G. Ramanujam, J.
1. A common question of law is involved in all the above cases and, therefore, they are disposed of together by a common judgment.
2. As the facts in all these cases are substantially the same it is sufficient to set out the facts in T.C. No. 197 of 1970. The petitioner in this case is a partnership firm carrying on business in matches-For the assessment year 1964-55 it had paid a sum of Rs. 1,91,400 as and by way of excise duty to the Central Government on the matches manufactured and sold during that year. The petitioner had claimed a deduction of the aforesaid amount in its returns filed under the Central Sales Tax . Act, hereinafter called the Central Act, on the ground that excise duty paid to the Central Government is an allowable deduction under Rule 6 (f) of the Madras General Sales Tax Rules, 1959. The assessing authority rejected the petitioner's claim for deduction on the ground that Section 9 (3) of the Central Act as it stood originally only attracted the procedure for assessment under the Madras General Sales Tax Act, hereinafter called the State Act, for making the assessments under the Central Act and that as such the exemptions provided under the State Act will not be available in respect of assessments made under the Central Act.
3. Aggrieved against that decision the assessee went on appeal before the Appellate Assistant Commissioner who held that the petitioner's claim for deduction towards excise duty paid by him in respect of assessments under the Central Act was not tenable in view of the decisions in Mariappa Nadar v. The State of Madras : AIR1962Mad290 , State of Mysore v. Mysore Paper Mills (1964) 15 S.T.C. 176 : A.I.R. 1964 Mys 212, Khader and Co. v. State of Madras (1966) 17 S.T.C. 396 and Thirukoilur Oil Mills Limited v. State of Madras : AIR1968Mad311 . There was a further appeal to the Sales Tax Appellate; ' Tribunal. Before the Tribunal considerable reliance was placed by the petitioner on the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty : 2SCR129 and sons in sup port of its case that if the excise duty was deductible under the local Sales Tax law in the computation of the taxable turnover, then such duty was also deductible in arriving at the taxable turnover under the Central Sales Tax law. But the Tribunal taking note of the Madras Ordinance 5 of 1968 (replaced by Madras Act III of 1969) which omitted Rules 6 (f) of the Madras General Sales Tax Rules, 1959 and 5 (1) (i) of the Madras General Sales Tax (Turnover and Assessments Rules, 1939 with retrospective effect from 5th January, 1957 held that in view of the deletion of the provision for deduction from the taxable turnover in relation to excise duty paid by the dealer under the State Act no claim for deduction could be sustained under the Central Act even as per the ruling of Supreme Court in Yaddalam's case. The petitioner then relied on Section 10 of the Central Ordinance 4 of 1969 which came into force on 9th June, 1969 and claimed that as it has not collected any tax: under the Central Act from its customers on the ground that no such tax is leviable on the turnover relating to excise duty, it is entitled to exemption from liability to pay tax in respect of the said turnover. The Tribunal took the view that for claiming exemption Under Section 10 two essential conditions are to be satisfied, (1) that the dealer should not have collected tax on the ground that tax is not leviable on excise duty and (2) that tax could not have been levied or collected under the principal Central Act before its amendment under Central Ordinance 4 of 1969. On facts the Tribunal found that the Department has not verified whether the petitioner has collected tax or not on the disputed portion of the turnover. However it held that even assuming that the petitioner has not collected tax, still the second condition set out above was not satisfied and, therefore, it is not entitled to the exemption under the said Section 10. According to the Tribunal in view of the deletion o f the provision for deduction in relation to the excise duty under the State Act, tax could be levied and collected on excise duty under the Central Act even before its amendment by Central Ordinance 4 of 1969 and, therefore, the second condition is not satisfied. In that view the petitioner's appeal came to be dismissed. That view of the Tribunal has been challenged in T.C. No. 197 of 1970.
4. The assessment year and the turn-ever disputed in each of the above cases are set out below:
________________________________________________Case No. Assessment Disputed turn-year. over excise duty________________________________________________Rs.T.C. 197/70 1964-65 1,91,400.00T.C. 196/70 1965-66 8,64,637.00T.C. 225/70 1965-66 45,900.00T.C 226/70 1964-55 45,900.00T.C. 227/70 1965-66 1,85,197.00T.C. 228/70 1965-66 2,63,199.50T.C. 307/70 1965-56 and 2,21,318.00W.P. 303/70
Except the difference in the disputed turnover the facts in all these cases are the same.
5. The common question involved in all these cases is as to the true scope of Section 10 of the Central Act XXVIII of 1969 which has replaced Clause 10 of Central Ordinance 4 of 1969. Before proceeding to consider that question, it is necessary to refer to the changes brought about in the provisions of the State Act as well as the Central Act.
