Full Judgment Text
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PETITIONER:
RATTAN LAL & CO. & ANR.
Vs.
RESPONDENT:
THE ASSESSING AUTHORITY & ANR.
DATE OF JUDGMENT:
29/10/1968
BENCH:
HIDAYATULLAH, M. (CJ)
BENCH:
HIDAYATULLAH, M. (CJ)
SHAH, J.C.
RAMASWAMI, V.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1970 AIR 1742 1969 SCR (2) 544
CITATOR INFO :
F 1972 SC1458 (32,37,38)
F 1974 SC1111 (7)
RF 1976 SC 769 (3)
D 1979 SC 435 (6)
R 1985 SC1041 (11)
F 1987 SC1922 (7,11,12,18)
RF 1990 SC 820 (17,25)
ACT:
Punjab General Sales Tax Act, 1948 as amended by Punjab Act
7 of 1967 and Haryana Act 14 of 1967, ss. 5, 11A--Fixation
of stage of tax--Amendments if contravene s. 15 Central
Sales Tax Act. 1955--If discriminatory--Constitution of
India, Art. 304.
HEADNOTE:
In Bhawani Cotton Mills v. Stale of Punjab 119671 3
S C R 577 this Court struck down s. 5(1) second proviso
and ss. 5(2)(a)(vi) of the Punjab General Sales Tax Act,
1948 as contravening s. 15 of the Central Sales Tax Act,
1955. because, neither the Punjab Act nor the rules made
thereunder indicated, as required by the Central Act the
stage at which tax was to be levied. After the formation of
the new States of Punjab and Haryana, the Act was amended by
the legislatures of the two States by Act 7 of 1967 and 14
of 1967 respectively. The amen,dments fixed it at the stage
of sale or purchase of respectively, goods by the last
dealer liable to pay tax. In a writ petition before this
Court the petitioners contended that (i) the position had
not altered at all even after the amendments and the
liability to taxation at different stages still remained and
therefore the Act con.tinned to be in conflict with the
Central Sales Tax Act; (ii) the legislatures of the two
States were not competent to amend retrospectively an act
passed by the composite State; (iii) by leaving it free to
the executive to impose the tax within the maximum fixed
there was excessive delegation of legislative functions;
(iv) there was discrimination in the new s. 11AA and the
opportunity given to a dealer to ask for reassessment or to
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submit to the old assessment and (v) the Act discriminated
between imported goods and local goods and therefore
contravened the equality clause and Art. 30. of the
Constitution.
HELD: Dismissing, the petition.
(1) The Act by specifying the stage its the last purchase
or sale a dealer liable It) pay the tax makes the stage
quite clear. The matter now in the hands of the dealer and
he has to find out for himself whether he is liable to pay
the tax or not. A dealer knows what he has done with his
goods or is going to do with them. By providing that he
need not include in his turnover any transaction except when
he is the last dealer, the position is now made clear. [553
F. G]
(2) The competency of the Icgislatures of Punjab and
Haryana to amend an Act passed the composite State cannot be
questioned. After reorganisation the Act applied as an
independent Act to each of the areas and is subject to the
legislative competence of the legislature in that area.
[556 B]
(3) There is no abdication of legislative funtions in
favour of the administrative authoritv as the Central Act
itself gives power to the legislature to choose a rate of
tax at not more than 3% of the taxable turnover. The tax
levied is well within that limit and therefore the
legislature has chosen the maximum and has left it free
to the
545
authorities to impose the tax within that maximum regard
being had to the requirements of revenue and the expenditure
necessary for the State. [555 G]
(4) The opportunity given to a dealer in s. 11AA to ask
for reassessment or to submit to the old assessment does not
result in discrimination. This is open to every dealer and
the intention is to give an opportunity to the dealer
himself leaving it to his own will whether to ask for a
refund or not. [555 E-F]
(5) When a taxing State is not imposing rates of tax on
imported goods different from rates of tax on goods
manufactured or produced. Article 304 has no application.
So long as the rate is the same Art. 304 is satisfied. In
the instant case the tax is at the same rate and therefore
tax can,not be said to be higher in the case of imported
goods. When the rate is applied the resulting tax may be
somewhat higher but that does not contravene the equality
contemplated by Art. 304. [557 B. C]
State of Madras v.N.K. Natraja, Mudaliar, [1969] 1
S.C.R. referred to
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petitions Nos. 133, 165,
169-172, 185, 218, 219, 227, 228, 230,239, 252, 253, 248 and
249 1968.
