ONKARLAL NANDLALversusSTATE OF RAJASTHAN & ANR.

                                                                             1075


                                  ONKARLAL NANDLAL
                                          v.                                        A
                           STATE OF RAJASTHAN & ANR.

                                  SEPTEMliEK 23, 1985
•
           [P.N, BHACMATI, C.J., R,S, PATHAK AND A,N, SEN, JJ,]
                                                                                    B
          Rajasthan Sales Tax Act, 1954, s.2(o) Explanation II -
    Intervretatlon of - Effect of incorporating sub-s.(2) of s.4 of
    Central Sales Tax Act 1956 in the Explanation - l<esale of goods
    in the course of inter-State trade of commerce -            \~hether   it can
    still be regarded as resale within the State.
                                                                                    c
          Interpretation     of     Statutes   -   &lle   of   incorporation    -
    Explained.

          Practice & Procedure - Appeal directly against an order by
    an Officer in the hierarchy·- When can be entertained - Art. 136,
    Constitution of India.                                                          D

          The Rajasthan Sales Tax Act 1954 (State Act) by Sub-section
    (o) of section 2 defines "sale" to mean inter alia "any transfer
    of property in goods for cash or for def erred payment or for any
    other valuable consideration. Explanation (ii) of section ·2(0)
    provides that "a transfer of property in goods shall be deemed to               E
•   have been made within the State if it fulfils the requirements of
    sub-sec. (2) of s. 4 of the Central Sales Tax Act, 1956 (Central
    Act). Sub-s.(s) of sec.2 defines "taxable turn over" to mean
    "that par~" of turn over which remains after deducting therefrom
    the aggregate amount of the proceeds of sale of goods, which have
    been sold to persons outside the State for consumption outside                  F
    the State. Sub-s.(l) of sec.4 of the Central Act provides that
    subject to the provisions contained in sec.3, when a sale or
    purchase is determined in accordance with sub-s.2 to take place
    inside a State, such sale or purchase shall be deemed to have
    taken place outside all other States. Sub-s.(2) lays down that a
    sale or purchase of goods shall be deemed to take place inside a                G
    State, if the goods are within the State in the case of specified
    or ascertained goods, at the time the contract of sale is made.

          The appellant-assessee, a registered dealer both· under the
    provisions of the State Act and the Central Act, purchased poppy
    seeds against Declarations in Form No •.s.T.17 furnished to the
                                                                                    H
    1076              SUPR&'!E COURT REPCRTS     [1985] SUPP.3 s.c.R.


    selling dealers. In the Declarations in Form No. S.T.17 it was
A
    stated that the assessee was purchasing the poppy seeds for the
    purpose of "resale within the State". The assessee, resold the
    poppy seeds to different buyers under contracts executed by and
    between the assessee and the buyers at Bhawani Mandi. Admittedly,
    when these contracts were made between the assessee and the
    buyers, the poppy seeds forming subject matter of the contracts
    were specific goods in deliverable condition situate in Bhawani     •
    Mandi and the property in the poppy seeds accordingly passed to
    the buyers under the contracts in Bhawani Mandi. While completing
    the assessment of the assessee to sales tax for the assessment
    years 1975-76 and 1976-77, the Colllllercial Tax Officer included
    the purchase price paid by the assessee for the poppy seeds in
c   his taxable turn over under the provisions of second proviso to
    cl.4 of suH.(s) of s.2 of the State Act on the ground that the
    resales of the poppy seeds effected by the assessee were sales in
    the course of inter-State trade and connnerce and were therefore
    not sales within the State and hence the poppy seeds purchased by
    the assessee were used for a purpose other than that mentioned in
u   the Declarations.

          Aggrieved by the aforesaid order, the assessee preferred
    civil appeals Nos. 207 and 208 of 1983 by special leave directly
    to Supreme Court. The facts of these appeals are broadly similar
    to the facts of the other appeals comprised in this group.
    Counsel on behalf of the appellant contended (i) that though it
    was true that the resales effected by it were sales in course of
    inter-State trade or connnerce as defined in sub-s.(3) of the
    Central Act, they were still sales within the State in accordance
    with the principles formulated in sub-s.(2) of sec.4 of the
    Central Act; (ii) that the resale by it being sales in the course
F
    of inter-State trade or connnerce, were not liable to be taxed by
    the State and could be taxed only by the'Central Government under
    the Central Act but that did not deprive the resales of their
    character of sales within the State which character attached to
    them by reason of sub-s.(2) of sec.4 which was incorporated in
    the State Act by Explanation II to suH.(o) of sec.2 of the
                                                                      •
    State Act and (iii) that what was incorporated in Explanation II
G   to suH.(o) of sec.2 of the State Act was only suH.(o) of
    sec.2 of the State Act and not sub-a.(l) of sec.4 of the Central
    Act and therefore the opening words in suH.(l) of sec.4 had no
    impact on the provisions enacted in the Explanation. On the other
    hand, counsel for the respondent-Revenue argued (1) that if on an
    application of the principles set out in sec. 3 of the Central .,,
H   Act, a sale was a sale in the course of inter-State trade or
    Commerce, it could not possibly be regarded as a sale within the
                        ONKARLAL NA.~DLA.L v. STATE             1077


    State and (2) that since the resales effected by the appellant-
    assessee were admittedly sales in the course of inter-State
    admittedly sales in the course of inter-State trade or commerce,
    they could not be said to be resales within the State as
    envisaged in the Declarations in From No.ST 17.

