TMI Blog1989 (10) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The goods taxed do not leave the State in the shape of raw material, which change their form in the State itself and there is no question of any direct, immediate or substantial hindrance to a free flow of trade. On the evidence adduced, we are in agreement with the High Court that the challenge to the imposition in the background of Article 301 cannot be sustained and, therefore, no question whether such imposition is saved under Article 304(b) of the Constitution arises. - Civil Appeal No. 1166-1172 of 1985, - - - Dated:- 19-10-1989 - Judge(s) : SABYASACHI MUKHERJEE., S. RANGANATHAN JJ. Writ Petition No. 3834 of 1985, Civil Appeal No. 1173, Civil Appeal No. 1174, Civil Appeal No. 1175, Civil Appeal No. 1176, Civil Appeal No. 1177 of 1985, Civil Appeal No. 1512, Civil Appeal No. 1515 of 1984, Civil Appeal No. 2674 of 1985, Civil Appeal No. 3033 of 1986, Civil Appeal No. 1633 of 1985, Civil Appeal No. 4162, Civil Appeal No. 4163 of 1988, Special Leave Petition (Civil) No. 8397, Special Leave Petition (Civil) No. 8398, Special Leave Petition (Civil) No. 8399, Special Leave Petition (Civil) No. 8400, Special Leave Petition (Civil) No. 8401, Special Leave Petition (Civil) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of the Act, and then with the provisions of the Bombay Act as mentioned hereinbefore. The appellant/petitioner, Goodyear India Ltd., was engaged at all relevant times, inter alia, in the manufacture and sale of automobile tyres and tubes. It manufactured the said tyres and tubes at its factory at Ballabhgarh in the district of Faridabad in the State of Haryana. For the said manufacturing activity, the appellant had, from time to time, to purchase various kinds of raw materials both within the State and outside the State. It is stated that about 7 to 10 per cent. of the total needs of raw materials on an all India basis were locally procured by the appellant from Haryana itself. The raw materials purchased in Haryana were : (i) pigments (partly), (ii) chemicals (partly), (iii) wires (partly), (iv) carbon black (partly), (v) rubber (partly) and (vi) fabric (partly). The rest of the requirements were imported from other States. The appellant had its depots at different places in the State of Haryana as well as in other States. After manufacturing the said tyres and tubes, about 10 to 12 per cent. of the total manufactured products used to be sold in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 15/74 dated July 19, 1974, issued under section 9 (prior to its amendment by Act No. 11 of 1979) was ultra vires section 9 of the Act. It was held that whereas the section provided only for the levy of purchase tax on the disposal of manufactured goods, the impugned notification, by making mere despatch of goods to the dealers themselves taxable, in essence, legislates and imposes a substantive tax which it obviously could not. It was held that this was contrary to and in conflict with the provisions of section 9. The High Court referred to the relevant portion of the unamended section 9 of the Act with which it was confronted and the notification. In order to appreciate the said decision and the position, it will be appropriate to set out the said provisions, namely, the unamended provisions of section 9 as well as the notification : "9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and- (a) uses them in the State in the manufacture of,- (i) goods specified in Schedule B or (ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the dictionary meaning of "disposes of" in Webster's Third New International Dictionary. Reference was also made to 27 Corpus Juri Secundum, page 345, and, ultimately, it came to the conclusion that the phrase "disposes of" or "disposal" cannot be possibly equated with the mere despatch of goods by a dealer to himself. After referring to the relevant provisions with which this court was concerned in Kandaswami's case [1975] 36 STC 191, the High Court held that that case was no warrant for construing the expression "despatch" as synonymous to "disposal". On the other hand, the court held that the decision of this court emphasises that the expression "disposal" of goods is separate and distinct from despatch thereof. According to the High Court, the same position was applicable to Ganesh Prasad Dixit's case [1969] 24 STC 343 (SC) and, in those circumstances, held that the term "disposes of" cannot be synonymous with "despatch", and once that is held, then the notification mentioned above travelled far beyond what is provided in section 9 of the Act while the said provision provided only for levy of purchase tax on disposal of manufactured goods. The High Court observed as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956 ; or' ; (ii) after clause (b), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 1979, namely: - '(bb) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956 ; or' (iii) the following proviso shall be added, namely: - "Provided that no tax shall be leviable under this section on scientific goods and guar gum, manufactured in the State and sold by him in the course of export outside the territory of India within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act, 1956.' ; and (b) in sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective State Legislatures. Even before the Forty-sixth Amendment, the mere consignment of goods in the course of inter-State trade or commerce was beyond the scope of the said entry and thus not within the legislative competence of the States and was entirely within the parliamentary field of legislation by virtue of article 248 and the residuary entry No. 97 of list I. The High Court was of the view that neither the original purchase of goods nor the manufacture thereof into the end-product by itself attracts purchase tax and consequently are not even remotely the taxable events. What directly and pristinely attracts the tax and can be truly labelled as the taxing event under section 9(1)(b) of the Act is the three-fold exigency of : (i) disposal of the manufactured goods in any manner otherwise than by way of sale in the State ; or (ii) despatch of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce ; or (iii) disposal or despatch of the manufactured goods in the course of export outside the territory of India. It was these three exigencies only which were the taxable events in the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation which Parliament can be presumed to have had in mind. It has always been said to be important to consider the mischief which the Act was apparently intended to remedy. The word 'mischief' is traditional. I would expand it in this way. In addition to reading the Act, you look at the facts presumed to be known to Parliament when the Bill which became the Act in question was before it, and you consider whether there is disclosed some unsatisfactory state of affairs which Parliament can properly be supposed to have intended to remedy by the Act . ......." The state of affairs that Parliament has sought to remedy by the Forty-sixth Amendment of the Constitution was that, prior to the promulgation, each State attempted to subject the same transaction to tax on the nexus doctrine under its sales tax laws. Consequently, on the basis of one or the other element of the territorial nexus the same transaction had to suffer tax in different States with the inevitable hardship to trade and consumers in the same or different States. The framers of the Constitution being fully aware of the problems sought to check the same by a somewhat complex constitutional scheme and by imposing rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raced all ancillary and complementary areas as well to the exclusion of the State Legislature therefrom. In the light of the aforesaid, the High Court construed section 9(1)(b) of the Haryana Act, 1973. Analysing the provisions in detail, it observed that section 9 of the Act was the charging section for the levy of purchase tax. It imposed a liability for payment of purchase tax and therefore, it should be distinguished from the machinery section. The High Court examined the real nature of the business outside the State and found that there was Merely a change in the physical situs of the goods without any change in the basic incidents of ownership and control. Therefore, in its true nature, a mere despatch of goods outside the State to another branch of the original institution is not and never can be equivalent of a sale either as a term of art in the existing sales tax legislation or remotely so in common parlance, and construing section 9(1)(b) of the Act, the High Court was of the view that the real taxing event is the despatch of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears that, in the meantime, a Full Bench of the High Court decided the question again in the case of Des Raj Pushap Kumar Gulati v. State of Punjab. This decision was rendered on January 24, 1985, and is reported in [1985] 58 STC 393 (P H). The assessment years involved in all these appeals are 1973-74 to 1982-83. According to the Full Bench, the taxing event is the act of purchase and not the act of despatch Or consignment as held in Bata India Ltd. [1983] 54 STC 226 (P H). In the premises, it was held that section 9(1)(b), as amended, was neither invalid nor ultra vires and overruled the decision of Bata India Ltd. [1983] 54 STC 226 (P H). The writ petitions filed were also dismissed. The petitioner-company filed special leave petitions against the aforesaid judgment of the Punjab and Haryana High Court which were admitted in Civil Appeals Nos. 1166 to 1172 of 1985. Goodyear India also filed Writ petition No. 3834 of 1985, in respect of the assessment year 1981-82, as he notices for assessment and penalty