Petition under Art. 32 of the Constitution of India
for the enforcement of the fundamental rights.
S.V. Gupte, S.K. Mehta and K.L. Mehta, for the
petitioners (in W.P. No. 133 of 1968).
C.D. Garg, S.K. Mehta and K.L. Mehta, for the
petitioners (in W.P. No. 165 of 1968).
Harder Singh, for the petitioners (in W.Ps. Nos. 169 and
170 of 1968).
V.C. Mahajan, S.K. Mehta and K.L. Mehta, for the
petitioners (in W.Ps. Nos. 171,172, 218, 219, 227, 228, 230,
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239, 248, 249, 252 and 253 of 1968).
M.C. Chagla, A.N. Sinha and B.P. Jha, for the
petitioners (in W.P. No. 185 of 1968).
Niren De, Solicitor-General, O.P. Malhotra and R.N.
Sachthey, for the respondents (in W.P. Nos. 133 and 165 of
1968).
A nand Saroop, Advocate-General for the State of Haryana
and R.N. Sachthey, for the respondents (in W.P. Nos. 218,
219, 227 & 228 of 1968).
O.P. Malhotra and R.N. Sachthey, for the respondents (in
W.P. Nos. 169 to 172 of 1968).
R.N. Sachthey,, for the respondents (in W.P. Nos. 185,
230, 239, 248, 249, 252 and 253 of 1968).
B. Datta and P.C. Bharatari, for the interveners (in
W.P. No. 165 of 1968).
546
The Judgment of the Court was delivered by
Hidayatullah, C.J. These are 17 petitions challenging
the validity of the Punjab General Sales Tax (Amendment and
Validation) Act, 1967 (Act No. 7 of 1967) by the Punjab
Legislature and the Punjab Sales Tax (Haryana Amendment and
Validation)Act, 1967. Thirteen of these petitions challenge
the Punjab Amendment Act and four challenge the Haryana
Amendment Act.
The petitioners are firms or companies dealing in cotton
or oil seeds. Their business is to purchase ginned and
unginned cotton for manufacturing yarn and selling the said
cotton also to registered and unregistered dealers both
inside and outside the State. The petitioners of the second
category purchase oil seeds for use in manufacture of edible
oils. The surplus oil-seeds are sold to other dealers,
registered or unregistered, inside and outside the State of
Punjab. Both these commodities are essential commodities to
which the Central Sales Tax Act applies. Certain provisions
of these Amending Acts are challenged on the ground that
they offend s. 15 of the Central Act and are also
unconstitutional being in violation of Articles 14 and 19.
The Punjab General Sales Tax Act was passed in 1948. It
was amended from time to time. The Act as it stood on April
1, 1960, was challenged in Bhawani Cotton Mills Ltd. v.
State of Punjab and anr.(1). On April 10, 1967 this Court
by majority struck down certain portions of the Act on the
ground that they were in conflict with the provision of s.
15 of the Central Act. On November 1, 1966 .the former
State of Punjab bifurcated and the States of Punjab and
Haryana came into existence. On December 29, 1967, the
Punjab Legislature enacted Act 7 of 1967 amending the
original Act, and the following day the President’s Act
intituled the Punjab General Sales Tax (Haryana Amendment
and Validation) Act, 1967 (Act No. 14 of 1967) was passed
for Haryana. Both the Acts were preceded by Ordinances which
they replaced. It is not necessary to refer to the
Ordinances.
Section 15 of the Central Sales Tax Act, 1956 (54 of
1956) provided as follows:
"15. Restrictions and conditions in regard
to tax on sale or purchase of declared goods
within a State. Every sales-tax law of a
State shall, in so far as it imposes or
authorises the imposition of a tax on the sale
or purchase of declared goods, be subject to
the following restrictions and conditions,
namely :--
(1) [1967] 3 S.C.R. 577.
