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Deputy Commissioner of Commercial Taxes Vs. Dhanalakshmi Trading Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 91 of 1966
Reported in[1973]31STC113(Mad)
AppellantDeputy Commissioner of Commercial Taxes
RespondentDhanalakshmi Trading Company
Advocates:K. Venkataswami, First Assistant Government Pleader
DispositionPetition allowed
Cases ReferredState of Madras v. R.M. Krishnaswami Naidu
.....1859. section 10 & tamil nadu special police subordinate service rules, rule 14(b), clause (iv) explanation (1); rule 14(b),ci.(iv) explanation (1) providing that a person acquitted or discharged on benefit of doubt shall be treated as person involved in criminal case - validity being questioned - held, the impugned rule 14(b) ci.(iv) explanation (1) has been issued in exercise of the power conferred upon the government under the tamil nadu district police act, the criminal city police act and the proviso to article 309 of the constitution., the rule is not assailed on the ground of lack of competence. it is challenged only on the ground that it is violative of articles 14 and 16 of the constitution. but it is well settled that if a rule passes the twin tests of (i) being founded on..........have to be deemed to have been included in the principalact as and from 1st april, 1959. if that is done, the assessee cannothave the benefits of section 3(3) in this case, as the groundnut oilis not a visually identifiable constituent of the finishedproduct.6. the tribunal's order is, therefore, set aside and the assesseeis held not entitled to the benefits of section 3(3) of the act for thetransactions in case allowed ; no costs.

Ramanujam, J.

1. The State is the petitioner herein. It is aggrieved against thedecision of the Sales Tax Appellate Tribunal, Madras, holding thatthe assessee is entitled to the benefits of the provision in Section3(3) of the Tamil Nadu General Sales Tax Act. The Tribunalpurported to follow the decisions in Commercial Tax Officer v.Mettur Chemical and Industrial Corporation [1965] 16 S.T.C. 281and Krishnaswami Naidu and Sons v. State of Madras [1965] 16 S.T.C. 671, wherein this court expressed the view that whengroundnut oil is used for manufacture of vanaspati, the groundnutoil, being a component part which went into the production ofvanaspati, Section 3(3) stood attracted in the case. After the filingof this tax case, the Supreme Court has also rendered the decisionin State of Madras v. R.M. Krishnaswami Naidu [1970] 26 S.T.C. 42 , confirming the view taken by this court in theaforementioned two cases. The decision of the Supreme Court wasto the effect that if a component is capable of identification by achemical or other test as a component of a finished product fallingwithin the First Schedule to the Tamil Nadu General Sales TaxAct, 1959, it would be an 'identifiable constituent' within themeaning of the explanation to Section 3(3) and that the sale of suchcomponent would qualify for the concessional levy of tax underSection 3(3).

2. Subsequent to the decision of the Supreme Court aforesaid,the Madras Legislature has enacted Madras Act 27 of 1970 with aview to make its intention clear. Under that Act, it purports toamend the 'explanation' to Section 3(3) in a slightly differentmanner. The 'explanation' before amendment and the'explanation' after its amendment by Act 27 of 1970 are set outbelow :

-------------------------------------------------------------------------------BEFOR AMENDMENT AFTER AMENDMENT--------------------------------------------------------------------------------'For the purposes of this Sub-section, 'For the purposes of this Sub-section,component part means an article which 'component part' means an article whichforms an identifiable constituent of the forms an identifiable constituent of thefinished product and which along with finished product, which along with othersothers goes to make up the finished pro- goes to make up the finished product andduct.' which, is identifiable visually, or by amechanical process and not by a chemicalprocess.'----------------------------------------------------------------------------------

3. The amendment has been brought into force as and from 1stApril, 1959, i. e , the date when the principal Act of 1959 wasbrought into force. In view of the express retrospective effect givento the 'explanation' as amended by Act 27 of 1970, it is contendedby the Government Pleader on behalf of the State that the principleof the decisions above-referred to cannot any longer apply andthat on a proper application of the amended explanation, thegroundnut oil not being identifiable, visually or by a mechanicalprocess, in the finished product, it should be held that Section 3(3)will not apply.

4. We are of the view that the scope and object of the present'explanation' is to give the benefit of concessional rate of levyunder Section 3(3) only to sales of components which areidentifiable visually and capable of being separated by anymechanical process from the finished product. The amendmenthaving been brought into force retrospectively from the date of thecommencement of the principal Act, we have to treat the'explanation' as having been in existence from the date of thecommencement of the principal Act. It is well-established that indeciding the true legal effect of a 'retrospective' provision in anamending Act, the intention of the Legislature cannot be ignoredand the amended explanation, by a legal fiction, has to be deemedto have been included in the principal Act as from the date ofcommencement of the principal Act. As pointed out by LordAsquith of Bishopstone in East End Dwellings Co. Ltd. v.Finsbury Borough Council [1952] A.C. 109:

If you are bidden to treat an imaginary state ofaffairs as real, you must surely, unless prohibited from doing so,also imagine as real the consequences and incidents which, if theputative state of affairs had in fact existed, must inevitably haveflowed from or accompanied it. One of those in this case isemancipation from the 1939 level of rents. The statute says thatyou must imagine a certain state of affairs; it does not say thathaving done so, you must cause or permit your imagination toboggle when it comes to the inevitable corollaries of that state ofaffairs.

5. We are, therefore, of the view that the effect of theretrospective operation of the amended Act 27 of 1970 is that the'explanation' inserted by Section 1(2) would, for all legalpurposes, have to be deemed to have been included in the principalAct as and from 1st April, 1959. If that is done, the assessee cannothave the benefits of Section 3(3) in this case, as the groundnut oilis not a visually identifiable constituent of the finishedproduct.

6. The Tribunal's order is, therefore, set aside and the assesseeis held not entitled to the benefits of Section 3(3) of the Act for thetransactions in question.

Tax case allowed ; no costs.

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