V. Ramaswami, J.
1. The petitioners are dealers in cotton yarn at Salem in the State of Tamil Nadu. In their return under the Central Sales Tax Act for the assessment year 1963-64, they claimed exemption among others on a turnover of Rs. 2,50,439,17 on the ground that they were second inter-State sales effected by them by transfer of documents of title to the goods during their movement from one State to another in pursuance of the earlier sales falling under Section 6(2) of the Central Sales Tax Act, hereinafter referred to as the Act. In respect of another turnover of Rs. 4,47,911.75, which also related to second inter-State sales by transfer of documents of title to such goods during their movement from one State to another, the petitioners claimed that in view of Section 15 of the Act, they were not liable for Central sales tax. Since these two items were alone disputed in this revision petition, it would be enough if we note the facts relating to these two items and the findings of the assessing authority, the Appellate Assistant Commissioner and the Tribunal.
2. The first item of transaction took place in the following circumstances : The petitioners purchased cotton yarn which is one of the items of declared goods falling under Section 14(ii-b) of the Act from a manufacturing mill at Mysore. They obtained certificates from the manufacturing mill in form E-I and also issued the declaration in form C to the mills. The delivery of the goods in all these cases was to be effected by the mills in the States of Gujarat, Maharashtra and West Bengal. When the goods were on their movement from Mysore State to the other States, the petitioners sold the goods by transfer of documents of title to such goods to certain out-of-State purchasers who were not registered dealers. The petitioners claimed exemption in respect of these second inter-State sales under Section 6(2). They also contended that, in any case, the proviso to Section 9(1) is not applicable in respect of these transactions and that, therefore, the State of Tamil Nadu could not assess them for Central sales tax under that provision. The assessing officer held that since the second inter-State sales by the petitioners were to purchasers outside the State, who are not registered dealers, Section 6(2) was not applicable. The assessing officer also held that the proviso to Section 9(1) is applicable in respect of this turnover and it is the State of Tamil Nadu which has to levy and collect the tax. Local sales of cotton yarn, which comes under declared goods, is taxable under Section 4 of the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the State law, at the rate of one per cent in the relevant assessment year 1963-64, at the point of first sale in the State. Under Section 8(1) of the Act, the rate prescribed for inter-State sales at the relevant period was 2 per cent. As the rate for local sales of such goods under the State law was lower than that prescribed for declared goods under the Act, the assessing officer also held that this turnover is liable to be taxed at one per cent under Section 8(2A) of the Act. This view was confirmed by both the Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal.
3. The second disputed item of turnover took place in the following manner. The petitioners purchased cotton yarn from a manufacturing mills in this State but the delivery of the goods was to be effected either in Gujarat, Maharashtra or West Bengal. They had obtained certificates from the selling mills in form E-I and had also issued declarations in form C to the selling mills. When the goods were on their movement from this State to other States, the petitioners effected sales by transfer of documents of title to such goods to out-of-State purchasers who were not registered dealers. In respect of this turnover, the contention of the petitioners was that the tax on the first sale in their favour was levied and collected by the State of Tamil Nadu and under the proviso to Section 9(1) even in respect of the second transaction of sale by them to the out-of-State purchasers, this State became entitled to levy and collect the tax. Cotton yarn being declared goods, this State was not entitled to levy tax at more than one stage under Section 15 of the Act. Therefore, the turnover was not liable to be taxed. This contention was also rejected by the assessing officer and the tax at one per cent was levied under Section 8(1) read with Section 8(2A) of the Act. The learned counsel for the petitioners in support of this contention also relied on the decision of this court reported in Madura South India Corporation Private Limited v. Joint Commercial Tax Officer [1968] 21 S.T.C. 163., which was affirmed by the Supreme Court in State of Tamil Nadu v. Madurai South India Corporation (P.) Ltd. : [1973]2SCR10 . This assessment order was confirmed by the Appellate Assistant Commissioner and the Tribunal.
