in Madhya Pradesh
for the purpose of consumption in that State but utilised
for any other purpose; such as one's own consumption
or for export outside the State for which deduction is claimed
under section 27-A or for use in the manufacture of goods
exported outside the State for which deduction is claimed
under section 27-A, etc."
The appellant filed a return for the quarter from May 3, l 9S4
to July 29, 1954 showing the amount of Rs. 16,47,567-3-3- as the
purchase price of goods purchased on declaration a, being goods
specified in the registration ce.tificate as intended for use ~ ra1V
material in the manufacture of goods for sale by actual delivery in
Madhya Pradesh for the purpose of consumption in that State but
utilised for any other purpose. In .he return which was filed for the
quarter beginning from July 27, 1954 and ending with October 26,
1954, the appellant did not fill in any tigurt but showed the above
item as blank contending that the Sales Tax authorities were not
entitled to levy any purchase tax against it in respect of the same.
The appellant thereafter moved this Court under Art. 32 of the
Constitution for the issue of a writ of mandamus or any other
suitable writ to restrain the respondents from enforcing the provisions of the Act and for other consequential reliefs.
In Writ Petition No. 67 of 1955 decided on September 20, 1955 M/s MohanJal
Hargovind Das v. Tile State of Madhya Pradesh(') this court
observed in the course of its judgment as follows:
"All the transactions entered into by a registered dealer,
however, do not necessarily import a liability to pay
tax under the Act because, whenever the question arises
in regard to his liability to pay any tax under the Act,
such liability would have to be determined in spite of his
being a registered dealer with reference, inter alia, to the
provisions of Section 27-A of the Act which incorporates
within its terms the bans which have been imposed on the
powers of the State Legislatures to tax under Article 286( !)
(a) and (2) of the Constitution. If, therefore, a dealer who
has got himself registered as dealer under the provisions of
Section 8(1) of the Act is sought to be made liable in
respect of transactions of sale effected by him he could
claim exemption froi;; such liability if the transactions of
sale or purchase took place in the course of inter-State trade
or commerce after t~e 3 I st March, I 951, except in so far
(I) [t95SJ 2 S.C.R. 509.
B
c
D
E
F
G
H
A.
B
c
D
E
F
G
H
MOIIANLAL v. M. P. STATE (Ramaswami, J.)
91
as Parliament may by law otherwise provide. In the case
before us there was no such provision made by Parliament
and the transactions in question were all after the 31st
March, 1951, with the result that the ban imposed by
Article 286(2) was in operation and if the transactions
took place in the course of inter-State trade or commerce
not only were Shri Chhaganlal Ugarchand Nipani and Shri
Maniklal Chunanlal Baroda exempt from the I iability
to pay the tax on these transactions but the petitioners
also were similarly exempt.
No liability, therefore. could
be imposed either for Sales Tax or for Purchase Tax within
the terms of the Act on these transactions which as above
stated took place in the course of inter-State trade or
commerce."
This Court accordingly granted a writ to the following
effect:
"The respondents will be restrained from enforcing
the Central Provinces and Berar Sales Tax Act, 1947,
and its provisions against the petitioners and from imposing
a tax in respect of the transactions in question and in
particular from imposing a tax on the purchase price of
goods purchased on the declarations under Rule 26
being goods specified in the registration certificate as intended for use as raw material in the manufacture of
goods for sale by actual delivery in Madhya Pradesh for
the purpose of consumption in that State but utilised for
any other purpose under the provisions of Section 4( 6)
of the Act."
In view of this writ the Assistant Commissioner of Sales Tax,
Jabalpur, by his two orders dated September 9, 1956 and September
10, 1956, exempted the appellant from tax on the purchases of
tobacco made in the State of Bombay, which, after being imported
into the State of Madhya Pradesh, was used as raw material for
manufacturing bidis exported to other States. The appellant
preferred appeals to the Deputy Commissioner of Sales Tax
against the two orders dated September 9, 1956 and September 10,
1956. In the meantime, on March 21, 1956, the Sales Tax Laws
Validation Act, 1956 (Act 7 of 1956), which repealed the Sales Tax
Validation Ordinance 3 of 1956, had come into force. Thereupon,
on December 5, 1958, the Deputy Commissioner of Sales Tax
issued two notices to the appellant proposing to. levy tax on purcbases of tobacco during the period from November 7, 1953 to
September 5, 1955 from non-resident dealers under s. 4( 6i of the
Act. The appellant filed in the High Court of Madhya Pradesh
Miscellaneous Petition No. 395 of 1953 praying for grant of a writ
of certiorari to quash the notices dated December 5, 1958 issued by
the Deputy Commissioner of Sales Tax and for a writ in the nature
92
SUPREME COURT
REPORTS
[1967] 2 s.c.R.
