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Report No. 61

4.10. The principle in Shama Rao's case.-

In this connection, a judgment of the Supreme Court is of importance.1 The facts of the case were as follows:-

On 16th August, 1962, the administration of Pondicherry became vested in the Government of India by virtue of a de jure transfer. The Pondicherry Administration Act, 1962 (42 of 1962), constituted that territory as a separate centrally administered unit; and under the Union Territories Act, 1963 (20 of 1963) a Legislative Assembly was set up for that area. The Assembly, under that Act, acquired the power of enacting laws in respect of items in Lists II and III of the Seventh Schedule to the Constitution. The Assembly thereafter passed the Pondicherry General Sales Tax Act, 1965 (10 of 1965), which was published on 3rd June, 1965, after receiving the President's assent on 25th May, 1965. The Act provided that section 1(2) of that Act would come into force on such date as the Government may by notification appoint. Section 2(1) of the Act provided that:-

"The Madras General Sales Tax Act, 1959 (1 of 1959) (hereinafter referred to as the Act), as in force in the State of Madras immediately before the commencement of this Act shall extend to and come into force in the Union Territory of Pondicherry subject to the following modifications and adaptations."

1. B. Shama Rao v. Union Territory of Pondicherry, (1967) 2 MP (SC) 98 (100, 105): AIR 1967 SC 1480: 20 STC 214: (1967) 2 SCR 288.

4.11. Thus, there was to be a time interval between the date of passing and date of commencement of the Pondicherry Sales Tax Act. If, in between the two dates, the Madras Legislature amended its own Sales Tax Act, that amendment would become applicable to Pondicherry. The validity of this position was at issue. The Supreme Court held the Pondicherry Act to be void. The reasons for this conclusion of the Supreme Court were thus stated:-

"In the present case, it is clear that the Pondicherry Legislature not only adopted the Madras Act as it stood at the date when it passed the Principal Act, but also enacted that if the Madras Legislature were to amend its Act prior to the date when the Pondicherry Government would issue its notification it would be the amended Act which would apply. The Legislature at that stage could not anticipate that the Madras Act would not be amended, nor could it predicate what amendment or amendments would be carried out or whether they would be of a sweeping character or whether they would be suitable in Pondicherry.1

In point of fact the Madras Act was amended, and by reason of section 2(1) read with section 1(2) of the principal Act, it was the amended Act which was brought into operation in Pondicherry. The result was that the Pondicherry Legislature accepted the amended Act, though it was not and could not be aware what the provisions of the amended Act would be. There was, in these circumstances a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature, and for that reason we must agree with Mr. Desai, that the Act is void, or as is often said, "still born".

1. Emphasis supplied.

4.12. The judgment in the case1 cited above was considered by Subba Rao, C.J., in a subsequent case2 relating to section 5, Punjab General Sates Tax Act. There the Chief Justice, who was a party to the majority judgment in Shama Rao's case, explained and distinguished the same, and observed as follows:-

"Section 1(2) of the said Act provided that the Act would come into force on such date as the Government by notification may appoint. The effect of the section was that the Madras Act as it stood on the date of the notification issued would be in force in the Union Territory of Pondicherry. Indeed, it turned out that the Madras Act was amended before the said notification. This Court held that there was a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature, and for that reason the said sections were void or still-born."

1. Shama Rao v. Pondicherry Administration, (1967) 20 STC 430 SC: AIR 1967 SC 1480, para. 4.11, supra.

2. Devi Dass Gopal Krishnan v. State of Punjab, (1967) 20 STC 430: AIR 1967 SC 1895; See para. 4.13B, infra.



Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back




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