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Chunnilal Motilal Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Excise
CourtMadhya Pradesh High Court
Decided On
Case Number Miscellaneous Civil Case No. 299 of 1969
Judge
Reported in[1975]35STC298(MP)
AppellantChunnilal Motilal
RespondentCommissioner of Sales Tax
Appellant Advocate R.S. Dabir and ; O.P. Namdeo, Advs.
Respondent Advocate Y.S. Dharmadhikari, Advs.
Cases ReferredState of Gujarat v. Sakarwala Brothers
Excerpt:
- - 4. thereafter, the petitioner unsuccessfully moved the board of revenue for making a reference to this court under section 44(1) of the m. 1 of schedule iii to the act and sales thereof are liable to tax at 2 per cent ? (2) whether, in the facts and circumstances of the case, the rejection of the account books of the applicant as unreliable was justified and assessment of the applicant according to best judgment was in order ? (3) whether, in the facts and circumstances of the case, the assessment of tax on sales of products of sugar estimated at rs. , answered the three questions as follows :the products like 'batasa',chironji' and 'mishri' could not be regarded as sugar within the meaning of item no. the division bench also opined on the second part of the first question that.....p.k. tare, c.j.1. in this reference under section 44(2) of the madhya pradesh general sales tax act, 1958, the board of revenue, on a direction given by this court dated 15th january, 1969, in miscellaneous civil case no. 233 of 1967, has referred the following two questions for our opinion :(1) whether, on the facts and circumstances of the case, there was any material to enhance the gross turnover from rs. 5,02,456 to rs. 5,18,755 and whether the enhancement was legal and(2) whether the sales of batasa, sugar-candy and chironjidana can be regarded as sales of sugar within the meaning of entry no. 41 of schedule i to the madhya pradesh general sales tax act, 1958 ?2. this reference had come up before a division bench of this court, presided over by b. dayal, c. j., and s.p. bhargava, j.,.....
Judgment:

P.K. Tare, C.J.

1. In this reference under Section 44(2) of the Madhya Pradesh General Sales Tax Act, 1958, the Board of Revenue, on a direction given by this court dated 15th January, 1969, in Miscellaneous Civil Case No. 233 of 1967, has referred the following two questions for our opinion :

(1) Whether, on the facts and circumstances of the case, there was any material to enhance the gross turnover from Rs. 5,02,456 to Rs. 5,18,755 and whether the enhancement was legal and

(2) Whether the sales of batasa, sugar-candy and chironjidana can be regarded as sales of sugar within the meaning of entry No. 41 of Schedule I to the Madhya Pradesh General Sales Tax Act, 1958 ?

2. This reference had come up before a Division Bench of this Court, presided over by B. Dayal, C. J., and S.P. Bhargava, J., which by order dated 16th July, 1971, directed that the entire reference be placed before a Full Bench to consider whether the question decided by a Division Bench of this Court in Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1965 M.P.L.J. 354, had been correctly decided. The said Division Bench doubted the correctness of that decision in view of the pronouncement of their Lordships of the Supreme Court in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C), and the decision of the Andhra Pradesh High Court in Paro & Co. v. State of Andhra Pradesh [1970] 25 S.T.C. 34. Hence this reference has come up before a Full Bench.

3. The facts leading to the present reference are as follows : - The petitioner is a dealer in ghee and sweetmeats. For the assessment period from 9th November, 1961, to 27th October, 1962, he submitted a return of his gross turnover amounting to Rs. 5,02,456.69. But as per the books exclusive retail sales account it was Rs. 4,94,053.41. The gross turnover of the petitioner was increased to Rs. 5,25,000, which included an estimated sale of Rs. 25,000 of sweetmeats. According to the petitioner, he had prepared batasas, chironjidana and sugar-candy out of 62 bags of sugar transferred by him from his wholesale shop to the retail shop. The petitioner carries on the business of sugar as a wholesale business and he has started a separate shop for that purpose. He also carries on the business of sweetmeat seller and he has a retail shop for that purpose where he sells sweetmeats prepared out of sugar. It is not disputed that batasas, chironjidana and sugar-candy, which the petitioner had prepared out of sugar only without mixing any other substance were sold in the retail shop. ?His accounts were unsystematic as they were not supported by vouchers and only a lump sum of the total sales of the day used to be entered in the accounts. The petitioner's contention before the Sales Tax Officer was that the three items, batasas, chironjidana and sugar-candy could not be taxed as they were prepared out of sugar only and they also could not be taxed as sweetmeats. That contention was negatived by the Sales Tax Officer. The Appellate Assistant Commissioner also rejected that contention of the petitioner and held that these three items were taxable as sweetmeats. However, he reduced the amount of gross turnover from Rs. 5,25,000 to Rs. 5,18,755. Against that decision of the Appellate Assistant Commissioner, the petitioner filed a second appeal before the Board of Revenue. The petitioner raised two contentions before the Board of Revenue. One was that in view of the decision of this High Court in Misc. Civil Case No. 275 of 1964 Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore [1965] 16 S.T.C. 297 : 1965 M.P.L.J. 354, as also in Misc. Civil Case No. 361 of 1967, the enhancement of the gross turnover was unwarranted and there was no basis for such enhancement. The other point was that batasas, chironjidana and sugar-candy could not at all be taxed as they were included within the meaning of sugar as per entry No. 41 in Schedule I to the Madhya Pradesh General Sales Tax Act, 1958. Therefore, the charging of sales tax at 4 per cent was illegal. However, the Board of Revenue rejected both the contentions of the petitioner and dismissed the appeal.

4. Thereafter, the petitioner unsuccessfully moved the Board of Revenue for making a reference to this court under Section 44(1) of the M. P. General Sales Tax Act, 1958. Thereafter, the petitioner moved this court for requiring the Board of Revenue to make a reference to this court and a Division Bench of this Court in Misc. Civil Case No. 233 of 1967 dated 15th January, 1969, directed the Board of Revenue to refer the two questions for the opinion of this Court. Accordingly, the Board of Revenue by a statement of case dated 13th May, 1969, has referred the two questions for the opinion of this Court. When this reference was heard by a Division Bench, it was directed to be heard by a Full Bench by order dated 16th July, 1971.

