Rajagopala Ayyangar, J.
1. At the date relevant to these petitions Article 286(3) of the Constitution ran:
'(3) No law made by the Legislature of a State imposing, or authorising the imposition of a fax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.' By virtue of the power thus vested in Parliament was enacted the Essential Goods (Declaration and Regulation of Tax on Sale Or Purchase) Act 1952 (Act 52 of 1952). The preamble to the Act stated that it was an Act to declare in pursuance of Clause (3) of Article 286 of the Constitution, certain goods to be essential for the life of the community. The operative part of this enactment was Section 3 which ran: '3. No law made after the commencement of this Act by the legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of any goods declared by this act to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.'
2. The date of the commencement of the Act was 9-8-1952 being the date on which having received the assent of the President it was published in the Gazette of India. Item 10 of the list of goods set out in the schedule and which were declared 'essential for the life of the community' to which the provisions of Section 3 were attracted was 'hides and skins'.
3. Under the rule making power vested in them under Section 3 and Section 19 of the Madras General Sales Tax Act, 1939, the Government of Madras framed certain amendments to the Turnover and Assessment Rules amending the already existing ones relative to the imposition and levy of sales tax on hides and skins. These changes were effected by a notification in the official Gazette dated 3-9-1955, the rules being expressed to have retrospective effect from the beginning of the financial year 1955-56.
The question that is raised in these petitions is whether these rules infringe the provisions of Article 286(3) of the Constitution or Section 3 of Act 52 of 1952.
4. Before entering on a discussion of this point, it would be convenient to put aside matters which are common ground and beyond controversy. The first is that Article 286(3) addresses itself to the future and not to the past; it imposes fetters on what might he termed post-constitution laws and does not seek the invalidation of laws in existence on the date of the Constitution. The Sales Tax Acts of the several States which were 'existing laws' on the date of the Constitution were thus left unaffected and operative without any restriction.
Next, the Constitutional prohibition did not operate of its own force but was dependent on parliamentary legislation declaring a commodity to be 'essential to the life of the community' before the restriction came into operation. Lastly on the terms of Section 3 of Act 52 of 1952 the area of the State laws which were saved extended to those in force on 9-8-1952, because only the State laws enacted after the coming info force of Act 52 of 1952 were hit at by the restriction imposed by the Act.
5. The question which requires to be decided in these petitions is whether the amendment effected to Rules 15 and 16 of the Turnover and Assessment Rules framed under the Madras General Sales Tax Act by the notification dated 3-9-1955 to whose terms I shall immediately refer, was 'a law made ............ by the legislature of a Stale imposing of authorising the imposition of a tax on the sale or purchase of hides and skins. The contentions urged by Mr. Nambiar for the petitioner and the learned Advocate General for respondent-State were directed to assert or deny this proposition.
6. To appreciate the point urged by learned counsel for the petitioner it is necessary to advert to the scheme underlying the levy of sales tax on hides and skins before and after the impugned amendments. The statutory basis for the levy of a tax on the sale of goods, including that on hides and skins, was the Madras General Sales Tax Act, 1939. The charging provision in this enactment imposing the levy was Section 3, the material portion of which ran:
3 (1): Subject to the provisions of this Act
(a) every dealer shall pay for each year a tax on his total turnover for such year; and
(b) the tax shall be calculated at the rate of three pies for every rupee in such turnover.
(4) For the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed:
Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly. (5) The taxes under Sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed.'
Sub-section (5) was followed by provisos which I omit as immaterial.
7. The expression 'dealer' was defined in Section 2 (b) to mean 'any person who carries on the business of buying or selling goods.' 'Goods' were defined in Section 2 (c) to mean, 'all kinds of moveable property other than actionable claims, stocks and shares and securities and includes all materials, commodities and articles.' This definition would therefore include hides and skins and if Section 3 (1) operated without any other qualification every dealer in hides and skins would have been liable to pay tax in respect of his transactions, that is on his turnover, subject to such rules as might be prescribed.
