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surcharge has been levied under Section 5A of the said Act on the gross sales tax payable, without deducting the entry tax as required under Section 4 of the OET Act.= It is well settled that the objective of framing rules is to fill up the gaps in a statutory enactment so as to make the statutory provisions operative. Rules also clarify the provisions of an Act under which the same are framed. Section 4 of the OST Act is a charging Section attracting liability to pay Sales Tax “on sales and purchases effected”. Section 5 of the OST Act provides for rate of Sales Tax. Section 5A of the OST Act levies surcharge on the dealer which is nothing but an additional tax. Therefore, on a plain reading of the provisions under the OST Act as well as under the OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge under Section 5A of the OST Act. A harmonious reading of Rule 18 of the Rules as well as Sections 4, 5, 5-A of the OST Act reveals no conflict or inconsistency. The Rules are to be construed to have been made for furtherance of the cause for which the Statute is enacted and not for the purpose of bringing inconsistencies. 21) Section 5A of the OST Act is a self-contained provision and the surcharge, as already seen above, is leviable at the specified per centum of tax payable under the OST Act. Tax payable under the OST Act is independent of the provisions of OET Act. The assessment or quantification or computation of surcharge shall have to be made in accordance with the provisions of the OST Act. 22) Thus, on a conjoint reading of Section 5 of the OST Act, Section 4 of the OET Act and Rule 18 of the Rules, we are of the considered opinion that the amount of surcharge under Section 5A of the OST Act is to be levied before deducting the amount of entry tax paid by a dealer. 23) In view of the forgoing discussion, the impugned judgment and order dated 05.01.2007 passed by the High Court cannot be sustained and is liable to be set aside. In the result, all the appeals are allowed; however, the parties shall bear their own cost.

                                     REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

1                CIVIL APPEAL NOs. 5913-5920 OF 2008


Commissioner of Commercial Taxes & Ors.  .... Appellant(s)

            Versus

M/s Bajaj Auto Ltd. & Anr.                               .... Respondent(s)


                                    WITH

   CIVIL APPEAL NOs. 5921 OF 2008
















                               J U D G M E N T



R.K. Agrawal, J.


1)    Challenge in the above said appeals is to the legality of  the  common
judgment and order dated 05.01.2007 rendered by  a  Division  Bench  of  the
High Court of Orissa at Cuttack in Writ Petition (C) being No. 233  of  2002
and connected matters wherein the High Court allowed the petitions filed  by
the respondents herein.
2)    Civil Appeal No. 5913 of 2008 is being treated as  the  leading  case,
hence, the facts of the said appeal are given below:-
The respondents are engaged in the sale and purchase of Motor  Vehicles  and
are registered dealers under the Orissa Sales Tax Act, 1947 (in  short  ‘the
OST Act’) as well as under the Central Sales Tax Act.  The  respondents  had
been paying entry tax on the goods when they were bought into the  State  of
Orissa under Section 3(3) of the Orissa Entry Tax Act, 1999  (in short  ‘the
OET Act’).  However, they were paying surcharge on the balance amount  after
deduction of the entry tax paid on the motor vehicles.
The Finance Department, Government of Orissa, by  letter  dated  20.11.2001,
stated that the surcharge under the OST  Act  shall  be  calculated  on  the
payable amount of tax due on the taxable turnover (Section 5 &  5A)  instead
of on the reduced Sales Tax amount after setting off of entry tax.
On 30.03.2002, the Sales Tax Officer, Sambalpur-I Circle,  passed  an  order
under Section 12(4) of the  OST  Act  wherein  surcharge  was  levied  under
Section 5A of the OST Act on the gross sales tax payable by the  respondent-
Company.
Being aggrieved by the demand notice dated 30.03.2002 as well as the  letter
dated 20.11.2001 issued by the  Finance  Department  of  the  Government  of
Orissa, the respondent-Company filed a writ petition being No. 233  of  2002
along with a set of other writ petitions filed  by  the  respondents  herein
before the High Court of Orissa at Cuttack.
The Division Bench of the High Court, vide common judgment and  order  dated
05.01.2007, allowed the appeals filed by the respondents herein.
(f)   Being aggrieved by  the  judgment  and  order  dated  05.01.2007,  the
appellants have preferred these appeals before this Court by way of  special
leave.
3)    Learned senior counsel for the appellants have taken  the  stand  that
there is nothing in the  provisions  of  the  OET  Act  or  the  Rules  made
thereunder which would alter the mode of computation prescribed  in  Section
5A of the OST Act.  Section 4 of the OET Act provides for reduction  of  the
liability of a dealer under the Sales Tax Act to the  extent  of  entry  tax
paid under the OET Act.  This provision  only  appertains  to  reduction  of
entry tax.  It has nothing to do  with  the  computation  of  the  surcharge
under the OST Act.  In any event, in terms of Section  4  of  the  OET  Act,
reduction of entry tax paid by the dealers is from the liability  under  the
Sales Tax Act.  In substance, it means that the total  liability  under  the
Sales Tax Act having been determined would then be reduced by the extent  of
entry tax paid.
4)    Learned senior counsel further submitted that the  illustration  given
under Rule 18 of the Odisha Entry Tax Rule,  1999  (in  short  ‘the  Rules’)
neither curtails nor expands the ambit of the  provisions  of  the  Act  for
which he relied upon a decision of this Court in Shambhu Nath Mehra vs.  The
State of Ajmer AIR 1956 SC 404, wherein it was held as under:-