5. At the outset, we may note that there have been many amendments after the year 1962 -in the M. P. General Sales Tax Act, 1958, and the Central Sales Tax Act, 1956. We are not concerned with all those amendments, which may be misleading. But, we have necessarily to consider the law as it stood at the time of the assessment year, i. e., the period from 9th November, 1961, to 27th October, 1962. We shall, therefore, be confining to the law as it existed at that time unless we find that the subsequent amendments have retrospective operation. At this stage we might advert to an earlier decision of this court in a reference sought by the petitioner, namely, Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1965 M.P.L.J. 354. In that case at the instance of the petitioner, the Board of Revenue had referred three questions for the opinion of this court under Section 44(1) of the M. P. General Sales Tax Act, 1958. The questions were as follows :

(1) Whether 'batasa', 'chironji', 'mishri', etc., are only crystallised sugar and sales thereof are not liable to tax under item No. 41 of Schedule I to the Act or whether they are products manufactured out of sugar and come under item No. 1 of Schedule III to the Act and sales thereof are liable to tax at 2 per cent ?

(2) Whether, in the facts and circumstances of the case, the rejection of the account books of the applicant as unreliable was justified and assessment of the applicant according to best judgment was in order ?

(3) Whether, in the facts and circumstances of the case, the assessment of tax on sales of products of sugar estimated at Rs. 80,750 by this Tribunal was legal and in order ?

In that case the relevant period for which sales were taxed was from 1st November, 1959, to 19th October, 1960. During that period sugar was a controlled commodity till 10th March, 1960. The Division Bench, presided over by Dixit, C. J., and K. L. Pandey, J., answered the three questions as follows :

The products like 'batasa', 'chironji' and 'mishri' could not be regarded as sugar within the meaning of item No. 41 of Schedule I to the Act.

The Division Bench also opined on the second part of the first question that ' 'batasa', 'chironji' and 'mishri' were not sweetmeats within the meaning of Schedule III to the Act'. As regards the second question, the rejection of the assessee's account books as unreliable was arbitrary and unjustified by any material on record. As regards the third question, the Division Bench opined that under the circumstances of the case the estimate of Rs. 80,750 grounded on the supposed utilisation of 500 bags for manufacture of these products after 9th March, 1960, was based on suspicion and surmises. At that time the relevant entries were as follows :

Item 9. Cooked food other than-

(a) Pastries,

(b) a meal, the charge of which exceeds rupees two,

(c) sweetmeats.

Item No. 41 of Schedule I was as follows :

Item 41. Sugar including khandsari and palmyra.Item No. 1 in Part VI of Schedule II was as follows :'Item 1. All other goods not 4 per cent. On the point of firstincluded in Schedule I sale in the State byor any other part of a dealer liable to tax.'this schedule.

Item 1 of Schedule III was as follows :

(1) Sweetmeats other than chocolates, toffees, lozenges and peppermint drops.

The entries in the relevant year, i. e., 1961-62, were the same as above. Subsequently, amendments were made in the schedule. But in the present case we are necessarily required to interpret the entries as they stood in the years 1960 to 1962. The subsequent amendments will not be material unless we find that they have any retrospective operation. For purposes of comparison, we may reproduce the entries as they stand at present in the year 1971. Item 9 in Schedule I was omitted by Amendment Act No. 9 of 1964 with effect from 1st April, 1964. Item 41 of Schedule I now, as amended, stands as follows :

Sugar including khandsari and palmyra but excluding mishri, batasa, and chironji.

This amendment was made by Amendment Act No. 23 of 1967, which was operative with effect from 1st September, 1967. The residuary entry in Part VI of Schedule II merely enhanced the tax from 4 per cent to 7 per cent. During all this period the rate of tax on this was raised from 4 per cent to 6 per cent and then 7 per cent. Entry No. 1 of Schedule III, as amended, now stands as follows :

Cooked food including sweetmeats (and mishri, batasa and chironji) but excluding cakes, pastries, biscuits, chocolates, toffees, lozenges and peppermint drops.

This amendment was made by Amendment Act No. 9 of 1964, which became effective from 1st April, 1964. Mishri, batasa and chironji were deleted from Schedule I and included in item 1 of Schedule III. Schedule I, which is related to Section 10(1) of the Act pertains to goods exempted from tax. Schedule II refers to Section 6 of the Act, which pertains to levy of tax at the rates shown in the Second Schedule. Schedule III is referable to Section 13 of the Act, which pertains to licensing of certain dealers. Therefore, after the said amendment, a person dealing in mishri, batasa and chironjidana would be required to take a licence, as required by Section 13 of the Act. At this stage we might mention that Section 10(2) of the Act provides that the State Government may in respect of any goods, by notification, amend Schedule I so as to include therein any goods not already specified or may relax or omit any of the conditions and exceptions set out in the corresponding entry in the third column thereof. Thus, the said section operates prospectively only.

6. Further on Section 11 of the Act empowers the State Government to amend Schedule II. It is as follows :

Section 11. Power of Government to amend Schedule II.-(1) The State Government may, by notification, amend Schedule II and thereupon Schedule II shall stand amended accordingly :

Provided that the rate of tax shall not exceed-

(a) 3 per cent in respect of goods in Part I other than foreign and Indian-made foreign liquor in which case it shall not exceed 30 per cent ;

(b) 12 per cent in respect of goods in Part II ;

(c) 3 per cent in respect of goods in Part III;

(d) 2 per cent in respect of goods in Part IV;

(e) 2 per cent in respect _of goods in Part V ; and

(f) 7 per cent in respect of goods in Part VI :

Provided further that if any goods are transposed by deleting them from one of the parts and inserting or adding them to another, the rate of tax in respect of such goods shall not exceed the rate specified in the preceding proviso for the part wherefrom such goods have been transposed :

Provided also that no notification shall be issued under this section without giving in the Gazette such previous notice as the State Government may consider reasonable, of its intention to issue such notification.

(2) Every notification issued under Sub-section (1) shall as soon as may be, after it is issued, be laid on the table of the Legislative Assembly.