4. In this petition, in respect of the first item of dispute, the learned counsel for the petitioners contended that though the second inter-State sale was effected during the movement of the goods from one State to another to an out-of-State buyer, who was not a registered dealer and that, therefore, Section 6(2) is not applicable, the proviso to Section 9(1) is not attracted as they were not persons who could have obtained the declaration form under Section 8(4)(a). The argument was that in respect of declared goods for which a lower rate is prescribed for a local sale in the State law than the one prescribed under Section 8(1), only Section 8(2A) is applicable but Section 8(4) applies only in respect of a sale to which Section 8(1) is applicable. Therefore, he could not have obtained a declaration in form C in connection with the purchase of such goods by him. He also contended that though in fact he had obtained form C declaration from the authorities in this State and gave it to the seller-mills of Mysore, that would not in any manner affect the legal position that in law he was not entitled to get the same. The fact that he was given a declaration will be of no relevance to the consideration of the applicability of the proviso to Section 9(1). The proviso to Section 9 is, therefore, not attracted and this State could not assess him under the Central Sales Tax Act in respect of second inter-State sales. On the other hand, the learned Government Pleader contended that Section 8(2A) is only in the nature of a proviso to Section 8(1) and that it is not an independent provision in the sense that when the provision of that sub-clause is attracted, the transaction will not fall under Section 8(1) at all. If Section 8(1) and 8(2A) are to be so read together to a transaction falling under Section 8(1) for which the rate is to be applied as per Sub-section (2A), Section 8(4) is clearly applicable. In this connection he also referred to the decisions of this court reported in K.A. Ramudu Chettiar & Co. v. State of Madras [1968] 22 S.T.C. 283 and State of Madras v. K. Nandagopal Chetty [1968] 22 S.T.C. 290 and the decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. G. Mumlidhar & Co. [1968] 22 S.T.C. 285, which dealt with the scope of the proviso to Section 9(1).
5. In order to appreciate these rival contentions, it is necessary for us to set out the relevant provisions of the Act as in force in the assessment year 1963-64:
8. Rates of tax on sales in the course of inter-State trade or commerce. --(1) Every dealer, who in the course of inter-State trade or commerce --
(a) sells to the Government any goods ; or
(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3);
shall be liable to pay tax under this Act, which shall be two per cent of his turnover.
(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within Sub-section (1) --
(a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State; and
(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent, or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher ; and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
(2A) Notwithstanding anything contained in Sub-section (1) or Sub-section (2), if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than two per cent (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation. -- For the purposes of this sub-section a sale or purchase of goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods.
(4) The provisions of Sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner --
(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority ; or
(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government.
9. Levy and collection of tax and penalties. -- (1) The tax payable by any dealer under this Act on sales of goods effected by him in the course 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 movement of the goods commenced :
Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within Sub-section (2) of Section 6, be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained or, as the case may be, could have obtained, the form prescribed for the purposes of Clause (a) of Sub-section (4) of Section 8 in connection with the purchase of such goods.
(2) Subject to the other provisions of this Act and the Rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, 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 of the State ; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, 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, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly:
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 subsection.
(3) The proceeds in any financial year of any tax, including any penalty, levied and collected under this Act in any State (other than a Union territory) on behalf of the Government of India shall be assigned to that State and shall be retained by it; and the proceeds attributable to Union territories shall form part of the Consolidated Fund of India.
6. It would be seen from Sub-clause (2) of Section 9 that though in respect of inter-State sales or purchases the tax shall be levied and collected by the Government of India, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State were empowered to assess, reassess, collect and enforce payment of tax, etc., on behalf of the Government of India. Under Section 9(1) read with Section 9(2), the State from which the movement of goods commenced was authorised to act on behalf of the Government of India in respect of inter-State sales. The proviso to Section 9(1) deals with the State, which is entitled to levy and collect on behalf of the Government of India in a case where the inter-State sale was not the first inter-State sale, but a sale effected subsequent to the first sale during the movement of the goods from one State to another but was not covered by exemption provided under Section 6(2). In respect of such case, to the State from which the registered dealer effecting the subsequent sale obtained or could have obtained the form prescribed for the purpose of Clause (a) of Sub-section (4) of Section 8 in connection with the purchase by him of such goods is empowered to assess. In other words, it is the State from which the C form declarations have been obtained or could have been obtained by the registered dealer in respect of the first purchase preceding his sale that would have jurisdiction to assess such turnover. In the three decisions referred to by the Government Pleader, the appropriate State which could tax the second or subsequent inter-State sale came up for consideration. In the first case reported in K.A. Ramudu Chettiar & Co. v. State of Madras [1968] 22 S.T.C. 283., the facts were as follows: The assessee purchased goods from registered dealers in Rajasthan where the goods were exempt from tax. But the Rajasthan dealers declined to give to the assessee certificate in form E-I of the Central Sales Tax (Registration and Turnover) Rules, 1957. The goods were despatched from Rajasthan by rail and during their movement the assessee transferred the documents of title thereto to certain purchasers in Madras State, who were also registered dealers. The assessee produced the declarations in C form obtained from the authorities in the Madras State. It was contended for the assessee that it was only the Rajasthan State from which the goods moved that could tax the subsequent sale effected during the movement of the goods on rail. This court held that since the certificate in form E-I was not produced, the second sale by the assessee to a dealer in Madras would not fall within the ambit of Section 6(2) and attracted the proviso to Section 9(1). It was further held that the State which could tax them was the State from which the assessee who effected the subsequent sale obtained the declaration in form C in respect of his purchase. This view was reaffirmed in the decision in State of Madras v. Nandagopal Chetty [1968] 22 S.T.C. 290. A similar view was also expressed by the Andhra Pradesh High Court in State of Andhra Pradesh v. G Murallidhar & Co. [1968] 22 S.T.C. 285. But the contention of the learned counsel for the petitioners is that in these decisions, there was no question about the registered dealers' right to obtain the declaration in form C from the Madras State in respect of their purchases. According to the learned counsel, only if the dealer is entitled to get the declaration referred to in Section 8(4)(a) in respect of the transactions of purchases, the State from which he could have obtained that declaration would get jurisdiction.
