Supreme Court of India
STATE OF U.P. & ANOTHERversusHAJI ISMAIL NOOR MOHAMMAD & CO.
- Citation
- 1988 INSC 159
- Decided
- 9 May 1988
- Disposal
- Dismissed
- Bench
- R S PATHAK
Holding
Section 4‑B does not require the dealer to hold the recognition certificate at the time of purchase; a certificate held at the time of assessment satisfies the statutory requirement, and Rule 25‑A(5) is not ultra‑vires.
Summary
The respondent, a dealer manufacturing oils, applied for a recognition certificate under Section 4‑B of the U.P. Sales Tax Act, 1948 on 21‑Mar‑1969, but the certificate was issued only on 5‑Dec‑1969. Rule 25‑A(5) of the U.P. Sales Tax Rules stipulated that such a certificate would take effect from the date of its issue, thereby limiting the concessional purchase‑tax rate to purchases made after that date. The Allahabad High Court held that the rule was inconsistent with Section 4‑B and that a dealer need only hold the certificate at the time of assessment, not at the time of purchase, to claim the reduced rate. The State of U.P. appealed, arguing that the High Court’s construction added words to the statute. The Supreme Court upheld the High Court’s view, stating that the language of Section 4‑B does not require contemporaneity of the certificate with the purchase and that the rule is not ultra‑vires; the 1978 amendment later clarified the rule to take effect from the date of application. Consequently, the appeal was dismissed.
Issues considered
- Whether sub‑rule 5 of Rule 25‑A, which makes a recognition certificate effective from the date of its issue, is inconsistent with and ultra‑vires Section 4‑B of the U.P. Sales Tax Act, 1948.
- Whether a dealer must hold the recognition certificate at the time of purchase to avail the concessional purchase‑tax rate, or if holding it at the time of assessment suffices.
Legislation cited
Subjects
sales taxpurchase taxrecognition certificateSection 4-BRule 25-Aultra viresstatutory constructionconcessional tax rateassessment1978 amendment
Judgment
STATE OF U.P. & ANOTHER A
v.
HAJI ISMAIL NOOR MOHAMMAD & CO.
MAY 9, 1988
[R.S. PATHAK, C.J. AND M.N. VENKATACHALIAH, J.] B
U.P. Sales Tax Act, 1948/U.P. Sales Tax Rules, 194S.Sections JD
and 4B/Rule 25A (5)-Tax-Special relief to dealer holding recognition
certificate -Date of actual issue of certificate immaterial-Dea/er to be
in possession of certificate at assessment.
The respondent "dealer" registered under the U .P. Sales Tax
c
Act, 1948 was carrying on the business of manufacture of oils from
groundnuts and other oil seeds, and was under section 3-D .of the Act,
liable to purchase-tax on oil seeds at 3% ad valorem on the turnover of
its purchases from ihe cultivators or other unregistered dealers. Section
4-B of the Act contemplated special reliefs in purchase-tax to certain D
manufacturers of 'notified goods', if the "dealer holds a recognition-
certificate issued llllder sub-section (2) in respect thereof''. Sub•rnle (5)
of Rule 25-A of the U.P. Sales Tax Rules, 1948, however, stipulated that
a 'recognition-certilicate' issued for purposes of Section 4-B of the Act
''shall take effect from the date of its issue."
E
On 10.2.1969 the State Government notified oils of all kinds to be
"notified goods" for purposes of section 4-B entitling the dealer to a
concessional rate of purchase tax at 2% on the raw material required t"or
the manufacture of the "notified goods". On 21.3.1969, respondent
applied under section 4-B(2) for the grant of a recognition certificate,
which was granted only on 5.12.1969. The relief to the respondent in F
the form of concessional rate of purchase tax was accordingly confined
and limited to the turnover of such rrrst-purchases made only after
5.12.1969, the date of issue of the recognition certificate.
In the writ petition filed by the respond~nt, the Full Bench of the
Allahabad High Court, by majority, accepted its contention I.bat the G
clause in sub-rule (5) of Rule 25-A regarding the effective date of the
recognition certificate was at cross-purposes with and did not carry out
the objects of Section 4-Band was therefore, ultra-vires section 4-B. The
High Court held that the requirements of section 4-B were substantially
complied with if the dealer, at the time of assessment, held a recognition
certif!cate, subject to the requirement that the turnover was after the date H
of the application.
