Full Judgment Text
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CASE NO.:
Appeal (civil) 11174 of 1995
PETITIONER:
M/s. Satnam Overseas (Export) Through its Partner Etc.Etc.
RESPONDENT:
State of Haryana & Anr.Etc.Etc.
DATE OF JUDGMENT: 24/10/2002
BENCH:
Syed Shah Mohammed Quadri & Ruma Pal.
JUDGMENT:
J U D G M E N T
W I T H
(C.A.Nos.11175-78/95, 11183-84/95, 11179/95, 11180/95, 11181/95,
11182/95, 2552/96, 2254/96,2553/96, 1581-96/96, 7679-7681/96,
3664/96, 3665/96, 3666/96, 3667/96, 3668/96, 3669/96, 12583-87/96,
3670/96, 257/96, 1597-1606/96, 1607/96, 2220/96, 3661/96, 3662/96,
3663/96, 3834-36/96, 12877-78/96, 346/97, 3993/99, W.P.(C)
Nos.82/96, 36/98, 141/98, 144/98, 178/98, 179/98, 181/98, 537/98,
538/98, 668/98, 675/98, 676/98, 240/98
W I T H
CIVIL APPEAL NOS. OF 2002
[@ S.L.P.(C) Nos.3531-3548/96 & 21539/96]
SYED SHAH MOHAMMED QUADRI,J.
Leave is granted in the special leave petitions.
The solution to the questions raised in this batch of cases
turns on a true interpretation of the provisions of the Haryana
General Sales Tax Act, 1973 (for short, "the Haryana Act")/the
Punjab General Sales Tax Act, 1948 (for short, "the Punjab Act") in
the light of the provisions of Article 286 of the Constitution and
the Central Sales Tax Act, 1956 (for short, "the CST Act").
For the sake of convenience, these cases can be divided into
two groups. (A) The first consists of two categories of cases
arising under the Haryana Act in respect of assessments for the
period : (i) ending with October 14, 1990 and (ii) between October
15, 1990 and September 28, 1996; and (B) The second takes in cases
arising under the Punjab Act.
Mr.P.Chidambaram, the learned senior counsel appearing for
the appellants, has piloted the arguments in the batch, which were
adopted by other learned counsel appearing for the appellants in
different appeals/writ petitions. The contentions of the learned
counsel are two fold. The first being, Section 9 of the Haryana
Act imposes charge of purchase tax on paddy and clause (b) of sub-
section (1) of the said section exempts the same as the rice
procured therefrom is exported. The second is that the High Court
committed error in holding that with omission of Section 9 from
the Statute, amendment of Section 6 and inclusion of Section 15A
with retrospective effect from 27.5.1971, the liability to pay
purchase tax is regulated by Section 6 read with Section 15 and
adjustments, if any, could be made under Section 15-A of the
Haryana Act. The case of the State of Haryana, as projected by
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the learned senior counsel, Mr.Mahendra Anand, is that the Haryana
Act contains more charging sections than one, viz., Sections 6, 9
and 17; as Section 9 has been omitted and Sections 2(p), 6, 15 and
15-A have been amended retrospectively, the assessee is liable to
pay tax on purchase of raw material.
For appreciating the contentions, we shall take up the cases
falling under groups (A)(i) and (B), which go together. It would
suffice to refer to the facts giving rise to Civil Appeal
Nos.11175-11178 of 1995. The assessee is a miller-exporter who
purchases paddy in the State of Haryana, mills the same and
exports the rice procured therefrom to places outside the
territory of India. For the Assessment Years 1982-83, 1983-84,
1988-89 and 1989-90, on the ground that the transactions of
purchase of paddy by the assessee were for export of rice procured
therefrom, the assessing authority granted benefit of Section
9(1)(b) of the Haryana Act and completed assessments raising ’Nil’
demand. However, the Deputy Excise and Taxation Commissioner
(Inspection)-cum-Revisional Authority, Karnal, (for short, "Dy.
Commissioner") issued show cause notice under Section 40 of the
Haryana Act and, after giving due opportunity of being heard to
the assessee, revised the assessment for the said years in view of
the retrospective amendment of Sections 6, 15, 15A and 17 and
omission of Section 9 thereof holding that the assessee was liable
to pay the purchase tax on the paddy. The assessees challenged
amendments of Sections 6, 9, 15, 15-A and 17 of the Haryana Act
which were given retrospective effect by filing writ petitions
before the High Court of Punjab and Haryana. A Full Bench of the
High Court upheld the validity of the impugned provisions of the
Haryana Act and the orders of the Dy.Commissioner revising the
assessments and, thus, dismissed the writ petitions. The
appellants are in appeal, by special leave, before this Court
challenging the legality of the judgment and order of the Full
Bench of the High Court.
It needs to be noticed, at the outset, that in view of the
provisions of sub-section (3) of Article 246 read with Entry 54 of
List II of the Seventh Schedule to the Constitution, a State is
competent to legislate authorising imposition of taxes on the sale
or purchase of goods (other than newspaper), subject to the
provisions of Entry 92A of List-I. Under the said Entry [92A of
List-I], the Parliament is competent to legislate authorising
imposition of taxes on the sale or purchase of goods (other than
newspaper), where such sale or purchase takes place in the course
of inter-State trade or commerce. In other words, any Act passed
by a State Legislature authorising imposition of taxes on sale or
purchase of goods will be subject to the legislation made by the
Parliament under Entry 92A of List -I of the Seventh Schedule to
the Constitution.
A reference to Article 286 of the Constitution of India
would also be apposite. It prescribes restriction as to the
imposition of tax on the sale or purchase of goods and is in the
following terms:
"286. Restrictions as to imposition of tax
on the sale or purchase of goods.-- (1) No
law of a State shall impose, or authorise
the imposition of, a tax on the sale or
purchase of goods where such sale or
purchase takes place--
(a) outside the State; or
(b) in the course of the import of the
goods into, or export of the goods out of,
the territory of India.
(2) Parliament may by law formulate
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principles for determining when a sale or
purchase of goods takes place in any of
the ways mentioned in clause (1).
(3) Any law of a State shall, in so far as
it imposes, or authorises the imposition
of, --
(a) a tax on the sale or purchase of goods
declared by Parliament by law to be of
special importance in inter-State trade or
commerce, or
(b) a tax on the sale or purchase of
goods, being a tax of the nature
referred to in sub-clause (b), sub-
clause (c) or sub-clause (d) of
clause (29A) of article 366,
be subject to such restrictions and
conditions in regard to the system of
levy, rates and other incidents of the tax
as Parliament may by law specify."
A plain reading of clause (1) of the Article, noted above,
shows that it lays down restrictions on a State law as to the
imposition or authorising the imposition of a tax on sale or
purchase of goods where such sale or purchase takes place (a)
outside the State or (b) in the course of import of goods into or
export of goods out of the territory of India. Clause (2) thereof
empowers the Parliament to formulate principles for determining as
to when a sale or purchase of goods takes place in any of the ways
aforementioned. The directive embodied in clause (3) is that any
law of a State shall, insofar as it imposes or authorises the
imposition of tax, specified in sub-clauses (a) and (b) thereof,
be subject to such restrictions and conditions in regard to the
system of levy, rates and other incidence of tax, as the
Parliament may by law specify. The said sub-clauses are as
follows: (a) a tax on the sale or purchase of goods declared by
Parliament by law to be of special importance in inter-State trade
or commerce (the declared goods); or (b) a tax on the sale or
purchase of goods being a tax of the nature referred to in sub-
clause (b), sub-clause (c) or sub-clause (d) of clause 29A of
Article 366.
