Supreme Court of India
STATE OF UTTAR PRADESH & ORS.versusKASTURI LAL HAR LAL
- Citation
- 1987 INSC 195
- Decided
- 3 August 1987
- Disposal
- Dismissed
- Bench
- SABYASACHI MUKHERJI
Holding
The Sales Tax Officer in Uttar Pradesh was not the appropriate authority to impose or collect Central Sales Tax on the inter‑State sale; jurisdiction lies with the State where the movement of goods commenced.
Summary
The State of Uttar Pradesh assessed Central Sales Tax on coal transactions carried out by the respondent, Kasturi Lal Har Lal, who sold coal by endorsing railway receipts while the goods were moving from Bihar to Uttar Pradesh. The Sales Tax Officer in Lucknow held that the sales were inter‑State under section 3(b) of the Central Sales Tax Act, 1956, and that tax was payable despite the dealer being unregistered. The High Court set aside the assessment, holding that jurisdiction to levy and collect tax lies with the State where the movement of goods commenced, i.e., Bihar, and that the Uttar Pradesh officer was not the appropriate authority. On appeal, the Supreme Court affirmed the High Court’s view, emphasizing that section 9(1) confers jurisdiction on the State of commencement and that the proviso to section 9(1) applies only to registered dealers. Consequently, the appeal was dismissed and the assessment remained quashed.
Issues considered
- Whether the Sales Tax Officer of Uttar Pradesh is the appropriate authority to levy and collect Central Sales Tax on an inter‑State sale where the movement of goods commenced in Bihar.
- Whether the transaction constitutes an inter‑State sale under section 3(b) of the Central Sales Tax Act, 1956.
- Whether the proviso to section 9(1) applies when the dealer is unregistered.
- Whether a subsequent sale in Uttar Pradesh is exempt from tax under section 6(2).
Legislation cited
- Central Sales Tax Act, 1956s. 2, s. 2(a), s. 2(b), s. 3, s. 6, s. 7, s. 8, s. 9, s. 9(1), s. 9(2)
Subjects
Central Sales Taxinter‑State salejurisdictionregistration of dealersales tax officermovement of goodsdocument of titleappropriate state
Judgment
A STATE OF UTTAR PRADESH & ORS.
v.
KASTURI LAL HAR LAL
AUGUST 3, 1987
B [SABYASACHI MUKHARJI AND G.L. OZA, JJ.)
Central Sales Tax Act, 1956-Sub-ss. (1) and (2) of s. 9-Read
with s. 3(b)-'Appropriate State' having jurisdiction to impose and
collect Central Sales Tax on sale of goods effected by transfer of docu-
c
ments of title to goods during their movement from one State to another..
-
Section 3 of the Central Sales Tax Act, 1956 stipulates that a sale Y
or purchase of goods shall he 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 effected by a
transfer of documents of title to the goods during their movement from
D one State to another. Sub-s. (1) of s. 9 provides that the tax payable by
any dealer under this Act on sales of goods effected by him in the course r
of inter-State trade or commerce, whether such sales fall within clause (a)
or clause (b) of section 3, shall be levied by the Government of India and
the tax so levied shall be collected by that Government in accordance
with the provisions of sub-section (2), in the State from which the
E movement of the goods commenced and sub-s. (2) thereof provides
that the authorities for the time being empowered to assess, re-assess, ~ -
collect and enforce payment of any tax under general sales tax law of
the appropriate State shall, on behalf' of the Government of India,
assess, re-assess, collect and enforce payment of tax, including any ~ ·
penalty, etc.
F
The respondent, a dealer in coal, had effected certain transactions
by endorsing Bi/ties (Railway Receipts made out in its name to various
parties in Uttar Pradesh while the goods relating to the Bi/ties were in a
state of movement from Bihar to Uttar Pradesh. The bills connected
with such Bi/ties had also been prepared by the respondent which had
G realised the money from the purchasing parties. The Sales Tax Officer,~
Lucknow was of the view that the sale of coal effected in this manner
came under inter-State sale and as such was liable under section 3(b) of
the Central Sales Tax Act, 1956. Disagreeing with the contention of the
respondent that the goods having been sold to an unregistered dealer,
the respondent too being not a registered dealer during the particular
H year, there was no question of imposition of any sales tax, the Sales Tax
756
STATE OF U.P. v. KASTURI LAL 757
'
Officer imposed the liability under that provision which was challenged · A
by the respondent by a writ petition. The High Court, allowing the
petition, set'aside the order of assessment.
