A. V. FERNANDEZ v. THE STATE OF KERALA

in sub-section (1) shall, except in cases covered by the first proviso to sub-section (12) of sec tion ?, of th:s Act be deemed to render any dealer 1957 A. V. F1rnmu/4 v. Tli• Stak of .Kerak Bhap; ati]. S.C.R. SUPREME COURT REPORTS 849 liable to tax on the sale of goods where such sale takes place : ( 1) outside the State of Assam; (2) in the course of the import o~ the goods. mto, or export of the goods out of, the terntory of India; or the course of inter-State trade or comme~ce law otherwise except in so far as Parliament may by provide." (3) in . The Hyderabad General Sales Tax Act, 1950 had a similar provision incorporated in its definition of sale given in s. 2(k) of the Act. The Explanation (2) which was substitution for the original Explanation (2) by s. 2 of the Hyderabad General Sales Tax (Amrndrr.cnt) Act, read as under: 1950 (Hyderabad -Act XXXIr of 1950) the contrary in any other law for the time being in force, a transfer of goods in respect of which no tax can be imposed by the provision contained m Article 286 of the Constitution, shall no!: be deemed to be "sale" within the meaning of this clat:se." (2)-"Notwithstanding Explanation reason of anything A further expedient which was adopted the Bombay Sales connection may be noted in r. 5 of Tax Rules, 1952, enacted under the Bombay Saks Tax 1952-(Bombay Act XXIV of 1952), which Act, the deduction of certain sales coming within authorised Art. 286 of the Constitution while calculating taxable turnover of a dealer. We are not called upon to express any opm10n as to whether the incorporation of the provisions of Art. 286 of the Constitution in the charging section as it was done in the Assam Sales Tax Act, 1947, or in the defini tion of "sale" as it was done in the Hyderabad Grneral Sales Tax Act, 1950, or even in the rules in regard the calculation of taxable turnover as it was done in the Bombay Sales Tax Rules, 1952, had the effect of ~king the sales falling withi°: the categories 5pecified m Art. 286 out of the purview of the respective Sales included at all Tax Acts, so the calculation of the net turnover on which within levied. What was done in the instant case before us as in the bulk of the Sales that they would not be tax could be the sales 1957 A. V. Fernand#~ v. The State of K1rala Bhagwati J. 850 SUPREME COURT REPORTS [1957] the end of Sales Tax Acts Tax Acts above noted was the incorporation of those prov1S1ons of Art. 286 of tk Constitution therein by adding a non-obstante provision at the manner above respective indicated. The definition of "sale" was not amended nor the charging section. The rules as to the calcula tion of the net turnover also remained the same, without sales coming within Art. 286 of the Constitution being incorporated therein, with the result that the Sales Tax Authorities founded themselves upon incorpo rated in the Act by the addition of s. 26 therein by the Travancore-Cochin General Sales Tax (Amendment) Act, 1951. the non-obstante provision deduction regard What, then, is the effect of this non-obstante provi sion? This Court in Aswani Kumar Ghosh v. Ara bind a Bose(' ) made the following observations in connection with the non-obstante clause : "lt should first be ascertained what the enacting p;rrt of the section provides on a fair construction of the words used according to their natural and ordinary to be under meaning, and the non-obstante clause longer valid stood as operating anything contained inconsistent with the new enactment." The same ratio applies to the construction of the non obstante provision contained in s. 26 of the Act with to all the other provisions of the Act that reference preceded the same. to set aside in relevant existing laws which as no the Act, In our opinion, s. 26 of i1, cases falling within the categories specified under Art. 286 of Constitution has the effect of setting at nought and of thereto the provisions contained obliterating in regard in the Act relating to the imposition of tax on the sale or purchase of such goods and in particular the provi sions contained the charging in r. 20(2) and other provrsrons provisions contained which are incidental to the process of levying such tax. the categories specified in So far as sales falling within Art. 286 of the corresponding s. 26 of the Act are concerned, they are, as it were, the Constitution and section and (1) f1953] S.C.R. I, 21, 22. 