1. The Constitutional validity of Section 2 of the Madras General Sales Tax and the Madras Tobacco (Taxation of Sales and Registration) Act, Act XIII of 1955 -- which we, shall refer to as the impugned Act -- is the subject of challenge in these writ petitions.
2. Section 2 of the impugned Act whose validity is challenged in these proceedings amended Section 5 of the Madras General Sales Tax Act, 1939.
3. The general scheme of taxation provided by the Madras General Sales Tax Act is the imposition of a multiple point levy by taxing the turnover of every dealer carrying on business within the State. This is achieved by the charging Section 3 which taxes every dealer on his annual turnover and the standard rate of tax provided by Sub-section 1 (b) and is three pies for every rupee of the turnover. Section 5 enacts the exemptions and reductions in the imposition of such a multiple point tax and the main feature of the "restriction" imposed is that in regard to the commodities specified in the several sub-sections the tax is levied only at such single point either set out in the body of the Act or left to be prescribed by rules. The impugned enactment added the following items to Section 5 and subjected them to tax at a single point at specified rates. The material portion of Section 2 of the impugned Act runs thus:
"In the Madras General Sales Tax Act 1939 .....(ii) in Section 5, after item (vi), the following Items shall be added, namely:
(vii) the sale of cigars and cheroots at less than two annas per cigar or cheroot, and bidis, snuff, chewing tobacco or any other produce manufactured from tobacco, shall be liable to tax under Section 3, Sub-section (1). only at the point of the first sale effected in the State of Madras by a dealer but at the rate of six pies for every rupee on his turnover;
(viii) raw tobacco, whether cured or uncured shall be liable to tax under Section 3. Sub-section (I), only at the point of the first purchase effected in the State of Madras by a dealer but at the rate of six. pies for every rupee on his turnover.
Provided that where a dealer who has paid tax in respect of his turnover relating to goods Included in Clause (vii) has also paid the tax on the purchase of raw tobacco used in the manufacture of such goods under Clause (viii) he shall be entitled to a rebate to the extent of the tax paid in respect of the raw tobacco so used.
Before formulating the points urged in support of this challenge by learned counsel for the petitioners it would tend to convenience if we set out briefly the facts of these petitions, so as to appreciate how the impugned tax affects the transactions involved in them.
4. W.P. No. 871 Of 1955:-- The petitioner in this petition is a firm dealing in tobacco. In the course of Its business the firm purchased tobacco from growers, obtained the licence from the Union Government to store the goods under the Central Excise and Salt Act (Act I of 1944) and paid the appropriate excise duty on the tobacco stored by it under that enactment. It sold these goods in the course of its business to other merchants. The Impugned Act came into force on 1-4-1955, (Section 1 (2)) and as the petitioner-firm was the first purchaser in the State, of the tobacco dealt with by it, the Sales-tax authorities required it to pay the tax on this purchase under Section 5(viii) of the Act as amended.
As the petitioner failed to do so, it was threatened with punitive action under the provisions of the Madras General Sales-tax Act, and it thereupon filed this petition challenging the validity of the tax on this purchase of tobacco and applied for the Issue of a writ of Mandamus to desist from taking further action for the collection of the tax and has obtained a rule nisi.
5. W.P. No. 118 of 1956: The petitioner in this writ petition is a firm carrying on business in the manufacture of bidies, the factory being situated In Salem. Bidies were not subject to sales-tax by reason of an exemption contained In Section 4 of the Madras General Sales-tax Act to which we shall advert in its proper place. After Act XIII of 1955 came into force the Assistant Commercial Tax Officer; Salem, required the petitioner to submit a return as regards these sales. A partner of the. petitioner-firm appeared before this officer and made a statement that the firm anticipated a turnover of Rs. 10,00,000, in regard to the bidl sales during the year 1955-56 and an advance turnover statement was duly signed and filed.
The petitioner was thereupon provisionally assessed to a tax of Rs. 31,250 for the year ending 31-3-1956, with a direction that the tax should be paid in monthly instalments of Rs. 2604 and threatening it with compulsory recoveries and penalties in the event of the tax not being paid on the due dates. The petitioner had been paying these Instalments until February 1956 when it filed the present writ petition.