Dismissing the appeal,
HELD: The Sales Tax Officer in Uttar Pradesh was not the B
;
appropriate authority either to impose or collect the duty on inter-State
sale. [764GJ
(i) Sub-s.(1) of s. 9 confers jurisdiction to make the levy and
- collect the tax on the State where the movement of the goods
commences, and so the determinative test for discovering the juris-
diction of a particular State, in an inter-State sale, is the place where
c
the movement of the goods commences. The words "appropriate
Government" given in sub-s. (2) of that section must necessarily refer
to the State which by s. 9(1) has been conferred jurisdiction to levy and
collect the tax. [763D-E]
D
(ii) lt is clear from an analysis of the scheme of the Central Sales
Tax Act, 1956 that it is the Central Government which imposes tax on
inter-State sale but it is collected by th~ Government in accordance with
the provisions of sub-s. (2) of s. 9 of the Act in the State. It is clear from
sub-s. (2) ot s. 9 that the "appropriate State" Imposes and collects the
tax on behalf of the Government of India. In order to be a sale or E
inter-State transaction the sale must occasion the movement ~f goods.
In the instant case, there were Railway receipts which were endor~ed in
favour of the parties in U.P. It is by that endorsement that title was
transferred to the purchasers and that transaction occasioned the move-
n'lent of the goods, in other words, caused inter-State sales to take place,
namely, the sale which occasions the movement of goods from one State F
to another, from the State ofBiharto the State ofU.P. [762E-Gl
(iii) The proviso to s. 9(1) can apply only if the sale is by a regis-
tered dealer. Here the admitted position is' that the dealer Is not a
registered one. It was urged on behalf of the revenue that inasmuch as
~ s. 7 required every dealer to obtain registration within the prescribed G
period and in the event of not obtaining such a registration, penal
consequences ensue under s. 10, the words "registered dealer" as_ used
in the proviso to s. 9 do not refer necessarily to a dealer who has
obtained registration under s. 7, but to a dealer who should have
obtained such a registration. In other words, counsel tried to import the
equitable maxim by statfng an argument in the manner that if registra- H
758 SUPREME COURT REPORTS [1987} 3 S.C.R.
A tion in the facts of a particular case was compulsory then such registra·
tion should be deemed to have been made as by law enjoined that it
should have been made. Equity, it was said, "looks upon a thing as done
which ought to have been done". But that is not the position in a fiscal
statute. The fiscal statute with which we are concerned recognises
B registration and non-registration and imposes liabilities on registration
and consequences for non-registration. It is not, therefore, possible to -4
look upo.n a thing as done which ought to have been done for which
Legislature has separately featured differently in a fiscal statute of this
nature. The Act provides machinery provisions for the imposition and
realisation of the Central Sales Tax. It must be read in a commonsense
point ohiew. [763E-H; 764A-B]
c
(iv) Sub-s. (2) of s. 6 provides that where a sale of goods in the
course of inter-State trade or comnerce bas either occasioned the move·
ment of such goods from one.State to another or has been effected by a
transfer of documents of title to such goods during their movement
D from one Stale to another, any subsequent sale during such movement
effected by a transfer of documents of title to such goods to the Govern-
ment or to a registered dealer other than the government, if the goods
are of the description referred to in sub-section (3) of section 8, shall he
exempt from tax under this Act. The proviso stipulates that no such
subsequent sale shall be exempt from tax under this sub-section unless
E the dealer effecting the sale furnishes to the prescribed authority in the
prescribed manner and within the prescribed time, a certificate as
mentioned therein. In this case, the subsequent sale if there be any in
U.P. did not occasion the movement of the goods. It is therefore, not
subject to inter-State sales tax. [7640-F]
F CIVIL APPELLATE JURISDICTION: Civil Appeal No.
5(NT) of 1975.
From the Judgment and Order dated 15.9.1971 of the Allahabad
High Court in Civil Misc. Writ Petition No. 5324 of 1970.
G Prithvi Raj, Mrs. Rekha Joshi and Ashok K. Srivastava for the
Appellants.
Ma.noj Swarup, Ms. Lalita Kohli and Prarnod Swarup for the
Respondent.