were received after the decision of he Punjab and Haryana High Court in Des Raj Pushap Kumar's case [1985] 58 STC 393 [FB]. The said decision was passed in appeal agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his judgment at page 66 of STC , (page 22 of AIR), observed that the power to tax the sale of goods is quite distinct from any right to impose taxes on use or consumption. It cannot be exercised at the earlier stage of import or manufacture or production, nor at the later stage of use or consumption, but only at the stage of sale (emphasis supplied). The essence of a tax on goods manufactured or produced is that the right to levy it accrues by virtue of their manufacture. On the other hand, a duty on the sale of goods cannot be levied merely because goods have been manufactured or produced. Nor can it be levied merely because the goods have been consumed or used or even destroyed. The right to levy the duty would not at all come into existence before the time of the sale. In this connection, reference may be made to the observations of Chief Justice Gwyer in Province of Madras v. Boddu Paidanna and Sons [1938-50] 1 STC 104 (FC) ; AIR 1942 FC 33. Mr. Rajaram Aggarwal, learned counsel for the appellant/assessees, contended before us that it is necessary to find out or identify the taxable event. If, on a true and proper construction of the amended provisions of section 9(1)(b), it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concession given to the manufacturers was withdrawn. Explaining this background, Mr. Tewatia contended that section 9, sub-section (1) of the Act, envisages payment of tax at such rate as may be notified under section 15 on the purchase of goods from any source within the State by a dealer liable to pay tax under the Act when such goods, not being Schedule B goods, were consumed either in producing Schedule B goods or when the manufactured goods were other than Schedule B goods, the same not being sold within the State or in the course of inter-State trade or commerce, or in the course of export outside the territory of India, or the purchased goods were exported outside the State. After referring to the relevant provisions and the provisions of section 9(1)(b), Mr. Tewatia emphasised that the contingency contemplated by "or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of section 5(1) of the Central Sales Tax Act, 1956 ; or" as well as clause (c) of section 9(1) which encompasses "purchases go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile, observed this court in that case. While bearing the aforesaid principle in mind, it has to be examined as to how far the application of this provision can be construed with the well-settled principle of fiscal legislation and the terms and conditions of the present legislation. It has been said on numerous occasions that fiscal laws must be strictly construed, words must say what these mean, nothing should be presumed or implied, these must say so. The true test must always be the language used. On behalf of the assessee, Mr. Rajaram Aggarwal, however, further contended that the ratio of Kandaswami's case [1975] 36 STC 191 (SC) to which Mr. Tewatia referred, must be understood in the light of the question involved in that case. The said decision of this court was concerned with the limited point as to whether the Madras High Court was right in observing "whether one could say that the sale which is exempted is liable to tax and then assume that because of exemption, the tax is not payable". This court held that the language of section 7A of the said Act wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be non-exempted goods purchased and manufactured in the State, whether exempted or not in the State which is liable to tax on despatch outside Haryana ; and, under clause (e), the goods purchased in Haryana without undergoing any further change or use is the quality of goods liable to tax when exported. The submission of the State is that the taxable event is the purchase of goods in Haryana while the obligation to pay is postponed to the fulfilment of certain conditions. The further argument is that there is a general liability to purchase tax which the dealer avoids on furnishing a declaration in form No. S. T. 15 as provided by section 24 at the time of purchase, wherein certain conditions are mentioned and when those conditions are not fulfilled, those revive. It was further argued that the conditions are incorporated in section 9 of the Act. For testing which of the contentions are nearer to find out the exact taxable event, certain indicia and illustrations may be seen. Their analysis will indicate that there is no liability to pay sales tax under the Haryana Act on the purchaser. It is admitted that, on such sales, the selling dealer is liable to pay sales tax. On such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is liable to pay. Lastly comes the