Thus, the amendment to Schedule II, as is suggested by this section, would also be prospective.

7. Section 12 of the Act, as amended up to date, is as follows : 'Section 12. Saving.-The State Government may, subject to such restrictions and conditions as may be prescribed by notification, exempt whether prospectively or retrospectively in whole or in part any class of dealers or any goods or class of goods from the payment of tax under this Act for such period as may be specified in the notification.

8. It is to be noted that the amended section empowers the State Government to grant an exemption retrospectively. This is the only provision which gives retrospective operation ; otherwise all other amendments would be prospective.

9. Section 13 of the Act is as follows :

Section 13. Licensing of certain dealers.-(1) The Commissioner may, subject to such conditions as may be prescribed, license under this section any dealer who carries on business in any of the goods specified in Schedule III and whose yearly turnover in respect of all goods specified in Schedule I and Schedule II does not exceed ordinarily one lakh rupees, on advance payment of such licence fee not exceeding one thousand rupees a year as may be determined in relation to such dealer in accordance with the rules made in this behalf and the provisions of Sections 17, 26 and 27 shall not apply to such dealer in respect of his business relating to goods specified in Schedules I and III during the period in which the licence issued to him under this section remains in force.

(2) The licence fee recovered from a dealer under Sub-section (1) shall be deemed to be in lieu of the tax payable in respect of the sales of goods specified in the licence during the currency of the licence.

(3) The State Government may, from time to time, by notification, amend Schedule III so as to include any goods not already specified therein.

10. The reason why a Division Bench of this Court on an earlier occasion in Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1965 M.P.L.J. 354, came to the conclusion that batasa, chironjidana and sugar-candy would not be included within the meaning of sugar was as follows :

The applicant's counsel, Shri R. S. Dabir, forcefully urged that these products, which were made of sugar only, could not be regarded as anything other than sugar only because they were given other forms. In support of this view, the counsel drew our attention to Punamchand Dalichand v. State of Bombay 3 S.T.D. 63, a decision of the Bombay Sales Tax Tribunal mentioned at page 367 of S.V. Aiyar's Sales Tax Digest, Third Edition (1959). The view taken in that case was that if loaf sugar and sugar cubes were exempted, there was no reason why batasas ought not to be exempted also. Even apart from the consideration that the judgment of that case is not before us, we think that the view taken in that case is distinguishable as grounded on the wide meaning of the relevant entry 'sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944' in Schedule A to the Bombay Sales Tax Act, 1946. Sugar in the aforesaid item No. 8 means 'any form of sugar containing more than ninety per cent of sucrose'. We are also of opinion that a word like sugar, which has not been defined in the Act and which is a word of every day use must be understood in the sense in which it is understood in general usage. As Craies observed in his Statute Law, Sixth Edition, at page 163, it must be construed in its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. This rule of construction was accepted and applied by the Supreme Court in Ramavatar v. Assistant Sales Tax Officer A.I.R. 1961 S.C. 1325, and also in Planters Nut and Chocolate Co. Ltd. The King (1952) 1 D.L.R. 385 and Commissioner of Sales Tax, M.P. v. Laddumal Jangilal 1964 M.P.L.J 358. It is obvious that sugar as understood in the popular sense does not include products of sugar like 'batasa', 'chironji', 'mishri', etc. So, in Jethmal Ramswaroop v. The State A.I.R. 1958 Raj. 262, Wanchoo, C. J. (as he then was), observed :

Turning briefly to the merits of the case, we are of the opinion that there is no force in the contention raised by the applicants. Mishri, batasa, etc., are not merely sugar and the fact that sales tax has been paid on sugar is no reason for not levying sales tax on these articles made from sugar. Nor are we prepared to accept that they are deshi sweetmeats. It would be impossible to attempt a definition of deshi sweetmeats. But it is common knowledge that no one in this part of the country would consider mishri, batasa or toys made of sugar, etc., deshi sweetmeats. So they are not exempt under the schedule.In our view, products like batasa, chironji and mishri cannot be regarded as sugar within the meaning of item No. 41 of Schedule I to the Act.

11. However, the Division Bench, which directed this reference to be heard by a Full Bench, was of the view that the view as expressed by the Division Bench in Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1965 M.P.L.J. 354, needs reconsideration in view of the pronouncement of their Lordships of the Supreme Court in State of Gujarat v. Sakarwala Brothers and the decision of the Andhra Pradesh High Court in Paro & Co. v. State of Andhra Pradesh. Therefore, we may examine the implications of the said decisions.

12. In State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.), their Lordships of the Supreme Court, while interpreting entry 47 of Schedule A to the Bombay Sales Tax Act, 1959, held that 'batasa', 'harda' and 'alchidana' would fall within the definition of sugar and that the word 'sugar' in entry 47 was intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it is called. Their Lordships affirmed that view of the Gujarat High Court. Section 5(1) of the Bombay Sales Tax Act, 1959, was as follows :

Section 5. (1) Notwithstanding anything in this Act, but subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of Schedule A, no tax shall be payable on the sales or purchases of any goods specified in that schedule.' Entry 47 in Schedule A read as under :

Sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944.It is true that entry 47 specifically mentioned sugar to mean in the same sense as item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944, which defined 'sugar' to mean any form of sugar containing more than 90 per cent of sucrose. However, in the Madhya Pradesh Act, the phrase used is merely 'sugar' including khandsari and palmyra. Of course, subsequent amendments have been made from time to time, but the phrase 'sugar' was given a meaning unqualified by any other category. Their Lordships of the Supreme Court, affirming the view of the Gujarat High Court, held that the word 'sugar' as used in entry 47 was wide enough to cover 'batasa', 'harda' and 'alchidana'. We do not see any distinction between the two definitions of 'sugar' in all its forms as provided by the Central Excises and Salt Act, 1944, and the phrase 'sugar' as used in the M. P. General Sales Tax Act, 1958. Of course, if sugar were to be mixed with some other substance, in that event it would be a taxable item. Moreover, the definition of 'sugar' as provided by an allied enactment, which has a bearing on the M. P. General Sales Tax Act, 1958, ought to be taken for the purposes of interpreting the word 'sugar' occurring in the M. P. General Sales Tax Act, 1958.

