Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11
PETITIONER:
M/S. J. K. JUTE MILLS CO. LTD.
Vs.
RESPONDENT:
THE STATE OF UTTAR PRADESH AND ANOTHER
DATE OF JUDGMENT:
17/04/1961
BENCH:
AIYYAR, T.L. VENKATARAMA
BENCH:
AIYYAR, T.L. VENKATARAMA
DAS, S.K.
KAPUR, J.L.
HIDAYATULLAH, M.
SHAH, J.C.
CITATION:
1961 AIR 1534 1962 SCR (2) 1
CITATOR INFO :
R 1962 SC1753 (19)
R 1963 SC 966 (19)
C 1963 SC1667 (15)
R 1965 SC 560 (1,23,18)
RF 1972 SC2455 (12,13)
R 1973 SC 376 (10)
F 1973 SC1034 (13,28)
ACT:
Sales Tax-Enactment enabling Government to fix rate of tax
by notification-Notification declared invalid by court-
Enactment validating notification-Retrospective operation-
Validity of enactment-U. P. Sales Tax (Validation) Act,
1958 (U. P. 15 of 1958), s. 3-U.P. Sales Tax Act, 1948
(U.P. 15 of 1948), s. 3A-Constitution of India, Seventh
Schedule, List II, Entry 54.
HEADNOTE:
In exercise of the power conferred by s. 3A(2) of the U.P.
Sales Tax Act, 1948, which enabled the State Government, by
notification, to fix the rate of the tax to be levied on the
sales of goods specified in the section not exceeding nine
pies per rupee, the Government issued at notification dated
June 8, 1948 imposing a tax of six pies in the rupee on
sales of jute. On March 31, 1956, the Governor of Uttar
Pradesh issued an Ordinance, inter alia, amending S. 3A(2)
of the Act, the effect of which was to enact one ceiling
rate of one anna per rupee on the sale proceeds for all
goods leaving it to the State to fix within the ceiling such
rates of tax for such goods as it might determine. On the
same date the Government issued a notification by which
sales on jute were liable to pay sales tax at the rate of
one anna per rupee on the sale proceeds. The Ordinance was
replaced by U.P. Sales Tax (Amendment) Act, 1956, under
which the amended section shall "be deemed to have effect on
and from April 1, 1956". One of the dealers who had been
assessed to sales tax in accordance with the notification
filed an application under Art. 226 of the Constitution of
India, calling in question its validity, and the High Court
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11
of Allahabad held that there was no power in the State to
issue the notification under s. 3A(2) on March 31, 1956, as
that section was itself to come into force only on April 1,
1956. With a view to remove the defect pointed out in said
decision, the State Legislature passed the U.P. Sales Tax
(Amendment) Act, 957, but this in turn having been declared
by the Allahabad High Court not being effective in saving
the notification, the legislature ultimately enacted the
U.P. Sales Tax (Validation) Act, 1958. Section 3 of this
Act provided that notwithstanding any judgment of any court
the notification dated March 31, 1956, shall be deemed to
have been issued in exercise of the powers conferred by s.
3A of the U.P. Sales Tax Act, 1948, as if the said section
was in force on the date on
2
which the notification was issued in the form in which it
was in force immediately before the commencement of this
Act. The petitioner who was carrying on business in the
manufacture and sale of jute goods filed an application
under Art. 32 of the Constitution and contended that the
Validation Act of 1958, had not brought about any change in
the situation on the grounds (1) that the words "in the form
in which it was in force immediately before the commencement
of this Act" in s. 3 must be read as qualifying the word
"notification" and not the word "section" and in that view
the notification in question was subject to the same
infirmity which attached to it when it was published on
March 31, 1956, and (2) that the State Legislature was not
competent to enact a law imposing sales tax retrospectively
and therefore the Validation Act was ultra vires.
Held: (1) that on its proper construction, the words "in
the form in which it was in force immediately before the
commencement of this Act" in s. 3 of the U.P. Sales Tax
(Validation) Act, 1958, qualify the word "section" and not
the word "notification", and that on that view the impugned
notification was within the saving clause of the Validation
Act.
H. L. M. Biri Works v. Sales Tax Officer, A.I.R. 1959 All.
208, approved.
