Full Judgment Text
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PETITIONER:
HIRA LAL RATTAN LAL ETC. ETC.
Vs.
RESPONDENT:
STATE OF U.P. AND ANR. ETC. ETC.
DATE OF JUDGMENT03/10/1972
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
REDDY, P. JAGANMOHAN
DUA, I.D.
KHANNA, HANS RAJ
CITATION:
1973 AIR 1034 1973 SCR (2) 502
1973 SCC (1) 216
CITATOR INFO :
R 1979 SC1475 (24)
F 1985 SC 421 (25,78)
F 1985 SC 582 (4)
RF 1985 SC1416 (60)
R 1989 SC2227 (32)
R 1990 SC 560 (13)
R 1990 SC1637 (21)
ACT:
U.P. Sales Tax Act 1948 as amended by the Uttar Pradesh
Sales Tax Act (Amendment and Validation) Act 1970, s. 3-D,
explanation II, validity of--S. 7 whether effective for
retrospective operation of explanation II--Single point tax
on first purchase of split foodgrains whether leviable under
amended Act--Explanation II whether an unlawful usurpation
of judicial points--Whether violates Art. 14 or 19(1)(f) and
(g) of Constitution--Tax on spilt grains whether leviable
without amending notification under s. 3-D--Section 3-D
whether suffers from excessive delegation of legislative
powers.
HEADNOTE:
Under the U.P. Sales Tax Act 1948 as it originally stood the
purchases of split or processed foodgrains and dal by
dealers were sought to be brought to tax under s. 3-D of the
principal Act read with the notification issued. in a writ
petition relating to the assessment year 1966-67 (Tilok
Chand Prasan Kumar v. Sale Tax Officer, Hathras 25 STC 118)
the High Court of Allahabad struck down the levy holding
that the dal purchased by the petitioner could not be said
to be a commodity essentially different from the arhar dal
purchased by the dal mills and accordingly the purchases
effected by the petitioner could not be regarded as the
first purchases. Thereafter the Governor of U.P. issued the
Uttar Pradesh Sale Tax (Amendment and Validation)
Ordinance,, 1970 adding inter alia Explanation to s. 3-D as
well as a validating provision viz. s. 7 to the principal
Act. The ordinance, was later enacted as the Uttar Pradesh
Sales Tax Act (Amendment and Validation) Act 1970.
Explanation II aforesaid provided that split or processed
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foodgrains such as in the form of dal shall be deemed to
be different from unsplit or unprocessed foodgrains and
accordingly tax could be levied on first purchases of split
dal. In support of the writ petition under Art. 226 of the
Constitution filed in the High Court by the appellant the
validity of Explanation 11 of s. 3-D as well as s. 7 was
challenged and it was contended that the amendments
incorporated were not effective enough to bring to tax the
first purchase of split or processed foodgrains and pulses.
The High Court rejected these contentions and dismissed the
writ petition. There after these recent appeals were
brought with certificates,
Dismissing the appeals.
HELD : (i) The source of the legislative power to levy sales
of purchases tax on goods is Entry 54 of List II of the
Constitution. It is well settled that subject to
constitutional restrictions a power to legislate includes a
power to legislate prospectively as well as retrospectively.
In Chhotabhai Jethabhai Patel it was specifically decided by
this Court that where the legislature can make a valid law,
it can provide net only for the prospective operation of the
material provisions of the said law but it can also provide
for the retrospective operation of the said provisions. The
contention that no fresh levy can be imposed by
retrospective legislation must therefore be rejected. [509
E]
The Union of India v. Madan Gopal Kamra, [1954] 3 S.C.R.
541, M.P. Sundararamer & Co. v. The State of Andhra Pradesh
and’ anr;
503
[1958] S.C.R. 1422, J. K. Jute Mills Co. Ltd. v. The State
of Uttar Pradesh and anr. 12, S.T.C. 429, Chhotabhai
Jethabhai Patel and Co. v. The Union of India and anr.;
[1962] Supp. 2 S.C.R., p. 1 and Sri Ramkrishna: & Ors. v.
The State of Bihar, [1964] 1 S.C.R. 897, applied.
(ii) It is open to the legislature to define the nature of
the goods, the sale or purchase of which should be brought
to tax.. Legislature was not incompetent to separate the
processed or split pulses from the unsplit or unprocessed
pulses and treat the two as separate and independent goods.