of mandamus restraining the respondents from enforcing the
provisions of the Act and of the Central Act 7 of 1956 and from
imposing any tax on purchases of tobacco and other raw materi.UI
from non-resident dealers.
By its judgment dated February 19,
1962, the High Court of Madhya Pradesh rejected the petition of
the appellant.
By the Madhya Pradesh Sales Tax (Amendment) Act, 1953
(M.P. Act 20 of 1953) certain amendments were made in the Act.
The material provisions of the latter
Act, as amended by the
former Act, were as follows:
"2. le) "dealer" means ~ny person who whether as
principal or agent, carries on in Madhya Pradesh the business. of selling or supplying goods. whether for comm;s.
sion, remuneration or otherwise and includes a firm, a
partnership ................ "
"2. (g) "sale" with all its grammatical variations and
cognate expressions means any transfer of property in
goods for cash or deferred payment or other valuable
consideration, including a transfer of property in goods
.made in course of the execution of a contract, ........ and
the word 'purchase' shall be construed accordingly;
Explanation (//).-(Notwithstanding anything to the
contrary in the Indian Sale of Goods Act, 1930, but
subject to the provision contained in the Explanation to
clause (i) of Article 286 of the Constitution) the sale or
purchase of any goods shall be deemed for the purposes
of this Act, to have taken place in this State wherever the
contract of sale or purchase might have been made-
(a) if the goods were actually in this State at the
time when the contract of sale or purchase
in respect thereof was made, or
(b) in case the contract was for the sale or purchase of future goods by description, then, if
the goods are actually produced or found
in this State at any time after the contract
of sale or purchase in respect thereof was
made;
Explanation (111).-Notwithstanding anything to the
contrary in the Indian Sale of Goods Act, 1930, the sale of
any goods which have actually been delivered in the State
of Madhya Pradesh as a direct result of such sale for the
purpose of consumption in the said State, shall be deemed,
A
B
c
D
E
'
G
H
A
B
c
D
'
E
F
G
H
MOHANLAII v. M. P. STATE (Ramaswami, /.)
93
for the purpose of this Act, to have taken place in the said
State, irrespective of the fact that the property in the goods
has by reason of such sale passed in another State."
"2. (J) 'turnover' means the aggregate of the amounts
of sale prices and parts of sale prices received or receivable
by a dealer in respect of the sale or supply of goods
or in respect of sales or supply of goods in the carrying
out of any contract affected or made during the prescribed
period; and the expression 'taxable turnover' means that
part ofa dealer's turnover during such period which remains
after deducting therefrom (a) his turnover during that
period on-
(ii) sale8 to a registered dealer of goods declared by
him in the prescribed form as being intended for
resale by him by actual delivery in Madhya
Pradesh for the purpose of consumption in· that
State or of goods specified in such dealer's certificate of registration as being intended for use
by him as raw materials in the manufacture of
any goods for sale by actual delivery in Madhya
Pradesh for the purpose of consumption in that
State, and of containers and other materials used
in the packing of such goods;"
"4. (6) Where any goods are purchased by a registered dealer as being intended for resale by him by a<-1:ual
delivery in Madhya Pradesh for the purpose of consumption in that Stiite,
or as being goods specified in such
dealer's certificate of registration as intended for use by
him as raw materials in the manufacture of any goods for
sale by actual delivery in Madhya Pradesh for the purpose
of consumption in that State and such goods ate utilised
by him for any other purpose, the price paid by him for
such goods shall be included in his turnover·and be liable
to tax in accordance with the provisions of this Act."
"27-A. (a) Notwithstanding anything contained in this
Act-
( a) a tax on the sale or purchase of goods shall not be
imposed under this Act-
(i) where such sale or purchase takes place outside
the State of Madhya Pradesh; or
(ii) where such sale or purchase takes place in the
·course of import of the goods into, or export of
the goods out of, the territories of India;
94
SUPREME COURT
Rl!POR.TS
[1967] 2 S.C.I..
