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Sri Kamla Dal Mills Vs. State of U.P. and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Civil
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ Nos. 3388, 3521, 3522, 3529, 3571 to 3579, 3800 to 3813, 3920 to 3926, 3928 to 3933
Judge
Reported in[1966]18STC204(All)
AppellantSri Kamla Dal Mills
RespondentState of U.P. and anr.
Appellant AdvocateR.K. Upadhya and ;Hari Sarup, Advs.
Respondent AdvocateStanding Counsel
Excerpt:
- - in the statement of objects and reasons for the enactment of section 3-d it is stated that there was some resentment against multiple point levy, particularly on essential commodities like foodgrains, that there has been evasion of tax on large scale by intermediaries between cultivators and purchasers on the ground that they are not 'dealers' and that consequently it was decided to have a system of single point purchase tax at the first point of purchase and to provide for levy of single point sales tax on transactions of first purchase on which purchase tax may not be leviable. the legislature has not parted with its perfect control over the governor, and has the power, of course, at any moment, of withdrawing or altering the power which they have entrusted to him. the selection.....m.c. desai, c.j.1. this is a petition under article 226 of the constitution for certiorari to quash notification no. st-7122/x-900 (16)/64 issued by the state government of u.p. on 1st october, 1964, and injunction prohibiting the state of u.p. and the sales tax officer, hathras, from enforcing section 3-d of the u.p. sales tax act and the above-mentioned notification against the petitioner and from levying, assessing and collecting purchase tax under section 3-d on purchases. the petitioner is a firm registered as a dealer under the u.p. sales tax act and carrying on the business of purchasing pulses from kachcha arhatiyas acting as agents of cultivators and from other dealers and manufacturers of dal and selling pulses. the u.p. sales tax act was enacted 'to provide for the levy of a.....
Judgment:

M.C. Desai, C.J.

1. This is a petition under Article 226 of the Constitution for certiorari to quash Notification No. ST-7122/X-900 (16)/64 issued by the State Government of U.P. on 1st October, 1964, and injunction prohibiting the State of U.P. and the Sales Tax Officer, Hathras, from enforcing Section 3-D of the U.P. Sales Tax Act and the above-mentioned notification against the petitioner and from levying, assessing and collecting purchase tax under Section 3-D on purchases. The petitioner is a firm registered as a dealer under the U.P. Sales Tax Act and carrying on the business of purchasing pulses from kachcha arhatiyas acting as agents of cultivators and from other dealers and manufacturers of dal and selling pulses. The U.P. Sales Tax Act was enacted 'to provide for the levy of a tax on the sale of goods in the United Provinces'. under Section 3 of it every dealer was required to 'pay a tax at the rate of three pies per rupee on his turnover of' each assessment year and it was to be determined in the prescribed manner and the State Government was empowered to enhance the rate on the turnover in respect of any goods. 'Turnover' was defined in Section 2(i) to mean 'the aggregate of the proceeds of sales by a dealer'. By Section 4, sale of water, milk etc. and goods notified by the State Government was exempted from payment of tax. The Act was amended from time to time. Section 3-A was added empowering the State Government to declare by notification that the turnover in respect of any goods or class of goods will not be liable to tax except at such single point in the series of sales by successive dealers as it may specify and to fix the rate of tax. Section 3-AA was added laying down that the turnover in respect of oil-seeds and certain other goods will not be liable to tax except at the point of sale by a dealer to the consumer and the rate of tax was not to exceed 3 pies per rupee. Sections 3 and 3-AA were subsequently amended and the rate of tax was increased from 3 pies per rupee to 2 naye paise per rupee of the turnover. By another amendment definition of 'turnover of purchases' was introduced; it was 'the aggregate of the amounts of purchase price paid or payable by a dealer in respect of purchase of goods made by or through him'. On 1st October, 1964, the rate of tax payable under Section 3 on the turnover of sale of foodgrains was 1 paisa per rupee and on the turnover of sales of gurrab and oil-seeds 2 paise per rupee. The Act was amended by Act No. 22 of 1964 and purchase tax was introduced for the first time with effect from 1st October, 1964. The following amendments were made by it. In the preamble the words 'to provide for the levy of a tax on the sales or purchase of goods' were substituted for the words 'to provide for the levy of a tax on the sate of goods'. The definition of 'turnover' was altered to 'the aggregate amount for which goods are supplied or. distributed by way of sale or are sold, or the aggregate amount for which goods are bought, whichever is greater by a dealer, either directly or through another, on his account or on account of others whether for cash or deferred payment or other valuable consideration'. Section 3-D was added ; it was :-

3-D. (1)...there shall be levied and paid, for each assessment year or part thereof, a tax on the turnover, to be determined in such manner as may be prescribed, of first purchases made by a dealer or through a dealer, acting as a purchasing agent in respect of such goods or class of goods, and at such rates, not exceeding two paise per rupee in the case of foodgrains, including cereals and pulses, and five paise per rupee in the case of other goods and with effect from such date, as may, from time to time, be notified by the State Government in this behalf....

