STATE OF MADRAS versus R. NAND LAL & CO.

Citation: [1967] 3 S.C.R. 645 · Decided: 14-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed
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Judgment (excerpt)

b 
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STATE OF MADRAS 
v. 
R. NAJ."ID LAL & CO. 
April 14, 1967 
[J. C. SHAH, S. M. SIKRI AND V. R.AMASWAM!, JJ.] 
Central Sales Tax Act, 
1956, s. 8(4)-Form 'C' as prescribed by 
Central Government to be filled by purchasing dealer for selling dealer 
to get benefit of lower rate under s. 8(1)(b)-Central Sales Tax (Mad-
ras) Rules, 1951 R~le 10(1) requiring each declaration in 'J!'orm 'C' to 
contain one transaction only-Sale by Madras dealer to Pun1ab dealer--
Punjab dealer declaring more than one transaction In one form-Whether 
contravenes Rule 10(1)-State Government does not have power wukr 
s. 13(3) ands. 13(4) (e) of the Cenlral Act to place such restriction on 
outside deale1'-Deslrabillty of Central Government making rules uruler 
s. 13 (1 )(d) in this regard. 
The assessee firm was a 'dealer' ·in Madras State. For the year 
1959-60 the firm was taxed at 7% on certain sales effected to registered 
dealers in the Punjab on the ground that the declaratfons taken from 
dealers in Punjab in Form 'C' were not in accordanee with r. 10(1) of 
the Central Sales Tax (Madras) Rules, 1957. The latter rule required 
that there must be a separate declaration in respect of each transaction 
whereas the declarations in the present case were 
in respect of several 
transactions each. The appellant firm claimed that on the turnover in 
9uestion it should have been a"essed at one per cent only, as laid down 
Ill s. 8(1) of the Central Sales Tax Act, 1956. The claun was turned 
down by the Sales-tax Authorities and the Tribunal, but the High Court 
held that r. 10(1) of the Central Sales Tax (Madras) Rules, 1957 appli-
ed only to transactions of purchase by a dealer in the State of Madras 
and not to the purchasing dealer in the State Of Punjab, that the Madras 
State was incompetent to frame rules governing the conduct of the JIU!-
chasing dealers in the Punjab, and that in any event r. 10(1) was dtrec-
tory and not mandatory. The State appealed. 
. 
HELD: (i) Ex facie r. 10(1) imposes no obligation upon a dealer 
m the State of Madras wishing to sell goods : It applies to a clear wishing 
''? purchase _goods from another dealer. The High 
Court was fUrther 
right m holdmg that under the scheine of the Central Sales Tax Act and 
the . Rules framed under that Act by the State of Madras the injunction 
agamst the J>Urchasing dealers in r. 10(1) did not apply to dealers in the 
State of Pun1ab. [650B-651A] 
A~cordingly the proviso to r. 10(1) which directs that no single de-
clarat10n shall cov~r '!'Ore than one ln!DSaction of sale except in certain 
cases has no apphcatton to a purchasmg dealer outside the State of 
Madras. Nor does r. 10(2) impose any binding obligation upon the 
selling dealer in Madras to obtain a separate declaration form in respect 
of each sale transaction. [ 651 C-F] 
The appellants were therefore to be taxed at the rate of one per cent 
and not seven per cent on the turnover in question. 
(ii) A rule prescribing that a declaration by a purchasing dealer shall 
(!fl contam more than one transaction can only be made by the Central 
overnment under s. 13(l)(d) and the State Governments do not have 
\ 
646 
SUPREME COURT REPORTS 
[1967] 3 S.C.R. 
power under s. 13(3) and s. 13(4) (e) to 
make any such rule. 
The 
ft,. 
situation which had arisen in this case could have been avoided if instead 
of each State making its rules requiring that no single declaration shall 
cover rnol'le than one transaction, the Central Government in exercise of 
the power under s. 13(1) (d) of the Act had made the rule. 
[6510-H; 
652A-Bl 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 604 of 
1966. 
Appeal by special leave from the judgment and order dated 
August 5, 1964 of the Madras High Court in Tax Case No. 131 
of 1963 (Revision No. 87). 
G. Ramanujam and A. V. Rangam, for the appellant. 
K. Srinivasan and R. Gopalakrishnan, for the respondent. 
The Judgment of the Court was delivered by 
Shah, J. 
M/s. R. Nand Lal & Company-hereinafter called 
'the assessee'-are dealers in wool at Vaniyambadi in North 
Arcot District in the State of Madras. In proceedings for assess· 
ment of sales-tax for the year 1959-60 the assessees were assessed 
to pay tax at the rate of seven per cent. on a turnover of 
Rs. 2,08,343-05 from sales effected by them to certain registered 
dealers in the State of Punjab. The assessing authority declined 
to assess the turnover at one per cent. as prescribed by s. 8 ( 1) of 
the Central Sales
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