In exercise of the power conferred under clause (2) of
Article 286, the Parliament enacted the CST Act formulating
principles for determining when a sale or purchase of goods takes
place in the course of inter-State trade or commerce or outside a
State or in the course of import or export. Section 5 of the CST
Act embodies the principles as to when a sale or purchase of goods
is said to take place in the course of import or export. Sub-
section (1) of Section 5 says that a sale or purchase of goods
shall be deemed to take place in the course of export of the goods
out of the territory of India only if the sale or purchase either
occasions such export or is effected by a transfer of documents of
title to the goods after the goods have crossed the customs
frontiers of India. Sub-section (2) provides that a sale or
purchase of goods shall be deemed to take place in the course of
import of goods into the territory of India only if the sale or
purchase either occasions such import or is effected by a transfer
of documents of title to the goods before the goods have crossed
the customs frontiers of India. Sub-section (3), which commences
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with a non-obstante clause, provides that despite sub-section (1),
the last sale or purchase of any goods preceding the sale or
purchase occasioning the export of those goods out of the
territory of India, shall also be deemed to be in the course of
such export if such last sale or purchase took place after and was
for the purpose of complying with the agreement or order for or in
relation to such export. In other words, the penultimate sale or
purchase before the sale or purchase occasioning the export of
those goods shall be treated as a sale or purchase in the course
of export of the goods. This is incorporated to get over the
judgment of this Court in Md.Serajuddin & Ors. vs. The State of
Orissa [1975 (2) SCC 47].
Next, we shall advert to Section 15 of the CST Act which
runs thus:
"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, insofar 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:-
(a) the tax payable under that law in
respect of any sale or purchase of such
goods inside the State shall not exceed
four per cent of the sale or purchase
price thereof, and such tax shall not
be levied 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, and
tax has been paid under this Act in
respect of the sale of such goods in
the course of inter-State trade or
commerce, the tax levied under such law
shall be reimbursed to the person
making such sale in the course of
inter-State trade or commerce in such
manner and subject to such conditions
as may be provided in any law in force
in that State;
(c) where a tax has been levied under that
law in respect of the sale or purchase
inside the State of any paddy referred
to in sub-clause (i) of clause (i) of
section 14, the tax leviable on rice
procured out of such paddy shall be
reduced by the amount of tax levied on
such paddy;
(ca) where a tax on sale or purchase of
paddy referred to in sub-clause (i) of
clause (i) of Section 14 is leviable
under the law and the rice procured out
of such paddy is exported out of India,
then, for purposes of sub-section (3)
of Section 5, the paddy and rice shall
be treated as a single commodity;
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(d) each of the pulses referred to in
clause (via) of Section 14, whether
whole or separated, and whether with or
without husk, shall be treated as a
single commodity for the purposes of
levy of tax under that law."
The provisions, quoted above, enumerate the restrictions
and conditions in regard to tax on sale or purchase of declared
goods within a State, which is defined in clause (c) of Section 2
of the CST Act to mean the goods declared under Section 14 to be
of special importance in inter-State trade or commerce. It may be
pointed out here that paddy and rice are enumerated in sub-clauses
(i) and (ii) respectively of clause (i) of Section 14 and they
are, therefore, ’declared goods’.
Reverting to Section 15, clause (a) imposes two restrictions
on the tax to be imposed on sale or purchase of declared goods
inside the State : (1) an upper ceiling of four per cent on sale
or purchase price of such goods and (2) such tax shall not be
levied at more than one stage*. Clause (b) provides relief of
reimbursement of tax paid under the CST Act in case of double
taxation of declared goods, that is, where tax has been levied
under the State Act on sale or purchase of such goods and is again
levied under the CST Act in respect of sale of such goods in the
course of inter-State trade or commerce. The edict of clause (c)
makes it clear that a State law which imposes or authorises the
imposition of tax on sale or purchase of rice or paddy inside the
State has to be treated in the following manner: where a tax has
been levied in respect of sale or purchase inside the State on
paddy, the tax leviable on rice procured out of such paddy shall
be reduced by the amount of tax levied on it (such paddy); for
example, assuming that in a State the rate of tax on the sale or
purchase price of paddy is one per cent and of rice is four per
cent, then the tax leviable on the sale of rice will be reduced by
one per cent; consequently, the tax payable on the sale of rice
would be only three per cent.
Clause (ca) is inserted by The Finance (No.2) Act, 1996 (33 of
1996) w.e.f. September 28, 1996. It directs that where a tax on sale
or purchase of paddy is leviable under a State law and the rice
procured out of such paddy is exported out of India then for purposes
of penultimate sale (under Section 5(3)), the paddy and rice shall be
treated as a single commodity. In the circumstances mentioned in
clause (ca), it brings paddy on par with pulses dealt with in clause
(d). The mandate embodied in clause (d) is that pulses enumerated in
clause (via) of Section 14, whether whole or separated, and whether
with or without husk, shall be treated as a single commodity for the
purposes of levy of tax under any State law.
In the light of the discussion of the afore-mentioned provisions
of the Constitution of India and of the CST Act, we proceed to
interpret the relevant provisions of the Haryana Act and the Punjab
Act. The provisions of the Haryana Act have undergone series of
amendments and we deem it appropriate to observe with concern that in
the mass of amendments now it is by no means an easy task for any
legal practitioner or even a Court, and more so for a trader or an
ordinary citizen, to cull out the correct position in regard to one’s
liability on the sales and purchases of the goods in a given
assessment year before 1996. Be that as it may, we shall now deal
with the contentions of the learned senior counsel for the
appellants/petitioners.