(2) that the power of a legislature to enact a law with re-
ference to a topic entrusted to it is unqualified and that
in the exercise of such a power it will be competent for the
legislature to enact a law which is either prospective or
retrospective. Accordingly, the Validation Act is not ultra
vires the powers of the legislature under entry 54 in List
II of the Seventh Schedule to the Constitution, for the
reason that it operates retrospectively.
The fact that the seller is not in a position to pass the
sales tax on to the consumer does not affect the competence
of the legislature to enact a law imposing a sales tax
retrospectively as that is a matter of policy.
The Province of Madras v. Boddu Paidanna and Sons, [1942]
F.C.R. go, explained.
The Tata Iron & Steel Co., Ltd. v. The State of Bihar,
[1958] S.C.R. 1355, Buchirajalingam v. State of Bihar,
A.I.R. 1958 S.C. 756 and M.P.V. Sundararamier & Co. v. The
State of Andhya Pradesh, [1958] S.C.R. 1422, followed.
The Union of India v. Madan Gopal Kabra, [1954] S.C.R. 541,
relied on.
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition No. 108 of 1961.
Writ Petition under Art. 32 of the Constitution of India for
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11
the enforcement of Fundamental Rights.
2
M. C. Setalvad, Attorney-General of India, Rameshwar Nath,
S. N. Andley and P. L. Vohra, for the petitioner.
C. K. Daphtary, Solicitor-General of India, K. L. Misra,
Advocate-General, U.P., K. B. Asthana and C. P. Lal, for the
respondents.
1961. April 17. The Judgment of the Court was delivered
by
VENKATARAMA AIYAR, J. - The petitioner is a company
incorporated under the Indian Companies Act, its registered
office being at Kanpur in the State of Uttar Pradesh, and it
is carrying on business in the manufacture and sale of jute
goods. By a notification dated March 31, 1956, the State of
Uttar Pradesh imposed a tax of one anna in the rupee on the
sale proceeds of jute. Previously thereto, the tax payable
on sale of jute was six pies in the rupee. This
notification having been struck down by the High Court of
Allahabad as unauthorised and inoperative, the State
legislature enacted the U. P. Sales Tax (Validation) Act,.
1958 (U. P. Act XV of 1958), hereinafter referred to as the
Validation Act, validating the said notification as from
March 31, 1956. In this petition filed under Art. 32 of the
Constitution, the petitioner contends that notwithstanding
the Validation Act, the notification in question continues
to be void and inoperative, because it has not in fact been
validated, and because the Act itself is ultra vires. The
impugned notification was, it may be mentioned, superseded
by a fresh notification on August 1, 1956, and the present
dispute relates only to the tax on sales effected between
April 1, 1956, and July 31, 1956. If the Validation Act is
intro vires, the tax payable by the petitioner would, in
accordance with the impugned notification, be Rs.
1,26,529-3-0, whereas if the said Act is ultra vires, the
tax would be reduced by half
Though the point for decision is a simple one lying within a
narrow compass, to reach it one has to wade through a
perfect morass of statutes, notifications and judicial
pronouncements. We begin with what has
4
been termed the "Principal Act" by which sales tax was
imposed in the Province. That is the U. P. Sales Tax Act
No. XV of 1948, and that came into force on April 1, 1948.
There were subsequent amendments to it in 1948, 1950 and
1952, but they are not material for the present discussion.
It is sufficient to refer to s. 3-A as it stood on March 31,
1956, when the notification in question was issued. This
section ran as follows:
"3-A. Single point taxation-(1) Notwithstanding anything
contained in Section 3, the State Government may by
notification in the official Gazette declare that the
turnover in respect of any goods or class of goods shall not
be liable to tax except at such single point in the series
of sales by successive dealers as the State Government may
specify.
(2) If the State Government makes a declaration under sub-
section (1) of this section, it may further declare that the
turnover of the dealer, who is liable to pay tax on the sale
of such goods, shall in respect of such sales, be taxed at
such rate as may be specified not exceeding one anna per
rupee if the sale relates to goods specified below:-
(i) Motor vehicles including motor cars, motor taxi-cabs,
motor cycles and cycle combinations, motor scooters,
motorettes, motor omnibuses, motor vans and motor lorries.