In other words, if Section 3 (1) stood unqualified and had unrestricted operation there would be a multipoint levy or a tax on every dealer on his transactions in hides and skins. For reasons which it is unnecessary to explain, based mainly upon the importance of the encouragement of the export of hides and skins as being vital to national economy, the provisions as to multi-point tax was modified in the case of these as well as certain other commodities by the provisions in Section 5. This section enacted:
'5. Subject to such restrictions and conditions as may be prescribed, including conditions as to licences 'and licence fees'
(vi) the sale of hides and skins, whether tanned or untanned shall be liable to tax under Section 3, Sub-section (1) only at such single point in the series of sales by successive dealers as may be prescribed.'
The net result was that the operation of the charge at multiple points on every dealer, levied by Section 3 was modified in the case of hides and skins, by the imposition of the tax at a single point, the point at which however the tax was to be levied or the transaction which should determine the tax-point being left to be prescribed by rules framed by the State Government.
8. Rules 15 and 16 of the Turnover and Assessment Rules contained this 'prescription' of the single point. These rules as they existed on 9-8-1952 and whoso validity therefore from the point of view arising for decision in the present case cannot be impugned ran:
'15 (1): Rules 6 to 13 shall not apply to licensed tanners and other licensed dealers in hides or skins in respect of their dealings in hides or skins; but the provisions of this and the following rule shall apply to them in respect of such dealings, x x x x x x x
16 (1): In the case of hides and skins the tax payable under Section 3 (1) shall be levied in accordance with the provisions of this rule.
(2) No tax shall he levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold! for export outside the State.
(i) In the case of all unlanned hides and skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him.
(ii) In the case of all untanned hides or skins which are not sold to a tanner in the State but are exported outside the State, the tax shall be levied from the dealer who was the last dealer not exempt from taxation under Section 3 (3) who buys them in the State on the amount for which they were bought by him.
(3) Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skins have been, tanned in a tannery which is exempt from taxation under Section 3 (3) the sale of such hides or skins shall be liable to taxation as under the next sub-rule below dealing with hides or skins tanned outside the State.
(4) Sales by licensed dealers in hides or skins which have been tanned outside the State shall be exempt from taxation except at the stage of sale by the dealer who is the first dealer not exempt from taxation under Section 3 (3) who sells them within the State. The tax shall be levied from such dealer on the amount for which he sells such hides or skins.
(5) Sale of hides Or skins by dealers other than licensed dealers in hides or skins shall subject to the provisions of Section 3, be liable to taxation on each occasion of sale.'
The proper interpretation of these provisions particularly in relation to what might be included in the purchase turnover of a tanner-dealer and the liability of unlicensed dealers to tax came up before this Court and as a result of the decisions rendered, the position reduced itself to this. Rule 16 (5) was held to be beyond the rule making power of the State Government as being in contravention of Section 5 (vi) (vide Syed Muhammad v. State, of Madras, : AIR1953Mad105 , confirmed by the Supreme Court in Syed Mohammad v. State of Andhra, : 1SCR1117 .
The assessable turnover of a dealer in hides and skins was held not to include purchases from unlicensed dealers. Abdul Shukoor v. State of Madras, : AIR1955Mad686 (FB). The sales and purchases by unlicensed dealers were held not liable to tax under the Act for the reason that the transaction or the point specified as attracting tax liability under the prescription, was confined to sales of purchases by licensed dealers, Noor Muhammad v. State of Madras, : AIR1957Mad33 .
9. Under the rules as they stood prior to the recent amendments in 1955 it was not compulsory For dealers to be licensed, licensing being optional, the licensing provisions (R. 5 of the Madras General Sales Tax Rules) appearing to proceed on the basis that if a dealer desired to avail himself of the exemption from the multi-point tax, or the benefit of a single point tax he should get himself registered.
This option, it may be mentioned, was generally availed of since the legal effect of the failure to exercise the option had not been adjudicated upon by the Court before the decision in Noor Muhammad's case, : AIR1957Mad33 .
10. It was to avoid the state of affairs created by these decisions that amendments were effected to the rules. First Rules 5 of the Madras General Sales Tax Rules was amended to make the taking out of a licence compulsory. This was followed by the impugned notification G. O. 2733 dated 3-9-1955 effecting amendments to Rules 15 and 16, Rules 15 (1) was amended to read;
'15 (1): Rules 6 to 13 shall not apply to dealers in hides and/or skins whether tanned or untanned in respect of their dealings in such hides and/or skins.'
