TMI Blog1967 (4) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... , as amended, the description of the stage was omitted, but that does not affect the question, for that description is maintained even under the amended clause (ff). It follows from the said discussion that the Punjab General Sales Tax Act, during the crucial period which is the subject-matter of these appeals, in terms fixed a stage for taxation, i.e., the stage of purchase by a dealer for use in the manufacture of goods. There are, therefore, no merits in this contention either. - Civil Appeal No. 526, 527, 529 of 1964, & 39, To 43 of 1965, Civil Appeal No. 81 of 1965, Civil Appeal No. 540 of 1965, - - - Dated:- 10-4-1967 - SUBBA RAO K., SHAH J.C., SHELAT J.M., HARGAVA V. AND MITTER G.K. S.T. Desai, Senior Advocate (O.C. Mathur of J.B. Dadachanji and Co. with him), for the appellants in C.A. Nos. 81 and 540 of 1965. R. Ganapathy Iyer and R.N. Sachthey, for the respondents in C.A. No. 81 of 1965. Hardev Singh and R.N. Sachthey, for the respondents in C.A. Nos. 39 to 43 of 1965. M.C. Setalvad, Senior Advocate (R.K. Garg and S.C. Agarwal of Ramamurthi and Co. with him), for the appellants in C.A. Nos. 526, 527 and 529 of 1964. O.P. Malhotra and R.N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking rolled steel sections and selling the same. The appellants filed petitions under Article 226 of the Constitution In the High Court for appropriate writs for quashing the orders of the assessing authorities and for prohibiting them from levying purchase tax on the goods purchased and for refund of the tax illegally collect- ed from them. A Division Bench of the High Court dismissed the petitions. Hence the appeals. Civil Appeals Nos. 81 of 1965 and 540 of 1965 relate to purchase tax on cotton. The appellants in Civil Appeal No. 81 of 1965 are the trustees of Birla Education Trust. They own a cotton and textile mill at Bhiwani. They purchase cotton from various dealers in Punjab and outside for the manufacture of yarn and cloth. By an order dated March 11, 1962, the District Taxation Officer, Hissar, imposed purchase tax on the appellants in respect of the cotton purchased by them for the assessment years 1958-59 and 1959-60. The appellant in Civil Appeal No. 540 of 1965 is a limited company carrying on the business of producing and selling yarn. For the purpose of its business it acquires cotton from commission agents. It is a registered dealer under the Act. The Excise and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Central Sales Tax Act, 1956, whereunder sales tax was prohibited to be imposed on the declared goods at more than one stage, whereas under the Act it could be imposed both at the purchase point and at the sale point of the transactions entered into by the manufacturer. (5) Purchase tax was not leviable on oil-seeds, as the assessees did not manufacture oil out of the seeds but only produced the oil. We shall now proceed to consider the points seriatim. The provisions relevant to the first two points read thus: East Punjab General Sales Tax Act, 1948 (Act 46 of 1948), Section 5. -"Subject to the provisions of this Act, there shall be levied on the taxable turnover every year of a dealer a tax at such rates as the Provincial Government may by notification direct. " East Punjab General Sales Tax (Second Amendment) Act, 1952 (Act No. 19 of 1952), Section 2.-Amendment of section 5 of Punjab Act 46 of 1948.-"In sub-section (1) of section 5 of the East Punjab General Sales Tax Act, 1948, after the word 'rates' the following words shall be Inserted and shall be deemed always to have been so inserted, namely, 'not exceeding two pice in a rupee'." The High Court of Punjab h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar Act. To that extent his judgment is binding on us. But we cannot go further and hold, as the learned counsel for the respondents asked us to do, that whenever a statute defines the purpose or purposes for which a statutory authority is constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates; it depends upon the provisions of each statute. Learned counsel for the State argued that under Article 162 of the Constitution the executive power of the State shall extend to matters with respect to which the Legislature of a State has power to make laws: that is to say, the executive power of a State extends to matters mentioned in List II of the Seventh Schedule to the Consti- tution; that under Article 266(1) of the Constitution all the taxes collected will go to the Consolidated Funds of the State, that the State has an unlimited power to raise funds by taxation to discharge its vast constitutional duties and that necessarily the amount of tax required would depend upon its needs which can only be known to it. In the said circumstances, the argument proceeds, the doctrine of constitutional and statutory needs would afford reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to