Chassis of motor vehicles. Articles including rubber and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11
other tires and tubes and batteries adapted for use as motor
part and accessories of motor vehicles, not being such arti-
cles as are ordinarily also used for other purposes than as
parts of accessories of motor vehicles.
(ii) Refrigerators and air conditioning plants.
(iii) (a) Wireless reception instruments, apparatus and
component parts thereof, including all electrical valves,
accumulators, amplifiers and loudspeakers which are not
specially designed for purposes other than wireless
reception.
(b) Radiogramophones.
(iv) Cinematographic, photographic and other cameras.
projectors and enlargers and films, plates, papers and cloth
required for use therewith.
5
(v) Scents and perfumes,
and nine pies per rupee if it relates to any other goods."
It was under this provision that the U. P. Government had
issued a notification on June 8, 1948, imposing
a tax of six pies in the rupee on the sale of jute.
In exercise of the power conferred by Art. 213(1) of the
Constitution, the Governor of Uttar Pradesh issued on March
31, 1956, Ordinance No. IX of 1956, and that was published
in the Official Gazette on the same date. Under this
Ordinance the whole of subsection (2) of s. 3-A as it then
stood was deleted and the following substituted:-
"(2) If the State Government makes a declaration under
subsection (1), it may further declare that the turnover in
respect of such goods shall be liable to tax at such rate
not exceeding one anna per rupee as may be specified."
The effect of this provision was to exact one ceiling rate
of one anna per rupee on the sale proceeds for all goods
leaving it to the State to fix within the ceiling such rates
of tax for such goods as it might determine.
On the same date, the Government published the following
notification No. ST. 905/X on which the entire controversy
has arisen.
"In exercise of the power conferred by section
3-A of the U. P. Sales Tax Act, 1948, as
amended from time to time, and in supersession
of all previous notifications on the subject,
the Governor of Uttar Pradesh is hereby
pleased to declare that the turnover in
respect of the goods specified in the List
below shall not with effect from April 1,
1956, be liable to tax except-
(a) in the case of goods imported from
outside, Uttar Pradesh at the point of sale
by importer; and
(b) in the case of goods manufactured in
Uttar Pradesh, at the point of sale by the
manufacturer;
and the Governor is further pleased to
declare that such turnover shall with effect
from the said date be taxed at the rate of one
anna per rupee.
List
18. Jute goods"
6
In due course, the U. P. Sales Tax Ordinance No. IX of 1956
was replaced by the U. P. Sales Tax (Amendment) Act XIX of
1956, and that came into force on May 28, 1956. It merely
reproduces the terms of the Ordinance No. IX of 1956 with
this modification which is consequential, that the amended
section including s. 3-A shall "be deemed to have effect on
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11
and from the first day of April, 1956". If notification No.
ST. 905/X dated March 31,1956, is valid there is no question
that the petitioner would be liable to pay sales tax for the
period in question at the rate of one anna per rupee on the
sale proceeds.
One of the dealers who had been assessed to sales tax in
accordance with this notification filed an application under
Art. 226 in the High Court of Allahabad calling in question
its validity and this proved successful, the court holding
that there was no power in the State to issue the impugned
notification under s. 3-A on March 31, 1956, as that section
was itself to come into force only on April 1, 1956, vide
Adarsh Bhandar v. Sales Tax Officer (1). The correctness of
this decision is not under challenge in these proceedings.
We do not therefore desire to express any opinion on it.
With a view to remove the defect pointed out in Adarsh
Bhandar v. Sales Tax Officer (1), the State legislature
passed the U. P. Sales Tax (Amendment) Act XXIV of 1957.
That Act received the assent of the President on August 31,
1957, and was published on September 3, 1957. It runs, so
far as is material, as follows:-
"For sub-section (2) of Section I of the U. P.
Sales Tax (Amendment) Act, 1956, the following
shall be and be deemed to have always been
substituted:-
’This Section, so much of Section 3, as
relates to the substitution of the second
proviso to sub-section (1) of Section 3 of
the U. P. Sales Tax Act, 1948 (hereinafter
called the principal Act) and section 4 shall
have effect on and from the 31st day of March,
1956’."
(1) A.I.R. 1957 All. 475.