“11. We recognise that an illustration does not exhaust the full content  of
the section which it illustrates but equally  it  can  neither  curtail  nor
expand its ambit;….”


5)    Learned senior counsel further relied  upon  Lalit  Mohan  Pandey  vs.
Pooran Singh and Others (2004) 6 SCC  626, wherein this Court  has  held  as
under:-

“75. The illustration appended  to  the  Rules  does  not  envisage  such  a
situation. Illustrations although are of relevance and have  some  value  in
the construction of the text of  the  sections  but  they  cannot  have  the
effect of modifying the language of  the  statute  and  they  cannot  either
curtail or expand the ambit of the statute.”

6)    Learned  senior  counsel  further  submitted  that  the  levy  of  tax
includes surcharge for which he relied upon the following judgments of  this
Court in:-
(i)   In The Commissioner of Income Tax, Kerala vs.  K. Srinivasan (1972)  4
SCC 526, this Court has held as under:-

“10. The meaning of the word “surcharge”  as  given  in  the  Webster’s  New
International Dictionary includes among others “to charge (one) too much  or
in addition …” also “additional tax”.”

(ii)  In The Madurai District Central Co-operative Bank Ltd. vs. The Third
Income Tax Officer, Madurai (1975) 2 SCC 454, it was held as under:-

“18. In CIT Kerala v. K. Srinivasan on  which  the  appellant  relies,  this
Court has traced the history of the concept of “surcharge” in the  tax  laws
of our country. After considering the report  of  the  Committee  on  Indian
Constitutional Reforms, the provisions  of  the  Government  of  India  Act,
1935, the provisions of Articles 269, 270 and 271 of  the  Constitution  and
the various Finance Acts, this Court held, differing from  the  High  Court,
that the word “income  tax”  in  Section  2(2)  of  the  Finance  Act,  1964
includes surcharges and the additional surcharge.”


(iii) In M/s Hoechst Pharmaceuticals Ltd. and Others vs. State of Bihar  and
Others (1983) 4 SCC 45, it was held as under:-

“28. It cannot be doubted that a surcharge partakes of the nature  of  sales
tax and therefore it was within the competence of the State  legislature  to
enact sub-section (1) of Section 5 of the Act for  the  purpose  of  levying
surcharge on certain class of dealers in addition  to  the  tax  payable  by
them…..

