Rajdhani Waste Cotton Agency vs Commissioner Of Sales Tax
1991 Latest Caselaw 572 Del

JUDGMENT

D.K. Jain, J.

1. Under section 45 of the Delhi Sales Tax Act, 1975, the Sales Tax Tribunal has referred the following question to this Court :

"Whether on the facts and in the circumstances of the case the Tribunal was right that the registration in the present cases should have been made effective from 17th June, 1976, instead of 21st June, 1976, as directed by the authorities below or from 10th June, 1976, as claimed by the dealer ?"

2. Briefly stated, the facts, giving rise to the present references, are that the dealer had placed an order for purchase of goods worth Rs. 21,661 with an Ahmedabad concern. Rupees 10,000 were paid as advance vide a bank draft on 29th May, 1976. The goods were dispatched by the Ahmedabad party through road transport on 10th June, 1976. On 17th June, 1976, the dealer applied for registration under the Central Sales Tax Act, 1956 and prayed that he be granted registration with effect from 10th June, 1976. Meanwhile, the goods dispatched from Ahmedabad were taken delivery of by the dealer at Delhi on 21st June, 1976, after getting the documents released from the bank on payment of the balance purchase price. The assessing authority granted registration to the dealer under the local and Central Sales Tax Acts but made them effective from 21st June, 1976. The contention of the dealer, that the registration certificate should be operative from 10th June, 1976 and from the said date he must be treated as a registered dealer so that he could avail of the relief from tax on issue of "C" form/declaration, did not find favor with the assessing authority.

3. The dealer impugned the validity of the order of the assessing authority by an appeal to the Assistant Commissioner, Sales Tax, but with no success.

4. Feeling still aggrieved, the dealer filed appeals before the Sales Tax Appellate Tribunal. The Tribunal recorded its findings as under :

"Feeling aggrieved the appellant has moved the present appeals. I have heard the parties and given my due consideration to all the circumstances. I find that under section 3 of the Central Sales Tax Act, a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another. In the present case when the goods were dispatched from Ahmedabad on 10th June, 1976, these provisions came into play and, therefore, so far as the appellant was concerned the purchase of goods had taken place. It would be clear from the narration of facts above that the agreement of purchase had been arrived at much earlier in May, 1976, when the appellant had paid Rs. 10,000 as advance. The rest followed in due course. According to the appellant, they were the consignee of the goods receipt of the transport company.

The definition of 'dealer' as contained in section 2(b) also covers persons who carry on business of buying or selling goods. The appellant thus qualified to be a 'dealer'. The taxable quantum in relation to a dealer who imports for sale any goods into Delhi is nil. In other words, to qualify to be a dealer, it is not necessary in such a case that the sales must have been effected. An activity in the nature of business does not essentially take place at the time of sale. It is a continuous process and there are several stages, buying of goods as merchandise or of raw material for manufacturing activity are as well part of the overall business activity. It may be that tax may be leviable when sales are effected. Section 6 of the Central Sales Tax Act, 1956, envisages the liability to tax on the taking place of sale. However, to qualify to be a dealer, one has only to focus attention whether one carries on business of buying or selling goods.

The effect of a dealer getting himself registered is twofold. One is while effecting sales, and the other while effecting purchases. So far as the taxing authority is concerned, it is primarily concerned with the sales. In case the turnover is of a particular level, the liability for tax qua such authority accrues on the dealer when sales are effected. In case those sales are to a registered dealer and the necessary declaration 'C' forms are available, then the incidence of tax may not be there or may be there or may be at much reduced rate.

The other effect of registration comes into play when purchases are effected. The benefit of this primarily accrues to the dealer. He is entitled to make purchases for his business after furnishing declarations 'C' forms on payment of no tax or at much reduced tax. This is a valuable benefit available to the dealer and is not co-related to the sales which he may effect. This is all the more so on inter-State sales where no minimum taxable turnover is prescribed. In other words, a registered dealer is entitled to the benefits available while effecting purchases although there are no sales. The Revenue has laid considerable emphasis on section 7 of the Central Act and section 15 of the Delhi Sales Tax Act, 1975, in order to show that liability to pay tax arises only when sales are effected. In Delhi it is pointed out, there is no purchase tax. However, this is alright so far as the Revenue and the exigibility to tax are concerned. The dealer, on the other hand, may be more interested to avail the benefit of registration while effecting purchases. It may not be correct to deny him this benefit especially when he qualifies to be a dealer and the effecting of purchases may itself constitute a stage in the activity of business. This may have all the more significance for a beginner in business as he has to in any case start the same by first effecting purchases. Sales come later. There is nothing in the law which purports to place such beginner at a disadvantage vis-a-vis those who are already well established and have effected sales also. To lay undue emphasis on the sales aspect for inviting liability to tax is to ignore the dealer's benefit which may flow to him from registration at the stage of effecting purchases.

