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Vrajlal Manilal and Company Vs. the State of Madhya Pradesh and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax;Constitution
CourtMadhya Pradesh High Court
Decided On
Case Number Miscellaneous Petition No. 317 of 1971
Judge
Reported in[1973]30STC291(MP)
AppellantVrajlal Manilal and Company
RespondentThe State of Madhya Pradesh and anr.
Appellant Advocate K.A. Chitaley, ;V.S. Dabir and ; P.R. Bhave, Advs.
Respondent Advocate Y.S. Dharmadhikari, Adv.-General and ; M.V. Tamaskar, Deputy Government Adv.
DispositionPetition dismissed
Cases ReferredDevelopment and Cane Marketing Union Ltd. v. Bank of Bihar and Ors.
Excerpt:
- indian penal code, 1890.section 306 :[dalveer bhandari & harjit singh bedi,jj] abetment of suicide deceased, a married woman, committed suicide - allegation of abetment of suicide against appellant husband and in-laws - ocular evidence was sketchy - dying declaration recorded by tahsildar completely exonerated all accused in-laws of any misconduct dispelling any suspicion as to their involvement - letter of threat allegedly written by appellant to father of victim was concocted piece of evidence held, though presumption against appellant can be raised, it cannot be said that onus shifts exclusively and heavily on him to prove his innocence. conviction of appellant is liable to be set aside. - 9. as empowered by clause (3) of article 286 of the constitution of india, the parliament.....orderp.k. tare, j.1. this order shall govern the disposal of the following cases also:(1) m. p. no. 440/68-chhotabhai jethabhai patel & co. and anr. v. the state of m.p. and ors.(2) m. p. no. 441/68- vrajlal manilal & co. and anr. v. the state of m.p. and ors.(3) m. p. no. 485/68- kalekhan mohd. hanif and another v. the state of m.p. and ors. (4) m. p. no. 486/68- jashwantlal prahladbhai & co. and anr. v. the state of m.p. and ors.(5) m. p. no. 487/68- purshottam jorabhai & co. and anr. v. the state of m.p. and ors..(6) m. p. no. 530/68- banwarilal harmukh rai and another v. the state of m.p. and ors..(7) m. p. no. 551/68- dayalal meghji & co. and anr. v. the state of m.p. and ors.(8) m. p. no. 552/68- tulsibhai gordhanbhai patel and anr. v. the state of m.p. and ors.(9) m. p. no. 553/68-.....
Judgment:
ORDER

P.K. Tare, J.

1. This order shall govern the disposal of the following cases also:

(1) M. P. No. 440/68-Chhotabhai Jethabhai Patel & Co. and Anr. v. The State of M.P. and Ors.

(2) M. P. No. 441/68- Vrajlal Manilal & Co. and Anr. v. The State of M.P. and Ors.

(3) M. P. No. 485/68- Kalekhan Mohd. Hanif and Another v. The State of M.P. and Ors.

(4) M. P. No. 486/68- Jashwantlal Prahladbhai & Co. and Anr. v. The State of M.P. and Ors.

(5) M. P. No. 487/68- Purshottam Jorabhai & Co. and Anr. v. The State of M.P. and Ors..

(6) M. P. No. 530/68- Banwarilal Harmukh Rai and Another v. The State of M.P. and Ors..

(7) M. P. No. 551/68- Dayalal Meghji & Co. and Anr. v. The State of M.P. and Ors.

(8) M. P. No. 552/68- Tulsibhai Gordhanbhai Patel and Anr. v. The State of M.P. and Ors.

(9) M. P. No. 553/68- Dayabhai Khushalbhai Patel and Anr. v. The State of M.P. and Ors.

(10) M. P. No. 554/68- M. Ishaq M. Gulam and Another v. The State of M.P. and Ors.

(11) M. P. No. 555/68- Chhotalal Keshoram and Another v. The State of M.P. and Ors.

(12) M. P. No. 556/68- Patel Dahyabhai Joitram and Anr. v. The State of M.P. and Ors.

(13) M. P. No. 557/68- Lallubhai B. Patel & Co. Pvt. Ltd. and Anr. v. The State of M.P. and Ors.

(14) M. P. No. 558/68- Govind Singh Gurudutt Singh and Anr. v. The State of M.P. and Ors.

(15) M. P. No. 559/68- Do Bhai Bidi Factory and Anr. v. The State of M.P. and Ors.

(16) M. P. No. 585/68- Allauddin Aulia Sahib and Another v. The State of M.P. and Ors.

(17) M. P. No. 587/68- Somabhai Kashibhai Patel and Anr. v. The State of M.P. and Ors.

(18) M. P. No. 21/69- Girdharilal Kanchhedilal Kethal and Anr. v. The State of M.P. and Ors.

(19) M. P. No. 70/69- S. M. Shan & Sons and Anr. v. The State of M.P. and Ors.

(20) M. P. No. 80/69- Mohanlal Harprasad v. The State of M.P. and Ors.

(21) M. P. No. 82/69- J. P. Patel (Bombay) Pvt. Ltd. v. The State of M.P. and Ors.

(22) M. P. No. 83/69- Pannalal Premraj and Another v. The State of M.P. and Ors.

(23) M. P. No. 86/69- Mohanlal Hargovind Das and Anr. v. The State of M.P. and Ors.

(24) M. P. No. 103/69- Jagdish Brothers v. The State of M.P., and Ors.

(25) M. P. No. 104/69-Gulabdas Agrawal v. The State of M.P. and Ors.

(26) M. P. No. 116/69- Bhagwandas Shobhalal Jain and Anr. v. The State of M.P. and Ors.

(27) M. P. No. 161/69- Girjaprasad Sunderlal and Another v. The State of M.P. and Ors.

(28) M. P. No. 204/69- Mohanlal & Company, Satna v. The State of M.P. and Ors.

(29) M. P. No. 205/69- Udhoji Shrikrishnadas v. The State of M.P. and Ors.

(30) M. P. No. 493/69- Vrajlal Manilal & Co. and Another v. The State of M.P. and Ors.

(31) M. P. No. 101/70- Vrajlal Manilal & Co. and Anr. v. The State of M.P. and Ors.

(32) M. P. No. 221/70- Vrajlal Manilal & Co. and Anr. v. The State of M.P. and Ors.

(33) M. P. No. 222/70- Devendra Trading Co. and Anr. v. The State of M.P. and Ors.

(34) M. P. No. 223/70- Chhotabhai Jethabhai Patel & Co. and Anr. v. The State of M.P. and Ors.

(35) M. P. No. 218/71- Patel Tobacco Bidi Works, Gondia v. The State of M.P. and Anr..

(36) M. P. No. 219/71- Manorbhai Ambalal Patel, Gondia v. The State of M.P. and Ors.

(37) M. P. No. 220/71- Muljibhai Ishwarbhai & Co., Gondia v. The State of M.P. and Ors.

(38) M. P. No. 221/71- Chhotabhai Jethabhai Patel & Co. v. The State of M.P. and Ors.

(39) M. P. No. 222/71- Santram Bidi Leaves Co., Balaghat v. The State of M.P. and Ors.

(40) M. P. No. 223/71-Shri Bharat Trading Company, Gondia v. The State of M.P. and Ors.

(41) M. P. No. 224/71-Shri Swastik Bidi Leaves Co., Gondia v. The State of M.P. and Anr.

(42) M. P. No. 247/71- Vrajlal Manilal & Co, and Anr. v. The State of M.P. and Ors.