13. In Paro & Co. v. State of Andhra Pradesh [1970] 25 S.T.C. 34, a Division Bench of that High Court held that the term 'sugar' used in item 6 of Schedule V of the Andhra Pradesh General Sales Tax Act, 1957, would include 'sugar-candy', which would be but a purer form of sugar and contains no other ingredient but sugar. The learned Judges of the said Division Bench laid down that the term 'sugar' was not confined to sugar in its ordinary form but cover sugar in all its forms provided the sugar element is wholly predominant. The learned Judges of the Andhra Pradesh High Court relied on the Supreme Court case of State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.).

14. In Madanlal Khaitan v. Commercial Tax Officer, Siliguri [1972] 29 S.T.C. 625, a Single Bench of the Calcutta High Court had to consider the question whether the term 'sugar' in Notification No. 506 F. T. dated 3rd March, 1958, issued under Section 26 of the West Bengal Sales Tax Act, 1954, would mean and include sugar in any form including therein sugar-candy as defined by the Central Excises and Salt Act, 1944. The learned Judge opined that as long as sugar-candy answers the description of sugar as denned in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and as long as the notification dated 3rd March, 1958, issued under Section 26 of the West Bengal Sales Tax Act, 1954, remained in force it was not liable to any taxation under either the v. Commercial Tax Officer (1963) 67 C.W.N. 1102 was notBengal Finance (Sales Tax) Act, 1941, or the West Bengal Sales Tax Act, 1954. The learned Judge followed the Supreme Court case of State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.), as also the decision of the Mysore High Court in M.L. Abdul Malik and Co. v. Commercial Tax Officer, 2nd Circle, Basavangudi, Bangalore [1963] 14 S.T.C. 214, and the decision of the Madras High Court in Vasantha & Co. v. State of Madras [1963] 14 S.T.C. 696. The view as expressed in G.C. Panda accepted by the learned Judge.

15. In Commissioner of Sales Tax, Lucknow v. Roshan Lal Balram [1972] 30 S.T.C. 166, a Division Bench of the Allahabad High Court presided over by S.N. Dwivedi, J. (as he then was), and R. L. Gulati, J., opined that 'batasa' would be nothing else but khandsari sugar in a different form. As khandsari sugar was only taxable at the point of sale by the importer or manufacturer under a notification issued under Section 3-A of the U. P. Sales Tax Act, 1948, 'batasa' prepared from locally purchased khandsari sugar would not be taxable as an unclassified item. The learned Judges of the Division Bench followed the view as expressed by their Lordships of the Supreme Court in State of Gujarat v. Sakarwala Brothers.

16. In M.L. Abdul Malik and Co. v. Commercial Tax Officer, 2nd Circle, Basavangudi, Bangalore', a Division Bench of the Mysore High Court held that sugar would include sugar-candy and both of them were the subject-matter of legislation in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and they would not be wholly exempt from taxation, but the power of the State Legislature to tax all those items would be subject to the restrictions provided by the Central enactment in view of Section 15 of the Central Sales Tax Act, 1956. However, the learned Judges of the said Division Bench opined that sugar would include sugar-candy.

17. In Vasantha & Co. v. State of Madras [1963] 14 S.T.C. 696, a Division Bench of the Madras High Court similarly opined that sugar-candy being included within the meaning of sugar would be exempt from payment of sales tax.

18. In Mangoo Mal Ram Kishore v. H.K. Sharma, Assistant Sales Tax Officer, Delhi [1974] 33 S.T.C. 182, a Single Bench of the Delhi High Court, presided over by Prithvi Raj, J., opined that 'bura' would be a form of sugar and, therefore, it would be exempt from taxation by virtue of entry 9 of the Second Schedule to the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi. The learned Judge further opined that since the Sales Tax Act did not define the word 'sugar', it would both be relevant and expedient to consider the definition of the word 'sugar' as contained in the various enactments to discern and appreciate not only the popular sense in which the people conversant with the subject-matter attribute meaning to the word 'sugar' but also the sense in which the Government attributes meaning to that word.

19. As against this the learned Advocate-General for the respondent relied on the observations of Wanchoo, C.J. (as he then was), in Jethmal Ramswaroop v. The State A.I.R. 1958 Raj. 262 as also the earlier case of this court in Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1965 M.P.L.J. 354. We are of the opinion that the observations made by their Lordships of the Supreme Court in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.) would not be distinguishable and those observations will apply to the question of interpretation of item No. 41 of Schedule I of the M.P. General Sales Tax Act, 1958, as it stood in the years 1960 to 1962.

20. There is another aspect of this question to be considered. Section 14 of the Central Sales Tax Act, 1956, declares the goods mentioned therein as of special importance in inter-State trade or commerce. Sub-clause (viii) of the said section declares 'sugar' as defined in item No. 1 of the First Schedule to the Central Excises and Salt Act, 1944 (No. 1 of 1944), to be goods of special importance. Section 15 of the Central Sales Tax Act, 1956, provides as follows :

Section 15. Every sales tax law of a State shall, in so far 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 three 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, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State.

21. Previously, the rate mentioned in this section was 2 per cent, while the words 'three per cent' were substituted by the Finance Act No. 13 of 1966, with effect from 1st July, 1966. Therefore, prior to 1st July, 1966, if a State law imposed sales tax on declared goods, it could in no case exceed 2 per cent in respect of sales inside the State. Later on the Parliament passed the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Act No. 58 of 1957). Section 3 of the said Act provided as follows:

Section 3. (1) There shall be levied and collected in respect of the following goods, namely, sugar, tobacco, cotton fabrics, rayon or artificial silk fabrics and woollen fabrics produced or manufactured in India and on all such goods lying in stock within the precincts of any factory, warehouse or other premises where the said goods were manufactured, stored or produced, or in any premises appurtenant thereto, duties of excise at the rate or rates specified in the First Schedule to this Act.