6. We will first refer to the changes brought about in the State Act so far as excise duty is concerned. Under Rule 5(1) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 excise duty paid to the Central Government by a dealer in respect of goods manufactured by him is an allowable deduction in the computation of the taxable turnover. The said rules were replaced by the Madras General Sales Tax Rules, 1959, with effect from 1st April 1959. Rule 6 (f ) of the Madras General Sales Tax Rules, 1959 also allowed a similar deduction in respect of excise duty paid by the dealer. However, the said Rule 6 (f) was deleted with effect from 1st April, 1966 by a notification of the State Government in G. O. No. 109 Revenue, dated 29th March, 1966. Later by the Madras Ordinance 5 of 1968, which came into force on 21st December, 1968, the deletion of Rule 6 (f) was made retrospective from (sic)st April, 105 . The Ordinance also deleted with retrospective effect Rule 5 () (i) of the Madras General Sales Tax (Turnover and Assessment) Rules. 1939 from 5th January, 1957 to 3 st March, 1959. The above Ordinance has been replaced by Madras Act III of 1969 which came into force on 5th March. 1969. The effect of the change brought about ultimately by Madras Act III of 1969 is that there was no provision for deduction of excise duty paid by a dealer for purpose of determination of his taxable turnover for the period between 5th January, 1957 to 31st March, 1966.
7. So far as the Central Sales Tax Act, 1956, is concerned, Section 9 (3) of that Act provided that the assessment and collection of the tax under that Act shall be in the same manner as the tax on the sale or purchase of the goods under the General Sales Tax law of a State is assessed, paid and collected, and for the said purpose, the authorities under the State Act may exercise all or any of the powers they have under the General Sales Tax law of that State. Construing this provision the Supreme Court for the first time in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and sons : 2SCR129 , held that the expression 'in the same manner occurring in Section 9 (3) made it clear that the tax payable by any dealer under the Central Act shall be levied and collected in the same manner as the tax on the sale or purchase of the goods under the General Sales Tax law of a State is assessed and collected and that the expression 'levied' occurring in Section. 9(1) will have the same meaning as under the local sales tax law. In that case the assessee, a dealer in textiles was taxed on his inter-State sales for the year 1957-58 Under Section 9 of the Central Sales Tax Act as it stood then. The assessee contended that as he was not the first seller, he is not liable to be assessed under the Mysore Sales Tax Act, 1957 if the sale had taken place in that State and therefore, he could not also be taxed on his inter-State sale under the Central Act. The Supreme Court expressed the view that by virtue of Sub-sections 1 and 2 of Section 9 of the Central Act, the power conferred; upon the authority competent is to assess the tax, in the same manner as the tax on the sale or purchase of the goods under the General Sales Tax law of a State is. levied and that it is not intended to make a departure in the manner of levy of tax on specified goods which are taxed only at a single point under the State Act The purport of the above decision is that Section 9 of the Central Act not only attracts the machinery provisions under the local sales tax laws but also the substantive provisions relating to the levy and collection of tax. In a subsequent decision in the State of Kerala v. Pothan Joseph and sons (1970) 25 S.T.C. 147, their Lordships of the Supreme Court specifically considered the question whether the excise duty which is an allowable deduction under the local' sales tax law would also be a deduction under the Central Act by virtue of section of that Act. The Supreme Court, following the decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty and sons : 2SCR129 , specifically held that the general sales tax law of a State, which would include the rules framed thereunder governed the levy and assessment of the tax in the matter of inter-State sales and, therefore, a dealer who is entitled to deduction towards excise duty indetermining the total turnover for the purpose of the State Act will be equally entitled to claim deduction in respect of such excise duty in relation to the inter-State sales in determining the turnover for the purposes of the Central Act.