(43) M. P. No. 251/71- Madan Bidi Leaves Company, Gondia v. The State of M.P. and Anr.

(44) M. P. No. 252/71- Ambika Trading Company, Gondia v. The State of M.P. and Anr.

(45) M. P. No. 259/71- Harnarndas Premchand Jain v. The State of M.P. and Ors.

(46) M. P. No. 269/71- S.M. Shan & Sons and Anr. v. The State of M.P. and Ors.

(47) M. P. No. 270/71- Harishbhai Dahyabhai & Bros, and Anr. v. The State of M.P. and Anr.

(48) M. P. No. 271/71- Devendra Trading Co. and Anr. v. The State of M.P. and Anr.

(49) M. P. No. 272/71 - Purshottam Jorabhai & Co. and Anr. v. The State of M.P. and Ors.

(50) M. P. No. 284/71- Patel Dahyabhai Joitram & Co. and Anr. v. The State of M.P. and Ors.

(51) M. P. No. 285/71 Shri Uma Transport Company and Anr. v. The State of M.P. and Anr.

(52) M. P. No. 286/71- Lallubhai B. Patel & Co. (P.) Ltd. and Anr. v. The State of M.P. and Anr.

(53) M. P. No. 287/71- Chhotabhai Jethabhai Patel & Co., Gondia v. The State of M.P. and Ors.

(54) M. P. No. 289/71- Madhya Pradesh Bidi Leaves Company v. The State of M.P. and Ors.

(55) M. P. No. 292/71-Shri Dineshchandra Thakorbhai Patel v. The State of M.P. and Anr.

(56) M.P. No. 293/71- Patel Bidi Leaves Company and Anr. v. The State of M P. and Anr.

(57) M. P. No. 294/71- Amul Trading Company, Gondia v. The State of M.P. and Anr.

(58) M. P. No. 295/71- Rameshprasad Laxminarayan Shrivastava v. The State of M.P. and Anr.

(59) M. P. No. 296/71- Sarvodaya Bidi Leaves Co. and Anr. v. The State of M.P. and Anr.

(60) M. P. No. 297/71-Shri Gajanan Bidi Leaves Co. and Another v. The State of M.P. and Anr.

(61) M. P. No. 298/71- Madan Beedi Leaves Company, Gondia v. The State of M.P. and Anr.

(62) M. P. No. 299/71-Shri Ganesh Trading Co., Sagar v. The State of M.P. and Anr.

(63) M. P. No. 300/71- Bhagwandas Shobhalal Jain and Anr. v. The State of M.P. and Ors.

(64) M. P. No. 316/71- Khemchand Motilal Jain and Anr. v. The State of M.P. and Anr.

2. These writ petitions have been filed by the bidi manufacturers of different places in the State, wherein they have challenged Section 8 of the Madhya Pradesh General Sales Tax Act, 1958, as amended by the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1971. In order to appreciate the implications of the amendment, it may be relevant to reproduce the section before and after the amendment. Before the amendment Section 8 was as follows:

Section 8.-Rate of tax for raw material.-(1) Notwithstanding anything contained in Section 6 or Section 7, but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent, of the sale or purchase price of such raw material.

(2) Where any raw material purchased by a registered dealer under Sub-section (1) is utilised by him for any purpose other than a purpose specified in the said sub-section, such dealer shall be liable to pay as penalty an amount not less than the difference between the amount of tax on the sale of such raw material at the full rate mentioned in column (3) of Schedule II and the amount of tax payable under Sub-section (1), and not exceeding one and one-quarter times the amount of tax at such full rate as the Commissioner may determine having regard to the circumstances in which such use was made :

Provided that no such penalty shall be imposed on a registered dealer where any raw material purchased by him under Sub-section (1) is sold by him, subject to such restrictions and conditions as may be prescribed, to another registered dealer, for the purpose specified in that sub-section :

Provided further that where such registered dealer subsequently purchasing the raw material as aforesaid, utilises it for any purpose other than the purpose specified in Sub-section (1), he shall be liable to pay the penalty specified under Sub-section (2).

After the amendment Section 8 stands as follows :

In Section 8 of the Principal Act,-

(a) for Sub-section (1), the following sub-section shall be substituted, namely :-

'(1) Notwithstanding anything contained in Section 6 or Section 7 but subject to the provisions of Sub-section (3) and to such restrictions and conditions as may be prescribed, the tax payable under Section 6 or Section 7, as the case may be, on the sale or purchase by a registered dealer of any raw material other than tendu leaves for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of export out of the territory of India shall be levied at 2 per cent, of the sale or purchase price of such raw material:

Provided that when the tax payable on the sale or purchase of such raw material under Section 6 or 7 is payable at a rate lower than two per cent., the tax payable under this sub-section shall be calculated at such lower rate.'

(b) after Sub-section (2), the following sub-section shall be inserted, namely:-

'(3) Nothing in this section shall apply to the sales of any goods made by the Forest Department of the State Government or any of the offices under that Department:

Provided that where any goods other than tendu leaves purchased by any registered dealer from the Forest Department or any of the offices under that Department are used by him as a raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of export out of the territory of India, the dealer shall be entitled, in such manner as may be prescribed to a set-off of an amount equal to the difference between the tax payable at the full rate on such goods as mentioned in Schedule II and the tax payable on raw material at the rate specified in Sub-section (1).

3. At this stage it is also necessary to take note of the amendment altering the definition of a 'dealer'. Originally the definition of a 'dealer' as per Section 2(d) of the Act was as follows :

Section 2. (d) 'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or (for deferred payment, or for commission, remuneration or other valuable consideration and includes,-

(i) the Central or a State Government or any of their departments, a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business;

(ii) a society (including a co-operative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to, its members ;

(iii) a commission agent, a broker, a del credere agent, an auctioneer, or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal.

Explanation.-Every person who acts as an agent of a non-resident dealer, that is, as an agent on behalf of a dealer residing outside the State and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as-

(i) a mercantile agent as defined in the Indian Sale of Goods Act, 1930 (III of 1930), or

(ii) an agent for handling goods or documents of title relating to goods or

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch of a firm or company situated outside the State, shall be deemed to be a dealer for the purposes of this Act.

4. The amended Section 2 in the Amending Act No. 13 of 1971 reads as follows :

In Section 2 of the Madhya Pradesh General Sales Tax Act, 1958 (No. 2 of 1959) (hereinafter referred to as the Principal Act)- (i) in Clause (d)-

(a) for Sub-clause (i), the following sub-clause shall be substituted, namely :-

'(i) a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business ;'

(b) the existing Explanation shall be numbered as Explanation I and after Explanation I as so re-numbered, the following Explanation shall be inserted, namely :-

'Explanation II.-The Central or a State Government or any of their departments or offices which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or for other valuable consideration, shall be deemed to be a dealer for the purposes of this Act.'

5. The amendment was effected without changing the definition of 'raw material'. Section 2, Sub-section (1), defines the 'raw material' as follows:

Section 2. (1) 'raw material' means an article used as an ingredient in any manufactured goods or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture, but does not include bullion and specie.

6. It is to be noted that the charging section, i.e., Section 8 makes a dealer liable for payment of sales tax in respect of sale or purchase of raw materials other than the tendu leaves for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the case of export outside the territory of India, at 2 per cent, of the sale or the purchase price of such raw material. Thus, tendu leaves, although used as raw material for manufacture of goods for using inside the State or for using outside the State in the course of inter-State trade or commerce or in the course of export, have been taxed under the residuary item No. 1 in Part VI of Schedule II of the M.P. General Sales Tax Act, 1958, at 7 per cent, of the purchase or the sale price.

