1. The appellant is a textile mill in Mahe. On 11th March, 1966, the revenue officials of Mahe served on the appellant a 'constreinte' (order of payment) for the recovery of a sum of Rs. 60,000, said to be the turnover tax due from the appellant in respect of the machines and raw materials of foreign origin imported by the appellant. The said 'constreinte' was made enforceable the same day by the Justice of Peace, Mahe and the appellant was notified of the same. The appellant filed his opposition against the said 'constreinte' contending that Clause 6 of the deliberations of 25th April, 1953, of the Representative Assembly of Pondicherry, under which the turnover tax is imposed, did not expressly subject these articles to the double taxation, that the recovery of the turnover tax was suspended in relation to textile mills by a letter dated 14th November, 1953, of the Chief Commissioner, that though the subsequent deliberations of the Representative Assembly of 29th September, 1962, enabled the collection of turnover tax from the textile mills, the machines and raw materials having been taxed at the time of their entry at Cochin Port to an import duty, the turnover tax cannot be claimed from the appellant a second time in Pondicherry territory and that, in any event, the claim is barred by limitation as the one year period prescribed had expired.
2. The Justice of Peace, hereinafter called as the court of the first instance, who notified the demand and before whom the opposition was entered by the appellant framed, among others, the following three issues : (1) Whether the dealings of the appellant which had been subjected to tax constitute import, (2) whether they have been exempted from the payment of 'transaction tax' and (3) whether the levy is barred by limitation. The court of the first instance held that by virtue of the deliberations of the General Council of Pondicherry dated 25th April, 1953, approved by the decret of 17th August, 1953 and made applicable to the State of Pondi-cherry by the order dated 8th September, 1953, a tax called 'tax on transactions' was imposed in the French Indian territories, that under Clause 6 of the said deliberations as amended on 23rd October, 1953 and approved by the decret dated 24th February, 1954, a compensatory tax at a double rate for the goods imported by industrial merchants for the use of their business or industries and not for resale in the Pondicherry State had been imposed, that under that clause the imports of tools and machines by the various industrial concerns are subject to tax at double the rate of the normal transaction tax and that the dealings of the appellant are not exempted from the said tax as alleged by the appellant. It also held that the demand is not barred by limitation. The result was the appellant's objections to the demand of tax were rejected.
3. There was an appeal to the District Court of Pondicherry by the appellant. In that appeal, the appellate court set out the following three points for consideration : (1) Whether the turnover tax is demandable for transactions in question and if so (2) what is the rate of tax to be levied and (3) whether there has been prescription. On the first point the lower appellate court held that though Clause 6 of the deliberations of 25th April, 1953, did not originally subject the articles imported by industrial concerns to tax at double the normal rates, the said article was modified by the subsequent deliberations dated 23rd October, 1953, which was approved by the decret dated 24th February, 1954, doubling the rate of tax for such imports, that the recovery of the turnover tax from the textile mills, though originally suspended by a letter of the Chief Commissioner dated 14th November, 1953, has later been resumed by the deliberations of the Representative Assembly dated 29th September, 1962, that no import tax was collected by the State of Pondicherry in respect of the machineries imported by the appellant and that, therefore, the appellant is liable to pay the tax in accordance with the said Clause 6 of the deliberations dated 25th April, 1953. On the second point, the appellate court held that the normal rate of transaction tax being 3 per cent, the rate of tax to be applied in relation to import transactions of the appellant was 6 per cent and that the said rate has correctly been applied in the appellant's case by the revenue department. On the third point relating to the plea of limitation, the appellate court took the view that though the period of limitation prescribed is one year, as the tax cannot be demanded unless the appellant had furnished all the materials required for quantifying the amount of tax, limitation cannot run against the department till that is done and that as the plaintiff had never produced the details enabling the department to quantify the tax, he can not contend that the tax has become demandable even on the date of import. Having held that all the contentions raised by the appellant were not tenable, the appellate court dismissed the appeal. This second appeal is directed against the judgment of the lower appellate court.
4. In this second appeal, it has been urged by the appellant that the machineries in question were not imported into Mahe, that they were imported by its main office in Cannanore in Kerala State, that the import of the said machineries was complete on their landing at the Cochin Port and that, therefore, the view taken by the courts below that the machineries were imported into Mahe and, therefore, Clause 6 of the deliberations dated 25th April, 1953, stands attracted, is erroneous. It has also been urged that the deliberations of the Representative Assembly dated 28th September, 1962, withdrawing the benefit of exemption granted to the textile mills cannot be enforced as it was without any legal sanction, that the impugned demand in this case was barred by limitation, that the finding of the courts below that the claim is not barred by limitation cannot be sustained in law and that any action on the part of the revenue authorities cannot extend the period of limitation prescribed by a statute. The appellant has also raised a new point before us that the deliberations of 25th April, 1953, imposing the transaction tax have ceased to have any force after the French territory became part of the Indian Union as a result of the de jure transfer on 16th August, 1962.
