TMI Blog1961 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... NKATARAMA AYYAR, J. -The petitioner is a company incorporated under the Indian Companies Act, its registered office being at Kanpur in the State of Uttar Pradesh, and it is carrying on business in the manufacture and sale of jute goods. By a notification dated March 31,'1956, the State of Uttar Pradesh imposed a tax of one anna in the rupee on the sale proceeds of jute. Previously thereto, the tax payable on sale of jute was six pies in the rupee. This notification having been struck down by the High Court of Allahabad as unauthorised and inoperative, the State Legislature enacted the U.P. Sales Tax (Validation) Act, 1958 (U.P. Act XV of 1958), hereinafter referred to as the Validation Act, validating the said notification as from March 31, 1956. In this petition filed under Article 32 of the Constitution, the petitioner contends that notwithstanding the Validation Act, the notification in question continues to be void and inoperative, because it has not in fact been validated, and because the Act itself is ultra vires. The impugned notification was, it may be mentioned, superseded by a fresh notification on August 1, 1956, and the present dispute relates only to the tax on sales e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cinematographic, photographic and other cameras, projectors and enlargers and films, plates, papers and cloth required for use there- with. (v) Scents and perfumes, and nine pies per rupee if it relates to any other goods." It was under this provision that the U.P. Government had issued a notification on June 8, 1948, imposing a tax of six pies in the rupee on the sale of jute. In exercise of the power conferred by Article 213(1) of the Constitution, the Governor of Uttar Pradesh issued on March 31, 1956, Ordinance No. IX of 1956, and that was published in the Official Gazette on the same date. Under this Ordinance the whole of sub-section (2) of section 3-A as it then stood was deleted and the following substituted: "(2) If the State Government makes a declaration under sub-section (1), it may further declare that the turnover in respect of such goods shall be liable to tax at such rate not exceeding one anna per rupee as may be specified." The effect of this provision was to enact one ceiling rate of one anna per rupee on the sale proceeds for all goods leaving it to the State to fix within the ceiling such rates of tax for such goods as it might determine. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assent of the President on August 31, 1957, and was published on September 3, 1957. It runs, so far as is material, as follows: "For sub-section (2) of section 1 of the U.P. Sales Tax (Amendment) Act, 1956, the following shall be and be deemed to have always been substituted: "This section, so much of section 3, as relates to the substitution of the second proviso to sub-section (1) of section 3 of the U.P. Sales Tax Act, 1948 (hereinafter called the principal Act) and section 4 shall have effect on and from the 31st day of March, 1956'." The result of this amendment was that section 3-A was given re- trospective operation from March 31, 1956, instead of April 1, 1956, as originally enacted. The intention behind the legislation is obvious. If the impugned notification was, as held in Adarsh Bhandar v. Sales Tax Officer [1957] 8 S.T.C. 666; A.I.R. 1957 All. 475 (F.B.)., invalid, because it was issued before section 3-A was in operation, that objection could no longer hold good as that section would now operate from a point of time anterior to the issue of the notification. If the State thought that this legislation would give a quietus to the controversy, they were sad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lid and shall be deemed always to have been valid and shall continue in force until amended, varied or rescinded by any notification issued under any of the said sections. (2) Anything done or any action taken (including any order made, proceeding taken, direction issued, jurisdiction exercised, assessment made or tax levied or collected) purporting to have been done or taken in pursuance of any of the notifications specified in the Schedule shall be deemed to be, and to have been, validly and lawfully done or taken." In Part B are set out the notifications issued in exercise of the powers conferred by section 3-A of the U.P. Sales Tax Act, 1948, and one of them is the impugned notification No. S.T. 905/X. If this legislation is valid, the impugned notification stands validated and the petitioner would be liable to pay tax in accordance therewith. But the petitioner contends that the Validation Act has not brought about any change in the situation and that the notification dated March 31, 1956, continues to be null and void now as before the Act. Two grounds have been urged in support of this contention-that on its true construction the Act does not in fact validate the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent setting that is the meaning of the section, and the impugned notification must be held to be within the saving of the Validation Act. We now proceed to examine the second contention of the petitioner that the Validation Act is itself invalid as being ultra vires the powers of the State Legislature under the Constitution. The argument of the learned Attorney-General in support of this contention may thus be stated. The State Legislature derives its authority to enact a law with respect to tax on the sale of goods under entry 54 in List 11 of the Seventh Schedule to the constitution. It has been held that a sale for the purpose of the entry must be what in law is recognised as sale. Likewise, a law imposing tax on sales of goods must, to be intra vires, possess certain well-defined characteristics associated with such laws. In The Province of Madras v. Boddu Paidanna and Sons [1942] F.C.R. 90; 1 S.T.C. 104., it has been held that sales tax is a tax on the occasion of sale. In the present case, the sales sought to be taxed took place between April 1, 1956, and July 31, 1956, whereas the Validation Act, by force of which the tax becomes payable, came into force in 1958. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co., Madras Ltd. [1959] S.C.R. 379; 9 S.T.C. 353., a tax on the supply of materials in a contract for the construction of works simpliciter on the footing of a sale was held to be outside the entry, and the legislation which imposed such a tax was struck down as ultra vires. But where the transaction is one of sale of goods as known to law, the power of the State to impose a tax thereon is plenary and unrestricted subject only to any limitation which the constitution might impose, and in the exercise of that power, it will be competent to the Legislature to impose a tax on sales which had taken place prior to the enactment of the legislation. But it is urged on the strength of certain observations in The Province of Madras v. Boddu Paidanna and Sons [1942] F.C.R. 60; 1 S.T.C. 104., that a sales tax is a tax on the occasion of sale, and that therefore it could not be imposed with retrospective operation. This contention is, in our judgment, wholly without substance. Now, the point for decision in that case was whether a tax imposed by a Provincial Legislature on the sale of oil by a person who manufactured it was bad on the ground that it was in essence an excise duty. While a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he competence of the Legislature. This question is concluded by the decision of this Court in The Tata Iron Steel Co., Ltd. v. The State of Bihar [1958] S.C.R. 1355; 9 S.T.C. 267. The following observations of Das, C.J., bearing on this question might be quoted: "Under the 1947 Act the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. Indeed before the amendment of the 1947 Act by the amending Act the sellers had no authority to collect the sales tax as such from the purchaser. The seller could undoubtedly have put up the price so as to include the sales tax, which he would have to pay but he could not realise any sales tax as such from the purchaser. That circumstance could not prevent the sales tax imposed on the seller to be any the less sales tax on the sale of goods. The circumstance that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by law otherwise provide'. It places no restrictions on the nature of the law to be passed by Parliament. On the other hand, the words 'in so far as' clearly leave it to Parliament to decide on the form and nature of the law to be enacted by it. What is material to observe is that the power conferred on Parliament under Article 286(2) is a legislative power, and such a power conferred on a Sovereign Legislature carries with it authority to enact a law either prospectively or retrospectively, unless there can be found in the Constitution itself a limitation on that power." (p. 1460). And it was held that the law was within the competence of the legislature. We must therefore hold that the Validation Act is not ultra vires the powers of the legislature under entry 54, for the reason that it operates retrospectively. It was finally urged on the basis of sections 8-A, 14 and rule 23 of the U.P. Sales Tax Act that they contemplated only a prospective legislation and that those sections would be impossible of compliance under the present legislation. This is a consideration which is wholly foreign to the present question. The point which we have got to decide is whether the Validat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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