 to the central sales tax (amendhent) bill, 1976 rto be/as introduced in wk sabha 71 - page 2, line 2,-for "me anin g " ~ "me anin g s " 2 page 2, line 26,-page for "as as" read "as an" 4, line -:p, -fo r " ( i v) " re ad "( v) " 4 page 8, line 2 from bottom,-for "purpose" read "purposes ii 5 page 8, line 1 from bottom,-for "orissa" ~ ''l'iaharashtra'' 6 page 10, line 6 from bottom,-1qr "ben" read iibeen" new delhi; august 24, 1~76 bhadra 2, 1 98 (saka) !sui no " of 1&74 the central sales tax (amendment) bill, 1976  a billfurther to armend the central sales tax act, 1956 be it enacted by parliament in the twenty-seventh year of the republic of india as follows:-1 this act may be called the central sales tax (amendment) act, 1976 short title 74011956 s 2 in section 2 of the central sales tax act, 1956 (hereinafter referred amendto as the principal act) ,-ment of iection 2 (a) after clause (a), the following clauses shall be inserted namely:-'(aa) "business" includes-is (i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues trom such trade, commerce, manufacture, adventure or concern; and (ii) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; 20 (ab) "crossing the customs frontiers of india" means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities explanation-}l'or the purposes of this clause, "customs station" and ··customs authorllles" shah have tne same meaning \ as m the: customs act, 1962;'; 152 of 1962 (b) tor clause (/), the following clause shall be substitutec\, namely:-s - (b) "dealer" means any person who carries on (whether reiwarly or ornerwlse) the ousmess of buying, selling, supplying or dlstl'lou~ •• !g goods, directil' or indirectly, for cash, or for deferred paymena or lor comnusslon, remuneration or other valuable conslcleration, and mcluces-10 (i) a local authority, a body corporate, a company any co-operative society or other soc:iety, club, firm, hindu undlvided family or other association of persons which carries on such busliless; l't) a factor, broker, commission agent, del credere agent, is or any otner mercantl1e agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of buying, selling, supplying or distributing, goods belonging to any principal whether dlsclosed or not; and 20 (iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal 25 erp;,anation i-every person who acts as as agent, in any state, of a dealer residing outside that state and buys, sells, supplies, or c\istributes, goods in the state or acts on behalf of such dealer as-(i) a mercantile agent as defined in the sale of goods 30 act, 1930, or 3 of 19ao i (ii) an agent for handling of goods or documents of title relating to goods, or (iii) an agent for the collectioll or the payment of the sale price of goods or as a guarantor for such collection or 35 payment, and every local branch or office in a state of a fum registered outside that state or a comp~y or other body corporate, the principal office or headquarters whereof is outside that state, shall be deemed to be a r\ealer for the purposes of this act 40 ' , explanation 2-a government which, whether or not in the course of business buys, sells, supplies or distributes, goods, cllrectly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration, shall, except in relation to any sale, supply or distribution of surplus, 45 un-serviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this act;' amendment of section 5 5 3 in section 5 of the principal act, after sub-section (2), the following sub-section shall be inserted, and shall be deemed to have been inserted with effect :6i'om the 1st day of april, 1976, namely:-"(3) notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioninjt the export of those goods out of the territory of india shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export" 10 amendment of section 6 is 4_ in section 6 of the principal act in sub-section (1), the following proviso shall be inserted and shall be deemed to have been inserted, with effect from the 1st day of april 1976, namely:-"provided that a dpaler shall not be liable to pay tax under this act on any sale of goods which, in accordance with thf' provisions of sub-section (3) of section 5 is a sale in the course of ex·port of those goods out of the territory of india" 5 in section 7 of the principal act, for sub-section (3b), the fou"wing sub-sections shall be substituted namely:-amendment of section 7 ci (3b) no dealer shall be required to furnish any security under 20 sub-section (2a) or any security or additional security lmder subsection (3a) unless he has been given an opportunity of being hearn_ (3bb) the amount of security which a dealer may be required to furnish under sub-section (2a) or sub-section '(3a) or the aggregate of the amount of such security and the amount of additional 2s security which he may be required 'to furnish under sub-section (3a), by the authority referred to therein, shall not exceed:-(a) in the case of a neater other than 8 dealer who has made an application or who has been rel1istered in pursuance of an application under sub-section (2' a sum equal to the tax pavable 30 under this act in accorn:mce with the estimrte of rllch authoritv on the turnover of such dealer for the year in which such securitv or, as the case may be, additional security is required to be furnished; and (b) in the casp of a dealer who has mrde an :it)plication or 3s who has bel''n re~stered in pursuance of an application under sub-section (2) a sum eaual to the tax leviable under this art in accordance with the estimatp