It may be mentioned that after formation of the State of
Haryana on November 1, 1966, it adopted the Punjab Act which was
in force in the then composite State of Punjab. The Haryana Act
was passed in the year 1973. Between 1982 and April, 1991,
Section 6 was amended as many as eight times. The last amendment
of Section 6 was by Ordinance No.2 of 1990, which was promulgated
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on October 15, 1990 and later replaced by Haryana Act 4 of 1991 on
April 16, 1991. By the said Act, the amended Section 6 was given
retrospective effect from May 27, 1971. It is unnecessary to refer
to all the earlier amendments as they have no bearing on the issue
under determination. Section 6, insofar as it is relevant for our
purpose, as it stood after the last mentioned amendment, read
thus:
"Section 6. Incidence of Taxation - (1)
Subject to other provisions of this Act,
every dealer whose gross turnover during
the year immediately preceding the 27th day
of May, 1971, exceeded the taxable
quantum, shall from the 27th day of May,
1971 and every other dealer shall, on the
expiry of thirty days after the date on
which his gross turnover first exceeds the
taxable quantum, be liable to pay tax
under this Act on the sale or purchase of
goods by him in the State at the stage
hereinafter provided.--
(a) on declared goods at the stage
specified under Section 17;
(b) & (c) xxx xxx xxx
Provided that this sub-section shall not
apply to a dealer who deals exclusively in
goods specified in Schedule B or who
executes a sub-contract with a contractor
who is liable to pay tax in respect of the
works contract of which the sub-contract
is a part:
Provided further that in the case of a
dealer, --
(a) xxx xxx xxx
(b) who manufactures or processes any
goods for sale, the liability to pay
tax shall commence, from the date on
which his gross turnover, during any
year, first exceeds the taxable
quantum;
(c) xxx xxx xxx
(d) who deals in declared goods, the
liability to pay tax shall commence
from the date on which his gross
turnover of such goods exceeds the
taxable quantum;
(e) to (h) xxx xxx xxx
(3) to (5) xxx xxx xxx"
A perusal of the above provision would show that it is a
charging section. It opens with the phrase "subject to the other
provisions of this Act" ; having been given retrospective effect
from May 27, 1971, it would apply in regard to the assessment
years in question, the last of them being 1989-90. The impost
under Section 6 is: (1) subject to the other provisions of the
Act; (2) on every dealer whose gross turn over during the relevant
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period, exceeds the taxable quantum; (3) on the taxable event of
sale or purchase of goods; and (4) in respect of declared goods
(say paddy) tax is payable at the stage of last purchase. What is
subjected to tax is the difference between the ‘gross turn over’
and the ‘taxable quantum’, which are defined in clauses (gg) and
(p), respectively, of Section 2. To comprehend the scope of the
charge under Section 6, which is subject to other provisions of
the Act, it has to be read with Section 2(p), Section 15, Section
17 and Section 27. A combined reading of these provisions would
disclose that tax is leviable on the taxable turn over of sales or
purchases of goods at the rate mentioned in Section 15 at
specified stages - in the case of declared goods at the stage
specified in Section 17.
The first proviso to sub-section (1) of Section 6 exempts:
(a) a dealer who deals exclusively in goods specified in Schedule
’B’; and (b) a dealer who executes a sub-contract with a
contractor. These are the only exemptions that Section 6 speaks
of, though Section 13 confers power on the Government to grant
exemption in specified cases.
Here, it would be relevant to note that the said Haryana Act
4 of 1991, omitted Section 9 of the principal Act, which, be it
noted, is not retrospective. Consequently, in respect of the
assessment years in question, Section 6, as amended by Haryana Act
4 of 1991 as well as Section 9 of the Haryana Act were on the
Statute Book and this fact should be borne in mind while
considering leviability of the purchase tax on the raw material
(Paddy) during the period ending with Assessment Year 1989-90.
It is pertinent to read Section 9 of the Haryana Act.
Though Section 9 was also amended on ten occasions between 1976
and 1991, for the present discussion, all those amendments are
inconsequential. Section 9(1)(b) as on October 15, 1990, insofar
as it is relevant, is extracted here:
"Section 9.
(1), Where a dealer liable to pay tax
under this Act,
(a) xxx xxx xxx
(b) purchases goods, other than those
specified in Schedule B, from any
source in the State and uses them in
the State in the manufacture of any
other goods and either disposes of
the manufactured goods in any manner
otherwise than by way of sale in the
State or despatches the manufactured
goods to the place outside the State
in any manner otherwise than by way
of sale in the course of inter-State
trade or commerce or in the course
of export outside the territory of
India within the meaning of section
5 of the Central Sales Tax Act,
1956; or
(c) XXX XXX XXX
in the circumstances in which no tax is
payable under any other provision of this
Act, there shall be levied, subject to the
provisions of Section 17, a tax on the
purchase of such goods at such rate as may
be notified under Section 15."
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This provision has had a chequered history. In Goodyear
India Limited & Ors. vs. State of Haryana & Anr. (1990 (2) S.C.C.
71), it was declared ultra vires the power of the State
Legislature. However, in Murli Manohar & Co. & Anr. vs. State of
Haryana & Anr. (1991 (1) S.C.C. 377), it was explained that the
unconstitutionality was confined to assignment sales. Ultimately,
in Hotel Balaji & Ors. Vs. State of Andhra Pradesh & Ors. (1993
Suppl.(4)SCC 536), it was declared that judgment of this Court in
Goodyear’s case (supra) was not a good law. Consequently, Section
9(1)(b) was a valid provision. We shall examine its ingredients
and impact vis-a-vis other provisions till it was omitted with
effect from April 1, 1991.
A careful reading of Section 9(1)(b) discloses that: it
postulates existence of circumstances in which no tax is payable
under any other provisions of the Act by a dealer who: (i) is
liable to pay tax under the Act; (ii) purchases goods (referred
to, ’raw material’) {other than those specified in Schedule B} from
any source in the State; (iii) uses them in the State in the
manufacture of any other goods (referred to as, ’manufactured
goods’); (iv) disposes of the manufactured goods in any manner
otherwise than by way of sale or (v) despatches the manufactured
goods to a place outside the State in any manner and provides that
in such a case there shall be levied, a tax, subject to the
provisions of Section 17, on the purchase of raw material at such
rate as may be notified under Section 15. This in substance is
the charge under Section 9(1)(b). It is important to note that
the afore-mentioned levy of purchase tax on the raw material would
have no application when the manufactured goods are : (a) disposed
of by way of sale in the State; (b) despatched to a place
outside the State: (1) in the course of inter-State trade or
commerce; or (2) in the course of export outside the territory of
India within the meaning of Section 5 of the CST Act. In other
words, levy of purchase tax thereunder on the raw material is
exempted if the manufactured goods are dealt with in the manner
outlined in clauses (a) and (b) hereinabove.
The exemptions contained in Section 9(1)(b) are confined to
cases of impost levied thereunder and not otherwise. In other
words, where purchase tax is leviable on goods under Section 6,
and not under Section 9(1)(b), a dealer cannot claim benefit of
the exemptions mentioned in latter section.
The rationale for the exemption of purchase tax on the raw
material from the purchase tax in the afore-mentioned cases, is
succinctly elucidated by Jeevan Reddy,J. speaking for a Bench of
three learned Judges of this Court in Hotel Balaji’s case (supra)
as follows :-
"The levy created by the said provision is a
levy on the purchase of raw material purchased
within the State which is consumed in the
manufacture of other goods within the State.
If, however, the manufactured goods are sold
within the State, no purchase tax is collected
on the raw material, evidently because the State
gets larger revenue by taxing the sale of such
goods. (The value of manufactured goods is
bound to be higher than the value of the raw
material.) The State legislature does not wish
to - in the interest of trade and general public
- tax both the raw material and the finished
(manufactured) product. This is a well-known
policy in the field of taxation. But where the
manufactured goods are not sold within the State
but are yet disposed of or where the
manufactured goods are sent outside the State
(otherwise than by way of inter-State sale or
export sale) the tax has to be paid on the
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purchase value of the raw material. The reason
is simple : if the manufactured goods are
disposed of otherwise than by sale within the
State or are sent out of State (i.e., consigned
to dealers own depots or agents), the State does
not get any revenue because no sale of
manufactured goods has taken place within
Haryana. In such a situation, the State says,
it would retain the levy and collect it since
there is no reason for waiving the purchase tax
in these two situations. Now coming to inter-
State sale, and export sale, it may be noticed
that in the case of inter-State sale, the State
of Haryana does get the tax revenue - may be not
to the full extent. Though the Central Sales
Tax is levied and collected by the Government of
India, Article 269 of the Constitution provides
for making over the tax collected to the States
in accordance with certain principles. Where,
of course, the sale is an export sale within the
meaning of Section 5(1) of the Central Sales Tax
Act (export sales) the State may not get any
revenue but larger national interest is served
thereby. It is for these reasons that tax on
the purchase of raw material is waived in these
two situations. Thus, there is a very sound and
consistent policy underlying the provision."