fix the rates must be supported by some reasonable guidance given under the Act whereunder the said power was conferred. Nor the observations of Rajagopala Ayyangar, J., in the said decision speaking for the minority, lend support to the contentions of the respondents. The decision in Vasantlal Maganbhai Sanjanwala v. The State of Bombay [1961] 1 S.C.R. 341., raised the question whether section 6(2) of the Bombay Tenancy and Agricultural Lands Act, 1948 (Bom. 67 of 1948), which enabled the Government to fix the rent payable by a tenant within the maximum limits prescribed thereunder, was valid. When it was argued that it was bad because of excessive delegation, this Court sustained it on the basis of a legislative policy disclosed by section 12(3) of the Act. In The Union of India v. Messrs. Bhana Mal GuIzari Mal [1960] 2 S.C.R. 627., this Court rejected the contention that clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, whereunder the Central Government was authorised to issue notification fixing the maximum price of steel, was void on the ground of excessive delegation, as it found that the said clause only further canalized the pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and it did not give any guidance either under that section or under any other provisions of the Act-no other provision was brought to our notice. The argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegatoin. It would also sanction conferment of power by Legislature on the executive Government without laying down any guidelines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guidelines in that regard. As the Act did not prescribe any such policy, It must be held that section 5 of the said Act, as it stood before the amendment, was void. The next step in the argument of Mr. M.C. Setalvad was that sections 4, 5 and 6 of the Punjab General Sales Tax Act, 1948, together formed a group of charging sections and they were so integrally connected with each other that if section 5 was void, sections 4 and 6 also fell with it, as one was not severable from the other. As the charging sections were the crux of the Act, the argument proceeded, the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidually." Section 2 of the Finance (No. 2) Act, 1957, read: "(1) Subject to the provisions of sub-sections (2), (3), (4) and (5) for the year beginning on the 1st day of April, 1957,- (a) income-tax shall be charged at the rates specified in Part I of the First Schedule, and, in the cases to which paragraphs A, B and C of that Part apply, shall be increased by a surcharge for purposes of the Union and a special surcharge on unearned income, calculated in either case in the manner provided therein." It was argued that the liability to tax did not arise till the Finance Act was made and the tax quantified. Dealing with this question, this Court by a majority observed: "A liability to pay income-tax is a present liability though it becomes payable after It is quantified in accordance with ascertainable data." The only difference between the Income-tax Act and the present Act is that while in the Income-tax Act section 3 thereof does not expressly make the liability subject to the provisions of the Finance Act which fixes the rate, under the Sales Tax Act in question section 4 thereof in terms is made subject to section 5. But under both the Acts there is a clear distincti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Schedule. But it was pointed out that the core of the taxing statute was in the charging section and that the remaining sections had no independent existence. In the present case the charging section was intact and what was struck out was only the section providing for rates. It cannot, therefore, be said that when section 5 was struck out, section 4 or other sections fell with it. It was then contended that even if the whole Act was not still- born, section 5 was non est, that the amending Act did not insert a new section 5 but purported to amend the earlier section 5 which was not in existence. Now under the East Punjab General Sales Tax (Second Amendment) Act, 1952 (Act No. 19 of 1952), section 5 of the East Punjab General Sales Tax Act, 1948, was amended. Section 2 of the said amending Act says: "In sub-section (1) of section 5 of the East Punjab General Sales Tax Act, 1948, after the word 'rates' the following words shall be inserted and shall be deemed always to have been so inserted, namely: 'not exceeding two pice in a rupee'." No doubt in terms the section Inserts the words "not exceeding two pice in a rupee" in section 5. If section 5 is inserted in the Act b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Seventh Schedule to the Constitution. The constitutional position is well settled. Entry 54 of List II of the Seventh Schedule to the Constitution reads: "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I." In The State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. [1959] S.C.R. 