of rllf'h a11thnrlty on the sales to such deale'r in the course of intf!r-st~te trane flr ('ommerce in the veal' in which such securitv nr a" thp case mav he additional 40 secnritv is reouirerl to hp furnished, had such dealer been not registered under this act" 6 in section 9 of the principal act-amend-ment of section 9 (a) in sub-section (1) for the proviso the following proviso shall be substituted namely:-45 "provided that in the case of 8 liale of ~onds durin~ their movement from one st~tp to :mother bpin!! a !l!ale subspouent to th" flrst sale in rel'ltlert of' the samp itoo"~ anrt hefn!! 81'10 r sale whic'h does not fall within s11b-section (2) of section 6 the tax shan be levied and collected-so (4) where such sl1bsmllent ~ale h::ls heen effected bv a registered dealer in the stllte from which the rf>~sterert nealer obtained or, as the case may be, could have obtained, the f()rm prescribed for the purposes of clause (a) of subsection (4) of section 8 in connection with the purchase of such goods, and (b) where such subsequent sale has been effected by an $ unregistered dealer, in the state from which such subsequent sale has been effected"; (b) in sub-section (2), before the words "compounding of offences", the words "charging or payment of interest," shall be inserted and shall be deemed always to have been inserted; 10 (c) after sub-section (2), the following sub-section shall be inserte<\, namely:-"(2a) all the provisions relating to offences and penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for is an offence but excluding the provisions relating to matters provided for in sections 10 and loa) of the general sales tax law of each state shall with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of payment of any tax required to be collected zo under this act in such state or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment as if the tax under this act were a tax under such sales tax law!' 1 in section 14 of the principal act, with effect from the 1st day of zs september,1976,- amendmental iectionl4(a) clause ('i) shall be re-numbered as clause (ia) and before clause (ia) as so re-numbered, the following clause shall be inserted, namely:-"(i) cereals, that is to say-(i) paddy (oryza sativa l); (ti) rice (oryza scltiva l); (iii) wheat (triticum tmlgare t compactum, t aphaerococcum, t durum, t aestivwm l, t dicoocum); (iv) jowar or milo (sorghum v"uiga1!e pen); 3s (iv) bajra (pennisetum typ'mideum l); (vi) maize (zea mays l); (t?ii) ragi (ele'u8ine coracana gaertn); (viii) kodon (pa!palum scrobiculatum l); (i,r) kutki (panicum miliare l); (r) barley (hordeum oolgare l) ;"; (b) after clause (iib) , the following clause shall be inserted, namely:-ii (tic) crude oil, that is to say, cnlde petroleum oils and crude oils obtained from bituminous minerals (such as shale, 45 calcareous rock sand) whatever their composition whether-" obtained from normal or condensation oil-deposits or by the destructive distillation of bituminous minerals and whether or not subjected to all or any of the following processes:-(1) decantation; 5 (2) de-salting; (3) dehydration; (4) stabilisation in order to normalise the vapour pressure; 10 (5) elimination of very light fractions with a view to returning them to the oil-deposits in order to improve the drainage and maintain the pressure; (6) the addition of only those hydrocarbons previously recovered by physical methods during the course of the above-mentioned processes; (7) any other minor process (including addition of pour point depressants or flow improvers) which does not change the essential character of the substance;"; (e) after clause (ui), the following clause shall be insertecl, namely:-20 "(via) pulses, that is to say,-(i) gram or gulab gram (cieerarietinum l); (ii) tur or arhar (cajanus cajan); (iii) moong or green gram (phaseolus aureus); (tv) m4sun- or lentil (lens esculenta moench, lens culinaris medic); (v) urad or black gram (phaseolus mungo); (vi) moth (ph4seolus aconitifolius jacq); (v'ii) lakh or khesat'i (lathyr'u'1 saiivtts l) ;" 8 in section 15 of the principal act, after clause (b), the following 30 clauses shall be inserted with effect from the 1st day of september, 1976, amendment of section 15 namely:-~ 3s ii (e) where a tax has been levied under that law in respect of the sale or purchase inside the state of any paddy referred to in subclause (i) of clause (i) of section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy; (d) each of the pulses referred to in clause (via) of section 14, whether whole or separated and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law" validation 9 (1) the provisions of section 9 of the principal act shall have effect, and shall be deemed always to have had effect, in relation to the period commencing on the 5th day of january, 1957, and ending with the date immediately preceding the date of commencement of this act, as if that section also provided-5 (a) that all the provisions relating to penalties (including provisions reoating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment on conviction for an offence but excluding the provisions relating to matters provided for in sections 10 and loa of the principal act and the provisionsi relating 10 to oft'ences) oif the general sales tax law of each state shall, with necessary modifications, apply in relation to-(i) the assessment, re-assessment, collection and enforcement of payment of any tax required to be collected under the principal act in such state; and is (ii) any process connected