•         A.llowing the appeals,
                                                                        B
          llEill : 1. It cannot be said that the assessee used the
    goods for a purpose other than that mentioned in the
    Declarations. The assessee resold the goods within the State as
    mentioned in the Declarations in Form No. ST.17 furnished by him
    to be selling dealers. The assessments made on each asses see to
    the extent that the assessments sought to include in the taxable    c
    turnover the purchase price paid by the assessee in respect of
    the goods purchased against Declarations in Form No. ST.17
    furnished to the selling dealers are set aside. [1090 D-E]

          2. There is, no antithesis between a sale in the.course of
    inter-State trade or coannerce and a. sale inside the State. Even   D
    an inter-State sale must have a situs and the situs may be in one
    State or another. It does not involve any contradictiOn in saying
    that an inter-state sale or purchase is inside a State or outside
    it. The situs of a sale may fall for consideration from more than
    one point of view. It. may require to be considered for the
    purpose of determining its exigibility to tax as also for other
    purposes such as the one arising in the present cases. Of course,
    a sale which is in the course of inter-State trade or commerce
    cannot be taxed by a State Legislature even if its situs is
    within the State, because the State Legislature has no
    legislative competence to impose tax on sale in the coursn of
    inter-State trade or commerce. That can be done only by Parlia-     F
    ment. If therefore a question arises whether a sale is exigible
    to tax by the State Legislature, it may have to be considered
    whether it is a sale in the course of inter-State trade or
    commerce. The same sale in another context may have to be
    examined from a different point of view for determining where its
    situs lies and whether it is a sale inside the State or outside     G
    the State. There is therefore no incompatibility in the same sale
    being both a sale in the course of inter-State trade or commerce
    within the meaning of sec. 3 of the Central Act as also a sale
    inside the State in accordance with the principles laid down in
    sub-s. 2 of sec.4 of the Central Act. [1086 D-H; 1087 A]

          3. It is a recognised cannon of construction that an          H
    expression used in a rule, bye law or form issued in exercise of
     1078              SUPRE:1E COURT REPORTS     [1985] SUPP.3 s.c.R. ,..


A    power conferred by a statute must, unless there is anything
     repugnant in the subject or context, have the same meaning as is
     assigned to it under the statute. The expression "resale within
     the State" in Form No. ST17 must therefore be read in the light
     of Explanation II to sub-s. (o} of sec.2 of the State Act which
     lays down as to when a sale shall be deemed to have been made
     within the State and this provision in the Explanation must          •
rl
     govern the determination of what is "resalw within the State"
     within the meaning of that expression as used in Forom No. ST17.
     (1087 C-E]

            3,(ii) Explanation II to sub-s.(o} of sec.2 of the State
c    Act, enacts as to when a sale shall be deemed to be a sale within
     the State by reference to sub-s.(2) of sec.4 of the Central Act.
     It is only sub-s. (o} of sec. 2 which is incorporated in
     Explanation II to sub-s,(o} of sec.2 of the State Act and the
     Court is called upon to consider as to what is the effect of such
     incorporation. The Court is not concerned with the interpretation
0    of sub-s.(l) or sub-s.(2) of s.4 in the context of s.3 of the
     Central Act. The State Legislature could have very well
     reproduced the entire language of sub-s.(2) of sec.4 bodily in
     Explanation II to sub-s.(o) of sec.2 but it preferred to employ a
     simplar device by incorporating by reference the provisions of
     sub-s,(2} of sec.4 in Explanation II to sub-s.(o) of sec.2, The
     rule of incorporation is that when a subsequent Act amends an
     earlier one in such a way as to incorporate itself, or a part of
     itself, into the earlier, then the earlier Act must thereafter be    •
     read and construed (except where that would lead to a repugnancy,
     inconsistency or absurdity) as if the altered words had been
     written into the earlier Act with pen and ink and the old words
F    scored out so that thereafter there is no need to refer to the
     amending Act at all. Therefore, Explanation II to sub-s,(o) of
     sec. 2 must be interpreted as if sub-s. (2) of sec. 4 were written
     out verbatim in the Explanation and once sub-s. (2) of sec.4 is
     written out in the Explanation, there is no occasion or need to
     refer to the Central Act from which this incorporation is made or
     to its purpose or context. (1087 E-F; 1088 H; 1089 A-C; 1089 C-ll]
G
            In re Wood's Estate (1886) 31 Ch. D, 607 & Shamrao v.
     Parulekar,  Ill.strict llagistrate, Thana A.I.R. 1952 s.c. 324,
     relied upon.

