AI Structured Summary
Not yet generated for this judgment
Judgment
Ismail, C.J.—This is an appeal against the order of the Board of Revenue (Commercial Taxes), Madras, dated 30th May, 1977, suo motu
revising the order of the Appellate Assistant Commissioner-II, Madras, dated 7th June, 1972. The appellant was purchasing old silver articles and
silver from customers and manufacturing silver articles out of the same and selling the same. The question that came to be decided by the Board
was whether the appellant was liable to purchase tax u/s 7-A of the Tamil Nadu General Sales Tax Act, 1959, or not. Section 7-A of the Act
reads as follows :
Levy of Purchase tax. - (1) Every dealer who in the course of his business purchases from a registered dealer or from any other person, any
goods (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable u/s 3, 4 or 5, as the case may be,
and either, -
(a) consumes such goods in the manufacture of other goods for sale or otherwise; or
(b) disposes of such goods in any manner other than by way of sale in the State; or
(c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce,
shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in section 3, 4 or 5, as the case may be, whatever be the
quantum of such turnover in a year :
Provided that a dealer (other than a casual trader or agent of a non-resident dealer) purchasing goods [the sale of which is liable to tax under sub-
section (1) of section 3] shall not be liable to pay tax under this sub-section, if his total turnover for a year is less than fifty thousand rupees .
(2) Notwithstanding anything contained in sub-section (1), the provisions of section 7 shall apply to a dealer referred to in sub-section (1) who
purchases goods [the sale of which is liable to tax under sub-section (1) of section 3] and whose total turnover for a year is not less than fifty
thousand rupees but not more than one lakh of rupees; and such a dealer may, at his option, instead of paying the tax in accordance with the
provisions of sub-section (1), pay tax at the rates mentioned in sub-section (1) of section 7.
(3) Every dealer liable to pay purchase tax under sub-section (1), shall, for the purposes of this Act, be deemed to be a registered dealer.
It is not necessary to refer to the proviso to section 7-A(1)(a) for the purpose of considering the point raised. There is no dispute that the
conditions contained in the opening part of sub-section (1) are satisfied. The only question that requires to be considered is, when the appellant
purchased old silver jewellery and silver and made them into new jewellery or silverware whether the case can be brought within the scope of
section 7-A(1)(a) or not. The expression used in section 7-A(1)(a) is ""consumes such goods in the manufacture of other goods for sale or
otherwise"". Certainly the silver jewellery or the old silverware purchased by the appellant had been consumed in the manufacture of new silverware
or new silver jewellery. But what the learned counsel for the appellant contends is whether they are old jewellery or new jewellery or whether they
are different kinds of jewellery, still the jewellery continued to be silver jewellery and, therefore, section 7-A(1)(a) is not attracted. We are of the
opinion that this argument has no substance whatever. The section uses the expression ""goods"" and the meaning of the expression ""goods"" has to
be understood only in the context of the use of the expression in the particular enactment, namely, the Tamil Nadu General Sales Tax Act, 1959.
There is First Schedule to this Act which gives a list of goods in respect of single point tax leviable under sub-section (2) of section 3. A perusal of
that list will clearly show that the articles are not listed according to the source material out of which they are made, but according to their
independent existence, commonly recognised as separate and distinct goods or commodities. If so, there can be no difficulty whatever in holding
that the old silver jewellery or silverware purchased, melted subsequently and made into new silver jewellery or silverware attract the provisions of
section 7-A(1)(a) of the Act. Hence the Board of Revenue cannot he said to have committed any error in holding that a turnover of Rs. 15,431.09
was liable to tax u/s 7-A(1)(a) of the Act.
There was admittedly a turnover of Rs. 67,900.70 liable to tax u/s 3(1) of the Act. The Board of Revenue aggregated these two amounts and
arrived at the total taxable turnover at Rs. 83,331.79. What the learned counsel for the appellant contends is that the Board of Revenue was in
error in doing so. According to the learned counsel, the turnover u/s 3(1) of Rs. 67,900.70 can be brought u/s 7 of the Act and the turnover of Rs.
15,431.09 u/s 7-A can be brought under sub-section (2) of section 7-A and as such, in respect of both the turnovers, the appellant was entitled to
pay the reduced rate of tax and both the turnovers ought not to he clubbed together. Section 7(1) of the Act states :
Notwithstanding anything contained in sub-section (1) of section 3, every dealer whose total turnover is not less than seventy- five thousand
rupees, but not more than one lakh of rupees, may at his option instead of paying the tax in accordance with the provisions of that sub-section, pay
tax at the following rates ........
Sub-section (2) of section 7-A, which has already been extracted, states :
Notwithstanding anything contained in sub-section (1), the provisions of section 7 shall apply to a dealer referred to in sub-section (1) who
purchases goods the sale of which is liable to tax under sub-section (1) of section 31 and whose total turnover for a year is not less than fifty
thousand rupees but not more than one lakh of rupees; and such a dealer may, at his option, instead of paying the tax in accordance with the
provisions of sub-section (1), pay tax at the rates mentioned in sub-section (1) of section 7.