The petitioner was further required to take out a licence for conducting its business and it complied with this requisition. It paid the licence fee demanded which was based on the turnover as estimated by the petitioner Itself, namely, Rs. 10,00,000 per year. This petition was filed in February 1956 for an appropriate direction under Article 226 of the Constitution restraining the Deputy Commercial Tax Officer, Salem, from levying or collecting the tax. It will be seen that the pro- vision relevant to this petitioner's complaint is Sub-section (vii) of Section 5, namely, a tax on the first; sale of bidis effected in the State of Madras at Re. 0-0-6 per rupee on the turnover.
6. W. P. No. 1038 of 1956:-- The petitioner here is the proprietress of a cheroot factory. For the purpose of manufacture she purchased raw tobacco on which, by virtue of Section 6, item VIII, Introduced by the impugned Amending Act she has paid tax at Re, 0-0-6 in the rupee. On her sales of cheroots she is liable to tax under Section 5(vii) at the rate of Re. 0-0-6 per rupee. Of course she is entitled to the deduction of the purchase tax in calculating the net sales tax payable by her by reason of the proviso to Section 5(viii) which we have extracted earlier. But her contention is that both the purchase tax levied and the sales tax demanded are illegal. Challenging the validity of these Impositions she has invoked the jurisdiction of this court under Article 226 of the Constitution to restrain the tax authorities' from proceeding to levy or collect the tax from her.
7. Mr. Bashyam Aiyangar, learned "counsel for the petitioners in W.P. No. 871 of 1955 and 1033 of 1956 as well as the learned Advocate General who appeared for the respondent supporting the validity of the tax imposition took us in detail through the history of the taxation on tobacco and tobacco products in this State to enable us to understand the economic or financial implications of the impugned legislation. We do not consider it necessary to burden this judgment with those details. It is sufficient if we set out the broad outlines which stand out in this history.
It is a matter of common knowledge that taxes on the sale of goods were imposed for the first time in this country after the Government of India Act, 1935, which came into force on 1-4-1937. So far as Madras is concerned, tax legislation of this type was first undertaken in 1939. Four enactments were passed in relation to this matter almost at the same time, the Madras Electricity Duty Act, (Act V of 1939), the Madras Sales of Motor Spirit Taxation Act (Act. VI of 1939), the Madras Tobacco (Taxation of Sales and Licensing) Act. (Act VIII. of 1939) and the Madras General Sales-tax Act (Act IX of 1939).
As the charging section in the Madras General Sales-tax Act. namely, Section 3 was of the Widest amplitude and included within it a dealer of every type of goods, it was necessary to enact a provision to exclude from the operation of the sales tax imposed by it, goods which were covered by the other special enactments, so as to avoid double taxation. This was achieved by enacting Section 4 which in its original form ran; (we set out only the words relevant to the taxation of tobacco),
4. The provisions of Section 3 of this Act shall not apply to the sale of .... "manufactured tobacco" as defined In the Madras Tobacco (Taxation of Sales and Licensing) Act, VIII of 1939..... Manufactured tobacco was defined in Act VIII of 1939 in its Section 2(8) thus:
"'Manufactured tobacco' means cigars, cheroote, cigarettes, cigarette tobacco, bidis and snuff but does not include any preparation or mixture of tobacco intended for a further process of manufacture."
It is needless to mention that "manufactured tobacco" was subject to tax under Act VIII of 1939, and this was the only tax which persons who handled tobacco had to pay i.e., there was then no excise duty on tobacco or tobacco products.
8. A change was however effected in this scheme of taxation by the Central Excise and Salt Act, I of 1944, which consolidated and amended the law relating to Central Duties and Excise on goods manufactured or produced in India. Section 3 of the Act which is the charging provision provides for the levy and collection of such duties as may be prescribed on all excisable goods produced or manufactured in India at the rates specified in the first schedule.