379, 397-398; 9 S.T.C. 353, 365., Venkatarama Aiyar, J., speaking for the Court, observed: "Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. Thus, if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale." This Court also held that the State Legislature, by enlarging the definition of "sale ", could not include transactions which were not sales according to the well establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingredient of "purchase". But a closer scrutiny compels us to give a restricted meaning to the expression "acquisition" and "price". Acquisition is the act by which a person acquires property in a thing. "Acquire" is to become the owner of the property. One can, therefore, acquire a property either by voluntary or involuntary transfer. But the Sales Tax Act applies only to "sale" as defined in the Act. Under clause (ff) of section 2 of the Act it is defined as a transfer of property. As purchase is only a different aspect of sale, looked at from the standpoint of the purchaser, and as the Act imposes tax at different points in respect of sales, having regard to the purpose of the sale, it is unreasonable to assume that the Legislature contemplated different categories of transactions when the taxable event is at the purchase point. Whether it is sale or purchase the transaction is the same. If it was a transfer inter vivos, in the case of a sale, it must equally be so in the case of a purchase. Context, consistency and avoidance of anomaly demand a restricted meaning. That it must only mean transfer is also made clear by the nature of the transactions excluded from the acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., but that the acquisition shall be for use in the manufacture of goods for sale for cash etc. On this construction it is argued that the tax levied was excise duty and, therefore, beyond the competence of the State Legislature. The contention is that the tax on the purchase was in connection with the manufacture of goods and, therefore, an excise duty. There is an essential distinction between the two imposts: while excise duty is in respect of manufacture of goods, the sales tax is upon the sale of the goods. The question, therefore, is whether under the Act the purchase tax is imposed on the sale of the goods or in connection with the manufacture of goods. The decisions of this Court establish that "in order to be an excise duty (a) the levy must be upon 'goods' and (b) the taxable event must be manufacture or production of goods": see Messrs. Shinde Brothers v. The Deputy Commissioner, Raichur Civil Appeals Nos. 1580-1586, 1588 and 1590-1600 of 1966 (decided on 26-9-1966). The tax has no nexus with the manufacture of goods. The purpose for which the goods are purchased is only relevant for fixing the taxable event, but the tax is on the pur- chase of the goods. That taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pressed. That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture. The next argument is that the Act is in conflict with section 15 of the Central Sales Tax Act, 1956, inasmuch as it enables the levy of sales tax at more than one stage. In these and connected appeals we are concerned only with two periods-the first period up to October 31, 1958, and the second period from November 1, 1958 to March 31, 1960. It is, therefore, necessary to notice the relevant provisions governing the said two periods. The relevant part of section 15 of the Central Sales Tax Act, 1956 (74 of 1956) as amended by the Central Sales Tax (Amendment) Act (16 of 1957), reads thus: "Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sales Tax Acts of the States which are discrepant with section 15(a) of the Central Sales Tax Act, but to modify them in accordance therewith. The law of the State is declared to be subject to the restrictions and conditions contained In the law made by Parliament and the rate in the State Act would pro tanto stand modified. The effect of Article 286(3) is now brought out by the second proviso to section 5(1). But this proviso is enacted out of abundant caution and even without it the result was the same." The effect of this judgment is that the stage prescribed under section 15 of the Central Sales Tax Act before the amendment and the prohibition against taxation at more than one stage contained in the amended section would automatically control the provisions of the Punjab General Sales Tax Act, 1948. With the result up to October 1, 1958, under the Sales Tax Act a tax could be levied only in respect of purchase of declared goods inside the State and only on the purchase made by a dealer of goods for use by him in the manufacture of goods; and from October 1, 1958, the State can only levy tax at one stage. For the second period the Central Act by its own force did not fix ..... X X X X Extracts X X X X X X X X Extracts X X X X
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