8. Till the above decision in Pothan Joseph's case (1970) 25 S.T.C. 147, was rendered by the Supreme Court, this Court had taken a consistent view that the phrase 'in the same manner' in Section 9 (3) did not attract all the incidents of the local sales tax law to the assessments under the Central Act, that what was contemplated was that the procedure for making an assessment, collection of tax etc., should be the same as laid down in the local sales tax law, and that as such it was only the machinery and the procedural provisions of the local law which were made applicable by Section 9 (3) of the Act. Mariappa Nadar v. State of Madras : (1962)2MLJ302 , is one of the earliest decisions rendered before Yaddalam's case ( : 2SCR129 , Khader and Co. v. State of Madras (1966) 17 S.T.C. 396 and Larsen and Toubro case : (1967)2MLJ552 and Tirukoilur Oil Mills case : AIR1968Mad311 , are all decisions rendered by this Court after the decision of the Supreme Court in Yaddalam's case : 2SCR129 and in all these decisions this Court has taken the view that the decision in Yaddalam's case : 2SCR129 , will not have any application to the question of deductions and that unless there is a specific provision for deduction in the Central Act or the rules framed thereunder, no deduction could be claimed under that Act. The Kerala High Court took the same view in Parvathi Mills case (1962) 13 S.T.C. 972. The Mysore High Court in Mysore Paper case (1964) 15 S.T.C. 176 : A.I.R. 1964 Mys. 212, also took the same view. It is at this stage the Central Ordinance 4 of 1969 came to be promulgated on 9th June, 1969, with retrospective effect from 1st October, 1959, amending Section 9 so as to give effect to the views expressed in the above decisions of this Court and other High Courts, and to supersede the decisions of the Supreme Court in Yaddalam's case : 2SCR129 and Pothan Joseph's case (1970) 25 S.T.C. 147 This Ordinance has been replaced by Central Act XXVIII of 1969. Section 9 as amended only attracts the machinery provisions of the local sales tax laws and not the substantive provisions such as the point or stage of levy e; emption, deductions, etc. The result is a claim for deduction towards excise duty based on a provision under the local sales tax law in respect of the Central sales tax: assessment cannot be sustained as at present and that excise duty becomes taxable under the Central Sales Tax Act from 1st October, 1959. But as a new liability has been created by a retrospective amendment of Section 9, the Parliament has enacted Section 10 of the Central Act XXVIII of 1969 providing for e emption from sales tax liability in case the dealer effecting inter-State sale has not colleted any tax under the Central Act before its amendment on. the ground that no such tax could be levied or collected in respect of such sale or any portion of the turnover relating to such sale and no such tax could be levied or collected under the Central Act before its amendment.
9. The petitioners do not dispute that Under Section 9 as amended they are liable to pay tax on the turnover relating to excise duty. But what they contend is that they are entitled to exemption from tax on the said turnover in view of the exemption contained in the said Section 10. Section 10 of the amending Act gives the benefit of exemption only to those who have not collected sales tax on their turnover of inter State sales or any portion thereof on the ground that they are not liable to pay tax on such turnover and that under the Central Act before its amendment tax could be levied on that turnover. A dealer had to satisfy both the above conditions before he claims exemption Under Section 10. Even if it is shown that he had not collected tax on the excise duty on the ground that excise duty is entitled to dedution and not liable to tax, still he will not be entitled to exemption Under Section 10 if under the Central Act, tax; is legally payable on the turnover relating to excise duty. Therefore, for applying Section 10 it has to be seen as to what is the law in force on the date of the final assessments in these cases.
10. Mr. V. K. Thiruvenkatachari, the learned Counsel for some of the petitioners contends that the question of exemption Under Section 10 should not be considered in the light of the retrospective amendments brought about by Madras Act III of 1969, that it should be considered only in the light of the provisions of the Central Act before its amendment, and the State law as it stood on the date of the interstate sale and that as the petitioners have not collected tax on the turnover representing excise duty on the ground that they are not liable to be taxed on that turnover and that Section 9 of the Central Act as it stood then and as interpreted by the Supreme Court did not enable the tax to be levied on such turnover, they are entitled to the exemption under the section. Section 9 provided that the tax payable under the Central Act shall be levied and collected by the Central Government in the same manner as the tax under the local sales tax law is assessed and collected. Section 9 as understood by the Supreme Court in Yaddalam's case : 2SCR129 and Pothan Joseph's case (1970) 25 S.T.C. 147 also attracted the provisions of the State Act relating to exemption, and deduction etc. Though factually there was a provision for deduction under the State law and, therefore, the tax Under Section 9 of the Central Act could not be levied on the turnover of excise duty on the dates of the assessments, the effect of the subsequent deletion of the provision for deduction under the State law with retrospective effect from 5th January, 1957 is that the provisions for exemption should be deemed not to have existed on the date of the assessments. The deeming clause in Madras Act III of 1969 results in the turnover relating to excise duty being taxable from 5th January, 1957 under the State law and consequent y the turn over relating to excise duty is also taxable under the Central Act. The contention of the learned Counsel that the amendments brought about in the local sales tax law in relation to the deduction of excise duty should not be construed in such a way as to affect the charge under the Central Act is not possible of acceptance. Section 9 of the Central Act in the form it was at the relevant time attracted the provisions of the local sales tax law in general. The section does not refer to the provisions of the local Sales Tax Act as they existed on the date when the Central Sales Tax Act was enacted. Therefore, the scope of the charge Under Section 9 of the Central Act as it then stood cannot be considered independent of the changes made in the provisions of the State law. It is said that the Parliament when it enacted the Central Act could have had in view only the provisions of the State law as they existed on 5th January, 1957, when the Act came into force and that in any event, it cannot be deemed to have adopted the provisions of the local law which did not actually exist at the time. We are not concerned here with the propriety of Parliament in enacting Section 9 in the form it was before its amendment in 1969 for none of the petitioners has questioned the validity of Section 9 on the ground either of excessive delegation of legislative power to or of abdication of the same in favour of the local legislatures. We are only concerned in the interpretation of Section 9 as has been enacted by Parliament. We are unable, therefore, to ignore the amendments brought about by Madras Act III of 1969 deleting the provision for deduction of excise duty from 5th January, 1957 while construing the scope of Section 9 as it existed before 1969.