5. Before dealing with the last contention, it is convenient to dispose of the points which have been raised before the courts below and which have been reiterated before us. For that purpose, it is necessary to refer to the relevant statutory provisions relating to the imposition of tax on transactions.
6. By a decret dated 25th October, 1946, a Representative Assembly has been set up by the French Government in the French Establishments in India. The said decret sets out the procedure to be followed in the election of members to the Representative Assembly from the various electoral constituencies and also the functions and powers of the Assembly. Articles 1 to 23 of the decret dealt with the constitution of the Assembly and Articles 24 to 32 dealt with its functions and Articles 33 to 48 its powers. Article 36 sets out the procedure for making a law imposing a tax as follows :
The deliberations passed on the mode of assessment and rules of the levying of taxes, duties and dues of any kind including the import and export duties and dock dues shall be applicable only after their being approved by a decret in the Council of State. The said decret should be made within 90 days from the date on which the deliberations are received by the Ministry of Overseas, France. On receipt of the deliberations the date of that receipt shall be notified to the President of the Assembly and to the President of the Standing Committee through the head of the territory. At the expiry of the said time-limit those deliberations shall be considered as approved, they shall become final and shall be enforceable.
7. This decret dated 25th October, 1946, has been promulgated by an arrete dated 10th November, 1946. The Representative Assembly of French Settlements in India constituted by the decret dated 25th October, 1946, in exercise of the powers conferred on it by Articles 33 to 48 deliberated at its meeting held on 25th April, 1953 and decided to impose a tax called 'transaction tax' on all transactions effected in the French Establishments in India by natural or artificial persons who usually or occasionally purchase for reselling or perform acts coming under an industrial, commercial or artisanal operation. The said deliberations of the Assembly were approved by the decret dated 17th August, 1953, of the French Government. The said deliberations as approved have been made enforceable by an arrete dated 8th September, 1953. As we are concerned with the ambit and scope of the said deliberations, it is necessary to scan through these provisions.
8. As already stated, a tax called 'transaction tax' has been imposed on all transactions of purchase for resale or for use in industrial, commercial or artisanal operations. Article 2 of the deliberations exempts from tax certain transactions in respect of certain articles in certain circumstances. Article 3 provides that the transaction tax is to be paid by persons effecting taxable transactions. Article 4 says that the tax is leviable at the point when the cost of the goods sold, supplies made, or services rendered is realised. Article 5 sets out the basis of taxation and says that the tax shall be determined on the basis of the cost of sale or of supplies or of services including all charges and taxes and that in respect of exports by sea, the taxable value shall be the actual cost f. o. b. price and in respect of exports by any other way the taxable value will be the commercial value at the point of export and that in respect of deliveries made by the co-operative to their members, by principal firms to their agencies or branches it shall be on the commercial value of supplies or deliveries at the local current price. Article 6 says that a double tax called 'compensating tax' shall be levied in respect of import of goods sold directly to consumers without intermediary and in respect of import of goods made by merchants, industrialists of machinery or equipment and in general, all other things which are meant for being used in their trade or industry without giving rise to resale. Then follows the articles dealing with the assessment and collection as also the penalties and fines. By a resolution dated 5th October, 1953, the Representative Assembly suspended the levy of transaction tax on the products manufactured by the textile mills temporarily. But the Representative Assembly again, at its meeting held on 29th September, 1962, on a report dated 15th September, 1962, made to the Representative Assembly by the Chief Commissioner, French Settlements in India, suggesting the withdrawal of the exemption from transaction tax granted to the textile mills, revoked the suspension and directed the collection of the said tax with effect from 1st June, 1962. Subsequently, the revenue authorities called upon the textile mills to pay the transaction tax with effect from 1st June, 1962. The textile mills have been, however, resisting the claim saying that the reimposition of the transaction tax has not been validly done. The law of prescription applicable to the French Settlements in India provides, inter alia :
Persons liable for the tax can assert his claim to the prescription, in respect of customs duties and purchase taxes which the Government has not claimed within one year with effect from the date on which the said duties and taxes were claimable....
The person liable for the tax can cause the prescription to run in his favour only from the date when the employees could ascertain the taxes....
9. It is in the light of the provisions referred to above the first three contentions of the appellant have to be dealt with.
