Thiru Manickam and Co. v. the State of Tamil Nadu

Judgment

The Judgment of the Court was delivered by KHANNA, J. This appeal by special leave is against the judgment of the Madras High Court whereby the High Court dismissed the petition filed by the appellant under section 38 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the State Act). The matter relates to the assessment year 1960-61. The appellant firm is a dealer in cotton yarn. The appellant bought yarn from local dealers and manufacturers and, in turn, sold that yarn by way of inter-State sale. Sales tax under the State Act on the yarn purchased by the appellant had been paid by those manufacturers and dealers. The inter-State sales of yarn made by the appellant were asseS1Sed to tax under the Central Sales Tax Act (hereinafter referred to as the Central A~t) in the hands . of the appellant. The appellant claimed refund of the tax amounting to Rs. 16,769.96 paid under the State Act in respect of the yam sold by it in the course of inter-State trade in accordance with section 15 (b) of the Central Act and the proviso to section 4 of the State Act read with rule 23 of the Tamil Nadu General Sales Tax Rules, as these provisions stood at the relevant time.

The Additional Commercial Taxation Officer admitted the claim of the appellant for refund of the tax only in respect of the sum of Rs. 5,562.59 and rejected the claim in respect of the balance. On appeal the Additional Appellate Assistant Commissioner allowed refund of a further sum of Rs. 3,204.73 and rejected the claim regarding the balance of Rs. 8,002.64. On second appeal t'he [ 1977) 1 S.C. R. Appellate Tribunal relying upon the decision of the Madras High Court in M. A. Khader & Co. v. Deputy Commercial Taxation Officer (1), rejected the claim of the appellant for the balance of Rs. 8,002.64. At the instance of the State representative, the Tribunal further held that the appellant was not entitled to get refund of the amount of Rs. 5,562.59 and Rs. 3,240.73 in respect of which relief had been granted by the Appellate Assistant Commissioner. The appellant thereafter preferred revision petition to the Madras High Court under section 38 of the State Act.

The High Court dhmissed the said petition after observing that the principle laid down in the_case of M. A. Khader & Co. (supra) would _apply to the facts of this case. The apJ'Cllant thereafter came up in appeal to this Court by special leave. __Before dealing with the point of controversy, it may be •..1ppositc to refer to the material provisions of Jaw, as they stood at the relevant time. A number of goods have been declared under section 14 of the Central Act to be of special importance in inter-State trade or commerce. Cotton yarn i:s one of those. goods. Section 15 of the Central Act at the relevant time read as under : "15.

Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.-Evcry sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, ~lamely :- (a) the tax payable under that Jaw in respect of any sale or purchase of such goods inside the State shall not exceed two -per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage; (b) where a tax has been levied under that Jaw in rl)S- pect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such condition:s as may be provided in ~my law in force in that State." Section 4 of the State Act reads as under : "4.

Tax in respect of declared goods.-Notwithstanding anyfuing contained in section 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goodis in each year, whatever be the quantum of turnover in that year: Provided that where a tax has been levied under this section in respect of the sale or purchase of declarod goods and such goods al'e sold in the course of inter-State trade 25 S.T.C. 104. y y I 'THIRU MANICKAM v. TAMIL NADU (Khanna, J.) or commerce the tax so levied shall be refunded -to such person in such manner and subject to such conditions · as may be prescribed." According to the Second Schedule to the State Act, the tax on cotto• yarn but excluding cotton yarn waste shall be one -per cent at the point of the first sale in the State.