We are in respectful agreement with the above passage.
The same principle is reiterated in Jagatjit Sugar Mills &
Ors. Vs. State of Punjab & Anr. (1995 (1) SCC 67) and applied in
K.B. Handicrafts Emporium and Ors. Vs. State of Haryana and Ors.
(1993 Suppl.(4)SCC 589).
In these cases, in the light of the above discussion, we
conclude that specific charging provision of Section 9(1)(b) will
be attracted as the assessee purchased paddy (which is not one of
the goods specified in Schedule B), procured rice (manufactured
goods) from the said paddy and exported rice outside the territory
of India, on which no purchase tax was payable under the general
charging provision of Section 6 which is, inter alia, subject to
the provisions of Section 9. We have already held above that the
assessees will not be liable to pay tax on the purchase of such
paddy in view of the provisions of clause (b) of sub-section (1)
of Section 9 in the assessment years in question, or, for that
matter, any assessment year ending before April 1, 1991. To the
same effect is the view expressed by this Court in the cases of
Murli Manohar (supra), Hotel Balaji (supra) and K.B. Handicrafts
Emporium (supra). The High Court was, therefore, clearly in error
in not following the ratio of these judgments on untenable
grounds.
The next contention of Mr.P.Chidambaram that the High Court
erred in holding that omission of Section 9 from the statute had
no effect in view of amendment of Section 6 and inclusion of
Section 15-A and that the liability to pay purchase tax was
regulated by Section 6 read with Section 15 and adjustments, if
any, could be made under Section 15-A of the Haryana Act.
Mr.Mahendra Anand supported the conclusion of the High Court on
the basis of retrospective amendment of Sections 2(p), 6, 15 and
15A of the Haryana Act. We shall take up these contentions.
We have already referred to Sections 6 and 9 of the Haryana
Act. To recapitulate, Section 6, which is a general charging
section, provides that every dealer shall be liable to pay tax
under the Act on the sale or purchase of, inter alia, declared
goods by him in the State at the stage specified under Section 17.
It says that at the stage of sale or purchase of the declared
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goods, the tax shall be levied and paid as specified against such
goods in Schedule ‘D’. It also provides that where the goods have
not been subjected to tax at any of the stages of sale or purchase
specified in Schedule ‘D’, the tax shall be levied and paid by a
dealer liable to pay tax under the Act at the stage of the last
purchase of such goods by him, after providing deductions
admissible under Section 27. It is not possible to read that the
section by itself creates an independent charge on the declared
goods. It merely indicates the stage at which the tax shall be
leviable and payable. Indeed, clause (a) of sub-section (1) of
Section 6 itself mentions that in respect of the declared goods
tax shall be levied at the stage specified in Section 17. It is,
therefore, futile to contend that under Section 17 levy of tax on
declared goods is not dependant on the use and disposal of such
goods whether as such or in the manufactured form. It has already
been pointed out above that when paddy, declared goods, is
manufactured into rice which is exported outside India, as
postulated in clause (b) of sub-section (1) of Section 9 of the
Haryana Act, the liability for payment of purchase tax on such
paddy would be ’nil’. The legislature enacted a specific
provision (Section 9(1)(b)) with regard to levy and payment of
purchase tax on paddy when rice is procured therefrom and exported
outside India. We find it difficult to sustain the argument that
in view of Section 17 of the Haryana Act, levy of purchase tax on
paddy would be valid notwithstanding the fact that the same is
exempted under Section 9(1)(b). Though in Murli Manohar’s case
(supra), the raw material was not one of the declared goods; it
makes no difference so far as the ratio of that decision is
concerned.
For the purpose of Section 6 read with Section 15 of the
Haryana Act, a dealer is liable to pay tax on the taxable turnover
of his sales and purchases. The expression ’taxable turnover’ is
defined in clause (p) of Section 2 to mean that part of a dealer’s
gross turnover which remains after allowing deductions under
Section 27 of the Haryana Act. Explanation (2) to the said clause
provides that the proceeds of sale of any goods on the purchase of
which tax is leviable under the Act or the purchase value of any
goods on the sale of which tax is leviable under the Act shall not
be included in the turnover. Inasmuch as the sale of paddy is
taxable under the Act, the purchase value of such paddy cannot be
included in the turnover; it is evident that no purchase tax can
be imposed under Section 6 of the Haryana Act. This explains the
reason as to why Section 9 specifically provides that the charge
thereunder shall be levied in the circumstances in which no tax is
payable under any other provision of the Act. In other words, it
is only because no tax can be levied and collected on the purchase
of paddy either under Section 6 or under any other provision of
the Haryana Act, that Section 9 imposes the tax, except in the
circumstances provided in clause (b) of sub-section (1) of Section
9. This is the view taken by a Bench of three learned Judges of
this Court in Murli Manohar’s case (supra) where the liability
under Section 9 was directly in question. This view was
reiterated by two more Benches of this Court in Hotel Balaji’s
case (supra) and K.B.Handicraft Emporium (supra). The Full Bench
of the High Court, in our view, was not right in declining to act
upon the ratio of the judgments in the aforementioned cases. In
the result, we hold that the amendment to the definition of
‘turnover’ in clause (p) of Section 2 and of Section 6 does not
affect the position when Section 9 is part of the statute.
Connected with the topic under discussion are the cases
arising under the Punjab Act - Group (B). It is urged that
Section 4-B of the Punjab Act is analogous to Section 9(1)(b) of
the Haryana Act and as the former provision (Section 4-B) exists
till date the judgment of this Court in Murli Manohar’s case
(supra) applies, therefore, there can be no demand of purchase tax
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on paddy.
We have indicated above that cases arising under the Punjab
Act (Group (B)) go with cases in Group (A)(i) and relate to the
period when Section 9(1)(b) of the Haryana Act was in force i.e.
before October 14, 1990. The facts giving rise to the appeal
[Civil Appeal No. 3666 of 1996] may briefly be noted as
representative of the facts of cases falling in this group. The
appeal relates to Assessment Years 1990-91 and 1991-92. The
assessee purchased paddy in the State of Punjab, milled the same
and exported rice procured therefrom to places outside the
territory of India. No tax was paid on the purchase of paddy.
However, show-cause notices were issued to demand purchase tax on
the paddy converted into rice in those years. The demand was
confirmed and that was unsuccessfully assailed in the High Court.