Item No. 9 of the first schedule as originally enacted included "tobacco cured", tobacco being defined as "any form of tobacco cured or uncured, and whether manufactured or not" including the leaf, stalks and stems of the tobacco plant. Varying rates of duty were levied on different varieties of tobacco, Virginia or country, and also on different types Of curing to which the leaf was subjected and also on two manufactured products, cigars and cheroots. By an amendment effected in 1951 cured or uncured tobacco were both made liable to the duty as also cigarettes.
9. Sections 6 and 8 of Act I of 1944 empowered the central Government by notification to provide that as and from the dates specified no person shall, except under the authority and in accordance with the terms and conditions of a licence, engage in the production or manufacture. of any specified excisable goods as also the wholesale purchase or. sale or storage of any excisable goods specified in Part A of the second schedule "and no person shall have in his possession any excisable goods in excess of the maximum quantity that may be prescribed" respectively. Tobacco was specified as such an article under both these provisions. The Central Excise and Salt Act came into force as and from April 1944.
10. At the same time as this Central Legislation, Madras Act XII of 1944 effected two changes in the relevant local enactments. By Section 1 of the amending Act the Madras Tobacco (Taxation of Sales and Licensing) Act, 1939, was repealed as and from 1st April 1944 and in Section 4 of the Madras. General Sales-tax Act there was substituted for the reference to "manufactured tobacco" etc., the words "tobacco in any form Whether manufactured or not." The result of these changes was as and from 1st April 1944 there was no tax on sales of tobacco or its products, the only tax payable in regard to them being the duty levied under the Central Excise and Salt Act of 1844.
11. Notwithstanding some intermediate local legislation, excise duties continued to be the sole tax levied on tobacco or its products till 1953, when the Madras Tobacco (Taxation of Sales and Registration) Act, IV of 1953, in an amended form was passed. The charging section of this enactment of 1953, Section 4(1) levied a tax on the "first Bale of taxed tobacco" effected in the State of Madras, the tax being made payable by the seller. Taxed tobacco was defined by Section 2 (13) to mean "manufactured tobacco liable to tax under this Act, namely, cigars, cheroots, cigarettes, cigarette tobacco and pipe tobacco".
The provisions as regards registration and licensing, etc., enacted by the Act were however directed not merely to persons dealing in taxed tobacco but all persons doing business in tobacco which was defined to include every form of tobacco, that is to say, "manufactured, cured of uncured tobacco, any preparation or mixture of tobacco and the leaf of the tobacco plant." Section 4 (3)(a) however exempted from the tax levied by the charging section on sales of cigarettes at less than three pies per cigarette as also sale of cigars and cheroots at less than two annas per cigar or cheroot; thus exempting from tax a large number of varieties of these tobacco products.
It would also be seen that raw tobacco whether cured or uncured though subject to the licensing provisions did not attract any duty on sales. The taxing, registration and licensing provisions of this enactment operated side by side with the provisions of the Central Excise Act I of 1944 and the taxation levied under it. It is unnecessary to consider the exact scope of the exemption in relation to tobacco under Section 4 of the General Sales-tax Act, 1939, as it is common ground that until the impugned Act was enacted, no tax on the Bale of these goods was levied except under the provisions first of Madras Act VIII of 1939 and later under Act IV of 1963.
12. Next we have the Impugned Madras Act XIII of 1955. By Section 2(1) it altered the scope of the exemption granted by Section 4 Of the Madras General Sales-tax Act, 1939, whereby it became confined to taxed tobacco as defined in Section 2(13) of the Madras Tobacco (Taxation of Sales and Registration) Act, IV of 1953. We have already set out the definition of taxed, tobacco in the Madras Act IV of 1953 as it was when enacted. This included only cigars, cheroots, cigarettes, cigarette tobacco and pipe tobacco and did not Include tobacco raw or cured other than cigarette tobacco Or pipe tobacco. Section 3 of the Act of 1955 however altered this definition in the Act of 1953 by Omitting the words cigars, cheroots, cigarettes, cigarette tobacco and pipe tobacco so that as amended taxed tobacco meant manufactured tobacco liable to tax under the Act and purchases and sales in regard to these alone were exempt from sales-tax under Act IK of 1939.