261
262 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.
A Before this Court the Revenue contended that the interpretation
placed by the High Court runs•in the teeth of the express statutory
language and the clear intendment of the provision tba.t the dealer
should bold the 'recognition certificate' at the time ortbe purchases.
Dismissing the appeal, it was,
B
HELD: (1) There is nothing basically wrong in the approach of
the High Court that the statutory laiiguage does not insist upon the
contemporaneity of the holding of the certificate with the purchases and
that ii was sufficient if the dealer, subsequently, came to hold a certi-
ficate "in respect thereor'. (2670-E I
'
c (2) To insist upon a contemporaneity would amount to qualifying
the word 'bolds' in section 4-B by adding the words "at the time of the
purchases". [267E)
(3) The words "in respect thereor• are "colourless words", but
D in section 4-B they are, in their reference to the certificate, sufficiently,
though non-specifically, wide enough to include a certificate obtained
later but pertaining to the turnover in question. [267F-G I
(4) The rule which compels only its prospective operation might,
not unreasonably, be held to be inconsistent with the ultra vires of
E section 4-B. There is nothing unreasonable in this construction of sec-
tion 4-B. Indeed, by the 1978 Amendment, this position has been made \•
clear in the rule itself, which after the amendment, expressly provides
that the certificate will take effect from the date of the application made
by the dealer and not merely from the date of the issue. [267G-H; 268Al
F Trustees v. !RC., (1946) 174LT133, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 768
(NT) of 1975.
From the Judgment and Order dated 3.1.1973 of the Allahabad
(} High Court in Writ Petition No. 4225of1971.
S.C. Manchanda and A.K. Srivastava for the Appellants.
NEMO for the Respondents.
H The Judgment of the Court was delivered by
STATE OF U.P. v. HAJJ ISMAIL [VENKATACHALIAH, J.] 263
VENKATACHALIAH, J. This appeal by certificate, preferred
A
by the State of U.P. against the Judgment, dated, 3.1.1973 of the
Allahabad High Court in W.P. No. 4225/1971, raises a short question
whether the Rule 25-A(5) of the U :P. Sales Tax Rules 1948 (Rules) in
so far as it stipulates that a 'recognition-certificate' issued for purposes
of Section 4-B of the U.P. Sales Tax Act 1948 (Act) "shall take effect
from the date of its issue" is inconsistent with does not carry-out the B
purposes of and, therefore, is ultra-vires Section 4-B of the U.P. Sales
Tax Act 1948 (Act).
The full bench of the Allahabad High Court, by a majority, has,
by the judgment under appeal, preferred this view.
2. So far as the declaration on the law on the point is concerned,
c
the matter loses much of its edge in view of the relevant amendment
brought about by the U.P. Taxation Laws (Amendment & Validation)
Act 1978, which now provides that such a recognition certificate shall
take effect from the anterior date of the presentation of the application
by the dealer. By the same amendment, the certificate is rendered D
valid, for three successive assessment years at a time and the renewals
shall also be for like periods.
3. The necessary and material facts are in a short compass and
may briefly be stated: Respondent Haji Ismail Noor Mohammad &
Co. a registered firm of partners was a "Dealer" registered under the E
Act. It, inter-alia, carried on the business of manufacture of oils from
groundnuts and other oil seeds. The oil so manufactured was sold by
the Dealer both intra-state; inter-state and by way of export.
Under Section 3-D of the Act, a dealer is liable to purchase-tax
on oil seeds at 3% ad-valorem on the turnover of the purchases made F
by the dealer from the cultivators or other unregistered dealers.
Section 4-B of the Act, however, contemplates special reliefS to cer-
tain manufactures of notified goods, the relief being in the form of
. concessional rate of purchase tax or exemption there from, as the case
may be, as notified by the State-Government if ·the .,'dealer holds a
recognition-certificate issued under sub-section (2) in respect G
thereof."
On 10.2.1969, the State Government notified that oils of all
kinds to be "notified goods" for purposes of Section 4-B and that the
purchases by the dealer, liable to tax on the turnover of the first-
purchases shall be entitled to a concessional rate of tax at 2% on the H
264 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.
raw-material required for the manufacture of notified-goods.