(3) No dealer shall be liable to pay a tax under this section if his turnover during the assessment year is less than Rs. 12,000 or such larger amount as may be notified by the State Government....

(4) On the issue of a notification under this section, no tax shall be levied under any other section in respect of the goods so notified.

2. There were other amendments which are irrelevant. On 1st October, 1964, the State Government issued the impugned Notification No. ST-7122/X in exercise of the powers conferred by Section 3-D(1) declaring that with effect from 1st October, 1964, the turnover of first purchases in respect of goods mentioned below shall be liable to tax under Section 3-D at the rate mentioned :-

Foodgrains ... 1.5 paise per rupee on first purchasesGur ... 3 paise per rupee on first purchasesOil-seeds ... 2 paise per rupee on first purchases.

3. By another Notification No. ST-7123 the State Government notified that with effect from 1st October, 1964, no dealer shall be liable to pay sales tax under this section if his turnover of foodgrains during the assessment year is less than Rs. 25,000. The State Government issued Notification No. ST-7931/X adding ghee to the list with effect from 1st December, 1964; the rate of tax was 5 paise per rupee. By another notification dated 16th February, 1965, the rate of tax on ghee was reduced to 3 paise per rupee. By a notification dated 26th December, 1964, the rate of tax on gur was increased to 5 paise per rupee. Rab was added to the list by a notification issued on 7th January, 1965, and the rate of tax was 5 paise per rupee on first purchases.

4. The case of the petitioner is that prior to the amendment by Act-No. 22 of 1964 it was liable to pay tax on the turnover of its sales of pulses at 1 paisa per rupee of the turnover and was made liable to pay tax on the turnover of purchases by Section 3-D with effect from 1st October, 1964. It challenges Section 3-D and the Notification No. ST-7122 issued by the State Government on the grounds that the Legislature did not itself levy any purchase tax on any goods but delegated the power to the State Government to levy it, that it did not reserve to itself any control or check on the exercise by the State Government of the power conferred by the Section, that the State Government was free to select any commodity for taking it out from taxability under Section 3 and making it taxable under Section 3-D, that the Legislature did not lay down any principle for the guidance of the State Government and that the tax on pulses has been increased from 1 paisa per rupee to 1.5 paise per rupee.