7. The petitioners challenge the levy of purchase tax or sales tax at 7 per cent, of the purchase or the sale price on the grounds:

(i) that there is a discrimination between other raw materials and the raw material, tendu leaves, which is required for manufacture of bidis and, therefore, the provision is violative of the equality guaranteed as per Article 14 of the Constitution of India;

(ii) that the said provision being in contravention of the provisions of articles 301 and 304 of the Constitution of India, would be rendered void as being in conflict with certain statutes framed by the Parliament, namely, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Central Excises and Salt Act, 1944, and the Central Sales Tax Act, 1956.

Presently, we propose to refer to the relevant provisions a little later.

(iii) that the levy is violative of Article 286(3) of the Constitution of India, which places some restrictions on the powers of a State Legislature to legislate in connection with goods of special importance and which have been so declared under Section 14 of the Central Sales Tax Act, 1956, and which are used in the course of inter-State trade and commerce.

(iv) that the definition of 'raw material' as per Section 2(1) of the M. P. General Sales Tax Act, 1958, not having been amended by the M. P. General Sales Tax (Amendment and Validation) Act, 1971, the provisions of Section 3 of the Amendment and Validation Act, 1971, amending Section 8 of the principal Act, would be incongruous and in conflict with the said definition of 'raw material' and as such, the provision relating to the exclusion of tendu leaves as raw material cannot be given effect to on account of such incongruity and conflict. The second line of argument with respect to Section 2 of the 1971 Amendment and Validation Act amending the definition of a 'dealer' in Section 2(d) of the principal Act, is that the Explanation II added by the said section would be conflicting with the main concept of a dealer carrying on business. As such, Explanation II added by the Amendment and Validation Act, 1971, being in conflict with the provisions of the Act and being incongruous, cannot be given effect to.

8. Before discussing the questions mentioned above, it is necessary to take note of the relevant provisions of the Central Acts and the other provisions of the State Act. Article 286, Clause (1) lays down that no law of a State shall impose, or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place-

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Clause (2) of the said article empowers the Parliament by law to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1). Clause (3) of the said article, with which we are concerned, is as follows :(3) 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.

9. As empowered by Clause (3) of Article 286 of the Constitution of India, the Parliament enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Section 3 of the said Act permits levy and collection of additional duties on articles like sugar, tobacco, cotton fabrics, silk fabrics, rayon or artificial silk fabrics and woollen fabrics produced or manufactured in India. The said additional duties as provided by Sub-section (2) of the said section are to be in addition to the duties of excise chargeable on such goods under the Central Excises and Salt Act, 1944. The provisions of the Central Excises and Salt Act, 1944, and the Rules framed thereunder are made applicable to cases of refund and exemption from duties. Section 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, provides for distribution of additional duties among States. The idea was that the States should not impose any tax or duty on goods of special importance. If they elected to impose such duties, then they would not be able to share in the additional duties to be distributed amongst the States. They would be able to share only if they did not impose any extra tax or duty. The First Schedule framed under Section 3(1) of the said Act imposes the following duty on the articles mentioned therein, including tobacco. For tobacco the entry reads as follows:

(Description of goods) (Rate of additional duty)'TOBACCO-I. Unmanufactured tobacco-(1) if flue cured and used in the Per kilogram-Nil.manufacture of cigarettes.(2) if flue cured and used for Per kilogram-One rupee andthe manufacture of smoking ten naye paise.mixtures for pipes andcigarettes.(3) if flue cured and not other- Forty-four naye paise.wise specified.(4) if other than flue cured and Nil.used for the manufacture of (a) cigarettes or (b)smoking mixtures for pipes and cigarettes.(5) if other than flue cured Six naye paise.and not actually used for the manufacture of (a) ciga-rettes or (b) smoking mixtures for pipes and cigarettes or (c) bidis.(i) stems of tobacco larger than 6.35 millimetres in size,(ii) dust of tobacco, (iii) omitted,(iv) tobacco cured in wholeleaf form and packed or tied in bundles, hanks or bunches or in the form of twists or coils.Explanation.-Such varieties of unmanufactured tobacco used in the manufacture of bidis as the Central Government, by notification in the Official Gazette, specifies in this behalf shall not be deemed to fall within this sub-item but shall be deemed to be unmanufactured tobacco, nor otherwise specified, within the meaning of sub-item (6).(6) if other than flue cured and Forty-four naye paise.not otherwise specified.(7) if used for agricultural purposes. Nil.(8) stalks. Two naye paise.II. Manufactured tobacco-(1) Cigars and cheroots of which Per hundred.the value-(i) exceeds Rs. 25 a hundred. Three rupees and seventy-five naye paise.(ii) exceeds Rs. 15 a hundred Two rupees and twenty-five but does not exceed Rs. 25 naye paise.a hundred.(iii) exceeds Rs. 5 a hundred but Seventy-five naye paise. does not exceed Rs. 15 a hundred.(iv) exceeds Rs. 1.25 a hundred Fifteen naye paise. but does not exceed Rs. 5 a hundred.(2) Cigarettes. 25 per cent, ad valorem.(3) Bidis in the manufacture of Sixty naye paise perwhich any process has been thousand.'conducted with the aid of machines operated with or without the aid of power.

10. The said provision is to be read along with the provisions of the Central Excises and Salt Act, 1944. The said Act imposes excise duty on certain articles, including tobacco. Schedule 1 framed under Section 3 of the said Act, provides for excise duty on tobacco as follows :

II. Manufactured tobacco- (1) Cigars and cheroots of which the Per hundred.value-(i) exceeds Rs. 25 a hundred. Twenty-one rupees,(ii) exceeds Rs. 15 a hundred, but Twelve rupees and seventy-does not exceed Rs. 25 a five paise. hundred.{iii) exceeds Rs. 5 a hundred, but Four rupees and fifty does not exceed Rs. 15 a paise.hundred.(iv) exceeds Rs. 1.25 a hundred One rupee and twenty but does not exceed Rs. 5 a paise.hundred.(2) Cigarettes. Per thousand.One hundred per cent. ad valorem.(3) Bidis in the manufacture of Three rupees per thou-which any process has been sand.conducted with the aid of machines operated with or without the aid of power.

11. Thus bidis are subject not only to excise duty under the Central Excises and Salt Act, 1944, but to additional duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Section 10 of the M. R General Sales Tax Act, 1958, 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. Subsection (2) of Section 10 empowers the State Government to include in the schedule by notification any goods not already specified in the schedule. Section 6 of the said Act specifies the tax payable by a dealer under the Act on the taxable turnover relating to the goods specified in Schedule II, at the rate mentioned in the corresponding entry in column (3) of the said schedule. Tendu leaves as such are not mentioned in the Second Schedule, but they are taxed at 7 per cent, under the residuary provision contained in Part VI of the Schedule, item 1, which lays down that all other goods not included in Schedule I or any other part of this schedule shall be taxed at 7 per cent, of the sale or the purchase price.