(b) a tax on the sale or purchase of any goods shall
not, after the 31st day of March 1951, be imposed
where such sale or purchase takes place in the
course of inter-State trade or commerce except
in so far as Parliament may by law otherwise
provide.
(2) The Explanation to clause (I) of Article 286 of
the Constitution shall apply for the interpretation of subclause (i) of clause (a) of sub-section (l)."
Article 286(1) and (2) of the Constitution, as it stood at the material
time, is reproduced below:
"286(1) No law of a State shall impose, or authorise
the imposition of, a tax on the sale or purchase of goods
where such sale or purchase takes place:-
(a) outside the State; or
(b) in the course of the import of the goods into, or
export of the goods out of, the territory of India.
Explanation.-For the purposes of sub-clause (a), a sale
or purchase shall be deemed to have taken place in the State
in which the goods have actually been delivered as a direct
result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the
general law relating to sale of goods the property in the
goods has by reason of such sale or purchase passed in
another State.
(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise
the imposition of a tax on the sale or purchase of any
goods where such sale or purchase takes place in the
course of inter-State trade or commerce.
Provided that the President may by order
direct
that any tax on the sale or purchase of goods which was
being lawfully levied by the Government of any State
immediately before the commencement of this Constitution
shall, notwithstanding that the imposition of such tax is
contrary to the provisions of this clause, continue to be
levied until the thirty-first day of March, 1951."
In M/s Mohan/a/ Hargovind Das v. The State of Madhya
Pradesh,(') it was held by this Court that the transaction of purchase
of tobacco by the appellant from dealers outside the territory of
Madhya Pradesh were transactions in the course of inter-State
(I) (1955) 2 S.C.R. 509.
B
c
D
E
F
G
H
1
p: '
,
A
B
c
D
E
F
G
H
MOHANLAL v. M. P. STATE (Ramaswami, J.)
95
trade or commerce and since the ban imposed by Art. 286(2)
was in operation, the appellant was exempt from liability to
:>aY tax on those transactions. On January
30,
1956,
the
President of India promulgated an O-dinance called 'The Sales
Tax Laws Validation Ordinance, 1956' (Ordinance No. 3 of
1956; which was repealed and replaced by the Sales Tax Law
Validation Act, 1956 (Act 7 of 1956) which came into force on
March 21, 1956. Section 2 of this Act states:
"Notwithstanding any judgment, decree or order of
any Court, no law of a State imposing or authorising the
imposition of, a tax on the sale or purchase of any goods
where such sale or purchase took place in the course of
inter-State trade or commerce during the period between the
!st day of April, 1951 and the 6th day of September, 1955,
shall be deemed to be invalid or ever to have been invalid
merely by reason of the fact that such sale or purchase took
place in the course of inter-State trade or commerce; and all
such taxes levied or collected or purporting to have been
validly ,evied or collected during the aforesaid period shall
be deemed always to have been validly levied or collected
in accordance with law.
Explanation.-In this section 'law of a State' in relation
to a State specified in Part C of the First Schedule to the
Constitution, means any law made by the Legislative Assembly, if any, of that Sate or extended to that State by a notification issued under Section 2 of the Part C States (Laws)
Act, 1950 (30 of 1950)''.
4.
It was argued by Mr. A. K. Sen on behalf of the appellant,
in the first place, that s~ 27-A of the Act places a restriction on the
power of the taxing authorities and so long as it stood unrepealed
there was no pre-existing law authorising the imposition of tax
on sales made in the course of inter-State trade or commerce and in
consequence the Sales Tax Laws Validation Act, 1956 which
merely lifted the ban and did not impose any tax, had no appliootion to the case of the appellant. To put it differently, the contention of Mr. A. K. Sen was that before adv:mtage could be taken
of the Sales Tax Laws Validation Act, 1956 there had to be in
existence a State Act i.mposing tax on such sales and s. 27-A of the
Act imposed no such tax on the sales. We are unable to accept
this argument as correct. An identical question was the subjectmatter of consideration by this Court in M. P . V. Sundararamier
& Co. v. Tho State of Andhra Pradesh & another(') and it was held
thats. 22 of the Madras Sales Tax Act had a positive content
and the Explanation in the context of s. 22 authorised the State of
(I) 11958) S.C.R. 1422.