11. We are also not inclined to accept the contention of the learned Counsel that it is only the factual existence of the provision for deduction in relation to excise duty under the State law that should be considered and not the fictional non-existence of the provision for deduction as a result of Madras Act III of 1969 It is a well-settled rule of interpretation that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. If the statute says that you must imagine a certain state of affairs, you must not cause or permit your imagination to boggle when it comes to the inevitable corrollaries of that state of affairs (Vide the observations of Lord Asquith in East End Dwellings Co. Limited v. Finsbury Borough Council (1952) A.C. 109. The effect oft he retrospective deletion of the provision for deduction of excise duty in the State Act is as if there was no such provision after 5th January, 1957.
12. The learned Counsel then urged that normally a retrospective amendment of the existing statute is resorted to only when the amendments proposed are either declaratory or clarificatory or to remove a defect found or difficulty arising out of the working of the statute sought to be amended, that a retrospective amendment cannot be resorted to impose a fresh leav of taxonly for an anterior period without any impact on f t re transactions and that, therefore, Madras Act III of 1969 more or less bringing to charge the turnover relating to excise duty for an anterior period between 5th January 1957 to 31st March, 1967 is in and in law. According to the learned Counsel, the object of bringing in this amending legislation by the Madras Legislature was only to disable the dealers from getting the benefit of exemption Under Section 10 of the Central Act XXVIII of 1969 and such an object clearly shows that the Madras Legislature has in substance and effect legislated with respect to inter-State sales which are admittedly outside its legislative powers and in any event, Madras Act III of 1969 in so far as it withdraws the provision for deduction for an anterior period should be taken to be unreasonable and violative of Article 19 (1) (f) of the Constitution.
13. As regards the contention that the Madras Legislative in enacting Madras Act III of 1969 has attempted to legislate in a way on inter-State sales is not texable at a'. Madras Act III of 1969 is well within the power of the State Legislative to enact a law on sales tax under Entry 5th, List II of Schedule VII of the Constitution. In exercise of that power it is a ways open to the legislature to provide for ancillary or incidental matters. It can provide for exemption deduction etc., or withdraw the same in its discretion, and the wisdom of the legislature in permitting exemptions and deductions or in withdrawing the same cannot at all be questioned When the legislature withdrew the provision for deduction in the State Act by Madras Act III of 1969 it is not legislating on any inter State sale which comes under Entry 92-A of List I in Schedule VII. The pith and substance of Madras Act III of 1969 cannot be said to relate to inter State sales. The fact that it has an impact on the law made by the Parliament, will not affect the power of the State legislature to enact a law with reference to an entry exclusively falling within its legislative competence. The impact on the Central Act was only due to a provision made in the Central Act itself attracting the provisions of the State Act and not as a result of a provision made by the State legislature. The following dicta of Veeraswami, CJ, in Sundaram Industries (P.) Limited, Madurai v. State of Tamil Nadu (1972) 29 S.T.C. 567 is in point:
So long as the Legislature is within the limits of its power under the entry, neither its e excise in a particular manner nor the policy which has dictated it can successfully be questioned. Within the field of power earmarked (or it under the Constitution, the State Legislature is supreme, except to the e lent of limitations envisaged under the Constitution. Having regard to the nature of the power, each entry should be read and understood in its widest and most comprehensive sense. The power to legislate on any of the matters enumerated in the list, includes the power to make provisions to cover ancillary or incidental matters.
It is not therefore, possible to say that Madras Act III of 1969 in any way trenches on the Central field.