7
The result of this amendment was that s. 3-A was given
retrospectively operation from March 31, 1956, instead of
April 1, 1956, as originally enacted. The intention behind
the legislation is obvious. If the impugned notification
was, as held in Adarsh Bhandar v. Sales Tax Officer (1),
invalid, because it was issued before s. 3-A was in
operation, that objection could no longer hold good as that
section would now operate from a point of time anterior to
the issue of the notification. If the State thought that
this legislation would give a quietus to the controversy,
they were sadly mistaken. After the Amendment Act of 1957
came into force, another dealer who was sought to be
assessed pursuant to the notification dated March 31, 1956,
filed a petition under Art. 226 before the Allahabad High
Court and raised the contention that as the Amendment Act
merely amended s. 3-A and did not in terms validate the
impugned notification, no proceedings could validly be taken
under that notification and that therefore the proposed levy
was illegal. This contention was again upheld by a Full
Bench in Firm Bangali Mal v. Sales Tax Officer (2), which
held that there was a difference between the existence of a
power and its actual exercise, that while by reason of Act
XXIV of 1957, a power had been conferred on Government to
issue a notification on March 31, 1956, the notification
actually issued on that date could not be referred to that
power, that it was in exercise of the power supposed to have
been conferred by s. 3-A as it stood on March 31, 1956, and
that in consequence the impugned notification was not saved
by the new Act.
This decision set the legislature again on the move and that
brings us to what may be said to be the final round in the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11
game. The State legislature enacted a fresh legislation for
the purpose of effectuating the impugned notification. That
was U. P. Sales Tax Validation Act XV of 1958. It received
the assent of the President on May 3, 1958, and was
published in the Official Gazette on May 6, 1958. The
preamble to the Act states that "it is expedient to provide
for
(1) A.I.R. 1957 All. 475.
(2) A.I.R. 1958 All, 478.
8
the validation of certain notifications issued under the U.
P. Sales Tax Act, 1948, (U. P. Act XV of 1948) and any
action taken in pursuance thereof". Section 3 of the Act
which deals with the present matter runs as follows:-
"3. Validation of certain notifications and action taken in
pursuance thereof.-
(1) Notwithstanding any judgment, decree or
order of any court, the notifications
specified in Part A, Part B and Part C of the
Schedule shall be deemed to have been issued
in exercise of the powers conferred
respectively by section 3, section 3 -A and
section 4 of the U. P. Sales Tax Act, 1948, as
if the said sections were in force on the date
on which the notifications were issued in the
form in which they were in force immediately
before the commencement of this Act and all
the said notifications shall be valid and
shall be deemed always to have been valid and
shall continue in force until amended, varied
or rescinded by any notification issued under
any of the said section.
(2) Anything done or any action taken
(including any order made, proceeding taken,
direction issued, jurisdiction exercised,
assessment made or tax levied or collected)
purporting to have been done or taken in
pursuance of any of the notifications
specified in the Schedule shall be deemed to
be and to have been validly and lawfully done
or taken."
In Part B are set out the notifications issued in exercise
of the powers conferred by s. 3A of the U.P. Sales Tax Act,
1948, and one of them is the impugned notification No. ST.
905/X. If this legislation is valid, the impugned
notification stands validated and the petitioner would be
liable to pay tax in accordance therewith.
But the petitioner contends that the Validation Act has not
brought about any change in the situation and that the
notification dated March 31, 1956, continues to be null and
void now as before the Act. Two grounds have been urged in
support of this contention that on its true construction
the Act does not in fact validate the impugned notification
and that it is not a
9
law which the State legislature was competent to enact and
it is therefore a nullity. We must now examine these
contentions. As regards the first contention, the argument
in support of it is that the words, "in the form in which
they were in force immediately before the commencement of
this Act" in s. 3 must, in their setting, be read as
qualifying the word, "notifications" and not the word
"sections", and in that view the notification in question is
subject to the same infirmity which attached to it when it
was published on March 31., 1956. We are wholly unable to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11
appreciate this contention. The object of the legislation
as stated in the long title and in the preamble to the Act
was to validate the impugned notification in relation to the
amended section. Schedule B to the Act expressly mentions
that notification. And if we are now to accede to the
contention of the petitioner, we must hold that though the
legislature set about avowedly to validate the notification
dated March 31, 1956, it failed to achieve that object. A
construction which will lead to such a result must, if that
is possible, be avoided. The words, "in the form in which
they were in force immediately before the commencement of
this Act", no doubt occur after the word, "notifications".