The net result of the changes carried out by this complicated phraseology and cross-exemptions was that all transactions of sale or purchase) of tobacco and tobacco products were subjected to tax either under the Tobacco Taxation Act, IV of 1953 or under the General Sales-tax Act,. IX of 1939, a double tax under both these being avoided, but this sales tax was to exist side by side with the excise duty under the Central Excise Act. In general the scheme of the division between the two sales-tax enactments appears to be that while the higher priced tobacco products and cigarettes fell within the scope of the Tobacco Taxation Act, IV of 1953, bidis, snuff and the lower priced varieties of cigars and cheroots and raw tobacco cured or uncured were taxed under the General Sales-tax Act (IX of 1939).
13. In passing we might mention that in these writ petitions learned counsel confined their attack to the validity of Section 2 of Act XIII of 1955 which amended the General Sales-tax Act IX Of 1939, and did not call in question the validity of Act IV of 1953 either as originally enacted or as amended by Section 3 of Act XIII of 1955.
14. The main contention urged by Mr. Bashyam Aiyangar learned counsel who appeared for the petitioners in W.P. No. 871 of 1955 and 1038 of 195C, was that the single point tax on the first purchase effected in the State of Madras of -raw tobacco, whether cured or uncured, directed to be levied under the amended Section 5(viii) of the Madras General Sales-tax Act, 1939 was in truth and substance a duty of excise which was exclusively a union subject and was therefore ultra vires the State legislature. Entry 84 of the Union List reads:
"Duties of excise on tobacco and other goods manufactured or produced in India except... "
It was contended that the tax. imposed by the Amendment Act XIII of 1955, whose terms we have set out at the beginning of this Judgment, fell within this entry and was not "a tax on the sale or purchase of goods", within entry 54 of the State List Learned counsel pointed out that side by side with the tax directed to be levied by the impugned Act was the excise duty payable on tobacco under the Central Excise Act I of 1944. tinder Section 3 of the Excise Act tobacco, cured or un-cured. manufactured or not, including the leaf, stalks, stem of the tobacco plant was liable to excise; duty at various rates per Ib. depending upon, the quality and grade of the tobacco.
The broad contention urged by Mr. Bhashyam Aiyangar was that the tax levied by the impugned enactment was merely an addition to the excise duty thus levied by the Central Excise Act, and that it was in substance a tax on production though in form it purported to be a tax on the sale of goods. In this connection learned counsel relied on passages in the Judgment of the Federal Court in in re Central Provinces and Berar Sales of Motor Spirit and Lubricant Taxation Act. 1938, 1939 FCR 13: (AIR 1939 PC 1) (A).
In particular he drew our attention to passages in the judgment which explained that the term excise considered in vacuo was one of wide and indefinite import and apt to include any Internal and indirect duty which was calculated to burden production. If this wide meaning were given to the expression undoubtedly any tax on the sale of the products of manufacture would be "excise'', and there were some, decisions of the High Court of Australia which favoured such an Interpretation.
These however could obviously not be applied for interpreting the entry in the Government of India Act, 1935. which while reserving duties of excise to be levied by the Centre, specifically vested a power in the provinces to levy taxes on the sale of goods. It was the problem of reconciling the scope, of these two competing powers and the allocation of the respective spheres. allotted to the two Governments that had come up for consideration in 1939 PCB 18: (AIR 1839 PC 1) (A), which was a reference by the Governor General under Section 213 of the Government of India Act, Invoking the consultation jurisdiction of the Federal Court to determine the constitutional validity of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, Which Was questioned by the Government of India.
The sales tax whose validity was impugned was that levied on retail sales of petrol and petroleum products by any dealer whether he were the manufacturer or not. The opinion of the court was in favour of the validity of the legislation as one falling in substance within the entry "taxes on the sale of goods", though the reasons assigned' by the three learned Judges for this conclusion were not identical or even uniform. There were passages in the opinions expressed which appeared to lay emphasis on the fact that the legislation debated before them related to a tax on a retail sale, i.e, a sale to the ultimate consumer.