H The Judgment of the Court was delivered by
STATE OF U.P. v. KASTURI LAL (fy!UKHARJI, J.( 759
SABYASACHI MUKHARJI, J, The question involved in this A
appeal is whether the respondent .herein M/s. Kasturi Lal Har Lal is
liable to the State of Uttar Pradesh for payment of the Central Sales
Tax in respect of the transactions of sale of coaL The Sales Tax Officer
in this case passed an order making the respondent liable for the pay-
ment of tax on certain transactions during the period from !st B
October, 1965 to 31st March, 1966 amounting to Rs. 9,08,548.81 and
> tax liability was imposed at the rate of 2% thereof amounting to
Rs. 18, 170-98. The Sales Tax Officer found that the assessee carried on
'"" business in coaL The Sales Tax Officer noted that the Billies, concern-
ing this kind of sale of coal had been prepared in the name of the
- dealer. The dealer endorsed these Billies (R.Rs) and gave these to the
diverse parties in U.P. The parties in U.P. on receiving these Bilties
got the goods released. The dealer admitted that the Bilties (R.Rs.)
C
having been endorsed to the parties in U.P. were given to them at the
time, while the goods were in the state of movement between Bihar
and U.P. The bills connected with Bilties (R.Rs.) of this kind had also
been prepared by the dealer and the money had been realised by the D
dealer from the purchasing parties. The Sales Tax Officer was of the
view that the sale of coal effected in that manner came under inter-
state sale and as such was liable under section 3(b) of the Central Sales
Tax Act, 1956, by transfer of document when the goods were in move-
ment. It was the case of the dealer that the goods had been sold to an
unregistered dealer and he too was not a registered dealer for the year E
1965-66. Therefore, there was no question of imposition of any Sales
Tax. The Sales Tax Officer did not agree with this view and imposed
liability for the said Rs.18170-98. Challenging the said imposition an
application was moved before the High Court under Article 226 of the
Constitution by the dealer. The applicatiou was allowed and the order
of assessment was set aside. F
The High Court having considered the facts and circumstances of
this case noted that the main contention raised on behalf of the asses-
see was that inasmuch as the movement of the goods had started from
the State of Bihar, the tax if any, payable on such sales, was assessable
in Bihar and the Sales Tax Officer, Lucknow had no jurisdiction to G
make the order of assessment. The High Court in the light of Section
· ..( 9( 1) of the Central Sales Tax Act was of the view that the "appropriate
State" would be the Sales Tax Officer in Bihar and as such the impo-
sition was not possible in the manner it was done. The assessee
succeeded before the High Court on this ground. The question for
I determination is whether that is so? H
760 SUPREME COURT REPORTS (1987] 3 S.C.R.
A The High Court noted that in the previous case of Karam Chand
Thapar and Bros. (Coal Sales) Ltd. v. The Sales Tax Officer,
Moradabad and others, (Civil Miscellaneous Writ No. 4356 of 1969)
the High Court had taken the same view on more or less identical facts
on 24th of July, 1970. We were told at the Bar that in the said matter
leave had been granted under Article 136 of the Constitution by this
B Co:irt. We wanted to know whether the matter had been disposed of
by this Court and if so what was the fate of the same and had
adjourned this appeal on this account. Neither the assessee nor the
revenue has been able to enlighten us on this point.
Act'),
Under the Central Sales Tax Act, 1956 (hereinafter called 'the
c relationSection 2(a) stipulates that the "appropriate State" means (i) in
to a dealer who has one or more places of business situate in
-
the same State, that State; (ii) in relation to a dealer who has places of
business situate in different States, every such State with respect to the
place or places of business situate within its territory. On the other
hand clause (b) of section 2 defines "dealer" to mean any person who
D carries on (whether regularly or otherwise) the business of buying and
selling, in the manner indicated in sub-clause (b ). It is not confined to
a registered dealer only. Section 3 is the charging section and is in
Chapter II dealing with the formulation of principles for determining
when a sale or purchase of goods takes place in the course of inter-
State trade or commerce or outside a State or in the course of import
E or export. Section 3 stipulates that 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 effected by a transfer of documents of title to
the goods during their movement from one State to another. There are
two explanations to that section and explanation I provides that where
F goods are delivered to a carrier or other bailee for transmission, the
movement of the goods shall, for the purposes of clause (b ), be
deemed to commence at the time of such delivery and terminate at the
time when delivery is taken from such carrier or bailee. Explanation 2
en joins that if the movement of goods commences and terminates in
the same State it shall not be deemed to be a movement of goods from
G one State to another by reason merely of the fact that in the course of >--
. such movement the goods pass through the territory of any other
State. Section 6 deals with the liability to tax on inter-State sales.