           Craies on Statute Law, 5th Edition, page 207, Crawford on
                                                                          (
H    Statutory .eoDstruction page 110, referred to,

           ec-issiooer of Sales tax v. !1!>drej Soap Private Ltd. 23
     s. r.c. 489, State of Orissa v. Jobri -Hal 37 s. r.c. 157 and
     Georgopoulos v. State of Maharashtra 37 S,T,C, 187, approved.
    ~.
                            ONKARLAL NANDLAL v. STATE                  1079


               M/s. Polestar Electronic (Pvt.) Ltd. v. Addl. ec-issiODer
                                                                              A
         Sales Tax and Anr. (1978) l s.c.c. 636, referred to.

          In the instant case, at the time when the contracts of
    resale were made by the assessee, the goods were specific
    ascertained goods lying at Bhawani Mandi inside the State and if
... that be so, the resales affected by the assessee must be deemed
                                                                              B
    to have taken place inside the State on the principles 1'1d down
    in sub41.(2) of sec.4 of the Central Act as incorporated in
    Explanation ll to sub-s.(o) of sec.2 of the State Act. lt did not
    make any difference to..this position that the resales were sales
    in the course of inter-State trade or coumerce. The only
    consequence of the resales being sales in the course of inter-
    state trade or COOlllerce was that they were not taxable under the        c
    State Legislation. (1089 F-G]

               Ordinarily the Supreme Court does not entertain an appeal
         directly against an order made by an officer in the hierarchy,
         when there are other remedies by way of appeal or revision
                                                                              D
         provided to an assessee under the statute. However, it would be
         futile to drive the assessee to the procedure of appeal and
         revision and then a Writ Petition to the High Court when the High
         Court in another case has already taken the view that when a
         resale is made by an assessee which is in the course of inter-
         State trade or coumerce, it cannot be regarded as a resale within
         the State and hence such resale would constitute a breach of the     E
•        Declaration given by the assessee to the selling dealer so as to
         attract of the applicability and the purchase price paid by the
         assessee would consequently be liable to be included in the
         taxable turnover of the assessee, (1081 C-G)
                                                                              F
               CIVIL APPELIATE JURISDICTION : Civil Appeal Nos. 207-08 Of
         1983 etc.

               From the Judgment and Order dated 22.9.1982 of the
         Commercial Taxes Officer, Jhalawar for Tax Assessment Year (1)
         1982-83.
                                                                              G
               Soli J, SorabJee, F.S. Nariman, R.L. &11ieya and S.K.   Jain
         for the Appellant,

               Dr. L.M. Singhvi and H.D. Sharma for the Respondents.

               The Judgment of the Court was delivered by
                                                                              H
    1080              SUPREME COURT REPORTS      [ 1985] SUPP. 3 S.C. R, r


A         BHAGWATI, C,J, These appeals by special leave raise a short
    question of construction of certain provisions of the Rajasthan
    Sales Tax Act 1954 (hereinafter referred to as the State Act), It
    is a pure question of law and does not depend for its
    determination on the distinctive facts of any particular case out
    of this group of ·appeals but in order to arrive at a proper
    determination, it is necessary to consider this question in its ,...
    proper perspective and therefore the broad constellation of facts
    in which the question arises may be briefly stated.

          We will confine ourselves only to the facts of Civil
    Appeal Nos. 207-208 of 1983 for the facts of this appeal are
c   broadly similar to the facts of the other appeals comprised in
    this group. The assessee. is a partnership firm which carries on
    business in grains, oil seeds, poppy seeds~ etc., in Bhawani
    Mandi in District Jhalawar in the State of Rajasthan. The
    assessee is a registered dealer under the provisions of the State
    Act and is also registered as a dealer under the provisions of
D   the Central Sales Tax Act 1956 (hereinafter referred to Central
    Act). The assessment year with which we are concerned in this
    appeal are assessment years 1975-76 and 1976-77. During these two
    assessment years, the assessee purchased poppy seeds against
    Declarations in Form No. S.T. 17 furnished to the selling
    dealers. 'These Declarations in Form No. S.T. 17 stated that the
E   assessee was purchasing the poppy seeds for the purpose of resale
    within the State. The assessee, after purchasing the poppy seeds
    against these Declarations, resold the same to different buyers
    under contracts executed by and between the assessee and the
    buyers. at l:Shawani Mandi. It was not disputed that at the date
    when these contracts were made between the assessee and the
F   buyers, the poppy seeds forming subject matter of the contracts
    were specific goods in deliverable condition situate in Bhawani
    Mandi and the property in the poppy seeds accordingly passed to
    the buyers under the contracts in Bhawani Mandi. The resale of
    poppy seeds to the buyers were therefore, according to the
    assessee, sales within the State and it could not be said that
    the poppy seeds purchased by the assessee were used by it for any
G   purpose other than the one mentioned in the Declarations
    furnished by the assessee to the selling dealers. But while
    completin~ the assessment ,of the assessee to sale tax for the
    assessment years 1975-76 and 1976-77, the Commercial Tax Officers
    took the view that the resale of the poppy seeds effected by
    assessee wer~ sales in the course of inter-State trade and
    commerce and were therefore not sales within the State and hf •lCe
     the poppy seeds purchased by the assessee·were used for a purpose
•                 ONKARLAL NANDLAL v. STATE [BHACMATI C,J,]                  1081