There was no basis for the contention that the legislature
cannot for the purpose of tax under the Act separate the
split or processed from the unsplit or unprocessed. [510A-D]
Jagannath and Ors. v. Union of India, [1962] 2 S.C.R. 118,
referred to.
(iii) There was no justification for the contention that
the legislature had usurped any judicial power. The
legislature had not purported either directly or by
implication to overrule the decision of the Allahabad High
Court in Tilok Chand Prasan Kumar’s case On the other hand
it had accepted that decision as correct; but had sought to
remove the basis of that decision by retrospectively
changing the law. Encroachment on the judicial power is
outside the competence of the legislature but the
nullification of the effect of a judicial decision by
changing the law retrospectively, is within its permissible
limits. From the statement of objects and reasons, it
appears that in the principal Act, the legislative intent
was not clearly brought out. By means of the Amending Act
the legislature wanted to make clear its intent. [510 D]
(iv) In a democratic set up it is for the legislature to
decide what economic or social policy it should pursue or
what administrative considerations it should bear in mind.,
The classification between the processed or split pulses and
unprocessed or unsplit pulses is a reasonable
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classification. It is based on the use to which those goods
can be put. Hence, the impugned classification was not
violative of Art. 14 of the Constitution. [511 F]
Khandige Sham and ors. v. The Agricultural Income Tax
Officer, [1963] 3 S.C.R. 809 referred to.
(v) The levy was not violative of Art. 19 (1) (f) and (g).
amendment of the Act was necessitated because of the
legislature’s failure bring out clearly in the principal Act
its intenion to separate the processed or split pulses from
the unsplit or unprocessed pulses. Further the
retrospective amendment became necessary as otherwise the
State would have to refund large sums of money. The
contention that the retrospective levy did Dot afford any
opportunity to the dealers to pass on the tax payable to the
consumers, has not much validity. The tax is levied on the
dealers, the fact that he is allowed to pass on the tax to
the consumers or he is generally in a position to pass on
the same to the consumer has no relevance when legislative
competence is under consideration. [511 G]
(vi) Ordinarily a proviso to a section is intended to take
out a part of the main section for special treatment. It is
not expected to enlarge the main section. But cases have
arisen in which this Court has held that despite the fact
that a provision is called proviso, ’it is really a separate
provision and the so called proviso has substantially
altered the main section. If on a true reading of an
Explanation it appears that it has widened the scope of the
main section, effect must be given to the legislative intent
not withstanding the fact that the legislature named that
provision as an Explanation. [512 C]
504
Commissioner of Income.,tax, Bombay City. Bombay v.
Bininchandra Maganlal & Co. Ltd. Bombay. [1961] 2 S.C.R.
493, State of Rajasthan v. Leela Jain, [1965]1 S.C.R. 276
and Bihta Cooperative Development Cane Marketing UnionLtd.
and anr. v. Bank of Bihar and ors., [1967] 1 S.C.R. 848
referred to.
The contention thatExplanation 11 to s. 3 D did not widen
the scope of s. 3-D could notbe accepted. Section 3-D as it
originally stood dealt with foodgrainsand pulses. It did not
treat the unprocessed or unsplit foodgrains and pulses as a
separate item. The newly added Explanation brings to tax
with retrospective effect the split or processed foodgrains
as well. [513E]
(vii) It cannot be said that because the notification under
s. 3D continues to refer to foodgrains only, it was not
possible to tax processed or split foodgrains under it.
Section 3 D refers to foodgrains, but be..cause of
Explanaticon II, the expression "foodgrains" has to be read
as containing two different items processed or split
foodgrains and upprocessed or unsplit foodgrains.
Consequtntly while reading the expression "foodgrains" in
the notification also the same approach must be adopted.
This conclusion is also obvious from s. 7 which says in
plain words that the notification must be deemed to have
been issued under s. 3-D as amended. While a taxing statute
must be strictly construed, but that ,does not mean that a
provision in a taxing statute should not be read reasonably.
[514 H]
(viii) Section 3 -D does not suffer from the vice of
delegation of legislative power to the executive.
