Full Judgment Text
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PETITIONER:
EPARI CHINNA KRISHNA MOORTHY, PROPRIETOR, EPARI CHINNA
Vs.
RESPONDENT:
STATE OF ORISSA(With Connected Petition)
DATE OF JUDGMENT:
12/03/1964
BENCH:
GAJENDRAGADKAR, P.B. (CJ)
BENCH:
GAJENDRAGADKAR, P.B. (CJ)
WANCHOO, K.N.
SHAH, J.C.
AYYANGAR, N. RAJAGOPALA
SIKRI, S.M.
CITATION:
1964 AIR 1581 1964 SCR (7) 185
CITATOR INFO :
RF 1972 SC2455 (11)
R 1976 SC 182 (25)
MV 1985 SC 421 (73)
ACT:
Fundamental Rights-Notiftcation by Government exempting
certain articles from sales tax-Petitioner claiming exemp-
tion under the notification-Validation Act coming into force
Retrospective operation-Validity-Enactment, if unconstitu-
tional--Orissa Sales Tax Act, 1947, (14 of 1947), s. 6-Sales
Tax Validation Act, 1961 (7 of 1961) s. 2-Constitution of
India, Arts. 14,19(1)(g).
HEADNOTE:
The petitioner, a merchant, carrying on business in "bullion
and specie" and gold and silver ornaments was a registered
’dealer’ under the Orissa Sales Tax Act, 1947. The
Government purporting to exercise its authority under s. 6
of the said Act issued a notification on July 1, 1949
exempting certain articles from the operation of the
charging section of that Act. Under the notification gold
ornaments were ordered to be exempted from sales tax when
the manufacturer selling them charges separately for the
value of gold and the cost of manufacture. The petitioner
filed his returns before the Sales-tax Officer and claimed
exemption of sales-tax under the said notification. Up to
June 1952, the claim for exemption was upheld.
Subsequently, however, these assessments were reopened under
s. 12(7) of the Act and it was claimed that the deductions
made on certain sale transactions of gold ornaments were not
justified and the petitioner had escaped assessment. The
petitioner pleaded that lie
was entitled to exemption, because he belonged to the class
of manufacturers to which the notification referred. The
Sales-tax Officer disallowed the petitioner’s contention.
The petitioner then challenged the said decision by
preferring appeals, but the said appeals were also
dismissed.
Pending these appeals, similar assessments made in respect
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of other dealers including the petitioner were challenged by
writ petitions before the High Court. The High Court upheld
the petitioner’s case and issued writs directing the Sales-
tax Officer to allow the petitioners’ claim for exemption.
After this judgement was pronounced, the impugned Act was
passed by the legislature on August 1, 1961 and was
published on September 18, 1961, containing one operative
provision in s. 2. It provided that notwithstanding anything
contained in any judgement, decree or order of any court,
the word ’manufacturer’ occuring against item 33 in the
schedule to the notification of the Government dated July
28, 1947 as amended by another notification of the 1st July,
1949 shall mean and shall always be deemed to have meant a
person who by his own labour works up materials into
suitable forms and a person who owns or runs a manufactory
for the purpose of business with respect to the articles
manufactured therein. The validity of this section was
challenged in the present writ petition.
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It was urged (i) that since the exemption was granted by the
State Government by virtue of the Powers conferred on it by
s. 6, it was not open to the legislature to take away that
exemption retrospectively; (ii) that the provision in s. 2
of the impugned Act was discriminatory and as such
contravened the equality before the law guaranteed by Art.
14 and (iii) that the retrospective operation of the
impugned section should be struck down as unconstitutional,
because it imposes an unreasonable restriction on the
petitioner’s fundamental right under Art. 19 (1) (g)
Held: (i) What the legislature had purported to do by s.
2 of the impugned Act, was to make the intention of the
notification clear. And, if the State Government was given
the power either to grant or withdraw the exemption, that
could not possibly affect the legislature’s competence to
make any provision in that behalf either prospectively or
retrospectively.