12. The State Government with a view to create monopoly in the trade of tendu leaves, enacted the M. P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, which is intended to control the trading in tendu leaves. Under the said Act, in exercise of the powers conferred by Section 19 of the Act, the State Government framed Rules, known as the Madhya Pradesh Tendu Patta (Viniyaman) Niyamavali, 1966. Section 4 of the Act empowers the State Government to appoint purchasing agents, whether in respect of private holdings owned by individuals or in respect of the tendu patta to be found in Government forests. Section 5 of the Act provides that all individuals shall sell the tendu patta to the agents appointed by the Government and to none else. Such Government agents alone are authorised to make the purchase. Such agents only are authorised to sell the tendu leaves to manufacturers of bidis, who are required to be registered under the Act. Thus, this Act creates a monopoly in favour of the State Government in the matter of purchase and sale of tendu patta. This Act was challenged on two earlier occasions as being unconstitutional, but it was held to be valid as laid down by their Lordships of the Supreme Court in Anwar Khan Mehboob Co. v. State of Madhya Pradesh 1966 M.P.L.J. 756 (S.C.). The Act was also attacked on slightly different grounds in Vrajlal Manilal and Co. v. The State of M.P. 1966 M.P.L.J. 806 but a Division Bench of this Court upheld its validity.

13. At this stage it may also be relevant to take note of articles 301, and 304 of the Constitution of India. Article 301 provides as follows :

Article 301. Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.

Article 302 empowers the Parliament to impose restrictions on trade, commerce and intercourse. Article 303 provides for restrictions on the legislative powers of the Union and of the States with regard to trade and commerce. Article 304 is relevant, as it needs to be considered in the present case. The said article is as follows :

Article 304. Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may, by law:-

(a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and

(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest:

Provided that no Bill or amendment for the purposes of Clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.

14. In the light of the constitutional and the statutory provisions mentioned above, we propose to discuss the four main attacks on the levy of the tax on tendu patta at 7 per cent, of the purchase or the sale price by the State Government. The first grievance of the learned counsel for the petitioners is that the said levy is discriminatory and as such, it violates the guarantee of equality under Article 14 of the Constitution of India. The suggestion of the learned counsel for the petitioners is that when 'raw material' has been defined by Section 2(1) of the M.P. General Sales Tax Act, 1958, it has to be construed throughout the Act in the light of the definition provided, which is as follows:

'raw material' means an article used as an ingredient in any manufactured goods or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture, but does not include bullion and specie.

It is contended that the State Legislature having defined the 'raw material', was not justified in providing in the amended Section 8 that all other raw materials shall be subject to the tax at 2 per cent, which are used in the course of manufacture in the State or in the course of inter-State trade or commerce or in the course of export out of the territory of India and to exclude from the operation of the said section the tendu leaves alone.

15. It is pointed out that bidis are altogether exempt from the sales tax as they would be covered by item No. 42 of Schedule I. The said item mentions that tobacco, manufactured or unmanufactured, cured or uncured and tobacco products including cigarettes, cigars, cheroots and bidis being exempt from any sales tax, the suggestion is that the constituents that were used in the manufacture of cigarettes, cigars, cheroots and bidis should also be held to be exempt from sales tax and such constituents cannot at all be taxed. The further suggestion is that the State Legislature had no power to discriminate between other raw materials and tendu leaves, which is a raw material or a constituent for the manufacture of bidis. We may observe that the argument, although attractive, would not, in our opinion, stand the test as laid down in several cases to hold that such an action of the State Government is violative of the equality guaranteed under article ,14 of the Constitution of India. Presently, we shall mention all those cases. But, it has to be realised that the Legislature while legislating has the power of selection or non-selection or exclusion of articles for the purpose of imposition of tax and if such selection is made, Article 14 of the Constitution cannot be said to have been violated thereby. What Article 14 prohibits is discrimination, but it permits reasonable classification. The said article might be reproduced as under:

Article 14. The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

Therefore, the question arises whether by distinguishing the producer of one raw material, i.e., tendu patta, from the producers of other raw materials required for the manufacture of other articles, the principle of equality before the law is violated.

16. In this connection, we may advert to the pronouncement of their Lordships of the Supreme Court in R. C. Cooper v. Union of India [1970] 40 Comp. Cas. 325 (S.C.) wherein their Lordships, while considering the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, made the following observations with reference to Article 14 of the Constitution :

By Article 14 of the Constitution the State is enjoined not to deny any person equality before the law or the equal protection of the laws within the territory of India. The article forbids class legislation, but not reasonable classification in making laws. The test of permissible classification under an Act lies in two cumulative conditions : (i) classification under the Act must be founded on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the group; and (ii) the differentia has a rational relation to the object sought to be achieved by the Act: there must be a nexus between the basis of classification and the object of the Act.

For that purpose their Lordships adverted to their earlier pronouncement in many cases.

Further on their Lordships observed as follows:

The courts recognise in the Legislature some degree of elasticity in the matter of making a classification between persons, objects and transactions. Provided the classification is based on some intelligible ground, the courts will not strike down that classification, because in the view of the court it should have proceeded on some other ground or should have included the class selected for special treatment, some other persons, objects or transactions which are not included by the Legislature. The Legislature is free to recognise the degree of harm and to restrict the operation of a law only to those cases where the need is the clearest. The Legislature need not extend the regulation of a law to all cases it may possibly reach, and may make a classification founded on practical grounds of convenience. Classification to be valid must, however, disclose a rational nexus with the object sought to be achieved by the law which makes the classification. Validity of a classification will be upheld only if that test is independently satisfied. The court in examining the validity of a statute challenged as infringing the equality clause makes an assumption that there is a reasonable classification and that the classification has a rational relation to the object sought to be achieved by the statute.

17. In the present case, the object of the Legislature in enacting the M. P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, was to create an exclusive monopoly in the trade of tendu patta in the State and it is a major product of the State. So far as the other raw materials are concerned, they are free articles and their trade has not been monopolised, either by the State Government or by the Central Government. But, so far as the trade of tendu patta in the State is concerned, an exclusive monopoly of sale and purchase has been created in favour of the State Government by enactment of the said Act and for the same reason the Legislature while passing the M. P. General Sales Tax (Amendment and Validation) Act, 1971, wanted to exclude the trade of tendu patta from the exemption granted to the business of manufacturing of bidis by the State Act in conjunction with other Central enactments. As such, the Legislature, while enacting the said M. P. General Sales Tax (Amendment and Validation) Act, 1971, would, in our opinion, have the power of selecting goods, including raw materials, so as to exclude them altogether from the exemption in favour of raw materials provided by the M. P. General Sales Tax Act, 1958, and while doing so, the Legislature cannot be said to have violated Article 14 of the Constitution of India.

18. In support of this view, we might advert to the pronouncement of their Lordships of the Supreme Court in Nazeeria Motor Service v. State of A.P. A.I.R. 1970 S.C. 1864 wherein their Lordships, in relation to the attack on the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and Validation Act, 1961, on the ground of violation of Article 14 of the Constitution, made the following observations :

Coming to the attack on the ground of violation of Article 14 reference may be made to the background relating to taxation of passengers and goods carried in motor vehicles in the State prior to the formation of Andhra Pradesh. It appears that there was no law in the erstwhile Hyderabad State imposing any tax on passengers and goods. After the merger of Telengana and Andhra Pradesh areas the laws in operation in the Telengana region continued to remain in force by virtue of the provisions of Section 119 of the States Reorganisation Act, 1956. By Act 10 of 1958, the State of Andhra Pradesh amended Act 16 of 1952, inter alia, extending that Act to the Telengana area. This Act (Act 10 of 1958) also amended the principal Act by adding Section 19 according to which the Government could grant an exemption by means of a notification in respect of any motor vehicle running in a particular area. On November 4, 1961, a notification was issued exempting passengers, luggage and goods carried in stage carriages from payment of tax under the aforesaid Act within the Telengana area. There can be no manner of doubt that this exemption was given to the operators in the Telengana region for the reason that before the extension of the parent Act to this area no tax similar to the one levied under the parent Act was payable in that area and that this exemption was granted under a different enactment. It is apparent that for these reasons the challenge under Article 14 cannot succeed. The same is the position with regard to the tax payable by the appellants and that which the transporters having permits for inter-State routes have to pay. As has been pointed out in the affidavits filed on behalf of this State, the laws in the two States, Madras and Andhra Pradesh, are different and persons having primary permits from Madras are naturally governed by the laws operating in that State. No question of discrimination can arise when taxes are being imposed under two different sets of laws in different States or geographical areas.