(2) The duties of excise referred to in Sub-section (1) in respect of the goods specified therein shall be in addition to the duties of excise chargeable on such goods under the Central Excises and Salt Act, 1944, or any other law for the time being in force.

(3) The provisions of the Central Excises and Salt Act, 1944, and the Rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in Sub-section (1).

Further on Section 4 of the said Act provides as follows : 'Section 4. During each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year, as are specified in that schedule.

22. Thereafter Section 15 of the Central Sales Tax Act, 1956, was amended and the amended provision, which came into effect from 1st October, 1958, is as follows :

Section 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, in so far 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 three 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.

23. The clear implication of the section is that any State levying sales tax on declared goods would not be entitled to participate in the distribution of additional excise duty and the further restriction is that before 1st July, 1966, the State Government, in no case, could charge sales tax in excess of 2 per cent. It appears that in accordance with the provisions, the State Government issued a notification dated 10th October, 1965, purporting to be under Section 12 of the M.P. General Sales Tax Act, 1958, taxing sugar at 2 per cent in compliance with the provisions made by the Central enactment. This is one of the factors to be considered in the present case.

24. The word 'sugar' has not been defined by the M. P. General Sales Tax Act, 1958. The question is whether the definition provided by the Central Excises and Salt Act, 1944, which is adopted by the Central Sales Tax Act, 1956, and the Additional Duties of Excise (Goods of Special Importance) Act, 1957, can be taken as a guide for interpreting the word 'sugar' for the purposes of the M.P. General Sales Tax Act, 1958. We do not see any reason why the definition in an allied enactment cannot be taken into consideration, especially when the M. P. General Sales Tax Act, 1958, does not define the word 'sugar'. We may observe that Sections 14 and 15 of the Central Sales Tax Act, 1956, have a bearing on the provisions of the State Sales Tax Act, in the matter of levying sales tax on declared goods. Therefore, at least for the purposes of sales tax on such declared goods, we would be entitled to take the definition of the word 'sugar' as provided by the Central Sales Tax Act, 1956, as also the Additional Duties of Excise (Goods of Special Importance) Act, 1957, which definition would ultimately be referable to the Central Excises and Salt Act, 1944. This is one reason why we would adopt the said definition given by the Central Excises and Salt Act, 1944.

25. Another reason why we would adopt the same interpretation is that in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.)., their Lordships of the Supreme Court have given a wider meaning to the word 'sugar' and for valid reasons the Division Bench of the Andhra Pradesh High Court in Paro & Co. v. State of Andhra Pradesh [1970] 25 S.T.C. 34 has adopted that principle. Similarly, in Madanlal Khaitan v. Commercial Tax Officer, Siliguri [1972] 29 S.T.C. 625, and Commissioner of Sales Tax, Lucknow v. Roshan Lai Balram [1972] 30 S.T.C. 166, the Division Benches of the said High Courts have followed that principle while interpreting the word 'sugar' in a comprehensive sense. The third reason is that the word 'sugar' as occurring in entry 41 of Schedule I to the M. P. General Sales Tax Act, 1958, as it stood during the years 1960 to 1962 was without any qualification. Therefore, even if we were to adopt the meaning as understood in common parlance, it would include all forms of sugar in whatever shape it may be. Of course, the condition would be that it should not be mixed with any other substance. But it should be pure sugar in whatever form, whether in the form of sweets such as batasas, chironjidana or sugar-candy or in the shape of ornaments made out of sugar. The very fact that the legislature subsequently amended the schedules and made these transformed items of sugar taxable, would be an indication of the intention of the legislature to the effect that previously these items were not taxable, but the legislature thought it proper to tax them subsequently.

26. As a result of the discussion aforesaid, we are of the opinion that the view as taken by a Division Bench of this Court in Channulal Motilal v. Commissioner of Sales Tax, M.P. 1965 M.P.L.J. 354, was an erroneous view in the light of the statutory provisions existing at that time and, moreover, the view as expressed in that case would not be in consonance with the view as expressed by their Lordships of the Supreme Court in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.). The distinction sought to be made by the learned Advocate-General that the definition of the word 'sugar' under the Central Excises and Salt Act, 1944, may have been relevant in that case, but not in the present case would, in our opinion, not be tenable, especially in view of the fact that Sections 14 and 15 of the Central Sales Tax Act, 1956, have a bearing on all State Sales Tax Acts, and, therefore, we would be justified in adopting the definition of the word 'sugar' as provided by an allied enactment, such as the Central Sales Tax Act, 1956. Of course, that position would be altered by the subsequent legislative enactments. But, we have no doubt that as the law stood in the years 1960 to 1962, the word 'sugar' would include transformation of sugar, pure and simple, into any shape or form such as batasa, chironjidana or sugar-candy. We would, therefore, express our dissent from the earlier pronouncement of this court in Channulal Motilal v. Commissioner of Sales Tax, M.P., Indore 1973 M.P.L.J. 858 (S.C.).

27. As regards the other question, whether there was any material to enhance the gross turnover from Rs. 5,02,456 to Rs. 5,18,755, we are clearly of the opinion that the learned Advocate-General has failed to show any material in that behalf, which would form the basis of a justification for enhancement. In this connection we might advert to the pronouncement of their Lordships of the Supreme Court in Commissioner of Sales Tax, M.P. v. H.M. Esufali 1973 M.P.L.J. 858 (S.C.), wherein their Lordships have elucidated the distinction between the best judgment assessment and an assessment based on accounts. Their Lordships clarified the distinction in the following words :

Before proceeding to examine the contentions advanced on behalf of the parties, it is necessary to clarify certain aspects. It may be noted that the first assessments were made by the Sales Tax Officer primarily on the basis of the return submitted by the assessee. In the proceedings relating to those assessments, the Sales Tax Officer relied on the books of account of the assessee. While making reassessments on the basis of the information gathered from the bill book seized, the Sales Tax Officer rejected the accounts maintained by the assessee as unreliable and assessed the assessee on the basis of his 'best judgment'. The distinction between a 'best judgment' assessment and assessment based on the accounts submitted by an assessee must be borne in mind. Sometimes there may be innocent or trivial mistakes in the accounts maintained by the assessee. There may be even certain unintended or unimportant omissions in those accounts ; but yet the accounts may be accepted as genuine and substantially correct. In such cases, the assessments are made on the basis of the accounts maintained even though the assessing officer may add back to the accounts price of items that might have been omitted to be included in the accounts. In such a case, the assessment made is not a 'best judgment' assessment. It is primarily made on the basis of the accounts maintained by the assessee. But when the assessing officer comes to the conclusion that no reliance can be placed on the accounts maintained by the assessee, he proceeds to assess the assessee on the basis of his 'best judgment'. In doing so, he may take such assistance as the assessee's accounts may afford ; he may also rely on other information gathered by him as well as on the surrounding circumstances of the case. The assessments made on the basis of assessee's accounts and those made on 'best judgment' basis are totally different types of assessments.