    other than that mentioned in the Declarations furnished by the                  A
    assessee to the selling dealers and consequently the purchase
    price of the poppy seeds was liable to be included in the taxable
    turn over of the assessee. The Commercial Tax Officer accordingly
    passed two assessment orders on 22nd September 1982, one for the
    assessment year 1975-76 and the other for the assessment year
    1976-77 and included the purchase price paid by the assessee for                B
    the poppy seeds in the taxable turn over of the assessee. The
    assessee there upon preferred the present appeal by special leave
    directly to this Court.                             ·

          Now at the outset we should like to make it clear that
    ordinarily we do not entertain an appeal directly aginst an order               c
    made by an officer in the hierarchy, when there are other
    remedies by way of appeal or revision provided to an assessee
    under the statute. Here the assessee         cou~d   have preferred an
    appeal against the order of assessment made by the Commercial Tax
    Officer and he could have then gone in revision to the Board of
    Revenue and thereafter to the High Court under article 226 or 227               D
    of the Constitution and then, if he was aggrieved by the order
    passed by the High Court, he could come to this. Court under
    Article 136. We would have ordinarily insisted on the assessee
    going through this hierarchy of judicial process and declined to
    entertain the petition for special leave directly against the
    order of assessment made by the Commercial Tax Officer. But we                  E
    were informed by the learned Advocate appearing on behalf of the
    assessee, and this was not controverted by the learned advocate
    appearing on behalf ot the Department, that the High Court in ·
    another case has already taken the view that when a resale is
    made by an assessee which is in the course of inter-State trade
    or commerce, it cannot be regarded as a resale within the State.                F
    and   hence    such   resale   would   constitute    a    breach   of     the
    Declaration given by the assessee to the selling dealer so as to
    attract of the applicability and the purchase price paid by the
    assessee would consequently be liable to be included in the
    taxable turnover of the assessee. It would therefore, argued the
    learned counsel for the assessee, be futile to drive the assessee               G
    to the procedure of appeal and revision and then a Writ Petition
    to the High Court. This contention urged on behalf of the
    assessee had force and we accordingly granted special leave and
    entertained this appeal. Similarly we granted special leave in
    the other cases as well and hence those appeals are placed before
    us alongwi th this appeal,
                                                                                    H
          The     short   but   interesting   question       that   arises    for
    consideration on these facts is : when an assessee purchases
    1082              SUPREME COURT REPORTS        [1985] SUPP.3 S.C.R,
                                                                            ,..


A   goods from a selling dealer against a Declaration in Form No. ST
    17 stating that the goods are being purchased by him for resale
    within the State and he then proceeds to resell the goods     and
    such resale is in the course of inter-State trade or conmerce,
    would such resale be liable to be regarded as a sale not within
    the State for the purpose of the Declaration in Form No. ST 17,
B   merely because it is a sale in the course of inter-State trade
    or conmerce. Would the character of such resale, namely, that it
    is a sale in the course of inter-State trade or commerce be
    inconsistent with its being also a sale within the State as
    contemplated in the Declaration in Form No. ST 17. The determi-
    nation of this question depends on the true interpretation of a
c   few relevant provisions of the State Act. Section 2 is the
    definition Section and it defines various terms used in the State
    Act. Sub-section (o) of Section 2 defines sale to mean inter alia
    "any transfer of property in goods for cash or for deferred
    payment or for any other valuable consideration". There are two
    Explanations to Section 2 sub-section (o). We need not refer to
D   the first Explanation since it has no bearing on the issues
    arising in these appeals but the second Explanation is material
    and it may be reproduced as follows

               "A transfer of property in goods shall be deemed to
               have been made within the State if it fulfils the
E              requirements of sub-section (2) of Section 4 of the
               Central Sales Tax Act, 1956 (Central Act 74 of 1956.)"

