GUJARAT TRADING COMPANY v. STATE OF MAHARASHTRA. — 1995 DIGILAW 21 (BOM)

JUDGMENT The judgment of the Court was delivered by DR. B. P. SARAF, J. - By this reference under section 61(1) of the Bombay Sales Tax Act, 1959 made at the instance of the assessee, the Maharashtra Sales Tax Tribunal ("the Tribunal") has referred the following question of law to this Court for opinion : "Whether, on the facts and circumstances of the case the sale of goods made by the applicant and recorded in books of account at Bombay of goods despatched to Jaipur but sold there entitled the applicant to obtain authorisation within the meaning of the terms set out in section 24 of the Act ?" 2. The assessee had made an application dated January 19, 1979 to the Sales Tax Officer (Registration Branch), Bombay for grant of authorisation under section 24 of the Bombay Sales Tax Act, 1959 ("the Act"). In support of his application, the assessee pointed out that he had despatched one tanker of Palmolin oil to one M/s. Bansilal Gupta and Company at Jaipur for sale on consignment basis. The said tanker of oil was sent through M/s. Rajpal Bulk Carriers, a transport contractor, under transport receipt No. 9618 dated May 18, 1978. The said goods, according to the assessee, were sold on his behalf by his commission agent M/s. Bansilal Gupta & Co., at Jaipur for Rs. 66,544.37. In support of the above contention, the assessee produced a sale patti dated August 3, 1978, issued by the said agent at Jaipur. According to the assessee, he was entitled to get authorisation under section 24 of the Act as the turnover of sales of goods despatched by him to Rajasthan from the State of Maharashtra exceeded Rs. 30,000. The above application of the assessee for authorisation was rejected by the Sales Tax Officer on the ground that "the dealer had despatched the goods outside the State without making sale as defined in section 2(28) of the Act". Aggrieved by the above order of the Sales Tax Officer rejecting the application of the assessee for authorisation, the assessee appealed to the Assistant Commissioner of Sales Tax (Appeals) VIII, Bombay City Division, Bombay, who affirmed the order of the Sales Tax Officer and dismissed the appeal. Aggrieved by the above order of the Sales Tax Officer rejecting the application of the assessee for authorisation, the assessee appealed to the Assistant Commissioner of Sales Tax (Appeals) VIII, Bombay City Division, Bombay, who affirmed the order of the Sales Tax Officer and dismissed the appeal. While doing so, he held that the despatch of goods should be "as a result of contract", He observed : "In the instant case, admittedly, despatch of goods was not as a result of contract. When the goods were sold at Jaipur they were not within the State of Maharashtra. Consequently, according to the provisions of section 4(2) of the Central Sales Tax Act, 1956 read with section 2(28) of the Bombay Sales Tax Act, 1959, the sale is not within the meaning of section 2(28) of the Bombay Sales Tax Act, 1959. Consequently, such transactions are not covered by the condition prescribed under section 24 of the Bombay Sales Tax Act, 1959 for grant of authorisation." The assessee went in further appeal to the Maharashtra Sales Tax Tribunal ("the Tribunal"). The Tribunal was also of the same opinion that in order to get authorisation under section 24 of the Act, the goods despatched outside the State "must be sold within the State of Maharashtra". The Tribunal, therefore, confirmed the order of the Assistant Commissioner and the Sales Tax Officer and dismissed the appeal. Hence, this reference at the instance of the assessee. 3. Mr. B. C. Joshi, learned counsel for the assessee, submitted before us that the Tribunal has committed a manifest error in law in interpreting the section 24 of the Act. According to him, section 24 of the Act provides in clear and unambiguous terms that a registered dealer is entitled to apply for authorisation and to get the same if the turnover of the sales of goods which are exported by him from the State outside the territory of India or despatched by him from the State of Maharashtra to any place in India outside the State exceeds thirty thousand rupees. The expression "turnover of sales" appearing in section 24, according to the learned counsel, should be read in the context of the scheme and object of the said section and should be given a meaning consistent therewith. The expression "turnover of sales" appearing in section 24, according to the learned counsel, should be read in the context of the scheme and object of the said section and should be given a meaning consistent therewith. According to the learned counsel, by no stretch of imagination, it can be interpreted to mean turnover of sales made within the State or in the course of inter-State trade. The submission of the counsel for the Revenue Mr. R. V. Desai, on the other hand, was that the turnover of sales of a registered dealer of goods which are exported by him outside India or despatched outside the State would mean "turnover of goods sold by the dealer within the State and then exported outside India or despatched outside the State." 