15. The question as to the import of the expression "excise" and whether a sales tax could be held to be a "duty of excise" came up however for consideration in a pointed form in the Province of Madras v. Boddu Paidanna & Sons, 1842 PCB 90: (AIR 1942 FCR 33) (B). The case was concerned with the validity of a tax on the sale of groundnut oil: Under the Madras General Sales-tax Act a tax was levied on the purchaser of groundnuts. When a miller of groundnut oil made his purchases, he had to pay this purchase tax. When, after milling, oil was extracted and the producer sold the oil. a tax on the sale of the oil was levied and collected from the seller i.e., the miller,
Provision was however made by rules framed under the Act by which manufacturers became entitled to claim a rebate from the tax. on the sale of the oil of the amount of tax paid at the point of the purchase of the nuts. A miller carrying on business in Vizianagaram challenged the validity of these taxing provisions and filed a suit for the recovery of the nett sales-tax, was really and in effect an excise duty.
Several other subsidiary contentions were also raised, to which however there is no need to refer. The District Munsif of Vizianagaram decreed the suit and the appeal filed by the province to the District court was transferred to this court for hearing. The appeal came on for hearing before Leach C. J. and Chandrasekhara Aiyar J. (See AIR 1941 Mad 913 -- Ed.) and the learned Judges dismissed it.
It was contended on behalf of the Province that in a constitution which vested a specific power to tax sales in provinces, the expression 'excise' must be so read as to exclude taxes on sales, and that in the context of these competing entries in the Government' of India Act 'excise' must be given the restricted meaning of a tax on manufacture or production a meaning which could not embrace a tax on the occasion of sale. This construction was however rejected by this court relying on certain passages in the opinion of the Federal Court in 1939 PCB 18: (AIR 1939 PC 1) (A), from which the principle was deduced that, a tax on first sales by a producer or manufacturer was a duty of excise as it fell on the producer or manufacturer and was therefore to be treated as a burden on production or manufacture.
16. The province preferred an appeal to the Federal Court, where this Judgment was unanimously reversed 1942 PCB 90: (AIR 1942 FC 33) (B). The argument put forward on behalf of the Province as to the relative scope of excise and sales-tax was accepted, and their Lordships stated that their decision in 1939 FCR 18: (AIR 1939 FC 1) (A), was not meant to draw a distinction between first sales and retail sales. Explaining the distinction between the scope of the two entries "excise" and "taxes on the sale of goods" their Lordships said (Pages 101 and 102 of FCR): (at p. 35 of AIR):
"The duties of excise which the Constitution Act assigns exclusively, to the Central Legislature are, according to the Central Provinces case (A), duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxes. The tax on the sale of goods, which the Act assigns exclusively to the Provincial legislature, is a tax levied on the occasion of the sale of the goods.
Plainly a tax levied on the first sale must in the nature of things be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit; but so is the tax payer in Canada who has to pay income-tax levied by the Province for provincial purposes and also income-tax levied by the Dominion for Dominion purposes; see Caron v. The King, 1924 AC 999 (C); Forbes v. Att. Gen. for Manitoba 1937 AC 260 (D).
If the tax payer who pays a sales-tax is also a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be an overlapping in one sense; but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is in theory nothing to prevent the Central legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away.....
It is the fact of manufacture which attracts the duty, even though it may be collected later; and we may draw attention to the Sugar Excise Act in which it is specially provided that the duty, is payable not only in respect of sugar which is issued from the factory but also in respect of sugar which is consumed within the factory. In the case of a sales tax the liability to tax arises on the occasion of a sale, and a sale has no necessary connection with manufacture or production. The manufacturer or producer cannot of course sell his commodity unless he has first manufactured or produced it but he is liable, if at all, to a sales tax because he sells and not because he manufactures or produces; and he would be free from liability if he chose to give away every--thing which came from his factory,
In our opinion the power of the Provincial Legislatures to levy a tax on the sale of goods extends to sales of every kind, whether first sales or not; and we regret that we are unable to agree with the contrary opinion which has been expressed by the High Court."
17. We need only add that the correctness of the decision of the Federal Court in Boddu Paidanna's case (B), was challenged by the Government of India before the Privy Council, and their lordships affirmed this decision and pronounced its reasoning to be correct (Governor General in Council v Province of Madras 1945 FCR 179: (AIR 1945 "PC 98) (E) ).