79. ….A surcharge in its true nature and character is nothing but  a  higher
rate of tax to raise revenue for general purposes….”


(iv)  In M/s Ashok Service Centre and Others vs. State of  Orissa  (1983)  2
SCC 82, this Court has held as under:-

“17….The Act only levied some extra sales tax in addition to what  had  been
levied by the principal Act. The nature of the taxes levied  under  the  Act
and under the principal Act was the same and the legislature expressly  made
the provisions of the principal Act mutatis mutandis applicable to the  levy
under the Act…..”

(v)   In Sarojini Tea Co. (P) Ltd. vs. Collector  of  Dibrugarh,  Assam  and
Another (1992) 2 SCC 156,  it was held as under:-

“16. From the aforesaid decisions, it is amply  clear  that  the  expression
‘surcharge’ in the context of taxation means an additional imposition  which
results in  enhancement  of  the  tax  and  the  nature  of  the  additional
imposition is the same as the tax on which it is  imposed  as  surcharge.  A
surcharge on land revenue is an enhancement  of  the  land  revenue  to  the
extent of the imposition of surcharge. The nature of such imposition is  the
same viz., land revenue on which it is a surcharge.”


7)    On  the  other  hand,  learned  senior  counsel  for  the  respondents
submitted that in  view  of  the  clarification  issued  by  the  office  of
Commercial Tax through e-mail to one  of  the  dealers  in  motor  vehicles,
viz.,  TELCO,  Bhubaneswar,  the  appellants  were  stopped  from  demanding
surcharge on the entire amount of tax  payable  under  the  OST  Act  before
deducting the amount payable under the  OET  Act.   According  to  him,  the
clarification  issued  by  the   Commercial   Tax   Department   to   TELCO,
Bhubaneswar, was in accordance with the illustration appended to Rule 18  of
the Rules which did not take into  consideration  the  amount  of  surcharge
payable before deducting the entry tax paid while computing  the  amount  of
sales tax payable.  He, thus, submitted that the amount of surcharge  is  to
be levied only on the balance amount of sales tax payable on the sale  price
of the motor vehicle after deducting the entry tax paid.  According to  him,
if  two  constructions  are  possible  then  the  one  which  preserves  the
workability and efficacy has to be preferred for  which  he  relied  upon  a
decision of this Court in State  of  Tamil  Nadu  vs.  M.K.  Kandaswami  and
Others (1975) 4 SCC 745, wherein it has been held as under:-

“26. It may be remembered that Section 7-A is at once a charging as well  as
a remedial provision. Its  main  object  is  to  plug  leakage  and  prevent
evasion of tax. In interpreting  such  a  provision,  a  construction  which
would defeat its purpose and, in effect,  obliterate  it  from  the  statute
book, should be eschewed. If more than one construction  is  possible,  that
which preserves its workability, and efficacy is to be preferred to the  one
which would render it otiose or sterile. The view taken by  the  High  Court
is repugnant to this cardinal canon of interpretation.”

8)    Learned senior counsel also relied upon a decision of  this  Court  in
Associated Cement Companies Ltd. vs. State of Bihar and Others (2004) 7  SCC
642, wherein this Court has held that a dealer is entitled to  reduction  in
tax to the extent of tax paid under the Bihar Entry Tax  Act  while  working
out the tax payable by it under the Bihar Sales Tax Act.
9)    Heard learned counsel for the parties and perused the records.
10)   The sole question for consideration is whether the  ‘Surcharge’  under
Section 5A of the OST Act is to be computed on the  gross  amount  of  sales
tax or on the net amount of sales tax after  setting  of  or  deducting  the
amount of entry tax?
11)   Under Section 5 of the OST Act, Sales Tax is payable by  a  dealer  on
the taxable turnover at a prescribed rate. Under Section 5A, it is  provided
inter alia for payment of surcharge. Section 5A of the OST Act (as it  stood
at the relevant time) reads as under:

“5A Surcharge: (1)  Every  dealer  whose  gross  turnover  during  any  year
exceeds rupees ten lakhs shall, in addition to the tax payable by him  under
this Act, also pay a surcharge at the rate of ten per centum  of  the  total
amount of tax payable by him:…..”
12)   It would also be relevant to reproduce Section 4 of the  OET  Act  (as
it stood at the relevant time) which reads as under:-
“(4)  Reduction in Tax Liability:

(1) where an importer of motor vehicle liable to pay tax  under  sub-section
(3) of Section 3 being a Dealer in motor vehicles becomes liable to pay  tax
under the Sales Tax Act by virtue of sale of such motor  vehicles  then  his
liability under the Sales Tax Act shall be reduced  to  the  extent  of  tax
paid under this Act.

Explanation: For the purpose  of  this  sub  section  the  chassis  and  the
vehicle with body built on the chassis shall be treated as one and the  same
goods.

(2)   When an importer or manufacturer of goods  specified  in  Part-III  of
the schedule except  motor  vehicles  pays  tax  under  sub-section  (1)  of
section 3 or section 26 of this Act, being a Dealer under the Sales Tax  Act
becomes liable to pay tax under the said Act  by  virtue  of  Sale  of  such
goods, then his liability under the Sales Tax Act shall be  reduced  to  the
extent of tax paid under this Act.
(3)   The reduction in tax liability of an  importer  as  provided  in  sub-
section (1) or of an importer or manufacturer  as  provided  in  sub-section
(2) shall not be allowed, unless the entry tax paid and  tax  payable  under
the Sales Tax Act are shown separately in the  cash  memo  or  the  bill  or
invoice issued by him for  the  sale  by  virtue  of  which  such  liability
accrues.”

13)   Rule 18 of the Odisha Entry Tax Rule, 1999 is reproduced hereunder:

“18.  Set off of Entry Tax against Sales Tax: (1) When  the  importer  of  a
motor vehicle liable to pay tax under sub-section (2) of section 3  of  this
Act being a dealer in motor vehicles becomes liable to  pay  tax  under  the
Sales Tax Act by virtue of sale of such motor  vehicle,  his  tax  liability
under the Sales Tax Act shall be reduced to  the  extent  of  the  tax  paid
under these rules.

Illustration: Assuming Entry Tax Rate and Sales Tax Rate to be 10%

|1)   |Purchase Value of Motor Vehicle |      Rs.         |
|     |                                |2,00,000/-        |
|2)   |Entry Tax Payable @ 10%         |         Rs.      |
|     |                                |20,000/-          |
|     |Total:-                         |    Rs. 2,20,000/-|
|3)   |Sale Price of the Motor Vehicle |      Rs.         |
|     |                                |2,20,000/-        |
|4)   |(a) Sales Tax due @ 10%         |         Rs.      |
|     |                                |22,000/-          |
|     |Deduct Entry Tax paid           |         Rs.      |
|     |                                |20,000/-          |
|     |Sales Tax payable               |          Rs.     |
|     |                                |2,000/-           |
|     |Total:-                         |    Rs. 2,22,000/-|

Note: If the sales tax payable on such motor vehicle is less than the  entry
tax paid, then the sales tax payable will be nil.

(2)   When an importer of goods specified in Part III  of  the  Schedule  to
the Act other than motor vehicle, liable to pay tax under this Act  is  also
a dealer liable to pay tax under the Sales  Tax  Act,  then  the  Sales  Tax
payable on the sale of goods shall be reduced to the  extent  of  entry  tax
paid in the same manner as illustrated under the sub-rule(1).”

In view of the statutory provision contained in Rule 18 of  the  Rules,  the
tax payable under  the  said  Act  was  to  be  determined  after  deduction
therefrom the entry tax paid by a dealer importing vehicle  into  the  State
of Orissa.
14)   Since the determination of surcharge payable under  the  OET  Act  was
relatable  and/or  linked  to  the  tax  payable  under  the  OST   Act,   a
clarification was sought for by  one  of  the  dealers  in  motor  vehicles,
namely, TELCO which is similarly situated  as  the  Respondent  No.1-company
from the office of Commercial Tax, in view of  the  provision  contained  in
Rule 18 of the Rules, which is as under:-

“Surcharge is payable on the amount of tax that becomes payable by a  dealer
after set off of entry tax paid at the time of purchase of such goods.”