The crucial question that, therefore, arises is from which date registration is allowable. There is no clear injunction by the law in this respect. Normally registration is effective from the date of application. The law also postulates that application for registration can be made within 30 days when the dealer becomes liable to pay tax. In other words up to 30 days registration can be made effective retrospectively. This has also reference to liability to tax.

So far as purchases are concerned, there is no provision permitting retrospective effect of any registration. Section 3 of the Central Act envisages when a sale or purchase takes place in the course of inter-State trade. It has already been noted above that in the present case the purchase qualified as such from 10th June, 1976. However, this section does not deal with registration or enjoins that registration should be made effective accordingly.

In the situation, the conclusion cannot be accepted that registration must take effect in such cases from the dates of the applications. It is, therefore, held that the registration in the present case should be made effective from 17th June, 1976 instead of 21st June, 1976, as directed by the authorities below. Whether any benefit accrues to the appellant on this score will be gone into by the Sales Tax Officer."

5. Thereafter on an application having been made, the aforesaid question has been referred to this Court.

6. It is contended by the learned counsel for the dealer that as ultimately the registration certificate was granted, the registration must relate back to take effect from the date when the application for registration is filed. The learned counsel for the Commissioner, on the other hand, has supported the view taken by the assessing authority.

7. Before examining the rival contentions, it would be appropriate to have, at the outset, a look at the relevant provisions of the Acts and the Rules made there under.

8. Taking the Central Act first, the material provisions are to be found in section 7 of the Central Sales Tax Act and relevant portion whereof is extracted below :

9. Section 7(1) :

"Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.

Section 7(2) .................................

10. Section 7(3) :

"If the authority to whom an application under sub-section (1) or sub-section (2) is made is satisfied that the application is in conformity with the provisions of this Act and the Rules made there under and the condition, if any, imposed under sub-section (2A), has been complied with, he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-section (1) of section 8."

11. Section 7(1) of the Act stipulates that every dealer liable to pay tax under the Act shall, within such time as may be prescribed for the purpose, make an application for registration under the Act to such authority in the appropriate State as the Central Government may, by general or special order specify. Rule 4 of the Central Sales Tax (Registration and Turnover) Rules, 1957, provides that an application for registration under sub-section (1) of section 7 shall be made not later than 30 days from the date on which the dealer becomes liable to pay tax under the Act. Sub-section (3) of section 7 of the Act contemplates that if the authority to whom an application under sub-section (1) of section 7 is made is satisfied that the application is in conformity with the provisions of the Act and the Rules made there under, the authority shall register the dealer and accord him a certificate of registration in the prescribed form.

12. Liability to tax on inter-State sales is determined under section 6 of the Act, relevant portion whereof is extracted below :

13. Section 6 :

(1) "Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified :

Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5, is a sale in the course of export of those goods out of the territory of India.

(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable whether on the seller or the purchaser under the sales tax law of the appropriate State if that sale had taken place inside that State."

(2) ...............

14. Section 6 contemplates that every dealer shall be liable to pay tax under the Act on all sales of goods, other than electrical energy, effected by him in the course of inter-State trade or commerce. A sale and its corresponding purchase are two facets of one and the same transaction; like the transaction is a sale qua seller, it is a purchase qua purchaser. Unlike intra-State sales where incidence of tax may also be on the purchaser on the point of purchase, in the case of inter-State transaction, it is only the seller who is within the taxing jurisdiction of the Act.

15. Whereas section 6 of the Act postulates the liability for tax on inter-State sales, section 3 of the Act specifies as to when a sale of goods is said to take place in the course of inter-State trade or commerce. Section 3 enacts :

16. Section 3 :

"When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. - A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase -

(a) occasions the movement of goods from one State to another; or

(b) is effect by a transfer of documents of title to the goods during their movement from one State to another;

............."

17. Clause (a) of section 3 of the Act contemplates a sale in the course of inter-State trade or commerce which occasions the movement of goods from one State to another. It thus, seems clear that a sale would fall in section 3(a) if the terms of contract stipulate movement of goods sold.