5. In connected Writ No. 3571 of 1965 the petitioner is a registered dealer carrying on the business of purchasing ghee (mostly from producers) and selling ghee. In connected Writ No. 3922 of 1965 the petitioner is a registered dealer purchasing oil-seeds from kachcha arhatiyas acting as agents of cultivators and from pakka arhatiyas. In connected Writ No. 3800 of 1965 the petitioner is a registered dealer carrying on the business of purchasing rab from other dealers. The petitioners in the other connected petitions are all registered dealers in foodgrains, ghee, gur, rab or oil-seeds. Under Article 246(3) of the Constitution the U.P. State Legislature had 'exclusive power to make laws...with respect to any of the matters enumerated in List II in the Seventh Schedule' and List II includes item 54 'taxes on the sale or purchase of goods'. Thus the U.P. Legislature had the exclusive power to make laws for U.P. with respect to taxes on purchase of goods. The U.P. Sales Tax Act was enacted in exercise of this power. By Section 3 it imposed a tax on the turnover of each dealer; it was called a tax and not sales tax. According to the definition of turnover as it stood prior to its amendment in 1964 the turnover meant the aggregate of proceeds of sale by a dealer ; the effect, therefore, was that tax was payable under Section 3 on sales, i.e., by the seller and not on purchases, i.e., by the purchaser. Though it was designed as a mere tax, in effect it was a sales tax. Section 3 remains as it was after the amendment; what is payable under it is a tax at a certain rate on the turnover of each dealer. A tax on the turnover of purchases is made payable for the first time under Section 3-D and now the tax is payable on the turnover either of sales or purchases under Section 3 or of purchases only under Section 3-D ; the former tax is payable by the seller or the purchaser, and the latter by the purchaser. The tax under Section 3 is payable on all goods barring certain goods specified in Section 4 and goods exempted by the State Government's notification ; on certain goods it is payable only at a single point of sale but on other goods it is payable at every point of sale. The rate of tax is fixed by Section 3 but the State Government is empowered to fix rates within limits in respect of goods selected for single point taxation. The Legislature has, on the other hand, neither specified the goods in respect of which the purchase tax (i.e., the tax payable under Section 3-D) is payable nor the rate at which it is payable. The selection of goods subject to the purchase tax is left at the discretion of the State Government. So long as it does not issue a notification, no purchase tax is payable at all. When it issues a notification it is payable only in respect of the goods notified in it. The Legislature has not fixed the rate of the purchase tax but only fixed the maximum limits of 2 paise per rupee in the case of food-grains and 5 paise per rupee in the case of other goods. In the statement of objects and reasons for the enactment of Section 3-D it is stated that there was some resentment against multiple point levy, particularly on essential commodities like foodgrains, that there has been evasion of tax on large scale by intermediaries between cultivators and purchasers on the ground that they are not 'dealers' and that consequently it was decided to have a system of single point purchase tax at the first point of purchase and to provide for levy of single point sales tax on transactions of first purchase on which purchase tax may not be leviable. It is further stated that since some commodity subject to multiple point tax generally passes through at least two hands before reaching the consumer it has become necessary to increase the rate of tax consequent to the switch-over to single point tax and the Government is empowered to fix the rate of tax which it considers equitable in respect of each individual commodity. This statement gives sufficient guidance not only about the rate of the purchase tax to be selected by the State Government but also about the particular goods to be subjected to the purchase tax. It indicates that foodgrains and certain other essential commodities are fit to be subjected to the purchase tax. Then there are other goods which can be subjected to it because mercantile agents dealing in them dispute their liability to pay sales tax on the ground that they are mere intermediaries. As regards the rate the maximum provides a limit to the rate to be selected by the State Government. About the exact rate to be selected for each kind of goods sufficient guidance is given by the fact that the goods generally pass through at least two hands before reaching the consumer. The State Government is expected, and should be relied upon, to be guided by these considerations in selecting the goods for the levy of the purchase tax and the rate of the purchase tax to be applicable to them. The argument that unguided discretion has been left to the State Government is without force. The discretion that is conferred is not dissimilar to the discretion conferred by other provisions of the Act, such as Sections 3-A and 4, which have not been held to be invalid. In Vasanlal Maganbhai v. State of Bombay : 1978CriLJ1281 the Supreme Court held that Section 6(2) of the Bombay Tenancy and Agricultural Lands Act (No. 67 of 1948), empowering the State Government to fix a lower maximum rate in any area as valid. The law on the subject of delegation of powers by a Legislature to the State Government was stated by Gajendragadkar, J., in these words :

The Legislature cannot delegate its essential legislative function in any case. It must lay down the legislative policy and principle, and must afford guidance for carrying out the said policy before it delegates its subsidiary powers in that behalf. (page 7).

6. The test laid down by him was 'whether the Legislature has enunciated its policy and principle and given guidance to the delegate or not.' He observed that in applying the test 'this Court has taken into account the statements in the preamble to the Act, and if the said statements afford a satisfactory basis for holding that the legislative policy and principle has been enunciated with sufficient accuracy and clarity the preamble itself has been held to satisfy the requirements of the relevant tests.' (page 7). In Harishanker Bagla v. State of Madhya Pradesh : 1954CriLJ1322 Sections 3 and 4 of the Essential Supplies (Temporary Powers) Act authorising the Central Government to regulate or prohibit the production, the supply and the distribution of essential commodities and to delegate its powers to officers subordinate to it or to State Governments was held to be valid. The power conferred by Section 3 was no less unguided and uncontrolled than the power conferred by Section 3-D of the Sales Tax Act. Mahajan, C.J., speaking for the Court repelled the contention that Section 3 amounted to delegation of legislative powers in excess of the permissible limits. He pointed out that the Legislature had laid down a principle, it being the maintenance, or increase in supply, of essential commodities and the equitable distribution and availability at fair prices of essential commodities and that the preamble and the body of the section sufficiently formulated the legislative policy. He considered the delegation of the power upon the Central Government to be necessary because the ambit and the character of the Act were such that the details of the policy could only be worked out by a subordinate authority. In V.M. Syed Mohamed & Co. v. The State of Madras [1952] 3 S.T.C. 367, Section 5 of the Madras General Sales Tax Act (No. 9 of 1939), providing that sale of hides and skins was liable to tax only at such single point in the series of sales by successive dealers as may be prescribed was not an invalid delegation of power upon the State Government. Venkatarama Ayyar, J., observed at page 380 that the law regarding delegation of legislative functions could be summed up in the following two propositions :-

(1) The enunciation of policy is a matter exclusively within the competence of the Legislature and incapable of delegation to other bodies ; (2) It is not unconstitutional to entrust to special bodies the carrying out of the policies declared by the Act and for that purpose to clothe them with authority to frame Regulations within the framework of the Act.