Mr.R.P.Gupta, learned counsel appearing for the assessee,
placed reliance on the observations of this court in Mukerian
Paper Limited vs. State of Punjab (1991 (2) SCC 580) and argued
that Section 4-B of the Punjab Act was similar to Section 9 of the
Haryana Act, so the ratio of the judgments of this Court in Murli
Manohar’s case (supra) and Jagatjit Sugar Mill’s case (supra)
would apply and as such the demand of purchase tax would be wholly
illegal. Mr.V.C.Mahajan, learned senior counsel appearing for the
State of Punjab, urged a feeble contention that neither the
assessee was the exporter nor the rice procured from paddy was
exported so the assessee would be liable to pay purchase tax on
paddy.
In view of the fact that the case proceeded on the basis
that the assessee was exporter of rice as this fact is also
evident from the judgment under appeal, it is difficult to accept
the contention of the learned senior counsel.
We shall now examine the contentions of Mr.Gupta.
Section 4-B was inserted in the Punjab Act by the Punjab Act
3 of 1973 with effect from November 15, 1972. It reads as
follows:
"4-B. Levy of purchase tax on certain
goods.-- Where a dealer who is liable to
pay tax under this Act purchases any goods
other than those specified in Schedule B,
from any source and
(i) uses them within the State in the
manufacture of goods specified in
Schedule B, or
(ii) uses them within the State in the
manufacture of any goods, other than
those specified in Schedule B, and
sends the goods so manufactured
outside the State in any manner
other than by way of sale in the
course of inter-State trade or
commerce or in the course of export
out of the territory of India, or
(iii) uses such goods for a purpose other
than that of resale within the State
or sale in the course of inter-State
trade or commerce or in the course
of export out of the territory of
India, or
(iv) sends them outside the State other
than by way of sale in the course of
inter-State trade or commerce or in
the course of export out of the
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territory of India,
and no tax is payable on the purchase of
such goods under any other provisions of
this Act, there shall be levied a tax on
the purchase of such goods at such rate
not exceeding the rate specified under
sub-section (1) of section 5 as the State
Government may direct."
The afore-quoted section makes it clear that it can be
invoked when a dealer who is liable to pay tax under the Act : (a)
purchases any goods (referred to as raw material) other than those
specified in Schedule B; (b) uses the raw material within the
State in the manufacture of goods specified in Schedule B; or (c)
uses them within the State in the manufacture of any goods other
than those specified in Schedule B and sends the goods so
manufactured out of the State in any manner; (d) uses the raw
material for a purpose other than that of resale within the State
or; (e) sends the raw material outside the State; and (f) no tax
is payable under any other provision of the Punjab Act on such raw
material. On fulfillment of these requirements, Section 4-B
imposes a tax on the purchase of the raw material at such rates
not exceeding the rate specified under sub-section (1) of Section
5, as the State Government may direct. The analysis of the
section would remain incomplete without recording that the raw
material is exempt from the levy of purchase tax when the
manufactured goods are sent outside the State by way of sale in
the course of inter-State trade or commerce or in the course of
export out of the territory of India.
A comparison of Section 4-B of the Punjab Act with Section
9(1)(b) of the Haryana Act shows that to a large extent there is
similarity in both these provisions. To the same effect is the
observation of a Bench of three learned Judges of this Court in
Mukerian’s case (supra), which reads thus:
"... even though the language of Section 4-B of
the Act is not identical with the relevant part
of Section 9(1) of the Haryana Act, it is in
substance similar in certain respects,
particularly in respect of the point of time
when the liability to pay tax arises. Under
that provision, as here, the liability to pay
purchase tax on the raw material purchased in
the State which was consumed in the manufacture
of any other taxable goods arose only on the
despatch of the goods outside the State."
In Devi Dass Gopal Krishan Pvt. Ltd. & Ors. vs. State of
Punjab & Ors. (1994 Suppl.(2) SCC 59), while sustaining the
legislative competence of the State of Punjab to enact Section 4-B
and upholding its validity, this court after analysing the said
section observed that Section 4-B of the Punjab Act was in
substance similar to Section 9(1)(b) of the Haryana Act.
In Jagatjit Sugar Mills case (supra), a Bench of three
learned Judges opined thus:
"In our opinion, the purpose of Section 4-
B is altogether different. It is designed
really to identify and affirm -- in a
broad sense, create -- the levy of
purchase tax in some cases and to provide
for exemption from purchase tax in certain
other specified situations. This is done
in the interest of manufacturers-dealers,
consuming public and other dealers -- a
common feature in almost all the sales tax
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enactments ......."
Though Section 4-B of the Punjab Act is not in iisdem
terminis with Section 9(1)(b) of the Haryana Act, however, they
are in pari materia. It is not the similarity of the said
provisions alone that would determine the liability of a dealer to
pay purchase tax on paddy under the said Acts. It is the ambit of
charging sections in those Acts, which will be determinative.
Section 6 of the Haryana Act, as pointed out above, did not charge
purchase tax on paddy before October 14, 1990 and in the
circumstances mentioned in Section 9(1)(b) imposed purchase tax
but provided for its exemption in specified situations.
We must now examine the scope of charge under Section 4 of
the Punjab Act which, insofar as it is relevant for our purpose,
is extracted hereunder :
"4.Incident of taxation - (1) Subject to the
provisions of sections 5 and 6 every dealer
except one dealing exclusively in goods declared
tax-free under section 6 whose gross turnover
during the year immediately preceding the
commencement of this Act exceeded the taxable
quantum shall be liable to pay tax under this
Act on all sales affected after the coming into
force of this Act and purchases made after the
commencement of the East Punjab General Sales
Tax (Amendment) Act, 1958 :
Provided that the tax shall not be payable
on sales involved in the execution of a contract
which is shown to the satisfaction of the
assessing authority to have been entered into
before the commencement of this Act."
A plain reading of this provision shows that it is subject to the
provisions of sections 5 and 6. It says that every dealer shall
be liable to pay tax under this Act (i) on all sales affected
after the coming into force of this Act if his gross turnover
during the year immediately preceding the commencement of this Act
exceeded the taxable quantum; and (ii) on all purchases made by
him after the commencement of the East Punjab General Sales Tax
(Amendment) Act, 1958. Section 5 provides for levy of tax on
taxable turnover. Section 6 exempts tax on sale of goods
enumerated in Schedule B. As defined in Section 5(2), ’taxable
turnover’ would mean that part of a dealer’s gross turnover which
remains after deducting therefrom, - "(a) his turnover during the
period on - (i) * (ii)........sale in the course of
inter-State trade or commerce or sale in the course of export of
goods out of the territory of India, or of goods specified in his
certificate of registration for use by him in the manufacture in
Punjab or any goods, other than goods declared tax free under
Section 6, or sale in the course of inter-State trade or commerce,
or sale in the course of export of goods out of the territory of
India........" The value of purchase of goods (paddy) does not
figure in the amounts which can be deducted for purposes of
determining taxable turnover. The definition of ’purchase’ in
clause (ff) is an inclusive definition. It means, inter alia,
acquisition of goods specified in Schedule ’C’ for cash or
deferred payment.
In Jagatjit Sugar Mills’ case (supra), this Court held that
Section 4 levies tax not only upon ’all sales affected’ but also
on ’all purchases made’ and negatived the contention that no
purchase tax was payable under Section 4 of the Act on goods other
than those mentioned in Schedule ’C’ (contains paddy and rice).
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It was held,
"Firstly, clause (ff) in Section 2 is not a
charging section. It only defines "purchase".