(ii) The notification as interpreted by s. 2 of the impugned
Act benefits the artisans who produce ornaments themselves
and who run manufactories. That is why the main object of
granting exemption can be said to be achieved by holding
that ,manufacturer’ means either a manufacturer properly so
called or one who engages artisans to manufacture gold
ornaments. In the present case the petitioners were not
directly concerned with the production of ornaments, and
admittedly, they did not produce the said ornaments
themselves. Therefore, the persons who get the benefit of
the exemption notification as a result of the provisions of
s. 2 of the impugned Act cannot be said to belong to the
same class as that of the petitioners. The two categories
are distinct and there is no sameness or similarity between
them, and if that is so, the main argument on the basis of
Art. 14 does not subsist.
(ii) It would be difficult to accept the argument that
because the retrospective operation may operate harshly in
some cases, therefore, the legislation itself is invalid.
In the circumstances of the present case it would not be
possible to hold that by making the provision of s. 2 of the
impugned Act retrospective the legislature has imposed a
restriction on the petitioner’s fundamental rights under
Art. 19(1) (g) which is not reasonable and is not in the
interest of the general public.
JUDGMENT:
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ORIGINAL JURISDICTION: Writ Petition Nos. 125--135, and 233
of 1963.
Petition under Art. 32 of the Constitution of India for
enforcement of Fundamental Rights.
A. V. Vishwanatha Sastri, T. A. Ramachandran, B. Par-
thasarathy, 0. C. Mathur, J. B. Dadachanji and Ravinder
Narain, for the petitioner (in W. P. Nos. 125-135 1963).
H. N. Sanyal, Solicitor-General, N. S. Bindra and R. N.
Sachthey, for the respondents (in W. P. Nos. 125-135 / 63).
O. C. Mathur, J. B. Dadachanji and Ravinder Narain for the
petitioner (in W. P. No. 233 / 1963).
R. N. Sachthey, for the respondents (in W.P. No. 233/ 63).
187
March 12, 1964. The Judgment of the Court was delivered
by--
GAJENDRAGADKAR, C. J.-This group of 12 writ petitions raises
a common question about the validity of the( Orissa Sales
Tax Validation Act, 1961 (Act No. 7 of 1961) (hereinafter
referred to as the Act). The facts on which the petitioners
rely are similar, and so, we shall mention the facts in the
first group consisting of writ petitions Nos. 125-135 of
1963. The petitioner in this group is Shri Epari Chinna
Krishna Moorthy, Proprietor, Epari Chinna Krishna Moorthy &
Sons, Berhampur, Orissa. He is a merchant who carries on
business in "bullion and specie" and gold and silver
ornaments at Berhampur and as such merchant, he has been
registered as ’dealer’ under the Orissa Sales Tax Act, 1947
(Act No. 14 of 1947). After the said Act came into force,
the Government of Orissa purporting to exercise its
authority under s. 6 of the said Sales Tax Act issued a
notification exempting certain articles from the operation
of the charging section of that Act. Under this
notification, gold ornaments were ordered to be exempted
from sales-tax ’when the manufacturer selling them charges
separately for the value of gold and the cost of
manufacture.’ This notification was issued on July 1, 1949
Durinh the course of his business, the petitioner
manufactures gold ornaments by supplying the gold to the
artisans and getting ornaments prepared by them under his
supervision and when the ornaments are so prepared, he sells
them in his shop and has been showing the value of gold and
the cost of manufacture separately. That is why the
petitioner alleges that he is entitled to claim the benefit
of the exemption notification.
Consistently with this plea, the petitioner filed his
returns before the Sales-tax Officer at Berhampur and had
been claiming exemption of Sales-tax on the sales as being
entitled to exemption under the said notification. Upto
June, 1952, the claim for exemption made by him was upheld
and the amount represented by sales of the said gold
ornaments was deducted from the taxable turnover shown by
the petitioner in his returns. Subsequently, however, these
assessments were re-opened under s. 12(7) of the Act and it
was claimed that the deductions made on certain sales
transactions of gold ornaments were not justified and to
that extent, the petitioner had escaped assessment. The
petitioner resisted this attempt to re-open the assessment
and he pleaded that he was entitled to claim exemption under
the notification, because he belonged to the class of
manufacturers to which the notification referred.
The Sales-tax Officer, however, disallowed the petitioner’s
contention and proceeded to levy tax on the sales transac-
tions in question. The petitioner then challenged the said
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decision by preferring appeals, but the said appeals were
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also dismissed. While the appeals were pending similar
assessments made in respect of other dealers including the
petitioner were challenged by them by writ petitions before
the High Court of Orissa. (Nos. 151, 161, 162, 204--209 and
110 of 1957 respectively).