method of recovery if the person taxed does not voluntarily pay. Reference may be made to the observations of Lord Dunedin in Whitney v. IRC [1926] AC 37 (HL) at page 52 and of the Federal Court in Chatturam v. CIT [1947] 15 ITR 302 at 308. The taxable event is that which on its occurrence creates or attracts the liability to tax. Such liability does not exist or accrue at any earlier or later point of time. The identification of the subject-matter of a tax is to be found in the charging section. In this connection, one has to analyse the provisions of section 9(2)(b), as well as sections 9(1)(b) and 9(1)(c). Analysing the section, it appears to us that the two conditions specified before the event of despatch outside the State as mentioned in section 9(1)(b), namely, (i) purchase of goods in the State, and (ii) using them for the manufacture of any other goods in the State, are only descriptive of the goods liable to tax under section 9(1)(b) in the event of despatch outside the State. If the goods do not answer both the descriptions cumulatively, even though these are despatched outside the State of Haryana, the purchase of those goods would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution Act and by the Supreme Court that speaks for it in these matters and only one fiction, not a dozen little ones". It is, therefore, necessary in all cases to find out what is the essence of the duty which is attracted. A taxable event is that which is closely related to imposition. In the instant section, there is such close relationship only with despatch. Therefore, the goods purchased are used in the manufacture of a new independent commodity and, thereafter, the said manufactured goods are despatched outside the State of Haryana. In this series of transactions, the original transaction is completely eclipsed or ceases to exist when the levy is imposed at the third stage of despatch after manufacture. In the instant case, the levy has no direct connection with the transaction of purchase of raw materials, it has only a remote connection of lineage. It may be indirectly and very remotely connected with the transaction of purchase of raw material wherein the present levy would lose its character of purchase tax on the said transaction. Mr. Rajaram Aggarwal submitted that the measure of tax is with reference to the value of purchased goods in the State of Haryana. As me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Yusuf Shabeer v. State of Kerala [1973] 32 STC 359, is clearly distinguishable. In Ganesh Prasad Dixit's case [1969] 24 STC 343 (SC), the question of constitutional validity was not argued. A reference was made by Mr. Tewatia to the decision of the High Court in Coffee Board v. Commissioner of Commercial Taxes [1985] 60 STC 142 (Kar) and the decision of this court in Coffee Board v. Commissioner of Commercial Taxes. [1988] 70 STC 162. In these cases, the question involved was the acquisition of coffee by the Coffee Board under compulsory acquisition or purchase or sale of goods. That question is entirely different from the question with which we are concerned in these appeals. Prior to the Forty-sixth Amendment, entry 54 of List II of the Seventh Schedule to the Constitution of India which demarcated the exclusive field of State legislation, read with article 246(3) of the Constitution, conferred power on the State Legislature to impose tax on the transactions of sale or purchase of goods. The said entry read as follows : "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I." Entry 92A of List I, which is in the exclusiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 92B and also inserted a new sub-clause (h) after sub-clause (g) in article 269(1) of the Constitution. Parliament also amended clause (3) of article 269. It appears to us that the effect of the aforesaid amendment is that the field of taxation on the consignment/despatch of goods in the course of inter-State trade or commerce expressly comes within the purview of the legislative competence of Parliament. It is well-settled that the nomenclature of the Act is not conclusive and, for determining the true character and nature of a particular tax, with reference to the legislative competence of a particular legislature, the court will look into its pith and substance. See the observations of Governor-General in Council v. Province of Madras [1945] 1 STC 135 (PC) ; [1945] 72 IA 91 (PC). There, Lord Simonds observed as follows (p. 137 of 1 STC) : ". . . For in a Federal Constitution, in which there is a division of legislative powers between Central and Provincial Legislatures, it appears to be inevitable that controversy should arise whether one or other Legislature is not exceeding its own, and encroaching on the other's constitutional legislative power, and in such a controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of section 9(1)(b) of the Act and the consequent