1. In this petition under Article 226 of the Constitution, the petitioners pray that this Court may be pleased to : (i) strike down item 31-B included in the Fifth Schedule of the Mysore Sales Tax Act, 1957 (to be hereinafter referred to as the 'Act') as a result of the enactment of the Mysore Sales Tax (Second Amendment) Act, 1958 (Act 31 of 1958) as being beyond the competence of the Mysore Legislature in view of the provisions of the Additional Excise Duty on woollen fabrics, artificial silk fabrics, sugar and tobacco (Goods of Special Importance) Act, 1957 - Central Act 58 of 1957 (to be hereinafter referred to as the Central Act 58 of 1957) and (ii) quash the Order No. D2/58-59 dated 19th March, 1960, (marked as exhibit A) passed by the first respondent and the appellate order in Appeal Petition No. 71/60-61 dated 10th December, 1960, passed by the second respondent by issue of a writ of certiorari or any other appropriate writ or direction or order as this Court may deem fit in the circumstances of the case.
2. The petitioner is a firm manufacturing sugar candy from sugar since last about 20 years. The petitioner was assessed to sales tax on 19th March, 1960, by the first respondent for the year 1958-59 on the sugar candy sold by it, by virtue of item 31-B in the Fifth Schedule. The petitioner's appeal in this regard was unsuccessful. The appellate order was passed on 10th December, 1960.
3. It was urged on behalf of the petitioner that the amendment effected to the Fifth Schedule by which 'sugar candy' was taken out of the category of sugar was beyond the powers of the Mysore Legislature and therefore is liable to be struck down as ultra vires. This contention was urged on the basis of the provisions in the Central Act 58 of 1957. It was contended on behalf of the petitioner that 'sugar candy' is only the purer form of 'sugar' and as such is protected by the provisions of the Central Act 58 of 1957; therefore the State Legislature lost competence to levy any sales tax on the same.
4. It cannot be seriously disputed that 'sugar candy' is a purer form of 'sugar'. In the opinion of the National Sugar Institute at Kanpur (an Institution run by the Government of India) 'sugar candy' is a purer form of 'sugar'- see exhibit C. It was urged by the learned Government Pleader that the Central Act 58 of 1957 merely mentions 'sugar' and not 'sugar candy'; and there is nothing in that Act to show that the Parliament intended to bring within the ambit of that Act 'sugar candy' also; it may be that according to the legislative practice adopted by the Parliament 'sugar candy' is dealt with separately from 'sugar'. There is no basis for these contentions. Ordinarily 'sugar' includes 'sugar candy'. 'Sugar candy' is not separately dealt with in the Central Act 58 of 1957. Now coming to he legislative practice, in the Finance Act, No. 13 of 1960, it is mentioned that ''sugar' means any form of sugar containing more than ninety per cent. of sucrose'; the word ''sugar' means any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105 degree Centigrade, would be more than ninety.' Hence I have to conclude that both 'sugar' and 'sugar candy' were the subject-matter of legislation in Central Act 58 of 1957. But then does that Act take away the power of the State Legislature to levy sales tax on 'sugar candy'
5. Sales tax legislations are enacted by the State Legislatures on the basis of the powers conferred on them under Entry 54 of List II of Schedule VII of the Constitution. 'Sugar' was one of the goods subjected to sales tax under the Act. It is included as item 34 in the Second Schedule. That it was subject to single point tax leviable on the first or earliest of successive dealers in the State under section 5(3)(a). The item 'sugar' found in Entry 34 admittedly included 'sugar candy' as well. There was no separate entry relating to 'sugar candy' in any of the Schedules in the 'Act.'
6. The Second Finance Commission recommended that it would be in the interest of the public if sales tax on certain goods including 'sugar' is replaced by additional excise duties. The Commission suggested that the Parliament may impose additional excise duties on the goods mentioned in the report and distribute the proceeds on some fixed basis between the several States which agree to remove sales tax on the goods in question. To carry out the recommendations of the Second Finance Commission, the Parliament passed Central Act 58 of 1957. Therein, provision has been made for levying, collecting and distributing additional excise duty. The duty collected has to be distributed among the several participating States, the condition for participation in the scheme in question being the removal of sales tax on the three items of goods, including 'sugar' mentioned therein, by the participating States. Provision is also made in that statute for including these goods in the category of goods declared to be of special importance in inter-State trade or commerce so that, following the imposition of uniform duties of excise on them, the rates of sales tax if levied by any State are subject to the restrictions contained in section 15 of the Central Sales Tax Act, 1956. Act 58 of 1957 was enacted by he Parliament in pursuance of the powers conferred under Entry 84 of List I of the Seventh Schedule of the Constitution.
7. I mention all these facts to show that Act 58 of 1957 was passed by he Parliament not under any Article which makes that enactment binding on the State Legislature. The Parliament merely exercised its own powers, leaving it to the State Legislatures to accept the scheme provided therein or to continue to levy sales tax on the goods in question but subject to the restriction contained in section 15 of the Central Sales Tax Act, 1956. Central Act 58 of 1957 came into force on 24th October, 1957. The State of Mysore appears to have accepted the scheme provided therein. This conclusion is available from the fact that the State Legislature enacted the Mysore Sales Tax (Amendment) Act, 1958 (Mysore Act No. 9 of 1958) which came into force on 14th December, 1957. Section 4 of that Act amended section 8 of the Principal Act. As a result of that amendment a new sub-section was added to section 8 which is numbered as sub-section (2) to section 8. That sub-section reads :
'Subject to the provisions of sub-section (1) in respect of the sale or purchase of the goods mentioned in items 1, 2, 3, 4, 5, 6, 7, 27, 28, 29, 30, 31, 32, 34 and 42 of the Second Schedule and in Item 3 of the Third Schedule, on which excise duty levied by the Central Government with effect from the fourteenth day of December, 1957 has been paid and of the sale of goods mentioned in items 33 and 42 of the Second Schedule acquired by a dealer on or after the fourteenth day of December, 1957, on which the said excise duty is not payable shall be exempt from the tax payable under this Act.'