In the Act under s. 3 the legislature has sought to impose
multi-point tax on all ’sales and purchase. After having
done that it has given power to the executive, a high
authority and which is presumed to command the majority
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support in the legislative, to select for special treatment
dealings in certain class of goods. In the very nature of
things, it is impossible for the legislature to enumerate
goods, dealings in which sales tax or purchase tax should be
imposed. it is also impossible for the legislature to select
the goods which should be subjected to a single point sales
or purchase tax. Before making such selections several
aspects such as the impact of the levy on the society,
economic consequences and the administrative convenience
will have to he considered. These factors may change from
time to time. Hence in the very nature of things, these
details have got to be left to the executive. [515 B]
Pt. Banarsi Das Bhanot and ors. v. The State of Madhya
Pradesh and others, [1959] S.C.R. 427, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 821 and
822 of 1971.
Appeals by certificates from the judgment and orders dated
July 14, and August 22, 1970 of the Allahabad High Court in
Civil Misc. Writ Petitions Nos. 957 and 3784 of 1970.
Civil Appeals Nos. 1625 and 2008 of 1971.
Appeals by certificates from the judgments and orders dated
July 14, 1970 of the Allahabad High Court at Allahabad in
Civil Misc. Writ Nos. 953 and 928 of 1970.
505
Som Nath Iyer, R. G. Sharma and Subodh Markendeya, for the
appellant (in C. As. Nos. 821-822/71).
S. T. Desai, R. K. Upadhya, P. C. Bhartari, Ravinder
Narain, for the appellant, (in C. A. No. 1625/71).
M. C. Chagla, Anil B. Divanji, P. C. Bhartari and Ravinder
Narain for the appellants, (in C.A. No. 2008/71).
O. P. Rana and Ravindra Bana, for the respondents (in C.
As. Nos. 821-822/71).
N. D. Karkhanis, O. P. Rana and Ravindra Bana, for the
respondents (in C. A. No. 1625/71).
S. C. Manchanda, O. P. Rana and Ravindra Bana, for the
respondents. (in C. A. No. 2008/71).
The Judgment of the, Court was delivered by
Hegde, J. These are appeals by certificate. They raise
common questions of law for decision, and they are directed
against a common judgment of the Allahabad High Court.
The facts of the case lie within a narrow compass. The
appellants are dealers in foodgrains including cereals and
pulses especially split or processed foodgrains and dal.
The dispute in this case centers round the question whether
the Government is competent to levy sales-tax on the
purchases made by the appellants of split processed
foodgrains and dal under the provisions of the United
Provinces Sales Tax Act, 1948 as amended by the Uttar
Pradesh Sales Tax Act (Amendment and Validation) Act, 1970
(which will hereinafter be referred to as the Act).
Under the Sales Tax Act as it originally stood which will
-hereinafter be referred to as the principal Act), the
purchases of split or processed foodgrains and dal by
dealers were sought, to be brought to tax under s. 3-D of
the principal Act read with the notification issued. The
validity of the levy was challenged by Tilock Chand Prasan
Kumar, the appellant in Civil Appeal NO’. 1625 of 1971 in
respect of the assessment made on him for the assessment
year 1966-67 by assessment order dated June 30, 1968 by
means of a writ petition under Art. 226 of the Constitution.
The High Court of Allahabad struck down the levy holding
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that the dal purchased by the petitioner before it could not
be said to be a commodity essentially different from the
arhar dal purchased by the dal mills and accordingly the
purchases effected by the petitioner could not be regarded
as the first purchases. This decision is reported in 25,
S.T.C. p. 118. Thereafter the Governor of U.P. issued an
ordinance known as Uttar Pradesh Sales Tax (Amendment and
Validation) Ordinance, 1970 (U.P. Ordinance
506
No. 2 of 1970) adding inter alia Explanation 11 to s. 3-D as
well as s. 7 to the principal Act. This ordinance was later
on enacted as an Act to which we have already made
reference. The provisions of the Amending Act are identical
with the provisions in the Ordinance. Though at the time of
the institution of the writ petitions from which these
appeals arise, the Ordinance had not yet been made into the
Act, the Amending Act came into force during the pendency of
the writ petitions. Hence we shall refer to the provisions
of the Amending Act.