But then the words, "in the form" can have no reference to
the impugned notification, because it had never changed
form, whereas they were quite appropriate to s. 3A, because
it had been amended. It should further be noted that the
Validation Act was published both in Hindi and in English,
and both of them were authorised versions. The words in the
Hindi version make it clear beyond all doubt that the words,
"in the form in which they were in force immediately before
the commencement of this Act" qualify the word "sections"
and not the word "notifications". That is the view
expressed by a Bench of the Allahabad High Court in H. L. M.
Biri Works v. Sales Tax Officer (1), on a comparison of the
two versions, and we are in agreement with it. There would
have been no scope for this argument if transposing the
’words, the section read, "as if the said
(1) A.I.R. 1959 All. 208.
2
10
sections were, in the form in which they were in force
immediately before the commencement of this Act, in force on
the date on which the notifications were issued." But even
in its present setting that is the meaning of the section,
and the impugned notification must be-held to be within the
saving of the Validation Act.
We now proceed to examine the second contention of the
petitioner that the validation Act is itself invalid as
being ultra vires the powers of the State legislature under
the Constitution. The argument of the learned Attorney-
General in support of this contention may thus be stated.
The State legislature derives its authority to enact a law
with respect to tax on the sale of goods under entry 54 in
List II of the Seventh Schedule to the Constitution. It has
been held that a sale for the purpose of the entry must be
what in law is recognised as sale. Likewise, a law imposing
tax on sales of goods must, to be intra vires, possess
certain well-defined characteristics associated with such
laws. In The Province of Madras v. Boddu Paidanna and Sons
(1) it has been held that sales tax is a tax on the occasion
of sale. In the present case, the sales sought to be taxed
took place between April 1, 1956 and July 31, 1956, whereas
the Validation Act, by force of which the tax becomes
payable, came into force in 1958. It is therefore not a tax
on the occasion of sale. Moreover a sales tax is an
indirect tax which can be passed on by the seller to the
purchaser. The Sales Tax Acts passed by the legislatures of
several States provide for the seller collecting the tax
from the purchaser as does the U. P. Sales Tax Act XV of
1948, vide s. 8A. That could be done only if the tax was
levied before the sale took place. Therefore by the very
nature of it there could be no retrospective legislation in
respect of sales tax. And finally it is argued that the
imposition of a tax retrospectively would be inconsistent
with the provisions of the U.P. Sales Tax Act, 1948, and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11
could not have been contemplated by that Act. Such for
example are the provisions of S. 8A which provide for the
registration of dealers for
(1) [1942] F.C.R. 90.
11
the assessment years, the deposit into Treasury of sales tax
collected from the purchasers in certain contingencies, S.
14 of the Act which imposes penalty for non-registration
under s. 8A, and rule 63 which provides for the deposit of
the sales tax collected under s. 8A(4) within thirty days of
the expiry of the month in which the amount is charged. It
is accordingly contended that whether we have regard to the
true features of the sales tax legislation or the provisions
of the U.P. Sales Tax Act, the Validation Act could not be
held to be one with respect to sales tax, that it is
therefore not within entry 54, and as there is no other
entry in List II or List III of the Seventh Schedule to the
Constitution, under which the legislation could be
justified, it must be held to be ultra vires. So ran the
argument.
The point for decision., stating it succinctly, is whether
the Validation Act is within the ambit of entry 54 in List
II of the Seventh Schedule to the Constitution. That entry
confers on the States authority to enact a law with respect
to tax on sales of goods. Now what is the extent of that
authority? There must be in fact a sale as recognised by
law. It is only then that a tax could be imposed. But if
the transaction sought to be taxed is not a sale, a law
which seeks to tax it, treating it as a, sale, would be
ultra vires. Thus in The Sales Tax Officer v. Messrs. Budh
Prakash Jai Prakash (1) a tax on agreement to sell was held
to be not authorised by the entry, and in The State of
Madras v. Gannon Dunkerley & Co., (Madras) Ltd. (2), a tax
on the supply of materials in a contract for the
construction of works simpliciter, on the footing of a sale
was held to be outside the entry, and the legislation which
imposed such a tax was struck down as ultra vires. But
where the transaction is one of sale of goods as known to
law, the power of the State to impose a tax thereon is
plenary and unrestricted subject only to any limitation
which the Constitution might impose, and in the exercise of
that power, it will be competent to the legislature to
impose a tax
(1) [1955] 1 S.C.R. 243. (2) [1959] S.C.R. 379.