1957 A. V. Fernandez v. Tht State of Kerala Bhagwati J. S.C.R. SUPREME COURT REPORTS 851 the sales taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if s. 26 had not been added to the If these provisions of the Act and the rules made Act. falling within thereunder do not apply those categories, the value thereof cannot be included in the turnover of the dealer and no question woulci arise of the applicability of r. 7 (l)(k) and r. 20(2) at sold in inter-State trade or commerce would not be lawfully included in the turnover of the dealer and if the amount for which such oil is sold cannot thus be included in his turnover no occasion would arise the deduction under r. 7(1)(k) of the value of the cocoanut and/or copra or groundnut and/or kernel purchased and converted by into such oil and cake. these cases. The amount for which the oil the dealer the purpose of assessment and the A distinction was sought to be made between the inclusion of the value of such oil in the turnover of the levy of dealer for tax thereupon. It was urged that the inclusion of such in the turnover for the purpose of assessment was quite distinct from the liability for tax which was only thing prohibited by s. 26 of the Act and therefore the value of such oil could be lawfully included in the turnover consequence deduction of the value of the copra purchased by dealer and converted by him into such oil from such the resultant turnover being the net turnover turnover, for the purposes of assessment, the value of the oil sold in the course of inter-State trade or commerce being further deducted therefrom by reason of the operation of s. 26 of the Act, thus making in effect a distinction between assessable turnover and the taxable turnover. involving as a necessary Reliance was placed in support of this position on in Messrs. Chatturam the observations of this Court Hori/ram Ltd. v. Commissioner of Income-Tax, Bihar and Orissa( 1 ) : "As has been pointed out by the Federal Court in Chatturam v. Cl.T., Bihar( 2 ) (quoting (I) [1955] 2 S.C.R. 290, 297, 2~0 S. C. India/59. (2) [1947] F.C.R.116, 126. I95i A. V. Fernandel: v. The State of Kuala BIJagwati J. 852 SUPREME COURT REPORTS [1957] the declaration of judgment of Lord Dunedin in Whitney v. Commissioners of Inland Revenue (1) 'there are three stages in the im position of a tax. There is liability, that is the part of the statute which determines what person liable. Next, in respect of what property are the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. the exact sum which a But assessment particularises person liable has to pay. Lastly, come the methods of recovery taxed does not voluntarily pay'.'' person liability liability. the first the terms of starting point. If there The appelbnt, however, forgets that the three stages imposition of a tax which are laid down here in the instance, a declaration of liability predicate, is a tax, taxing statute, imposed under follo\v the provisions the asscssrnent of If there is no liability to tax there can not be any assessment either. Sales or purchases i:-. respect of which there is no liability to tax imposed by in the calculation 0f turnmTr for the purpose of assessment an<l the exact to pay must be 1s the <lealer reference whatever ascertained without any 'iJillC. .statute cannot al all be included in rcgJrd \\'hich liable There is a broad distil1ction between the provisions containecl in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in to the non-liability to tax or non-imposition of regard the former case, but tax on In the other. exemptions or refund or pro\·1s1ons as regards rebate of tax, the sales or purchases would haH: to be the dealer because included the\· are prima facie the only thing tax an<l which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on "'hich the tax can be imposed. In the sales or purchases are exempted from taxation altogether. The Legislation cannot enact a imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition in the gross turno\'er of latter case, liable la\\' (!) [19261 A. C. 37. 1957 A. V. Fmiandtt: v. TJi. State of Kerala Bhagwati ]. S.C.R. SUPllEME COURT REPORTS 853 tax. If they are thus not liable to can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the net turnover on which sales tax can be levied or imposed. turnover as well as the gross tax, no If this distinction is borne in mind, it is clear that s. 26 of the Act enacts a provision with regard to non liability of these transactions to tax and these transac tions were therefore taken out of the purview of the Act. We are therefore of opinion that the non-obstante provision contained in s. 26 of the Act has the effect of taking these transactions out of the purview of the Act with the result that the dealer is not required nor is he entitled to include them in the calculations of his turn over liable to tax thereunder. tax by This position is not at all affected by the prov1S1on with regard to registration and submissions of returns of the sales the dealers under the Act. The its disability in the matter of legislature, in spite of imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales include these dealer's purposes aforesaid would not affect the non-liability of to levy or imposition of sales tax by virtue of the provisions of Art. 286 of the Constitution and the corresponding provision enacted in the Act, as above. inclusion, however, for turnover. Such transactions transactions We are, therefore, of opinion that the conclusion the High Court was correct; the calcula the Sales Tax this appeal must reached by tions of the net turnover made by Authorities were also correct; and stand dismissed with costs. Appeal dismissed.