Thus, according to their Lordships, the classification on a geographical basis would be a perfectly reasonable classification which would not violate Article 14 of the Constitution.

19. In Jaipur Hosiery Mills Pvt. Ltd. v. The State of Rajasthan A.I.R. 1971 S.C. 1330 their Lordships while considering Section 4(2) of the Rajasthan Sales Tax Act, 1954, which provided that no tax shall be payable on the sale or purchase of any of the exempted goods if the conditions specified in column 3 of the schedule were satisfied, held that where the State Government is of opinion that it is necessary or expedient in the public interest so to do, it may by notification exempt from tax the sale or purchase of any goods or class of goods or any person or class of persons on such conditions as may be specified. Their Lordships laid down that the selection of goods or persons or class of goods or persons would not violate Article 14 of the Constitution of India. Thus, excluding the tendu patta from the exemption clause in the M. P. General Sales Tax Act, 1958, would not, in our opinion, be violative of the equality before the law guaranteed by Article 14 of the Constitution of India.

20. In Jonnala Narasimharao & Co. v. State of A.P. A.I.R. 1971 S.C. 1507 their Lordships had to consider a case where by the Andhra Pradesh General Sales Tax (Amendment) Act, 1970, exemption was granted to dealers who had not collected the tax. An argument was advanced that that exemption was violative of Article 14 of the Constitution. Negativing that contention raised on behalf of the dealers, their Lordships observed that the section was enacted by the Legislature with the object of removing shortcomings in the principal Act which were found wanting by judicial interpretation. The interregnum between the declaration by the High Court of certain provision of the Act as being unconstitutional and the attempt of the Legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers, namely, those who had collected the tax, whether they were assessed or not and those who had not collected the tax. This classification, according to their Lordships, was certainly reasonable and was related to the object of the amending Act sought to be achieved.

21. Thus, the Legislature while passing an enactment would have the choice to select persons or class of persons, goods or class of goods or particular territory or class of territories for the imposition of a tax or for granting exemption from the tax. Selection of a person or a class of persons or goods or class of goods or particular regions of a territory will not violate the equality protection under article 14 of the Constitution if the enactment be for the purpose of achieving the object of an Act. In the present case, we are fully satisfied that the trade of tendupatta having been monopolised by the State Government, it was necessary for the State Legislature to have excluded the tendu patta from the category of other raw materials in respect of which there is no State monopoly. For this reason we are of opinion that Section 8, as amended by the M. P. General Sales Tax (Amendment and Validation) Act, 1971, cannot be construed to be unconstitutional on the ground of violating Article 14 of the Constitution of India.

22. Another objection raised on behalf of the learned counsel for the petitioners is that while in the case of others who are considered to be dealers under Section 2(d) of the M. P. General Sales Tax Act, 1958, it is necessary to carry on the business, in the case of Central or the State Government, Explanation II provides that the Central or a State Government need not carry on business and still it will be considered to be a dealer. We have already pointed out that the Government has become a dealer in tendu patta trade under the monopoly Act and so even without the explanation the Government is a dealer as defined. Earlier, we have already indicated that this exclusion of tendu pattas from the category of raw materials cannot be challenged on any valid ground and only from that point of view, Sub-section (3) of Section 8 excludes the operation of the section to all sales of goods made by the forest department of the State Government or any of the offices under that department. That provision evidently was made in conformity with the State monopoly for purchase and sale of tendu leaves. We do not find any incongruity or any conflict between the said provisions, although it would have been better if the definition of raw material, as per Section 2(1) of the M.P. General Sales Tax Act, 1958, had also been amended by the amending Act in conformity with the provision of Section 8, as amended. But, however, that, in our opinion, is not material, although there may be some variance or conflict between the definition section and the charging section. But that would not affect the validity of the charging section. The object of the definition is to define particular words or phrases with precision and such definitions are to be read into the charging section. But the liability is created by the charging section and the charging section, in our opinion, cannot be declared invalid on an assumption of incongruity or conflict with the definition section. Ultimately, the liability has to be determined an accordance with the charging section.

23. Another argument was that item 1 in Part VI of Schedule II of the M. P. General Sales Tax Act, 1958, cannot be said to specify any article and the State Government would have no power to impose the sales tax under the residuary article which is not specified therein. In this connection we do not think it necessary to say anything more except to advert to the pronouncement of their Lordships of the Supreme Court in Anwarkhan Mehboob Co. v. The State of Bombay A.I.R. 1961 S.C. 213 wherein their Lordships considered Section 10(1) and Schedule B, entry 80, of the Bombay Sales Tax Act, 1953, levying sales tax on all goods other than those specified from time to time in Schedule A and in the preceding entries a good classification. Thus, a residuary article or a residuary item, such as item 1 of Part VI of Schedule II of the M.P. General Sales Tax Act, 1958, would be a perfectly valid specification and under that tendu leaves can be taxed at 7 per cent, of the sale or the purchase price.

24. Next, we have to consider the second attack on the said Amendment Act on the ground that it violates articles 301 and 304 of the Constitution of India and as such, the amending Act would be rendered void as being in conflict with certain statutes framed by the Parliament, namely, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Central Excises and Salt Act, 1944, and the Central Sales Tax Act, 1956. We have already reproduced all the relevant provisions of the Central enactments earlier.

25. Section 14 of the Central Sales Tax Act, 1956, declared certain goods to be of special importance in inter-State trade or commerce. Item (ix) of that section declares tobacco, as defined in item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944, to be goods of special importance. Later on the Parliament passed an Act, namely, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, imposing additional duties on such goods and out of that, tobacco was one item. Similarly, excise duty is payable on tobacco under the Central Excises and Salt Act, 1944, at the rate mentioned in the schedule and also the additional duty would be payable. It is to be noted that under all the Central enactments, it is tobacco and its finished products, namely, cigarettes, bidis, etc., which are liable for the Central excise duty as also the additional excise duty. Therefore, the State Legislature, in order to bring the M.P. General Sales Tax Act, 1958, in conformity with all the Central enactments, exempted tobacco and all its products from sales tax as per item 42 of Schedule I, framed under Section 10 of the Act. The said item specifically excludes tobacco, manufactured or unmanufactured, cured or uncured and tobacco products like cigarettes, cheroots and bidis from imposition of sales tax, whatsoever. However, what the M. P. General Sales Tax Act, 1958, as amended by the M. P. General Sales Tax (Amendment and Validation) Act, 1971, does is to tax the tendu leaves, which may be a raw material for the manufacture of bidis by excluding it from the category of other raw materials. As such, the impugned provision cannot at all be said to be violative of any of the Central enactments. In fact, the impugned provision is in conformity with all the Central enactments and it cannot be said to be violative of the Central enactments, merely because it purports to tax a constituent of bidis, which is a raw material and which can, under no circumstances, be said to be covered by the exemption granted by item No. 42 of Schedule I of the M. P. General Sales Tax Act, 1958. We do not find the impugned provision to be in conflict with this section. Thus, we would negative the contention of the learned counsel for the petitioners that the impugned provision is in any manner violative of any of the Central enactments.