7. He referred to Willis on Constitutional Law stating that legislations entrusting to outside bodies the power to fix rates is an exception to the rule that legislative power cannot be delegated. Section 1(3) of the Employees' State Insurance Act (No. 34 of 1948) providing that the Act would come into force on such date as the Central Government might appoint and that the different dates might be appointed for different provisions of the Act or for different States was upheld in Basant Kumar v. Eagle Rolling Mills : (1964)IILLJ105SC . Gajendragadkar, C.J., relied upon Queen v. Burah (1878) 5 I.A. 178 at p. 195 and held that the Legislature had exercised its judgment as to place, person, laws, powers and that the impugned provision was conditional legislation and not delegation of legislation. The learned Chief Justice pointed out that the scheme envisaged by the Act could not be introduced in the whole of the country all at once, that it required careful experimentation by stages and in different phases and that consequently the question of extending its benefits had to be left to the discretion of the appropriate Government. The argument that the Legislature has delegated its essential legislative functions to the State Government amounts to arguing that the tax in question has been imposed by the State Government and not by the Legislature which alone has the power to impose it. This argument was repelled by the Judicial Committee of the Privy Council in Powell v. Apollo Candle Company (1885) 10 App. Cas. 282. Sir Robert P. Collier observed at page 291 :-

The duties levied under the Order-in-Council are really levied by the authority of the Act under which the order is issued. The Legislature has not parted with its perfect control over the Governor, and has the power, of course, at any moment, of withdrawing or altering the power which they have entrusted to him. Under these circumstances, their Lordships are of opinion that the judgment of the Supreme Court was wrong in declaring Section 133 of the Customs Regulation Act of 1879 to be beyond the power of the Legislature.

8. On this reasoning the argument that the tax in question is imposed by the State Government through the impugned notification and not by the Legislature must be repelled. The validity of Section 3-A was challenged in Firm Thakur Das Sunder Das v. Sales Tax Officer [1959] 10 S.T.C. 432, on the ground that no guiding principles were laid down by the Legislature. Chaturvedi and Takru, JJ., observed at page 445:

On further consideration, we have come to the conclusion that the observations were not meant to apply to statutes where it was not possible to lay down any guiding principles in view of the nature of power that was conferred on the Government. The power was for making selection out of innumerable commodities, which are for sale in the State, and circumstances of most of them vary, sometimes permanently and sometimes from month to month and day to day. The selection was to depend upon a variety of facts which were by no means uniform and which could best be ascertained by the persons who were placed in charge of the administration of the State.

9. In Pandit Banarsi Das Bhanot v. State of M.P. : [1959]1SCR427 Venkatarama Aiyar, J., speaking for the Court said at page 913 :

It is not unconstitutional for the Legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like.

10. under Section 548 of the Calcutta Municipal Act, 1951, a fee can be charged for a licence at such rate as may from time to time be provided. In The Corporation of Calcutta v. Liberty Cinema : [1965]2SCR477 the Supreme Court referred to the decision in Pandit Banarsi Das Bhanot's case : [1959]1SCR427 and said at page 1117:

This case would appear to be express authority for the proposition that fixation of rates of taxes may be legitimately left by a statute to a non-legislative authority, for we see no distinction in principle between delegation of power to fix rates of taxes to be charged on different classes of goods and power to fix rates simpliciter, if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated.... The question was on what subject-matter, and therefore on what persons, the tax could be imposed. Between the two we are unable to distinguish in principle, as to which is of the essence of legislation ; if the power to decide who is to pay the tax is not an essential part of legislation, neither would the power to decide the rate of tax be so. Therefore, we think that apart from the express observation made, this case on principle supports the contention that fixing of the rate of a tax is not of the essence of legislative power.

