M/S. MODI SPINNING & WEAVING MILLS CO., LTD. versus COMMISSIONER OF INCOME-TAX, PUNJAB & ANR.

Citation: [1965] 1 S.C.R. 592 · Decided: 05-10-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

592 
M/S. MODI SPINNING & WEAVING MILLS CO., LTD. 
A 
v. 
COMMISSIONER OF INCOME-TAX, PUNJAB & ANR. 
October 5, 1964 
(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, 
M. HIDAYATULLAH, RAGHUBAR DAYAL AND 
J. R. MUDHOLKAR JJ.) 
Pun;ab General Sales Tax Act, 1948 (XLVI of 1948) as amended by 
Punjab Act XIII of 1959, s. 5(2) (a) (ii)·-'-Exempflon clause amended with-
out consequential amendment of form of registraJion-Effect of discrepanary 
--Charging section wherher incomplete without an1endment of said Form. 
Constitution of India, Art. 286(3 )-Rates of tax provided in Stare Act 
hig)ier than ma.xin1u1n rates provided under ss. 14 and 15 of Central Sales 
Tax Act-Provision in State Act ·whether becornes inoperative. 
Section 7 of the Punjab General Sales Tax Act, 1948 (XLVI of 1948) 
required from all dealers liable to pay tax under 1hc Act, as a conditjon 
of carrying on business in the State, rhat they should secure a registration 
certificate in the prescrihcd form i.e. Form Ill which would specify the 
class or classes of goods for the purposes of s. 5 ( 2) (a) (ii). 
The said 
section provided for cxcmp1ion from inclusion in the taxable turn·-0ver of a 
1 dealer of goods \vhich \\'Crc sold to a regLc;tercd dealer who purchased them 
with the intention of using them "in the manufacture in the State of 
Punjab of any goods for sale". The said section also provided that if the 
goods \\·ere not used for the purpose d~clarcd, the purchaser would have 
to pay s;ilcs 1::;.x on them. ·111e form of the declaration was prescribed in 
r. 26 under the Act as Form S.T. XXll. 
The words 'in the State of 
Punjab' appearing ins. 5(2) (a)(ii) were introduced by an amendment in 
1959. Consequential amendments \\'ere also made in rule 26 and in Form 
X.Xll hut Form 111 remained unamended, till 1961. The appellants who 
were registered dealers under the Act had secured a certificate of registrat.ion 
in Fann Ill in the year 1956. For the year 1959-60 they claimed exemp-
tion on account of unginncd cotton purch<1sed by them v.•hich they ginned 
in the Punjab and thereafter sent 10 Modinagar. U.P .. for use in the 
manufacture of cloth there. Their claim "'as disallowed by the Sales Tax 
authorities and they filed a writ petition in the l-ligh Court The same being 
dismissed, they came to the Supreme (~ourt \vith a certificate of fitness. 
It was contended on behalf of the appellants : 
( 1) According to the certificate in Form Ill granted to the appellant 
there was no condition that cotton purchased under that certificate shou1d be 
subjected to manufacture in the Punjab. 
(2) If the section required that the manufacture should be in the 
Punjab, then as the ra\v cotton \Vas ginned in the Punjab, that condition 
was s:ttisfied. 
Ciinning of cotton was a manufacturing process. 
( 3) There could be no tax because the charge in s. 5 of the Act was 
not complete after its amendment in 1959 because the section and the 
amended rules required a modified certificate of registration which was not 
is.sued as the fonn was not prescribed. 
( 4) Sections 4 and 5 of the Act which orovided for tax at 4% must be 
hclJ to !'le inoperative as they y;cre in conffict with the provisions of ss. 14 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
MODI MILLS v. C.I.T., PUNJAB (Hidayatullah I.) 
593 
and 15 of the 'centi:al Sales Tax Act, 1956 which created a maximum 
limit. 
HELD : (i) The company was wrong in reading the certificate of Regis-
tration by itself. Sections 5 and 7 had to be read with rule 26 and Form 
S.T. XXII, and the declaration. 
So read the old registration certificate 
even though it did not contain the words "in the State of Punjab" would 
stand impliedly modified by the sections, the rule, and Form S.T. XXll 
operating together. 
The company had to comply with the Act and the 
Rules, and could not take shelter 
behind 
the 
unamended 
certificate. 
[598 C-E]. 
(ii) Whether the process of ginning was a process of manufacturing or 
not was unnecessary to decide, because another requirement of the provi-
sion,. namely, that the manufacture must result in goods for sale, was 
not satisfied by the appellants. They admittedly used the cotton for man11-
facturing cloth. [598 D-FJ. 
(iii) The contention that the charging section was incomplete without 
the prescription of the proper Form for the certificate of registration was 
without force. 
The old form must be .deemed to be modified, and even 
otherwise the section and the rules were compl

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