    "Sale Price" is defined in Section 2 sub-section (p) to mean
                                                                            •
    inter alia 11 the amount payable to a dealer as consideration for
    the sale of any goods, less any swn allowed as cash discount".
F   Then there is the definition of 11 turn over 11 in sub-section (t) of
    Section 2 and according to this definition, 11 turn over" means
    "the aggregate of the amount of sale price received or receivable
    by a dealer in respect of the sale or supply of goods in the
    carrying out of any contract." The expression 11 taxable turn over"
    is defined in sub-section (s) of Section 2 and it provides inter
    alia that "taxable turn over" means "that part of turn over which
G
    remains after deducting therefrom the aggregate amount of the
    proceeds of sale of goods, which have been sold to persons
    outside the State for consumption outside the State". It is clear
    on a combined reading of these definitions that "taxable turn
    over" means the aggregate amount. of sale price received or
    receivable by a dealer in respect of sales of goods within the
     State, It is only sales of goods within the State which can be
                                                                            ,
H
     taxed by the State Legislature Clause (i) of Article 286 of the
•               ONKARLAL NAND!AL v. STATE [BHAGIATI C.J,]          1083


    Constitution provides inter alia that no law of a State s~all
                                                                          A
    impose or authorise the imposition of a tax on the sale or
    purchase of goods where such sale or purchase takes place outside
  . the State and Clause (ii) of that Article empowers Parliament to
    formulate principles for determining when a sale or purchase of
    goods can be said to have taken place outside the State. These
'· principles have been formulated by Parliament in Section 4 of the
                                                                          B
    Central Act which reads :

               "4. When is a sale or purchase of goods said to take
               place outside a State - (l) Subject to the provisions
               contained in Section 3, when a sale or purchase is
               determined in accordance with sub-section (2) to take
               place inside a State, such sale or purchase shall be       c
               deemed to have taken place outside all other States.

               (2) A sale or purchase of goods shall be deemed to
               take place inside a State, if the goods are within the
               State -
                                                                          D
               (a) in the case of specific or ascertained goods,     at
               the time the contract of sale is made; and

               (b) in the case of unascertained or future goods, at
               the time of their appropriation to the contract of
                                                                          E
               sale by the seller or by the buyer, whether assent of
               the other party is prior or subsequent to such
               appropriation."

    3ub-section (2) of Section 4 lays down the principles for
    determining when a sale or purchase of goods shall be deemed to
                                                                          F
    take place inside the State. Once on the application of these
    principles set out in sub-section (2) of Section 4, it is
    determined that a sale or purchase of goods has taken place
    inside a particular State, both according to general principles
    as also by the express words of sub-section ( l) of Section 4 it
    must be deemed to have taken place outside all other States. Such
                                                                          G
    sale or purchase can then be fixed only by the State in which it
    must be deemed to have taken place on the application of the
    principles set out in sub-section (2) of Section 4 and no other
    State can impose tax on such sale or purchase by reason of Clause
    (i) of Article 286. Parliament has also in Section 3 of the
t   Central Act formulated principles for determining when a sale or
    purchase of goods can be said to take place in the course of
                                                                          H
    inter-State trade or cormnerce and in Section 5 of the Central Act
     1084             SUPREME COURT REPORTS       [1985] SUPP,3 s.c.R. ~


A    principles have been formulated for determining when a sale or
     purchase of goods can be said to take place in the course of
     import or export. These principles were necessary to be
     formulated because a sale or purchase of goods in the course of
     inter-State trade or commerce cannot be taxed by a State on
     account of Entry 92A in List I of the Seventh Schedule of the
B    Constitution which sets out the topic of tax on sale or purchase I
     of goods in the course of inter-State tra4e or conmerce within
     the exclusive legislative competence of Parliament and so far as
     sale or purchase of goods in the course of import or export is
     concerned it is also not taxable by a State by reason of Clause
     (i) of Article 286, It is necessary to mention here that
c    sub-section (1) of Section 4 opens with the words "Subject to the
     provisions contained in Section 311 , but when we turn to
     Explanation II to sub-section (o) of Section 2 of the State Act
     we find that what is incorporated in that sub-section is only
     sub-section (2) of Section 4 and not sub-section (1) of Section 4    Ill
     nor Section 3 or Section 5 of the Central Act.                        ~
D
          Now the lleclarations in Form No. ST 17 furnished by the
     assessee to the selling dealers uniformally stated that the goods
     were purchased by the assessee for the purpose of resale within
     the State. The advantage of furnishing a lleclaration in Form No.
     ST 17 is that the selling dealer would not be liable to pay
E    sales-tax on the sale effected by him against the Declaration and
     the assessee would not therefore have to pay to the selling
     dealer sales-tax as part of the purchase price nor would the ."'
     assessee be liable to pay any purchase tax on the purchase made
     by him on account of the saving enacted in Section SA of the
     State Act. But the second proviso to clause (iv) of sub-section
F    (s) of· Section 2 of the State Act provides as to what would be
     the consequence if an assessee purchases goods without paying any
     tax on the strength of a Declaration furnished by him and the
     goods are then used by him for a purpose other than the one
     mentioned in the Declaration. It enacts the following provision ..
     with a view to penalising an assessee who cotmnits a breach of the
     statement made by him in the lleclaration:
G
                "Provided further that when any dealer has purchased
                any goods without paying any tax on the strength of
                any declaration furnished by him and the said goods
                are used by him for any purpose other than the one
                mentioned in the declaration, the purchase price of t
ti              such goods shall be included in his taxable turn
                over. 11
..               ONKARLAL NANDLAL v. STATE [BHAGWATI C,J,]       1085