Secondly, the definition not only includes the
purchase of Schedule C goods but purchase of
other goods which are subject to purchase tax
under any other provisions of the Act. The fact
that the words "or of goods on the purchase
whereof tax is payable under any provisions of
this Act" were inserted in this definition by
the same Amendment which introduced Section 4-B
into the Act does not mean that the said words
are confined to Section 4-B. If that were the
intention, the legislature would have used
appropriate words to that effect. Moreover,
Section 4-B is designed for a different purpose.
The said definition cannot, therefore, be read
in derogation of Section 4(1) nor can the levy
created by Section 4(1) be curtailed or cut down
in any manner by the said definition."
Section 29, which provides exemption in certain cases, is also
of no avail to the assessee. It reads as under :
"29. Provisions in case of inter-State trade,
etc -
(1) Notwithstanding anything contained in this
Act -
(a) a tax on the sale or purchase of goods
shall not be imposed under this Act
(i) where such sale or purchase takes
place outside the State of Punjab; or
(ii) where such sale or purchase takes
place in the course of import of the
goods into, or export of the goods
out of, the territory of India;
Provided that the last sale or purchase of
any goods preceding the sale or purchase
occasioning the export of such goods out of the
territory of India shall also be deemed to be in
the course of such export, if such last sale or
purchase takes place after making an agreement
or order for such export;
Provided further..................."
Sub-clause (ii) of clause (a) of sub-section (1), which is
relevant here, read with the first proviso, applies where such
sale or purchase is a penultimate sale or purchase and takes place
in the course of import of the goods into or export of the goods
out of the territory of India. This clause is also of no
consequence; firstly, because paddy and rice being two different
commodities and secondly, the proviso was inserted only with
effect from February 5, 1999 by Act 4 of 1999.
In the light of the above discussion, it cannot but be held
that the assessees are liable to pay tax on the purchase of paddy
under Section 4 of the Punjab Act and the similarity between
Section 4-B of the Punjab Act and Section 6 of the Haryana Act and
the ratio of the judgments in Murli Manohar’s case and other
cases, referred to above, are of no assistance to them.
We may now notice the contention of Mr.Chidambaram based on
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sub-section (3) of Section 5 of the CST Act. The learned senior
counsel argued that as paddy purchased by the assessees was
exported albeit in the rice form, therefore, the purchase of paddy
itself would be deemed to be in the course of export. He pointed
out that the latin name for paddy and rice was the same viz. Oryza
sativa L. and they fall in one and the same group. He suggested
that the judgments of this Court in Ganesh Trading Company, Karnal
vs. State of Haryana & Anr. (1974 (3) SCC 620) and Babu Ram
Jagdish Kumar & Co. vs. State of Punjab & Ors. (1979 (3) SCC 616),
holding that ’paddy and rice are different commodities’, were not
rendered in the context of sub-section (3) of Section 5 of the CST
Act and that they require reconsideration. On the other hand,
Mr.Mahendra Anand strenuously urged that paddy and rice were two
different ’goods’, therefore, on the export of rice the assessee
could not claim exemption on the purchase of paddy either under
Section 5(3) of the CST Act or under Article 286(1)(b) of the
Constitution of India because penultimate sale was not that of
rice but of paddy. He argued that only when paddy would undergo
various processes, which tantamounts to manufacture, rice could be
procured.
It may be noticed that the principle laid down by this Court
in Ganesh Trading Co. (supra) and Babu Ram Jagdish Kumar case
(supra) was accepted by the Parliament and Section 14 of the CST
Act was amended to show that paddy and rice are two distinct
goods. In Vijay Laxmi Cashew Company vs. Deputy Commercial Tax
Officer (1996 (1) SCC 468), this Court held that to claim the
benefit under Section 5(3) of the CST Act, a dealer would have to
establish the identity of the goods purchased and the goods
exported out of the territory of India. When in order to fulfil
an export obligation some goods are purchased and processed which
resulted in change of the identity and character of the goods like
processing of paddy into rice, which is exported, then it would
not be an export of the same goods. Therefore, the assessee will
not be entitled to exemption under Section 5(3) of the CST Act.
We have already indicated above that sub-section (3) of Section 5
treats penultimate sale of the goods which are exported as the
sale in the course of export. It is difficult to accept the
contention of Mr.Chidambaram that paddy and rice are the same
goods. The usual commercial parlance test that is applied is how
such goods are known in the commercial circles. It is a common
knowledge that paddy and rice are treated in the market as two
different commodities. We are not persuaded to accept the
submission that the case of Ganesh Trading Co. (supra) in which it
is held that paddy and rice are different commodities and which
was followed by a Bench of three learned Judges in Jagdish Kumar’s
case (supra) require reconsideration. Those cases arose under the
Punjab Act and Ganesh Trading Co.’s case (supra) was decided even
before the insertion of sub-section (3) of Section 5. With great
respect to the learned Judges, we are in entire agreement with the
view expressed in those cases that paddy and rice are two
different commodities. It is unnecessary to delve into the process
of procuring rice from paddy to ascertain whether a complicated
process results in change of identity of goods (raw material) as
was found in State of Travancore-Cochin & Ors. vs. Shanmugha Vilas
Cashew Nut Factory & Ors. [1954 SCR 53] and in Vijay Laxmi Cashew
Company vs. Deputy Commercial Tax Officer [1996 (1) SCC 468] or
involves only a simple process as was the case in Sterling Foods
vs. State of Karnataka [1986 (3) SCC 469] and Deputy Commissioner
of Sales Tax vs. Pio-Food Packers [1980 Suppl. SCC 174] not
affecting the identity of the goods (raw material). It is a common
ground that the Parliament treated paddy and rice as two different
goods as is evident from sub-clauses (i) and (ii) of Clause (i) of
Section 14 of the CST Act which was inserted by the Parliament by
Act 103 of 1976 with effect from September 7, 1976. The argument
of the learned senior counsel based on Section 5(3) of the CST Act
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must, therefore, fail. Mr. P.Chidambaram has argued that the
requirements of Article 286 of the Constitution and Section 15(c)
of the CST Act are mandatory and this accounts for clause (iii) of
the proviso to sub-section (1) of Section 15 of the Haryana Act,
therefore, Section 15-A of the Haryana Act, insofar as it denies
the benefit of adjustment/refund of purchase tax in regard to
paddy, is unconstitutional and ultra vires; in the alternative it
was urged that the amendment of Section 15-A by Ordinance 1 of
1992 took away the benefit of adjustment/refund retrospectively
from May 27, 1971, availed by the assessees for the last twenty
one years which is unjust, arbitrary and unconstitutional.
