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Swadesh Leather Store Vs. Sales Tax Officer, Sector Iv and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case Number Civil Misc. Writ Petition No. 3167 of 1970
Judge
Reported in[1972]29STC308(All)
AppellantSwadesh Leather Store
RespondentSales Tax Officer, Sector Iv and anr.
Appellant Advocate Beni Prasad Agarwal, Adv.
Respondent Advocate Standing Counsel
Cases ReferredIn Narayanan Krishnan Kaimal v. Narayanan Parameswara Kaimal
Excerpt:
.....of a like nature. therefore, if the notification is bad because it has been made with retrospective effect, it is not open to this court to say that in any event it can be treated as valid for the period following the date on which it was made, namely, 1 st august, 1958. in my opinion, as a vital ingredient constituting an essential element of the notification is without authority, the entire notification must fall. so clause (b) is retrospective as well as prospective. a different rule might be disastrous to the financial operations of the government, and produce the utmost confusion in the business of the entire country. 688. at page 688 of the report it was said :this being the position the question arises whether the act is bad in toto or is bad only in so far as it..........of the tax. in these circumstances it is difficult to say that the scheme of taxing inter-state sales forms such an integral part of the entire scheme of taxation on sales or purchases of goods as to be inextricably interwoven with it. there is no reason to presume that had the bihar legislature known that the provisions of the act might be held bad in so far as they imposed or authorised the imposition of a tax on inter-state trade or commerce even though parliament had not by law provided otherwise, it would, nevertheless, not have passed the rest of the act.20. in r. m. d. chamarbaugwalla and anr. v. union of india and anr. a.i.r. 1957 s.c. 628 venkatarama ayyar, j., on a comprehensive review of the case law, summarised the principles governing separability of the valid part.....
Judgment:

S.N. Dwivedi, J.

1. The petitioner seeks to challenge the assessment orders for the years 1958-59, 1959-60 and 1960-61 made under the U.P. Sales Tax Act on 30th March, 1970. The orders were passed by the Sales Tax Officer, Agra.

2. The petitioner is a dealer in dressed hides and skins. Tax has been assessed in accordance with the Notification No. ST 2934/X-902(7)-56 dated 1st August, 1958. This notification was issued by the State Government under Section 3-AA of the U.P. Sales Tax Act (hereinafter called 'the Act'). The argument of learned counsel for the petitioner is that as the notification was made operative from a back date it is invalid in toto. Before we examine the argument on merits we shall give a short history of the genesis of the notification.

3. Section 3 of the Act, at the relevant time, provided that every dealer shall, for each assessment year, pay a tax at the specified rate on his turnover of such year. The U.P. Sales Tax (Amendment) Act, 1956, inserted Section 3-AA into the Act. Section 3-AA provided that notwithstanding anything contained in Section 3, the turnover in respect of coal, iron and steel, raw jute, cotton, oil-seeds, or raw hides and skins shall not be liable to tax except at the point of sale by a dealer to the consumer, and the rate of tax shall not exceed three pies per rupee. The U.P. Sales Tax (Amendment) Act, 1957, amended Section 3-AA. It may be noted that in the original section only raw hides and skins were mentioned. The amendment now included in Section 3-AA dressed hides and skins. The amendment came into force with effect from 30th November, 1957.

4. The U.P. Sales Tax (Amendment) Act, 1958, amended Section 3-AA. It substituted for the words 'two per cent.' the words 'two paise per rupee'. Some other amendments were also made but we are not concerned with them.

5. The State Government issued the impugned notification. It reads: 'In pursuance of the provisions of Section 3-AA of the U.P. Sales Tax Act, 1948 (U.P. Act No. 15 of 1948), as amended up to date, and in modification of all previous notifications on the subject to the extent they are repugnant to this notification, the following is hereby notified for the information of all concerned :

(a) the turnover in respect of raw hides and skins which under the said Section 3-AA are liable to tax only at the point of sale by a dealer to the consumer shall with effect from the date of issue of this notification be subject to tax at the rate of one naya paisa per rupee;

(b) the turnover in respect of dressed hides and skins which under the said Section 3-AA are liable to tax only at the point of sale by a dealer to the consumer shall with effect from 30th November, 1957, be subject, to tax at the rate of two naye paise per rupee ; and.

(c) the turnover in respect of cotton yam as defined in the said Section 3-AA and which under the said section is liable to tax only at the point of sale by a dealer to the consumer shall with effect from 1st August. 1958, be subject to tax at the rate of two naye paise per rupee.

6. It may now be noted that there is no reference to the issue of a notification by any authority in Section 3-AA. However, the Government issued the impugned notification in 1958. It had also issued several other notifications of a like nature. In 1964 the State Legislature made an attempt to repair the lacuna. It passed the U.P. Sales Tax (Amendment) Act (No. 14 of 1964) on 27th June, 1964. Section 3-AA(1) was amended. It was provided that in Sub-section (1) for the words 'shall not exceed two paise per rupee' the words 'shall be such not exceeding 2 paise per rupee as may be declared by the State Government by notification in the Official Gazette.' It was further provided that these words shall be substituted and shall be deemed always to have been substituted. Section 3 of the Amending Act reads:

Any notification declaring the rate of tax issued before the commencement of this Act purporting to be under Section 3-AA of the principal Act shall be deemed to have been issued under that section as amended by this Act....

