Commercial Tax Officer vs M/S Bombay Machinery Store - (Supreme Court) (27 Apr 2020)

Tax Administration Authorities cannot give their own interpretation to legislative provisions on basis of their own perception of trade practise

MANU/SC/0419/2020

Sales Tax/VAT

The question involved in present case is as to whether as a condition of giving the benefit of Section 6(2) of the Central Sales Tax Act, 1956, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be taken from a carrier, when the goods are delivered to a carrier for transmission in course of inter-state sale.

The Respondent-assessee Bombay Machinery Store had purchased electricity motors and its parts in the said financial year out of the State and sold them to purchasers within the Kota region of the State of Rajasthan. For such sales, they obtained the benefit of exemption under Section 6(2) of the 1956 Act. These goods had remained with the transport company upon arrival in Kota for more than a month. Revenue’s case is that, after importing these goods into Rajasthan, sale was effected through bilty (transport receipt) on obtaining separate orders. Such sale, it is the revenue’s case, constituted sale within the State and hence, taxable @12% per annum under the Rajasthan Sales Tax Act, 1954.

Claim of benefit under Section 6(2) of the 1956 Act was rejected and tax along with interest and penalty was imposed under the State Act by Commercial Tax Officer. The appeals by Bombay Machinery Stores were allowed by the Deputy Commissioner (Appeals).

The High Court confirmed the Board’s order and quashed two circulars bearing S.No.115B dated 16th September, 1997 and S.No.1132A dated 15th April, 1998. These circulars sought to impose a time limit on retention of goods in the carrier’s godown, beyond which time the revenue was to treat obtaining of constructive delivery of the goods involved.

As per the aforesaid circulars, retention of goods by the transporter beyond the time stipulated therein (being 30 days as per the later circular) would imply that constructive delivery of the goods has been made by the transporter to the consignee. In such a situation, the transit status of the goods would stand terminated and the deeming provision in first explanation to Section 3 of the 1956 Act conceiving the time-point of delivery as termination of movement shall cease to operate.

Transfer of documents of title was effected subsequent to the goods reaching the location within destination State. But when the goods are delivered to a carrier for transmission, first explanation to Section 3 of the 1956 Act specifies that movement of the goods would be deemed to commence at the time, when goods are delivered to a carrier and shall terminate at the time when delivery is taken from such carrier. The said provision does not qualify the term ‘delivery’ with any timeframe within which such delivery shall have to take place. In such circumstances, fixing of timeframe by order of the Tax Administration of the State would be impermissible.

On a plain reading of the statute, the movement of the goods, for the purposes of clause (b) of Section 3 of the 1956 Act would terminate only when delivery is taken. There is no scope of incorporating any further word to qualify the nature and scope of the expression “delivery” within the said section. The legislature has eschewed from giving the said word an expansive meaning. The interpretation of the Division Bench of the Delhi High Court given in the case of Arjan Dass Gupta and Bros. v. Commissioner of Sales Tax, Delhi Administration does not lays down correct position of law. In the event, the authorities felt any assessee or dealer was taking unintended benefit under the aforesaid provisions of the 1956 Act, then the proper course would be legislative amendment.

The Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. This administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature. There is no reason to interfere with the judgments of the High Court. The appeals are dismissed.

Tags : GOODS DELIVERY TIMEFRAME