Rule 16 as amended read:
'16 (1): In the case of untanned hides and/or skins the tax under Section 3 (1) shall be levied from-the dealer who is the last purchaser in the State not exempt from taxation under Section 3 (3) on the amount for which they are bought by him.
(2) (i) In the case of hides or skins which had been tanned outside the State, the tax under Section 3 (1) shall be levied from the dealer who in the State is the first dealer in such hides or skins not exempt from taxation under Section 3 (3) on the amount for which they are sold by him.
(ii) In the case of tanned skins which have been tanned within the State, the tax under Section 3 (1) shall be levied from a person who is the first dealer in such hides or skins not exempt from taxation under Section 3(3) on the amount for which they are sold by him :
Provided that, if he proves that the tax has already been levied under Sub-rule (1) on the untanned hides and skins out of which the tanned hides and skins had been produced, he shall not be so liable. (3) The burden of proving that a transaction is not liable to taxation under 'this rule shall be on the dealer.'
11. The contention urged by Mr. Nambiar in these petitions was that the amended Rules 15 and 16 were 'a law imposing or authorising the imposition of a tax'' on the sale or purchase of goods --hides and skins declared by Parliament to be essential to the life of the community under Act 52 of 1952. This thesis he sought to establish by the following line of reasoning.
No doubt Section 3 (1) of the Madras General Sales Tax Act imposed a tax on the sale or purchase of any kind of moods but its imposition was subject to the restriction or limitation imposed by Section 5 of the Act in relation to hides and skins. By reason of the latter provision Section 3 was modified in the case of hides and skins by being taken out of the multi-point levy under Section 3 (1).
In cases therefore where sales tax is levied at a single point the charge to tax under Section 3 (1) does not operate unless and until the single point is determined. If Section 5 itself determined that point the charge to tax levied or imposed by Section 3 would have been brought into play at the date of enactment of Section 5. That however was not the scheme which the Legislature pursued.
The fixation of the single point, was, on the terms of Section 5 (Vi), left to be determined by rules, and the relevant rules in that connection were Rules 15 and 16 of the Turnover and Assessment Rules, The result was that until these rules were framed there was no imposition of sales-tax under the Act on hides and skins, the tax liability imposed by Section 3 (1) becoming attracted to the transaction only by the rules and therefore the rules were framed.
In this connection learned counsel for the petitioners invited my attention to certain passages in the judgment of this Court in : AIR1935Mad686 and : AIR1957Mad33 , where it was held that if a Iransaction was by a person or of the category not within Rules 16 and 15, there was no liability to tax. Rasing himself on these, the learned counsel submitted that it was Rules 15 and 16 as they existed prior to 9-8-1952 which had imposed tax on transactions in hides and skins, that since the rules under which the taxes now are sought to be levied were those framed in September 1955 replacing the earlier rules, these new rules constituted 'the law imposing the tax' within the meaning of Section 3 of Act 52 of 1952 and that as these rules were not reserved for the consideration of the President, they would be inoperative by reason of Article 286(3) of the Constitution read with Section 3 of Central Act 52 of 1952.
12. I must say that the submission above summarised raises difficult problems and merits serious consideration.
13. Before detailing or discussing the arguments of the learned Advocate-General, there is one matter I would like to refer to immediately. It was not disputed that subordinate legislation in the sense of a rule made under an enactment was a 'law' within the opening words of Article 286(3) of the Constitution and Section 3 of Act 52 of 1952.
The learned Advocate-General however submitted that the words 'imposing or authorising the imposition of' connected two distinct concepts. A law 'imposed a tax' where it directly did so, that is proprio vigore. The expression 'authorising the imposition of a tax' he said would apply to cases where the Legislature vested another body with a power to make 'a law imposing the tax.'
He instanced the cases of taxes imposed by Municipal authorities under the provisions of the Municipal or Local Government Acts. In such cases the Legislature of the State which had power under the relevant entries of the State Legislative list to impose a tax authorised Municipal authorities to levy certain designated taxes within their respective areas. There is no doubt that the Advocate-General was right so far that the taxation permitted to Municipalities and other local authorities by State legislation could be aptly described as 'laws authorising the imposition of a tax.'
