M/S. Satnam
Overseas Vs. State of Haryana & Anr [2002] Insc 439 (24 October 2002)
Syed
Shah Mohammed Quadri & Ruma Pal. Syed Shah Mohammed Quadri,J.
WITH
(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 WITH CIVIL APPEAL NOS. OF 2002 [@ S.L.P.(C)
Nos.3531-3548/96 & 21539/96]
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 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 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 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;
(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 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 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." 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, 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 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 & (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 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 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 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 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).
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 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 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 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 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.
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
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 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 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.
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