The Division Bench of the Orissa High Court which heard the
writ petitions upheld the petitioner’s case and issued
appropriate writs directing the Sales-tax Officer to allow
the petitioner’s claim for exemption ’under the notification
in question. The main controversy before the High Court was
about the precise denotation of the word ’manufacturer’ used
in the notification. The High Court hold that the
expression manufacturer’ meant the first owner of the
finished products for whom it was mad(. either by his paid
employee or even by independent artisans on receipt of raw
materials and labour charges from him. According to this
view, the petitioners before the High Court were found to be
manufacturers and as such entitled to claim exemption in
respect of sale of -old ornaments made by them. This
judgement was pronounced on March 13, 1959. Against this
judgement the State of Orissa has filed appeals to this
Court and they are numbered as Civil Appeals Nos. 92 to 94
of 1963. These appeals are till pending disposal.
After the Orissa High Court pronounced its judgement in the
writ petitions to which reference has been made, the
impugned Act was passed by the Orissa Legislature on August
1, 1961. This Act received the assent of the Governor on
September 10, 1961, and was published on September 18, 1961.
It contains one operative provision in s. 2. Section 2
provides that notwithstanding anything contained in any
judgment, decree or order of any court, the word ’manufactu-
rer’ occurring against item 33 in the schedule to the
notification of the Government of Orissa dated July 28, 1947
as amended by another notification of the 1st July, 1949
shall mean and shall always be deemed to have meant a,
person who by his own labour works up materials into
suitable forms and a person who owns or runs a manufactory
for the purpose of business with respect to the articles
manufactured therein. It is the validity of this section
which is challenged before us by the petitioners in the
present writ petitions.
It is clear that the object of s. 2 of the impugned Act is
to make it clear that the legislature’s intention was not,
as the High Court had held, to, include within the
notification all persons who are first owners of the
finished product of gold. Section 2 shows that the
legislative intention was to give benefit of the said
exemption only to persons who themselves work and produce
gold ornaments or who run or own a manufactory for the
purpose of business with respect to the articles
manufactured therein. In other words, the intention of the
Government in issuing the notification was not to give the
benefit of the exemption to traders or shop-keepers who were
no more than commission agents and who did not personally,
work for making gold ornaments or who did not own a manu-
factory employing artisans for that purpose. If this
section is valid, it is common ground that the petitioners
are not entitled ,to claim the exemption. On the other
hand, if this section is invalid, the petitioners would be
the first owners of gold ornaments and may be entitled to
claim exemption.
The first argument which has been urged before us by Mr.
Sastri is that since the exemption was granted by the State
Government by virtue of the powers conferred on it by s. 6,
it was not open to the legislature to take away that exemp-
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tion retrospectively. Section 4 of the parent Sales-tax Act
is the charging section and s. 6 is the section which
confers on the State Government power to issue a
notification exempting from the tax the sale of any goods or
class of goods and likewise withdraw any such exemption
subject to such conditions and exceptions as it may deem
fit. The argument is, the power to grant exemption having
been conferred on the State Government, it was validly
exercised by the State Government and though the legislature
may withdraw such exemption, it cannot do so
retrospectively. It is obvious that if the State
,Government which is the delegate of the legislature can
withdraw the exemption granted by it, the legislature cannot
be denied such right. But it is urged that once exemption
was validly granted, the legislature cannot withdraw it
retrospectively, because that would be invalidating the
notification itself. We are not impressed by this argument.
What the legislature has purported to do by s. 2 of the
impugned Act is to make the intention of the notification
clear. Section 2 in substance declares that the intention
of the delegate in issuing the notification granting
exemption was to confine the benefit of the said exemption
only to persons who, actually produce -old ornaments or
employ artisans for that purpose. We do not see how any
question of legislative incompetence can come in the present
discussion. And, if the State Government was given the
power either to grant or withdraw the exemption that cannot
possibly affect the legislature’s competency to make any
provision in that behalf either prospectively or
retrospectively. Therefore, there is no substance in the
argument that the retrospective operation of s. 2 of the
impugned Act ’is invalid.