But this in my opinion does not exhaust the entire category of 'laws authorising the imposition of a tax'. For instance customs duties imposed by notification of the Central Government under Sections 3 (a), 4 and 4 (a) of the Indian Tariff Act (Act 32 of 1934) would fall within the category of 'impositions authorised by law.' Taxes levied by virtue of power conferred by lawful delegation would be comprehended within the meaning of these words. Broadly speaking the distinction between the two categories would correspond to that between 'by' and 'under' a law.
14. The learned Advocate-General invited my attention to the provisions of Articles 287, 288 and 289 in which the expression 'law imposing or authorising the imposition of, a tax' occurs and in particular to the provision in Article 288(2) under which even rules are required to obtain the previous sanction of the President if those rules touch upon 'the fixation of the rates and other incidents of such tax' on the terms specified in Clause (1) andcontrasted them with the terms of Article 286(3).
This however does not lead to the conclusion that the absence of a specific reference to rules in Article 286(3) favours an interpretation that if a Sales Tax Act left the fixation of the rate of levy to a rule, the rule determining the rate would not be a law imposing the tax' which was required to be reserved for the President's sanction before it could be valid or operative under Article 286(3).
Indeed the learned Advocate General expresslydisclaimed any such inference being drawn from thiscontrast in the contents of the Articles. Though the point is not covered by authority, I entertain nodoubt that such a rule would be 'a law imposing the tax' because the rate of tax is such an essential constituent part of tax legislation -- see for instance the Annual Finance Acts -- that it would be impossible to take them out of the category of 'a law imposing a tax'.
15. This brings me to a consideration of the crucial point in this case namely whether the new Rules 15 and 16 of the Turnover and Assessment Rules which became law on their publication in the Gazette on 3-9-1955 was 'a law imposing a tax' on the purchase and sale of goods within Section 3 of Act 52 of 1952. I shall now Briefly state the opposing contentions.
On behalf of the petitioners it was urged that it was by virtue of Rules 15 and 16 that any transaction of purchase or sale of hides and skins was brought within the sphere of the charging provision of the Madras General Sales Tax Act and the new rules not having received the President's sanction, cannot have legal operation. If this contention were upheld it would mean that no sales tax could lawfully be levied on transactions in hides and skins from and after 1-4-1955 because the earlier rules which did not offend Article 286(3) were repealed and the new rules could not operate.
On the other hand, the contention on behalf of the State was that 'the law imposing sales tax' on transactions in hides and skins was the Madras General Sales Tax Act, 1939, a law which does not offend the provisions of Act 52 of 1952 and that the rules made under it including Rules 15 and 16 were merely machinery provisions and not 'laws imposing a tax'.
In this connection the learned Advocate General submitted that in regard to a tax of the nature of a sales tax the essential constituent elements would be these: (1) the provision which determined the goods upon which the tax was leviable and (2) that which prescribed the rate of duty; (3) the nature of the tax i.e. whether it was multi-point or at a single point. In the case of a personal tax as distinguished from taxes on transactions like sales tax, the persons who would be liable to tax would have been an essential constituent element of the law imposing the tax.
But in the case of taxes like sales tax the emphasis is shifted from the persons liable to the commodities liable to tax, the latter becoming crucial as an essential constituent of 'the law imposing a tax'. These three elements were, he Submitted, present in the parent Act of 1939 a pre-1952 law and so the other provisions both of that enactment and of the subsidiary legislation thereunder should be viewed merely as machinery provisions which however important they might be could not by themselves by properly designated as laws imposing the tax.'
16. Before considering the correctness of these two opposing views, I might pause to mention that during the course of the arguments a third possible position suggested itself to me. This was that even assuming that learned counsel for the petitioners was right in his submission that the new Rules 15 and 16 were 'laws imposing taxes' they would be invalid only to the extent to which the persons and transactions not previously liable to tax were brought within the area of taxation after the coming into force of Act 52 of 1952.