26. Another line of argument advanced by the learned counsel for the petitioners was that the impugned provision is violative of articles 301 and 304 of the Constitution of India, as according to him, taxing a raw material, which is a constituent of bidis, the State Legislature would be imposing a tax on such constituent of bidis, which would be in violation of the principle of free trade and which would also violate the restrictions placed by Article 304 of the Constitution of India in the matter of placing restrictions on inter-State trade and commerce.

27. In this connection, we might advert to the observations of Gajendragadkar, J. (as he then was) who, delivering the majority judgment in Atiabari Tea Co. Ltd. v. State of Assam [1961] 1 S.C.R. 809 made the following observations : .

Thus the intrinsic evidence furnished by some of the articles of Part XIII shows that taxing laws are not excluded from the operation of Article 301; which means that tax laws can and do amount to restrictions, freedom from which is guaranteed to trade under the said Part. Does that mean that all tax laws attract the provisions of Part XIII whether their impact on trade or its movement is direct and immediate or indirect and remote It is precisely because the words used in Article 301 are very wide, and in a sense vague and indefinite that the problem of construing them and determining their exact width and scope becomes complex and difficult. However, in interpreting the provisions of the Constitution we must always bear in mind that the relevant provision 'has to be read not in vacuo but as occurring in a single complex instrument in which one part may throw light on another' : vide James v. Commonwealth of Australia [1936] A.C. 578 at p. 613. In construing Article 301 we must, therefore, have regard to the general scheme of our Constitution as well as the particular provisions in regard to taxing laws. The construction of Article 301 should not be determined on a purely academic or doctrinaire considerations; in construing the said article we must adopt a realistic approach and bear in mind the essential features of the separation of powers on which our Constitution rests. It is a Federal Constitution which we are interpreting,, and so the impact of Article 301 must be judged accordingly. Besides, it is not irrelevant to remember in this connection that the article we are construing imposes a constitutional limitation on the power of the Parliament and State Legislatures to levy taxes, and generally, but for such limitation, the power of taxation would be presumed to be for public good and would not be subject to judicial review or scrutiny. Thus considered we think it would be reasonable and proper to hold that restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301. The argument that all taxes should be governed by Article 301, whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld. If the said argument is accepted it would mean, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense, an additional wage bill may indirectly affect trade or commerce. We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by Article 301 a rational and workable test to apply would be:'Does the impugned restriction operate directly or immediately on trade or its movement It is in the light of this test that we propose to examine the validity of the Act under scrutiny in the present proceedings'.

Thus, according to their Lordships of the Supreme Court, the real test would be whether the impugned restriction operates directly and immediately on trade or its movement and it was in the light of that test that their Lordships examined the validity of the Assam Taxation (on Goods Carried by Roads or Inland Waterways) Act, 1954.

28. However, the aforesaid case was explained and distinguished by their Lordships of the Supreme Court in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1961] 1 S.C.R. 491 wherein S.K. Das, J. (as he then was), delivering the majority judgment made the following observations :

We have, therefore, come to the conclusion that neither the widest interpretation nor the nairow interpretations canvassed before us are acceptable. The interpretation which was accepted by the majority in the Atiabari Tea Co., Ltd. v. State of Assam case A.I.R. 1961 S.C. 232 is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Article 304(b) of the Constitution.

Thus, their Lordships of the Supreme Court modified their earlier view to the extent indicated.

29. In the State of Madras v. N. K. Nataraja Mudaliar A.I.R. 1969 S.C. 147 Shah, J. (as he then was), delivering the judgment on behalf of the majority, made the following observations :

Prevalence of differential rates of tax on sales of the same commodity cannot be regarded in isolation as determinative of the object to discriminate between one State and another. Under the Constitution as originally framed, revenue from sales tax was reserved to the States. But since the power of taxation could be exercised in a manner prejudicial to the larger public interests by the States, it was found necessary to restrict the power of taxation in respect of transactions which had an inter-State content. Amendment of Article 286 and the enactment of the Sales Tax Laws Validation Act, 1956, and the Central Sales Tax Act, 1956, were all intended to serve a dual purpose : to maintain the source of revenue from sales tax to the States and at the same time to prevent the States from subjecting transactions in the course of inter-State trade so as to obstruct the free flow of trade by making commodities unduly expensive. The effect of the constitutional provisions achieved in a somewhat devious manner is still clear, viz., to reserve sales tax as a source of revenue for the States. The Central Sales Tax .Act is enacted under the authority of the Union Parliament, but the tax is collected through the agency of the State and is levied ultimately for the benefit of the States and is statutorily assigned to the Slates. That is clear from the amendments made by the Constitution (Sixth Amendment) Act, 1956, in Article 269, and the enactment of Clauses (!) and (4) of Section 9 of the Central Sales Tax Act. The Central sales tax though levied for and collected in the name of the Central Government is a part of the sales tax levy imposed for the benefit of the States. By leaving it to the States to levy sales tax in respect of a commodity on ultra-State transactions no discrimination is practised : and by authorising the State from which the movement of goods commences to levy on transactions of sale Central sales tax, at rates prevailing in the State, subject to the limitation already set out, in our judgment, no discrimination can be deemed to be practised.

Thus, mere imposition of sales tax at different rates would not by itself be violative of the freedom of trade.

30. In T.G. Venkataraman v. State of Madras (1969) 2 S.C.C. 299 their Lordships of the Supreme Court had to consider a notification issued by the Tamil Nadu Government under the Madras General Sales Tax Act, 1959, which imposed tax on transactions of sale in cane jaggery, while it exempted the transactions of sale of palm jaggery. An argument was advanced that the provision was not only violative of the equality clause under Article 14 of the Constitution, but also of the guarantee of free trade under Article 301 of the Constitution of India. Negativing that argument, Shah, J. (as he then was), delivering the judgment of the court made the following observations:

In a recent judgment, N. Venugopala Ravi Varma Rajah v. Union of India and Anr. Civil Appeal Nos. 2436 and 2437 of 1966 decided on 26th February, 1969 [1969] 74 I.T.R. 49 (S.C.) this court observed:...tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be exercised so as to adjust the system of taxation in all proper and reasonable ways ; the Legislature may select persons, properties, transactions and objects, and apply different methods and even rates for tax, if the Legislature does so reasonably.... If the classification is rational, the Legislature is free to choose objects of taxation, impose different rates, exempt classes of property from taxation, subject different classes of property to tax in different ways and adopt different modes of assessment. A taxing statute may contravene Article 14 of the Constitution if it seeks to impose on the same class of property, persons, transactions or occupations similarly situate, incidence of taxation, which leads to obvious inequality.

It was also said by the court that:

It is for the Legislature to determine the objects on which tax shall be levied, and the rates thereof. The courts will not strike down an Act as denying the equal protection of laws merely because other objects could have been, but are not, taxed by the Legislature.'

We are accordingly of the view that 'cane jaggery' and 'palm jaggery' are not commodities of the same class, and in any event in imposing liability to tax on transactions of sale of 'cane jaggery' and exempting 'palm jaggery', no unlawful discrimination denying the guarantee of equal protection was practised.