12
on sales,which had taken, place prior to the enactment of
the legislation.
But it is urged on the strength of certain observations in
The Province of Madras v. Boddu Paidanna and Sons (1) that a
sales tax is a tax on the occasion of sale, and that
therefore it could not be imposed with retrospective
operation. This contention is, in our judgment, wholly
without substance. Now, the point for decision in that case
was whether a tax imposed by a Provincial legislature on the
sale of oil by a person who manufactured it was bad on the
ground that it was in essence an excise duty. While a sales
tax could be imposed by a Provincial legislature, an excise
duty could be imposed only by the Federal legislature. In
holding that the tax in question was a sales tax and not an
excise duty, the court observed as follows:-
"The duties of excise which the Constitution
Act assigns exclusively to the Central
Legislature are, according to the Central
Provinces Case, duties levied upon the
manufacturer or producer in respect of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11
manufacture or production of the commodity
taxed. The tax on the sale of goods, which
the Act assigns exclusively to the Provincial
Legislatures, is a tax levied on the occasion
of the sale of the goods. Plainly a tax
levied on the first sale must in the nature of
things be a tax on the sale by the manu-
facturer or producer; but it is levied upon
him qua seller and not qua manufacturer or
producer." (P. 101).
In the context, the words, "on the occasion of the sale"
have reference to the character of the transaction and not
to the point of time at which the duty becomes leviable, and
they have no bearing on the question as to when such a tax
could be imposed.
And then it is argued that a sales tax being an indirect
tax, the seller who pays that tax has the right to pass it
on to the consumer, that a law which imposes a sales tax
long after the sales had taken place deprives him of that
right, that retrospective operation is, in consequence, an
incident inconsistent with the true character of a sales tax
law, and that the Validation Act is therefore not a law in
respect of tax on the
(1) [1942] F.C.R. 90.
13
sale of goods, as recognised, and it is ultra vires entry
54. We see no force in this contention. It is no doubt true
that a sales tax is, according to accepted notions, intended
to be passed on to the buyer, and provisions authorising and
regulating the collection of sales tax by the seller from
the purchaser are a usual feature of sales tax legislation.
But it is not an essential characteristic of a sales tax
that the seller must have the right to pass it on to the
consumer, nor is the power of the legislature to impose a
tax on sales conditional on its making a provision for
sellers to collect the tax from the purchasers. Whether a
law should be enacted, imposing a sales tax, or validating
the imposition of sales tax, when the seller is not in a
position to pass it on to the consumer, is a matter of
policy and does not affect the competence of the
legislature. This question is concluded by the decision of
this Court in The Tata Iron & Steel Co., Ltd. v. The State
of Bihar (1). The following observations of Das, C. J.,
bearing on this question might be quoted:-
" Under the 1947 Act the primary liability to
pay the sales tax, so far as the State is
concerned, is on the seller. Indeed before
the amendment of the 1947 Act by the amending
Act the sellers had no authority to collect
the sales tax as such from the purchaser. The
seller could undoubtedly have put up the price
so as to include the sales tax, which he would
have to pay but he could not realise any sales
tax as such from the purchaser. That circum-
stance could not prevent the sales tax imposed
on the seller to be any the less sales tax on
the sale of goods. The circumstance that the
1947 Act, after the amendment, permitted the
seller who was a registered dealer to collect
the sales tax as a tax from the purchaser does
not do away with the primary liability of the
seller to pay the sales tax. This is further
made clear by the fact that the registered
dealer need not, if he so pleases or chooses,
collect the tax from the purchaser and some-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11
times by reason of competition with other
registered dealers he may find it profitable
to sell his goods
(1) [1958] S.C.R: 1355.