On further consideration however I have reached the conclusion that this intermediate position could not be fitted into the language of Article 286(3) of the Constitution or Section 3 of Act 52 of 1952 The intermediate view that 'a law imposing a tax' which replaces an earlier one of the same nature, contravenes Section 3 of Act 52 of 1952 only to the extent to which it oversteps the previous law, assumes that the later enactment is 'a law imposing a tax'.
If however the later provision were 'a law imposing a tax' no portion of it can be saved from the prohibition enacted by Article 286(3) or Section 3, without reading into the later a saving in regard to taxes previously imposed, which is not to be found there. Where the impugned law expressly repeals an earlier enactment and re-enacts the taxation-provision in a modified form, either extending its scope, altering its incidence or even restricting its area, the source of power to the taxing authorities to levy and assess the tax would be the later enactment and not the earlier one and therefore in that sense it would be the later law that would impose the tax.
The theory which I just now mentioned could be sustained only by denying the fact of a repeal which is in terms expressed, for these reasons I consider thus intermediate theory as illogical and unsound.
17. This leaves for consideration the two opposite views put forward by learned counsel for the petitioners and for the State-either Rules 15 and 16 of the Turnover and Assessment Rules is 'a law imposing a tax' in which case there could be no tax levied on hides and skins or they are not a law imposing a tax in which case the entire provisions would be valid. The choice between them can bo made only by ascertaining the precise connotation and import of the words 'Law imposing or authorising the imposition of a tax' in Article 286(3) which are repeated in Section 3 of Act 52 of 1952.
18. What then is the import of the expression 'law imposing a tax' or put in another way what as a law which imposes a tax or when can a law be said to 'impose' tax? One thing is clear. It is not every law which has something to do with taxation that can be said to be a law which 'imposes'. Take for instance the Revenue Recovery Act, -- which provides for the collection of taxes and other impositions.
Though it touches and concerns taxes, it' cannot be said to be 'a law imposing a tax' for it assumes that a tax has been laid and merely provides the machinery for its collection. The illustration I have taken is so clearly outside the field of a 'law imposing' a tax that there may be no controversy regarding its classification but that cannot exhaust the category of laws dealing with taxation which are not themselves 'laws imposing taxes.'
19. In this context I feel I could derive considerable ass/stance for the decisions and dicta of the learned Judges of the High Court of Australia explaining the meaning of the words 'laws imposing taxation' in Sections 53 and 55 of the Commonwealth of Australia Act 1900. Section 51 (if) of the Act vests in the 'Commonwealth Parliament the power to make 'laws respecting taxation'.
Tin's however is subject to the restriction to be found to be in Sections 53 and 55 of the Act the portions material to our purpose reading:
53. 'proposed laws ........... imposing taxation, shall not originate in the senate. The Senate may not amend proposed laws imposing taxation.' 55. 'Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.'
In order to conform to the requirements of these two provisions the Parliament of the Commonwealth uniformly and invariably followed the practice of passing separately Tax Acts which 'imposed' any particular tax and Assessment Acts which provided machinery for the assessment and collection of the tax imposed or to be imposed by the other, This was to enable the Senate to amend Assessment Acts which they could not do in the case of the Tax Acts.
Acts of the former type provided means for the assessment and collection of the tax. They authorised officers to compute and collect the tax laying duties upon persons to make returns in order to make such assessment and collection possible. The tax Acts contained 'the grant' of money they imposed the burden upon the people. According to the High Court of Australia it is the latter Arts and not the former which were to be regarded 'as imposing taxation' and therefore as not capable of originating in the senate or of being amended by the Senate.
It has been held on several occasions that the various Assessment Acts did not 'impose taxation' and so held notwithstanding that such Acts contained provisions which brought into charge persons or transactions not normally within the scope of the Tax Acts, for the reason that the Assessment Act was ancillary to the Tax Act.
20. In Osborne v. Commonwealth, 12 CLR 821, the question for the decision of the court related to whether the Land Tax Assessment Act 1910 was or was not 'an Act imposing taxation' within the meaning of Section 55 of the Constitution. Counsel seeking an affirmative answer pointed to Sections 10 and 12 and certain other sections. Section 10 of the Act provided that land tax imposed by the relevant tax Act should be levied and paid upon the unimproved value of the land but it also contained a provision that the rate of tax should be as declared by Parliament.