11. It approved of the decision in V.M. Syed Mohamed & Co.'s case [1952] 3 S.T.C. 367.

12. There is no provision in Section 3-D or any other section that the notification issued by the State Government must be laid before the Legislature within a certain time and that it can be amended by the Legislature. But an omission in the Act to reserve expressly this power in the Legislature does not mean that the power conferred upon the State Government is so uncontrolled as to amount to unconstitutional delegation. If the State Government issues a notification contrary to its policy it can always amend Section 3-D by taking away the power or restricting it. In the case of V.M. Syed Mohamed & Co. [1952] 3 S.T.C. 367, Venkatarama Ayyar, J., stated at page 383 (with reference to such a safeguard) that 'however desirable the adoption of the safeguard and other safeguards which have been suggested from time to time may be, the validity of the Acts, which has to be determined on purely legal considerations, cannot be affected by their absence.' In Haji Lal Mohammad Biri Works v. Sales Tax Officer [1959] 10 S.T.C 424 and Firm Thakur Das Sunder Das v. Sales Tax Officer [1959] 10 S.T.C. 432, one of the reasons given for repelling the contention that Section 3-A gave unfettered power to the State Government to discriminate between goods and goods was that the State Government was required to lay every notification before the Legislative Assembly and the Assembly had the power of amending or modifying it but it was not laid down that no delegation of power is valid unless such a safeguard has been provided. A provision for such a safeguard is not the only thing that validates the delegation of a power. In Ram Krishna Dalmia v. Justice Tendolkar : [1959]1SCR279 Das, C.J., stated at page 549 that a statute which does not make a classification of the persons or things to whom these provisions are intended to apply and leaves it to the discretion of the Government to select or classify the persons or things for applying the provisions according to the policy or principle laid down by the statute itself for guidance of the exercise of the discretion by the Government in the matter of such selection or classification it is valid and that if the State Government makes the selection or classification in contravention of the policy or principle the executive action would be unconstitutional. In Raja Jagannath Baksh Singh v. State of U.P. : [1962]46ITR169(SC) a provision of the U.P. Large Land Holdings Tax Act giving power to the State Government to select multiples for ascertaining the annual value of holdings (on the basis of which they were taxed) was challenged on the ground that no guidance was given to the Government in the matter of selecting a particular multiple for a particular area. Gajendragadkar, J., held that in view of the policy behind the Act and the fact that the maximum limit to the multiple provided by the provision and the impracticability for the Legislature itself to provide different multiples for different districts and different classes of lands it could not be said that the discretion left to the Government was unfettered or undanalised. In the same way the discretion left by Section 3-D to the State Government to select the goods to be subjected to purchase tax and the rates at which they are to be taxed cannot be said to be unfettered or uncanalised. The distinction between conditional legislation and delegated legislation was pointed out by Kapur, J., in Hamdard Dawakhana v. Union of India : 1960CriLJ671 in these words :-

In the former the delegate's power is that of determining when a legislative declared rule of conduct shall become effective : Hampton & Co. v. United States (1927) 276 U.S. 394 and the latter involves delegation of rulemaking power which constitutionally may be exercised by the administrative agent. This means that the Legislature having laid down the broad principles of its policy in the legislation can then leave the details to be supplied by the administrative authority. In other words by delegated legislation the delegate completes the legislation by supplying details within the limits prescribed by the statute and in the case of conditional legislation the power of legislation is exercised by the Legislature conditionally leaving to the discretion of an external authority the time and manner of carrying its legislation into effect as also the determination of the area to which it is to extend...when the legislation is complete in itself and the Legislature has itself made the law and the only function left to the delegate is to apply the law to an area or to determine the time and manner of carrying it into effect, it is conditional legislation.

13. What holds good in respect of a power delegated to the State Government to determine the time or the manner of carrying the law into effect also holds good in respect of delegation of a power to select goods to which the law of taxation is to apply and the rates at which they are to be taxed. The provision that a purchase tax shall be payable on certain goods to be selected by the State Government and at the rates fixed by it is complete legislation in itself ; it is carried into effect on the State Government's issuing a notification specifying the goods and the rates and so is an instance of conditional legislation.

14. I am unable to understand the argument of Sri Hari Swarup that no tax is imposed by the impugned provision in Section 3-D. His argument is that purchase tax is imposed not by Section 3-D, but by a notification to be issued by the State Government. The operative words of the section are 'there shall be levied and paid...a tax on the turnover.' These words themselves impose the tax; it was not essential for the Legislature to use the word 'charged' before the words 'levied and paid'. Merely because the future tense is used it cannot be said that the tax is not imposed by the Legislature and is left to be imposed by the State Government. Future tense is used because the provision is prospective. The only power conferred upon the State Government is to select the goods in respect of which purchase tax is payable and the rates at which it is payable. The State Government is not given the power to impose purchase tax at all. When it issues a notification selecting the goods and the rates, and purchase tax is levied it is levied under the authority of Section 3-D and not under the authority of the notification. Merely because the notification when specifying the goods and the rates states that purchase tax is payable at such and such rates on the turnover of such and such goods, it cannot be said that the tax is imposed by it. When it specifies the goods and the rates it may refer to the purchase tax payable on them under Section 3-D, but the authority for the levy of the tax is Section 3-D and not itself. It would be enough for the State Government to state in a notification that 'such and such goods and such and such rates are notified in exercise of the power conferred upon the State Government by Section 3-D'; on such a notification being issued purchase tax on the goods at the rate would become payable. On the goods and the rates being notified in a notification the position would be exactly the same as if Section 3-D itself had provided that 'there shall be levied and paid...a tax on the turnover in respect of such and such goods at such and such rates'; if it could not be said then that no tax is imposed by it, it cannot be said that no tax is simply imposed because the goods and the rates are required to be notified by the State Government. So long as no notification is issued by the State Government no tax is to be paid but it does not follow that there has been no imposition of tax. The tax is imposed in ftresenti but its assessment and payment are postponed so long as the State Government does not issue a notification.