In that particular case a bill book had been seized by the sales tax authorities, which disclosed sales, which were not at all mentioned in the account books. Therefore, while reassessing, the sales tax authorities came to the conclusion that the account books of the assessee were not correct and for that reason they were rejected. It was for that reason that the sales tax authorities added certain amount on the basis of best judgment assessment. It may be that at the time of assessment, the account books of the assessee may have been taken as correct. But, subsequently, they were found to be incorrect on account of seizure of the bill books, which disclosed sales not mentioned in the account books. Therefore, for that reason, the account books could be rejected outright and a best judgment assessment could be made. But for that purpose, there must be some material of whatever kind, on the basis of which the taxing authority would be justified in rejecting the accounts as incorrect. The addition of a sum to the accounts, which are accepted by the taxing authority would be unwarranted if there be no basic material in that behalf to arrive at that conclusion. In this connection we might advert to the observations of a Division Bench of this Court in Commissioner of Income-tax, M.P., Nagpur and Bhandara v. Vrajlal Manilal and Company [1972] 86 I.T.R. 799, wherein the Division Bench with reference to this aspect observed in paragraph 13 as follows :

However, the controversy has now been set at rest by the decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali [1970] 76 I.T.R. 696 (S.C), where, dealing with the question-, the Supreme Court said :

The first point which falls for determination is whether the imposition of penalty is in the nature of a penal provision. The determination of the question of burden of proof will depend largely on the penalty proceedings being penal in nature or being merely meant for imposition of an additional tax, the liability to pay such tax having been designated as penalty under Section 28.... It is true that penalty proceedings under Section 28 are included in the expression 'assessment' and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting Section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest.... It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings: Hindustan Steel Limited v. State of Orissa [1970] 25 S.T.C. 211 (S.C.). In England also it has never been doubted that such proceedings are penal in character : Fattorini (Thomas) (Lancashire) Limited v. Inland Revenue Commissioners [1943] 11 I.T.R. (Suppl.) 50....The next question is that when proceedings under Section 28 are penal in character what would be the nature of the burden upon the department for establishing that the assessee is liable to payment of penalty. As has been rightly observed by Chagla, C. J., in Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 I.T.R. 98 (Bom.), the gist of the offence under Section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and, therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income.

Another point is whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under Section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under Section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.

28. The only reason why the taxing authorities increased the quantum of gross turnover was that they were of the opinion that the petitioner had used 62 bags of sugar, which he had transferred from the wholesale shop to the retail shop and the sales of batasa, chironjidana and sugar-candy were not sufficient so as to encompass the consumption of 62 bags of sugar. We may observe that the taxing authorities in their orders have not at all given any indication as to how the sales were inadequate looking to the consumption of 62 bags of sugar. It was the duty of the taxing authorities to furnish some material. Consequently, we are of the opinion that there being no material in that behalf, the conclusion of the taxing authorities on this aspect was a matter of pure guess or surmise and, therefore, we are of the opinion that the addition was not only unjustified and unwarranted, but illegal.

29. Consequently, we would answer the two questions as follows :

(1) That, on the facts and in the circumstances of the case, there was no material, whatsoever, to enhance the gross turnover from Rs. 5,02,456 to Rs. 5,18,755 and that the enhancement was not legal.

(2) That the sales of batasa, chironjidana and sugar-candy ought to have been regarded as sales of sugar within the meaning of entry No. 41 of Schedule I to the Madhya Pradesh General Sales Tax Act, 1958, according to the provisions of law as they stood in the years 1960 to 1962.

This opinion of ours would not affect the position as it might emerge subsequently in pursuance of the amendments made in the Act and the schedules from time to time.

30. Let the case be returned to the Board of Revenue for passing orders in the light of answers given by us above. Parties to bear their own costs.

G.P. Singh, J.

1. Facts have been fully stated by my Lord the Chief Justice and it is not necessary to repeat them. The period covered by assessment is the Diwali year 2018-19 beginning from 9th November, 1961, and ending on 27th October, 1962.

2. As regards the first question, it is pertinent to note that the assessing authority did not reject the accounts of the assessee outright. The assessee's account books relating to total sales of mishri, batasa and chironjidana were merely doubted as incorrect on the hypothesis that they did not completely explain the utilisation of 62 bags of sugar for preparation of these goods. The assessing authority did not, however, come to the conclusion that no reliance could be placed on the books of account. It was, therefore, not a case of best judgment assessment but of assessment made on the basis of accounts: see the distinction drawn in Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 32 S.T.C. 77 at 81. The assessing authority had, therefore, no justification for enhancing the turnover without any material.

3. The second question referred to us involves the construction of entry 41 of Schedule I to the Madhya Pradesh General Sales Tax Act, 1958. Section 10 of the Act provides that no tax shall be payable on the sales or purchases of goods specified in the second column of Schedule I subject to the conditions and exceptions, if any, set out in the corresponding entry in the third column thereof. Tax is levied under Section 6 of the Act on a dealer's taxable turnover relating to goods specified in Schedule II at the rate and the point mentioned in the corresponding entry in columns 3 and 4 respectively of the said schedule. Entry 41 in Schedule I during the period of assessment read as follows :

41. Sugar including khandsari and palmyra.

This entry in this shape continued up to 31st August, 1967, when by Ordinance No. 10 of 1967 it was substituted by the following :

41. Sugar including khandsari and palmyra but excluding mishri, batasa and chironji.

There was no specific entry embracing mishri, batasa and chironji in Schedule II during the period of assessment. Later on these articles came to be included in entry 8 of Part I which from time to time read as follows :

Schedule II

Part I

From 15-8-62 to 31-3-64. Added 8. Sweetmeats other than choco- 2 per cent,

by Section 8(b) of M.P. Act No. 13 lates, toffees, lozenges and

of 1962. peppermint drops.