A
The present controversy relates to the Dealer's entitlement to the
concessional rate of purchase tax respecting the purchase tum-over of
its first-purchases under the said notification.
B 4. On 21.3.1969, Respondent applied under Section 4-B(2) to
the prescribed-authority, in the prescribed-form for the grant of a
recognition certificate. The recognition certificate, for certain reasons,
was granted only on 5.12.1969. There appears no dispute that the
turn-over of the first-purchases of the Respondent, respecting which
the claim for reduced-rate of tax was made, constituted raw-material
required for the manufacture of notified goods and, therefore, satis-
c fied the requirement of the notificati,on. However, the relief was con-
fined to the turnover of such first-purchases made only after 5.12.1969,
i.e., the date of issue of the certificate and the relief in respect of the
turnover prior to that date was refused on the basis.of the condition in
sub-rule 5 of Rule 25-A which provided that "such certificate shall
D take effect from the date ofits issue".
Respondent, in .its writ-petition before t]le High Court conten-
. ded that this clause in Sub-Rule (5) of Rule 25-A is at cross-purposes
with and did not carry out the objects of Section 4-B and is ultra-vires
Section 4-B. The High Court, by majority opinion, has accepted this
E contention.
5. The provisions of Section 4-B and Rule 25-A(5) may now be
noticed:
"4-B. Special relief to c.ertain manufacturers.
F
(1) Notwithstanding anything contained in sections 3, 3-A,
3-AA and 3-D:-
(a) where any goods liable to tax undei section 3-D are
purchased by a dealer who is liable to tax on the tur-
G nover of his first purchases under that section and the
dealer" holds arecognition certificate issued under sub-
section (2) in respect thereof," he shall be liable in
respect of those goods to tax at such concessional rate,
or be exempt from tax, as may be notified in the
Gazette by the State Government in that behalf;
H
STAIB OF U.P. v. HAJJ ISMAIL IVENKATACHALIAH, J.) 265
(b) where any goods liable to tax under any other section A
are sold by a dealer to another dealer and such other
dealer furnishes to the selling dealer in the prescribed
form and manner a certificate to the effect that he
. holds a recognition certificate issued under sub-section
(2) in respect thereof, the selling dealer shall.be liable
in respect of these goods to tax at such concessional B
rates, or be exempt from tax as may be notified in the
Gazette by the State Government in that behal.f.
(2) A dealer who requires any goods referred to in
sub-section (1) for use as raw material for the purposes of
manufacture in the State of Uttar Pradesh of any notified
goods, and such notified goods are intended to be sold by · C
him in the State or in the course of inter-state trade or
commerce or in the course of export out of India, may
apply within such period, and in such form and manner, as
may be prescribed, to the assessing authority for the grant
of recognition certificate in respect thereof and if ,he appl- D
icant satisfied such requirements and conditions as may be
prescribed, the assessing authority shall grant to the d.ealer
J' in respect of such goods a recognition certificate in such
form and subject to such conditions as may be prescribed."
Sub-Rule.5 of Rule 25-A provides: - E
"25-A(5). The recognition certificate shall ordinarily
be issued within 30 days of the presentation of the applica-
tion to ihe Sales Tax Officer. If, however, it may not b~
possible to issue the certificate within the time. specified
above, the Sales Tax Office~ s_hall obtain the approval of F
the Assistant Commissioner (Executive} of his range for an
extension of time, after stating the reasons for which it is
not possible to issue the certificate in time. Such certificate
shall take effect from the date of its issue."
(underlining supplied)
G
In reaching such conclusion on the point as it did the reasoning
that commended itself to the High Court was this:
" . . . . The efficacy of the recognition certificate under
clause (a) aforesaid becomes material and relevant at the
time of the quantification of the purchase tax, i.e., when H
266 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.
the assessment order is being drawn up. It is in the assess-
A ment proceedings that the liability to pay tax at a conces-
sional rate is fructified. A dealer would be entitled to the
concessional rate if he holds a recognition certificate
"
B " .... The language of clause (b) does not make it a condi-
tion precedent or a necessary obligation that the purchas-
ing dealer must a( the time of the purchase produce the
recognition certificate. If the purchasing dealer, subse-
quent to the transaction of purchase, furnishes to the sell-
ing dealer the certificate that he holds a recognition certi-
ficate, the requirements of clause (b) are fully satisfied."
c
.