15. After the amendment by Act 22 of 1964, tax is payable under Section 3 by every dealer on his turnover, which is defined to mean the aggregate sum for which the goods are sold or the aggregate amount for which the goods are bought, whichever is greater. Under this provision a dealer pays the tax either as a seller or as a purchaser. By Section 3-D a tax is payable by a dealer on his turnover of purchases in respect of certain goods and no tax is payable under Section 3 in respect of them. The purchase tax referred to in Section 3-D is a tax different from that imposed by Section 3. It is not described as a purchase tax and is referred to as a tax on the turnover just like Section 3 but the turnover is different, it being the turnover of purchases and not of sales or purchases, whichever is greater, as in Section 3. Of course, both are taxes imposed on sales ; in one case it is imposed on the turnover of sales or purchases and in the other case it is imposed exclusively on the turnover of purchases. As the purchase tax is different from the tax imposed by Section 3 there must be a provision imposing it and Section 3-D is the required provision.

16. under Section 4 'no tax is payable' on the sale of water, milk and certain other goods ; this means that neither the tax imposed by Section 3 nor the tax imposed by Section 3-D is payable on their sale. Both the taxes are on the sale of goods ; it is a sale of goods by a dealer that furnishes the occasion for imposition of one or the other of the taxes. Though the amounts on which the taxes are imposed are different, they are both taxes on sale and, therefore, the sale of water, milk and the other goods mentioned in Section 4 is exempt from both taxes. The provisions of Section 4 are general and apply to whatever tax would otherwise be payable. If the sale of water, milk, etc., would otherwise be subject to tax under Section 3 that tax is not payable and if it would be subject to tax under Section 3-D that tax is not payable. The argument that Section 3-D confers power upon the Government to remove articles from the exemption list contained in Section 4 is, therefore, misconceived. The State Government has not the power to select any of the goods mentioned in Section 4 for imposition of purchase tax. Even if it selects them Section 4 will prevail over Section 3-D as it prevails over Section 3. It is designed to exempt from taxation what would have been liable to taxation under Sections 3 and 3-D. Then it was argued that if the State Government includes in a notification issued under Section 3-D all the commodities, the turnover of which is taxed under Sections 3 and 3-A, it would amount to the State Government's being invested with the power of repealing or rendering useless Sections 3 and 3-A. There is no question of Section 3 being repealed by a notification issued by the State Government under Section 3-D regardless of the goods specified in it. Even if purchase tax is payable on the turnover of all goods Section 3 is not thereby repealed; it remains in force but there is no turnover to which it can be applied. The State Government is certainly given the power, through the notification, of selecting between Section 3 and Section 3-D in respect of any commodity but it does not amount to excessive delegation of legislative power. If the State Government misuses the power conferred upon it the Legislature can always step in to prevent the misuse by amending Section 3-D. A notification issued under Section 3-A is revisable by the Legislature but no anomaly results from the State Government's issuing a notification under Section 3-D in respect of the goods, in respect of which it had issued a notification under Section 3-A and it was cancelled by the Legislature. There is no repugnancy between the goods being subjected to purchase tax and their being held by the Legislature not to be fit to be subject to tax under Section 3-A. If a notification issued under Section 3-A is cancelled by the Legislature the only effect is that Section 3 becomes applicable to the turnover of the commodity and on the issue of the notification under Section 3-D in respect of it, Section 3-D becomes applicable. If the Legislature thinks that issue of a notification under Section 3-D is against the policy underlying its cancellation of the notification under Section 3-A it can interfere through amendment of Section 3-D. By cancelling the notification under Section 3-A it simply indicates its preference to taxability under Section 3 over taxability under Section 3-A and does not indicate its preference to taxability under Section 3 over taxability under Section 3-D.