From 1-4-64 to 17-2-66. Substi- 8. Cooked food including sweet- 2 per cent,

tuted by Section 3(i) of M.P. Act meats but excluding cakes,

No. 9 of 1964. pastries, biscuits, chocolates,

Toffees, lozenges and peppermint

drops.

From 18-2-66 amended by notifica- 8. Cooked food including sweet- 2 per cent,

tion dated 31-1-66. meats and mishri, batasa and

chironji but excluding cakes,

pastries, biscuits, chocolates,

toffees, lozenges and peppermint

drops.

Other relevant entries in Schedule II are :

Schedule II

Part III

Form 1-4-59 to 14-8-62. 11. Goods specified in Schedule III. 2 per cent.

Part VI

From 1-4-59 to 31-7-62. 1. All other goods not included in 4 per cent.

Schedule I or any other part of

the schedule.

From 1-8-62 to 31-3-64. ' ' 5 per cent.

From 1-4-64 to 31-8-67. ' ' 6 per cent.

From 1-9-67. ' ' 7 per cent.

During the course of arguments entry No. 1 in Schedule III was also referred to. This schedule refers to goods in respect of which licence can be taken under Section 13. When licence is taken, licence fee becomes a substitute for sales tax. Entry No. 1 in this schedule read from time to time as follows :

Schedule III

From 1-4-59 to 31-3-64. 1. Sweetmeats other than chocolates, toffees,

lozenges and peppermint drops.

From 1-4-64 by Act 9 of 1964. 1. Cooked food including sweetmeats but

excluding cakes, pastries, biscuits, choco-

lates, toffees, lozenges and peppermint

drops.

By notification dated 10-10-65 1. Cooked food including sweetmeats and

'mishri, batasa and chironji' mishri, batasa and chironji, but excluding

added with retrospective effect cakes, pastries, biscuits, chocolates, toffees,

from 1-4-59. lozenges and peppermint drops.

4. By Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, additional duty of excise was imposed on certain goods of special importance, namely, sugar, tobacco, cotton fabrics, silk fabrics, rayon or artificial silk fabrics and woollen fabrics produced or manufactured in India. The words and expressions 'sugar', 'tobacco', 'cotton fabrics', etc., are defined by Section 2(c) of the Act to have the same meaning as assigned to them in the First Schedule to the Central Excises and Salt Act, 1944. The object of the Act, as disclosed by the statement of objects and reasons, was to impose additional duties of excise in replacement of the sales taxes levied by the Union and States on these goods and to distribute the net proceeds of these duties, except the proceeds attributable to the Union territories, to the States. Provision for distribution of the proceeds amongst the States is made in the Second Schedule. The Act does not contain any restriction on the power of the States to levy sales tax on sales of these goods. It, however, provides in Schedule II that if during any financial year a State levies and collects a tax on the sale or purchase of these goods, it shall not be entitled to receive its share of the net proceeds of additional duty in that financial year unless the Central Government by special order otherwise directs.

5. Article 286(3) of the Constitution, as amended by the Constitution (Sixth Amendment) Act, provides that any law of a State shall, in so far as it imposes, or authorises the imposition of, 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, 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. Section 14 of the Central Sales Tax Act, 1956, declares the goods specified therein of special importance in inter-State trade or commerce. One of the goods specified is 'sugar, as defined in item 8 (now item No. 1) of the First Schedule to the Central Excises and Salt Act, 1944'. Section 15 of the Central Sales Tax Act contains the restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. One of the restrictions is that the tax payable under a State Act in respect of any sale or purchase of such goods inside the State shall not exceed 2 per cent (3 per cent from 1st July, 1966) of the sale or purchase price thereof and that the tax shall be levied only at one stage. Another restriction is that when such goods are sold in the course of inter-State trade or commerce and Central sales tax is paid in respect of such sale, the tax levied under the State Act shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in the State. After Central Act 61 of 1972 it is the person making the sale in the course of inter-State trade or commerce who has to be reimbursed. Section 15 of the Central Sales Tax Tax Act was brought into force from 1st October, 1958, but the restrictions contained in it were earlier given effect to by Section 7 of the Additional Duties of Excise Act, 1957, with effect from 1st April, 1958.

6. In the Central Excises and Salt Act, 1944, sugar was originally denned in item No. 8 of the schedule to mean 'any form of sugar containing more than ninety per cent sucrose'. By the Finance Act, 1961, sugar now find place in item No. 1 which defines sugar substantially in the same terms to mean 'any form of sugar in which the sucrose content, if expressed as a percentage of the material dried to constant weight at 105 centigrade, would be more than ninety'.

7. A perusal of the relevant entries in the schedules to the Madhya Pradesh General Sales Tax Act, 1958, will show that 'mishri, batasa and chironji' for the first time came to be specifically included in the entry of cooked food in item No. 1 of Schedule III by notification of 10th October, 1965. This notification is made retrospective so as to have effect from 1st April, 1959, which is the date of the commencement of the Act. Power to amend Schedule III is conferred on the Government under Section 13(3). This provision, however, does not enable the Government to make retrospective amendment in the schedule, at any rate, when its effect would be to tax a commodity for a period before the issue of notification. The Government, therefore, cannot argue that as a result of this notification 'mishri, batasa and chironji' became taxable under entry 11 of Schedule II (Part III) which imposed a tax of 2 per cent in respect of goods specified in Schedule III for the period from 1st April, 1959, to 14th August, 1962. Then by notification dated 31st January, 1966, 'mishri, batasa and chironji' were included in entry No. 8 relating to cooked food in Schedule II and were made taxable at 2 per cent. Lastly, by Ordinance No. 10 of 1967 these goods were specifically excluded from item 11 of Schedule I relating to sugar from 31st August, 1967. The position, therefore, is that at the time when the Act was passed there was no entry in any of the schedules either specifically excluding or including mishri, batasa and chironjidana. This position continued during the entire period of assessment with which we are concerned. The question then is whether during this period these goods were impliedly included in entry 41, Schedule I.