14. As regards the attack based on the retrospective nature of Madras Act III of 1969, it is well established that the legislature is fully competent to make a law with retrospective effect and that a legislation cannot be said to be unreasonable for the only reason that it is retrospective. The mere fact that a legislative provision has been made to operate retrospectively will not make it unreasonable as offending Article 19 (1) (f) of the Constitution. In this case it is true the concession which was in vogue practically from 1st April, 1939 had been withdrawn for the period from 1st April, 1957 to 31st March, 1966 by a retrospective legislation made in the year 1969. But that fact alone cannot make the amending Act unreasonable There is always a presumption in favour of the constitutionality of a statutory provision and to strike it down as being unreasonable and as offending Article. 19 (1) (f) of the Constitution, it most be shown, that the operation of the retrospective legislation will result in taking away the right guaranteed under Article 19 (1) (f) and that it is not a reasonable restriction coming under Article 19 (5). The withdrawal of the concession might have been thought of as necessary in view of the Supreme Court judgment in Yaddalam's case : 2SCR129 . If the power of the legislature to enact a law with retrospective effect cannot be questioned, the mere fact that the withdrawal of the concession with retrospective effect will result in certain dealers being exposed to an additional burden will not make the legislation unreasonable. As pointed out in Krishnamoorthy and Co. v. State of Madras : AIR1969Mad265 , it is well-established that the power of the legislature in a taxation entry is plenary and it includes the power to legislate prospectively as well as retrospectively. No question of legislative competency of an enactment can arise merely on the ground of its retrospective effect in taxation. The inhibition of ex post facto laws does not apply to imposition of taxes by retrospective legislation, but if the retrospectivity is in its effect confiscatory or operates as a cloak for an oblique legislative purpose removed from ostensible tax considerations or is so totally oppressive as might destroy the very source of taxation, it may be regarded as unreasonable. The above decision has been affirmed by the Supreme Court in CA. Nos. 471 to 474 of 1969. In J.K. Jute Mills Co. Limited v. State of Uttar Pradesh : 2SCR1 , it has been held by the Supreme Court that it would be competent to a Legislature to impose a tax on sales which had taken place prior to the enactment of the legislation. In M/s. Chhotabhai v. Union of India (UOI) : AIR1962SC1006 , it was held that mere retrospectivity in the imposition of a tax could not per se render the law unconstitutional on the ground of its infringing the right to hold property under Article 19 (1)(f) or on the ground that it was unreasonable because it deprived a citizen of his right to pass on the tax to others. In C. Krishnamoorthy v. State of Orissa : 7SCR185 , the Supreme Court observed:
It is true that in considering the question as to whether legislative power to pass an Act retrospectively has been reasonably exercised or not, it is relevant to enquire how the retrospective operation operates. But because the retrospective operation may operate harshly in some cases, it cannot be said that the legislation, itself is invalid.
15. We find that the very same amending Act, Madras Act III of 1969, was under attack in Mohamed Salam v. Commissioner of Commercial Taxes (1970) 26 S.T.C. 163, and it had been clearty held that Madras Act III of 1969 is not confscatory and is not relative of Article 19 (1) (f) of the Constitution. A similar view has also been taken by Ramaprasada Rao, J. in The Pioneer Match Works, Sivakasi v. Deputy Commercial Tax Officers and Ors. W.P. No. 74 of l970 Ramaprasada Rao, J. has a so considered the tenability of the identical contentions as have been nut forward before us and the learned Judge, if we may say so with respect has considered the matter in some detal and has ultimate y rejected the contentions. Construing the scope of Section 10 of Central Act XXVIII of 1969 the learned Judge has expressed:
To claim or to qualify to claim that concession the section prescribes three conditions, namely: (1) the dealer should not have collected tax, (2) that such non-collection must be in the belief that no such tax could have been levied or collected in respect of such sale or any portion of the turnover relating to such sale; and (3 no such tax could have been (sic) or conected if the amendments made in the principal Act by Central Act XXVIII of 1969 had not been made.
Ultimately it was held that the petitioner in T.C. No. 179 of 1970 who was a so the petitioner before the earned Judge in that writ petition is not entitled to claim exemption Under Section 10 as a conjoint reading of Section 9 of the Central Act and the provisions of the State Act as amended by Madras Act III of 1969 makes the position clear that the Central. Act before its amendment by Central Act XXVIII of 1969 enabled the tax to be levied on exercise duty With respect we entirely agree with the reasoning of Ramaprasada Rao J. in that case. We have to, therefore, hold that Madras Act III of 1969 does not suffer from any of the infirmities pointed out by the learned Counsel for the assessee and that the assessee is not entitled to the benefit of exemption Under Section 10 of Central Act XXVIII of 1969.
16. The result is all the Tax Cases and the writ petition are dismissed with costs. Counsel's fee Rs. 100 in each case.