Supreme Court clarifies “Casual Trader” definition under Rajasthan Sales Tax Act: Commercial Taxes Officer vs. M/s Bhagat Singh (21 January 2021)

LEGAL ISSUE: Interpretation of “Casual Trader” under the Rajasthan Sales Tax Act, 1954, concerning the time limit for tax assessment.

CASE TYPE: Tax Law

Case Name: Commercial Taxes Officer, Circle-B, Bharatpur vs. M/s Bhagat Singh

[Judgment Date]: 21 January 2021

Date of the Judgment: 21 January 2021
Citation: 2021 INSC 40
Judges: Hon’ble Ms. Justice Indira Banerjee and Hon’ble Mr. Justice Sanjiv Khanna. The judgment was authored by Justice Indira Banerjee.
Can a single purchase of a vehicle qualify a person as a “Casual Trader” under the Rajasthan Sales Tax Act, thereby limiting the time for tax assessment? The Supreme Court addressed this question in a case concerning the imposition of entry tax on a vehicle purchased in Uttar Pradesh and registered in Rajasthan. The core issue revolved around whether the respondent, who had purchased a truck, should be considered a “Casual Trader,” which would subject him to a shorter limitation period for tax assessment. The Supreme Court, in this case, clarified the definition of “Casual Trader” under the Rajasthan Sales Tax Act, 1954.

Case Background

The respondent, M/s Bhagat Singh, purchased a truck/trailer from M/s Ashok Auto Sales Ltd in Aligarh, Uttar Pradesh, on 26 December 2009, for ₹16,20,000. The vehicle was registered in Bharatpur, Rajasthan. Almost three years later, on 11 July 2012, the Commercial Taxes Department issued summons to the respondent under the Rajasthan Tax on Entry of Motor Vehicle into Local Areas Act, 1988 (the Entry Tax Act of 1988). The summons were related to the entry tax on the purchased vehicle.

The respondent did not appear in response to the summons. Consequently, on 9 October 2012, the Assistant Commissioner of the Commercial Taxes Department, Bharatpur, passed an assessment order, levying a tax of ₹2,26,800 (14% of the purchase value) along with a penalty of ₹1,000 and interest of ₹72,576, totaling ₹3,00,376.

The respondent appealed, contending that the summons were received after the date mentioned and that the assessment order was time-barred, as it was passed more than two years after the purchase date. The respondent also disputed the liability to pay entry tax.

Timeline

Course of Proceedings

The Appellate Authority, Commercial Tax Department, Bharatpur, allowed the respondent’s appeal on 4 January 2017, setting aside the assessment order. The Appellate Authority held that the respondent was a “Casual Trader,” and therefore, the limitation for passing an assessment order was two years from the transaction date. The Commercial Taxes Officer then appealed to the Rajasthan Tax Board, which rejected the appeal on 8 October 2018. The petitioner then filed a revision petition in the High Court of Judicature for Rajasthan at Jaipur, which was also dismissed on 9 July 2020. The Commercial Taxes Officer then filed a Special Leave Petition before the Supreme Court.

Legal Framework

The case primarily concerns the interpretation of the term “Casual Trader” under the Rajasthan Sales Tax Act, 1954, and its implications for the time limit for tax assessment. The relevant sections are as follows:

• Section 3 of the Rajasthan Tax on Entry of Motor Vehicle into Local Areas Act, 1988: This section provides for the levy and collection of tax on the purchase value of a motor vehicle entering a local area for use or sale, which is liable for registration in the State. It states that the tax shall be payable by an importer.
• Section 6 of the Rajasthan Tax on Entry of Motor Vehicle into Local Areas Act, 1988: This section deals with offences and penalties for non-compliance with the Act. It states that the provisions relating to offences and penalties of the Rajasthan Sales Tax Act, 1954 shall apply to the assessment, collection, and enforcement of tax under this Act.
• Section 7 of the Rajasthan Tax on Entry of Motor Vehicle into Local Areas Act, 1988: This section states that the authorities empowered to assess, collect, and enforce payment of tax under the Rajasthan Sales Tax Act, 1954, shall also do so under this Act.
• Section 2(ccc) of the Rajasthan Sales Tax Act, 1994: Defines “Casual Trader” as a person who has occasional transactions of business involving buying, selling, supplying, or distributing goods.
• Section 10A of the Rajasthan Sales Tax Act, 1954: Requires every “Casual Trader” to report their transactions and deposit the tax.
• Section 10B(1)(iii) of the Rajasthan Sales Tax Act, 1954: Stipulates the time limit for assessment in the case of a “Casual Trader,” which is one year from the date of filing the report, and if no report is made, within two years from the date of the transaction.

The interplay between these provisions determines the applicable time limit for assessing entry tax on the vehicle purchased by the respondent. The core issue is whether a single purchase transaction qualifies someone as a “Casual Trader”.

Arguments

Petitioner’s (Commercial Taxes Officer) Arguments:

• The petitioner argued that a single transaction of purchasing a motor vehicle does not qualify a person as a “Casual Trader” under Section 2(ccc) of the Rajasthan Sales Tax Act, 1994.
• According to the petitioner, the definition of “Casual Trader” requires “occasional transactions” of business involving buying and selling of goods, implying that there must be more than one transaction.
• The petitioner contended that the respondent, having engaged in only one transaction, should not be treated as a “Casual Trader” and should not benefit from the shorter limitation period for assessment.
• The petitioner argued that the lower authorities erred in applying the shorter limitation period applicable to casual traders.

Respondent’s (M/s Bhagat Singh) Arguments:

• The respondent contended that the assessment order was barred by limitation, as it was passed beyond the period of two years from the date of purchase of the vehicle.
• The respondent argued that they were a “Casual Trader” as per the definition under the Rajasthan Sales Tax Act, 1994.
• The respondent relied on the findings of the Appellate Authority, the Rajasthan Tax Board, and the High Court, all of which had concurred that the respondent was a “Casual Trader.”