Under the principal Act a dealer is defined in
s. 2(c) as " "dealer" means any person or
association of persons carrying on the
business of buying or selling goods in Uttar
Pradesh, whether for commission, remuneration
or otherwise, and includes any firm or Hindu
Joint Family and any society, club or
association which sells goods to its members
and also includes any department of the State
Government or the Central Government which
carries on such business and any undertaking
engaged in the generation or distribution of
electrical energy or any other form of power."
(Explanation to the section is not relevant
for our present purpose).
Section 3 of the Act provides for the levy of
multi-point tax. The portion of that section
which is material for our present purpose
reads :
"Subject to the provisions of this Act, every
dealer shall, for each assessment year, pay a
lax at the rate of two naye paise per rupee on
his turnover of such year, which shall be
determined in such manner as may be
prescribed......"
Section 3-A provides for a single point
taxation in respect of sale of certain goods.
At present we are only concerned with s. 3-
D(1). It provides :
"Except as provided in sub-section (2), there
shall be levied and paid, for each assessment
year or part thereof, a tax on the turnover,
to be determined in such manner as may be
prescribed, of first purchases made by a
dealer or through a dealer, acting as a
purchasing agent in respect of such goods or
class of goods, and at such rates, not
exceeding two paise per rupee in the case of
foodgrains, including cereals and pulses, and
five paise per rupee in the case of other
goods and with effect from such date, as may,
from time to time, be notified by the, State
Government in this behalf."
(Explanation 1 to this section is not relevant
for our purpose).
507
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The notification issued under s. 3-D of the principal Act on
October 1, 1964 (Notification No. S. T. 7122/X) provided
that with effect from October 1, 1964, the turnover of
purchases in respect of goods mentioned therein shall be
liable to tax under s. 3-D at the rate mentioned:
"Foodgrains 1.5 paise per rupee on first purchase
On the basis of s. 3-D read with the notification, as
mentioned earlier, the authorities under the Act sought to
bring to tax under the principal Act the first purchases of
processed or split foodgrains including dal on the ground
that they constituted a separate item of foodgrains quite
independent of the unprocessed or unsplit foodgains. This
view, as seen above, was negatived by the High Court. After
the decision of the High Court, the principal Act was
amended. Under the. Amending Act one more Explanation
viz., Explanation 11 was added to s. 3-D.
"For the purposes of this sub-section, split
or processed foodgrains, such as in the form
of dal shall be deemed to be different from
unsplit or unprocessed foodgrains, and
accordingly, nothing in this sub-section shall
be construed to prevent the imposition, levy
or collection of the tax in respect of the
first purchases of split or processed
foodgrains merely because. tax had been im-
posed levied or collected earlier in respect
of the first purchases of those foodgrains in
their unsplit or unprocessed form."
The Amending Act also added a validating
provision to the principal Act viz. s. 7. That
section reads :
"Notwithstanding any judgment, decree or order
of any court or tribunal to the contrary,
every notification issued or purporting to
have been issued under Section 3-A or Section
3-D of the principal Act before the com-
mencement of this Act shall be deemed to have
been issued under that section as amended by
this Act and shall be so interpreted and be
deemed to be and always to have been as valid
as if the provisions of this Act were in force
at all material times; and accordingly
anything done or any action taken (including
any order made, proceeding taken, jurisdiction
exercised, assessment made, or tax levied,
collected or paid purporting to have been done
or taken in pursuance of any such
notification) shall be deemed to be, and
always to have been, validly and lawfully done
or taken."
It will be necessary later on to consider what
was the vice that the legislature intended to
cure by the Amending Act. The
--L498Sup Cl/73
508
sequence of events itself discloses the
purpose of the Ordinance as well as the
Amending Act. That apart, the statement of
objects and reasons which can be usefully
looked into for the purpose of finding the
vice that the legislature was trying to
provide against reads thus
"Sections 3-A and 3-D of the U.P. Sales Tax
Act, 1948 provide for single point taxation.
Under the fondler section the tax is levied on
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the turnover of sales, while under the latter
the tax is levied on the turnover of first
purchases. Plain and ornamented glass bangles
are subject to tax separately under section 3-
A. Similarly, unsplit and split pulses are
separately subject to tax under section 3-D.