18. Sub-section (1) of section 7 mandatorily enjoins such a dealer to be registered irrespective of the gross turnover, exceeding or not exceeding a particular quantum. A single inter-State sale, makes a dealer liable to pay tax and get registered under the Act. This indeed is the undisputed position in law.

19. Having noticed the above provisions, we now advert to the question posed for determination in the instant case. The question is whether registration certificate granted herein under section 7 of the Act, takes effect from 10th June, 1976, the date when consignment was dispatched from Ahmedabad to Delhi as claimed by the dealer or from 17th June, 1976, the date of filing of application for registration under section 7 or from 21st June, 1976, when the dealer herein effected his first inter-State sale.

20. On this very circular point the Act and the Rules are silent and, therefore, answer to the said question has to be found from the scheme of various provisions referred to and briefly discussed above.

21. Section 7(1) of the Act debars a dealer from carrying on business in inter-State sales unless he is a registered dealer. A plain reading of the section makes the dealer's liability to pay tax and get itself registered coterminous. No specific point of time or stage, as to when a dealer may apply for registration is prescribed in the Act. Rule 4, however, puts an outside limit of 30 days from the date of such sale within which a dealer must apply. A harmonious construction of the various provisions, however, seems to indicate the intention of the Legislature as being that in the case of a dealer who makes an application, simultaneously with or within thirty days of the incurrence of liability to pay tax, and does all what he is required to do by section 7 of the Act read with Rules made there under, the registration certificate takes effect from the date of submission of the requisite application.

22. We are, therefore, of the view that a dealer's liability to pay tax and the making of an application being coterminous, the certificate, though granted later would relate back to the date of application, when the application for registration is filed as stated above. The other view which was faintly suggested by the learned counsel for the Commissioner that the registration certificate will take effect from the date of its issue only is obviously fraught with uncalled for consequences whereby a dealer may be held liable for a penal action for the laches and delays on the part of the assessing authority in issuing the certificate of registration.

23. Broadly speaking, the same is the position in the local Act. Section 14 of the Delhi Sales Tax Act, 1975 (hereinafter referred to as "the local Act") in material respect, is in pari materia to section 7 of the Central Act. In that it lays down that no dealer, shall, while being liable to pay tax under section 3 of the local Act, carry on the business as a dealer, unless he has been registered and possesses a certificate of registration. It is therefore, obligatory on such dealer, like under the Central Act, who has become liable to pay tax under the local Act, to get himself registered. Rule 15(5) of the Rules made under the local Act (like rule 4 of the Rules made under the Central Act) prescribes a period of 30 days, from the date of dealer's becoming liable to pay tax, within which he is liable to get himself registered.

24. The liability to pay tax is imposed by section 3 of the local Act. Clause (ii) of sub-section (2) of section 3, of the local Act, which is relevant for the present purpose, provides that all such dealers who, after the commencement of the local Act either become liable to pay tax under the Central Sales Tax Act or are registered under the said Act, become liable to pay tax on all sales effected by them from the date they become liable or are registered under the Central Act, whichever is earlier.

25. It is, therefore, clear that a dealer is obliged to get himself registered under the local Act only when any one of the conditions stipulated in section 3 of the Act, briefly mentioned above, exists and he becomes liable to pay tax. Thus, like the Central Act, a dealer's liability to get registered is coterminous with his liability to pay tax.

26. On the aforesaid analysis, we are of the considered opinion that in the instant case, the dealer having effected first inter-State sale admittedly on 21st June, 1976 and thus incurred liability to pay tax under the Act on the said date, the conclusion of the assessing authority that the registration certificate shall take effect from 21st June, 1976 is correct. The conclusion arrived at by the Tribunal to the effect that registration should be made effective from 17th June, 1976, i.e., from the date of application for grant of registration, in our view, cannot be sustained because on 17th June, 1976 the dealer had not incurred liability to pay tax under the Act.

27. In other words, the registration certificate must take effect from the date of application or from the date of incurrence of liability to pay tax whichever is later.

28. As regards the local Act, having regard to the provisions of sub-clause (ii) of sub-section (2) of section 3, we are again of the view that the certificate of registration granted under the local Act will also take effect from 21st June, 1976.

29. In the aforesaid view of the matter, the question referred to this Court is answered in the negative and in favor of the sale tax authorities.

30. In the facts and circumstances of the case, there will be no order as to costs.

31. Reference answered in the negative.