Purchase of ‘C’ form
Q. The dealer is engaged in job work. Dealer receives goods from other parties, which are processed and returned back by the dealer. Whether such job work dealer can purchase goods like machinery etc., on ‘C’ form?
Reply
The eligibility to purchase goods against ‘C’ form is provided in section 8(3)(b) of the CST Act, 1956. The said section is reproduced below for ready reference.
“S. 8. Rates of tax on sales in the course of inter-State trade or commerce. –
(3)(b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in telecommunications network or in mining or in generation or distribution of electricity or any other form of power.”
Therefore, as per the first recital, the goods intended for use in manufacturing or processing of goods for sale can be purchased against ‘C’ form. There is no condition that such manufactured or processed goods should be sold by the purchaser himself. Therefore, if the goods processed by the job worker are to be sold by the original owner for whom the job work is done, then job worker can purchase the goods against ‘C’ form. However, if the owner is not going to sell the processed goods supplied by job worker as it is but going to use them in further manufacturing and then such manufactured goods are intended to be sold then job worker cannot purchase the goods against ‘C’ form. This position is clear from landmark judgment of Hon’ble Supreme Court in case of
Assessing Authority-cum-Excise and Taxation Officer, Gurgaon and Another V. East India Cotton Mfg. Co. Ltd. (48 STC 239) (SC). Hon’ble Supreme Court has observed as under:
“The question which therefore arises for consideration is as to what is the scope and meaning of the expression “for use………in the manufacture………of goods for sale” occurring in section 8(3)(b) and in the declaration in Form C and rule 13. Does it mean that the goods manufactured by a registered dealer by using the goods purchased against his certificate of registration and the declaration in Form C must be intended for sale by him or does it also include a case where goods are manufactured by a registered dealer for a third party under a job-contract and the manufactured goods are intended for sale by such third party? Now it is a well-settled rule of interpretation that a statute must be construed according to its plain language and neither should anything be added nor subtracted unless there are adequate grounds to justify the inference that the legislature clearly so intended. It was said more than seven decades ago by Lord Mersey in
Thompson v. Goold and Company(1):
“It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do.”
Lord Loreburn, L.C., also observed in
Vickers, Sons and Maxim Limited v. Evans(2):
“We are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself.”
Now here we find that the expression used by the legislature as also the rule making authority is
simpliciter “for use……..in the manufacture…….of goods for sale” without any addition of words indicating that the sale must be by any particular individual. The legislature has designedly abstained from using any words of limitation indicating that the sale should be by the registered dealer manufacturing the goods. It is significant to note that where the legislature wanted to restrict the sale to one by the registered dealer himself, the legislature used the qualifying words “by him” after the words “for resale” in the first sub-clause of section 8(3)(b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second sub-clause of section 8(3)(b) the legislature did not qualify the words “for sale” by adding the words “by him”. This deliberate omission of the words “by him” after the words “for sale” clearly indicates that the legislature did not intend that the sale of the manufactured goods should be restricted to the registered dealer manufacturing the goods. If the legislature intended that the sale of the manufactured goods should be by the registered dealer manufacturing the goods and by no one else, there is no reason why the words “by him” should have been omitted after the words “for sale” when the legislature considered it necessary to introduce those words after the words “for resale” in the first sub-clause of section 8(3)(b). The omission of the words “by him” is clearly deliberate and intentional and it cannot be explained away on any reasonable hypothesis except that the legislature did not intend that the sale should be limited to that by the registered dealer manufacturing the goods. The court must construe the language of section 8(3)(b) according to its plain words and it cannot write in the section words which are not there. To read the words “by him” after the words “for sale” in section 8(3)(b) would not be construction but judicial paraphrase which is impermissible to the court. It is also important to note that the word “use” is followed by the words “by him” clearly indicating that the use of the goods purchased in the manufacture of goods for sale must be by the registered dealer himself but these words are significantly absent after the words “for sale”. On a plain grammatical construction these words govern and qualify only “use” and cannot be projected into the words “for sale”. The goods purchased by the registered dealer must be used by him in the manufacture of goods which are intended for sale but such sale need not be by the registered dealer himself; it may be by anyone.
Now ordinarily when the language of a statutory provision is plain and unambiguous, there is no need to resort to the object and purpose of the enactment because, in such a case, the language best declares the intention of the law-giver. But, even if we look at the object and intendment of section 8(1)(b) read with section 8(3)(b), we reach the same conclusion. The object of providing a lower rate of tax under section 8(1)(b) for sales of goods described in section 8(3)(b) clearly is that when goods are purchased by a registered dealer for being used by him in the manufacture or processing of goods which are intended for sale, the goods which are ultimately sold should not become unduly expensive to the consumer by addition of a high rate of sales tax on the purchase of goods which are used in the manufacture or processing of the goods ultimately sold. Now if this be the object of section 8(1)(b) read with section 8(3)(b) it should be immaterial whether the sale of the manufactured or processed goods is by the registered dealer manufacturing or processing goods or by another person for whom the goods are manufactured or processed by the registered dealer. The intendment of the statutory provision being that the cost of the manufactured or processed goods to the consumer should not be unduly enhanced by reason of higher rate of tax on the goods used in the manufacture or processing of the goods sold, it is obvious that if this intendment is to be fully effectuated, the benefit of the statutory provision should be available irrespective of whether the manufactured or processed goods are sold to the consumer by the registered dealer or by some one else who has got the same manufactured by the registered dealer. It was for this reason that the legislature deliberately omitted to add the words “by him” after the words “for sale” so as to make it clear that this sub-clause of section 8(3)(b) would apply even if the goods manufactured or processed by the registered dealer were intended for sale by someone else. The words “for sale” following upon the word “goods” clearly indicate that the goods manufactured or processed by the registered dealer must be goods for sale or, in other words, they must be goods intended for sale, and it is immaterial whether they are intended for sale by the registered dealer himself or by anyone else.
This sub-clause of section 8(3)(b) would therefore clearly cover a case where a registered dealer manufactures or processes goods for a third party on a job-contract and uses in the manufacture or processing of such goods, materials purchased by him against his certificate of registration and the declarations in Form C, so long as the manufactured or processed goods are intended for sale by such third party. It is, of course, true that if the proceedings are taken against the registered dealer under section 10, clause (d), or section 10A, the question would arise whether the goods manufactured or processed by the registered dealer for a third party were intended for sale by such third party and that would have to be decided by the court or the competent authority according to the appropriate and relevant rules of evidence, but merely because some difficulties may arise in the determination of this question by reason of the third party coming into the picture that would be no ground for refusing to place on the language of section 8(3)(b) the only construction which it can reasonably bear.”
Thus, the legal position is clear that the processed goods need not be sold by the processor itself and therefore, even if the processing is on job work basis, still the ‘C’ form can be used. However, it should be ensured and sufficient evidence should be kept that the processed goods supplied by job worker themselves are sold by the original owner.
C. B. Thakar, B.Com., L.L.B.F.C.A., Advocate