Clauses (1) to (3) of rule 23 of the Madras General Sales Tax Rules, :\,959 read as under : ·. "23. (I) The tax levied under section 4 in respect of the sale or purchase inside the State of any goods specified therein shall, if such goods are sold in the course of inter- State trade qr commerce, be refunded in the manner and . subject to the conditions prescribed in this rule to the dealer who has made· the inter-State sale and has paid the tax under the Central Sales Tax Act, 1956, in respect of such sale. (2) Every such dealer who claims a refund under this rule, shall, within the time anowed in sub-rule (3), submit to the assessing authority a statement in Form A-4. (3) The statement referred to in sub-rule (4) shall be submitted to the assessing authority not later than three months from the date on which the dealer paid the Central sales tax 9ue on the transaction in respect of which he claims refund of the State sales tax:

Provided that the assessing authority may condone delays up to a period of fourteen days in the submission of · the statement,· if he is satisfied t.hat the dealer had sufficient cause for not submitting· the statement within the said period." ll . In appeal before us, Mr. Desai on behalf of the appellant has assailed the judgment of the· High Court and has urged that in accordance with clause .(b) of section 15 of the Central Act, the proviso to section 4 of the State Act and rule 23 of the Madras General Sales Tax Rules, the sales tax under the State Act in respect of yarn, which was the subjact-matter of inter-State sale, should have been paid to the appellant. The High Court, according to· the learned counsel, was . in error in holding to the contrary. As against that, learned Additional Solicitor General has canvassed for the correctness of the view taken by the High Court. There is, in our opinion, considerable force in the contention advanced by Mr. Desai.

Section 15 of the Central Act, as it existed at the relevant time, contemplates that every State law in so far. as it imposes or authorises the imposition of tax on sale or purchase of _declared goods, would be subject to the restriction and condition that the tax payable nnder that law in respect of any sale of purchase of such goods in- . side the State, shall hot exceed two per cent of the sale or purchase price thereof and .. such tax ~hall not be levied at more than one ~tage. Clause (b) of that section has a direct bearing, and according to that clause,. where tax has been levied under the State law in respect of sale or purchase of declared goods which are subsequently sold in the course. of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject. to such conditions as may be prescribed in any law in force in that State.

Section 4 of the State Act has been enacted in conformity with section 15 of . the Central Act. · The proviso to that section deals with the refund of the sales tax levied under the State Act in respect of declared goods when such goods are sold in the course of inter-State '1"ade or commerce. According to that proviso, where a tax has been levied under section 4 in respect of the sale or purchase of declared goods. and such goods are sold in the course of inter-State •trade or commerce, the amount. of tax shall be refunded to such person in ruch manner and subject to such conditions as may be prescribed. In pursuance of this proviso, the State Government has framed rule 23 of the Madras General Sales Tax Rules, 1959. According to clause · (1) of that rule, the refund of the sales tax has to be made to the dealer who makes the inter-State sale and who has paid the sales tax under the Central· Act in respect of such sale.

Clause (3) of the rule provides that statement shall be. submitted to the assessing authority by the aforesaid dealer not later than three months from the date on which the dealer pays the tax under the Central Act. It may be stated t)lat the Madras General Sales Tax Rules, 1959 had to be placed on the table of both the Houses of the State legislature under su)l-section (5) of section 53 of the State Act .. In the face of clause (b) of section 15 of the Central Act, the proviso to section 4 of the State Act and rule 23 of the Madras General Sales Tax Ruleo, we have no doubt in our mind that it is the appellant who is entitled to :;et the refund of the sales tax levied under the State Act in respect of the goods in question because it was the appellant who sold the goods in the course of inter-State trade and paid the sales tax under the Central Act on that account. . . The High Court in turning down the claim of the appellant relied upon its earlier decision in the case of M. A. Khader & Co. (supra).

Perusal of the facts of that case would show that the assessee therein sought a writ of certiorari to quash the assessment made under the· Central Act in respect of transactions which were admittedly inter- State sales. The question of asking for the ref,.nd of the sales tax paid under the State Act did not. arise directly in that case .. There were . no doubt some observations in the course of that judgment, according to which refund of the sales tax can be claimed only by . the person who himself has earlier paid that tax, and not by a person who has not himself paid such tax. So far as those observations are concerned, we are of the opinion that the> emphasis in the word "refunded" as used in clause (b) of section 15 of the Central Act and the proviso to section 4 of the. State Act is ··on repayment of the amount. A word can have many meanings. .J'o find out the exact connotation of a word in a statute, we must look to the context in which it is used.