with such assessment, re-assessment, collection or enforcement of payment; and (b) that for the purpose of the a~plication of the provisions of such law, the tax under the principal act shall be deemed to be tax' under such law 20 (2) notwithstanding anything contained in any judgment, decree or order of any court or tribunal or ot11er authority, all penalties under the general sales tax law of any state imposed or purporting to have been imposed in pursuance of the provisions of section 9 of the principal act, and all proceedings, acts or things taken or done for the purpose of, or in 25 relation to, the imposition or collection of such penalties, before the commencement of this act shall, for all purposes, be deemed to be and to have always been imposed, taken or done as validly and effectively as if the provisions of sub-section (1) had been in force when such penalties were imposed or proceedings or acts or things were taken or done and, 30 accordingly,-(a) no suit or other proceedings shall be maintained or continued in or before any court or any tribunal or other authority for the refund of any amount received or realised by way of such penalty: (b) no court, tribunal or other authority shall enforce any 3s decree or order directing the refund of any amount received or realised by way of such penalty; (e) where any amount which had been received or realised by way of such penalty had been refunded before the commencement of this act and such refund would not ~ave been allowed if the provisions 40 of sub-section (1) had been in force on the date on which the orde+r for such refund was passed, the amount so refunded may be recovered as an arrear of tax under the principal act; (d) any proceeding, act or thing which could have been validly taken, continued or done for the imposition of such penalty at any 4s time befare the commencement of this act if the provisions of subsection (1) had then been in force but which had not been taken, continued or done, may after such commencement be taken, continued or done (3) nothing in sub-section (2) shall be construed as preventing any person,-(a) from questioning the imposition or collection ~ any penalty or any proceedings, act or thing in connection therewith; or (b) from claiming any refund, s in accordance with the provisions of the principal act read with sub-section (1) explanation-in computing the period of limitation, if any, for questioning as provided in clause (a) or for claiming as provided in clause 10 (b), the period commencing on the 27th day of february, 1975 and ending with the date of commencement of this act shall be excluded (4) any interest cbarged or paid or purporting to have been charged or paid, and any proceeding, act or thing taken or done or purporting to have been taken or done for charging or paying any interest, under is the provisions of the general sales tax law of any state read with section 9 of the principal act, before the commencement of this act, shall be deemed to be and to have always been as validly charged, paid, taken or done as if the amendment made by clause (b) of section 6 had been in force when such interest was charged or paid or when such proceeding, 20 act or thing was taken or done explanation-for the purposes of this section, "general sales tax law" shall have the same meaning as in the principal act the central sales tax act, 1956, formulates the principles for determimng when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a state ':>r in the course of import into, or export from, india the act also provides for the levy, assessment and collection of tax on sales of goods in the course of inter-state trade or commerce further, the act declares certain goods to be of special importance in inter-state trade or commerce and specifies the restrictions and conditions to which state laws relating to sales tax shall be subject in regard to the levy of tax on the sale or purchase of such goods 2 according to section 5(1) of the central sales tax act, a sale or purchase of goods can qualify as a sale in the course of exl»rt of the goods out of the territory of india only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of india the supreme court has held (vide mom serajuddin 'os state of orissa, 36 stc, 136) that the sale by an indian exporter from india to the foreign importer alone qualifies as a sale which has occasioned the export of the goods according to the export control orders, exp:>rts of certain goods can be made only by specified agencies such as the state trading corporation in other cases also, manufacturers of goods, particularly in the small scale and mediwn sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade a sale of goods made to an export canalising agency such as the state trading corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods further if such sales do not qualify as sales in the course of export, they wouln be liable to state sales tax and there would be a corresponding increase in the price of the goods this would make our exports uncompetitive in the fiercely competitive international markets it is, therefore, prop:>sed to amend, with effect from the beginning of the current financial year, section 5 of the central sales tax act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of india shall also be deemed to be in the course of such export if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export 3 sub-section (2) of section 9 of the central sales tax act empowers the state sales tax authorities to assess, re-assess, collect