Section 6(1) provides that subject to the other provisions contained in
the Act, every dealer is liable to pay tax under the Act on all sales
effected by him in the course of inter-State trade or commerce during
any year on and from the date so notified. Sub-section (_lA) of section I
STATE OF U.P. v. KASTURI LAL [MUKHARJI, J.] 761
6 provides that a dealer shall be liable to pay tax under the Act on sale A
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. Sub-
section (2) of section 6 stipulates that notwithstanding anything con-
) tained in sub-section ( 1) or sub-section (lA), where a sale of any goods B
in the course of inter-State trade or commerce has either occasioned
the movement of such goods from one State to another or has been
"' effected by a transfer of documents of title to such goods during their
movement from one State to another, any subsequent sale during such
movement effected by transfer of documents of title to such goods to
the Government or to a registered dealer other than the Government, c
if the goods are of the description referred to in sub-section (3) of
section 8, shall be exempt from tax under the Act. Sub-section (2) of
section 6 provides that no such subsequent sale shall be exempt from
tax under that sub-section unless the dealer effecting the sale furnishes
to the prescribed authority in the prescribed manner and within the
prescribed time or within such further time as that authority may, for D
sufficient cause, permit,--( a) a certificate duly filled and signed by the
registered dealer from whom the goods were purchased containing the
prescribed particulars in the prescribed form obtained from the pre-
scribed authority; and (b) if the subsequent sale is made (i) to a
registered dealer, a declaration referred to in clause (a) of sub-section
(4) of section 8, or (ii) to the Government, not being a registered E
dealer, a certificate referred to in clause (b) of sub-section (4) of
section 8, Sub-section ( l) and sub-section (2) of section 9 of the Act
ar.e material for our present purpose and read as follows:
"9( 1) The tax payable by any dealer under this Act on sales
of goods effected by him in the course of inter-State trade F
or commerce, whether such sales fall within clause (a) or-
clause (b) of section 3, shall be levied by the Government
of India and the tax so levied shall be collected by that
Government in accordance with the provisions of sub-
section (2), in the State from which the movement of the
goods commenced; G
(2) Subject to the other provisions of this Act and the
rules made thereunder, the authorities for the time being
empowered to assess, re-assess, collect and enforce
payment of any tax under general sales tax law of the
appropriate State shall, on behalf of the Government.of H
762 SUPREME COURT REPORTS [1987] 3 S.C.R.
A India, assess, re-assess, collect and enforce payment of tax,
including any penalty, payable by a dealer under this Act as
if the tax or penalty payable by such a dealer under this Act
is a tax or penalty payable under the general sales tax law
of the State; and for this purpose they may exercise all or
any of the powers they have under the general sales tax law i
B of the State; and the provisions of such law, including pro· I
visions relating to returns, provisional assessment, advance
payment of tax, registration of the transferee of any busi·
ness, imposition of the lax liability of a person carrying on
business on the transferee of, or successor to, such busi·
c
ness, transfer of liability of any firm or Hindu undivided
family to pay tax in the event of the dissolution of such firm -
or partition of such family, recovery of tax from third
parties, appeals, reviews, revisions, references, compound-
ing of offences and treatment of documents furnished by a
dealer as confidential, shall apply accordingly:
D Provided that if in any State or part thereof there is
no general sales tax law in force, the Central Government
may, by rules made in this behalf make necessary provision
for all or any of the matters specified in this sub-section."
It is clear from the analysis of the scheme of the Act that the
E Central Government imposes tax and it is by the Central Government
the tax is imposed for inter-State sale but it is collected by the Govern-
ment in accordance with the provisions of sub-section (2) of section 9
-'\-
of the Act in the State. It will be clear from sub-section (2) of section 9
that the "appropriate State" imposes and collects the tax on behalf of
the Government of India. The question is which is the "appropriate
F State" in a transaction of the nature or the type with which we are
-concerned where tax on inter-State sale was sought to be imposed. In
order to be a sale or inter-State transaction the sale must occasion the
movement of goods. Here in the instant case, it appears that there
were Railway receipts which were endorsed in favour of the parties in
U.P. It is by that endorsement that title was transferred to the pur·
G chases and that transaction occasioned the movement of the goods, in ~
other words, caused inter-State sales to take place, namely, the sale
which occasions the movement of goods from one State to another
from the State of Bihar to the State of U .P.