547
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(a) the tax payable under that law in
respect of any sale or purchase of such goods
inside the State shall not exceed three per
cent of the sale or purchase price thereof,
and such tax shall not be leviable at more
than one stage;
(b) where a tax has been levied =under
that law in respect of the sale or purchase
inside the State of any declared goods and
such goods are sold in the course of inter-
State trade or commerce, the tax so levied
shall be refunded to such person in such
manner and subject to such conditions as may
be provided in any law in force in that
State."
The section provides that in respect of declared goods the
tax (sales or purchase) shall not exceed the prescribed
limit and shall not be levied at more than one stage and
shall be refunded to persons from whom it is collected if
the goods are sold in the course of inter-state trade or
commerce. The original Punjab General Sales Tax Act, 1948
was challenged before this Court in Bhawani Cotton Mills
Ltd.’s case(1). The Act in defining the tax-able turnover
in s. 5 (2) allowed certain deductions and one such
deduction in cl. (vi) was:
" ........ turnover during that
period on the purchase of goods which are sold
not later than six months after the close of
the year, to a registered dealer, or in the
course of inter-State trade or commerce, or in
the course of export out of the territory of
India:
Provided that in the case of such a
sale to a registered dealer, a declaration, in
the prescribed form and duly filled and signed
by the registered dealer to whom the goods are
sold, is furnished by the dealer claiming
deduction."
The original section, as it stood on April 1, 1960, read
as follows:
"5. Rate of tax.
(1) Subject to the provisions of this
Act, there shall be levied on the taxable
turnover every year of a dealer a tax at such
rates not exceeding four naye paise in a rupee
as the State Government may by notification
direct:
Provided .. ... .. .. .. ..
... ... .. .. .. .. ..
(1) [1967] 3 S.C.R. 577.
548
Provided ,further that the rate of tax shall
not exceed two naye paise in a rupee in
respect of any declared goods as defined in
clause (c) of section 2 of the Central Sales
Tax Act, 1956, and such tax shall not be
levied on the purchase or sale of such goods
at more than one stage:
Provided .........
(2) In this Act the expression "taxable
turnover" means that part of a dealer’s gross
turnover during any period which remains after
deducting therefrom--
(a) his turnover during that period on--
(i) ......................
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(ii) sales to a registered dealer of goods
declared by him in a prescribed form ........
(vi) the purchase of goods which are sold not
later than six months after the close of the
year, to a registered dealer, or in the course
of inter-State trade or commerce, or in the
course of export out of the territory of
India:
Provided that in the case of such a sale to a
registered dealer a declaration in the
prescribed form and duly filled and signed by
the registered dealer to whom the goods are
sold, is furnished by the dealer claiming
deduction.
It was contended in that case that s. 2(ff), 5 (1) second
proviso and 5(2)(a)(vi) were in conflict with section 15 of
the Central Act. Bhawani Mills were dealers registered
under the Punjab General Sales Tax Act, 1948 and for the
assessment years 1960-61 1961-62 and 1962-63 the Mills
denied their liability to the Central Sales Tax on the
purchase of cotton in the accounting year.
The scheme of the Act then in force put the tax on
purchase of cotton (which was a declared commodity) ’at the
rate of 2 naye paise in a rupee. By the second proviso to
s. 5 (1) it was further provided that such tax shall not be
levied on the purchase or sale of such goods at more than
one stage. The word ’dealer’ at that time was defined as
follows:
549
Dealer means any person including a
Department of Government who in the normal
course of trade sells or purchases any goods
that are actually delivered for the purpose of
consumption in the State of Punjab.
irrespective of the fact that the main place
of business of such person is outside the said
State and where the main place of business of’
any such person is not in the said State,
’dealer’ includes the local manager or agent
of such person in Punjab in respect of such
business."
The provisions for taxing purchases of cotton were
challenged on the ground that there was a possibility of the
tax being levied at more than one stage, the provisions of
the second proviso notwithstanding. The argument was
summarized by our brother Vaidialingam thus:
"In this case, according to the appellant, it has to
send quarterly returns, even during the accounting year and,
as per s. 10(4) of the Act, it has to pay also tax. in
accordance with the returns submitted by it for every
quarter. In the returns that are being sent, the dealer
will have to include all purchases of cotton, effected by
him during the quarter for which the return is sent. There
is no indication, either in the Act. or in the rules or ,the
forms prescribed, as to whether the persons from whom the
appellant purchased cotton, have paid tax or not. Section
15 of the Central Act is not restricted only to registered
dealers. There will also be nothing to guide the appellant
to know as to whether the goods, purchased by it, have ’been
sold to it by its vendor within the period mentioned in cl.