31. In State of Kerala v. A.B. Abdul Kadir (1969) 2 S C.C. 363 their Lordships of the Supreme Court were required to consider the validity of the provisions of the Luxury Tax on Tobacco Validation Act, 1964. The Kerala High Court had expressed the view that the said Act infringed the guarantee contained in articles 301 and 304 of the Constitution of India. Their Lordships, while reversing the view of the High Court, made the following observations:

Adverting to the ratio of the case of Kalyani Stores v. The State of Orissa [1966] 1 S.C.R. 865 that the decision was based on the assumption that the notification dated March 31, 1961, enhancing the duty on foreign liquor, infringed the guarantee under Article 301 and might be saved if it fell within the exceptions contained in Article 304 of the Constitution. The court did not intend to lay down the proposition that the imposition of a duty or tax in every case would be tantamount per se to an infringement of Article 301. As we have already pointed out it is well established by numerous authorities of this court that only such restrictions or impediments which directly or immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Article 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance.

That is the test laid down by their Lordships in the said case.

32. In Hansraj Bagrecha v. State of Bihar and Ors. (1971) 1 S.C.C. 59 their Lordships had to consider a situation where the Bihar Sales Tax Act, 1959, provided for levy of purchase tax. However, it was introduced by enactment of the Bihar Finance Act, 1966, with effect from 1st April, 1967. By a notification issued under that Act, jute was made liable to purchase tax. The State Government issued a notification, dated 26th December, 1967, under which jute exceeding 800 kilograms could not be tendered for transport without a 'despatch permit'. The appellant in that case was affected by that notification. The Superintendent of Commercial Taxes prohibited the railway stations mentioned in that notification from allowing transport of goods, including jute goods, except on production of a registration certificate. As the appellant was unable to produce the registration certificate, the wagons allotted to him were cancelled. Therefore, the appellant challenged Sections 3-A, 5-A, 42 and 45 of the Bihar Sales Tax Act, 1959, and Rule 31-B of the Bihar Sales Tax Rules, 1959, on the ground that the said provisions were violative of articles 301 and 304(b) of the Constitution of India. The High Court bad dismissed the writ petition. Their Lordships of the Supreme Court, while reversing the judgment of the High Court held that the impugned provisions, namely, Rule 31-B of the Rules violated the guarantee of free trade. In that particular case, the production of a registration certificate had a direct effect on the right of free trade and it was for that reason that their Lordships struck down that provision. Where there is no such direct effect, the provision of law, as laid down by their Lordships of the Supreme Court in the other cases mentioned above, cannot be struck down. For this reason, we are unable to accept the contention of the learned counsel for the petitioners that Section 8 of the M.P. General Sales Tax Act, 1958, as amended by the M.P. General Sales Tax (Amendment and Validation) Act, 1971, should be struck down as being violative of articles 301 and 304 of the Constitution of India. A mere imposition of sales tax on one of the constituents of bidis at the earlier stage would not, in our opinion, impose any restriction on free trade. The argument that the prices will increase and the petitioners will not be able to stand in competition with the dealers of other States, cannot evidently be accepted as the provision would have no direct effect on the freedom of trade. We, therefore, reject that part of the contention.

33. Next, we come to the question whether the impugned provision is violative of Article 286(3) of the Constitution, which places a restriction on the powers of the State Legislature to legislate in connection with goods of special importance, which have been so declared under Section 14 of the Central Sales Tax Act, 1956, and which are used in the course of inter-State trade and commerce. Earlier we have already discussed the other aspect of this question, namely, whether the impugned provision violates any of the provisions of the Central enactments. With regard to the particular provision of Article 286(3) of the Constitution we may observe that the article lays down the following restrictions :

286. (3) 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.

34. If the State Legislature had done anything contrary to the Central enactments in the matter of goods of special importance, namely, tobacco with all its products, the impugned provision could have been challenged on the ground of violation of Article 286(3) of the Constitution. But, what the State Legislature has done is to tax the tendu leaves which might be used as one of the constituents for the manufacture of bidis. No such prohibition can be read into the provision of Article 286(3) of the Constitution. The article prohibits the State Legislature from imposing or authorising the imposition of a tax on the sale or purchase of goods declared by Parliament by law to be of special importance. In conformity with the said provision, the State Legislature has exempted tobacco and all its products from the operation of sales tax altogether. Imposition of sales tax on tendu pattas can, by no stretch of imagination, be construed to be in violation of the restriction placed by Article 286(3) of the Constitution of India.

35. In Modi Spinning and Weaving Mills Co. Ltd. v. The Commissioner of Sales Tax, Punjab, and Anr. A.I.R. 1965 S.C. 957 an argument was advanced that the provisions of the East Punjab General Sales Tax Act, 1948, as amended by Acts Nos. 13 of 1959 and 18 of 1960, read with Rule 26 of the Punjab General Sales Tax Rules, 1949, granting exemption from sales tax on fulfilment of certain conditions, were violative of Article 286(3) of the Constitution. Their Lordships rejected that contention and observed that the effect of Article 286(3) had been brought out by the second proviso to Section 5(1) of the Act, which had been enacted out of an abundant caution and even without it, the result would be the same.

36. In Bhawani Cotton Mills Ltd. v. State of Punjab, the provisions of the Punjab General Sales Tax Act, 1948, were challenged on similar grounds and. specially on the ground that they were violative of Section 15 of the Central Sales Tax Act, 1956, as also on the ground that they were discriminatory and as such, violated the guarantee of equality under Article 14 of the Constitution. Lastly, they were challenged on the ground of competency of the State Legislature to enact laws within the framework of Article 254 and Article 286 of the Constitution of India. Vaidialingam, J., delivering the majority judgment, negatived the argument that the provisions of Section 5(1) of the Punjab General Sales Tax Act, 1948, were violative of Article 286(3) of the Constitution. But, it was found that the impugned provision imposed sales tax on some of the declared goods. In that view, the assessment for the years 1960-61 and 1961-62 on the basis of the original notification of the year 1958, could not be valid. For that reason, their Lordships reversed the judgment of the High Court. So far as the present case is concerned, we have already pointed out earlier that the impugned provision in the M. P. General Sales Tax Act, 1958, namely Section 8, as amended by the M. P. General Sales Tax (Amendment and Validation) Act, 1971, cannot be said to be contravening either Section 14 or even Section 15 of the Central Sales Tax Act, 1956. What Section 15 of the Central Sales Tax Act prohibits is as follows :

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.

Therefore, the restriction is that the Sales Tax Act of a State cannot impose a tax on declared goods in excess of three per cent, of the sale or purchase price thereof and such tax cannot be levied at more than one (1) [1967] 20 S.T.C. 290 (S.G.); A.I.R. 1967 S.C. 1616. stage. We do not find any contravention of Section 15 of the Central Sales Tax Act, 1956, so far as the impugned provision is concerned.

37. The entire arguments of the learned counsel for the petitioners were based on the assumption that the phrase 'tobacco', manufactured or unmanufactured, including bidis, cigarettes, cheroots, shoald be construed to include all constituents which are utilised in the manufacture of those articles, such as the paper used in the manufacture of cigarettes, or the tendu leaves used for the manufacture of bidis. Evidently, such an interpretation, in our opinion, cannot be accepted. We feel that the phrase 'tobacco', manufactured or unmanufactured with all its products, would mean all forms of tobacco and all its finished products, but the phrase would not include the other non-tobacco constituents, which may have to be utilised in the .manufacturing process of other finished products.

38. Coming to the last line of attack on the impugned provision, the argument of the learned counsel for the petitioners is that as there is incongruity between the definition section, i.e., Section 2(1) of the M. P. General Sales Tax Act, 1958, and Section 8 of the Act, as amended by the 1971 Amendment and Validation Act, the amended provision which is the charging section cannot be given effect to. It was also pointed out that the said enactment is not in conformity with the well-known and well-recognised interpretation of statutes. The other line of argument adopted by the learned counsel for the petitioners is that the purpose of an explanation is merely to clarify the main section and not to enlarge its scope or to provide for a new category altogether.