Innovativeness of the argument: The petitioner’s argument focused on the interpretation of the word “transactions” in the definition of “Casual Trader,” arguing that it should be interpreted in the plural sense, requiring multiple transactions. This was a key point of contention.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issue:

1. Whether a single transaction of purchase of a motor vehicle brings a person within the definition of “Casual Trader” under the Rajasthan Sales Tax Act, 1954, and its implications for the time limit for tax assessment.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Govinda Bala Patil v. Ganpati Ramchandra Naikwade, (2013) 5 SCC 644: The Supreme Court referred to this case, which relied on Section 13(b) of the Bombay General Clauses Act, 1904, to hold that words in the singular include the plural and vice versa. This was used to interpret the expression “any bodies or persons” to include a singular person.
• Tirath Singh v. Bachittar Singh, AIR 1955 SC 830: The Supreme Court quoted this case, which stated that if the ordinary meaning and grammatical construction of a statute leads to a contradiction of the apparent purpose of the enactment, the construction may be modified to avoid absurdity.

Statutes:

• Section 13(2) of the General Clauses Act, 1897: This section states that words in the singular include the plural and vice versa, unless the context suggests otherwise.
• Section 2(ccc) of the Rajasthan Sales Tax Act, 1994: Defines “Casual Trader” as a person who has occasional transactions of business involving buying, selling, supplying, or distributing goods.
• Section 10A of the Rajasthan Sales Tax Act, 1954: Requires every “Casual Trader” to report their transactions and deposit the tax.
• Section 10B(1)(iii) of the Rajasthan Sales Tax Act, 1954: Stipulates the time limit for assessment in the case of a “Casual Trader”.

Judgment

How each authority was viewed by the Court:

• The Court relied on Govinda Bala Patil v. Ganpati Ramchandra Naikwade [(2013) 5 SCC 644]* to interpret the term “transactions” to include a single transaction, citing the principle that words in the singular include the plural and vice versa.
• The Court quoted Tirath Singh v. Bachittar Singh [AIR 1955 SC 830]* to justify its departure from a strictly grammatical construction of the statute, stating that the interpretation should not lead to absurdity or inconsistency with the legislative intent.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of statutory interpretation that words in the singular can include the plural and vice versa. The Court emphasized that if the legislature had intended to exclude a single transaction from the definition of “Casual Trader,” it would have explicitly stated so. The Court also aimed to avoid an interpretation that would lead to absurdity, ensuring that a person making a single transaction is not treated differently from those making multiple transactions for the purpose of tax assessment timelines.

The Court’s reasoning was based on the legal interpretation of the term “transactions” and the application of the General Clauses Act. The factual aspect of the case, concerning the single transaction of purchase, was less significant than the legal principles applied.

Logical Reasoning

The Court considered alternative interpretations but rejected them because they would lead to an anomaly where a person with a single transaction would be treated differently from those with multiple transactions. The Court’s decision was based on the principle of purposive interpretation, which aims to give effect to the legislature’s intent.

The Supreme Court dismissed the Special Leave Petition, upholding the decisions of the lower authorities. The Court reasoned that the term “transactions” as used in the definition of “Casual Trader” in Section 2(ccc) of the Rajasthan Sales Tax Act, 1994, should be interpreted to include a single transaction. The Court observed that if the legislature intended to exclude a single transaction, it would have explicitly mentioned it. The Court relied on Section 13(2) of the General Clauses Act, 1897, which states that words in the singular include the plural and vice versa, unless the context suggests otherwise. The Court stated:

“It is well settled that in construing a statutory provision, words in the singular are to include the plural and vice versa, unless repugnant to the context in which the expression has been used, as provided in Section 13(2) of the General Clauses Act, 1897…”

The Court also emphasized that a statute must be interpreted in a manner that is just, reasonable, and sensible. The Court stated:

“The Court must interpret a statute in a manner which is just, reasonable and sensible. If the grammatical construction leads to some absurdity or some repugnancy or inconsistency with the legislative intent, as may be deduced by reading the provisions of the statute as a whole, the grammatical construction may be departed from to avoid anomaly, absurdity or inconsistency.”

The Court further quoted:

“…where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence.”

There were no minority opinions in this case.

Key Takeaways

• A single purchase transaction can qualify a person as a “Casual Trader” under the Rajasthan Sales Tax Act, 1954.
• The time limit for assessment for a “Casual Trader” is two years from the date of the transaction if no report is made.
• Tax authorities must adhere to the prescribed limitation periods for assessment.

This judgment clarifies the scope of the term “Casual Trader” and ensures that individuals engaged in single transactions are not subject to extended assessment periods. This decision will have implications for tax assessments under the Rajasthan Sales Tax Act, 1954, and provide clarity on the application of limitation periods.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that the term “transactions” in the definition of “Casual Trader” under the Rajasthan Sales Tax Act, 1954, includes a single transaction. This clarifies the interpretation of the term and ensures that individuals engaged in single transactions are also considered “Casual Traders” for the purpose of assessment timelines. There is no change in the previous position of law but an interpretation of the term “transactions” has been clarified.

Conclusion

The Supreme Court dismissed the Special Leave Petition, affirming that a single transaction can qualify a person as a “Casual Trader” under the Rajasthan Sales Tax Act, 1954. This ruling upholds the shorter limitation period for assessment for such traders and provides clarity on the interpretation of the term “transactions.” The judgment ensures that tax authorities adhere to the prescribed time limits for assessment, thereby protecting individuals from prolonged tax proceedings.