8. To begin with, the words of a statute are to be construed in their natural or popular sense meaning thereby that sense which the persons to whom the legislation is addressed would ordinarily ascribe to them. A Sales Tax Act is directed to the dealers who carry on trade in the commodities, sales and purchases of which are made taxable under the Act. The point to be considered, therefore, is what will a person dealing in sugar ordinarily understand about the scope of the exemption granted by entry 41 in Schedule I. It is no doubt true that mishri, batasa and chironji are made from sugar, but still they are different commercial commodities and cannot be described as just different varieties of sugar. A person dealing in sugar or a person purchasing sugar would consider sugar as a different commodity from its products. In my opinion, therefore, if the word 'sugar' is given its popular meaning, entry 41 cannot be read to include impliedly mishri, batasa and chironji. But before the popular meaning is accepted as expressing the legislative intention, it has further to be examined whether the meaning so derived does not lead to any absurdity or repugnancy. In this connection it is relevant to recollect the provisions of the Additional Duties of Excise Act, 1957. By this Act sugar as defined in the Central Excises and Salt Act, 1944, was declared to be one of the goods of special importance and provision was made for replacement of sales taxes on declared goods by additional duties of excise. Sugar as defined in the Central Excises and Salt Act means any form of sugar containing more than 90 per cent sucrose. The meaning of this definition is now settled; it includes not merely all varieties of sugar but all forms of sugar and mishri, batasa and chironji are implicitly included in this definition: State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.). It is difficult to assume that when the Madhya Pradesh Sales Tax Act came to be enacted in 1958, soon after the passing of the Additional Duties Act, the legislature did not intend to give a complete exemption in the matter of levy of sales tax to all forms of sugar for which provision for levy of additional duty was made in the Central Act. It is true that the Central Act did not deprive the legislative power of the States to tax the declared goods and the States were only deprived of their share of the net proceeds of the additional duties in case they taxed the declared goods ; still it is not readily believable that the Madhya Pradesh Legislature intended to tax certain forms of sugar and to deprive the State of its share of the additional duty collected under the Central Act. Further, the Additional Duties of Excise Act gave effect to the restrictions contained in Section 15 of the Central Sales Tax Act from 1st April, 1958. As a consequence the States could not from that date levy sales tax on sugar as defined in the Central Excises and Salt Act at a rate exceeding 2 per cent. Now, if mishri, batasa and chironji were not exempted under entry 41 of Schedule I of the Madhya Pradesh Act, they could be taxed only under entry 1 of Schedule II (Part VI), which is the residuary entry, and under which the tax exigible at the relevant time was at the rate of 4 per cent. Could it be supposed that the State Legislature intended to bypass the restrictions contained in Section 7 of the Additional Duties of Excise Act and Section 15 of the Central Sales Tax Act read with Article 286(3) of the Constitution It is well-settled that a legislature is presumed not to exceed its powers. Again, the Central and the State Legislatures must be presumed to act in harmony and an Act of the State Legislature cannot be readily construed to go against the policy of a Central Act on an allied subject or to create repugnancy with it. It will thus be seen that if the words in entry 41 of Schedule I of the Madhya Pradesh Act are construed according to their ordinary and popular sense, the conclusion reached conflicts with the policy of the Additional Duties of Excise Act and results in repugnancy with the provisions of Section 7 of the said Act and Section 15 of the Central Sales Tax Act. These results could not have been intended by the State Legislature and the natural and popular meaning of the words cannot, therefore, be accepted. The more reasonable theory to adopt is that the State Act intended to implement the policy of the Central Acts and to exempt every form of sugar from sales tax. The words in entry 41 of Schedule I must, therefore, be construed to include all forms of sugar in the same way as they are included in the definition of sugar in the Central Excise and Salt Act. Mishri, batasa and chironji are merely different forms of sugar. These items were not specifically included in any entry in the schedules during the relevant period and they must be deemed to be included in the entry of sugar in entry 41 of Schedule I. I will, however, like to make it clear that after these goods were specifically mentioned in one or more of the entries of the schedules, the question whether thereafter they continued to be impliedly included in entry 41 is not before us. I am confining my answer to the relevant period when these goods were not specifically included in any entry.

9. The case of Channulal v. Commissioner of Sales Tax, Indore 1965 M.P.L.J. 354, must be taken to be wrongly decided as it did not take into consideration the provisions of the Additional Duties of Excise Act and the Central Sales Tax Act, which, as already stated, have an important bearing in considering the full import of the exemption enacted under entry 41 of Schedule I of the State Act.

10. It was argued, though somewhat half-heartedly, by the learned Advocate-General that mishri, batasa and chironji were included in entry 1 of Schedule III relating to sweetmeats and were subject to sales tax at 2 per cent under entry 11 of Schedule II (Part III). I have already stated that these goods came to be specifically included in the entry relating to sweetmeats by notification dated 10th October, 1965. I have also said that the said notification cannot have retrospective operation, so as to include these goods in entry 1 of Schedule III from a date anterior to the date of issue of the notification. The argument that the word 'sweetmeats' will even standing alone include mishri, batasa and chironji cannot be accepted for the simple reason that no one in this part of the country would consider these goods sweetmeats : Jethmal Ramswaroop v. The State [1959] 10 S.T.C. 270 at 277.

11. We were referred to a number of cases of different High Courts in which it has been held that goods like mishri, batasa and chironji are included in sugar in the context of its definition as contained in the Central Excises and Salt Act. It is not necessary to refer to these cases, for this point is now firmly settled by the decision of the Supreme Court in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C.).

12. For these reasons, I agree that the questions referred to us be answered as proposed by my Lord the Chief Justice.


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