7. In this case, there is no dispute that the sale was effected by the petitioners to the out-of-State purchaser during the movement of the goods from one State to another. It was also a second inter-State sale and that sale being not to a registered dealer, did not come within the provisions of Sub-section (2) of Section 6. But what was contended by the learned counsel for the assessee was that he is not a registered dealer who could have obtained the form prescribed for the purpose of Clause (a) of Sub-section (4) of Section 8 in connection with the purchase of such goods by him, because, according to the learned counsel, since the goods are declared goods the tax was payable only under Section 8(2A). This provision in Section 8(2A) is an independent provision and only for those sales which would fall under Sub-section (1) of Section 8, Section 8(4)(a) could be invoked. We are unable to agree with this contention of the learned counsel. Section 8(2A) only deals with the rate of tax in respect of declared goods in certain circumstances. But it is not an independent provision. It is in the nature of a proviso to Section 8(1). The liability of the transaction itself is to be tested only with reference to the conditions prescribed in Section 8(1). While the nature of the transaction is tested with reference to the conditions prescribed in Section 8(1), the conditions prescribed in Sub-section (2A) will have to be satisfied in order to get the further concession of paying the tax at the lower rate. Further, if Sub-section (2A) is to stand alone without reference to Sub-section (1), it would not be workable at all because in the case of a local sale taxable under the State law at a rate lower than three per cent, that provision stated that the tax payable under this Act shall be calculated at the lower rate. The expression 'tax payable under this Act' in this sub-section could only relate to Section 8(1) and (2) and there is no other provision prescribing the rate in respect of inter-State transactions and if Section 8(1) is not to be looked into, there can be no case for calculating at the lower rate. Obviously, in order to find a lower rate, there should be two rates and Sub-section (2A) deals with only one rate, that is the local rate under the State law. The other rate is only prescribed under Section 8(1) of the Act. Therefore, necessarily both will have to be read together and the character of the transaction and its eligibility for concessional rates will have to be tested with reference to Section 8(1) and (2A) and cannot be applied independently.
8. The legislative history of Section 8 also shows that Section 8(2A) is not an independent provision but is in the nature of a proviso to Section 8(1). Section 8 was amended by Central Act No. 31 of 1958 with effect from 1st October, 1958. Prior to that amendment Section 8(1), (2) and (4) read as follows:
8. Rates of tax on sales in the course of inter-State trade or commerce. -- (1) Every dealer who, in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in subsection (3) shall be liable to pay tax under this Act, which shall be one per cent of his turnover ;
Provided that, if under the sales tax law of the appropriate State, the sale or purchase of any goods by a dealer is exempt from tax generally and not in specified cases or in specified circumstances or is subject to tax (by whatever name called) at a rate or rates which is or are lower than the rate specified in Sub-section (1), the tax payable under this Act on the turnover in relation to the sale of such goods in the course of inter-State trade or commerce shall be nil or shall be calculated at the lower rate, as the case may be.
(2) The tax payable by any dealer in any case not falling within subsection (1) in respect of the sale by him of any goods in the course of inter-State trade or commerce shall be calculated at the same rates and in the same manner as would have been done if the sale had, in fact, taken place inside the appropriate State, and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
(4) The provisions of Sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold, containing the prescribed particulars on a prescribed form obtained from the prescribed authority.'