(vi) of s. 5(2)(a) of the Act. Under those circumstances,
there is always a possibility, or even a certainty, of more
persons than one having paid tax or being made liable to pay
tax in respect of the same goods at different stages. That
is quite opposed to the provisions of s. 15 (a) of the
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Central Act. Even otherwise, it is pointed out that if a
person has purchased cotton and sells it after the period
provided for in s. 5 (2)(a) (vi), that party is liable to
pay sales tax and would have also paid the same. Another
purchaser from the said party will also be liable to pay
tax. on the same commodity, if he sells the goods, after
’the period mentioned in cl. (vi). That is, two persons are
made liable for payment of tax in respect of the same
commodity. In other words the purchases of the same item of
declared goods, by the persons indicated above, are made
liable for tax, whereas under the Central Act. there can be
only one levy and collection of tax at one stage, either on
sale or on purchase."
550
Learned counsel in that case showed by way of contrast
how the Madras, Mysore, Andhra Pradesh and U.P. had avoided
such a consequence. In answer, it was pointed out by the
State that since the tax was levied, whether on sale or
purchase, at the very first transaction, the stage was
fixed and that the dealer could always claim exemption
under s. 5(2)(a)(vi) or a refund under s. 12 of the Act.
This Court in its majority judgment did not consider that
the second proviso to s. 5 (1) by its mere declaration
prevented the levy of tax at more than one stage. The
difficulty however, remained that the Act itself did not
indicate the stage at which the tax was to be levied and
because under s. 15(1) of the Central Act there could be no
liability for payment of tax unless this stage was so stated
in the Act or the rules thereunder. It was pointed out that
a dealer would have to show in his return all purchases of
cotton and pay the tax with his return. There was nothing
which would have enabled the dealer to know whether the tax
had already been paid by another dealer and to exclude from
his return those transactions. The dealer could not take a
chance as heavy penalties were provided. This was
particularly so where the goods passed through an
unregistered dealer’s hands at an intermediate stage. In
dealing with the latter part of the reasons this Court gave
an example which may be quoted here:
" .... if a dealer, ’A’ sells the declared foods to
’B’, six months after the close of the year (B being a
registered dealer), A becomes liable to purchase tax. But,
if B sells the identical declared goods, again, after the
period mentioned in sub-el.-(vi), he will also be liable to
pay purchase tax. That means, in respect of. the same item
of declared goods, more than one person is made liable to
pay tax and the tax is also levied at more than one stage.
That is not permissible under s. 15(a) of the Central Act.
If goods are resold to a nonregistered dealer, within the
period, sub-el. (vi), will not help the original purchaser.
We may also point out, at this stage, that sub-cl. (vi) of
s. 5(2)(a), negatives the assumption that the normal rule,
under the Act, in respect of declared goods, is to levy the
tax on the first purchaser."
This Court then referred to s. 12 where there is a provision
for refund which taken with rules 48-58 allowed for refund
to be claimed, and found the provisions insufficient to get
over the difficulty. This Court observed:
"Even in the matter of obtaining
refunds, there can be no controversy, that the
appellant will have to place, before the
officer concerned, particulars of transactions
connected with the commodity, in question and
also the
551
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basis on which it claims the relief. It will be absolutely
difficult, if not impossible, for persons like the
appellant, to collect materials in this behalf, because,
there is no provision, contained either in the Act or the
rules, on the basis of which it will be entitled to be
supplied with all the material information, relevant, for
sustaining a request for refund. If the Central Act makes
it mandatory that the tax can be collected only at one
stage, in our opinion, it is not enough for the State to say
that a person, who is not liable to pay tax, must
nevertheless, pay it in the first instance, and then claim
refund, at a later stage. We may state that the question as
to how far a party can ask for refund, without the order of
assessment being set aside, by appropriate proceedings, is
highly doubtful; because at the time when the actual order
of assessment is passed, in certain eases, it may not be
possible for a party to say whether he is entitled to
exemption, or not, under sub-cl. (vi) of s. 5(2) of the Act.