It has been held by the High Court in one case
that tax cannot be levied separately on plain
and ornamented glass bangles under section 3-A
and in another that tax cannot be levied
separately on unsplit and split pulses under
section 3-D because in their opinion plain
glass bangles are not a commodity different
from ornamented glass bangles and similarly
unsplit pulses and split pulses are also not
two different commodities. These judgments
have created legal difficulties in the
assessment and collection of tax on the
aforesaid commodities. Besides, the dealers
have started applying for the refund of tax
already collected on these commodities. Ibis
will have serious repercussions on the State’s
revenue. Accordingly, it is proposed to amend
sections 3-A and 3-D to provide for the levy
of tax on the aforesaid commodities as
separate items. It is also proposed to
validate the past levy, assessment and
collection of tax on the above commodities."
(The remaining part of the statement of
objects and reasons is not relevant for our
present purpose).
The appellants challenged the validity of
Explanation 11 of S. 3-D as well as s. 7
introduced by the Amending Act before the High
Court of Allahabad in petitions under Art. 226
of the Constitution. They further took the
plea that the amendments incorporated were not
effective enough to bring to tax the first
purchases of split or processed foodgrains and
pulses. The High Court rejected these
contentions and dismissed the writ petitions.
Thereafter these appeals have been brought
after obtaining certificates from the High
Court.
The validity of the levy in question was
challenged on the following grounds’:
(1) That no fresh levy can be imposed by a
retrospective legislation;
509
(2) That the legislature cannot in case of
legislation of the nature with which we are
concerned, separate into independent
commodities split and unsplit pulses or
processed or unprocessed pulses and on that
footing seek to impose tax twice over on the
same commodity in respect of the goods liable
to be taxed at a single point;
(3) That the newly added Explanation to s.
3-D read with s. 7 of the Amending Act amounts
to an unlawful usurpation of judicial power by
the legislature;
(4) The newly added Explanation II to s. 3-D
is violative of Art. 14 of the Constitution..
There is no rational basis for separating
split or processed pulses from unsplit or
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unprocessed pulses;
(5) On a true construction of Explanation It
to s. 3-D no fresh charge can be held to have
been imposed,
(6) No levy of purchase tax can be made
without a fresh Notification under s. 3-D read
with Explanation 11 showing therein separately
foodgrains unsplit or unprocessed as well as
foodgrains split or processed; and
(7) That the power conferred on the
Government under s. 3-D amounts to an
excessive delegation of legislative power. and
consequently void.
The source of the legislative power to levy sales or
purchase tax on goods is Entry 54 of the List II of the
Constitution. It is well settled that subject to
constitutional restrictions a power to legislate includes a
power to legislate prospectively as well as retrospectively.
In this regard legislative power to impose tax also includes
within itself the power to tax retrospectively--see The
Union of India v. Madan Gopal Kabra;(1) M. P. Sundararamier
& Co. v. The State of Andhra Pradesh and Anr. (2) ; J. K.
Jute Mills Co. Ltd. v. The State of Uttar Pradesh and Anr.;
(3) Chhotabhai Jethabhai Patel and Co. v. The Union of India
and Anr. (4 Sri Ramkrishna & Ors. v. The State of Bihar. (5)
In the last mentioned case it was specifically decided that
where the legislature can make a valid law, it can provide
not only for the prospective operation of the material
provisions of the said law but it can also provide for the
retrospective operation of the said provisions.
We see no force in the second contention advanced on behalf
of the appellants. As seen earlier the general rule as
enunciated in s. 3 is multi point tax sales tax or purchase
tax; but power
(1) [1954] S. C. R. 541.
(2) [1958] S. C. R. 1422.
(3) 12. S.T.C. 429.
(4) [1962] Supp, (2) S.C.R. p. 1.
(5) [1964] 1 S.C.R. 897.
510
is conferred on the Government to select any transaction in
respect of such goods or class of goods as the Government
may choose to levy a single point sales tax or purchase tax.
It is open to the legislature to define the nature of the
goods, the sale or purchase of which should be brought to
tax. Legislature was not incompetent to separate the
processed or split pulses from the unsplit or unprocessed
pulses and treat the two as separate and independent goods.
In Jagannath and Ors. v. Union of India,(1) question arose
for decision whether it was open to the legislature to
impose separate excise duty on tobacco leaf as well as on
broken leaf of tobacco. This Court overruled the contention
that such a levy was invalid. It head that it was open for
the legislature to separate the two items. We see no basis
for the contention that the legislature cannot for the
purpose of tax under the Act separate the split or processed
Pulses from the unsplit or unprocessed. The power of the
legislature to specify the nature of the goods the sale or
purchase of which, it will bring to tax is very wide.