17. It was next contended that Section 3-D and the notification issued by the State Government infringe Article 14, by arbitrary power being given to the State Government to distinguish between dealers and dealers. There is undoubtedly a difference between a tax payable on a commodity under Section 3 and a tax payable on it under Section 3-D. The discrimination that is made by the provision and the notification is between dealers who have to pay tax on certain goods under Section 3 and dealers who have to pay tax on other goods under Section 3-D. There is no discrimination at all between one dealer and another dealer in respect of the same goods ; both are charged under Section 3 or Section 3-D and are charged at the same rate. All dealers have to pay the tax at a certain rate under Section 3 on certain goods and all have to pay purchase tax on other goods under Section 3-D and at the same rate. Consequently making the turnover of some goods liable to tax under Section 3 and the turnover of other goods liable to tax under Section 3-D is not at all making any discrimination between one dealer and another and no question of infringement of Article 14 arises. The reasons for which I have found that the power conferred upon the State Government to select the goods to be subjected to purchase tax under Section 3-D and the rates to be applied to them is not a case of unconstitutional delegation of legislative power are available also for holding that no arbitrary power has been conferred upon the Government. The finding that the conferment of the power does not amount to unconstitutional delegation of legislative power is based upon the fact that the power conferred is guided or controlled and not absolute or arbitrary. Therefore, even in respect of the selection of goods and the rates applicable to them the power conferred upon the State Government is not arbitrary.

18. It cannot be disputed that a taxing statute can be knocked down on the ground that it infringes Article 14. So it is needless to refer to K.T. Moopil Nair v. State of Kerala : [1961]3SCR77 . There are numerous pronouncements of the Supreme Court explaining the law about a statute being unconstitutional on the ground of infringing Article 14 of the Constitution. For instance in V.M. Syed Mohammad & Co. : [1954]1SCR1117 Das, J., said :-

The guarantee of equal protection of laws does not require that the same law should be made applicable to all persons. Article 14, it has been said, does not forbid classification for legislative purposes, provided that such classification is based on some differentia having a reasonable relation to the object and purpose of the law in question. As pointed out by the majority of the Bench which decided Chiranjitlal Chowdhury's case [1950] S.C.R. 869 there is a strong presumption in favour of the validity of legislative classification and it is for those who challenge it as unconstitutional to allege and prove beyond all doubt that the legislation arbitrarily discriminates between different persons similarly circumstanced. (page 315-16).

19. In Raja Jagannath Baksh Singh : [1962]46ITR169(SC) Gajendragadkar, J., said at page 1570:

It is for the Legislature to decide on what objects to levy what rate of tax and it is not for the courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the tax. It is also true that the Legislature is competent to classify persons or properties into different categories and tax them differently, and if the classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different categories of persons or objects.

20. In East India Tobacco Co. v. State of A.P. : [1963]1SCR404 Venkatarama Ayyar, J., drew attention to the law stated in K.T. Moopil Nair : [1961]3SCR77 and stated 'that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others' (page 1735). He also referred to authorities laying down that 'Legislatures possess the greatest freedom in classification' and that the United States' Supreme Court 'has seldom held invalid any classification made in connection with the levying of property taxes.' (page 1735). Similarly, Sinha, C.J., said in Orient Weaving Mills (P.) Ltd. v. Union of India : 1978(2)ELT311(SC) :

It is always open to the State to tax certain classes of goods and not to tax others. The Legislature is the best judge to decide as to the incident of taxation as also to the amount of tax to be levied in respect of different classes of goods. The Act recognizes and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind.... It is a function of the State, in order to raise revenue for State purposes, to determine what kind of taxes shall be levied and in what manner.

21. These observations confirm not only that the State Legislature itself could select some goods for being subjected to purchase tax and the rates at which the purchase tax is to be levied but also that the power to do so can be exercised by the State Government without Article 14 being infringed (provided it is conferred on it). In State of M.P. v. Bhopal Sugar Industries : [1964]52ITR443(SC) geographical division of a territory for taxation purposes on historical grounds was held to be valid. Shah, J., said at page 1183 that one challenging a statute on the ground of infringing Article 14 has to make out 'that not only he had been treated differently from others but he has been so treated from persons similarly circumstanced without any reasonable basis, and such differential treatment is unjustifiably made.' The duty of a challenger was expressed thus by Gajendragadkar, C.J., in V.S. Rice and Oil Mills v. State of A.P. : [1964]7SCR456 :

When a citizen wants to challenge the validity of any statute on the ground that it contravenes Article 14, specific, clear and unambiguous allegations must be made in that behalf and it must be shown that the impugned statute is based on discrimination and that such discrimination is not referable to any classification which is rational and which has nexus with the object intended to be achieved by the said statute.