If a person is not liable for payment of tax at all, at any
time, the collection of a tax from him, with a possible
contingency, of refund at a later stage, will not make the
original levy valid; because, if particular sales or
purchase are exempt from taxation altogether, they can never
be taken into account, at any stage, for the purpose of
calculating or arriving at the taxable turnover and for
levying tax."
Relying upon the observations in .4. V. Fernandez v. State
of Kerala (1) this Court concluded:
" ...... the provisions contained in a statute
with .respect to exemptions of tax or refund or rebate, on
the one hand, must be distinguished from the total
nonliability or non-imposition of tax, on the other. These
observations, also, in our opinion, effectively provide an
answer to the stand taken by the State, in this ease that s.
12 of the Act provides an adequate relief, by way of refund,
even if tax is collected at an earlier stage."
The Amending Acts which are now challenged set about
removing these difficulties. These amendments are again
challenged on the same lines. It is convenient to take the
two Amending Acts separately. First we shall take up for
consideration the Punjab amendments. Here, we are
concerned only with a few of the amendments made by the
Amending Act 7 of 1967. Section 5 was amended
retrospectively from different dates. In subsection (1), in
the second proviso, the words "as defined in el.
[1957] S.C.R, 837.
552
of s. 2 of the Central Sales Tax Act, 1956, and such tax
shall not be levied on the purchase of sale of such goods at
more than one stage" are now omitted. After the second
proviso another proviso is introduced: In sub-s. 1 A, the
words "in respect of such goods other than declared goods"
are substituted retrospectively from 16th December, 1965 for
the words "in respect of such goods.’ After sub-s. (2) a
new sub-section (3) from October 1,1958. We may now set
out the 5th sub-section as it emerges from the amendment
before we deal with the objections:
"Section 5--Rate of tax (1) Subject to the
provisions of this Act, there shall be levied
on the taxable turnover of a dealer a tax at
such rates not exceeding six naye paise in a
rupee as the State Government may by
notification direct."
(2) In this Act the expression ’taxable
turnover means that part of a dealer’s gross
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turnover during any period which remains after
deducting therefrom
(a) his turnover during that period on--
(i) . . . .
. . . .
(vi) the purchase of’ goods which are sold not
later than six months after the close of the
year, to a registered dealer, or in the course
of inter-State trade or commerce, or in the
course of export out of the territory of
India;
Provided that in the case of such sale to a registered
dealer, a declaration, in the prescribed front and duly
filled and signed by the registered dealer to whom the goods
are sold, is furnished by the dealer claiming deduction.
(3) Notwithstanding anything contained in this
Act-
(a) in respect of declared goods tax shall be
levied at one stage and that stage shall be --
(i) in the case of goods liable to sales tax,
the stage of sale of such goods by the last
dealer liable to pay tax under this Act;
(ii) in the case of goods liable to purchase
tax, the stage of purchase of such goods by
the last dealer liable to pay tax under this
Act;
(b) the taxable turnover of any dealer for any
period shall not include his turnover during
that period
553
on any sale or purchase of declared goods at stage other
than the stage referred to in subclause (i). or as the case
may be, sub-clause (ii) of clause (a)."
In addition, a new section, s. 11 AA was added to the
following effect:
"11 AA. Review of certain assessments, etc. of tax on
declared goods :--
(1) Notwithstanding anything contained in
this Act. the Assessing Authority shall
(whether or not an application is made to him
in this behalf), review all assessments and
reassessments made before the commencement of
the Punjab GeneraI Sales Tax Amendment and
Validation Act, 1967, in respect of declared
goods and make such order varying or revising
the order previously made as may be necessary
for bringing the order previously made into
conformity with the provisions of this Act as
amended by the Punjab General Sales Tax
(Amendment and Validation) Act.1967:
Provided that no proceeding for review shall be
initiated without giving the dealer concerned a notice in
writing of not less than thirty days.
(2) Any dealer on whom a notice is served under sub-section
(1) may within thirty days from the date of receipt of such
notice intimate in writing the assessing authority of his
intention to abide by the assessment or reassessment sought
to be reviewed and if he does so. the assessing authority
shall not review such assessment or reassessment under this
section.
(3) No order shall be made under this section against
any dealer without giving such dealer a reasonable
opportunity of being heard.