8. Section 8(1) says :
'No tax shall be payable under this Act on the sale of goods specified in the Fifth Schedule subject to the conditions and exceptions, if any, set out therein.'
9. After coming into force of the Mysore Act 9 of 1958, a dealer in 'sugar' was exempt from paying sales tax in respect of his sale transactions in 'sugar' on which excise duty levied by the Central Government with effect from the fourteenth day of December, 1957, had been paid. There is no dispute that excise duty had been levied and the same had been paid in respect of the 'sugar candy' with which we are concerned in this case.
10. It is agreed that but for the inclusion of Entry 31-B in the Fifth Schedule, the petitioner would not have had to pay sales tax in respect of the transactions in dispute. The question is whether that entry was validly added
11. It was urged by Sri K. Srinivasan, appearing on behalf of the learned counsel for the petitioner, that the State Legislature having accepted the scheme of distribution provided under the Central Act 58 of 1957, cannot now go back upon the understanding reached and tax 'sugar candy' as such by separating it from 'sugar'. If the State Legislature has legislative competence to impose sales tax on any goods, the fact that it might have not honoured its understanding with the Central Government is not a factor that can take away its undoubted power. No estoppel can be pleaded against the Legislature. It is true, as seen earlier, that the State Legislature had accepted the scheme provided under the Central Act 58 of 1957, and the State is evidently participating in the distribution scheme provided under Central Act 58 of 1957. But these aspects do not bear on the question of competence of the Legislature. As mentioned earlier, its competence to levy sales tax springs from Entry 54 of List II of the Seventh Schedule of the Constitution. No Central Statute can abridge that power. Therefore, there is no force in the contention that Entry 31-B was not validly introduced into the 'Act.'
12. For the reasons mentioned above, the grounds taken in the petition can be of no assistance to the petitioner.
13. But in the course of the discussion, it appeared to us that even under the provisions of the 'Act' as they stand, the transactions in dispute may not be liable to be taxed. Hence we directed the counsel on either side to address themselves to that question. We have heard elaborate arguments on that point. It is true that it is not a point taken in the petition. But it is undoubtedly an important question of law which can be decided solely on the basis of the provisions of the 'Act'. Hence, we thought it proper to decide that question.
14. Section 5 of the 'Act' provides for the levy of sales tax on sale or purchase of goods. Section 8 provides for exemptions. The Second Schedule deals with goods on the sale of which a single point tax is leviable on the first or earliest of successive dealers in the State under section 5(3)(a). The Third Schedule deals with declared goods in respect of which a single point purchase tax only is leviable under section 5(3)(b). The Fourth Schedule deals with declared goods in respect of which a single point tax is leviable under section 5(4). The Fifth Schedule deals with goods exempted from tax under section 8. As seen earlier, originally 'sugar' including 'sugar candy' found a place in the Second Schedule (Entry 34). As a result of the addition of section 8(2) 'sugar' including 'sugar candy' was exempted from payment of sales tax if certain conditions are fulfilled. This provision still continues to be in force. Under Mysore Act No. 31 of 1958 no amendment was effected either to section 8 or to the Second Schedule. But Entry 31-B was included in the Fifth Schedule which sets out goods which are exempt from sales tax. Under the Principal Act 'sugar' or 'sugar candy' did not find a place in the Fifth Schedule. In other words, it was not an article exempted from payment of tax. Even after the amendment effected by means of Mysore Act No. 9 of 1958, all sales of 'sugar' are not exempt from sales tax. It is only such sales of 'sugar' which expression includes 'sugar candy' on which excise duty levied by the Central Government with effect from the fourteenth day of December, 1957, has been paid are exempt from sales tax. But in view of Entry 31-B introduced by the Mysore Act No. 31 of 1958, 'sugar other than sugar candy, confectionery and the like' became totally exempt from sales tax. It came within the categories mentioned in section 8(1) but 'sugar candy' does not get that benefit. But in view of section 8(2) 'sugar candy' is still exempt from sales tax if it fulfils the requirements of the provision. In other words, if excise duty mentioned in sub-section (2) had been paid in respect of the disputed transactions - as admittedly it has been paid - those transactions are exempt from sales tax. In view of the history of the legislation referred to earlier, I have to hold that 'sugar' mentioned in section 8(2) still includes 'sugar candy' though 'sugar candy' is separately dealt with under Entry 31-B of the Fifth Schedule. It may be, as contended by the learned Government Pleader, that the Legislature wanted to bring 'sugar candy' within the net of taxation. If that was its intention, it failed to convey that intention. At any rate that intention is not made clear. The Courts have to look at the provisions as they stand and if there is any ambiguity, give the benefit of that ambiguity to the assessee.
15. For the reasons mentioned above, I am of the opinion that the tax imposed on the petitioner is not authorised by the provisions of the 'Act'. Hence I direct that the order of assessment impugned in this proceedings be quashed by issuing a writ of certiorari.
16. As the petitioner has succeeded on a ground which he has not taken in his petition, I do not think that there is any justification in granting costs to him. The parties will bear their own costs.
Ahmed Ali Khan, J.
17. Petition allowed.