4. We have considered the rival submissions of the counsel for the parties. The real controversy is about the interpretation of the expression "turnover of sales of a registered dealer of goods which are despatched by him from the State of Maharashtra to any place in India outside the State". To resolve the same, it would be expedient to refer to the provisions of section 24 of the Act and some other sections which have a bearing on the controversy. Section 24 of the Act deals with authorisations. It lays down the requirements on fulfilment of which a registered dealer can apply for authorisation. This section as it stood at the material time, reads as follows : "24. Authorisations. - Where, during the previous or current year, the turnover of sales of a registered dealer of goods - (a) which are exported by him from the State outside the territory of India, or despatched by him from the State to any place in India outside the State; and (b) which are sold by him to any authorised dealer and exported or despatched by that dealer to any destination referred to in clause (a), exceeds thirty thousand rupees, he may apply for an authorisation to the Commissioner. Subject to the provisions of section 27 the Commissioner shall, if the registered dealer satisfies such further requirements (including the furnishing of adequate security) as may be prescribed, issue to him an authorisation in such form, and subject to such conditions, as may be prescribed." Authorisation under the above section enables the dealer to purchase certain taxable goods on payment of a lower rate of tax than the rates applicable under the Act by virtue of section 11(1) of the Act. "Authorised dealer" has been defined in clause (5) of section 2 of the Act to mean "a registered dealer who holds an authorisation" and "authorisation" has been defined in clause (4) of the same section to mean "an authorisation granted under section 24". Section 11, so far as relevant, at the material time provided as follows : "Section 11. Tax payable at a reduced rate on certain sales. - Where any dealer liable to pay tax under this Act, sells any taxable goods, - (1) to an authorised dealer, who certifies in the prescribed declaration form, - (a) that the goods will be despatched in the same form in which they were purchased and without doing anything to them, which might amount to or result in manufacture thereof, within three months from the date of purchase, to his own place of business outside the State for sale or for use in the manufacture of goods for sale outside the State, and (b) that in respect of the said place of business he or his manager or agent at that place is a registered dealer under the Central Sales Tax Act, 1956. ........ then, notwithstanding anything contained in sections 7, 8, 9 or 10 on such sale of goods, the dealer shall be liable to pay a sales tax at the rate of 4 paise in the rupee if such sale falls under clause (1) or (2) ......" A conjoint reading of the above provisions makes it clear that a person who holds authorisation granted under section 24 of the Act, is entitled to purchase taxable goods at a lower rate of 4 paise in a rupee. 5. 5. The requirement for grant of authorisation under section 24, with which we are concerned in the case, is that during the previous or current year the turnover of sales of a registered dealer - (a) of goods which are exported by him from the State outside the territory of India, or (b) despatched by him from the State to any place in India outside the State, exceeds 30,000 rupees. The assessee in the instant case despatched a consignment of oil to his agent at Jaipur for sale there. Admittedly, the value of the consignment exceeded Rs. 30,000. The consignment was sold by the assessee's agent at Jaipur for Rs. 66,545.37. From these facts, it appears that the condition for grant of authorisation contained in section 24 of the Act was fulfilled by the assessee and he was entitled to get authorisation. His application was, however, rejected on the ground that the expression "turnover of sales of goods despatched by him to any place outside the State" must mean the "turnover of sales effected within the State and then despatched to any place outside the State". This was done by relying on the definition of the expression "turnover of sales" appearing in clause (36) of section 2 of the Act which reads : "2(36) 'turnover of sales' means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount of sale price, if any, refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period." It is this interpretation of section 24 which has given rise to this reference. According to the counsel for the assessee, in the context of section 24 of the Act, "turnover of sales" can only mean "turnover of sales of the goods despatched by the assessee outside the State". It cannot be interpreted to mean "turnover of sales made within the State". Any such interpretation, according to the learned counsel, will go counter to the clear language of section 24 and will have the effect of rendering the same unworkable. Counsel for the Revenue, however, says that "turnover of sales" having been defined in clause (36) of section 2 of the Act, it must receive the same meaning wherever it appears in the Act. Counsel for the Revenue, however, says that "turnover of sales" having been defined in clause (36) of section 2 of the Act, it must receive the same meaning wherever it appears in the Act. According to the learned counsel under clause (36) of section 2, "turnover of sales" means the aggregate of the sale price of the goods sold within the State. 