15)   In accordance with the clarification issued to TELCO, Bhubaneswar,  as
aforesaid, which was also circulated to other  dealers  of  motor  vehicles,
including the Respondent No.1-Company, surcharge  was  calculated  and  paid
which was quantified after deducting therefrom the amount of entry tax  paid
by the Respondent No.1-Company while importing  a  motor  vehicle  into  the
State of Orissa.
16)   On 20.11.2001, the Government of Orissa, in  the  Finance  Department,
wrote a letter to the Commissioner of Commercial Taxes, Orissa  relating  to
the computation of tax payable on the motor vehicle for the purpose of  levy
of surcharge on an interpretation of the provisions of the OET Act, the  OST
Act and the Rules which is as under:-

                            “GOVERNMENT OF ORISSA
                             FINANCE DEPARTMENT

      No.  CTB-23/2001. 55863/F
From:
      Shri K.C. Parija,
      Deputy Secretary to Government
To
      The Commissioner of Commercial Taxes,
      Orissa, Cuttack
Sub:  Computation of tax payable on Motor Vehicle for the purpose of levy
of surcharge.

Ref:  C.C.T.’s  letter No. 15264/CT, dt. 12.7.2000
      Bhubaneswar, the 19th November,  2001.

Sir,
      In inviting a reference to the aforesaid letter, I am directed to  say
that surcharge under Orissa Sales Tax Act, 1947, shall be calculated on  the
payable amount of tax due on the taxable turnover (Section 5 &  5A)  instead
of on the reduced Sales Tax amount after setting  off  of  entry  tax.   The
position may kindly be clarified to the Field Officers and  if  such  faulty
procedure of charging surcharge is adopted by any of  the  Circle  Officers,
same should be discontinued forthwith and  corrective  measure  as  per  the
provisions of the statue may be taken up to make good the loss.
      2.  It may further be noted that  the  illustration  in  rule  -18  of
Orissa Entry Tax Rule, 1999 or provision of  any  other  Finance  Department
notification have limited implication for that purpose only  and  they  have
no overriding effect on the statutory provisions of the OST Act.

                                        Yours faithfully

     Sd/-
                                        (K.C. Parija)
                    DEPUTY SECRETARY TO GOVERNMENT

OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES: ORISSA: CUTTACK
                                                             Dated: 20.11.01
Memo No.  24808/CT
                    III(I) 207/2000

      Copy forwarded to all ACCTs/All  CTOs/All  Addl.  CTOs  of  Assessment
Units for information and necessary  action.   The  CTOs  are  requested  to
circulate the  above clarification of Finance Deptt. to all the  Addl.  CTOs
of their respective circles.
Dd/-
                                            Addl. Commissioner of Commercial
                                                Taxes (Gen) Orissa, Cuttack”