10. There cannot be any dispute that Clause 6 provides for a compensatory tax (double tax) in respect of all import of goods made by industrial concerns for their own use and not for resale. The question, however, is whether there has been an import of the goods by the appellant for its own use during the relevant period for which the tax is sought to be imposed. According to the appellant, the goods were imported from Japan and England by its head office at Cannanore and then transported to Mahe and, therefore, the goods cannot be taken to have been directly imported to Mahe. The word 'import' occurring in Clause 6 seems to mean bringing into the territory of Pondicherry either by sea or by land from outside. Therefore, even if the goods have landed at Cochin Port and then taken to Mahe, it should be taken to be an import from outside the territory of Pondicherry. On the date when the deliberations were brought into force in 1953, the French Settlements were not part of the Indian territory. Therefore, even if the goods have moved from the Indian territory to Mahe as alleged by the appellant, it would be an import. The content of the word 'import' occurring in Clause 6 cannot be taken to be different in the year 1962, when the levy made under the deliberations is sought to be enforced. We are, therefore, inclined to agree with the courts below that the bringing in of the machinery into the Pondicherry State for use in the textile mills will clearly fall under Clause 6.
11. This leads us to the next contention of the appellant that the textile mills having been exempted from payment of the transaction tax under Clause 6, the exemption cannot be taken away except by a fresh deliberation imposing the tax once again and that, in any event, the decision of the Representative Assembly to withdraw the exemption and collect the tax has not been approved by the Head of the State. The levy of transaction tax under the deliberations dated 25th April, 1953, stood temporarily suspended by an order of the Chief Commissioner. But the said suspension cannot be construed as a withdrawal or repeal of the deliberations so far as the textile mills are concerned. It is a well-established rule of construction of statutes that if an authority has got the power to suspend a levy of tax it has also the power to withdraw the suspension of the said levy. Once the suspension is withdrawn the deliberations can automatically be enforced against the textile mills. We have, therefore, to see whether the suspension has been withdrawn by the proper authority. In this case, the withdrawal of the suspension was by the Representative Assembly itself on the basis of the report of the Chief Commissioner that there is no longer any necessity to continue the temporary suspension of the levy. In the light of these facts, which are not in dispute, the courts below are right in holding that the revenue authorities are empowered to levy the transaction tax in respect of the transactions of the textile mills subsequent to 1st June, 1962, as a result of the Representative Assembly deciding the cancellation of the suspension of the levy ordered earlier.
12. As regards the third contention that the recovery of tax is barred by limitation, the law relating to prescriptions provides that the tax is to be claimed within one year from the date on which the tax and duties were claimable by the revenue. But it also provides that the period of one year prescribed for recovery of tax will run in favour of the person liable for the tax only from the date when the revenue authorities could ascertain the tax. The revenue authorities could ascertain the tax payable by the appellant in this case only if he has submitted a return giving his turnover, etc., relating to the period in question. It is true, in this case, the demand in question has been issued after the expiry of one year from the date of the import. But the law of limitation provides that the assessee can raise the plea of limitation only when he has furnished the necessary materials to the revenue authorities to determine the tax payable by him. The appellant, not having admittedly furnished the required materials even up to this date, is not entitled to raise the plea of limitation. Though the tax is demandable from the date of the import of the goods, the amount of tax could be quantified only when the requisite materials are produced by the plaintiff which has not been done so far. We cannot, therefore, hold that the recovery of tax in this case is barred by limitation as contended for by the appellant.
13. The only contention that remains to be considered is whether the deliberations under which the tax has been levied cannot be enforced after the de jure merger of the French Settlements in the Indian territory as contended by the appellant. The contention advanced on behalf of the appellant is that in view of the provisions of the French Establishments (Application of Laws) Order, 1954 (S.R.O. No. 3315), the transaction tax imposed under the deliberations in question by the Representative Assembly has ceased to be in force and that the said tax can no longer be levied in the territorry of Pondicherry. The preamble to the said Order refers to the agreement dated 21st October, 1954, entered into between the Government of India and the Government of France under which the Central Government has taken over the jurisdiction in relation to the French Establishments in India. The said Order has come into force on 1st November, 1954. Clause 3(1) of that Order provides that the enactments specified in column 3 of the Schedule as in force before the commencement of this Order will continue to be in force in the French Establishments subject to the amendments or modifications specified in column 4. Clause 3(2) says that all rules made under the enactments referred to in Clause 3 of the Schedule immediately before the commencement of that Order and all notifications, orders and regulations issued thereunder will continue to be in force in the French Establishments. Clause 6 of the Order, which has been mainly relied on by the appellant, is as follows:
Unless otherwise specially provided in the Schedule, all laws in force in the French Establishments immediately before the commencement of this Order, which correspond to the enactments specified in the Schedule, shall cease to have effect, save as respects things done or omitted to be done before such commencement.