Section 12 provided that land tax should be charged on land as owned at a particular time. There were other sections which stated that persons should be liable for land tax in certain specified cases and counsel relied on these also in support of the violation of Section 55, Griffith C. J., Barton, O'Connor and Issacs JJ., held that the Assessment Act did not impose taxation notwithstanding the presence of these provisions.
The reasoning on which this conclusion was rested was that the Tax Act fixed the rate and specified land as the subject of taxation and the Assessment Act which in part determined the value which was subjected to tax was ancillary to the tax Act and constituted merely machinery for the assessment and collection of the tax.
21. Federal Commissioner of Taxation v. Munro, 38 CLR 153, was concerned with the validity of the Income-tax Assessment Act 1922-24. Section 28 of that enactment created a special measure of taxable income to meet the special requirements of a case which offered facilities for evasion and which were not properly met by the ordinary measure of taxable income applied in the Australian Income-tax Act. The Court held that this provision in the Assessment Act did not impose taxation. Issacs J., saying
'The words 'imposition' and 'imposing' mean the same thing and both mean 'grant' and Both are distinct from the management, assessment, collection and control of the tax.'
22. Cadbury-Fry-Fascall Proprietary Ltd, v. Federal Commissioner of Taxation, 70 CLR 362 raised inter alia the validity of the Income-tax Assessment Act 1936-39 and in particular whether Sections 104 and 105 offended Section 55 of the Constitution as a law imposing a tax. These sections made provision for the passing of orders corresponding to those under Section 23A of the Indian Income-tax Act under which an assessing authority might treat the undistributed profits of a company on the same basis as if dividends were declared, the relative share-holders treated as being in receipt of such notional dividends.
This 'deemed income' of the share-holders was sought to be assessed under the relevant Income-tax Acts. The Full Court unanimously held that Sections 104 and 105 of the Income-tax Assessment Act were not 'laws imposing taxation' within Section 55 of the Constitution. If the Tax Act imposed a tax on income the determination of what constituted 'income' in certain special circumstances which should be brought within the charge was held not to be part of 'law which imposed the tax'.
23. These decisions and the reasoning contained in them led me to the conclusion that the expression 'laws imposing taxation' occurring in our Constitution should receive a limited construction.
24. A law dealing with taxation is therefore not necessarily a 'law imposing taxation'. To apply these decisions to the situation on hand, the position appears to me to be this. The Madras General Sales Tax Act is a 'law imposing the tax'. Under it the person who is liable to tax is the 'dealer'. The subject-matter of the tax is a transaction of sale or purchase of any commodity and the tax is laid on the total turnover of such dealer.
The rate of tax is that laid down in the levy provision, Section 3 (1 and 2). The nature of the levy whether it is multiple point or at a single point is determined by the operation of Section 5. The rest of the Act contains merely machinary provisions for the assessment and collection of tax. How the turnover as to be computed, which items of transactions shall be included or excluded in such computation, who shall compute it in the first instance and determine the tax payable, to whom appeals shall be preferred from such determination or decision, when me tax has to be paid as well as the machinery for collection including penalties for non-payment, are machinery provisions for the assessment and collection of the tax imposed.
The sections of the Act or the rules dealing with these matters would undoubtedly be laws 'dealing' with sales-tax but they would not be 'laws imposing the Tax'. There can be no doubt that these machinery or assessment provisions are vital and without these 'laws dealing with the sales tax' -- the Tax cannot be effectively laid or enforced and though in that sense they would he part of taxation measure, they would not, in my opinion, be 'laws imposing taxes' to fall within Article 286(3).
If any other construction were adopted it would mean that every little change in the rule which might after all be machinery for collection, would have to obtain the sanction of the President, a situation which would lead to serious inconvenience, an inconvenience which could not have been intended by the framers of the Constitution.
25. I have next to consider whether the provision in Section 5 (vi) and the place which rules 15 and 16 occupy in the scheme of the sales tax on hides and skins render these rules 'laws imposing taxes'. I fully recognise that taxation might be imposed absolutely as well as conditionally and that while one law may select the subject of taxation it might leave it to other laws to prescribe conditions on the fulfilment of which alone the tax liability shall fasten.