7. Although on 1st August, 1958, the State Government might have no power to issue the impugned notification (we do not express any opinion on this aspect) the validity of the notification cannot be challenged on this score now. The Amending Act, 1964, gives power to the State Government to issue a notification under Section 3-AA. The power is given retrospectively. In view of this amendment, it will be deemed that on 1st August, 1958, the State Government had the power to issue the impugned notification.

8. Counsel for the petitioner has submitted that Section 3-AA, even after amendment in 1964, does not empower the State Government to authorise levy of sales tax from a date anterior to the date of the birth of the notification.

9. In Shri Hari Kishan v. Commissioner of Sales Tax [1970] 26 S.T.C. 511 a Division Bench of this court has held that the State Government has no power to authorise a levy from a back date. That decision is binding on us. Accordingly we will hold that Clause (b) of the impugned notification, in so far as it authorises levy of sales tax from a back-date, is invalid.

10. The next question is whether the tax can be assessed from 1st August, 1958, and onwards under the impugned notification. Counsel for the petitioner submits that as the retrospective part of Clause (b) of the impugned notification is invalid, effect cannot be given to the notification even from 1st August, 1958. According to him the entire Clause (b) will fall down. In support of this argument he relies on Shri Hari Kishan's case [1970] 26 S.T.C. 511.

11. The leading judgment in Shri Hari Kishan's case [1970] 26 S.T.C. 511 was delivered by Pathak, J. Gulati, J , agreed with him. In that case the court was dealing with Notification No. ST-2933/X-902(7)-56 dated 1st August, 1958. The language of that notification is similar to the language of the impugned notification except for one difference. That difference is in regard to the backdate. In that case the back date was 1st April, 1956, while in the impugned notification the back date is 30th November, 1957. Pathak, J., took the view that as the notification was retrospective, it was invalid in toto. The learned Judge said :

It cannot be disputed that it (notification) has been made with retrospective effect.... Now, that being so, the notification dated 1st August, 1958, must be held to be invalid. In my opinion such a notification cannot be treated as operative even prospectively, namely, from the date on which it is published. The point of time from which any legislation, principal or subordinate, will take effect is an essential ingredient of the legislation. When the author of the legislation states that it will come into operation from a specified point of time, it is from that point of time alone that it can take effect. It can take effect either from that point of time or not at all. It is not open to a court construing or applying the legislation to substitute another point of time for the one specified by the author of the legislation. Therefore, if the notification is bad because it has been made with retrospective effect, it is not open to this court to say that in any event it can be treated as valid for the period following the date on which it was made, namely, 1 st August, 1958. In my opinion, as a vital ingredient constituting an essential element of the notification is without authority, the entire notification must fall.

12. It was assumed that the notification operated 'with retrospective effect'. But the notification before us does not operate 'with retrospective effect'. It was issued on, and operated from, 1st August, 1958. But Clause (b) of the notification authorises the levy of tax on dressed hides and skins from a retrospective date. Again, it was assumed in Shri Hari Kishan's case [1970] 26 S.T.C. 511 that the notifying authority has fixed one point of time only for the commencement of the notification. It was assumed that that point of time was a back date. We shall show that the notification before us authorises levy of sales tax with effect from 30th November, 1957, and until it is deleted. It seems to us that Pathak, J., had the particular notification (as construed by him) in his mind. His observation is, we think, restricted to the notification as construed by him. So it should not be extended to the notification before us which we have construed in a different manner.

13. We have already quoted the impugned notification. It is clear from the text of the notification that it commences to operate from 1st August, 1958. It is the date on which it was published in the Gazette. It does not show that it will come into effect from any back date. Clause (a) of the notification authorises levy of tax on raw hides and skins from 1st August, 1958, and not from any back date. Similarly, Clause (c) authorises levy of tax on cotton yarn from 1st August, 1958, and not from any back date. Only Clause (b) authorises levy of tax on dressed hides and skins from a back date, namely, 30th November, 1957. In respect of Clauses (a) and (c) it commences from 1st August, 1958. So the notification itself is not retrospective.

14. The expression 'with effect from November 30, 1957' in Clause (b) of the notification has got a double meaning. Firstly, it authorises levy of sales tax on dressed hides and skins from 30th November, 1957. Secondly, it authorises levy of sales tax even after 1st August, 1958, and till the notification is deleted. So Clause (b) is retrospective as well as prospective. We have already said that the retrospective portion of the notification is invalid. The question is whether the prospective operation which is necessarily implied in the expression 'with effect from November 30, 1957' and which is valid is severable from the retrospective operation which is invalid. The question of severability is a question of construction. In taxing statutes courts adopt a liberal construction.