6. We have carefully considered the rival submissions of the counsel for the parties. So far as the submission on behalf of the Revenue is concerned, it appears that it is based on the assumption that the words "turnover of sales" having been defined in section 2(36) of the Act, the said definition has to be substituted for the words "turnover of sales" appearing in section 24 of the Act. This assumption, itself, in our opinion, is erroneous in view of the well-settled rule of construction that an interpretation clause is not to be taken as substituting one set of words for another without regard to the context in which it appears. In the instant case, section 2 which defines various words and expressions used in the Act, has itself qualified the definitions contained therein by the expression "unless the context otherwise requires". The above qualifying expression makes it clear that if certain words or expressions defined in section 2 are used in the Act in a context in which the given definition or meaning will not fit, it may be interpreted according to its ordinary meaning. In the instant case, in the context of section 24 of the Act, "turnover of sales of goods despatched by the assessee to any place outside the State" cannot mean the turnover of goods "sold by the assessee in the State". Because, "sales of the goods in the State" would result in the transfer of title in those goods for consideration from the assessee to the purchaser. If that happens, nothing would be left with the assessee to despatch to any place outside the State and question of turnover of such despatches would not arise. 7. It is therefore clear that in the context of section 24, the expression "turnover of sales" cannot be interpreted to mean "turnover of sales of goods made in the State". Such an interpretation will lead to absurdity and make section 24 wholly unworkable. 7. It is therefore clear that in the context of section 24, the expression "turnover of sales" cannot be interpreted to mean "turnover of sales of goods made in the State". Such an interpretation will lead to absurdity and make section 24 wholly unworkable. Viewed in the context of section 24, the expression "turnover of sales of goods which are despatched by the dealer applying for authorisation to any place in India outside the State", will mean and only mean the "sale price of the goods received or receivable by the dealer in respect of the sale of those goods in the place outside the State where they were despatched by him". This is the only meaning which can be correctly and properly attributed to the expression "turnover of sales" appearing in section 24 of the Act. 8. Moreover, the definition of "turnover of sales" appearing in clause (36) of section 2 itself nowhere uses the expression "sale price of goods receivable in respect of goods sold within the State". In fact, the definition of "turnover of sales" in clause (36) has been couched in a most general and flexible language which can fit in all contexts and settings. In the context of a section which refers to sale of goods in the State, it would mean "turnover of sales of goods sold in the State", whereas in the context of despatch of goods to a place outside the State, it would mean sale price of goods received or receivable by the dealer in respect of sale of goods despatched by him in the place where they are despatched. This expression is thus capable of having different meanings in different contexts and settings. 9. From the above discussion, it is obvious that the authorities below including the Tribunal, committed a manifest error of law in holding that in order to get authorisation under section 24 of the Act, the despatch of the goods by the assessee to any place outside the State must be preceded by a "sale of those goods within the State" because, as stated by us above, that is impossible. We are, therefore, of the clear opinion that on the facts and in the circumstances of this case, the assessee was entitled to get the authorisation under section 24 of the Act, as the turnover of sales of goods despatched by him to Jaipur and sold there by his agent exceeded the specified limit of Rs. 30,000. 10. Accordingly, we answer the question referred to us in the affirmative and in favour of the assessee. 11. In the facts and circumstances of the case, we make no order as to costs. Reference answered in the affirmative.