The context would quite often provide( the key to meaning of the word and the sense it should cairy. lts setting would give colour ·to it and provide cue to the intention of the legislature THIRU MANICKAM v. TAMIL NADU (Khanna,!.) 955. in using it. A word, as said by Holmes, is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in wWch it is used. Th" context in wWch the word "refunded" is med shows that such repayment need not be to the person who initially paid the tax. It is indeed for the State legislature to specify the person to whom such amount is to be repaid either in the statute enacted by it or to make a provision for that purpose in the rules.

The State legislature has made it clear in the proviso to section 4 of the statute · that provision in this respect would be made in the rules.· The rules wWch have been framed leave no doubt that the amount has to be paid to the dealer who sells the goods in the course of intelr-State trade· and who has paid the tax under the Central Act in· respect of such sale. There is also no anomaly in paying tha amount of the sales tax under the State Act to a dealer who sells declared goods in the course of inter-State trade, even though htl did not Wmself pay the tax under the State Act in respect of those goods. The reason for that is that the price charged from such dealer by the person from whom he purchases the goods would normally take into account the sales tax paid by the seller. Assuming that there was some ambignity in the languages of clause (b) of section 15, as it existed at the relevant time, the matter is made clear by the amendment made in the Central Act by the Central Sales.

Tax (Amendment) Act, 1972 (Act No. 61 of 1972). As a result of the amendment, clause (b) of section 15 of the Central Act reads as under: "(b)

Where a· tax has been levied under that law in . respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be reimburse.d to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may. be provided in any law in force in that Sta.le." · The amended provision makes it plain beyond any pale of controversy that the tax levied under the State Act in respect of declared goods has to be reimbursed to the person making sale of those goods in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in the law in force in that State.

According to the notes explaining the different clauses appended to the statement of objects and reasons of the. Bill which emerged as the amending Act, the amendment made in clause (b) makes it clear that local sales tax would be reimbursed to the person making the sale in the course of inter-State trade and commerce. The amendment made in clause (b) can thus be taken to be an exposition by the legislature itself of its intent contained in the earlier provision. We are not impressed by the argument of the learned Additional Solicitor-General lt-!338SCI/76 that the amendment mad~ in clause (b) was intended to mark a departnre from the position in law as it existed before the amendment.

The fact that the amendment of clause (b) of section 15 was not like some other provisions given retrospective effect, 'would not materially affect the position. ~s :i.Iready m~ntioned above, the legislature ·as a result of the amendment, clarified what was implicit in the provisions <ts they existed earlier. An amendment which is by way· of clarification of an earlier ambigiicius provision can be useful aid in construing the earlier provision, even though such amendment is not given retrospective effect. We may refer in this context to observations on page 147 of Craies on Statute Law (Sixth Ed.) which read as 'Ullder : " .... iri · Cape Brandy Syndicate v. I.R.C.(') Lord Sterndale M. R. said : 'I thin!< it is clearly established in Att.-Gen. v. Clarkson, supra, that subsequent legislation may be looked at in order to see the proper construction to be put upon an earlier Act where that earlier Act is ambiguous:

I quite agree that subsequent legislation if it proceeded on an erroneous construction of previous legislation cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier'." Looking to all the facts, we are of the view that the appellant-firm is entitled to be paid the amount of sales tax levied under the State Act in respect of the goods sold by it in the course of inter-State trade provided the appellant has paid the sales tax under the Central Act in respect of thooe sales. We accordingly accept the appeal, set aside the judgment of the High Court and order that the appellant-firm . be paid the amount of sales tax levied under the State Act in respect of the goods sold by it in the course of inter-State trade· provided the appellant has paid the sales tax under the Central Act in respect of those sales.

The appellant shall be entitled to recover its costs both in this Court as well as in the High Court from the respondent. P. B. R. Appeal allowed. (I) [19211 2 KB. 403 at P. 156. I