The High Court also took into account that sub-Rule .5 of
Rule 25-A while rightly recognising the need for the issue of the certifi-
cate with due despatch and within a time bound schedule, could not,
consistently with the scheme and purpose of Section 4-B, provide that
D the certificate shall take effect only from the date of its issue.
6. Shri Manchanda, learned Senior Advocate appearing in SJlp-
port of the appeal, contended that the interpretation placed by the
High Court runs in the teeth of the express statutory language which
E stipulates that "the dealers holds a recognition certificate" and the
interpretation placed on it by the High Court, if accepted, would have
the effect of adding something to the language of the section which is
not in the Section. Learned Counsel said that the High Court had, by
the judgment, virtually introduced a fiction that under certain circum-
stances where there had been a delay in issuing the certificate, the
F dealer must be deemed to have held the certificate.
Shri Manchanda submitted that the clear intendment of the pro-
vision was that the dealer should hold the 'recognition-certificate' at
the time of the purchases and that it would not be sufficient comp-
liance with the statute if the dealer comes to hold it supsequently. He
G accordingly commended the view that found favour with the learned
judge in the minority in the High Court.
We did not have the benefit of the arguments from the side of the
respondent, which has·remained unrepresented.
H 7. It is really a matter of construction of the language of Section
STATE OF U.P. v. HAJJ ISMAIL [VENKATACHALIAH, J.) 267
4-B; whether the dealer should hold a recognition certificate at the A
time the purchases were made or whether the requirements of the
'Section should be held to be satisfied if the dealer holds such a "rec-
ognition certificate" at the time of the assessment of the turnover in
question. The High Court has held that the requirements of the Sec-
tion are substantially complied with if the certificate is available to the
dealer at the time the liability to tax of the turnover in question is
B
sought to be determined, subject to the requirement that the turnover
is after the date of the application fi!ed by the dealer for issue of a
certificate. According to the High Court, the date of actual issue of the
certificate should not be held to be material and that the benefit for the
concessional rate of tax should be available to the dealer if the dealer,
at the time of the assessment, holds a recognition certificate "in respect c
thereof'. According to the High Court the language of Section 4-B
does support the extreme construction that the recognition certificate
should be held at the time of the purchases themselves.
8. On a consideration of the matter we are persuaded to the D
view that the construction placed on the provision by the High Court is
an eminently plausible one. There is nothing basically wrong in the
approach of the High Court that the statutory language does not insist
upon the contemporaneity of the holding of the certificate with the
purchases and that it is sufficient if the dealer, subsequently, ccrnes to
hold certificate "in respect thereof'. It seems possible to say that to E
insist upon a contemporaneity of the purchases and the certificate
would also amount to qualifying the word 'holds' in the section by
adding the words "at the time of the purchases".
It is ture, the words "in respect thereof' as Lord Greene M.R.
said are "colourless words", See Trustees v. /RC, [1946] 174 LT 133 F
but in Section 4-B, they are in their reference to the certificate, suffi-
ciently, though non-specifically wide enough to include a certificate
obtained later but pertaining to the turnover in question. If this is the
scheme of Section 4-B in that it does not exclude from its contempla-
tion the efficacy and sufficiency, for its purpose of a certificate issued
subsequently, then, the rule which compels only its prospective opera- G
ti on might, not unreasonably, be held to be inconsistent with and
ultra-vires of Section 4-B. We find therefore nothing unr')asonable in
this construction of Section4-B. Indeed by the 1978 Amendment, this
position has been made clear in the rule itself which, after the amend-
ment, expressly provides that the certificate will take effect from the
H
268 SUPREME COURT REPORTS [1988] Supp. 1 S.C.R.
A date of the application made by the dealer and not merely from the
date of the issue.
9. In this view of the matter, the judgment of the High Court
does not call for interference. The appeal is dismissed. However, there
will be no order as to the costs.
13
R.S.S. Appeal dismissed.
,
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