96
[1967] 2 S.C.R.
Madras to impose tax on sales falling within its purview.
In the
course of his judgment Venkatarama Aiyar, J., speaking for tl•e
Court, observed:
"These considerations will clearly be inapposite in
construing a taxing statute like the Madras Act, the object
of which is primanly to confer power on th~ State to levy
and collr.ct !dx. When we find in such a stati~te a provision
containing a prohibition followed by an Explanation
which is positive in its terms, the true interpretation to
'>e put on it is that while the prohibition is intended
t;, prevent taxation uf outside sales on the basis of the
nexus doctrine, the explanation is intended to anthorise
taxation
of sales falling within its purview, subject of
course to the other provisions of the Constitution, such
as Art. 286(2). It should be remembered that unlike the
Constitution, the law of a State can speak only within its
own territories. It cannot operate either to invest another
State with a power which it does not possess, or divest
it of a power which it does possess under the Constitution.
Its mandates can run only within its own borders. That
being the position, what purpose would the Explanation
i;erve ins. 22 of the Madras Act, if it Merely meant that
when goods are delivered under a contract of sale for
co'lsumption in the State of Madras, the outside State in
which property in the goods passes has no power to tax
the sale? That is not the concern of the State of Madras,
and indeed, the Legislature of Madras would be incompetent to enact such a law. In its context and setting,
therefore, the Exrlanation to s. 22 must mean that it
authorises the Stute of Madras to impose a tax on sales
falling within its purview. Thus, while in the context of
Art. 286(1) (a) the Explanation :hereto could be construed
as purely ne: ative in character though positive in form, it
cannot be so construed in its setting in s. 22 of the Madras
Act, where it must have a positive content. ...
"ection 22 of the Madras Act is couched in a similar language to
s. 27-A of the Act.
In our opinion, the principle of the decision
in M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh
& another(') therefore governs the present case.
We should also
refer to the additional circumstance that in the present case the third
Explanation to s. 2(g) incorporates into the definition of 'sale'
the
I'~planation occurring in Art. 286 in contrast to the Madras
Act v ; ;re there is no such incorporation in the definition of sale
under s. 2(h) of that Act. We are accorclingly of the opinion that
the argument of the appellant must be rejected on this aspect of
the case.
ti) !1958! S.C.R. 1422.
B
c
D
E
F
'
G
H
A
B
c
D
E
F
G
H
MOHANLAL v. M. P. STATE (Ramaswami,J.)
97,
The next question to be considered in this appeal is whether
the provisions of s. 4(6) of the Act are attracted in the circumstances
of the case. It was submitted for the appellant that the section has
no application because tobacco was not specified in the certificate of registration granted to the appellant "as intended for use
by it as raw material in the manufacture of any goods for sale by
actual uelivery in Madhya Pradesh for the purpose of consumption in that State", Section 2(j) of the Act, as it originally
stood, was to the following effect :
"Sales to a registered dealer of goods specified in such
dealer's certificate of registration as being intended for
re-sale by him, or for use by hlm in the manufacture of
any goods for sale or in the execution of any contract and
on sales to a registered dealer of containers and other
materials for the packing of such goods;"
The section was amended from time to time until, with effect from
December 1, 1953 it stood as follows:
"Sales to a registered dealer of goods declared by him
in the prescribed form as being intended for resale by him
by actual delivery in Madhya Pradesh for the purpose of
consumption in that State or of goods specified in such
dealer's certificate of registration as being intended for
use by him as raw materials in th~ manufacture of any
goods for sale by actual delivery in Madhya Pradesh for
the purpose of consumption in that State, and of containers
and other materials used in the packing of such goods;"
Section 4(6) of the Act was also inserted with effect from
December I, 1953 by the Madhya Pradesh Sales Tax (Amendmeni) Act 1953 (Act 20 -0f 1953). In consequence of these amendments it became necessary to amend the certificate of registration
granted to the appellant before the amendment of the Act. Therefore,
on January 5, 1954, even before the relevant Rule was
amended, the appellant applied for substitution of the words "raw
materials" for the words "for the purpose of manufacture". In
allowing the application the Sales Tax Officer did not comply with
the language of Form II but merely specified as raw materials "Tendu
leaves, Tobacco, Yarn" The contention of the appellant is that the
purchase of tobacco cannot be taxed because it was not "specified
in the dealers' certificate of registration as intended for use by
him as raw materials in the manufacture of any goods for the
purpose of sale by actual delivery in Madhya Pradesh for the
purpose of consumption in that State" as required by s. 4(6) of the
Act. We are unable to accept the argument of the appellant as
correct. It is true that there is a technical omission in the order of
the Sales Tax Officer amending the certificate of registration, but
the certificate must be fair!:; construed in the light of the language
98
SUPlll!MB COURT
llEPOllTS
(1967] 2 S.C.R.