Now coming to point No. 3, there is no justification for the
contention that the legislature has usurped any judicial
power. The legislature has not purported either directly or
by necessary implication to overrule the decisions of the
Allahabad High. Court in Tilok Chand Prasan Kumar’s case
(supra). On the other hand it. has accepted that decision
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as correct; but has sought to remove the basis of that
decision by retrospectively changing the law. This Court
has pointed out in several cases the distinction between the
encroachment on the judicial power and the nullification of
the effect of a judicial decision by changing the law
retrospectively. The former is outside the competence of
the legislature but, the latter is within its permissible
limits. From the statement of objects and reasons, it
appears that in the principal Act, the legislative intent
was not clearly brought out. By means of the Amending Act
the legislature wanted to make clear its intent.
The fourth contention also appears to be without any basis.
It is true that the taxing statutes are not outside the
scope of Art. 14 of the Constitution. But the legislature
has wide powers of classification in the case of taxing
statutes.
In Jagannath’s case (supra), this Court ruled that there was
no unconstitutional discrimination in the imposition of the
excise duty on tobacco in the broken leaf form. Therein it
was observed that tobacco in the, broken leaf form was
capable of being used in the manufacture of bidis while
tobacco in the whole leaf form could not be so used
economically; the two forms of tobacco were different by the
test of capability of user; the tariff is not based either
wholly or even primarily by reference to the
(1) [1962] 2 S.C.R. 118.
511
use of tobacco and there was a clear and unambiguous
distinction between tobacco the whole leaf form covered by
item 5 and tobacco in the broken leaf form covered by item 6
which had a reasonable relation to the object intended by
the imposition of the tariff.
In Khandige Sham Bhat and Ors. v. The Agricultural Income
Tax Officer,(1) this Court laid down the tests to find out
whether there are discriminatory provisions in a taxing
statute. Therein this Court observed that in order to judge
whether a law was discriminatory what had primarily to be
looked into was not its phraseology but its real effect. If
there was equality and uniformity within each group, the law
could :pot be discriminatory, though due to fortuitous
circumstances in a peculiar situation some included in a
class might get some advantage over others, so long as they
were not sought out for special treatment. Although
taxation laws could be no exception to this rule, the courts
would, in view of the inherent complexity of fiscal
adjustment of diverse elements, permit a larger discretion
to the legislature in the matter of classification so long
as there was no transgression of the fundamental principles
underlying the doctrine of classification. The power of the
legislature to classify must necessarily be wide and
flexible so as to enable it to adjust its system of taxation
in all proper and reasonable ways.
It must be noticed that generally speaking the primary
purpose of the levy of all taxes is to raise funds for pub-
lie good. Which person should be taxed, what transaction
should be taxed or what goods should be taxed, depends upon
social, economic and administrative considerations. In a
democratic set up it is for the legislature to decide what
economic or social policy it should pursue or what
administrative consideration it should bear in mind. The
classification between the processed or split pulses and un-
processed or unsplit pulses is a reasonable classification.
It is based on the use to which those goods can, be put.
Hence, in our opinion, the impugned classification is not
violative of. Art. 14.
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A feeble attempt was made to’ show that the retrospective
levy made under the Act is violative of Art. 19 (1) (f) and
(g) But we see no substance in that contention. As seen
earlier, the amendment of the Act was necessitated because
of the legislatures failure to bring out clearly in the
principal Act its intention to separate the processed or
split pulses from the, unsplit or unprocessed pulses.
Further the retrospective amendment became necessary as
otherwise the State would have to refund large sum of money.
The contention that the retrospective levy did not afford
any opportunity to the dealers to pass on the tax payable to
the consumers, has not much validity. The tax is levied on
the dealer;
(1) [1963] 3 S.C.R. 809.
512
the fact that he is allowed to pass on the tax to the
consumers or he is generally in position to pass on the same
to the consumer has no relevance when we consider the
legislative competence.
It was next urged that on a true contribution of Explanation
II to s. 3-D, no charge can be said to have been created on
the purchases of split or processed pulses. It was firstly
contended that an Explanation cannot extend the scope of the
main section; it can only explain that section. In
construing a statutory provision, the first and the foremost
rule of construction is the literary construction. All that
we have to see at the very outset is what does that
provision say ? If the provision is unambiguous and if from
that provision, the legislative intent is clear, we need not
call into aid the other rules of construction of statutes.