39. All authors on interpretation of statutes are agreed that the scope of an explanation would be to make plain or elucidate what is enacted and not to add to or substract from it. Thus, an explanation would not either restrict or extend the enacted part and it would not enlarge or narrow down the scope of the original Section that it is supposed to explain. However, construction of the explanation must depend upon its terms and not the theory of its purpose and by intention unless it is to be inferred from the language used. That being an accepted general proposition, it is not necessary for us to discuss that in great detail except to refer to the commentary of the learned authors N. S. Bindra on 'The Interpretation of Statutes', 5th Edition (1970), at page 67 ; and Jagdish Swaroop in his book 'Legislation and Interpretation', 1968 Edition, at page 256. In this connection we might observe that if the provision of the charging section be clear, which would not admit of any doubt or which would not create any ambiguity, such provision has to be given effect to, although it may be strictly not in conformity to the well-known principles of interpretation of statutes and it cannot be declared void merely on account of such incongruity. We may observe that the drafting of Section 2 of the M. P. General Sales Tax (Amendment and Validation) Act, 1971, or the drafting of the original provisions of the M. P. General Sales Tax Act, 1958, might, to some extent, be inartistic. But, if the intention of the Legislature be clear, such unambiguous and clear intention as expressed by the Legislature has to be given effect to despite inartistic drafting or despite some minor incongruity which does not affect the validity of the charging section at all.

40. In this connection, our attention was invited to the pronouncement of a Division Bench of this court, to which one of us (namely, B. Dayal, C.J.) was a party, in Orient Paper Mills Ltd. v. State of M.P. 1971 M.P.L.J. 560 In that case the question was whether the State Government, selling a forest produce, like bamboos, would be a dealer for the purposes of the M.P. General Sales Tax Act, 1958. That was a case before the Amendment and Validation Act, 1971, was brought into force and the Government had not monopolised its trade. In view of the earlier provision, the Division Bench laid down that the State Government merely selling a forest produce would not be a dealer. But the M. P. General Sales Tax (Amendment and Validation) Act, 1971, has amended the very definition of a dealer so that now under the amended provision, the State Government is deemed to be a dealer, although it may not carry on business. That also might appear rather incongruous. But the intention of the Legislature being clear and unambiguous, we do not find any difficulty in giving effect to it and as already observed by us, no legislative provision, either of the Parliament or the State Legislature, can be declared void merely because of some minor incongruity or inartistic drafting or the provision not being in conformity with the well-known and well-recognised principles of interpretation of statutes, provided the intention of the Legislature must be expressed in very clear terms without any ambiguity. If there be any ambiguity, the law courts, in some special circumstances only, supply the casus omissus by way of interpretation, thereby indulging in judicial legislation, though ordinarily it is not done. But, where the intention is quite clear, the law courts do not refuse to give effect to such clear and unambiguous intention. Therefore, we would reject the last line of attack on the impugned provision.

41. The learned counsel for the petitioners also urged that a contract of tendu leaves would not be a sale, but would be a licence. It is unnecessary for us to enter into that controversy. We may observe that the provisions of the M.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (Act No. 29 of 1964), give a clear indication that the right to pluck the tendu leaves is a sale coupled with a licence and such a contract cannot be understood in any other manner. It can neither be treated to be a pure sale, nor a pure licence, but a combination of both. The licence is to go over the Government, forests or private lands growing tendu patta. Coupled with this is the right to pluck and remove the tendu leaves, which would clearly amount to a sale as per the definition in Section 2(n) of the M.P. General Sales Tax Act, 1958. In this connection, we might further observe that although the provision impugned describes the widening of the definition of a dealer as an explanation, it might be construed to be supplying another category of the definition of a dealer. As such, its description as an explanation would not strictly be correct in all propriety. It could as well have been added to the main section or even by way of an exception.

42. It is true that as laid down by their Lordships of the Supreme Court in Sugauli Sugar Works (Private) Ltd. v. Assistant Registrar, Cooperative Societies, Motihari A.I.R. 1962 S.C. 1367 and by their Lordships of the Supreme Court in Bihta Co-operative Development and Cane Marketing Union Ltd. v. Bank of Bihar and Ors. [1967] 37 Comp. Cas. 98 (S.C) an explanation, according to their Lordships, ought to be read so as to harmonise with and clear up any ambiguity in the main section and the same cannot be so construed as to widen the ambit of the section. In that view, their Lordships with reference to Section 48(1) of the Bihar and Orissa Co-operative Societies Act, 1935, held that the explanation could not be so construed as to prevent the jurisdiction of the Registrar to settle the disputes between a registered society and others which is not envisaged by the main section itself. That would certainly be the purport and scope of an explanation. But, in our opinion, the word 'explanation' occurring in Section 2(d) and Section 8 of the M. P. General Sales Tax Act, 1958, as amended by the M. P. General Sales Tax (Amendment and Validation) Act, 1971, would rather be a case of mis-description, which would not affect the validity of the charging section, i.e., Section 8 of the Act, because the intention of the Legislature is very clear in imposing the sales tax on the goods mentioned therein and such an amendment was necessitated because of the State monopoly in the sale and purchase of tendu leaves by the enactment of a special statute. Therefore, we think that the clear intention of the Legislature for which the M.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, was enacted, has to be given effect to.

43. Lastly, we may observe that the word 'tobacco', manufactured or unmanufactured, occurring in the M.P. General Sales Tax Act, 1958, as also in the Central enactments, i.e., the Central Sales Tax Act, 1956, the Central Excises and Salt Act, 1944, and the Additional Duties of Excise (Goods of Special Importance) Act, 1957, is a well-known phrase interpreted in judicial decisions, and the Parliament or the State Legislature must be presumed to have that well-known meaning in view while enacting the said provision. The phrase, in our opinion, would clearly mean s

(i) tobacco, unmanufactured or manufactured, and

(ii) end all its finished products, such as snuff, cheroots, cigarettes, bidis, etc.

But the phrase cannot be interpreted to include other non-tobacco constituents, such as the paper which may be utilised for manufacture of the finished products or for the matter of that, paste, gum or the thread that is used for rolling the cheroots or cigarettes or bidis. The exemption in respect of tobacco will be applicable to tobacco in whatever form and its finished products only and to no other constituents that may be used in the manufacture of the finished products. By no stretch of imagination, the interpretation put by the learned counsel for the petitioners would, in our opinion, be a correct interpretation and we feel that it would tantamount to enlarging the scope of the phrase 'tobacco' and all its products. In this view of the matter, the State Legislature would certainly have no jurisdiction to impose greater duty on tobacco and its products in excess of what the Central enactments and particularly Section 15 of the Central Sales Tax Act, 1956, and Article 286(3) of the Constitution of India have provided for. But the State Legislature can certainly act within those limits.

44. Viewed in this light, we do not see any bar to the taxing of tendu leaves by the State Legislature, which according to us, is not at all covered by the phrase 'tobacco' unmanufactured or manufactured in all its forms or its finished products. Thus, in our opinion, the attack on the legislative competency of the State Legislature as also on the validity of the impugned provision fails and, consequently, we dismiss all these writ petitions with costs. Counsel's fee in each case shall be Rs. 50, if certified. The balance of the security deposit, after deduction of the costs awarded, be refunded to the respective petitioner or petitioners.


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