 In the said letter, it was inter alia intimated  that  surcharge  shall  be
calculated on the  payable  amount  of  tax  due  on  the  taxable  turnover
(section 5 and 5A) instead of on the reduced sales tax amount after  setting
off of Entry Tax.
17)   On 30.03.2002, the Sales Tax Officer,  Sambalpur-I  Circle,  Sambalpur
passed an order under section 12(4) of the OST  Act  wherein  surcharge  has
been levied under Section 5A  of  the  said  Act  on  the  gross  sales  tax
payable, without deducting the entry tax as required under Section 4 of  the
OET Act.  As a  result  of  this,  excess  surcharge  to  the  tune  of  Rs.
21,25,117.37/- has been levied by the Sales Tax Officer.
18)   It is well settled that an illustration given  under  the  Rules  does
not exhaust the full  content  of  the  section  which  it  illustrates  but
equally it can neither curtails nor expands its ambit.   Further,  surcharge
is nothing but an additional tax and is payable on the sale of goods in  the
manner laid  down  for  levy  of  surcharge.   In  view  of  the  provisions
contained in the OET Act, a dealer is not  entitled  for  reduction  of  the
amount of entry tax from the amount  of  tax  payable  before  the  levy  of
surcharge under Section 5A of the OST Act.
19)   On a plain reading of the provisions of the OST Act  as  well  as  the
OET Act and the Rules, it can be  seen  that  Section  5A  of  the  OST  Act
creates a charge and imposes liability on every dealer under the OST Act  to
pay surcharge @ 10% on the amount of tax payable by him under the  OST  Act.
Section 4(1) of the OET Act, in the same way, prescribes  for  reduction  of
the tax amount payable by the dealer to the  extent  of  entry  tax  already
paid for the same article for which sales  tax  is  payable.   The  Section,
does not specifically contemplate anything, which would  indicate  that  the
provisions of the OET Act or the Rules have to be taken  into  consideration
while assessing the sales tax or  surcharge.   In  essence,  the  provisions
made in the Rules lay down the modality of ‘set off’.  It  is  important  to
mention here that OST Act was enacted in the year 1947 whereas OET  Act  was
enacted in 1999.  The provision of set off has been made in the OET Act  and
the Rules framed thereunder and not in the OST Act.  The heading of  Section
4 of the OET Act gives a broad idea regarding the provision of  set  off  by
way of “reduction in tax liability”.  Sub-Sections 1 and 2 of Section  4  of
the OET Act provide for reduction of liability under the OST Act.
20)   It is well settled that the objective of framing rules is to  fill  up
the gaps in a statutory enactment so as to  make  the  statutory  provisions
operative.  Rules also clarify the provisions of  an  Act  under  which  the
same are framed.  Section 4 of the OST Act is a charging Section  attracting
liability to pay Sales Tax “on sales and purchases effected”.  Section 5  of
the OST Act provides for rate of Sales Tax.   Section  5A  of  the  OST  Act
levies surcharge on the dealer which  is  nothing  but  an  additional  tax.
Therefore, on a plain reading of the provisions under the OST  Act  as  well
as under the OET Act, a dealer is not entitled for reduction of  the  amount
of entry tax from the amount of tax payable before  the  levy  of  surcharge
under Section 5A of the OST Act.  A harmonious reading of  Rule  18  of  the
Rules as well as Sections 4, 5, 5-A of the OST Act reveals  no  conflict  or
inconsistency.  The Rules  are  to  be  construed  to  have  been  made  for
furtherance of the cause for which the Statute is enacted and  not  for  the
purpose of bringing inconsistencies.
21)   Section 5A of the OST  Act  is  a  self-contained  provision  and  the
surcharge, as already seen above, is leviable at the  specified  per  centum
of tax payable under the  OST  Act.   Tax  payable  under  the  OST  Act  is
independent of the provisions of OET Act.  The assessment or  quantification
or computation of surcharge shall have to be made  in  accordance  with  the
provisions of the OST Act.

22)   Thus, on a conjoint reading of Section 5 of the OST Act, Section 4  of
the OET Act and Rule 18 of the Rules, we are of the considered opinion  that
the amount of surcharge under Section 5A of the OST  Act  is  to  be  levied
before deducting the amount of entry tax paid by a dealer.

23)   In view of the forgoing discussion, the impugned  judgment  and  order
dated 05.01.2007 passed by the High Court cannot be sustained and is  liable
to be set aside.  In the result, all the appeals are allowed;  however,  the
parties shall bear their own cost.

...…………….………………………J.
          (SHIVA KIRTI SINGH)










.…....…………………………………J.
   (R.K. AGRAWAL)

NEW DELHI;
OCTOBER 28, 2016.
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