No scope of intendment in taxing statutes by departmental circulars, for giving expansive meaning to words: SC

The SC on April 27, 2020 {COMMERCIAL TAXES OFFICER v. M/S. BOMBAY MACHINERY STORE} held that if the authorities felt any assessee or dealer was taking unintended benefit under the provisions (as stated in latter part) of the Central Sales Tax Act, 1956 Act, then the proper course would be legislative amendment. It was held that the Tax Administration Authorities cannot give their own interpretation to legislative provisions on the basis of their own perception of trade practise. It was observed that this administrative exercise, in effect, would result in supplying words to legislative provisions, as if to cure omissions of the legislature.

It was further held by the SC Bench, comprising of Justice Deepak Gupta &  Justice Aniruddha Bose, that  the Commercial Tax officer in the respective orders, in present cases, treated retention of goods beyond 30 days in the transporters’ godown as the cut-off period. It was observed that, after that date, the assessee was deemed to have had taken constructive delivery of goods and sale beyond that period within the State of Rajasthan was held to be local sales and subjected to sales tax under the State Law. 

The issue before the SC in present case was arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956 (1956 Act), which was operational at the material point of time. The question was as to whether as a condition of giving the benefit of Section 6(2) of the said Act, 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.

In the present case, as per two circulars issued by the Commissioner, 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.

It was held by the SC that transfer of documents of title were effected subsequent to the goods reaching the location within destination State. It was held that 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. It was further held that the said provision does not qualify the term ‘delivery’ with any timeframe within which such delivery shall have to take place. It was held by the SC that in such circumstances fixing of timeframe by order of the Tax Administration of the State in its opinion would be impermissible.

Further held by the SC that a legal fiction is created in first explanation to Section 3 of the 1956 Act. It was held that fiction is that the movement of goods, from one State to another shall terminate, where the good have been delivered to a carrier for transmission, at the time of when delivery is taken from such carrier. It was further held that there is no concept of constructive delivery either express or implied in the said provision. It was held that 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, having regard to first explanation to that Section. It was held that there is no scope of incorporating any further word to qualify the nature and scope of the expression “delivery” within the said section. It was held that the legislature has eschewed from giving the said word an expansive meaning. It was concluded that the High Court under the judgment which is assailed rightly held that there is no place for any intendment in taxing statutes by circulars issued by the Commissioner. It was held by the SC that circulars were issued without any authority of law; consequently, both these circulars were rightly found to be ultra vires and quashed by the HC. 

For these reasons, the SC did not interfere with the judgments of the High Court in the appeals. The appeals of the department were accordingly dismissed.