ana enforce payment of central sales tax the sub-section also authorises the authorities under the state sales tax laws to exercise all the powers which they have under those laws (including, inter alia, the power to impose penalties) for the purpose of the central sales tax act also in khemka " co (agencies) private ltd vs state of orissa (31) stc, 1)71), the supreme court, by a majority of 3:2, held that the provisions of the state sales tax laws as to penalties do not apply for purposes of the central sales tax in view ol! this judgment, the state governments are faced with the problem of having to refund the amounts collected in the past by way of penalties the judgment has also resulted in a vacuum being created in regard to levy of penalties it is, therefore, necessary to amend section 9 of the central sales tax act to provide expressly that the provisions relating to offences and penalties under the general sales tax law of each state shall, with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of "tax urder the central sales tax act it is also necessary to validate the penalt'es which have been levied in the past, for the purposes of the central sales tax act, on the basis of the provisions of the state sales tax laws 4 it is proposed to avail of the present opportunity to declare crude oil and certain cereals and pulses as goods of special importance in the course of inter-state trade or ('ommerce and to make certain other amendments to remove difficulties which have been experienced in the administration of the act 5 the· bill seeks to achieve the above objects the notes on clauses explain the provisions of the bill new deulij the 18th august, 1976 pranab mukherjee  president's recommendation under articles 117 and 274 of the constitution of india[copy of letter no 2313175·st (vol iii), dated the 21st august, 1976 from shri pranab kumar mukherjee, minister of revenue and banking ~o the secretary-general, lok sabha] the president having been apprised of· the subject matter of the bill further to amend the central sales tax act, 1956 has been pleased to recommend in pursuance of clause (1) of article 117 and clause (1) of article 274 of the constitution of india the introduction of the bill in lok sabha clause 2-sub-clause fa) seeks to insert definitions of the expressions "business" and "crossing the customs frontiers of india" the definition of "business" is for making it clear that a dealer carrying on' a business would be liable to tax under this act whether he carries on such business with or without profit motive the expression "customs frontiers of india" is used in section 5 ·:>f the act in the absence of a definition, "customs fronters" has been interpreted to be co-terminus with the extent of the territorial waters this gives rise to practical difficulties as in many cases it would be difficult to determine the question whether at the time of the sale or purchase the goods have entered or crossen the territorial waters the actual checking of the goods takes place in' the customs station and not at the edge of the territorial waters hence, it is proposed to define the expression "crossing the customs frontiers of india" as meaning "crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities" sub-clause (b) seeks to substitute the existing definition of the term "dealer" by a new comprehensive definition clause 3-this clause seeks to insert with retrospective effect from 1-4-76 a new sub-section (3) in section 5 the new sub-section provides that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out qf the territory of india shall also be deemed to be in the course ot such export if such last sale or purchase took place after, and was for the purpose of complying wah the agreement or order for, or in relation to such export clause 4-this clause seeks to amend, with retrospective effect from 1-4-76, sub-section (1) of section 6 to provide that the sales of goods which qualify as sales in the course of export out of the territory of inc\ia under suh-section (3) as proposed to be inserted in section 5 by clause 3 of the bill shall not be liable to central sales tax clause 5-this clause seeks to amend section 7 to enable the amount of security to be demanded being computed in the case of a dealer who applies for registration under section 7 (2) of the act the amount of security in such a case shall not exceed the sum equal to the tax which would have been levied on sales to such dealer in the course of inter-state trade or commerce if such dealer had not been registered under the act the security cannot be demanded unless the dealer has ben given an opportunity of being heard clause 6-sub-clause (a) of this clause seeks to plug a lacuna and pr0-vide that where a subsequent sale not exempt from tax under section 6(2) of the act is made by an unregistered dealer, the tax will be collected in the state from which such subsequent sale is effected sub-clause (b) seeks to amend sub-section (2) of aection 9 retrospectively to make it clear that provisions relating to charging or payment of interest in the general sales tax law of the state are applicable for the purposes of the central sales tax act sub-clause (c) seeks to insert a new sub-section (2a) in section 9 to provide that provisions relating to offences and penalties (including provisions relating to penalties in lieu of prosecution for an offence or in additi<:m to the penalties or punishment for an offence but excluding the provisions relating to matters provided for in sections 10 and