of s. 8 and other relevant provisions of the Act.
Before the
A
amendment made by Act XX of 1953 s. 8(3) read as follows:
"8. (3) If the said authority is satisfied that an application
for registration is in order, it shall in accordance with such
rules as may be made under this Act, registt• the applicant
and grant him a certificate of registration in tLe prescribed
form which, in the case of a registered dealer who himself
manufactures any goods for purposes of sale shall specify
the class or classes of goods which are intended to be used
by him in the manufacture of such goods."
After the amendment the sub-section was to the following
effect:
·
"8. (3) If tht said authority is satisfied that an application
for registration is in order, it shall in accordance with such
rules as ;nay be made under this Act, register the applicant
and grant him a certificate of registration in the prescribed
form which, in the case of a registered dealer who manufactures any goods for purposes of sale by actual delivery in
Madi .ya Pradesh for the purpose of consumption in that
State shall specify the raw materials which are intended
to be used by him in the manufaaurc of such goods."
In this connection reference may be made to s. 2(j) (a) (ii)
which states that a selling dealer is entitled to deduct from his turnover sal~s to a registered dealer of goods "specified in such dealer's
certificate of registration as being intended for use bv nim as raw
materials in the manufacture of any goods for sale by actual delivery
in Madhya Pradesh for the purpose of consumption in that State".
It is manifest that the only legitimate object which the purchasing
dealer seeks in having a class 0f good specified i11 the certificate of
registration as "raw materials" is to purchase the goods tax-free in the
sense contemplated by the Act.
By asking for such specification
the dealer represents that he intcnil.s to use the goods specified in the
mauufacturc of other goods for the purpose of sale by actual delivery
in the State of Madhya Pradesh for the purpose of consumption
in that State. In this context reference should be made to declarations made hy the appellant to the Bombay dealers printed at
page 88 of the Paper Book. In these declarations the appellant stated
that it was purchasing tobacco for use as raw materials in the
manufacture of goods for sale by actual delivery in Madhya
Pradesh for the purpose of consumption in that State and that
tobacco was so specified in its certificate of
registration. As
we have already said, the certificate of registration granted to the
appellant must be construed in the context of s. 8 as it stood after
its arr.cndment and the declarations of the appellant made to the
Bombay dealers. If the language of the certificate is so construed
B
c
D
E
F
G
H
A
8
c
D
MOHANLAL V. M. P. STATE (Ramaswami, !.)
99
in the context of the amended s. 8 of the Act and along with the
declarations of the appellant, it is manifest that the appellant is
liable to pay tax on tobacco imported from Bombay dealers for the
relevant periods and that the requirements of s. 4 ( 6) of the Act are
satisfied in this case. The view that we have taken is borne out by
the decision of this Court in Modi Spinning & Weaving Mills Co.
Ltd. v. Commissioner of Sa/es Tax Punjab, and another(') in
which it was held that the registration certificate was only evidence
that the assessee was a registered dealer for purposes of certam
·commodities to be used in manufacture and any formal defect
iD the registration certificate was not material. We therefore
hold that the technical omission of the Sales Tax Officer to make a
specific entry in the certificate will not confer any benefit on the
appellant if there is other incontrovertible evidence in the case to
show that the appellant did purchase the goods specified in the
certificate as raw materials in the manufacture of any goods for
the purpose of sale by actual delivery in Madhya Pradesh for the
pnrpose of consumption in that State. Wi!, therefore, hold that
Mr. A. K. Sen has not been able to make good his argument on this
aspect of the case.
For these reasons this appeal fails and must be dismissed with
costs.
G.C.
Appeal dismissed.
(I) 16 S. T. C. 310.