It will be seen that concessional rate of one per cent under this un-amended provision was applicable to sales made to registered dealers alone and not to anyone else. Sub-section (2) also did not make any distinction between sales of declared goods and sales of goods other than declared goods. The amending Act included the sales to Government also for the concessional levy under Section 8(1) and provided for different rates in Sub-section (2) on the sales of declared goods and other than declared goods. What was a proviso to Sub-section (1) was separated and shown as Sub-section (2A) in the amending Act. A corresponding amendment was also made in Section 8(4). These original provisions and the amendments clearly show that Sub-section (2A) of Section 8 has to be read along with Section 8(1) or 8(2), as the case may be, and not intended to be operative independently of that provision. Thus, Sub-section (2A), in spite of the non obstante clause in the opening part of the section, should not be read independently and has to be construed only as a proviso with respect to the rate of tax prescribed under Section 8(1). Thus in respect of declared goods for which the rate prescribed in the local law for a local sale was lower than the concessional rate prescribed under Section 8(1), the provisions of Section 8(4) could be invoked in respect of inter-State sale of such goods. The petitioners are, therefore, persons who could have obtained the declaration in form C, for the purpose of Clause (a) of Sub-section (4) of Section 8 in connection with their purchases from the Mysore seller-mills. As already stated, they had in fact obtained and given the declaration to their seller. The petitioners therefore satisfied the conditions prescribed in the proviso to Section 9(1). Since they are entitled to get a declaration in form G from this State in respect of their purchases from the Mysore mills they are liable to be taxed by this State under the Act.
The argument of the learned counsel for the petitioners in regard to the second disputed item was that for the purpose of finding out whether a transaction of sale or purchase of declared goods had already suffered tax once inside a State, prohibiting further levy, the assessment of that turnover by that particular State even under the Central Sales Tax Act shall be taken into account. In support of that contention he relied on the decision reported in Madura South India Corporation Private Limited v. Joint Commercial Tax Officer [1968] 21 S.T.C. 163, which was approved in State of Tamil Nadu v. Madurai South India Corporation (P.) Ltd. : [1973]2SCR10 . Before dealing with that decision it is necessary to note the provisions of Section 15 itself. The State's power by law to impose or authorise the imposition of tax on a sale or purchase of declared goods was subjected by this section to the following restrictions and conditions:
15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. -- Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions namely:
(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage ;
(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State.
9. We are unable to see how the learned counsel is invoking this provision at all. The provision deals with imposition or authorising the imposition of a tax on sale or purchase under a State law, at more than one stage and at a rate exceeding three per cent. It does not prohibit the imposition of Central sales tax more than once. In fact Section 6, as originally stood prior to its amendment by Central Act 31 of 1958, provided for the levying of tax on every sale that took place in the course of inter-State trade or commerce. Those inter-State sales were subjected to multiple levy of tax. It is only by amending Act 31 of 1958 certain second or subsequent inter-State sales were exempted from tax if the conditions prescribed by subsection (2) of Section 6 were satisfied. That was the position even in respect of declared goods. What the learned counsel for the petitioners contended was that though the first inter-State sale is taxed under the Central Sales Tax Act, since the goods moved from this State, the assessment was factually made by the State Government authorities under Section 9(2). In respect of the second inter-State sales also, by virtue of the proviso to Sub-section (1) of Section 9, this State beca'me entitled to assess second inter-State sales and that, therefore, they are subjecting the same declared goods at more than one stage. This contention is merely to be stated for rejection. What is contemplated in the prohibition contained in Section 15 is the levy at the second or subsequent sale under the State law. The decision in Madura South India Corporation Private Ltd. v. Joint Commercial Tax Officer [1968] 21 S.T.C. 193., also related to a case where the levy was attempted to be made under the local law after the goods had suffered levy under the Central Sales Tax Act by the same State. That is not the case here. Both the first transaction of inter-State sale and the second transaction of inter-State sale are subjected to levy only under the Central Sales Tax Act and not under the State law. In fact, Article 269 and Article 286 of the Constitution prohibit the State from levying tax on inter-State sales. Therefore, the second inter-State sales could not have been subjected to tax under the State law. Though the learned counsel referred to Section 4 in the course of his arguments, we are unable to agree with the learned counsel that that provision in any way assists him in support of his argument. As held in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150., the inter-State character of the transaction is to be determined under Section 3(a) and (b) and Section 4 is relevant to decide the situs of such inter-State sale or the appropriate State which could bring it to tax. By determining the situs, the inter-State sale is not converted into a local sale which could have been assessed under the State law. We are, therefore, unable to agree with the learned counsel that the second item of transaction is not liable to tax.
10. In the result, the revision petition is dismissed with costs. Counsel's fee Rs. 250.