15. In Marshal Field & Co. v. Clark (1891) 36 Law. Ed. 294 Harlan, J., said:

Even if the position of the appellants with respect to the power of Congress to pay these bounties were sustained, it is clear that the parts of the Act in which they are interested, namely, those laying duties upon articles imported, would remain in force. It cannot be said to be evident that the provisions imposing duties on imported articles are so connected with or dependent upon those giving bounties upon the production of sugar in this country that the former would not have been adopted except in connection with the latter.

16. While in a general sense, both may be said to be parts of a system neither the words nor the general scope of the Act justifies the belief that Congress intended they should operate as a whole, and not separately for the purpose of accomplishing the objects for which they were respectively designed.

17. Unless it be impossible to avoid it, a general revenue statute should never be declared inoperative in all its parts because a particular part relating to a distinct subject may be invalid. A different rule might be disastrous to the financial operations of the Government, and produce the utmost confusion in the business of the entire country.'

18. In Firm Jaswant Rai Jai Narain v. Sales Tax Officer and Ors. A.I.R. 1955 All. 585 Agarwal, J., said:

No Government can be carried on without taxation. In taxing statutes, the presumption is that the Legislature's predominant intention was to tax and the exemptions granted were secondary in importance. If the exemptions are found to be invalid, the presumption is that the Legislature would still have intended that the rest of the statute should be enforced.

19. The question of severability arose in the Bengal Immunity Co. v. State of Bihar A.I.R. 1955 S.C. 661 at p. 688. At page 688 of the report it was said :

This being the position the question arises whether the Act is bad in toto or is bad only in so far as it offends the provisions of Article 286 as construed above. It appears to us that the Act imposes tax on subjects divisible in their nature but does not exclude in express terms subjects exempted by the Constitution. In such a situation the Act need not be declared wholly ultra vires and void, for it is feasible to separate taxes levied on authorised subjects from those levied on exempted subjects and to exclude the latter in the assessment of the tax. In these circumstances it is difficult to say that the scheme of taxing inter-State sales forms such an integral part of the entire scheme of taxation on sales or purchases of goods as to be inextricably interwoven with it. There is no reason to presume that had the Bihar Legislature known that the provisions of the Act might be held bad in so far as they imposed or authorised the imposition of a tax on inter-State trade or commerce even though Parliament had not by law provided otherwise, it would, nevertheless, not have passed the rest of the Act.

20. In R. M. D. Chamarbaugwalla and Anr. v. Union of India and Anr. A.I.R. 1957 S.C. 628 Venkatarama Ayyar, J., on a comprehensive review of the case law, summarised the principles governing separability of the valid part from the invalid part of an enactment. Three of those principles are material in this case. They are:

(1) In determining whether the valid parts of a statute are separable from the invalid parts thereof, it is the intention of the Legislature that is the determining factor. The test to be applied is whether the Legislature would have enacted the valid part if it had known that the rest of the statute was invalid.

(2) If the valid and invalid provisions are so inextricably mixed up that they cannot be separated from one another, then the invalidity of a portion must result in the invalidity of the Act in its entirety. On the other hand, if they are so distinct and separate that after striking out what is invalid, what remains is in itself a complete code independent of the rest, then it will be upheld notwithstanding that the rest has become unenforceable.

(3) The separability of the valid and invalid provisions of a statute does not depend on whether the law is enacted in the same section or different section; it is not the form, but the substance of the matter that is material, and that has to be ascertained on an examination of the Act as a whole and of the setting of the relevant provisions therein.

21. The main notification is a taxing enactment. It is designed to raise revenue for the State. If this purpose is kept in view there is no difficulty in holding that the State Government would have issued the notification even if it had known that it could not authorise the levy from a back date. We have no doubt in our mind that the State Government intended to keep the levy alive from 1st August, 1958. The expression 'with effect from November 30, 1957', though an apparent unit, has got a double meaning. The levy is authorised from 30th November, 1957, as well as in future also. The prospective aspect of the notification is not inextricably interwoven with its retrospective aspect. The two can be separated and what survives on such separation can stand on its own feet. In Narayanan Krishnan Kaimal v. Narayanan Parameswara Kaimal, A.I.R. 1954 Trav. Co. 130, a Government notification which was retrospective was not struck down in entirety. It was held that it could legitimately operate with effect from the date of the issue of the notification.

22. The impugned notification will remain operative from 1st August, 1958, even though the retrospective levy with effect from 30th November, 1957, is invalid.

23. The notification was issued on 1st August, 1958. In the assessment year 1958-59 tax on dressed hides and skins will be assessed on the petitioner in accordance with the notification with effect from 1st August, 1958. For the earlier period tax may be assessed on him in accordance with the other provisions of the Act. As regards the assessment years 1959-60 and 1960-61 tax will be assessed on him in accordance with the notification, for the notification was in force during these years. It was deleted on 15th November, 1961.

24. In the result, we allow this petition partly. It is dismissed in regard to the assessment years 1959-60 and 1960-61, The assessment order for the assessment year 1958-59 is quashed. The Sales Tax Officer is directed to assess the petitioner on his turnover for the assessment year 1958-59 as already indicated in the judgment. There shall be no order as to costs.


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