22. Lastly, I would refer to Khyerbari Tea Co. v. State of Assam : [1964]5SCR975 in which Gajendragadkar, J., said at page 941 :-.the power conferred on this Court to strike down a taxing statute if it contravenes the provisions of Articles 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power of the State to levy taxes for the purpose of governance and for carrying out its welfare, activities is a necessary attribute of sovereignty and in that sense it is a power of paramount character.

23. When the provisions of Section 3-D and the notification are examined in the light of the law laid down in the above decisions there would be no difficulty in concluding that they do not infringe Article 14. All that was alleged in the petition in respect of infringement of Article 14 is that 'the notification created discrimination between the sale of foodgrains and other commodities' and that 'the selection of the goods made by the State Government is without any basis'. These allegations hardly make out a case of infringement of Article 14.

24. In K.T. Moopil Nair : [1961]3SCR77 Travancore-Cochin Land Tax Act (No. 15 of 1955) was struck down as discriminatory and offending against Article 14; the reasons on account of which it was struck down do not apply in the instant case. The particularly offensive provision of it was one empowering the State Government wholly or partially to exempt any land from its provisions. No principle or policy was laid down for the guidance of the Government in exercise of the power.

25. In the result, the challenge on the ground of infringement of Article 14 fails.

26. In Petition No. 3579 it was contended that the petitioner was assessed without its being given any opportunity to be heard as required under Rule 41(3). The assessment order that has been passed against the petitioner is a provisional assessment order under Rule 41(3). Rule 41 applies to every dealer liable to pay tax under the Act; so it applies to every dealer liable to pay purchase tax under Section 3-D. He is required to submit quarterly returns of his gross turnover and to deposit in the treasury the amount of tax collected by him on the turnover shown in each return and submit the treasury chalan with the return. Rule 41(3) lays down that if no return is submitted in respect of any quarter or if a return is submitted without the treasury chalan, the Sales Tax Officer must 'after making such enquiry as he considers necessary, determine the turnover to the best of his judgment, provisionally assess the tax payable for the quarter...and serve upon the dealer a notice...and the dealer shall pay the sum demanded within the time and in the manner specified in the notice.' Under Sub-Rule (5) upon the expiry of the assessment year the Sales Tax Officer is required after such inquiry as he may deem necessary to determine the turnover of the assessment year and to assess tax thereon ; this is the final assessment. The dealer in the petition deals in oil-seeds, rab, pulses etc. It filed a return in respect of the first purchases of rab for the first quarter of 1965 and deposited the tax of Rs. 2,000 collected on the amount of the turnover but failed to file a return of the first purchases of oil-seeds and to deposit the tax thereon. So the Sales Tax Officer assessed it to purchase tax under Sub-Rule (3) without giving any opportunity to it to be heard. It was not obligatory upon him to make any enquiry ; he was required to make only such enquiry as he considered necessary. Whether an enquiry was necessary or not was a matter for his subjective determination ; it was for him to decide the question. If he found that no enquiry was necessary he did not act illegally by making no enquiry. No question of infringement of natural justice principle arises in this case. Any dealer who wants to be heard is given an opportunity of being heard by submitting quarterly returns ; whatever he wants to say can be said by him in his quarterly returns. If he does not submit a quarterly return he cannot blame the Sales Tax Officer if he assesses him without calling him before him and hearing him; he has denied himself the opportunity by his own failure to submit the return. Further the assessment under Sub-rule (5) is only provisional; the binding assessment is to be made finally under Sub-rule (6). A question of his being heard may arise at that stage but not at the stage of provisional assessment. In Qamruddin v. Commissioner, Sales Tax, U.P. [1963] 14 S.T.C. 534 to which one of us was a party, it was stated that if an assessee does not file a return he is in the same position as if he had filed a return which was not accepted as correct or complete by the Sales Tax Officer and he had failed to prove that it was complete and correct in spite of a reasonable opportunity having been given to him. Consequently no question of want of opportunity arises when no return has been filed. In Maheshwari Devi Jute Mills v. State of U.P. [1966] 17 S.T.C. 106 our brother Satish Chandra set aside an assessment order passed under Rule 41(3) on the ground that the dealer was not heard before the return submitted by him was rejected as incorrect or incomplete. In the instant case the return has not been rejected as incorrect or incomplete and, therefore, the decision is of no avail.

27. In the result I would dismiss this and connected writ petitions with costs.

S.C. Manchanda, J.

28. I agree.


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