The other rules of construction of statutes are called into
aid only when the legislative intention is not clear.
Ordinarily a proviso to a section is intended to take out a
part of the main section for special treatment. It is not
expected to enlarge the scope of the main section-. But
cases have arisen in which this Court has held that despite
the fact that a provision is called proviso, it is really a
separate provision and the socalled proviso has
substantially altered’ the main section. In Commissioner of
Income-tax, Bombay, City. Bombay v. Bipinchandra Maganlal &
Co. Ltd., Bombay,(1) this Court held that by the fiction in
S. 10(2)(vii) second proviso read with S. 2 (6C) of the
Indian Income-tax Act, 1922 what is really not income is,
for the purpose of computation of assessable income, made,
taxable income.
In State of Rajasthan v. Leela Jain 2 this
Court observed
"The primary purpose of the proviso now under
consideration is, it is apparent, to provide a
substitute or an alternative remedy to that
which is prohibited by the main part of S.
4(1). There is, therefore, no question of the
proviso carving out any portion out of the
area covered by the main part and leaving the
other part unaffected. What we have stated
earlier should suffice to establish that the
proviso- now before us is really not a proviso
in the accepted sense but an independent
legislative provision by which to a remedy
which is prohibited by the main part of the
section, an alternative is provided.. It is
further obvious to us that the proviso is not
coextensive with but covers a field wider than
the main part of S. 4 (1 ) ".
In Bihta Co-operative Development Cane
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Marketing Union Ltd. and Anr. v. Bank of Bihar
and Ors. (3) this Court was called upon to
consider the Explanation to s. 48 (1 ) of the
Bihar and’
(1) [1961] 2 S.C.R.493.
(2) [1965] 1 S.C..R., 276
(3) [1967] 1 S.C.R. 848.
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Orissa Co-operative Societies Act 1935.
Therein this Court observed:
"The question then arises whether the first
Explanation to the section widens the scope of
sub-s. (1) of s. 48 so as to include claims by
registered societies against non-members even
if the same are not covered by clause (c)."
On the basis of the language of the Explanation this Court
held that it did not widen the scope of clause (c). But
from what has been said in the case, it is clear that if on
a true reading of an Explanation it appears that it has
widened the scope of the main section, effect must be given
to the legislative intent notwithstanding the fact that the
legislature named that provision as an Explanation. In all
these matters the courts have to find out the true intention
of the legislature.
We are unable to accept the contention that Explanation II
to s. 3-D did not widen. the scope of s. 3-D. Section 3-D s
it originally stood dealt with foodgrains and pulses. It
did not treat the unprocessed or unsplit foodgrains and
pulses as a separate item but because of Explanation 11, we
have now to read the expression "foodgrains" in s. 3-D as
containing two separate items viz. (1) foodgrains
unprocessed or unsplit and (2) foodgrains processed or
split. It is true that Explanation 11 is not very happily
worded but the intention of the legislature is clear and
unambiguous. The newly added Explanation brings to tax with
retrospective effect the split or processed foodgrains as
well.
We next come to the contention that no levy of purchase tax
can be made on split or unprocessed pulses without a fresh
notification under S. 3-D read with Explanation 11 showing
therein separately foodgrains unsplit or unprocessed as well
as foodgrains split or processed. As seen earlier that the
notification issued merely refers to foodgrains. That
notification does not classify foodgrains into two separate
categories-processed or split and unprocessed or unsplit.
Therefore we were told that no tax can be levied on
processed or split foodgrains on the basis of that
notification. This contention cannot be accepted as
correct. The notification in question was issued under S.
3-D, Section 3-D refers to foodgrains; but because of
Explanation 11 to that section, we have now to read the
expression "foodgrains" as containing two different items,
processed or split foodgrains and unprocessed or unsplit
foodgrains. Consequently while reading the expression
"foodgrains" in the notification also, we must adopt the
same approach. This conclusion is also obvious from S. 7.