14. According to the learned counsel for the appellant, the transaction tax which was levied in the French Establishments immediately before the first of November, 1954, the date of the commencement of the said Order, corresponds to the customs duty normally levied under the Sea Customs Act, 1878, which is one of the enactments set out in column 3 of the Schedule to that Order and, therefore, it ceases to have any effect. In substance what is urged on behalf of the appellant is that the law imposing transaction tax which was in force in the French Settlements before 1st November, 1954, corresponds to the Sea Customs Act referred to in column 3 of the Schedule and, therefore, transaction tax can no longer be levied after 1st November, 1954, in the State of Pondicherry in view of Clause 6 of the said Order. It is also contended that even if the law relating to transaction tax cannot be taken to correspond to the Sea Customs Act, it can be taken to correspond to the Indian Tariff Act and, as such, transaction tax cannot be levied any further.
15. The said French Establishments (Application of Laws) Order, 1954, came to be made simultaneous with the French Establishments (Administration) Order, 1954, by S.R.O. No. 3314. The said Administration Order by Clause 5 laid down:
All laws in force in the French Establishments or any part thereof immediately before the commencement of this Order and not repealed by paragraph 6 of the French Establishments (Application of Laws) Order, 1954, shall continue to be in force until repealed or amended by a competent authority.
16. Clause 6 provided that all taxes, duties, cesses or fees which, immediately before the commencement of the said Order, were being lawfully levied in the French Establishments or any part thereof shall continue to be levied and applied for the same purpose until other provisions are made by a competent legislature or authority, if it has not been discontinued by any of the laws extended to the French Settlements by the Application of Laws Order, 1954. Therefore, if by virtue of the Application of Laws Order, 1954, the transaction tax has not ceased to be in force as contended for by the appellant, the transaction tax can continue to be levied as before under the Administration Order, 1954, until other provisions are made by the competent legislature or authority. We are of the view that the transaction tax does not correspond to customs duty levied either under the provisions of the Customs Act or under the Indian Tariff Act and, therefore, it has not ceased to be in force. Transaction tax imposed under the deliberations referred to above contemplates levy of tax on certain transactions. Import or export may be the subject-matter of a levy as a transaction carried on by the appellant but merely from that fact the tax imposed on such a transaction cannot be treated either as import duty, export duty or customs duty. Even assuming that any of the enactments referred to in column 3 of the Schedule to the Application of Laws Order, 1954, imposed a tax on imports or exports, that cannot' be taken to correspond to the tax levied on all transactions, including the import or export transactions. It is seen that in the French Settlements there was in fact a tax on import levied under the decret dated 20th September, 1950, called 'tax de debarquement' and a tax on export of textiles under decret dated 9th December, 1948, side by side with the law imposing a transaction tax. The transaction tax imposed in the French Settlements was different from either a tax on import or a tax on export. If at all, it is the law imposing tax on exports or one imposing tax on imports which will correspond to the Tariff Act or the Sea Customs Act. Therefore, the imposition of transaction tax can continue to be levied in the French Settlements by virtue of Clauses 5 and 6 of the Administration Order, 1954.
17. The French Settlements became part of the Indian territory by the Treaty of Cession and after such de jure merger, the Pondicherry (Administration) Act (49 of 1962) came to be enacted by the Parliament. Section 4(1) of that Act stated that all laws in force immediately before 16th August, 1962, the appointed day, in the former French Establishments or any part thereof shall continue to be in force in Pondicherry until amended or repealed by a competent legislature or other competent authority. Section 4(2) specifically states that for the purpose of facilitating the application of any such law in relation to the administration of Pondicherry and for the purpose of bringing the provisions of any such law into accord with the provisions of the Constitution of India, the Central Government may, within three years from the appointed day, by order, make such adaptations and modifications, whether by way of repeal or amendment as may be necessary or expedient and thereupon every such law shall have effect subject to the adaptations and modifications so made by the Central Government. This provision indicates that any tax that was being levied by the former French Settlements will continue to be levied for a period of three years unless the Central Government repeals the same in the meanwhile. It is not the case of the appellant that the Central Government at any time repealed the deliberations of the Representative Assembly imposing the transaction tax as provided in Section 4(2). We have to, therefore, sustain the transaction tax levied on the appellant in this case.
18. The learned counsel for the appellant points out that the demand issued in this case has been made without giving an opportunity to the appellant to produce materials for quantifying the correct tax. It is not disputed by the respondents that the demand of tax was made on best judgment basis without reference to the appellant's records. Therefore, while upholding the levy of tax, we have to direct the respondents to quantify the tax after giving an opportunity to the appellant to produce its records and other materials and after verification of such records produced by the appellant. The appellant, therefore, is given two months time from this date for producing the necessary documents before the respondents to enable them to quantify the taxable turnover and the tax due thereon. If the appellant fails to produce the documents and other necessary materials within the time set out above, the demand in question will stand. Subject to the above modification, the decision of the lower courts is affirmed and the second appeal is dismissed. No costs.