18. If the principle laid down in this case were applied, there is, in our opinion, hardly room for any argument challenging the validity of the tax now levied.
19. Mr. Bhashyam Aiyangar however sought, to draw a distinction between the case before the Federal Court and the present and urged that the Federal Court had to deal with a tax imposed on a producer after manufacture whereas here the tax was imposed before the manufacturing operation starts. We see no force at all in his argument. If a tax on the first sale of goods effected by the producer were not a tax on production and therefore not a duty of excise, we consider the present case a fortiori.
As the Federal Court explained -- an explanation which was affirmed by the Privy Council in 1945 FCR 179; (AIR 1945 PC 98) (E), a duty of excise is under the Indian Constitution a duty on production levied on a producer and grounded on the fact of production, while a sales tax is a tax levied on a dealer on the occasion.of a sale. We do not see any basis for the argument that the tax now impugned, is a duty of excise.
20. The only other contention of Mr. Bha-shyam Aiyangar which remains to be considered is, that the amendments Introduced into the Madras General Sales-tax Act by the Amending Act XIII of 1955 offended Article 14 of the Constitution by introducing an unreasonable discrimination between different classes of manufacturers. Learned Counsel pointed out that, where a manufacturer purchased his requirements of tobacco from a dealer he did not pay any tax on his purchase, but the manufacturer who purchased from the grower was called upon to pay the purchase tax though he was entitled to a rebate of the identical amount of tax paid when the sales tax payable by him on his sales of tobacco products came to be assessed.
This it was urged was an unreasonable discrimination against manufacturers who bought from the growers. We must confess that we are unable to appreciate any force in this argument. A manufacturer who buys tobacco required by him front a dealer does not pay any tax because the tax levied is a single point tax and unless it is to be held that tax levied at a single point is obnoxious to Article 14 of the Constitution -- a contention which has only to be stated to be rejected -- we do not see any basis for an allegation of discrimination between several classes of manufacturers under the impugned enactment.
Learned counsel for the petitioners In W.P., No. 118 of 1956 adopted the arguments of Mr. Bhashyam Aiyangar which We have already considered and urged in addition arguments challenging the validity of Section 3(1-A) of the Madras General Sales-tax Act. It would be necessary to set out the provisions of this section which was introduced by the Madras General Sales-tax Act, VIII of 1955; This new section ran:
"3 (1-A): The tax for each year may be assessed, levied and collected in advance during the year in monthly or quarterly instalments, and for that purpose a dealer may be required to furnish either an advance estimate of his turn over for the year, or periodical returns of the actual turnover as may be prescribed. The assessing authority may determine the amount of tax pay able in respect of any period and on such assessment the dealer shall pay the sum demanded within such time as may be fixed by such authority."
21. The necessity for this amendment arose out of the decision of this court in M. P. Kumara-swami Raja, in re, (F), to
which one of us was a party. Under the Madras General Sales-tax Act, 1939, as it stood before the amendment by Act VIII of 1955, the sales-tax was stated by an annual tax on the total aggregate turnover of each financial year, and therefore the tax did not accrue till the end of the financial year. The local Government however by rules framed under the Act levied a tax on the monthly turnover of each dealer with a provision for adjustment at the end of the year.
A contention that was raised before the court and which was referred to the Division Bench was that the obligation to pay as per the provisional assessment month by month under the rules was inconsistent with the Act. This contention was upheld, and the provisional assessment was quashed. This defect was remedied by an express provision in the enactment in the form of Section 3 (1-A) which we have extracted above. In view of the amendment thus effected, an attack grounded that the rules are inconsistent with the Act has been eliminated.
22. So far as the rules themselves are concerned, there is neither ambiguity nor injustice. The Madras General Sales-tax (Turnover and Assessment) Rules, which are the relevant rules provide for submission of returns by dealers regarding their estimated gross and net turnover. If the assessing authority is satisfied about the correctness of the return, the tax is provisionally assessed on that basis (Rule 7).
As soon as the tax has been provisionally fixed the assessing authority issues a notice to a dealer and the dealer is directed to pay for each month of the year of assessment one twelfth of the tax provisionally fixed (Rule 10), A dealer might elect not to be assessed on this basis of an estimated turnover. Rule 13 provides for an alternative method which is available to the assessee at his option.