proceedings flowing therefrom. It is in that context that in Writ Petition No. 3834 of 1985, Mr. Soli Sorabjee urged that the attempt and action of the State in imposing tax and attempting to penalise are bad. In this connection, it may be mentioned that before the Full Bench of the Punjab and Haryana High Court, on behalf of the State, a statement was made which has been recorded in [1985] 58 STC 393, 408, (Des Rai Pushap Kumar Gulati v. State of Punjab) as follows: "Counsel appearing for the State of Haryana made a statement that if the Full Bench held that Bata India Limited's case [1983] 54 STC 226 did not lay down the correct law and the amendment effected by Act No. 11 of 1984 to section 9 was intra vires, then the provision of sub-section (3) of section 24 regarding the rate of tax shall not be enforced and only the old rate will be leviable." In view of the aforesaid statement, no higher rate except the old rate admissible factually would be applicable. Section 24(3) was introduced by the Haryana Act with retrospective effect from May 27, 1971, which is as follows: "Notwithstanding any other provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dis of Haryana and despatches them to its own branches in the deficit States of the country. The Corporation's branches in the recipient States supply these stocks to the State agencies/fair price shops and also pay tax as per the provisions of the sales tax law of the respective States. Some of the stocks are distributed within Haryana for the Public Distribution System (PDS) for which sales tax is charged and deposited with the sales tax department as per the provisions of the Haryana General Sales Tax Act. In case the stocks are also sold in the course of inter-State trade or commerce, Central sales tax is levied and deposited with the Haryana sales tax authorities. Some of the grains" are also exported out of India on which there is exemption from payment of any tax. In fact, the points at which the tax is to be levied have been indicated in Scheduled to the Act. It is clear from a perusal of the Schedule that, in case of paddy, the taxable event is the last purchase. Similarly, in case of rice, the taxable event is the first sale point in the State. In case of wheat and other cereals, the point of taxation is the last sale to the consumer by a dealer liable to pay tax under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales tax is leviable under the Haryana Act. It is Parliament alone which is legislatively competent to enact a legislation on consignment. Now, it is necessary to deal with Civil Appeals Nos. 4162 and 4163 of 1988 which deal with the validity of section 13AA of the Bombay Sale Tax Act. These appeals are by Hindustan Lever Ltd., and Wipro Products Ltd., the appellants herein. The appellants, at all material times, manufacture, make and deal in vanaspati, soaps, etc., chemicals and agro-chemicals, and they used to purchase various types of VNE oils for their manufacture of vanaspati, soaps and other products. Since the appellants had a wide net of distribution of their products all over India, they appointed 40 and more clearing and forwarding agents in the country. The appellants used to despatch the goods so manufactured from their factory to the clearing and forwarding agents. They also used to purchase VNE oils and other raw materials and paid 4 per cent tax byway of purchase tax under section 3 of the Bombay Sales Tax Act, 1959 (hereinafter called "the, Bombay Act"). The raw materials are used in the manufacture of the Said goods and as the said manufactured goods are despatch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court on July 19, 1988, in respect of these two writ petitions by Wipro Products as well as Hindustan Lever Ltd. The decision of the High Court is reported in [1989] 72 STC 69 (Bom) ( Wipro Products Ltd. v. State of Maharashtra). Dismissing the petitions of the appellants, the High Court held that (i) three different phases are contemplated in section 13AA of the Act, namely, the initial purchase of the raw material, the consumption thereof in the manufacture of taxable goods, and the despatch of the manufactured goods outside the State. If the goods purchased remain in the same form within the State, the question of levying additional tax would not arise. The High Court came to the conclusion that there was no ground to hold that the additional tax was levied on the despatch of goods and was unconnected with the initial transaction of purchase, as it was required to be paid in addition to the sales or purchase tax paid or payable in respect of the same goods which had been so purchased before the conditions specified in section 13AA are fulfilled, (ii) in the context of the other provisions of the Act, a sort of concession is given at the time of purchase on the quantum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of producing other commodities. Hence, there