14
and to retain his old customers even at the
sacrifice of the sales tax. This also makes
it clear that the sales tax need not be passed
on to the purchasers and this fact does not
alter the real nature of the tax which, by the
express provisions of the law, is cast upon
the seller. The buyer is under no liability
to pay sales tax in addition to the agreed
sale price unless the contract specifically
provides otherwise. See Love v. Norman Wright
(Builders) Ltd. If that be the true view of
sales tax then the Bihar Legislature acting
within its own legislative field had the
powers of a sovereign legislature and could
make its law prospectively as well as
retrospectively." (pp. 1378-1379).
The decision of this Court in Buchirajalingam v. State of
Hyderabad (1) is also to the same effect.
The power of a legislature to enact a law with reference to
a topic entrusted to it, is, as already stated, unqualified
subject only to any limitation imposed by the Constitution.
In the exercise of such a power, it will be competent for
the legislature to enact a law, which is either prospective
or retrospective. In The Union of India v. Madan Gopal(2)
it was held by this Court that the power to impose tax on
income under entry 82 of List I in Schedule VII to the
Constitution, comprehended the power to impose income-tax
with retrospective operation even for a period prior to the
Constitution. The position will be the same as regards laws
imposing tax on sale of goods. In M. P. V. Sundararamier &
Co. v. The State of Andhra Pradesh (3), this Court had
occasion to consider the validity of a law enacted by
Parliament giving retrospective operation to laws passed by
the State legislatures imposing a tax on certain sales in
the course of inter-State trade. One of the contentions
raised against the validity of this legislation was that,
having regard to the terms of Art. 286(2), the retrospective
legislation was not within the competence of Parliament. In
rejecting this contention, the Court observed:
(1) A.I. R. 1958 S.C. 756, 759-60. (2) [1954] S.C.R. 541.
(3) [1958] S.C.R. 1422.
15
"Article 286(2) merely provides that no law of
a State shall impose tax on inter-State sales
’except in so far as Parliament may by law
otherwise provide’. It places no restrictions
on the nature of the law to be passed by
Parliament. On the other hand, the words ’in
so far as’ clearly leave it to Parliament to
decide on the form and nature of the law to be
enacted by it. What is material to observe is
that the power conferred on Parliament under
Art. 286(2) is a legislative power, and such a
power conferred on a Sovereign Legislature
carries with it authority to enact a law
either prospectively or retrospectively,
unless there can be found in the Constitution
itself a limitation on that power." (p. 1460).
And it was held that the law was within the competence of
the legislature. We must therefore hold that the Validation
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
Act is not ultra vires the powers of the legislature under
entry 54, for the reason that it operates retrospectively.
It was finally urged on the basis of ss. 8-A, 14 and rule 23
of the U. P. Sales Tax Act that they contemplated only a
prospective legislation and that those sections would be
impossible of compliance under the present legislation.
This is a consideration which is wholly foreign to the
present question. The point which we have got to decide is
whether the Validation Act is ultra vires. That has to be
determined solely on the construction of entry 54 in List II
in the Seventh Schedule, and any other provisions of the
Constitution bearing on the question. Even assuming that
the provisions of the U. P. Sales Tax Act XV of 1948
contemplate a levy of tax in future, that does not affect
the power of the legislature under entry 54 to enact a law
with retrospective operation. It can only result in those
provisions being unenforceable as regards the levy under the
impugned notification. Dealing with a similar contention in
M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh
(1), this Court observed:
"It is also contended that under the Sales Tax
(1) [1958] S.C.R. 1422.
16
Acts, the levy of tax is annual and the rules
contemplate submission of quarterly returns
and payment of taxes every quarter on the
admitted turnover, and that a conditional
legislation under which payment of tax will
become enforceable in fururo would be
inconsistent with the scheme of the Act and
the rules. But this argument, when examined,
comes to no more than this that the existing
rules do not provide a machinery for the levy
and the collection of taxes which might become
payable in future, when Parliament lifts the
ban. Assuming that is the true position, that
does not affect the factum of the imposition,
which is the only point with which we are now
concerned. That the States will have to frame
rules for realising the tax which becomes now
payable is not a ground for holding that there
is, in fact, no imposition of tax." (p. 1454).
None of the grounds urged by the petitioner in support of
the contention that the Validation Act is ultra vires can be
sustained. In the result we must hold that the Validation
Act is intra vires, and the impugned notification dated
March 31, 1956, stands validated by it. This petition must
therefore be dismissed with costs.
Petition dismissed.
17