loa) of the general sales tax law of each state shall with necessary modifications apply in relation to the assessment, re-assessment, collection and enforcement of payment of any tax required to be collected under this act clause 7-thi3 clause seeks to amend with effect from 1-9-76 section 14 of the act to declare "crude oil" and certain cereals and pulses as goods of special importance in inter-state trade or commerce c£ause b-this clause seeks to insert with effect from 1·9-76 two new clauses (c) and (d) in section 15 of the act t<) make it clear that there will be no double taxation on paddy and rice produced from such paddy and that pulses whether whole or separated and whether with or without husk shall be treated as a single commodity for the purposes of levy of sales tax by states clause 9-this clause seeks to make applicable all the provisions relating to penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment on conviction for an 'offence but excluding the provisions relating to matters provided for in secticms 10 and loa of the act and the provisions relating to offences) of the general sales tax law of each state for the purpose of assessment, re-assessment, collection and enforcement of payment of any tax required to be collected under this act in the past the clause also provides for the validation of any penalties imposed, proceedings acts, or things taken or done, interest charged or paid or purporting to have been charged or paid in the past it has been made clear that a person shall not be prevented from questioning the imposition or collection of any penalty or any proceeding, act or thing in connection therewith or from claiming any refund in accordance with the provisions of the act read with the provisions of sub-clause (a) of this clause it has also been provided that in computing the period of limitation, if any, the period commencing on the 27th day of february, 1975 (being the date on which the supreme court delivered its judginent in khemka's case) and ending with the date of commencement of this act shall be excluded  extracts from the central sales tax act, 1956(74 of 1956) - - - - - definitions 2 in this act, unless the context otherwise requires,-- - - - - liability to tax on inter_ state sales (b) "dealer" means any person who carries on the business of buying or selling goods, and includes a government which canies on such business; - - - - - 6 (1) subject to the other provisions contained in this act, every dealer shall, with effect from such date as the central government may, by notification in the ofticialgazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this act on all sales of goods other than electrical energy effected by him in the course of inter-state trade or commerce during any year on and from the date so notified - - - - - 7 (1) - - - - - registration of dealers levy and collection of tax ant penal tiel (3b) no dealer shall be required to furnish any security under subsection (2a) or an} security or additional security under sub-section (3a) by the authority referred to therein, unless he has been given an opportunity of being heard and the amount of security that may be required to be furnished by any dealer under either of the aforesaid subsections or the aggregate of the amount of such security and the amount of additional security that may be required to be furnished by any dealer under sub-section (3a), shall in no case exceed the tax payable, in accordance with the estimate of such authority, on the turnover of the dealer for the year in which such security or, as the case may be, additional security is required to be furnished - - - - - t (1) the tax payable by any dealer under this act on sales of goods effected by him in the course of inter-state trade or commerce, whether such sales fall within clause (a) or clause (b) o~ section 3, shall be levied by the government of india and the tax so levied shall be collected by that gove;-nment in accordance with the provisions of sub-section (2), in the state from which the movement of the goods commenced: provicied that, in the case of a sale of goods during their movement from one state to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within sub-section (2) of section 6, be levied and collected in the state from which the registered dealer effecting the subsequent sale obtained or, as the case may be, could have obtained, the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods (2) subject to the other provisions of this act and the rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate state shall, on behalf of the government of india, assess, re-assess, collect and enforce payment of tax, including any penalty, payable by a dealer under this act as if the tax or penalty payable by such a dealer under this act is a tax or penalty payable under the general sales tax law of the state; and for this ~purpose they may exercise all or any of the powers they have under the general sales tax law of the state; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of, tax from third parties appeals, reviews, revisions, references, refunds, rebates, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: provided that if in any state or part thereof there is no general sales tax law in force, the central government may, by rqles made in this behalf, make necessary provision folr all or any cyf the matters speoifted in this sub-section - - - - - a bill further to amend the central sales tax act, 1956 (sh,i pranab kumar jlukherjee, mini8ter of revenue and banking) 