The argument of the learned counsel for the appellant is, with regard to the turnover of Rs. 67,900.70 covered by section 3(1), the appellant
was liable to pay tax at the rate mentioned in section 7(1) by virtue of the opening expression contained in section 7(1) and with regard to the
turnover of Rs. 15,431.09 coming within the scope of section 7-A, the appellant is liable to pay tax under the same section 7(1) at the rate
mentioned therein by virtue of sub-section (2) of section 7-A. We are not able to accept this argument. It has to be seen that both section 7(1) and
section 7-A(2) use the expression ""total turnover"". Section 2(q) defines the expression ""total turnover"" as meaning :
the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is
liable to tax.
Consequently, the Act contemplates only one ""total turnover"" and not different total turnovers and hence the ""turnover"" u/s 7-A as well as the
turnover"" u/s 3(1) had to he aggregated for the purpose of finding out the ""total turnover"" under the Act and for determining the taxable turnover.
The learned counsel for the appellant drew our attention to the provisions contained in section 53, namely, the rule-making section, read with
rule 5 of the Tamil Nadu General Sales Tax Rules, 1959. Section 53 is the section conferring power on the Government to make rules and one of
the matters with reference to which the Government can make a rule is, ""determining the total turnover or turnover of a dealer for the purposes of
this Act"". Rule 5(1) and (2) on the other hand state :
(1) Save as provided in sub-rule (2), the total turnover of a dealer for the purposes of these rules shall he the amount for which goods are sold
by the dealer.
(2) In the case of the undermentioned goods the total turnover of a dealer for the purposes of these rules shall be the amount for which the goods
are bought by the dealer ........
Relying upon this rule 5, the learned counsel for the appellant contends that the rule contemplates two turnovers, one being a sales turnover and
the other, purchase turnover and, therefore, there is nothing wrong in the appellant claiming two reliefs, one u/s 7(1) and the other u/s 7(1) read
with section 7-A(2) of the Act. It is worth-while pointing out that the rules themselves referred to the total turnover propounded by them as only
for the purpose of the Rules and not for the purpose of the Act. As we pointed out already, section 2(q) of the Act defines the expression ""total
turnover"", and that takes in every turnover whether liable to tax or not. In any event, rule 5 cannot override section 2(q). We are fortified in our
conclusion by a judgment of this Court in N. Mohanlal v. Commissioner of Commercial Taxes, Ezhilagam, Madras 1979 43S.T.C.433. That was
a case where the turnover u/s 3(1) was Rs. 43,359.58 and the turnover u/s 7-A was Rs. 14,717.50. The case of the assessee was that these two
turnovers ought not to be aggregated for the purpose of finding out the total turnover under the Act and the turnover of Rs. 43,359.58 was entitled
to exemption by virtue of section 3(1) of the Act. The court stated :
Now, turning to the contention raised by the appellant, it can be summarised thus. The appellant has admittedly a turnover relating to sales
amounting to Rs. 43,359.58. It is also admitted that the turnover of Rs. 14,717.50 is also taxable by virtue of the provisions of section 7-A. The
two together exceed the Rs. 50,000 limit mentioned in section 3(1) and so the appellant is liable to pay tax under the Act. But it was contended
before us by the counsel for the appellant that the only turnover that is taxable under the Act is that of Rs. 14,717.50 coming u/s 7-A. The attempt
is to leave out the sum of Rs. 43,000 and odd turnover from reckoning altogether. This is sought to be achieved by stating that rule 5, which
provides for computation of the turnover, only referred to in sections 3, 4 and 5 of the Act. The rules were framed before section 7-A was
introduced in the Act. Those rules cannot obliterate the section or produce a result different from that contemplated under the Act. We have,
therefore, to look at the relevant sections, section 3(1), section 7-A, as well as the definition of the term ''total turnover'' under the Act. If we look
at these provisions, it is clear that the Rs. 50,000 limit has been exceeded. The ''total turnover'' takes within its ambit taxable as well as non-taxable
turnover. Admittedly. Rs. 14,717.50 is taxable turnover. Assuming that the sum of Rs. 43,000 and odd is a non-taxable turnover, that has also to
be taken into account for the purpose of computing the ''total turnover''. Section 3(1) talks of the ''total turnover'' exceeding Rs. 50,000. So, the
two have to be added together for determining the liability. When they are added, clearly the assessee is liable to be taxed on the sum total of the
two turnovers. Rules, as we said, cannot have the overriding effect on the provisions of the Act.
Though the point that was raised in that case was slightly different from the one with which we are dealing in the instant case, still, the decision in
the above case supports our conclusion in the present case. Consequently, the appeal fails and is dismissed with costs. Counsel''s fee Rs. 250.
Appeal dismissed.