     It was on the basis of this proviso that the Comercial Tax          A
     Officer sought to tax the assessee on the purchase price paid by
     it to the selling dealers on the ground that the assessee had not
     resold the goods within the State but had resold them in the
     course of inter-State trade or commerce and thus use the goods
     for a purpose other than that mentioned in the, Declarations in
     Form No. ST 17. The question is whether this view t,aken by the     B
     Commercial Tax Officer is right.

          The principal argument advanced on behalf of the Department
     was that since the resales effected by the assessee were
     admittedly sales in the course of inter-State trade or commerce
     they could not be said to be resales within the State as            C
     envisaged in the Declarations in Form No. ST 17 and the goods
     were therefore used by the assessee for a purpose other than that
     mentioned in the Declarations. The.Department contended that if
     on an application of the principles set out in Section 3 of the
     Central Act, a sale was a sale in the course of inter-State trade
  or commerce, it could not possibly be regarded as a sale within        D
  the State and in support of this contention the Department relied
  on the opening words "Subject to the provisions contained in
  Section 3" in sub-section (1) of Section 4 of the Central Act.
  The assessee on the other hand contended that though it was true
  that the resales effected by it were sales in the course of
  inter-State trade or commerce as defined in sub-section (3) of         E
  the Central Act, they were still sales within the State in
  accordance with the principles formulated in sub-section (2) of
• section 4 of the Central Act. The argument of the asessee was
  that the resa!es effected by it being sales in the course of
  inter-State trade or commerce were not liable to be taxed by the
  State and could be taxed only by the Central Government under the      F
  C.entral Act but that did not deprive the resales of their
  character of sales within the State which character attached to
  them by reason of sub-section (2) of Section 4 which was incorpo-
  rated in the State Act by Explanation II to sub-section (o) of
  Section 2 of the State Act. The answer given by the assessee to
<
     the argument of the Department based on the opening words of        G
  sub-section (1) of Section 4 of the Central Act was that what was
  incorporated in ;J{planation II to sub-section (o) of Section 2 of
  the State Act was only sub-section (2) of Section 4 and not sub-
  section (1) of Section 4 of the Central Act and therefore the
  opening words in sub-section (1) of Section 4 had no impact on
  the provisions enacted in Explanstion. These rival arguments
\ raised an interesting question of interpretation and though it is      H
  ~ integra so far as this Court is concerned we find that there
    1086               SUPREME COURT REPORTS        [1985] SUPP.3 s.c.R.


    are a large number of decisions of various High Courts which have
A
    accepted the construction contended for on behalf of            the
    assessee. We may refer only to a few of these decisions namely,
    Colllllissioner of Sales Tax v. Godrej Soap Private Limited 23 s. T.C
    489, State of Orissa v. Johri Mal 37 S.T.C 157 and Georgopoulos
    v. State of Maharashtra 37 S.T.C 187.
B
         We may first clear the ground by stating facts which were t
    not in dispute between the parties. There were two basic facts on
    which there was no dispute. One was that the resales effected by
    the assessee were sales in the course of inter-State trade or
    CO!Wllerce within the meaning of section 3 of the Central Act. The
    assessee did not dispute the correctness of this position. The
c   second was that at the time when the contracts of resale were
    made by the assessee, the goods were specific ascertained goods
    situate in Bhawani Mandi, that is, within the State and on the
    principles formulated in sub-section (2) of section 4 of the
    Central Act, the resale effected by the assessee were deemed to
    take place inside the State. The only question is whether by
D
    reason of the resale being sales in the course of inter-State
    trade or commerce, they ceased to be sales inside the State. We
    do not think the answer to this question admits to any serious
    doubt. There is, in our opinion, no antithesis between a sale in
    the course of inter-State trade or commerce and a sale inside the
    State. Even an inter-State sale must have a situs and the situs
E
    may be in one State or another. It does not involve any contra-
    diction in saying that an inter-State sale or purchase is inside
    a State or outside it. The situs of a sale may fall for consider-
    ation from more than point of view. It may require to be
    considered for the purpose of determining its exigibility to tax
    as also for other purposes such as the one arising in the present
F   case. Of course a sale which is in the course of inter-state
    trade or COlllllerce cannot be taxed by a State Legislature even if
    its situs is within the State, because the State Legislature has
    no legislative competence to impose tax on sale in the course of
    inter-State trade or commerce. That can be done only by Parlia-
    ment. If therefore a question arises whether a sale is exigible.
    to tax by the State Legislature, it may have to be considered
G   whether it is a sale in the course of inter-State trade or
    comemerce. The same sale in another context may have to be
    examined from a different point of view for determining where its
    situs lies and whether it is a sale inside the State or outside
    the State. There is therefore no incompatibility in the same sale
    being both a sale in the course of inter-state trade or conmerce
H
    within the meaning of Section 3 of the Central Act as also a sale ,1
               ONKARLAL NANDLA.L v. STATE [BHAGIATI C.J.]        1087