(4) Notwithstanding anything contained in any judgment,
decree or order of any court or other authority to the
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contrary but subject to the provisions of the foregoing sub-
sections any assessment. reassessment. levy or collection of
any tax in respect of declared goods made or purporting to
have been made, and any’ action or thing taken or done or
purporting to have done in relation to such assessment.
are-assessment. levy or collection under the provision of
this Act before the commencement of the Punjab General
554
Sales Tax (Amendment and Validation) Act,
1967, shall be as valid and effective as if
such assessment, reassessment, levy or
collection or action or thing had been made,
taken or done under this Act as amended by
the Punjab General Sales Tax (Amendment and
Validation)Act, 1967."
The argument is that the position has not altered at all
even after the amendments and the liability to taxation at
different stages remains still and the Act continues to be
in conflict with the Central Act on the same reasons on
which Bhawani Mills case(1) proceeded. It is argued that
the amendments have been made retrospective but no machinery
is provided to enable the dealer to discover that the goods
had been taxed before and the single stage at which the tax
is to be levied is still not clearly discernible. This is
the main argument but there are many supplementary
arguments which we shall notice later. For the present we
confine our attention to the main point.
The stage of tax is now stated in s. 5(3)(i) and (ii).
In the case of sales-tax, the stage of tax is the sale of
such goods by the last dealer liable to pay the tax and in
the case of purchase tax the stage is purchase by the last
dealer liable to pay the tax. It is also provided that the
turnover of any dealer for any period shall not include his
turnover during that period of any sale or purchase of
declared goods at any other stage than the stage so
mentioned.
It will be seen that the matter is now in the hands of
the dealer. He has to find out for himself whether he is
liable to pay the tax or not. A dealer knows what he has
done with his goods or is going to do with them. If he
knows that he is not the last dealer having parted with the
goods to another dealer or he knows that he is going to use
the goods or sell them to consumers, he knows when’ he is
not liable to tax and when he is. Therefore, he will not
include the transaction in his taxable turnover in the first
case but include it in the second. Goods in the hands of a
dealer are not taxed. They are only taxed on the last
purchase or sales. This information is always possessed by
a dealer and by providing that he need not include in his
turnover any transaction except when he is the last dealer,
the position is now clear.
It is contended that even so the dealer may not know
that he is the last dealer and may make some mistake. The
law does not take .into account the actions of persons who
are negligent or mistaken but only of persons who act
correctly, according to law. If the dealer is clear ’about
his own position he is now quite able see whether he is the
last purchaser liable to pay the tax or the last seller
liable to pay the tax. The Act by Specifying the stage
[1967] 3 S.C.R. 577.
555
as the last purchase or sale by a dealer liable to pay the
tax makes the stage quite clear and by giving an option to
him not to include such transactions in his return saves him
from the liability to pay the tax till he is the dealer
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liable to pay the tax. In our opinion, therefore, the
present provisions of the Act are quite clear and are quite
sufficient to make the amended Act accord with the Central
Act. The arguments noted in the earlier case of this Court
do not therefore arise.
It will thus be seen that the present Act does not
suffer from any of the defects from which the unamended Act
had suffered. It is, however, contended that the Act has
been made retrospective but no machinery is provided to
discover if the declared goods were assessed to tax more
than once. As we have already pointed out, the matter is
within the ken of the dealer himself and it is ,for him to
decide whether he would not claim the benefit of s. 11AA
and ask for a refund or in future transactions delete the
sales from his taxable turnover when he is not the last
dealer liable to pay the tax. Therefore the retrospectivity
of the Act does not make any difference. It is not
contended before us that it was not within the competence of
the Punjab Legislature to pass such an Act retrospectively.
The defect pointed out is the self same defect which was
noticed in Bhawani Mills case(1). But that defect no longer
exists.
It is argued further that there is a discrimination
between the two kinds of manufacturers. In the definition
of ’dealer’ in s. (2)(d) and in the proviso to s. 1 IAA it
is submitted discrimination arises because of the
opportunity given to a dealer to ask for reassessment or to
submit to the old assessment. This is open to every
dealer and the intention is to give ,an opportunity to the
dealer himself leaving it to his own will whether to ask for
a refund or not. This hardly can be said to create a
discrimination.
Lastly it is contended that there is a delegated
legislation in that the maximum has been provided without
indication of the circumstances under which the tax is to be
levied. This, it is said, creates unguided delegation to
administrative authority, the function of the legislature.