Section 15-A was first inserted in the Haryana Act on
January 25, 1990 and was given retrospective effect from May 27,
1971. Like its companion sections, it also underwent many
changes. We are concerned with Section 15-A, as substituted by
the Haryana Act 9 of 1993 on February 10, 1993 retrospectively
from May 27, 1971. It was as under :
*
" 15-A. Adjustment or refund of tax in certain
cases -
Subject to the provisions of clause (iii) of
proviso to sub-section (1) of Section 15 and
subject to the conditions and restrictions, as
may be prescribed -
(i) the tax leviable under this Act or the
Central Sales Tax Act, 1956, on the sale of
goods by a dealer, manufactured by him, shall be
reduced by the amount of tax paid in the State
on the sale or purchase of goods, other than
paddy, cotton and oilseeds, used in their
manufacture, and
(ii) when no tax is leviable on the sale of
manufactured goods except those specified in
Schedule B, subject to the conditions and
exceptions specified therein, or when the tax
leviable on the sale of manufactured goods is
less than the tax paid in the State on the sale
or purchase of goods, other than paddy, cotton
and oil seeds, used in their manufacture, the
full amount of tax paid or the excess amount of
tax paid over the tax leviable on sale, as the
case may be, shall be refundable if the
manufactured goods are sold in the State 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 case the manufactured
goods have been sold before the 1st day of
January, 1988, the tax paid on goods, leviable
to tax at the first stage of sale under section
18, used in their manufacture, shall not be
refunded."
This provision speaks of adjustment and refund of
tax in certain cases. It operates subject to the provisions of
clause (iii) of proviso to sub-section (1) of Section 15, we shall
refer to it presently, and is also subject to the conditions and
restrictions, as may be prescribed. Clause (i) of Section 15-A
stipulates that the tax leviable under the Haryana Act or the CST
Act on the sale of goods by a dealer manufactured by him shall be
reduced by the amount of tax paid in the State on the sale or
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purchase of the raw material, other than the tax paid on the last
purchase of paddy, cotton and oil seeds used in their manufacture.
Clause (ii) speaks of a situation where no tax is leviable on the
sale of manufactured goods [except those specified in Schedule
‘B’], subject to the conditions and exceptions specified therein;
or when the tax leviable on the sale of manufactured goods is less
than the tax paid in the State on the sale or purchase of raw
material other than the tax paid on the last purchase of paddy,
cotton and oil seeds used in their manufacture, the full amount of
tax paid or the excess amount of tax paid over the tax leviable on
the sale, as the case may be, shall be refundable if the
manufactured goods are sold in the State or in the course of
inter-State trade or commerce or in the course of export out of
the territory of India. It is plain that this clause provides for
refund of tax paid on the last purchase of raw material, except on
paddy, cotton and oil seeds. However, the proviso creates an
exemption to the refund of tax when the manufactured goods have
been sold before the 1st day of January, 1988. What is relevant to
note is that the purchase tax paid on paddy, cotton and oil seeds
(which are used as raw material) can neither be refunded nor
adjusted. It is in view of this provision that show cause notices
were issued to the assessees denying both the benefit of
adjustment as well as refund of tax paid on the purchase of paddy.
The last mentioned amendment inserted in Section 15-A, the
following words "subject to the provisions of clause (iii) of
proviso to sub-section (1) of Section 15". Clause (iii) of
proviso to sub-section (1) of Section 15 of the Haryana Act reads
as under:
"15.(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,--
(a) and (b) xxx xxx xxx
Provided that --
(i) and (ii) xxx xxx xxx
*
(iii) in the case of rice procured out of
paddy on the purchase of which a tax has
been levied inside the State, tax leviable
on such rice shall be reduced by the
amount of tax levied on such paddy."
It specifies different rates of tax leviable on the taxable
turnover of a dealer depending on the nature of goods. Clause
(iii) of the proviso to sub-section (1) says that the tax leviable
on rice, which is procured from the purchase tax suffered paddy,
shall be reduced by the amount of tax levied on such paddy.
Having referred to the provisions of Article 286 of the
Constitution and Section 15(c) of the CST Act, we have pointed out
that clause (1) of Article 286 protects sale or purchase which
takes place (a) outside the State or (b) in the course of import
of goods into or export of the goods out of the territory of
India, from a State Law imposing or authorising imposition of a
tax. We have also indicated that clause (c) of Section 15 of the
CST Act directs that where in respect of sale or purchase of
paddy, tax has been levied in a State, then the tax leviable on
the rice procured out of such paddy shall be reduced by the amount
of tax levied on such paddy. This is to ensure that paddy and
rice, being declared goods, considered to be of special importance
in the inter-State trade or commerce, be relieved of so much
burden of tax on rice as has been on the paddy from which rice has
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been procured. It appears to us that clause (iii) of the proviso
to sub-section (1) of Section 15 reflects the intendment of clause
(c) of Section 15 of the CST Act. It is not possible to accept
that Section 15-A denies adjustment in regard to the tax paid on
the purchase of paddy, as it is clear that in view of the opening
words of Section 15-A, inserted by the amendment referred to
above, it is subject to clause (iii) of the proviso to sub-section
(1) of Section 15. Consequently, applying the principle of
harmonious construction Section 15-A cannot be so interpreted as
to override the provisions of either Section 15(c) of the CST Act
or clause (iii) of the proviso to sub-section (1) of Section 15 of
the Haryana Act so as to deny the benefit of adjustment. It,
therefore, follows that the assessees are entitled to adjustment
of purchase tax paid on paddy when the rice procured therefrom is
taxed.
It is true that Section 15A does not permit refund of
purchase tax paid on paddy, cotton and oilseeds by an assessee
though such a relief is available in regard to other goods. In
the light of the above discussion, the challenge to Section 15A on
the ground of violation of Section 15(c) of the CST Act or Article
286 (1)(b) of the Constitution cannot be sustained because the
only relief that is granted by Section 15(c) is reduction of tax
leviable on the sale of rice procured from out of paddy, where tax
has been levied on sale or purchase of such paddy inside the
State. This relief is incorporated by the Haryana Act in clause
(iii) of the proviso to sub-section (1) of Section 15. Even
clause (b) of sub-article (1) of Article 286 does not provide for
exemption of tax on the purchase of paddy. There is no other
provision either in Article 286 or in the CST Act which bars a
State from levying tax on the sale or purchase of paddy which is
not exported out of the territory of India. Section 15A proceeds
on the premise that purchase tax is payable, inter alia, on paddy.
From the above discussion, it is clear that before the omission of
Section 9 from the Haryana Act, no purchase tax was payable on
paddy under Section 6 of the Act, therefore, during the aforesaid
period, the assessee cannot complain of the denial of the benefit
of adjustment and refund of purchase tax on the basis of Section
15-A of the Haryana Act. The position would, however, be different
after April 1, 1991, when Section 9 was omitted from the Act.
In regard to the competence of a legislature to levy impost,
it is well established that it can do so, it can as well legislate
retrospectively.
In Rai Ramkarishna & Ors. Vs. The State of Bihar (1964 (1)
SCR 897), a Constitution Bench of this Court observed, where the
legislature could make a valid law, it could provide not only for
the prospective operation of the material provisions of the said
law, but also for the retrospective operation of the said
provisions. It was also observed that the legislative power
included the subsidiary or the auxiliary power to validate law
which was found to be invalid. Even if a law passed by the
legislature was struck down by the Courts, it was competent for
the appropriate legislature to pass a validating law so as to make
the provisions of the earlier law effective from the date when it
was passed. In that connection, it was held that the test of the
length of time covered by the retrospective operation could not by
itself be treated as a decisive test.