Counsel for the revenue sought to urge at one point of time that
H as the railway receipts were endorsed in U.P. in favour of different
STATE OF U.P. v. KASTURI LAL (MUKHARJI, J.) 763
parties such a sale would not be an inter-State sale that would have A
occasioned the movement of goods. If that is the position here which
counsel for the revenue sought to urge then a tax on such sales as an
internal sale might have been levied under the U.P. Sales Tax Act. But
that would not be the case of sale on a transaction which occasions the
movement. For this purpose section 9 provides for the collection and
levy by the "appropriate Government". The "appropriate Govern- B
ment" means in relation to a dealer who has one or more places of
business situate in the same State, that State or in relation to a dealer
who has places of business situate in different States, every such State
with respect to the place or places of business situate within its terri-
- tory. It is not the position in the instant case. It was contended on
behalf of the revenue that in the State of Uttar Pradesh, the concerned c
Sales Tax Officer was fully competent to make the assessment. The
High Court was of the view that this argument proceeded on an omis-
sion to consider the opening words of section 2 which is the definition
, clause, and which makes the definitions given thereunder subject to
. the context. Sub-section (1) of section 9 confers jurisdiction to make
the levy and collection of the tax on the State where the movement of D
the goods commences, and so the determinative test for discovering
the jurisdiction of a particular State, in an inter-State sale, is the place
where the movement of the goods commences. The words "appro-
priate Government" given in sub-section (3) of that section must
necessarily refer to the State which by section 9( 1) has been conferred
jurisdiction to levy and collect the tax. The provisions must be E
harmonised. It was next contended that the case of the respondent fell
within the ambit of the proviso to Section 9(1). We have noted that the
provisions of the proviso can apply only if the sale is by a registered
dealer. Here the admitted position is that the dealer is not a registered
one. It was urged on behalf of the revenue that inasmuch as section 7
of the Act required every dealer to obtain registration within the pre- F
scribed period and in the event of not obtaining such a registration,
.penal consequences ensue under section JO of the Act, the words
"registered dealer" as· used in the proviso to section 9 do not refer
necessarily to a dealer who has obtained registration under section 7,
but to a dealer who should have obtained such a registration. In other
-o\ words, counsel. tried to import the equitable maxim by stating an argu- G
· ment in the manner that if registration in the facts of a particular case
was compulsory then such registration should be deemed to have been
made as by law enjoined that it should have been made. Equity, it was
said the maxim long time ago "looks upon a thing as done which ought
to have been done." But that is not the position in a fiscal statute. The
fiscal statute with which we are concerned recognised registration and H
764 SUPREME COURT REPORTS [1987] 3 S.C.R.
A non-registration and imposes liabilities on registration and consequ-
ences for non-registration. It is not, therefore, possible to look upon a
thing as done which ought to have been done for which Legislature has
separately featured differently in a fiscal statute of this nature. The
Act provides machinery provisions for the imposition and realisation
of the Central Sales Tax. It must be read in a commonsense point of
B
view.
It is clear here that registration of dealer is important because the
proviso states that in the case of sale of goods during their movement
from one State to another, the sale subsequent to first sale in respect of
the same goods being also a sale which fell under sub-section (2) of
c section 6, the tax shall be levied and collected on a subsequent sale
which had been effected by a transfer of documents of title to suc)l
-
goods by a registered dealer in the State from which the registered
dealer obtained or as the case may be could have obtained the form
prescribed in clause (a) of sub-section (4) of section 8 of the Act in
D connection with purchase of such goods. Sub-section (2) of section 6
provides that where a sale of goods in the course of inter-State trade or
commerce has either occasioned the movement of such goods from
one State to another or has been effected by a transfer of documents of
title to such goods during their movement from one State to another,
any subsequent sale during such movement effected by a transfer of
documents of title to such goods to the Government or to a registered
E dealer other than the government, if the goods are of the description
referred to in sub-section (3) of section 8, shall be exempt from tax
under this Act. The proviso stipulates that no such subsequent sale
shall be exempt from tax under this sub-section unless the dealer
effecting the sale furnishes to the prescribed authority in the pres-
cribed manner and within the prescribed time, a certificate liS
F mentioned therein. In this case, the subsequent sale if there be any in
U .P. did not occasion the movement of the goods. It is therefore, not
subject to inter-State sales tax.
In that view of the matter we are of the opinion that the Sales
Tax Officer in U.P. was not the appropriate authority either to impose
G or collect the duty on inter-State sale. The High Court was right in the ~
view it took. This appeal must therefore, be dismissed with costs.
H.L.C. Appeal dismissed.
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