Then Mr. Sastri contends that this provision is discrimina
tory and as such, contravenes the equality before the law,
guaranteed by Art. 14. This argument is also misconceived,
is not seriously disputed that the petitioners belong to the
190
class of traders or shopkeepers who are like commission
agents. They give gold to the artisans, paying the artisans
their labour charges and when the ornaments are thus
produced, they charge commission before they are sold to the
customers. In such a case, it is not easy to understand how
this class of traders can be said belong to same class of
persons who produce gold ornaments themselves or run
manufactories where artisans are engaged for producing them.
The counter-affidavit filed on behalf of the respondent-
State has also averred that the petitioners sometimes sell
goods manufactured by firms outside the State of Orissa and
in no case had they manufactured ornaments themselves.
Whether the gold which they give to the artisans is their
own or is supplied to them by customers is not a matter of
any significance, because what is important in this
connection is that they are not directly concerned with the
production of ornaments, and admittedly, they do not produce
the said ornaments themselves. Therefore, the persons who
get the benefit of the exemption notification as a result of
the provisions of s. 2 of the impugned Act cannot be said to
belong to the same class as that of the petitioners, and if
that is so, the main argument on the basis of Art. 14 does
not subsist.
Besides, one of the objects of the impugned Act appears to
be to make it clear that the legislature intends to benefit
the goldsmiths who actually make gold ornaments and that
object can be carried out only if exemption is granted to
persons who keep in their continuous employment artisans who
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produce gold ornaments. If a person produces gold ornaments
himself and if a person employs artisans to produce gold
ornaments for him, they fall within the protection of the
exemption. In the case of the petitioners, however, they do
not keep any artisans in their continuous employment, and
so, if the legislature thought it was not necessary to give
them the benefit of the exemption, it cannot be said that
the classification made by the legislature has no rational
connection with the object intended to be achieved by it.
This argument assume,,, that the petitioners belong to the
same class as the persons to whom the benefit of the
exemption is available. But as we have already stated,
these two categories are distinct and there is no sameness
or similarity between them.
It was also suggested by Mr. Sastri that the result of the
impugned provision is to deny the benefit of the exemption
to the poorer classes of persons who are engaged in the
business of manufacturing gold ornaments, and in that con-
nection, he has commented on the fact that the notification
gives the benefit of the exemption to persons who run manu-
factories but it denies that benefit to persons who carry on
the work of producing gold ornaments on a smaller scale, and
191
so, are unable to run a manufactory. This argument is fal-
lacious. The notification as interpreted by s. 2 of the
impugned Act benefits the artisans who produce ornaments
themselves and that obviously covers a very large section of
independent artisans engaged in the trade. The notification
also benefits persons who run manufactories and that ensures
the continuous employment of artisans. That is why it seems
to us that the main object of -ranting exemption can be said
to be achieved by holding that ’manufacturer, means either
a, manufacturer properly so called or one who engages
artisans lo manufacture gold ornaments.
Mr. Sastri also argued that the retrospective operation ,of
the impugned section should be struck down as unconsti-
tutional,, because it imposes an unreasonable restriction on
the petitioners’ fundamental right under Art. 19(1)(g). It
is true that in considering the question as to whether
legislative power to pass an Act retrospectively has been
reasonably ,exercised or not, it is relevant to enquire how
the retrospective operation operates. But it would be
difficult to accept the argument that because the
retrospective operation may operate harshly in some cases,
therefore, the legislation itself is invalid. Besides, in
the present case, the retrospective operation does not
spread over a very long period either. Incidentally, it is
not clear from the record that the petitioners did not
recover sales, tax from their customers when they sold the
gold ornaments to them. The counter-affidavit filed by the,
respondent-State alleges that even where sales-tax has not
been charged separately, the price charged included sales-
tax because it was the usual practice of every registered
dealer ,doing similar business to collect sales-tax either
by showing it as such separately and thereby claiming
deduction of the, ,sales-tax from the gross turnover to
arrive at the taxable turn-, ,over shown separately or by
including it in the price and thereby collecting it as a
part of the price charged. In any event, -we do not think
that in the circumstances of this case it would be possible
to hold that by making the provision of s. 2 of’ the
impugned Act retrospective the legislature has imposed a
restriction on the petitioners’ fundamental right under Art.
19(1)(g) which is not reasonable and is not in the interest
of the general public.
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The result is, the petitions fail and are dismissed with
costs. One set of hearing fees.
Petitions dismissed.
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