was no question of any hindrance to a free flow of trade bringing into operation article 301 of the Constitution. According to the High Court, the petitioners had not brought forth any material to show how the free flow of trade has been affected by this additional rate of tax ; and held that section 13AA is not violative of article 14 of the Constitution ; and that section 13AA of the Bombay Act and the orders requiring the appellants to pay additional tax at 2 per cent. on purchase of VNE oil used by them as raw material in the manufacture of goods despatched outside the State, were valid. The High Court, in the judgment under appeal, has set out the relevant provisions of the Act which were enacted to consolidate and amend the law relating to levy of tax on the sale or purchase of certain goods in the State of. Bombay. Section 2 contains some of the definitions. Section 24 deals with authorisations of turnover, etc. Section 13AA of the Bombay Act with which the High Court and these appeals are concerned, is in the following terms : "13AA. Purchase tax payable on goods in Schedule C, Part I, when manufactured goods are transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble event is not the purchase of goods as such which is the raw material, but it is the despatch or consignment of goods manufactured by the dealer/manufacturer to its own branch outside the State ; and that thus manufactured goods are different from a commercial commodity, distinct and separate from the raw materials on which purchase tax has already been paid. It is well-settled, it was reiterated before us, that, in case of excise duty, the taxable event is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. In case of sales tax, the taxable event is the sale of goods. Hence, though both excise duty and sales tax are levied with reference to the goods, the two are different imposts, in one case the imposition is on the act of manufacture or production while, in the case of other the imposition is on the act of sale, but in neither case the impost is a tax directly on the goods. See in this connection, the observations of this court in In re Bill to amend section 20 of the Sea Customs Act, 1878, and section 3 of the Central Excises and Salt Act, 1944 [1964] 3 SCR 787 at 821 and Guruswami and Co. v. State of Mysore [1967] 1 SCR 548 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e despatched outside the State, the additional tax under section 13AA of the Act is not attracted. Hence, the incidence of additional tax has no nexus with the purchase of the raw materials, as was contended by Mr. S. K. Dholakia, appearing for the State and as held by the High Court. Purchase tax under section 3 of the Act is attracted when the, taxable event, i.e., the purchase of goods occurs, but the taxable event for the imposition of additional tax of two paise in the rupee occurs only when the goods so purchased are used in the manufacture of taxable goods and such taxable goods are despatched outside the State by a dealer-manufacturer. Dr. Pal drew our attention to some of the observations of this court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 ; [1971] 28 STC 672 ; and State of Madhya Pradesh v. Shyama Charan Shukla [1972] 29 STC 215 at 218-219. On the other hand, Mr. Dholakia submitted that the submission of the appellant proceeded on the assumption that the liability to pay is the same as the obligation to pay but this was wrong. These two are different. It was submitted that the obligation to pay is not the same thing as liability to tax : and that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll within Part II of Schedule C ; and (b) that the goods bought would be used for manufacture of other taxable goods within the State and sold within the State. Mr. Dholakia submitted that, on giving the aforesaid declaration, the purchaser would have to pay only 4 per cent. tax. The rates prescribed in Schedule C are as under: Schedule C Part Minimum rate Maximum rate I 2 per cent. 4 per cent. II 6 per cent. 15 per cent. The effect of section 13A without section 13AA, according to Mr. Dholakia, was that only those who bought goods which fell under Part II would have benefited by the declaration, since the rate mentioned in section 13A was 4 per cent. Hence, those buying goods falling within Part I of Schedule C had not to give any declaration under section 12(b) or 12(d), as the case may be, and could still manufacture the taxable goods and despatch them outside the State. According to him, as a result of this situation, two results emerged, i.e., (i) the State lost revenue because the goods manufactured with the help of the infrastructure provided by the State escaped further tax, by goods being resold outside the State ; and (ii) the purchasers of raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pith and substance, not one levying tax on purchase but one levying tax