    inside the State in accordance with the principles laid down in      A
    sub-section (2) of Section 4 of the Central Act.

         Now let us turn to consider the purpose mentioned in the
    Declarations in Form No. ST 17 furnished by the assessee to the
    selling dealers. The purpose for which the goods were purchased
    by the assessee was stated in the Declarations to be "resale             B
    within the State". Obviously the expression "resale within the
    State" in Form No. ST 17 wst bear the same meaning it has in the
    State Act. Form No; ST 17 has been prescribed by the State
    Government in exercise of the power conferred under Section 26
    of the State Act and it is a recognised cannon of construction
    that an expression used in a rule, by law or form issued in              c
    exercise of power conferred by a statute must, unless there is
    anything repugnant in the subject or context, have the same
    meaning as is assigned to it under the statute. The expression       0
    "resale within the State" in Form No. ST 17 must therefore be
    read in the light of Explanation II to sub-section (o) of section
    2 of the State Act which lays down as to. when a sale shall be           D
    deemed to have been made within the State and this provision in
    the Explanation must govern the determination of what is "resale
    within the State" within the meaning of that expression as used
    in Form No. ST 17.

         That takes us to a consideration of Explanation II to               E
    sub-section (o) of Section 2 of the State Act. This Explanation
    enacts as to when a sale shall be deemed to be a sale within the
    State by reference to sub-section (2) of Section 4 of the Central
    Act. If a sale fulfils the requirements of .sub-section (2) of
    Section 4 of the Central Act, it shall be deemed to be a sale
    within the State and it will be so also for the purpose of the           F
    Declaration in Form No. ST 17. It is with reference to the
    requirements of sub-section (2) of Section 4 that we shall have
    to judge whether the resales effected by the assessee were sales
    within the State. But before we do so, it would be convenient at
    this stage to refer to the argument of the Department based on
    the opening words "Subject to the provisions contained in section        G


-
    3" in sub-section (1) of Section 4 of the Central Act. The
    Department argued that since the enactment in sub-section (1) of
    Section 4 is expressly made subject to the provision contained in
    Section 3, the latter provision must over-ride the former and
    therefore, once it is found on an application of the principles
    formulated in Section 3 that a sale is in the course of inter-
    state trade or comnerce, the provision enacted i.n Section 4 would       H
    have no application and it cannot be said of such a sale that it
    1088              SUPREME COURT REPORTS      [1985] SUPP.3 s.c.R.


A   is a sale inside the State. This argument of the Department
    suffers from an obvious fallacy. In the first place, all that
    the opening words "Subject to the provisions contained in Section
    3" intend to convey is that even where a sale is determined in
    accordance with sub-section (2) of Section 4 to take place inside
    a State and therefore outside all other States, it would not
R   exclude the applicability of Section 3 and if it satisfies the
    requirements of that section, it would still be a sale in the       •
    course of inter-state trade or commerce taxable ur..der the
    provisions of the Central Act. Secondly, we are not concerned
    here with the interpretation of sub-section (1) or sub-section
    (2) of section 4 in the context of Section 3 of the Central Act.
c   We are concerned only with Explanation II to sub-section (o) of
    Section 2 of the State Act and that Explanation refers only to
    sub-section (2) of section 4 and not to sub-section (1) of that
    section or to section 3. It is only sub-section (2) of Section 4
    which is incorporated in Explanation II to sub-section ( o) of
    section 2 of the State Act and we are called upon to consider as
D   to what is the effect of such incorporation. The State Legis-
    lature could have very well reproduced the entire language of            ...
    sub-section (2) of section 4 bodily in Explanation II to sub-            ....
    section (o) of Section 2 but it preferred to employ a simpler:
    device by incorporating by reference the provisions of sub-
    section (2) of Section 4 in Explanation II to sub-section (o) of
E   section 2. The doctrine of incorporation by reference has been
    succintly explained by Lord Es her, M. R. in In re Wood's Estate
    (1886) 31 Ch. D, 607 in the following words :