This alternative method is that the tax is paid on the net turnover for each month the dealer sending a cheque for the tax due along with the submission of his return in the present case the petitioner in W.P. No. 118 of 1956 did not elect to send the monthly returns under Rule 13 but had been assessed on the turnover which he estimated and which estimate was accepted by the assessing authority.
23. The contention urged by Mr. Raghavachariar for the petitioner was that the provisional assessment thus levied upon his client was not in truth a tax on the sale of goods falling within entry 54 of the State list but was a tax on an anticipated sale which was not within the legislative power of the State. We are clearly of the opinion that this contention is not well-founded. One thing is clear that if the anticipated sales do not take place, no tax liability is incurred
In other words if at the end of the year the estimated turnover is not reached the dealer pays a' tax only on the actual sales during the year. But this might not conclude the question of the existence or otherwise of the legislative power. It is not in our opinion correct to say- that it is a tax on an anticipated sale. On the other hand, it is merely machinery employed for securing to the state the tax due and payable to it,
24. It has to be remembered that the power confided to the Sale legislature under Article 246(3) in common with other similar power to Parliament by the other sub-sections of the Article Ss to make laws with respect to the matters specified in the several entries of the State list including entry 54. The words of the entry designate the centre and not the circumstance of the power. If therefore the impugned provision has relevance to or connection with the subject assigned, it would be within the State legislative power.
Again every legislative power carries with it authority to legislate in relation to aits, matters and things the control of which is found necessary to effectuate its main purpose and thus carries with it power to make laws governing or affecting many matters that are incidental or ancillary to the subject matter. If a tax liability is certain to arise -- a matter not in controversy -- a provision designed to ensure that this shall not be evaded is in our Judgment clearly within, the power to enact a law with respect to taxes on the sale of goods.
This is just on a line with Section 18-A of the Indian Income-tax Act and grounded on the same ratio. Where the assessee avails himself of the option to be taxed on his monthly turnover under Rule 13 there is no factual foundation for any contention that the tax was being collected before the liability for it could be fastened under a power to tax sales.
25. As pointed out by this Court in Mohamed & Co. v. State of Madras, (G), a decision confirmed by the Supreme Court, at
page 395 (of STC): (at p. 116 of AIR).
"..... advance payment of tax is a well-recognised feature in the mode of realising tax end the provision in Rule 15 (2) (corresponding to Rule 13) is in accordance with, the practice generally obtaining in this branch of the law. In discussing the validity of a somewhat similar provision in a tax statute of southern Iowa, the Court observed: It is of course true that as the report is required on the twentieth of the calendar mouth for transactions of the preceding month, there may at times be gasoline received in the month covered by the report which has not been exported by, the twentieth of the succeeding month; hut. the distributor is entitled to a credit for such exportation in his report made in the next month, and the mere fact that he cannot claim an anticipatory credit for gasoline not yet exported, but intended so to be. seems to us to be too slight a burden to be of any moment, or to raise a substantial constitutional question: Monamotor Oil Co, v. Johnson, (1934) 293 US 86: (78 L Ed. 1141) (H). The attack on Rule 15(2) must accordingly fail."
Learned counsel for the petitioner however pointed out that in (G), the court was concerned with the validity of a rule corresponding to Rule 13 and not with a provision for assessment under Rule 10. It was however clearly open to the assessee to elect to be assessed under Rule 13, and if he considered it convenient to be assessed on an estimate which he himself furnished and which itself was an alternative to an assessment under Rule 13. we do not see how he could complain about the validity of the tax.
If the argument of learned counsel were accepted it would mean that in every case the provisional assessment should be on the basis of Rule 13, which would certainly not Improve the position of the petitioner who elected not to be governed by it. As we have stated before, the rules relating to provisional assessment are clearly within the legislative power of the State as providing the machinery for ensuring proper collection of the tax due under entry 54 of the State List.
26. The result is that all the writ petitions fail and are dismissed. Rules nisi issued will be discharged. There will however be no order as to costs in any of these petitions.