In such cases no doubt the fulfilment of the condition would he a constituent fact in the emergence of tax liability and therefore an essential element in the imposition of the tax. A law which prescribes the conditions on which the tax liability should arise can properly be described as part of the law imposing the tax; I am however unable to attribute this effect to the rules with which these petitions are concerned.
No doubt there are passages in the judgment of this Court in : AIR1955Mad686 (FB), as well as in : AIR1957Mad33 , where stress is laid on the operation of Rules 16 as bringing into existence the liability of tax. But the Court was there dealing with problems of quite a different nature from those which arise here. To illustrate my point I would take the case of rules framed under Section 3 (4) from the computation of the turnover.
It cannot be disputed that without the rules pre-scribing the method for computing the turnover, the charging provision in Section 3 (1) could not be brought into play. It cannot on this account be contended that the rules made under Section 3 (4) for computing the turnover is a law imposing the tax. Take again the case of rules framed under Section 3 (5) which enacts:
'3. (5) The taxes under Sub-sections (1), (1-A) and (2) shall he assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed:
(i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed shall be taxed;
(ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in Clause (i) of this proviso he shall not be taxed again in respect of any sale of such goods effected by him.'
The rules framed under the first paragraph of the sub-section are undoubtedly merely machinery provisions and not laws imposing a tax in the sense I have described above. The first proviso enacts that the rides should lay down whether the seller or the buyer in respect of each transaction of sale should be liable to tax on his total turnover.
The prescription in this regard cannot be disassociated and be held a law imposing a tax as distinguished from a law 'dealing' with the taxing provision merely because it was that prescription which brought the dealer within or without the scope of the levy. It is the essential nature of the provision that has to be considered, its primary or subordinate place in the scheme of the enactment Take the instant case of the rule determining the single point at which the tax shall be levied on transactions in hides and skins. The provision in relation to the levy of the tax -- the law imposing the tax -- is Section 3 (1) and (2) as modified by provisions of Section 5 (vi); it is these that constitute the law imposing the tax.' They determine (1) that in the case of hides and skins there shall be tax at a single point as well as the rate at which such tax shall be levied.
What that single point would be is no doubt left to the rule but the rules which select the single point, perform no other function than carrying out the provisions of the enactment which impose the tax. The fact that without the prescription by the rule, the tax would not be exigible does not decide the question as to whether the rules are or are not 'laws imposing taxes' within the meaning of Article 288(3).
As I have already pointed out the fact that, in the absence of any rule, which, though in its essentials, is a machinery provision, it is not possible to levy the tax or collect it, does not thereby render the rule 'a law imposing the tax' within the meaning of Article 286(3). In my opinion, the test formulated by learned counsel for the petitioners that if in the absence of a particular rule, taxes could not be levied or collected, the rule in question would be 'a law imposing a tax' is too wide and an overstatement because admitted machinery provisions would then he comprehended within such a law.
Different aspects of what might broadly be termed the subject of taxation may be found in separate enactments but a distinction must be drawn, which defines the subject-matter of the tax and fixes the rate and others which provide for the collection, recovery, exemption, refunds, penalties and other necessary incidents in any scheme of taxation. Without the machinery enactment the taxes may be incapable of being laid or collected but that does not make it a 'law imposing the tax'.
In my opinion the impugned Rules 15 and 16 of the Turnover and assessment Rules were subordinate legislation whose subject-matter was the prescription regarding assessment and collection of taxes 'imposed' by Sections 3 and 5 of the Sales Tax Act and though without their existence, it could not have been possible to levy or collect the tax, they are not in themselves 'laws imposing the tax' within Article 286(3) or Section 3 of Act 52 of 1952.
26. Before closing I must add that the Question to be decided was a very different one, really of first impression being uncovered by authority and I must not fail to acknowledge the assistance I have derived from the arguments of Learned counsel on either side.
27. The other point raised in the petitions regarding the validity of the retrospective operation of the G. O. dated 3-9-1955 from 1-4-1955 was not argued by counsel, as this has been decided adverse to the petitioner in W. P. Nos. 625 and 626 of 1936. The petitions fail and are dismissed. The rules NISI are discharged but there will be no order as to costs.