               "It is to put them into the Act of   1855, just as if
               they had been written into it for the first time. If a
F              subsequent Act brings into itself by reference some of
               the clauses of a former Act, the legal effect of that,
               as has often been held, is to write those sections
               into the new Act just as if they had been actually
               written in it with the pen, or printed in it, and, the
               moment you have those clauses in the later Act, you
               have no occasion to refer to the former Act at all."
G
    This Court also explained the doctrine of incorporation by
    reference in similar terms in Shamrao v. Parulekar, v. DI.strict
    Magistrate, lbana A.I.R, 1952 S.C. 324, when Court observed :

               "The rule is that when a subsequent Act amends an
H              earlier one in such a way as to incorporate itself, or   -~
               a part itself, into the earlier, then the earlier Act
                 ONKARLAL NANDLAL v. STATE [BHAQIATI C.J.)        1089


                must thereafter be read and construed (except where
                that would lead to a repugnancy, inconsistency or         A
                absurdity) as if the altered words had been written
                into the earlier Act with pen and ink and the old
                words scored out so that thereafter there is no need
                to refer to the amending Act at all. lhis is the rule
\               in England : see Craies on Statute Law, 5th &lition,
                page 207; it is the law in America: see Crawford on       B
                Statutory Construction, page 110; and it is the law
                which the Privy Council applied to India in Keshor1111
                Poddar v. llandulal llallick."

     We must therefore proceed to interpret Explanation II to
     sub-section (o) of Section 2 as if sub-section (2) of section 4      c
     were written out verbatim in the Explanation and once sub-section
     (2) of Section 4 is written out in the Explanation, there is no
     occasion or need to refer to the Central Act from which this
     incorporation is made or to its purpose or context. We need not
     therefore allow ourselves to be oppressed by the opening words
     "Subject to the provisions contained in Section 3" in sub-section    D
     (1) of Section 4 or by the context in which Section 4 occurs in
     the Central Act.

           We must accordingly read Explanation II to sub-section ( o)
      of Section 2 of the State Act as if sub-section (2) of section 4
      of the Central Act were written into it and then proceed to apply   E
      the Explanation to the facts of the present case in order to
      determine whether the resales effected by the assessee were sales
      inside the State within the meaning of the Explanation. Now it
      was not disputed on behalf of the Department that at the time
      when the contracts of resale were made by the assessee, the goods
      were specific ascertained goods lying at Bhawani Mandi inside the   F
      State and if that be so, the resales effected by the assessee
      must be deemed to have taken place inside the State on the
      principles laid down in sub-section (2) of Section 4 of the
    • Central Act as incorporated in Explanation II to sub-section (o)
      of Section 2 of the State Act. It did not make any difference to
      this position that the resales were sales in the course of inter-   G
      State trade or commerce. The only consequence of the resales
      being sales in the course of inter-State trade or commerce was
      that they were not taxable under the State Legislation. But there
      is no provision in the State Act which requires that in order
      that an assessee may be exempt from purchase tax in respect of
     lpurchase of goods made by him against a Declaration in Form No.
      ST 17, he must resell the goods within the State in such a manner   H
    1090               SUPlill1E COURT !(£PORTS      [1985] SUPP.3 s.c.R. ,~


A   that such resale becomes exigible to tax under the State
    Legislation. lie had occasion to consider a similar question in
    M/s Polestar Electronic (Pvt,) Ltd. v. Addl. Comnissioner, Sales
    Tax and Aor., [1978] l S.C.C, 636,     where we pointed out in
    relation to the llengal Finance (Sales Tax) Act 1941 as applicable
    in Delhi that the words "for resale by him" included not only .
    resale in Delhi but also outside Delhi even if no tax was I
    exigible under that legislation on sale outside Delhi, But apart
    frorn the fact that it makes no difference that the resales
    effected by tl1e assessee were not exigible to tax under the State
    Legislation, it may be possible to contend that such resales were
    taxable under the Central Act and if that be so, a substantial
c   part of the tax recovered under the Central Act would go to the
    State to agument its revenues.

         We are therefore of the view that the assessee resold the
    goods within the State as mentioned in the Declarations in Forro ,. _ _.......
    No. :;r 17 furnished by the assessee to the selling dealers and it
D   cannot be said that the assessee used the goods for a purpose
    other than that mentioned in the Declarations. We must therefore
    allow these ar>peals and set aside the assessments made on each
    assessee to the extent that the assessments sought to include in
    the taxable turnover the purchase price paid by the assessee in
    respect of the goods purchased against Declarations in Form No.
    ST 17 furnished to the selling dealers. The respondents will pay
£   to the assessee in each appeal costs throughout including the
    costs of the appeal.



    H,L.A,                                               Appeals allowed.




                                                                            •




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