In Jawaharmal vs. State of Rajasthan and Ors. (1966 (1)
SCR 890) a Constitution Bench of this Court laid down,
"What it (Section 2 of the Act of 1964) does is to
amend retrospectively Section 3 of the principal Act
by inserting a proviso ........... The power to
legislate includes the power to legislate
prospectively as well as retrospectively and in that
behalf, tax legislation is no different from any other
legislation. The power to tax can be competently
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exercised by the legislature either prospectively or
retrospectively; and that is precisely what Section 2
has done in the present case. Therefore, there was no
substance in the argument that Section 2 of the Act
was invalid."
In that case Section 3 of the Rajasthan Passengers and Goods
Taxation Act, 1959 (Act 18 of 1959) was amended by Rajasthan
Finance Act Nos.14 of 1961 and 11 of 1962 to raise the maximum
rates leviable under the Act. The Acts did not, however, obtain
the assent of the President, as required by Article 255 of the
Constitution. The defect was cured by issuing Ordinance No.4 of
1964 which was replaced by Act 22 of 1964 for which the assent of
the President was duly obtained. Section 2 of the said Act of
1964 retrospectively re-enacted the amendments to Section 3 of the
Principal Act by Acts of 1961 and 1962 and Section 4 of the Act
validated all the collections and levies under the earlier Acts
and also purported to cure the infirmity in the said earlier Act
arising from non-compliance with Article 255. The petitioner
therein challenged the validity of the said ordinance as well as
the Act of 1964 under Article 32 of the Constitution, which
failed.
In M/s. J.K. Cotton Spinning and Weaving Mills Ltd. & Anr.
vs. Union of India & Ors. (1987 (Supp.) SCC 350) by Section 51 of
Finance Act, 1982, Rules 9 and 49 of the Central Excise Rules,
1944 were amended retrospectively from the date of framing of the
Rules in 1944. After referring to the cases of Rai Ramakrishna
and Jawaharmal (supra), it was observed that the Court might have
to consider the question as to whether excessive retrospective
operation prescribed by a taxing statute amounted to contravention
of the citizens’ fundamental rights and in dealing with such a
question the Court might have to take into account all the
relevant and surrounding facts and circumstances in relation to
the taxation and in that connection the test of the length of time
covered by the retrospective operation cannot, by itself,
necessarily be a decisive test. By examination of the merits of
the case it was held that the retrospective effect given to the
said provisions was subject to Section 11-A of the Act and was,
therefore, not excessive and arbitrary.
In State of Tamil Nadu vs. Arooran Sugars Ltd. (1997 (1)
SCC 326), the same principle is reiterated and it is added that in
special situation this Court has held that such excessive
retrospectivity was violative of Article 14 of the Constitution.
In the instant case, having regard to the provisions of
Section 40 of the Haryana Act, the authorities can not revise the
assessment for period beyond five years. Further, even though
Section 15-A was given retrospectivity with effect from May 27,
1971, it would hardly be effective between May 27, 1971 and April
1, 1991 when the benefit of exemption under Section 9(1)(b) ceased
to exist, as such none of contentions that giving Section 15-A
retrospectivity of 21 years could be harsh, arbitrary and illegal
would be devoid of merit.
No relief was available in regard to penultimate purchase of
paddy which was converted into rice and exported. This position
obtained till clause (ca) of Section 15 of the CST Act was
inserted by Act 33 of 1996 on September 28, 1996. The said clause
(ca) provides, where a tax on sale or purchase of paddy
is leviable under a State Law and the
rice procured out of such paddy is exported out of India, then for
the purposes of sub-section (3) of Section 5 of the CST Act, the
paddy and rice have to be treated as a single commodity. What is,
however, contended in clause (ca) is only declaratory and,
therefore, retrospective. We do not so think. A declaratory Act
is defined in ’Craies on Statute Law’ thus :
"For modern purposes a declaratory Act may be defined
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as an Act to remove doubts existing as to the common
law, or the meaning or effect of any statute. Such
Acts are usually held to be retrospective." *
It cannot be said to be clarificatory for, it neither
supplies an obvious omission in the CST Act nor purport to explain
any provision of that Act. It confers a new benefit hitherto not
available. It is not given retrospective effect expressly. There
is also nothing to imply that it has retrospective operation.
However, had it been declaratory or curative, it would have been
treated as retrospective. (See: Shri Chaman Singh & Anr. vs.
Srimathi Jaikaur [1969 (2) SCC 429]).
We do not also find any force in the contention of
Mr.Chidambaram that in not granting refund of purchase tax only in
regard to three goods - paddy, cotton and oil seeds - there is
violation of Article 14 of the Constitution. It is a settled
proposition of law that in the matter of taxation, the legislature
has greater latitude to give effect to its policy of raising
revenue and for that purpose selecting the goods for taxing. The
classification of goods based on the policy of taxing some goods
and leaving others outside the net of taxation cannot be assailed
as violative of Article 14 of the Constitution. (See :
M/s.Steelworth Ltd. vs. State of Assam [1962 Suppl.(2) SCR 589]
and Gopal Narain vs. State of Uttar Pradesh & Anr. [1964 (4) SCR
869]).
The observations of Krishna Iyer,J. in Murthy Match Works,
Etc.Etc. vs. The Asstt. Collector of Central Excise, etc. [1974
(3) SCR 121] which are approved by a Constitution Bench in Ganga
Sugar Corporation Ltd. vs. State of Uttar Pradesh & Ors. [1980 (1)
SCC 223] are worth quoting :
"It is well established that the modern State, in
exercising its sovereign powers of taxation, has to
deal with complex factors relating to the objects to
be taxed, the quantum to be levied, the conditions
subject to which the levy has to be made, the social
and economic policies which the tax is designed to
subserve, and what not. In the famous words of
Holmes,J., in Bain Peanut Co. vs. Finson [(1930) 282
US 499] :
We must remember that the machinery of
government would not work if it were not allowed a
little play in its joints. "
Granting relief, whether of refund or otherwise, stands on the
same footing.
To sum up :
(1) In the specified circumstances in which charge of
purchase tax on the raw material is imposed, clause
(b) of sub-section (1) of Section 9 of the Haryana Act
and the exemptions provided therein would apply; the
law declared by this Court in Murli Manohar & Co.;
Hotel Balaji and K.B.Handicrafts (supra) holds the
field;
(2) while Section 9 remained on the Statute till April 1,
1991, retrospective amendments of Sections 2(p), 6, 15
and 15-A of the Haryana Act would make no difference
in regard to levy of purchase tax on paddy;
(3) adjustment of purchase tax paid on paddy (raw
material) is permissible under Section 15-A of the
Haryana Act during the relevant period;
(4) by virtue of Section 15-A of the Haryana Act, denial of
refund of purchase tax, if any, paid by a dealer is
not illegal much less unconstitutional; and
(5) mere similarity between Section 9(1)(b) of the Haryana
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Act and Section 4-B of the Punjab Act would not
relieve a dealer of the liability to pay purchase tax
on paddy as the scope of charging sections under the
said Acts are different.
In view of the above discussion, the appeals filed by the
assessees under the Haryana Act are allowed in part and the
appeals filed by the assessees under the Punjab Act are dismissed.
The writ petitions are disposed of accordingly.
No costs.
Insofar as the question of payment of interest, if any, is
concerned, it is left open to be adjudicated in the connected
cases.