If the legislature had not retrospectively validated the
assessments made on the first purchases of split or
processed foodgrain. what did s. 7 seek to achieve ? That
section says in plain words that not-
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withstanding any judgment, decree or order of any court or
tribunal to the contrary, every notification issued or
purporting to have been issued under s. 3-D of the principal
Act. before the commencement of the Amending Act shall be
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deemed to have been issued under that section as amended by
the Amending Act and shall be so interpreted and be deemed
to be and always to. have been as valid as if the provisions
of the amending Act were in force at all material times and
accordingly, anything done or any action taken (including
any order made, proceedings taken, jurisdiction exercised,
assessment made, or tax levied, collected or paid,
purporting to have, been done or taken in pursuance of any
such notification) shall be deemed to be, and always to have
been validly and lawfully done or taken.
We asked the learned Counsel appearing for the appellant’s
to let us know the field in which S. 7 can be said to
operate. Their answer was that though the legislature
intended to validate the assessments made on the first
purchases of the split or processed dal, it failed to
achieve that object because of the defective phraseology
employed in Explanation 11 to s. 3-D and S. 7 of the
Amending Act. In other words their submission was that S. 7
has become otios. It was urged on behalf of the appellants
that a taxing provision will have to be strictly
interpreted and in finding out the intention of the
legislature in the matter of imposing tax, we cannot travel
beyond the words of the section.
There is no doubt that a taxing provision has to be strictly
interpreted. If any legislature intends to impose any tax,
that intention must be made clear by the language employed
in the statute; but that does not mean that the provision in
a taxing statute should not be read reasonably. The
contention that we should ignore S. 7 of the Amending Act is
a contention difficult of acceptance. Dealing with a
similar contention Venkatarama Ayyar J. speaking for the
Court in J. K. Jute Mills’ case (supra) observed at p. 435
"The object of the legislation as stated in
the long title and in the preamble to the Act
was to validate the impugned notification in
relation to the amended section. Schedule B
to the Act expressly mentions that notifica-
tion. And if we are now to accede to the,
contention of’ the petitioner, we must hold
that though the legislature set about avowedly
to validate the notification dated March 31,
1956, it failed to achieve that object. A
construction which will lead to such a result
must, if that is possible, be avoided."
We have earlier come to the conclusion that because
Explanation II to S. 3-D the, expression "foodgrains
including pulses" in s. 3-D should be read as including two
different items i.e., (1)
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unsplit or unprocessed foodgrains including pulses and (2)
split or processed foodgrains including pulses.
Consequently the expression "foodgrains" in the notification
will also have to be read in the same manner. This, in our
opinion, is the reasonable way of reading the notification
in the light of s. 3-D, Explanation 11 to that section and
s. 7 of the Act.
The only remaining contention is that the delegation made to
the executive under s. 3-D is an excessive delegation. It
is true that the legislature cannot delegate its legislative
functions to any other body-. But subject to, that
qualification, it is permissible for the legislature to
delegate the power to select the persons on whom the tax is
to be levied or the goods or the transactions on which the
tax is to be lievied. In the Act, under s. 3 the
legislature has sought to impose multi-point tax on all
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sales and purchases. After having done that it has given
power to the executive, a high authority and which is
presumed to command the majority support in the legislature,
to select for special treatment dealings in certain class of
goods. In the very nature of things, it is impossible for
the legislature to enumerate goods, dealings in which sales
tax or purchase, tax should be imposed. It is also
impossible for the legislature to select the goods which
should be subjected to a single point sales or purchase tax.
Before making such selections several aspects such as the
impact of the levy on the society, economic consequences and
the administrative convenience will have to be considered.
These factors may change from time to time. Hence in the
very nature of things, these details have got to be left to
the executive.
In Pt. Banarsi Das Bhanot and Ors. v. The State of Madhya
Pradesh and Ors. (1) the question arose whether it was
permissible for the legislature to empower the executive to
amend the Schedule relating to exemptions. This Court by
majority answered that question in the affirmative. It
further held that it is not unconstitutional for the
legislature to leave it to the executive to determine the
details relating to the working of the taxation laws, such
as the selection of the persons on whom the tax is to be
levied, the rates at which it is to be charged in respect of
different classes of goods and the like.
We have not found any substance in any of the contentions
advanced on behalf of the appellants. Hence these appeals
fail and they are dismissed with costs--hearing fee one set.
G.C.
Appeals dismissed.
(1) [1959] S.CR. 427.
516