It is to be noticed that the Central Act itself gives power
to the legislature to choose a rate of tax at not more than
3 per cent of the taxable turnover. The tax levied is well
within that limit and therefore the legislature has chosen
the maximum and has left it free to the authorities to
impose the tax within that maximum regard being had to the
requirements of revenue and the expenditure necessary for
the State.
We may now deal with some arguments which are common both
sets of cases before considering the case of the Haryana
amendment. It is ,argued that the organisation of the State
(1) [1967] 3 S.C.R. 577.
556
took place on November 1, 1966 and the amendment in some of
its parts seeks to amend the original Act from a date
anterior to this date. In other words, the legislature of
one of the States seeks to amend a law passed by the
composite State. This argument entirely misunderstands the
position of the original Act after the reorganisation. That
Act applied now as an independent Act to each of the areas
and is subject to the legislative competence of the
legislature in that area. The Act has been amended in the
new States in relation to the area of that State and it is
inconceivable that this could not be within the competence.
If the argument were accepted then the Act would remain
unamendable unless the composite State came into existence
once more. The scheme of the States Reorganization Acts
makes the laws applicable to the new areas until superseded,
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amended or altered by the appropriate legislature in the new
States. This is what the legislature has done and there is
nothing that can be said against such amendment.
In regard to Haryana cases also the same arguments
are urged. It is contended that the amended Act there also
offends s. 15 for the reasons which we have given. Neither
the amendment of s. 55 in this area nor the introduction of
s. 11AA for refund offends against s. 15 of the Central Act
or the equality clause of the Constitution. It is said that
pending cases will always be reconsidered whether or not an
application in that behalf is made but in the case of
disposed of cases it depends upon the party to intimate in
writing that he has no objection to the assessment or
reassessment already made. If any objection can be taken it
will ’be by those whose cases are pending and not by those
whose cases have been closed. The option to submit to the
assessment is open to every one alike and there is no
discrimination if a party wants that his case need not be
reconsidered. He has only to state that in writing and that
would be the end of the matter. If he wants his case to be
reconsidered then he can go before the Tribunal and get his
case reconsidered.
It is also urged in this connection that there is a
discrimination between the imported goods and local goods. .
It is said that the discrimination is also between the first
purchase in the case of imported goods and last sale in the
case of local goods. Since the imported goods might be more
expensive by reason of freight etc. or intermediary sales
having taken place, it is said. that the burden of tax will
be heavier and therefore this will offend against the
equality clause and Art. 304 of the Constitution. In our
opinion this argument is without any substance. The rate of
tax
same in every case. In State of Madras v.N.K. Nataraja
Mudaliar(1). this Court stated that the essence of Arts. 301
and 303 is to enable the State by a law "to impose on goods
imported
(1) [1969] S.C.R.
557
from other States or the Union territories any tax to which
similar goods manufactured or produced in the State are
subject, so, however as not to discriminate between goods so
imported and goods so manufactured or produced." It was
pointed out by this Court that "imposition of differential
rates of tax by the same State on goods manufactured or
produced in the State and similar goods imported in the
State is prohibited by that clause. But where the taxing
State is not imposing rates of tax on imported goods
different from rates of tax on goods manufactured or
produced,Art. 304 has no application".
Here also the tax is at the same rate and therefore the tax
cannot be said to be higher in the case of imported goods.
It may be that when the rate is applied the resulting tax is
somewhat higher but that does not offend against the
equality contemplated by Art. 304. That is the consequence
of ad valorem tax being levied at a particular rate. So
long as the rate is the same Art.304 is satisfied. Even in
the case of local manufactures if their cost of production
varies, the net tax collected will be more or less in some
cases but that does not create any inequality because
inequality is not the result of the tax but results from the
cost of production of the goods or the ’cost of their
importation. This ground, therefore, has also no substance.
We do not think it necessary to set down here the provisions
of the Haryana Amendment Act because they follow the scheme
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of the Punjab Amendment Act in substance and what we have
said in regard to the Punjab Amending Act applies mutatis
mutandis to Haryana Amendment Act also.
In the result these petitions have no substance. They are
dismissed with costs. One set of hearing fee.
Y.P. Petitions dismissed.
4Sup. C.I./69-3
558