on consignment. Depending upon the answer to the question, the validity of the section can be judged. Mr. Dholakia submitted that the Act is, in pith and substance, an Act levying tax on purchase and not one levying tax on consignment, and referred to the observations of this court in State of Karnataka v. Ranganatha Reddy [1978] 1 SCR 641. According to him, the consignment contemplated in section 13AA is only of manufactured goods and no tax is levied under section 13AA in respect of such manufactured goods. He emphasised as aforesaid. It is well-settled that, while determining the nature of a tax, though the standard or the measure on which the tax is levied may be a relevant consideration, it is not the conclusive consideration. One must have regard to such other matters as decided by the Privy Council in Governor-General in Council v. Province of Madras [1945] 1 STC 135, not by the name of tax but to its real nature, its pith and substance which must determine into what category it falls. See the observations in R. R. Engineering Co. v. Zila Parishad, Bareilly [1980] 3 SCR 1, In re : A reference under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent condition the occurrence of which would attract the charge which will be the taxable event. If that is so, then it is a duty on despatch. In that view of the matter, this charge cannot be sustained. As mentioned hereinbefore, the section has been challenged as being violative of article 14 of the Constitution. This attack is based on the discrimination between the two types of taxes but, in the way we have construed the section, in our opinion, this question does not survive. It was further submitted by Dr. Pal that section 13AA of the Act is violative of article 301 of the Constitution. It makes a discrimination between the dealer/manufacturer who despatches the goods outside the State and other dealers/manufacturers. Both the dealers/manufacturers purchase the goods on payment of purchase tax and use them in the manufacture of taxable goods. The incidence of additional tax on the purchase of goods is attracted only when such manufactured goods are despatched outside the State. If a dealer/manufacturer has to despatch the goods outside the State, he has to pay a higher rate of tax and thus lie is discriminated against as compared to the other dealer/manufacturer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 163 (P H), as well as the views expressed by the High Court in Bata India Ltd. v. State of Haryana [1983] 54 STC 226 (P H), are correct and are affirmed. The views of the High Court expressed in Des Raj Pushap Kumar Gulati's case [1985] 58 STC 393 (P H) [FB] are incorrect for the reasons mentioned herein before. The last mentioned judgment and the judgments and orders following that passed by the Punjab and Haryana High Court are, therefore, set aside. In the premises, Civil Appeals Nos. 1166 to 1172 of 1985 (Goodyear India Ltd. v. State of Haryana), Civil Appeals Nos. 1173 to 1177 of 1985 (Gedore (India) P. Ltd. v. State of Haryana), Civil Appeal No. 2674 of 1985 (Kelvinator of India Ltd. v. State of Haryana), Civil Appeal No. 1633 of 1985 (Food Corporation of India v. State of Haryana) and Civil Appeal No. 3033 of 1986 (Food Corporation of India v. State of Haryana) are allowed and the judgment and order of the High Court are set aside. Civil Appeals Nos. 1512 of 1984 (State of Haryana v. Gedore Tools (P.) Ltd.) and 1515 of 1984 (State of Haryana v. Goodyear India Ltd.) are dismissed. Special Leave Petitions Nos. 8398 to 8402 of 1983 are dismissed and for the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods manufactured in the State to places outside the State, camouflaged as a purchase tax, by quantifying the levy of the tax with reference to the purchase price of the goods purchased in the State and utilised in the manufacture. To me it appeared as plausible to describe the levy as a tax on purchase of goods inside the State (which attaches itself only in certain eventualities) as to describe it as a tax on goods consigned outside the State but limited to the value of the raw material purchased inside the State and utilised therein. I, therefore, had considerable doubts not only during the arguments but even sometime thereafter as to whether so long as the tax purports to be a tax on purchases and has a nexus, though a little distant, with purchase of goods in the State, the State Government's competence to impose such a tax should not be upheld. But, on deeper thought, I am inclined to agree with the conclusion of my learned brother. It is one thing to levy a purchase tax where the character and class of goods in respect of which the tax is levied, is described in a particular manner (vide Andhra Sugars Ltd. v. State of A. P. [1968] 21 STC 212 (SC) ; [1968] 1 SCR 705) and a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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